MONETARY CRISIS REPORT
CLIMAX OF FINANCIAL FRAUD
COMPREHENSIVE GUIDE

* Monetary Fragments
* USDollar End Game
* Dollar Foreign Front
* Central Banks & Busted Bonds
* USFed as Toxic Centrifuge
* Broken Bank Walls


HAT TRICK LETTER
Issue #97
Jim Willie CB, 
“the Golden Jackass”
22 April 2012

EDITOR NEWS FLASH: a German banker contact informs that as a result of a high level meeting in Germany (not in the news), a decision has been made for France to exit the Euro currency first. They are ordered out. Regardless of whether Hollande displaces Sarkozy for the president post, the French have been instructed as to how business will be conducted. No other information, like whether France will revert to the Franc currency and not risk a severe Latin Euro devaluation after Germany and Netherlands depart. My impression is that Germany will launch a new currency very soon. Perhaps they wished for France to take some of the attention and to begin the chaotic process. The contact has consistently stated that France would not be included from the new Nordic Euro, an exlusive core group of Central European nations that qualify by having a current account surplus. French debt is too great, and likely to soon expand much worse. He said France would become a ward of the German state, with dictated policy and direction. Bear in mind that Germany owns of 90% of the French Govt debt. It remains to be seen whether France will assume the lead position among the PIGS, whose nations will all go adrift. Rumors of a Latin Euro Central Bank located in Marseilles were once spun.

"When stocks lose their value, that is a terrible thing. When homes lose their value, that is a terrible thing. But when money loses its value, that is the most terrible thing of all." ~ Darryl Robert Schoon


"The USDollar is an instrument for hyper-inflation, bond fraud, big bank largesse, and endless war. Foreigners have begun to organize against the abused corrupted global reserve currency. American citizens seem oblivious to what is happening, distracted easily by all manner of topics." ~ Jackass

"It is interesting to follow a counter-power system growing very rapidly since it is not easily intimidated. The alternative challenging system has structures that are collaborative and relational rather than hierarchical. The hierarchical power structures do not stand a chance to unhinge these new structures. It is like trying to nail a jelly pudding to the wall or trying to fight against a powerful cloud." ~ connected sassy gold banker (referring to global anti-US$ revolt)

"Some people think the Federal Reserve Banks are US government institutions. They are not. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign and domestic swindlers, the rich and predatory money lenders. The sack of the United States by the Fed is the greatest crime in history. Every effort has been made by the Fed to conceal its powers, but the truth is the Fed has usurped the government. It controls everything here and it controls all our foreign relations. It makes and breaks governments at will." ~ Congressman Charles McFadden (Chairman of House Banking and Currency Committee, 1932)

"The idea is in line with many interests and economic exigencies in the world economy. The Euro and Dollar are no longer seen as unquestionable monopolies in the role of reserve currencies. Clearly the world needs more reserve currencies." ~ Yaroslav Lissovolik (chief economist at Deutsche Bank)

"Regardless of the fact that Quantitative Easing has had no durable economic benefits, and does little but to repeatedly lay fresh wallpaper over the rotting edifice that is the global banking system, the main effect of QE has been to provide temporary support for the most speculative corners of the financial market after they have been pummeled." ~ John Hussman (for a good review essay, CLICK HERE)

"We have found some evidence that at the very long end of the yield curve, where Operation Twist is concentrated, it may be not just the stock of securities held by the Fed but also the ongoing flow of purchases that matters for yields." ~ Jan Hatzius (from Goldman Sachs pointing out that it is flow, not stock, that matters on the USFed balance sheet)

"The allegory of Jaws can be applied to liquidity addicted capital markets. Translated simply, it means that it is irrelevant if the Fed's balance sheet is $1 million, $1 trillion, or $1000 quadrillion. A primacy of flow over stock means that unless the Fed is actively engaging in monetization at every given moment, the impact from easing diminishes progressively, ultimately approaching zero and subsequently becoming negative!" ~ Tyler Durden (the brilliant irrepressible soldier from Zero Hedge)

"Decades of foolishness, debt accumulation, and a materialistic feeding frenzy of delusion have left the world broke and out of options. And still our leaders accelerate the debt accumulation, while encouraging the masses to carry on as if nothing has changed since 2008. Sadly, millions of lemmings want to believe they will not drown in the sea of unpayable commitments. Truth is a scarce resource on the planet today." ~ Jim Quinn (Burning Platform, for a good review essay, CLICK HERE)

"My Economics college degree training taught me jargon. The experience polluted my mind with misinformed jibberish and grotesque hubris about accepted heresy. It omitted very important topics, with zero mention of the Gold Standard, except that it failed. It prepared me for working on international markets, taught paper jockeying, and developed expertise in the great bond game. I was forced to unlearn what was learned in a great challenge, much like a escaping a Flat Earth Society." ~ Rob Kirby (economics degree holder)

## MONETARY FRAGMENTS

◄$$$ A QUICK IRAN UPDATE. THE QUINTET OF NON-INDUSTRIALIZED NATIONS SHOWS DEFIANCE. EXPECT SOME RELEASE OF RESERVE CRUDE OIL TO ALLEVIATE ANY SUPPLY PRESSURES. THE SANCTION PARADE CONTINUES WITH MORE TARGETS. THE DECEPTION AND MISDIRECTION IS ENORMOUS. IRAN IS A TARGET FOR SELLING ITS CRUDE ON THE WORLD MARKET OUTSIDE THE US$ FRAMEWORK, AND THUS ATTACK THE PETRO-DOLLAR. IRAN IS ALSO A MAJOR COUNTERFEITER OF USDOLLARS. JAPAN HAS SHOWN TO BE A MAVERICK, INSURING IRANIAN OIL SHIPMENTS. EXPECT NEW MARITIME INSURANCE TO BLOSSOM IN ASIA AND THE EAST. $$$

The BRICS nations of Brazil, Russia, India, and China, together with South Africa claim in defiance that they are not bound by sanctions on Iran. They object to the unilateral decisions made by the United States. These five organized nations regard the dictum as threatening higher global oil prices that could breed supply shortages. Nevertheless, South Africa has cut its dependence on buying oil from Iran, and is proactively working to diversify its purchases. The criticism is heard frequently that for sanctions to have meaning and legitimacy, the call must come from the UN Security Council, something the megalomaniac US leaders find distasteful.

