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Some very
confusing factors are at work relating to the USTreasury
Bond market and the gold market. To assume that gold will rise in kneejerk fashion in response to the gargantuan grotesque
growth in monetary inflation (aka US$ money supply)
is simply naïve for the public and amateurish for professionals. Never
in the US
history has more confusion reigned within the body financial. This is to be
expected, since the US
banking system is insolvent, in parallel to the US
housing landscape being increasingly insolvent. The nation must soon make
difficult decisions on rebuilding the United States,
its infrastructure, its energy supply industry, and put down its military
weapons used abroad. Some strange effects are detectable regarding the USTreasury yield curve changes in recent weeks. They
coincide with the broader usage of the US Federal Reserve Lending
Facilities. In my view, the USFed is slowly killing
the USEconomy in order to grant a reprieve to a
criminal collusion of corrupt Wall Street bankers. They lied, they cheated,
they stole, and now they are being given money as that
same funds are being drained from the private sector. The evidence lies in
the USTreasury yield curve and gold price. Helicopter
Ben Bernanke is more like a Mad Scientist draining
the blood out of a victim on a surgeon’s table. His helicopters only
travel over Wall Street. He has become a tool for the Manhattan Ruling Elite.
USTREASURY
YIELD CURVE CHANGES
The USTreasury
yield spread is of crucial importance. The ratio of the 10-year USTreasury yield to the 2-year yield is telling the story
of the USFed betrayal to the economic participants
on Main Street USA. The gold price tends to rise in brisk fashion when the
yield ratio rises. The gold price consolidates when the yield ratio tends to
consolidate. Here is some reasoning as to why. Generally, a flat yield
curve has the short-term yields roughly equal to the long-term yield.
That signals a period of economic stagnation expected. The cost of short-term
money would not be very high, since no significant demand would come for that
money intended for business investment. Economic prospects would be somewhat
dampened. Generally, a steep yield curve has long-term yields
much higher than short-term. The cost of long-term money would be set higher
in order to reflect the erosion from price inflation on assets. The entire
system would gear toward the systemic price inflation. Volumes can be written
on the yield curve topic. The short and long ends of the USTreasury
yield curve do not stand still. In recent weeks, both ends are rising. The
short end is rising much faster, in almost a scary fashion, like a panic.
Today’s climate is very
confusing. Silly questions prevail as to whether we have inflation or
deflation. We have both, and will continue to have both. The key question is
which is winning. Asset prices are falling as costs are rising, all without
the benefit of wage gains. That is the formula for system implosion. As the USEconomy is heading deeper into recession, but a
tremendous amount of money is being created. The system is broken, and
desperate repairs are attempted. Old theory must be adapted to total
financial chaos. When inflation is WINNING the battle, the
monetary spigot flows fast. Inflation floods the financial system, as much of
the money flow comes OUT of the long end in response to price inflation deep
concerns. At the same time, the USFed monetizes the
short end so as to keep it close to the current Fed Funds rate. They purchase
short-term USTBills with printed money, plainly
told. When deflation is WINNING the battle, the destruction of
asset values occurs faster than newly created money can replace it. Inflation
still floods the system, but its directed locations are not where needed,
rather where power controls it. Inflation has occurred more so on the cost side, as economic distress becomes a huge
issue. Profit margins are squeezed or vanish. Money flow comes into the long
end from recession concerns as the inflation effects hit the cost side, which
destroys businesses. At the same time, the USFed
does not have to monetize the short end much, since the market takes care of
that task. Funds move from stocks to bonds.
Pressure is acute on the USFed itself on interest rate policy. The 3-month TBill yield remains near 2.0%, but the 2-year TBill has moved to 2.9% on its yield. With the official
Fed Funds rate at 2.0%, the bond market is pulling the USFed
into a rate hike, when the opposite is needed for aiding mortgage rates,
housing, and easier credit conditions for the strained USEconomy.
