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The year 2012 has started out in strange ways. While
celestial forces augur for rare tail events, the assurance of man-made events
that stretch far into the extreme tail of probability are not only very
likely but will be of a type to reflect the change in the global balance of
financial power. The Paradigm Shift mentioned over the course of the last two
to three years is at work, having moved into a higher gear. The gold is
moving from the West to the East, along with the power. We will not see the
process reverse in our lifetime. The sanctions set against Iran have been
devised by a former global leader nation that is beset by insolvency, fraud,
and lost integrity. The backfire has consolidated forces into a more
fortified position against the USDollar. Trade
increasingly is not being settled in US$ terms. The icons of the day are mere
apologist public address systems attempting to rationalize and justify the
deep insolvency and wrecked systems. The new normal is of a caravan file of
broken cars and trucks sputtering down the road, using the false fuel of
hyper monetary inflation and the offensive paint of phony financial
accounting, the tell-tale sign being the ugly rancid smoke out of their
tailpipes. The last insult is of the US Presidential election process, which
is badly marred by obvious inconsistencies and anomalies. The vote count for
the candidate that attracts the biggest crowds, attracts the biggest
donations from corporations, and defies the financially teetering system does
not match the final official tallies.
PREPARE FOR
RARE DAMAGE OF TAIL EVENTS
In the probability world,
a tail event is described as an occurrence far out in the small numbers of
probability, extended on the tail of the curve of likelihood. In the quality
control domain, the battle cry used to be Six Sigma, meaning the tolerated
defect rate goal would be six standard errors, a rate in no way achievable. A
quick check of the probability tables unmasks the lofty goal as one defect
part off the assembly line in every 1.013 billion items. That is Six Sigma on
the normal bell-shaped curve. However, in the world of phony finagled finance,
such rare events are indeed occurring. The modern world has never seen
such grotesque charred ramparts posing as financial structures, badly beset
by the insolvency caused by the natural sequence of broken asset bubbles,
aggravated by absent industry. In fact, the entire fiat currency system,
where money is nothing but redefined debt, is an abomination destined for the
ruin we see on such a tragic widespread level. The modern world has never
seen such grotesque housing disasters, the dream of home ownership turned
upside down, one quarter of American households owing
more than the value of their homes. In fact, the entire housing dependence
devised by Greenspan, where the USEconomy would
lean not on industry but on rising home equity, serves as the calling card of
central bank heresy. The heresy continues with the high priest ZIRP and
bishop QE. Of course it ended in tears. The modern world has never seen such
grotesque quicksand in sovereign debt for so many major nations. This
goes far beyond Greece, Ireland, and Portugal, the symbols of small fry
nations that few nations will make deep sacrifice for. In fact, as the
sovereign debt spreads, it has become clear that Italy, Spain, France, and
many other nations suffer from the sinking pressures that national
securitized debt brings. As the sovereign debt loses value, the banking
system sheds reserves valuation and goes insolvent, the credit engines stall,
the economy falls into recession, the labor force loses jobs, the spending
patterns falter, and the nation goes into a failure mode. See the Cauchy
distribution in the graphic, which when the degrees of freedom grow
unbounded, approaches the Gaussian normal.
Some important tail events
of rare type are coming. Any attempts to control a Greek Govt
Bond default will be fraught with high risk and deep peril. The equal
necessity to control a default for Ireland and Portugal will be made obvious.
The extension to Italian and Spanish Govt Bond
losses in collateral damage will be obvious. The implications to Credit
Default Swaps must also be handled, not possible in the same fraudulent
manner as before with redefinitions and denied insurance awards. The
contagion of vanished equity in the banking system will spread to London, New
York, and Germany, in whose nations numerous banks will fail. It will be
extremely difficult for the USDollar to ward off
such powerful storm damage, and remain as the global reserve currency. Some
distant maritime voices might regard my claims as premature and far-fetched,
but their preoccupation with gold basis has left their voices mere
reverberant richochets in the hinterland. The
academic voices seem out of touch with trends, the loud laps on the rocks
from waves of inflation hardly recognized for their damage from the remote
seacoast. They seem unable to foresee the new found land that is forming in
the East, divorced from the USDollar.
IRAN SANCTIONS
BACKFIRE INTO ISOLATION
In the last two weekly
articles, the backfire was described regarding Iran sanctions, the response
from the emerging economies, and the harmful effects of foreign nations
grappling with defense from the uncontrollable unbridled unending printing of
phony money. The USGovt actions have galvanized a
response, led not by Iran but by China. The raft of bilateral accords
juiced by currency swap agreements has provided a
significant buoyancy in the global trade framework, a highly complex
system. It dictates the flow of USDollars in
obvious ways, but it also dictates the formation of reserve banking systems
in more subtle ways. In 2007, when Brazil and China announced a swap facility
to bypass the USDollar in trade settlement, the
Jackass took notice like a prairie dog raising his head with erect spine. In
2010, when Russia and China announced a swap facility to bypass the USDollar in trade settlement, the Jackass took notice
again. The big trade winds were changing direction. The extreme importance of
trade and banking interwoven should not be overlooked, as often done by the
clueless cast of US economists. So when in the last month, Japan and China
announced a swap facility to bypass the USDollar in
trade settlement, the Jackass concluded that the end was near for the
waterlogged American financial fortress. These are two primary Asian
powerhouses, who with South Korea form the core strength of the entire East.