Crude oil supply is hindered by obstructed Iranian sales. The Saudis cannot compensate for the cutbacks, since they have almost nothing in spare capacity. For years they have lied. The

United States, United Kingdom, and France are considering release of strategic oil reserves. A coordinated emergency release of oil stocks is early in the planning. The French ministry claims that the US had requested a coordinated release. The group awaits analysis by the IEA. Maria van der Hoeven, head of the IEA, had earlier concluded that a coordinated IEA release is not warranted due to the lack of significant supply disruption on world oil markets. That seems an obtuse position. She advised countries to choose by themselves to release stocks after consultation with the agency.

The US Senate has some elements that object to Iran sanctions without a declaration of war, which has not been done. Thus the sanctions are an aggressive pursuit of the President and USDept Treasury. The Senate failed to pass a bill on increased sanctions targeting foreign banks that handle transactions for Iran's national oil and tanker companies. It also included several measures aimed to close loopholes in existing sanctions. The USGovt added an Iranian cargo airline, and a Nigerian trading firm to its Iran sanctions blacklist. Supposedly thye had conspired to funnel weapons to Syria and Africa disguised as humanitarian aid and building materials. Doubt the accuracy of that accusation. No independent agency verified the charge. Nothing was mentioned in the Congress recently about the USMilitary flooding the Iranian borders with narcotics from Afghanistan, a longstanding practice. Some topics are taboo.

Fully 95% percent of the global tankers will be able to carry Iranian oil only if willing to conduct shipment without insurance coverage. That includes collisions, fires, and oil spills. The insurers are affected by a European Union embargo that takes effect July 1st. Besides blocking SWIFT transactions to Iran, the Western financial system appears to have deployed maritime insurance as a weapon of means to blockade Iran. Note that China, Japan, and India are looking at providing their own sovereign coverage on insurance. The most recent to announce insurance underwriting was Japan. The West is forcing the East to create an alternative to Lloyds of London as well as an alternative to the SWIFT system. They will likely do exactly that. In the process, the United States and United Kingdom will be isolated. Europe will be divided and eventually (my belief) side with the East in an act of practicality and defiance. Perhaps Shanghai or Mumbai will replace London as the insurance capital of the world. Besides, Lloyds is wrecked as a company, having been forced to seek UKGovt aid with crutches. The West has created another investment area for the Chinese to spend their USTreasury Bonds as a platform foundation in promising new business. See the Tehran Times article (CLICK HERE).

◄$$$ THE TURKMENISTAN ANGLE HAS ENABLED IRAN TO SHIP SOME CRUDE OIL VIA SWAPS WITH ITS FRIENDLY NEIGHBOR. THEY HAVE ACCESS TO THE IMPORTANT B.T.C. OIL PIPELINE. DETAILS ARE SKETCHY AND WILL NOT YET BE REPORTED. $$$

◄$$$ RUSSIA, IRAN, AND GERMANY FIGURE IN A POTENTIAL CHESS MOVE.

THE THEORY DESERVES MERIT. THE MOTIVE IS TO DRIVE GERMANY INTO RUSSIA'S ARMS AND THUS HELP ADD STRENGTH TO A GROWING PARTNERSHIP. THEIR NEW COLLABORATION WILL BECOME A KEY FOUNDATION TO THE NEXT CHAPTER OF EUROPE. RUSSIA'S GAIN IS THE AMERICAN LOSS. $$$

For five years, the Hat Trick Letter has described Europe as the grand prize, taught by friend JohnM in Zurich. How true! Germany is making important ties with Russia for developing trade and reliable energy supply. In keeping, Russia wins Europe, while the United States will be pushed aside in Europe. The US has horrendous strategists, or else has no more cards to play. The Weatherman is a Hat Trick Letter subscriber with a solid argument, which the Jackass will expound upon. He follows the path of events. Spain had its oil shut off from Iran. Their government bonds went crazy. Then Germany and Italy were threatened by Iran to have their oil shut off. That effectively rattled the EU cages enough for the continent to push back on the United States. The US backed off from the SWIFT bank sanctions aimed at the European nations, a serious overstep breach. Two elements stick out. Iran is at Russia's beck & call from the ample arms deals, such as the Sunburn missiles that guard the Iranian coast of the Persian Gulf. Second, the sequence is how Russia are going to play hero to Italy.

Russia already owns a significant stake in Italian oil companies. The Italian Govt Bond yields are driven up. Then Russia comes riding in on horses like Cossacks to save the day. The public outcry generated creates a path for Germany to seek and locate crude oil elsewhere. Aha! They found Russia, bringing closer ties between important chess players. So Iran serves as a key piece on the chess board to enable a delayed check from the German column in collusion with the Russian chess master Vladimir Putin. With Peak Oil still threatening ample unlimited supply, the future Germany-Russia relationship will be left to do deals and trade huge crude oil volume. The United States has its hands full with the cooperative footwork among Russia, Germany, and Japan. Nevermind China, the obvious antagonist and building foe.

◄$$$ INDIA'S CENTRAL BANK CUT RATES BY A HEFTY 50 BASIS POINTS IN RESPONSE TO A LAGGING ECONOMY. THE ENTIRE GLOBAL ECONOMY IS SLOWING, PULLED DOWN BY THE USFED BOND MONETIZATION PURCHASES AND UNIVERSAL 0% RATE. THE KILLED OR RETIRED CAPITAL CONCEPT ACTS LIKE A WRECKING BALL, NOT NOTICED BY WESTERN ECONOMISTS. $$$

The Reserve Bank of India's (RBI) moved on April 17th to cut key official rates for the first time in three years, this time by an emphatic 50 basis points. They move is intended to provide much needed relief to consumers and bankers. Aditya Puri from HDFC Bank MD said both deposit rates and lending rates will come down, but not right away. The lead banks promised that interest rates would go down, but not too soon. They must exploit for profit briefly. Pratip Chaudhuri is chairman of the State Bank of India. He said, "Of course, the rate cuts will be passed on. Let me admit, after the last Cash Reserve Ratio cut of 75 basis points, the transmission has not happened fully because that came in the month of March. So, we were just slightly watchful of the liquidity situation." He expected that SBI might make a comprehensive rate cut but not across the board, only in particular segments. See the Times of India article (CLICK HERE).

