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Something
big is going on in the United States in a sentiment change, an altered state
of psychology, a growing sense of panic. My opinion is that the nation has
entered the early stage of comprehension among the population of systemic
failure. The most immediate measures are the rash of heavy selling down days
in the US Stock market, the strong purchases in Gold, as well as the
reactions to constant news of sovereign debt in trouble, and the big banks
teetering. Several other softer measures have been noted, made overwhelming
by their sheer numbers. A perception wave has taken hold of a toxic USEconomy, a toxic US financial sector, a toxic US
housing sector, a toxic economic brain trust in the US towers. A sense of
doom is creeping into the nation's living rooms and board rooms,
that the nation is in deterioration. Worse, they are realizing how US
Federal Reserve is toothless, unable to address or treat the problems. The
citizenry is not adept or gifted enough to conclude that the problem is
national insolvency, whose errant prescription has been a flood of liquidity.
But they sense something is horribly wrong, and
worse, that no current treatment will fix anything. They detect the backfire
of the blunt banker solution and the misfired futility of the federal
government solution. Witness the
rooted perception and horrifying awareness that the United States is moving
gradually and unavoidably into a systemic failure. The perception is that
neither governments nor bankers have any solutions to help the people, who
must impose their own gold standard. The Gold price registered a new high
over $1900 per ounce, this after mental midget clowns and propaganda wags in
May pronounced the bull market as finished. Their opinions are worthless.
Watch them vanish behind the tall shrubbery when Gold surpasses $2000 this
autumn.
ROOT OF
NATIONAL ILLNESS
In my view, the national illness is a toxic USEconomy
dominated by pervasive profound grotesque insolvency. In the early part of the 2000 decade, a strong
hint of near-term future failure was obvious. The USEconomy
shed its industry to Asia since the 1980 decade. In the early years of last
decade, the migration of factories was to China. In its place, the US
consumers relied upon home equity withdrawal, blessed as good by the American
economists and high priest of heretical ideology Alan Greenspasm.
The hint to sound money economists such as the Jackass from the dependence
shift was a clear signal of ruin in a few years, as in now. It came on time.
In my view, the national illness is a toxic
US financial sector dominated by pervasive insolvency and massive fraud. The FASB accounting rule
change permitted grotesque falsification of the bank balance sheets,
reflected in market capitalizations above zero. The value zero has been and
still is more accurate, still is the price target. The big US banks continue
to fight off the powerful forces of a housing market in resumed chronic
decline, sovereign bonds overseas beset by heavy losses, and a spate of bond
investor lawsuits that rack up. All attempts to limit lawsuit exposure have
failed. Litigants line up in court like Wal-Mart shoppers on a big sale. Americans are awakening to the unfixable
nature of the USEconomy and the broken fraudulent
nature of the US financial sector.
The Achilles Heel, the broken leg, the ruined road,
and the toxic field is HOUSING & MORTGAGES. The
contaminated blood, the leaking gangrene into the circulation system, the
sewer line in the water supply is BANKING & FINANCE. The USEconomy grew dependent upon the two-sided asset bubble.
No resolution or remedy or liquidation means rotting flesh and gangrene on
the body economic. Americans have noticed. The US banking system remains
insolvent, worse each quarter from toxic assets. Home prices have resumed
their decline, despite all incorrect announcements by banking, political, and
economic leaders over public address propaganda loudspeakers. The crowd
control devices are not working, as the people are deeply worried. The banks
are plagued by an REO inventory bloat extended from home foreclosures, where
they do not dare release all the homes onto the already bloated market for
sale. The banks are peppered in attacks by bond investor lawsuits, which work
to resolve the bond fraud from misrepresentation of mortgages packaged in AAA
toxic bundles. They lost 30% to 60% in a matter of months and a few years. The
banks have a dirty secret of hundreds of thousands of home loans operating in
strategic default, whether the homeowners refuse to pay anything more on
their mortgages, often demanding to see the proper title on the property. The
news media will not cover this story. In every court challenge, the banks
have lost the cases, resulting in the homeowners taking clear title with the
loan fully forgiven. The newest threat to the banks is the next Option ARM
wave, the second round of adjustable rate mortgage that will continue in a
storm until 2013 ends. Americans are awakening to the unfixable nature of the
USEconomy and the broken fraudulent nature of the
US financial sector.