One could describe the internal conditions of the Untied States are the
best living example of what Ludwig Von Mises
described as a CRACK-UP BOOM. The term will soon enter the active lexicon
of financial media writers, anchors, and pundits, but they will make it sound
like a positive development. Intense political pressure will next push the USFed to restore the steeper slope in the USTreasury yield curve. They will be urged to lower the
Fed Funds rate, but before such action, an experiment will be conducted. They
will attempt to push down the 2-year TBill yield
back toward 2.0% when it now threatens the 3.0% level. Their success is
uncertain.
In the last few months, since the USFed opened its Lending
Facilities, the USTreasury yield curve has the
10yr/2yr ratio sliding lower. Big banks lend long and borrow short. So their
profit margin on lending is being strained, even as the USFed
has been giving them a reprieve on their impaired bonds. What an irony! This
cannot continue! Wall Street applauds the rescue of banks, which by the way
are still in dire straits. Lehman Brothers is in the process of implosion, as
predicted. Wall Street has trumpeted a very false message that the bond swaps
conducted by the USFed have fixed the problem. Not
only are they dead wrong, but the USFed actions
have ensured a deeper USEconomic recession, since
they refuse to deploy PURE MONETIZATION. USFed
officials are scared to death at the cost inflation problem sweeping the
nation, led by energy and food prices. The dire situation with Bear Stearns
coincides with a faltering of the USTreasury yield
curve steep slope. Few have noticed, probably because Wall Street enjoys the
largesse and socialist medicine. My patience continues as news is hoped
eventually for criminal indictments and convictions of Wall Street
executives. Instead, they are on planning boards for USGovt-led
rescues.
The next round of largesse will be
more complicated and difficult to pull off. Lehman Brothers is doomed not to
survive as an independent corporate entity. Their business lines are
shriveling. Investment banking? What investment banking? After selling
lemonade laced with subprime rat poison, the
lemonade market has surprisingly vanished. Lehman Brothers might be better
diversified than Bear Stearns, but almost all those diversified business
lines are simultaneously suffering major losses. The Lehman story will
drive home the point that contagion in the banking crisis extends far beyond
mortgages. The kill job of Lehman Brothers is now being planned. It
will be much more difficult for JPMorgan to devour
them, to raid their assets and to discard their rubbish bonds into the secret
JPMorgan ‘Garbage Can’ that eludes all
accounting requirements. The US Congress might wish to investigate the
actions by JPMorgan, but those sessions are mere
window dressing, a charade to satisfy the public, to dupe them into believing
that officials are scrutinizing the matter. A grand consolidation of banking
power is in progress. Most people are totally unaware. They are such fools
that they probably still believe Bear Stearns was rescued!!! They could not
recognize a burial site and tombstone.
TIME OUT
Let’s correct one of the
biggest misconceptions out there. Fast rising energy costs worsen the USEconomic recession, forcing more asset deflation. Sure,
they lift some prices, but they are costs. Money to pay for the higher costs
are nowhere, with falling home values, vanishing home equity credit, tighter
bank lending, ruined banks, restricted credit cards, and lost jobs with
income. Bank destruction will worsen. Job loss will worsen. Wages do not keep
pace, as long as China
is a competitor. The Clinton Congress accepted the Trojan Horse, when they
granted China Most Favored Nation Status in 1999. The maneuver betrayed
American workers, sent jobs to China.
The globalization movement dovetails as part of an elite plan. Did anyone
notice that the SARS and Avian Flu epidemics ended at the same time as the
initial public stock offerings began for big Chinese banks? See ICBC and
other giant Chinese banks, and Wall Street fees. Surely just a coincidence? A
smart fellow taught me 20 years ago that there are no billion$ coincidences!
A grand chess game is underway among the United States, China, Russia, and Europe. Add the Middle East since all the above have an entrant in the Iran
cock fight pit.