◄$$$ UNITED STATES LEADS THE WORLD IN CORPORATE TAXATION, BUT WONDERS WHY BUSINESS CANNOT GROW ON THE DOMESTIC FRONT. INDUSTRY HAS NOT RETURNED TO AMERICAN SHORES. THINK DEAF DUMB AND BLIND. $$$

America is used to lead the world in business formation and industrial diversity, with innovation and work paying off handsomely. The US manufacturing sector contains a mere nine million jobs. A generation ago, it was triple that figure. The US currently leads the world in demanding taxes from companies. On April 1st, Uncle Sam became the fool. The US has garnered the dubious distinction of being the industrialized nation with the highest corporate tax rates. Japan just reduced their tax rates, coming to their senses. The Tokyo leaders cut corporate taxes in Japan down to 38%, rendering America's 39.2% rate the world's highest. In fact, it stands far above the average of 25.4% for developed nations, according to the Organization for Economic Cooperation and Development. The US leaders mindlessly wonder why job growth cannot be revived. It is because they inhibit it, like clueless clutzes. See the Yahoo Finance article (CLICK HERE). Worse, the USGovt still has tax breaks for corporations that expand or have headquarters overseas. They seem ignorant to the reality that the US must encourage the return of industry to US shores, a major source of legitimate wealth. It is absent. The nation is in love with asset inflation, a truly lazy solution that has a perfect track record of failure and widespread ruin. The reams of USGovt regulations also inhibit business, as does the prohibitive Obama Health Care.

## USDOLLAR END GAME

◄$$$ THE USDOLLAR END GAME WAR IS IN PROGRESS, AS MANY FACTORS ARE ALIGNED. HOWEVER, NEUTRALIZATION ELEMENTS ARE IN PLACE. THE UNITED STATES WILL BE FORCED TO WALK THE GAUNTLET INTO THE THIRD WORLD MARRED BY INFLATION AND SHORTAGE. MANY ARE THE WEAPONS POINTED AT THE UNITED STATES IN CONSEQUENT REACTION TO STRAINED POLICY. $$$

Ron Hera does excellent work. He laid out the many high risk factors at work with the Iran threat and the resulting sanctions in reaction. My opinion for over seven years has been that the threat from Iran is highly exaggerated, their nuclear capability is primitive, and the weapon potential is almost insignificant. My expectation is of continued standoff and no wider war, even if the USDollar is rejected from the world stage. The United States is being forced to walk a gauntlet into a very ugly desolate place, many of its weapons already neutralized. The bank weapon is the final straw. Hera puts high odds on a war outcome as the USDollar fades into the dustbin of history, saying "Given the history of the US dollar, it seems likely that an eventual end of the US dollar's reign as the world reserve currency will be marked by war." The Jackass disagrees, not based upon empty hope toward humankind. Rather, Russia and China have already made a large imprint like cops to ensure that a hot war does not break out. Also, Israel has never been more isolated, with only loose leash attached to the USMilitary. The former (the ally) are contending with an unprecedented degree of lost command and internal problems. Russia might be permitting more violence internal to Syria, but it serves as substitute perhaps for a wider war centered on Iran. China is taking action also, having neutralized one USNavy warship near the Persian Gulf with an electro magnetic pulse usage. This event display was not reported in the lapdog Western press. Also, Iran has in place a scattered array of Sunburn missiles from Russian origin ready to inflict staggering damage to the USNaval fleet in hours. The standoff is easy to see if the US press slant is put aside.

The pressures so far are to lift the crude oil price, to isolate the US further, and to motivate the usage of alternatives to the USDollar in global trade even beyond the crude oil transactions. The Iran sanctions hide the true motive by the USGovt and USMilitary to confront Iran in at least a war of words. It is to protect and preserve the singlemost tool of financial tyranny in modern history, the USDollar. A parallel exists with acts from the Iraq War prelude, since Saddam Hussein sold crude oil in Euro terms for two full years before being canceled. It was not always this way, but in the last 15 years, without question the global reserve currency has been converted into a tool of fascism, extortion, theft, counterfeit, and financed aggression. In other words, hegemony. The United States has gradually transformed into the center of the global Axis of Fascism, while at the same time grabbed the global monopoly on narcotics through the direct bold abuse of USMilitary bases. Airport abuse is the flick of the public's nose in defiance. Water bottles used to be a common method to transport white diamonds. The shoe removal is for distraction and comedy. In my view, the most damaging policy so far has been the SWIFT tool used as a weapon. Its backfire has been a colossal event of failure, which has galvanized resistance in the rest of the world, including to some extent the US allies in Europe. See the Financial Sense article entitled "The War at the End of the Dollar" by Ron Hera (CLICK HERE).

The big miss here is the influence of Russia and China, almost totally overlooked by Hera for its stabilizing effects. The two superpowers serve to obstruct the aggressive US initiatives. He falls victim to the US media propaganda on the nuclear threat. It is somewhat low, while the USDollar threat is exceptionally high. What Hera writes is true enough, but he does not adequately lay out the countervailing forces. The United States, its government, its military, and its economy, will be forced to adapt to a magnificent decline due to the removal of the USDollar from its dominant post. The government in WashingtonDC will face debt default. The defense establishment will splinter into a new Odessa Corp. The economy will endure strong price inflation and broad shortages in an accelerated deterioration. The leaders (political, banking, and military) will share motive to strike at the foe. But the foe is gradually being identified as the entire world, even parts of the shrinking group of ally nations. If the US strikes, it will shoot itself in the foot, leg, groin, gut, and wallet, then later in the head.