No meaningful home loan balance scheme conducted by
the USGovt means the housing mass & mortgage
connective tissue circle the toilet in a flush. The reason is simple. Home
loan balance reductions would expose gigantic bond fraud in tracing the
mortgage bonds to home loans with title registrations. It would result in
exposure of Fannie Mae counterfeit bonds having circulated widely. It would
result in forced bank asset writedowns amidst the
pervasive accounting fiction at work on the balance sheets, blessed as good
by the FASB. It would expose MERS as a fraudulent device to hold titles without
legal standing. It would embolden half the nation into civil disobedience, as
in outright refusal to pay banks on home loans. It would expose the nation as
insolvent generally. It might interfere with some perverse national plan to
use Fannie Mae as some devious device to become landlord to one third of the
nation's homes, a plan of collectivism that Karl Marx might approve.
Americans are awakening to the unfixable nature of the USEconomy
and the broken fraudulent nature of the US financial sector.
PANHANDLE
DOCTRINE & PARASITE DOCTRINE
The tragedy that struck the US nation has a great
connection to toxic economic thought from its economic brain trust. It is
thoroughly toxic, corrupted, and destructive ideology woven in an acidic
blanket with rampant impairment to working capital. It earns a D grade on
economics effectiveness, and in fairness is not what Keynes prescribed. It is
toxic thinking. It seems to have elevated the Voodoo Economics of the 1980
decade to the Fascist Business Model in the 2000 decade. The license to
engage in fraudulent activity is engrained in the pact between big business
(led by big banks) and the USGovt policy making
groups which are dominated by Wall Street firms (led by Goldman Sachs). The summary line is vividly clear to astute
adept students of economics: the United States no longer has any concept
of capitalism, and has undergone three decades of capital destruction.
The crescendo of the capital destruction has taken place in the last three or
four years, whose climax tune is the shrill Quantitative Easing. The cast of
American economists is wedded deeply to the notion of credit dispensation and
monetary growth under the illusion of control. They do not comprehend capital
formation anymore, relying instead upon what the Jackass calls with bitter
intended mockery the Panhandle
Doctrine applied to consumers, matched by a Parasite Doctrine
applied to banks. If you give a street bum
money, he will buy coffee and maybe a sandwich. The USEconomy
is based upon coffee and sandwiches, not much more, as the consumer is given
money in pockets and purses to spend. The depravity of economic thought is
shocking. The stock market & housing sector (FIRE) replaced industry
& factories with tragic outcome. FIRE means finance, insurance, and real
estate, a great ironic moniker since the fires burned capital at a rapid
rate.
A prevailing belief exists among American economists
that if the consumer picks up, then industry will expand with big capital
spending and job hires. The belief is entirely backwards, a symptom of
American economist ignorance and stupidity. The consumer (street bum) relies
upon tax breaks, reduced Social Security & Medicare contributions,
extended jobless benefits, clunker car gifts, first time home buyer tax
credits, and more. They are all examples
of the Panhandle Doctrine from which the USEconomy
have grown dependent upon. Observe the toxic American economist ideology. For
banks, a parallel Parasite Doctrine
hard at work has gutted the financial sector. The regular fare offered as
examples as strategic crutches to a broken sector are sponsored USTreasury carry trade (aided steered by Interest Rate
Swaps), betting on their own stocks lifted by phony FASB accounting rules,
participation in USFed frequent flyer programs like
the Money Market giveaways, flash stock trading (High Frequency Games) done
with impunity, short stock sale bans (Goldman Sachs given an exemption), and
naked selling of USTBonds (grandaddy
fraud). See failures to deliver, buttressed by Interest Rate Swap artificial
end demand that serves to cover the other end and qualify as a bonafide bucket shop.