BETRAYAL OF US
WORKERS
Put aside the betrayal of worker
savings from the premeditated, calculated, persistent policy of monetary
inflation. Savings in deposits pay 4% when price inflation rages over 10%,
resulting in erosion and corrosion and implosion of savings. What makes the
current USTreasury yield curve confusing right now
is that the US Federal Reserve is draining the banking system as it attempts
to balance its bond portfolio. The USFed is not an
altruistic firm, but rather a monolith parasite. All the Lending
Facility swaps to relieve badly damaged bond impairment have put them on the USFed’s balance sheet, while the many troubled
banks hold the more valued Treasurys. The USFed has been reacting since late March by selling USTreasurys into the market, alongside their own
accumulation of those USTreasurys. Thus, bond
yields have risen. The USFed is essentially
draining the private sector in order to bail out the Wall Street bank sector.
This is blatant elite socialism, putting the Middle Class in a vise, since
the primary directive for over two decades has been TO PREVENT SECONDARY
INFLATION EFFECTS IN THE FORM OF WAGE GAINS. Today is a time of desperate
need for better wages, as people cannot handle higher costs in their lives.
Without higher wages, companies cannot raise prices. Higher wages mean
greater ability to pay higher prices. The system is dissolving before our
eyes. USGovt officials continue to claim the Untied
States has strong fundamentals, and a strong USDollar
is in our best interest. One is reminded of murder movies where the killer
tells the victim that he is enabling a better life.
Steadfast refusal to permit higher
wages, the dreaded secondary inflation effect, is a vivid betrayal by the USFed to pursue strong and stable employment conditions.
They are defending the USTreasury Bond yields from
rampant systemic inflation, no more. They are aiding and abetting the
historical kill of the US Middle Class and US Corporate environment outside
the protected, coddled, and corrupt financial sector. Then again, is this not
the Rockefeller New American Century plan installed??? They quietly are
working within US institutions, media included, to return a concentration of
economic and banking power to the hands of a few multi-billionaires. The evidence
is everywhere, but the recognition is nowhere. The movement occurs side by
side with the gradual implosion of the financial system, whose downward
spiral is led by the dissolution of the risk pricing model. The mortgages\
arena is only the tip of this iceberg. And subprime
mortgages are only the tip of the mortgage iceberg.
CONSOLIDATION OF BANKING POWER
The Second American Revolution has
architect John D Rockefeller III, scion of the powerful Standard Oil and
Chase Manhattan Bank, with support from his three brothers David, Nelson, and
Laurance. They were also key architects of the
global reconstruction after 1945 known as the American Century. Rockefeller
has openly declared the resolve of the powerful establishment to roll back
concessions grudgingly granted by the wealthy and powerful during the Great
Depression, the call issued in 1973. He called for a “deliberate,
consistent, long-term policy to decentralize and privatize many
government function, and to diffuse power throughout the
society.” By the latter is meant clearly to concentrate that
economic and banking power into the hands of the Ruling Elite, and to promote
an impoverished society. The Rockefeller agenda intends to reverse the
processes established often with great social agitation and political
pressure during the difficult crises of the 1930 decade. It has seen the
removal of Depression Era government regulations on many aspects of economic
life in America,
even banking strictures. Labor union power is nonexistent anymore. The Glass Steagall Act limited merger of banks, brokerages, and
insurance firms. Its fall by the wayside set the stage for a powerful
concentration of power, perhaps at the tail end of a planned collapse. Watch
the consolidation of Federal Reserve banks, led by JPMorgan.
Crisis actually enables structural change and that power concentration. What
is described is the agenda of the Neocon wing in
power since 2001. A
Hat Trick Letter Special Report was just published last week, entitled “Banks,
War, US
Power, East vs West” for subscribers.
Vast geopolitical shifts are occurring in foreign lands, even as power is
shifting to the US
state and large corporations.