A rising crude oil price is a global vote against war by means of the economic lash of a whip. Hera provided some key details on the standoff itself. He wrote, "Demand from emerging economies, particularly China, is placing steady upward pressure on the price of crude oil. Higher oil prices resulting from a combination of a weaker US dollar and increased global demand threaten to push the US economy back into recession. Setting aside flat to declining supplies of sweet light crude oil (Peak Oil), the fact that the price of gold has risen roughly 500% in a single decade suggests much higher oil prices in the future. Iran, which is the world's third largest oil exporter and a major supplier of oil to China, lies outside of US control. Iran refuses to sell oil for US dollars, partly as a consequence of the overthrow of the democratically elected government of Iran in 1953, orchestrated by the US Central Intelligence Agency, and partly as a consequence of current US policies in the Middle East.

In March of 2012, the United States unilaterally removed Iran from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system, effectively cutting it off from world commerce. However, wielding the US dollar's world reserve currency status as a blunt instrument could be counter-productive in the current international climate. If the US dollar were to lose its world reserve currency status over a short period of time, a US sovereign debt crisis would be certain and a catastrophic collapse of the US dollar, i.e., hyperinflation, would be possible.

Having taken a decision to act unilaterally against Iran, the United States may be forced to resort to more extreme measures if the world reserve currency status of the US dollar begins to break down. Of course, the US does not control the oil trade solely through financial means. With Israel as a close ally, Iraq and Afghanistan occupied by US forces, close ties with Turkey, Saudi Arabia, Kuwait, Qatar, and other Middle Eastern countries, Iran is surrounded by more than 40 US Military installations. A successful invasion of Iran would eliminate the largest non-US$ oil exporter, delaying the breakdown of the US dollar's status as the world reserve currency. Although a war with Iran would cause a spike in oil prices, US control of Iran's oil would increase the supply of oil available for purchase in US dollars, which would bring the US dollar price of oil down and enhance the ability of the US to manage the price of oil to meet the needs of the US economy. Controlling a major supplier of crude oil to China and India would give the United States additional leverage to support the US dollar and US debt, as well as a means of influencing the policies and economic growth of the two largest nations. The option of invasion, however, may be time limited. If Iran were to eventually obtain nuclear weapons, the risks involved in a United States invasion would escalate." Hera does not notice that China will work to obstruct US initiatives that would result in crude oil cuttoff to China from Iran. He has not noticed that China already has given a demonstration.

◄$$$ USGOVT DEBT IS GROWING 4X FASTER THAN THE USECONOMY, EVEN IN THE DOCTORED DATA SCENARIO. THE REALITY IS MUCH WORSE, AS THE DEBT GROWS EXPONENTIALLY WHILE THE RECESSION TAKES DEEP ROOT. ACTUAL DEBT GROWS FASTER THAN REPORTED. ACTUAL GROWTH IS NEGATIVE AND STUCK, SURELY NOT REPORTED. THE RECESSION IS IN ITS FIFTH YEAR, PULLED DOWN BY THE HOUSING DECLINE, THE BANK RUIN, BOND FRAUD, AND WAR. NO BASIS FOR GROWTH EXISTS. $$$

Give benefit to the propaganda story on recovery for a minute, but only a minute. The USGovt debt is growing at a rate four times faster than the USEconomy as measured by its official GDP. This is an unsustainable situation. It is made much worse by the fact that the debt is much greater than reported, and the economic growth is actually a recession stuck in reverse. The debt to growth factor is an order of magnitude worse than what is common presently and observed. Factor in the hidden costs of wars and security agency black ops and the domestic black holes (Fannie, AIG) and the coverage of big US bank derivative craters. The debt is much worse when JPMorgan and other Wall Street derivative coverage is factored in, possibly into the multiple $trillions. Then consider the USEconomy and its Gross Domestic Product. In reality (where people and business live), the GDP is in a minus 3% to 5% steady decline, never having recovered or lifted itself from the mire of the Lehman failure. The removal of US industry to Asia, the climax being to China, ensures no recovery. The US can find no traction for recovery without a critical mass of industry, period. When factoring in the actual price inflation adjustment, with the CPI ranging from 8% to 11% for the last four or five years, the GDP is seen without rose colored glasses to be stuck in a powerful recession of something like minus 4%. This is utterly basis. In fact, the Shadow Govt Statistics folks show that even the nominal GDP without adjustments tends to be falling from one quarter versus the same quarter a year ago.

The nation is heading to a USGovt debt default, as forecasted in 2008 by the Jackass. All in time. The establishment of a new Nordic Euro and the new Chinese Dollar will torpedo the US, and accelerate the decline since it will isolate the USDollar and USEconomy further, subjecting it to more price inflation and more widespread shortages. The defiant US will try to avoid bidding up new competing global currencies. The broad wrecking ball is the USFed monetary policy itself. The 0% official rate misprices money, ensures a rising cost structure in response, and ultimately kills capital. As profits slowly fade away in a relentless squeeze, working capital is retired and liquidated. The response to 0% is not from speculation but rather real market forces. The real inflation adjusted rate of interest has been negative since 2008. Greenspan warned about an installed ultra-low official rate lasting more than six to nine months. Not only has Bernanke been forced to suspend monetary policy, but he has made the 0% rate a fixture in permanent policy. The national debt management is being stretched to the breaking point.

President Obama has an effective distraction underway, regarding tax measures on the wealthy. It is often called the Buffet Rule plan. He enjoys the speech from the pulpit like a populist demagogue, proclaiming the path to the 21st Century for the United States is a fair tax levied on the successful. He is way off base. Redistributed wealth is no solution, certainly no panacea, since it is the socialist way. The best path is to build and grow the entire tax base, not refine the tools to distribute the shrinking pie that leaders oversee through dimwitted policy. The path to the future prosperity is made from low tax on corporations (US is the highest), from removal of regulations (US is worst), from solid education (US lags badly), from return of factories (US shipped them to Asia), from reasonable social safety net (US has a huge net), and from toning down the military spending (US is higher than rest of world combined). These are the earmarks of capitalism, a lost science in the United States. Sorry, but tax on the rich is the distraction, even a trap door into a further slide, not the door to the future. And the secret to a stronger USEconomy is not finding a way to put money into people's pockets by any means. It is from efficient credit engines, effective capital formation, innovative ideas (like patents), job creation, and hiring of qualified workers that produces legitimate income. American leaders have no concept of capitalism anymore, as they lean too heavily on redistribution, inflation, aggression, and fraud.