Thanks to Aaron Krowne and
his Mortgage Implode website, for the intrepid work on the mortgage market
and recently on the USTreasury market. He provided
the graph on Failures to Deliver on USTBonds. See the ML Implode article
(CLICK HERE). The total is
roughly $1 trillion in bond fraud, an ongoing figure. The story broke in
mid-2009, only to disappear with organized suppression. The Wall Street firms
lost their investment banking business, but found a fertile source of
liquidity from naked short sales of USTBonds, whose
buyers were the artificial factory of Interest Rate Swaps. Without this naked
shorting line of liquidity, the Wall Street job cuts would have been much
worse, equal to the London and European bank sector job cuts. The Parasite
Doctrine has a poster boy project with these fraudulent sales given cover by
the Securities & Exchange Commission, whose official ranks are filled by
Wall Street henchmen.
THE CONFIDENCE
GAME RUSE
The American public is told that confidence is the
root cause of the absent woefully low business spending. The confidence took
on damage after the vacant USGovt & USCongress budget deal and debt extension to be sure. But the true source of absent business
capital investment is broad deep insolvency, the poor business risk,
extending from the broken housing market, the wrecked banking sector, and the
inadequate industrial base. The
government finance requirements serve to crowd out the bond market, which
in a normal system would rely upon the financial sector for capital
formation, business development, and construction of platforms that offer job
growth. In the US financial sector, the innovation is with carry trade
speculation, exploitation of easy money facilities, and profound bond fraud,
hardly the stuff of growth mechanisms. Big banks do not lend when they can
reliably make money on the USTreasury Bond carry
trade. The American corporate sector has responded to the liquidity flood,
aka monetary hyper-inflation, and the corresponding acidic undermine to
capital, by moving investment overseas. See Cisco, General Electric, and
Hewlett Packard, which is instead raising a white flag to Asian PC makers.
The most glaring consequence to the monetary policy, marred (not aided) by QE
and QE-Lite and QE2 and Secret Global QE, has been the entire cost structure
has risen, without benefit of rising incomes.
Furthermore check Economics 201, Chairman Bernanke.
Low interest rates suppress the USEconomy, not
stimulate it. Almost twice as much interest income is earned versus interest
costs paid. The pensioners and retirees are struggling with inadequate
income, spending less. The bond investors sought out higher yields in
mortgage bonds, only to be burned by 25% to 40% losses in principal. Pension
fund income is way down. Of course the motive has been to support and
stimulate speculation in Wall Street, where the USFed
primary loyalty lies, surely not with Main Street and business interests.
FEAR SETS IN,
PANIC BEGINS, RUIN PERCEIVED
A confluence of major perceptual factors is flowing
in the national mindset. Fear is setting in. The early stage of panic is
evident. A growing perception of ruin can be spotted. People are responding
to numerous high profile stories, each of which is important in painting a
mosaic of extremes, none of which would have occurred in the 1990 decade. The
chorus of crisis is loud and shrill. Here are some important events that the
American public must examine.
- The broken USGovt
budget and upcoming huger deficits. With tax receipts trending down, and
the need for economic stimulus programs clear, the USGovt
deficit next year will be larger, not smaller, despite what the errant Govt Accountability Office statement reads.
- The blatantly obvious USeconomic
recession, whose billboard signs litter the highway, the latest being
the Richmond Fed down 10% (called good), and the Philly Fed down 37
(could not be called anything but horrible). The Philly Fed forecast was
minus 2 by the intrepid marketing prop carnival barker American
economists.
- The EUR 850 billion bailout by the Euro
Central Bank, intended to cover the mountain of Italian and Spanish Govt bonds. But the bailout will accomplish nothing,
just like Greece, where numerous bank bond bandaids
have been applied. And besides, the Germans have refused to offer any
more bailout funds, calling Italy and Spain too big to bail out, quite
properly.
- The creepy feeling of a global monetary
system breakdown. The major currencies are being debased to such a grand
extent that even the less gifted American public can notice. They see
the onslaught of sovereign bonds overseas, and might harbor more
distrust for USTreasury Bonds that the media
reports. They might be buying gold & silver coins from the USMint, which cannot keep up with demand.