GOLD &
SILVER FINISH RETEST
A very significant period of gold
price consolidation has lasted longer than most analysts anticipated, me
included. The 20-week moving average stands at 853. That level coincides with
the 850 critical support line. The gold correction
since the March high has endured multiple impulse lows. After a magnificent
rise from the desperate news on the US
bank implosion and insolvency in August, the gold price has corrected many
times. Are USFed actions, auctions, swaps, and
rebalancing inflationary or deflationary? Lately, they are deflationary, as
they drain the private sector to subsidize the financial sector. Gold is
completing a complex correction process. The daily chart shows several
positive signs. With gold at or near 863 on noon Thursday, clearly the May
1st low has held in support. A rounded bottom can be seen. A possible
reversal pattern might be showing through. The gold price on a daily basis is
near the oversold cyclical point again. An A-B-C
correction seems near an end. The USDollar DX index
must contend with upside resistance of a powerful nature. That is covered in
the Hat Trick Gold & Energy Report due out this weekend.
The bigger picture for gold
is well viewed on the weekly chart. The correction steps have dampened
enthusiasm, but they have not changed the bull uptrend. The hyperbolic rise
from last August to March has not seen any move below the 850 impulse high in
November. Thus, the long-term bullish picture is intact. A retest of the May
low at 855 is in progress. The USDollar support is
bizarre, given the astonishing persistent horrendous negative fundamentals
that pervasively worsen with each passing month within the USEconomy and US
bank system.
In the entire financial world, the
two biggest enemies are gold and USTreasurys, the
trading instrument of the USDollar. Given that the
US banking officials are up against the wall right now, they will continue to
inflate, and in doing so, they will work to bring down the long-term USTBond yield via direct monetization actions. To be
sure, a strong rise in the 10-year USTreasury yield
well past 4% toward 5% and beyond would create forces for credit derivative
explosions and the total ruin of the US and Western world banking systems.
The JPMorgan machinery has kept the long-term rates
down far below prevailing price inflation levels. However, monetary inflation
on an even grander scale, as is coming next, will be directed into USTBonds, regardless of price inflation. A profound
irony, or conundrum, has been that long-term USTBond
yields are a reflection of USFed, Euro Central
Bank, Bank of Japan, and Bank of England monetary inflation. The USFed has cut the official interest rate several times.
The market response has been to contradict. The USFed
has lost control.
CRUDE OIL
SPECULATORS ARE BIG BANKS
Lastly, a comment on crude
oil and the concern over speculators. Some of the biggest speculators are the
Wall Street bankers. As policy have been
discussed toward more speculator control, some of the biggest violators are
Goldman Sachs, Morgan Stanley, and Deutsche Bank. This group has been
very active in buying and leasing enormous storage tanks for holding crude
oil. They have been active in recent months in securing a vertical
integration of control, from owning oil storage centers,
oil pipelines, electrical power plants, and gasoline refineries. They even
purchased some future North Sea
oil production. All this without a single peep in the subservient US
financial press networks! Details are provided in the June Hat Trick Letter.
They destroyed the housing & mortgage industry. The have set their sights
on the energy industry next. Tighter control of speculators would enable them
to control the energy market much more effectively. JPMorgan
taught Enron everything they ever learned.
The new rules will not
apply to Wall Street firms. Why? Because they make the rules, and when they
break the rules, the regulators do not enforce rule violations. Why? Because
they serve on agencies as regulators. The system is broken, and the grand
fissures are extending to the energy market. Has anyone asked whether the
crude oil price is rising in response to failed confidence in the US custodians and
concerns over a wider disastrous war in the Middle East? Perhaps a few inside the US and the majority
outside the US.
Has anyone asked if the crude oil price is rising as a Lame Duck president
effect? Not really. Has anyone noticed that the crude oil price rose sharply
after further belligerent comments came from the US Military and its MidEast small nation ally against Iran?
A few did last week, but their voices have not been invited back onto
financial media stages. Take a closer look at Wall Street banks and their
crude oil storage, their arbitrage, and their urges to Congress to limit
competition. The Mussolini Fascist Business Model might be extending its
lethal tentacles from banking into the energy market.
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By : Jim Willie CB
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