The constant theme is propaganda and deception to hide a faltering economy, one not improving at all. Recall the nonsense about Green Shoots, an extension of the scorched earth imagery. The current quagmire of a listless and regressing USEconomy would surely not be called Green Shoots II. Look for a recycle of propaganda themes. Recall the nonsense about Exit Strategy, when the USFed is stuck at 0% and embarrassed. Lately Bernanke proclaims the wisdom of the stuck official rate. The clueless bank analysts are talking again about raising rates. They are sell-side experts on the financial markets and justifying a crippled USEconomy though. Let's see how they label it, surely not Exit Strategy II. The Home Loan Modification plans have no altered themes, just the straight constant empty promise of aid, coupled with absurdly minimal volume. All the commonly bandied themes are false. It is pure Orwellian in stench. Lies told boldly, and if bold to the extreme with an official marquee emphasis, it becomes like Goebbels.

The principal theme that must be emphasized and acted upon, but hardly ever is, centers in my view on the urgent need to move away from finance as wealth output and back to industry. The nation has gone down the tubes with the outsourcing of industry to Asia that began in the 1980 decade and hit climax early in the 2000 decade, with disastrous consequences still not properly recognized. The talk of building jobs is dishonest, incompetent, and replete with pedagoguery as long as the topic of returning factories to US shores is avoided. That would bring focus to the decisions made in the past that actually continue. See Cisco Systems and IBM on outsourcing. The fact that factories are dirty must be dealt with intelligently. Nothing wrong with factory dirt, which can be managed. Humans eat a varied diet including proteins, with dirty effluent as well, something dealt with intelligently in bathrooms, water closets, sewer systems, and sewage treatment plants, the biggest of which is Fannie Mae. The United States must remove itself from the notion that finance creates wealth. It should be a utility, a smart utility, to aid in business development and capital formation, not speculation and not asset inflation.

◄$$$ A MAJOR CULPRIT FOR USGOVT DEBT IS MILITARY SPENDING. IT IS NO LONGER DEFENSE. THE US-MILITARY SPENDS MORE THAN THE REST OF THE WORLD COMBINED, BUT NOT IN GLOBAL SERVICE. ITS COST IS A GRAND BURDEN AND DEFICIT AGENT. THE BURDEN IS HUGE WHILE THE BENEFIT IS ABSENT. MILITARY CONTRACTORS ARE THE ONLY BENEFICIARIES, ALONG WITH AGENCY NARCOTICS PROFITEERING. THE WORLDWIDE RESPONSE IS NEGATIVE TO THE AGGRESSION, SEEN INCREASINGLY SEEN AS DEFENDING THE USDOLLAR REGIME. THE ENTIRE WORLD WATCHES AND REACTS, THUS ADDING MOMENTUM TO THE ANTI-US$ REVOLT. $$$

The United States accounts for 45.7% of total military spending by the 171 governments and territories of the entire world. But, like with federal debt and economic growth, the reality is worse then the commonly seen reports. Do not overlook the ancillary costs. Add in all of the non-Defense agency costs, to arrive at a much higher figure that approaches $1 trillion annually. The USMilitary retirement spending adds $20 billion. Veterans Admin aid for prosthetic legs and arms, and drugs for post trauma adds more cost. Tack on military aid to countries like Israel and Pakistan, where the drone aircraft are killing civilians by the thousands, a certain negative payback. Add in secret black operations costs by the security agencies, whose specialty in smuggling seems to start wars (see Africa and Congo), whose activities result in gold hoard confiscation (see Libya), and more. Add in Homeland Security costs which beef up airport abuse, border rudeness, and more. Add the budget for countless worthless projects in the USDept Energy, in addition to their Solyndra fiasco on green energy, more negative results.

If one combines the annual interest on the national debt, the total US defense related spending pushes up to $1 trillion. Currently spending by the federal government accounts for 24% of GDP. In 2001, just eleven years ago, it accounted for 18% only. The USGovt exempts itself, unlike the nations of Southern Europe, from austerity measures, reasoning openly that it would move the USEconomy in the wrong direction. The constant banter about terrorism enables the outsized high US Defense budget. The fiscal and debt situation in the United States is ruining the USDollar in a grand insolvency, while the central bank leads a grand debasement chapter. The result is a grand encouragement for the entire world to take defensive measures. Thus the anti-USDollar revolt.

The USGovt keeps many counter-productive policies in place. Consider that the United States has world's highest corporate tax rate at 39.5%, when central government, regional and local taxes are factored in. Countries like China continue to shun the purchase of USTreasurys. In 2009, the total foreign purchases of USGovt debt amounted to 6% of GDP. Here is the shocker of isolation, a response of indignation to USFed hyper monetary inflation. The foreign USGovt debt purchase has fallen by over 80% of overall USTreasury sales. The USFed picks up the entire slack in debt monetization. The US Federal Reserve bought 61% of all government debt issued by the USDept Treasury in 2011. The debt monetization, otherwise called printing money to buy your own debt, is the most grievous devastating disastrous inflationary act a country can do. It is highly destructive to working capital, and the cause of rising cost structure, later possibly a significant price inflation event. The USFed is currently buying over 80% of the USGovt debt. See the Market Oracle article entitled "Sovereign Debt, Gold and Okun's Law" by Richard Mills (CLICK HERE).