The USDollar
might not be attacked on several front with harsh
assaults so much as it will be relegated into irrelevance, as the USDollar will be ignored and left to defend itself in the
open fields where wolves and dragons roam wild. Note the parallel to the
COMEX, which as a market will also be relegated into irrelevance, as the
precious metals will be traded elsewhere, in markets where private accounts
are not stolen. Entire Compliance Departments have forbidden usage of the COMEX
as of January, due to outlaws overrunning the floors. As the USEconomy is isolated, it will be compelled to bid up
whatever foreign currency is required to purchase commodities and finished
products. In reaction, the USDollar will fall in
value.
In April 2010, a
conference took place in the United Arab Emirates among a couple hundred
billionaires, sheiks, and other royalty. They decided to embrace the Chinese
Protectorate plan for the Persian Gulf, and to accept Russian oversight in
the region. Without the Asian offset to the American aggression, no stability
is remotely achievable. That event served as a clear signal that the sunset
shadows for the USDollar were soon to encounter
reality. The process would clearly require a couple years, but the writing was
on the wall. Much critical structural work would be required to complete, as
trade, banking, currency, and gold management has become far more complex and
integrated for the array of professors to comprehend. Not sure such
developments are detectable in the maritimes,
especially in academic outhouses or local taverns. Furthermore, the actual
Dollar Kill Switch had to be devised, with confirmed connection to the OPEC
oil trade. My source has informed me that the switch is finally in place and
ready. Recent events show the East walking toward the switch. The
numerous defiant gestures by China, Iran, Russia, India, and Japan paint the
billboard in big bold letters. The workaround of the USDollar
is moving fast apace. A confirmation occurred just last week when the Saudis
and Chinese announced a joint project for a refinery to be built on the Red
Sea. The Saudis in effect were tipping their hat to the Chinese, and again
were turning their backs on the Untied States. The
signals are abundantly clear. What we are witnessing is the end of the
Petro-Dollar in slow steps. The steps are unmistakable to those who study the
interwoven nature of global finance. They are easily overlooked by those who
operate within the dome of perceptions controlled by the American apparatus,
and are locked in mental gibberish ensconced in gold basis. The crowning
blow might have been announced this week, as India will pay for Iranian oil
in gold bullion. The news invites many questions. Apparently, the Turkish
intermediary will not be needed. Gold for oil sounds like a historical point
in time.
Backfire extends to
Europe, where the absence of Iranian oil supply will cause some extreme
problems. The shortages are soon to be acute, word coming from a German
source with great contacts in the middle of the mix. He wrote this morning, "The Persians are cutting off oil
shipments to Europe, effective immediately, which will kill Greece, Italy,
and the other Club Med deadbeats. The West with their sanctions led by the
Americans screwed itself royally. The Asians and others are dis-engaging from
the Western banks as fast as they can. Expect to see more wild fluctuations
in the Gold and Silver prices continue. Until this week, the Gold forces did
not know how weak the Anglos already are. They have hardly any firepower
left." Difficult decisions will be made toward the USGovt leadership. It is shaky. It is lacking integrity.
The nation is smeared by the splatter of fraud. Its markets are propped by
the heavy hand of daily interventions. Its economic data is laughed at as a
fantasy. Its elite are given huge grants without global approval. Its central
bank makes decisions unilaterally, without conferring with USGovt creditors. The foreign anger is ripe. The motive
to seek alternatives is at high pitch. Big changes are in progress, pushed
along ironically by the USGovt itself. If their spokesmen insists on the many major global trade
participants to take sides, the crew in WashingtonDC
might be in for a shock, colored by isolation. The real loser will eventually
be the USDollar, whose Petro-Dollar defacto standard is being washed away by central bank
liquidity and leadership arrogance. The US financial body resembles a pig
adorned with lipstick with each passing day.
NEW NORMAL OF
HYPER MONETARY INFLATION
It is hard to describe
fully the lost ways of the US Federal Reserve. The phrase New Normal is a
transparent attempt by financial icons in the private sector to put a face of
legitimacy on a system bound in the USDollar and
its heavy handed management, reinforced by a daisy chain of $trillion frauds.