- The anticipated QE3 heresy is certain to
continue. It has already come in Global QE form, as the Jackass
expected. My forecast is that the USFed will
formally support the US Stock market and violate its charter. But the
move will be applauded and serve as the next heroin injection to the
body economic, with certain additional capital destruction and rising
cost structure.
- The Swiss and Japanese central bank
futile actions, designed to halt their rising Franc and Yen currencies.
The lesson learned is that all major central banks have turned
toothless, their policies ineffective, wasteful, and destructive. The
Competing Currency War is making all of them big losers. Their economies suffer.
- The pitiful paltry puny USTreasury long-term yield of 2.0% to 2.2% does not
offer the American saver the proper incentive to save, nor the proper return on investment, certainly not an
adequate yield to reflect the risk taken. The yield now stands at 7% to
8% below the true CPI rate.
SINKING INTO
THE AMERICAN PEOPLE MINDSET IS THAT THIS IS 2008 ALL OVER AGAIN, BUT TWICE AS
BAD, SINCE THE SOLUTION HAS FAILED AND TRUE REMEDY IS SEEN AS
IMPOSSIBLE!! The USGovt and USFed and Wall
Street policy makers and league of Rasputins have
thrown $3 trillion at the problem, have bailed out the big US banks, have
conducted numerous liquidity programs, have made Swap Lines to Europe, have
completed a few mickey mouse stimulus initiatives (clunker cars, first time
home buyers), have extended but terminated aid to states, have extended
jobless benefits, have given SS/Medicare relief, have operated gigantic debt
monetization programs (QE's), but
the USEconomy is rolling over into a recession
anyway. The confirmation of the recession is the many denials with
shorter frequency between denials
THE SHAPE OF QE3
As the Jackson Hole Conference is set to begin in
the spectacular picturesque mountains of Wyoming, anticipation and anxiety rise.
The Grand Tetons serve as a fitting location to announce the renewed
dependence from the USFed teats, the monetary
spigot. Where the spigot is directed remains the main question in debate. Given the robust supposed USTreasury Bond rally, it hardly seems suitable to direct
QE3 toward more USTBond buying, unless they wish to
avoid USTreasury auction failures. The
ultra-low yield combined with ultra-high supply makes for extremely high
risk. Bond investors might not show up at all. A failed auction would be
highly embarrassing as a
event after the highly publicized bond rally, an irony worthy of Rolling
Stone exposure or a Saturday Night Live comedy segment. The USGovt minions and Wall Street made men had crowed that
the bond rally contradicted the Standard & Poors
downgrade for the USGovt debt. My forecast is that the QE3, when it comes, will be designed and
intended openly to support the Stock market. It will not arrive this
week. It will arrive with full bore announcement in response to the next
round of deep US stock market declines. History will be made. The spin on the
USTBond rally to 2% on the 10-yr is deafening and
deceptive. We are told the bond market anticipates QE3 but that is patently
false. The bond market smells with
great dread the next USEconomic recession, or
more accurately, recognition of the ongoing chronic powerful recession that
began in 2008 and never ended. The bond market smells unfixable recession,
all current tools having failed. The bond market detects correctly that the
US Stock market from mid-2010 has been propped by QE initiatives, now absent.
The irony, intrigue, and corruption is both bizarre and macabre. The Standard & Poors President Deven Sharma
has decided to step down only three weeks after the agency downgraded the US
credit rating. What a predictable move. The post will be occupied by Douglas
Peterson, chief operating officer of Citibank, to take effect on September
12th. Business as usual on Wall Street. The S&P lead role will be in
capable hands. One might wonder if the outgoing officer will be charged with
child pornography or a rape in a hotel. That event might not be needed.
GOLD MAKES
RECORD HIGHS
This week has been tumultuous. The best summary in
my view is to conclude that the Gold
price set a record high, and fully revealed what direction it will take this
autumn. In the low volume vacation dominated days of summer, an
opportunity to engineer a selloff has begun in earnest. Gold has gone down to
$1765 and Silver to $40 flat, still way up on the year. Hats off to Ben
Davies, who has been impressively accurate in his precious metals forecasts.