◄$$$ CURRENCY PREPARATIONS FOR D-MARK HAVE BEEN IN PROGRESS FOR SOME TIME. THE STAGE IS SET ON THE GIGANTIC RESCUE FUND FOR THE GERMAN BANKS, CERTAIN TO FACE MASSIVE LOSSES FROM THE CRATERING P.I.G.S. BONDS. THE CLEAR CLUE ON SOMETHING BREWING ON THE CURRENCY REFORM FRONT IS THE STOCKPILE OF CURRENCY WITHOUT MARKINGS ON PLAIN QUALITY PAPER. THE EURO CENTRAL BANK HAS SURPRSINGLY LITTLE CONTROL OVER BANKNOTE PRODUCTION. THE TRIGGER LIES IN SPAIN, NOT GREECE. $$$

Two glaring signals within Germany. Plain banknote paper is being stockpiled, and the Bundesdruckerei printing firm was renationalized. Germany in the past few months has built up a gigantic bank rescue fund, reported in recent past Hat Trick Letter reports. A ripe $1 trillion at least in bank losses is anticipated. They are ready to aid the big banks after departing the Euro Monetary Union, which will inflict powerful losses on bank balance sheets from the sovereign bonds left in the Latin Euro hands. They will depreciate from both lost confidence (bond principal, rising yield), and currency decline (Latin Euro bagholder with toxic remnant core). Truly dangerous but intriguing times in Germany. This story has been verified by my German banker source. Credit goes to the Slog for details, the same source as previous cutting edge reports. Follow the trail of key events like big bread crumbs, leading to the conclusion of a new German currency initiative. Berlin is sitting on a huge stock of unprinted banknote quality paper, and has reduced the amount of its existing Euros in circulation. The Nordic Euro is nigh, or call it the Euro Mark, my preference since it has a traditional German imprint of integrity. Consider the many indications of imminent new currency launch.

  • The European Union system of banknote printing is easy to abuse. The Bank of Greece was caught in unauthorized printing of Euros.
  • Germany ordered a large consignment of plain banknote paper from its main supplier in 2010. They have the quality paper in readiness to convert to another currency, or to revert to the Mark. A substantial proportion of the plain banknote paper was ordered by the BundesRepublik.
  • Germany printed fewer Euros than normal, when in the EuroZone the printing of Euros generally was on the increase. The main banknote printer Giesecke & Devrient in its annual report revealed its Euro printing division saw a dip in sales during 2010, when the number of EuroNotes in circulation went up by EUR 7 billion, a 16% drop. The EU Economy grew by 4%.
  • Germany has led the circulation growth every year since original Euro launch. It has the lowest credit card and bank card usage rates in the EU, and easily the highest consumption of cash for transactions.
  • The other Berlin government banknote supplier Bundesdruckerei was quietly nationalized by early 2009, in order to protect security policy interests. It has expanded into multiple security related fields after being privatized in 2000. Even more intrigue, since Giesicke & Devrient complained to the media that it had made a bid for Bundesdruckerei at a very fair price. The German Govt quashed the offer, in order to secure control of the Bundesdruckerei.

The entire EuroNote production market and related stories demonstrate how little real control the ECB has daily basis. It prints only 8% of all the banknotes in circulation. Over 80% of banknotes are produced by the EU members via state print suppliers, often dedicated controlled nationalized firms. No country in the EU prints money on contract for any other member nation. Each output has a different serial prefix to identify it, making the task simple to detect unauthorized printing. Obviously, Mario Draghi at the Euro Central Bank is aware that the Bank of Greece has been printing without permission, but he has chosen to do nothing in response. From an opposite perspective, the EuroCB answers to nobody, a mini-monetary kingdom. When the European Parliament requested the issuance of 1 and 2 Euro currency notes, the ECB under Trichet ignored the motion. Popular demands and priorities mean zippo. Follow further events. In Germany the Christian Democratic Union party voted to allow European member states to quit the currency area, endorsing a pathway opposed under Euro Monetary Union rules. The statement of intent (not approved law) reveals the need for the option to depart the Euro if Berlin leaders feel compelled to act. Like fine engineers, Germany has every angle covered.

Another Slog item. The German banking community has told Chancellor Angela Merkel, "Either Greece must be amputated, or we must leave the EuroZone." Look for both directions to be taken, amputation and departure. The decision will be made obvious for a German exit solution in a post-election repudiation of the Brussels Accord in Greece, alongside collapse in Spain and Portugal, possibly France also.

The hot button is Spain in my view, to force change and open the door to chaos. Right wing fanatics are having their way in Madrid during volatile pressured times that require decisions on reform and change. Some extremely harsh cuts in health, education, and social services have ignited a public uproar and backlash. Journalist Pepe Escobar wrote, "It is a counter-reformation that erases with a single stroke many labor and union rights acquired by the working class in decades and generations. The catalogue of Spain's austerity is the usual catalogue of neoliberalism in trouble. A previous nominally socialist and now an ultra-conservative government have furiously decimated unemployment, retirement, and severance benefits. It has turned virtually all labor contracts into precariousness hell. It has steeply raised fees for education and transportation, vastly militarized the police, and spent fortunes to bail out banks." Sounds eerily like the United States and its embrace of the Fascist Business Model. See the CounterPunch article (CLICK HERE).

Gonzalo Lira pitched in a perspective on Spain. He is afforded a close view from his current Paris residence. He wrote, "The more you look at the situation cold-bloodedly, the more obvious it is that a EuroZone exit and devaluation is the absolutely best thing for the long term health of the Spanish Economy. It remains to be seen if the Spanish leadership will have the cojones to do what has to be done, to save the Spanish economy: Exit the Eurozone, devalue, and rebuild." Lira makes an excellent comparison to the Corralito phenomenon in Argentina and what might be expected in Spain. Tens of thousand of citizens in Buenos Aires lost most of their life savings. See the Gonzalo Lira articles (CLICK HERE and HERE).