Such cannot be done. The term was coined by Mohamed El-Erian,
from the PIMCO helm. Bond fraud followed by TARP Fund fraud, followed by
Financial Accounting fraud, followed by Mortgage Contract fraud, followed by
unauthorized multi-$trillion fraudulent grants by the USFed,
followed by the grand sequence Quantitative Easing to wash value out of the USDollar, followed by the unilateral undercut to USGovt creditors, followed by more unilateral decisions
to sanction Iran for nuclear weapon development that even Defense Secretary
Leon Panetta admits is not a reality, well, does not make for global
leadership. It makes for a travesty. Yesterday the USFed
released more directives. So the USEconomy is stuck
in a weak reverse gear. The accommodation will extend until year 2014. These
guys are basic liars. Even Bill Gross of PIMCO takes shots at the central
bank policy or ruin. The United States will suffer financial repression (in
Gross's words) if the Federal Reserve implements additional bond monetization
as policy. The USFed will hold its benchmark interest
rate at near 0% for at least the next three years, as a testament to central
bank failure. No departure from the 0% rate can be done. The USGovt debt service requires it, demands it, and will
default without it. The ZIRP and QE are worn as badges of failure and
dishonor.
Remember the Green Shoots
of USEconomic recovery in 2009? The Jackass
dismissed it as nonsense. Remember the Exit Strategy later in 2009? The
Jackass dismissed it as nonsense. Remember 0% was for just six to nine
months, an emergency policy? The Jackass dismissed it as nonsense. Remember
how Quantitative Easing was to be temporary in 2010? The Jackass dismissed it
as nonsense. Remember how the 0% accommodation was to last until 2013,
announced early this year? The Jackass dismissed it as nonsense. It is all
the stuff of cows and bulls propelled from hind quarters, piling on the
meadow in lumpen form. Tragically, the reality is more simple. The 0% rate (ZIRP) and the heavy hand of
monetized bond purchase (QE) are permanent or else the system falls apart and
collapses. Such an admission would send the USDollar,
the Euro, and all major sovereign bonds to the woodshed for processing in a
pit filled with excrement, where they will ultimately end up. The tragic fact
from the world of economics, is that 0% and bond
purchase kills capital, diminishes the economy, puts business asunder, ruins
jobs, and causes federal deficits to grow. They are not stimulus, but rather
financial formaldehyde.
GOLD &
SILVER READY FINALLY TO RUN
For the last several
weeks, a theme was mentioned numerous times, that the 1650 level would be
defended. It would be defended not just vigorously, but almost to the death.
Enormous naked short positions are in place between 1625 and 1650, put by the
gold cartel. They might be in the process of being overrun. My sources inform
that in November an important team was assembled, and funded to the hilt,
with a mission to trample the gold cartel, to cause a failure in their
attempts to deploy naked shorting in price suppression, to force them to
cover their huge short positions in retreat, to oblige outsized drainage of
the COMEX, to even induce them into draining the GLD exchange traded fund of
its inventory from the backdoor. The team was from the East, and not
necessarily only from China. They are determined. They are motivated. They
are wealthy. They are angry. They want an end to Dollar Hegemony. They see
the Untied States as both weak and corrupt in
visible manner. The time is now. The Iran grappling hooks seem not to find
the fleshy matter of the allied fortress walls. They have been tossed aside,
while new alliances form in defiance.
The US & London tagteam seems not to properly assess their adversary.
These bankers who parrot the English language (but hail from fascist roots)
are not the beneficent lords that they used to be. They have become syndicate
captains and leaders. The events of the last few years have demonstrated
allegiance to the elite and contempt for the masses. The nationalized
financial firms are kept under foot so that the fraud is not exposed. One
would shudder to see the toxic paper mixed among bond fraud and outright
counterfeit, housed safely under USGovt roof. See
Fannie Mae and AIG. The mantra of Too Big to Fail is an epitaph, not a call
to remedy. The chief stanchions of toxicity and fraud are Bank of America,
which would fail without the money laundering lifeline. So it is rescued in
generous offerings.
The USDollar
ship of sea is adrift, soon a derelict vessel. The signs are clear. The
sovereign debt system that serves as foundation is a rotting corpse. The
East is working feverishly to build the alternative system. Look for barter
to be its backbone. By the Ides of March, it should be more
clear. Any controlled demolition of PIIGS debt and bond writedowns will make for quite the event to watch. The
upcoming funding needs of Italy are an order of magnitude greater than the
bond market or the Euro Central Bank can manage. The game breaker events are
nigh. Just this week, India and Iran announced settlement of oil trade
in gold bullion. The workaround seems unique and novel, but with
historical precedent. Before the USGovt
unilaterally broke the Bretton Woods Accord that established the Dollar Gold
Standard, settlement in gold was the norm. The world might
be soon coming full circle.