He nailed the silver forecast in April, expecting a steep pullback to $35. We
saw it!! In June, when Gold was trading in the low $1500 level, Davies boldly
forecasted that Gold would break above $2000 by yearend 2011. The strong
upward moves seen so far in August have captured global attention. After
action last week, Davies fine tuned his 2011 gold
call, stating he expects Gold to reach $2100 by the end of December after
first a correction to $1675. Today we saw it!! The hefty pullback will lose
some faithful followers, but offer savvy investors a great chance to add to
their positions. The cartel is busy making countless grateful Chinese,
Indians, and Asians who have not stopped buying precious metals in defense of
rapid inflation. They see the American bankers as the inflation villains. The
sudden pullback has assured the last fire sale before the autumn gold bull
romp, a great trampling event to come. It is written, it will happen. See the
King World News interview (CLICK HERE).
The compromised clowns have been busy citing how the
Gold price is $150 to $200 too high based upon price inflation, or even 50%
over-valued based on some cockeyed Fed Business Model. They overlook the
broken distorted market is the USTBonds, supported
by powerful usage of Interest Rate Swaps, aided by USFed
monetization still and the migration from stocks to bonds. The volatile moves
in the Gold market can be interpreted with high predictability. The big down move today signals even
bigger upward moves in the next few months. The money is moving quickly
today on Wednesday. The 10-yr USTreasury has
rallied on the TNX from 2.14% to 2.21% as a decent move. The crude oil price
is up from $85.40 to $86.1 as a modest move. Nobody can deny that panic has
hit the stock market, as the recession can be seen without rose colored
glasses. Expect much more debasement of the USDollar,
as tax revenues fall and stimulus costs rise. The bigger USGovt deficits must be
financed, during a truly hostile climate. The complete ruin of major global
currencies is in progress, not stoppable. Money is being ruined to such
an extent that people are bewildered, wondering what
constitutes money if sovereign bonds are being attacked and losing value. The
tainted USTreasury Bond market has become almost a
source of great amusement. The entire major currency market is in turmoil.
See the Swiss Franc, the Japanese Yen, and their rapid rise
several standard deviations above their norms or trendlines.
Havoc has taken root.
The Libyan chapter will be properly told in a year
or two. Tyrant Qaddafi wanted to install a Gold Dinar for North African
usage, a similar sin committed by Saddam Hussein. These guys never learn that
a challenge to the USDollar is met with armed
resistance. The US & UK forces entered the fray. The secondary goal might
have been to take oil producing capacity offline, thus lifting the crude oil
price. Big Oil interests do not want the global recession to rock the crude
oil price too much. The other benefits
have been the $50 billion in funds frozen solid in US & London banks.
Another $50 billion is frozen in European banks. Expect it to remain out of
reach by Libya's new leaders, despite talk. It is too badly needed within the
Anglo banking system. See Oslo. The search is on not only for Qaddafi, who is
surely comfortable somewhere in a desert bunker, but also well fed, and well
medicated with his usual fare of psycho-tropic drugs. The hunt is also on for
Libyan gold bullion. The Anglo bankers need it, since the COMEX and LBMA are
just about bone dry, and the big US & UK banks are insolvent on the edge
of failure. See their Credit Default Swap rates on debt insurance. For the
greater good of the Anglo Empire, gold must be found and secured and locked
up in the banking system, regardless of the propaganda messages put forth.
Prepare for
$2100 gold by January, and $60 silver by January. The
last open door is being made possible in the final days of August. Like last
year, the months of September through January will be ones for the history
books. The start of big bank failures in the United States, London, and
Europe should add to the gold run. Contagion has hit Italy, Spain, and France
(the newest PIGS lookalike). The breakdown will be broad, deep, and
frightening in the next few months. The twisted thinking is probably that
gold must be brought down as much as possible, to make a lower base before
the next gigantic upward moves beyond the $2000 level and probably past
$2100. The gold breakout will capture global attention and make major
headline news. This is 2008 all over again, but much worse!! The story line
will be that nothing was fixed, but that nothing can be fixed, and much more
debasement of money will come. The
Gold Meter will rise in direct reflection.
Jim Willie CB
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