◄$$$ EXPANDED EMPOWERED ROBUST EURASIA LIES AT THE DOORSTEP. THE WESTERN ANALYSTS AND PRESS ARE TOTALLY OBTUSE TO DEVELOPMENTS IN CENTRAL EUROPE. GERMANY IS FORGING AN ALLIANCE WITH THE EAST, LED BY RUSSIA AND CHINA. THE ODD MAN OUT IN EUROPE WILL BE FRANCE, AN IMPORTANT HISTORICAL LINK IN THE US/ANGLO CHAIN. THE POWER AND WEALTH AND COMMERCE AND RULES WILL SHIFT EAST. $$$

To my excellent astute reliable German banker source, the Jackass shared a viewpoint regarding the imminent changes in Germany vis-a-vis the Euro currency regime. My comment was that loosely and inferentially, the new currency for Germany will be accepted for Russian trade, and Chinese trade, and investment with both nations. An important factor dictates that a new strong currency should not run alone, vulnerable to becoming a victim of its own success due to export trade impact from a rising exchange rate. My thought is that simultaneously, expect a mix on the new currency front between what has been formulated as the Nordic Euro, crossed with the gold-backed Chinese Yuan. At least in the immediate the Chinese Yuan will be fully convertible. But talk of future gold backing will fortify it and take slack off the new Nordic Euro, or new Euro Mark, whatever Germany decides to call it. Add to that the possibility that a Russian Ruble currency could have some hint of gold backing or energy commodity backing, like a given ratio of crude oil and natural gas.

The kicker to add to the trifecta of new currencies could be, a long shot admittedly, a gold-backed Gulf Dinar. For seven years the Gulf Coop nations have been threatening its launch, dithering and relenting under US/Anglo pressure. But with a new Russian-Chinese protector in agreement for the Persian Gulf region, the Saudis might lead the charge and agree to a gold-backed Gulf Dinar, since given protective cover provided in the financial arena by Germany, China, and maybe Russia. A four-way new currency launch would mitigate the risk to Germany, and strengthen the Eastern Alliance, a primary initiative for the development of Eurasia. The time is perfect for the Arabs to grow a pair and show some guts. The United East, together with Central Europe attached by cable lines, would represent a lethal blow to the US/Anglo dominance. The USDollar and British Pound would have to bid up the Euro Mark, the Ruble, the Yuan, and the Dinar in order to purchase crude oil and a vast array of commodities. The new launches would not be marginal if done together, and would render the US$ & British Pound isolated, outside looking in.

The German banker source responded. He has yet to hear or read my full four-prong new currency phalanx driven into the US/Anglo fortress. It is admittedly idealistic and the basis of a long-term strategy perhaps. But he had been exposed to my view of simultaneous integration of Russia and China with the new Euro Mark currency usage. He said, "In principle you have a point. The post Euro currency will have a new alignment in the currency regime with emphasis given to successful economies that run a trade surplus. The Russia / China trade settlement is not an issue whatsoever, since there is a very robust and trusted basis to do business and getting things done. Once Europe can shake off the Americans and British, the French will be easy to ring fence. All will come together quite rapidly. German engineering and Russian resources combined with the emerging Chinese market is not rocket science to figure out where it will lead to. The result will emerge as Eurasia. There are mega rail grid projects on the drawing board for high speed passenger and cargo trains, all ending in Germany and the Far East. It is pretty much like with the Russian pipelines. They all end in Germany, the industrial heart of Europe.

Interesting to note that Ireland is moving very close to Germany since they totally distrust the British. From a historic point of view it is interesting to note that the Irish refused to be part of WWII and refused the Americans to use any of their ports or airfields. Later they refused to join NATO. The Irish and Northern Germans are Celts and hence stick together, come hell or high water. And that in spite of them being predominantly Catholic and the German brothers being Protestants. All is coming full circle. By the way, many highly educated young Spaniards are flocking to Germany and have landed jobs there. They are welcome since they are cultured and very civil people, bringing Mediterranean flair to somewhat dry and sober Germany. It is noteworthy how the young people of Europe are taking charge and communicating. They are the ones who will send today's politicians packing not before long. All this is more difficult politically than it is economically. Once Germany leaves (or takes) the Euro, the bastion of France will become somewhat useless. Russia and Eastern Europe will become the European center. France would then become a defacto appendix to Germany. This does not wash too well with the Frogs." Watch France fall into some chaos, but serve as provider of wine, cheese, fashion, perfume, pharmaceuticals, and foodstuffs.

## DOLLAR FOREIGN FRONT

◄$$$ IN A FIT OF DESPERATION, THE USGOVT COMMITTED A GRAND BLUNDER IN USING SWIFT BANK CODES AS A WEAPON. THE REACTION HAS BEEN SWIFT AND POWERFUL. THE UNITED STATES HAS LOST EVEN MORE CREDIBILITY, THE PRESTIGE GONE SINCE 2001. THE SWIFT ABUSE HAS SERVED AS A GALVANIZED PLATE IN GLOBAL REACTION. THE ANTI-US$ REVOLT WILL CONTINUE, AND GATHER TREMENDOUS MOMENTUM IN 2012. THE USGOVT APPEARS TO BE TWISTING IN THE WIND OF ITS OWN FLATULLENCE IN A VAGUE ENFORCEMENT OF ITS OWN OVER-EXTENDED POWER PLAY. $$$

In a matter of mere hours or days, the USGovt reversed its blundering policy of a SWIFT ban on several nations, including some European nations doing business with Iran, like Spain. The reversal of policy marked a significant day, when the US realized its error but was powerless to avoid the nasty backlash. As a result, the anti-US$ forces are gathering, with sympathy from the official US allies. The allies themselves have endured much abuse, as they look the other way when NATO airbases have converted into narcotics distribution route stations. The SWIFT decision will go down in history as a turning point rejoinder along with the latest Iran sanctions. They have proved disastrous to the United States, despite the absent press coverage. Steadfast analyst and friend of gold Jim Sinclair added a pointed critique and harangue in early April, perfectly on the mark, effective in its lambaste. He wrote, "Brazil, Russia, India, China, and South Africa are meeting next week because of the use of SWIFT as a weapon of war. Expect the formation of a competitive SWIFT system in three blocks. The dollar will test 7200 USDX and fail on the third tap. I have been doubted on many things, much of which has come to fruition. There was a time when $1650 in gold was considered the ludicrous dream of a madman. The year 2012 is when the US dollar will suffer from a significant drop in utilization as the international settlement currency. The utilization of the SWIFT system as a means of making war is the singular greatest mistake that the dollar managers have ever made. It might seem logical, but one should focus on the consequences now in motion soon to isolate the dollar in a three currency block (Yuan/Euro/Dollar) losing at least half of its previous strength from the international settlement mechanism provided. It is too late to rethink the use of the SWIFT system as a weapon of war. The cat is out of the bag and the damage is done. As a product of acceleration of this process, the US dollar will test 7200 on the outdated USDX. The test will fail on the third tap."