The US-based silver
production in October 2011 was 30% below the same month in 2010. It went from
117 metric tons to 81.4 metric tons. In contrast, the American Eagle silver
coin production is on a strong upward course since 2007. The current US
silver demand is 117% of the current domestic production level, in deficit.
The USMint will have to import silver. They can
always shut down, or impose a vacation, or ship steel coins clad in silver.
If it works for tungsten and gold, it might work for steel and silver. Be
sure to know that like with gold, the newly assembled Eastern team is at work
in the silver market. Their objective is to cause a failure in the cartel
attempts to deploy naked shorting in price suppression, to force them to
cover their huge short positions in retreat, to oblige outsized drainage of
the COMEX, to even induce them into draining the SLV exchange traded fund of
its inventory from the backdoor. The method is simple, coming from illicit
(but not illegal) shorting of the shares.
CONTROLLED U.S.
PRESIDENTIAL ELECTION
The clues are clear but
only to the alert observers. In year 2000, for the first time a gross
inconsistency showed itself as an anomaly. The exit polls in Florida and Ohio
did not match the election results at the local level. For a full generation,
the correlation had been over 90%, as it should be, since people exiting a
voting center reveal their votes with consistency. This is the left hand and
the right hand coinciding genetically with the same human standing before the
clipboard recording the exit poll. The lapdog subservient US press reported
the anomaly as people changing their minds, or not admitting to the clipboard
their actual voting preference. Numerous statistical studies showed the
anomalies in colored form, to expose Florida and Ohio for its voting system
fraud. Yet another blatant fraud has infected the American landscape. This is
a far cry from legions of dead people rallying to vote for Kennedy in Chicago
during the 1960 election, with the forces marshalled
by Mayor Daley. History has repeated, as 1000 dead people voted in the South
Carolina primary in one city alone. My guess is the dead people voted for Gingrich.
The season started in Iowa, where Ron Paul had a nice steady lead for the few
weeks leading into the caucus. Then suddenly Santorum came out of nowhere to
share the win with Romney. Paul finished a lowly third. The Santorum crowds
were small except for his victory speech. Could it be that the outsourced
vote count took 10% to 12% of the Paul vote and put it in the Santorum bin?
Then in New Hampshire, where vote fraud is much more difficult due to hand
counted ballots, a reality check came. Santorum finished way down the line.
Move on to South Carolina, where again Ron Paul shared the lead position in
the polls. But on the primary day, again Paul finished again a lowly third.
We are told Gingrich won, and justified by having his home state so nearby.
Yet Gingrich had to cancel a couple campaign stops due to lack of attendance.
Ooops! Could it be that the outsourced vote count
took 10% to 12% of the Paul vote and put it in the Gingrich bin?
In a recent article, the
Jackass remarked that the US presidential election process was another
controlled process subject to outsourcing. The patterns of software changing
votes by Diebold loyalists have matured into bolder block changes without
transparency, but such thoughts might be entirely errant.
The blatant maneuvering of voting process fraud will be more
clear by the November confrontation. My contacts back in the states
include an Afro-American lady with a big base of black business contacts.
They do not favor Obama anymore, wondering aloud who he is and what benefits
ever came to the black community. Busloads of urban votes from the Acorn tree
might not be able to conceal what comes in the fraudulent process. Heck, vote
rigging is just one more Third World characteristic, hardly unexpected.
My thought in December 2008 was that Obama would fill two important cabinet positions, the rest did not matter in my view. My forecast
was for Goldman Sachs to occupy the Treasury Secretary post, and for Gates to
continue as Secy Defense. Control of the USDollar and US Banks was too vital to put in the hands
of somebody who required on the job training. Control of the military
projects was also too vital to put in civilian hands, including the critical
wealth generation out of Afghanistan, whose sticky product had clearing house
function in the Iraq Export Bank in Baghdad (run by JPMorgan), with lines
feeding Wall Street for their cut. Both forecasts turned true. The other
cabinet appointments meant little. The Secretary of State has become an
important attack dog, to be sure.
Good riddance to Geithner.
Timmy the Tool is nothing but a mechanic, a diminutive figure from the Wall
Street club, nothing in stature like his predecessor Paulson. If truth be
told, the Chinese probably ordered him out of office, after far too many ridiculous
meetings on Beijing soil. Timmy's battle cry of currency manipulation had
grown tiresome. The laughter given him by university students two years ago
was too much to stomach, when he claimed the US financial structures were
strong and sound. Let's watch to see if the next Treasury Secretary is of
Goldman Sachs pedigree. Its firm death grip on American bank rule has been
evident since Rubin in 1994. Few seem to realize it is all downhill toward
ruin since that fox took control of the American henhouse, jumping the pond
from the London Gold desk of Goldman Sachs. The eggs are gone and the hens
are sterile. All that is left is cartel droppings.
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