My German banker source assures that Asia led by China plans to launch a new SWIFT competitive bank transfer system, and do so imminently. He called the maneuver by the USGovt a massive blunder that will result in rapid change. The new SWIFT alternative will further isolate the United States, and contribute to a fractured global transfer system. It will also add to non-US$ settlement in trade, far beyond the crude oil sector. It will diminish the USDollar standing. Eventually it will lead to the removal of the USDollar as exclusive global reserve currency. Later it will become an important factor in the isolation of the USEconomy, leaving it vulnerable to the impact of its galloping debt and currency debasement. He added a final exclamation point, that US leaders are no longer taken seriously across the world, either in political arenas or corporate conference rooms.

In a feeble attempt to reverse a reckless rash decision, the USGovt decided to exempt Japan and ten European nations from the Iran oil sanctions via SWIFT retaliation. The message sent to major buyers, in particular China, India and South Korea, is that they can avoid new US sanctions by curtailing their imports of Iranian crude by the end of June. Or they can perhaps lie and claim imports have been curtailed. Secy State Hillary appears to be aiding the charade by claiming the eleven nations have significantly reduced their Iranian oil purchases and thus qualified for an exemption from sanctions for a renewable period of 180 days under the law. Whew!! No such waiver was granted to China, the biggest importer of Iranian crude in the first half of last year. No waiver was granted to India or South Korea, which were the third and fourth largest buyers. Failure to cut back such Iranian imports would result in the banks that settle their oil trades being cut off from the US financial system. However, the United States is isolating itself gradually, not the allied nations.

Pressure remains on South Korea, India, China, Turkey, South Africa, and other major buyers of Iranian oil to comply with US law. The USGovt has not yet defined what constitutes a significant reduction, but an anonymous source stated that 15% minimum is the target. One must be reminded of the loose definition, kind of like what an enemy of the state is, when giving the USGovt permission to kill or incarcerate citizens. The leadership crew in WashingtonDC must be praying for compliance, in order to avoid having the US isolate itself in a backfire of policy. In addition to Japan, the EU nations that purchased Iranian oil in the past year include Belgium, the Czech Republic, France, Germany, Greece, Italy, the Netherlands, Poland, Spain, and the United Kingdom. They all cut back or halted their imports in order to qualify for the exemption. The EU imported 450 thousand barrels per day of Iranian oil in the first half of last year, about 3% of regional needs, according to the Intl Energy Agency. The EU collectively accounted for 18% of Iranian oil exports in that period, according to the USDept Energy. Iran is the #2 producer among OPEC nations, and earns more than half of its government revenue from oil sales. See the Bloomberg article (CLICK HERE).

◄$$$ THE B.R.I.C.S. NATIONS PLAN FOR THE FUTURE. THEY STRIVE FOR INDEPENDENT FINANCIAL FUNCTION AND FREEDOM FROM THE STRANGLE OF WESTERN GLOBAL BANK STRUCTURES USED AS WEAPONS. THEIR VAST CASH RESERVES ENABLE THE PATHWAY TO MORE INDEPENDENCE AND SELF-DETERMINATION. A VIABLE DEDICATED DEVELOPMENT BANK WILL IN TIME CHALLENGE THE WEST. IT WILL ENSURE THE END TO USDOLLAR-BASED TRADE SETTLEMENT. EXPECT SOME WESTERN NATIONS TO DEFECT FROM THE AMERICAN FOLD AND JOIN WITH THE NEW GROUP. $$$

As the month of March came to a close, the leaders of Brazil, Russia, India, China, and South Africa convened for an extremely important meeting in New Delhi for their fourth annual BRICS summit. These five nations represent collectively 43% of the world's population and 18% of world GDP. They are a force to be reckoned with, led by the increasingly irritable testy and indignant China. Keep in mind that economic expansion is not happening in the Western industrialized nations, for many reasons. Labor costs are high. Government regulations are diverse. Environmental obstacles are many. Science and math abilities are on the wane. The BRICS group currently attracts 53% of global financial capital, which by definition means capital formation (wealth engine). The coalition issued yet another direct challenge to the desperate bankers and politicians of the West who are embroiled in insolvency and deadlocked political debate. They announced plans to establish a BRICS development bank, to be funded solely by the BRICS countries. Such an institution could allow the pursuit of independent policies.

The billboard message is clear, of challenge to the global financial dominance of the World Bank and the Intl Monetary Fund. No longer will the tagteam of financial weapons, whose offices are littered with spooks from Langley security agencies, be given free rein to pull powerful monetary levers for Western interests. In time, the BRICS countries will be capable of funding their bank at levels that could challenge the foremost Western institutions. It should be noted that many of these nations resemble the United States in the late 19th Century and early 20th Century. They boast robust industries, high savings levels, and strong investment, low government debt, sensible economic policies, and vast accumulated vast reserves.

The BRICS nations have accumulated aggregate reserves of some $4 trillion in impressive fashion. Compare to USTreasury debts incurred in $15.6 trillion volume. Worse, as BRICS reserves grow each year, the projected USGovt debt will expand by well over $1 trillion annually for the foreeable future. The last year in WashingtonDC put on display the deadlock for its political process, unable to permit the Special Super Committee to enact a single measure. The monetary dominance of the Anglo-Americans is no longer deserved, and will come to a bitter tragic end. No prospect of compromise can be expected in a colossal struggle, which stands at the epicenter of the future world clash over money and power. Led by China, the BRICS appear to favor an alternative to the USDollar, and strive to create it. They are extremely angry at the continued hyper monetary inflation, executed without a vote by creditor nations. They chafe under the yoke of a monetary system based upon insolvent broken Western economic fundamentals. Furthermore, they are striving for a new global trade system based upon barter, linked to an international reserve standard linked up gold. The current monetary regime will be replaced, but not unless and until the new diverse comprehensive system is in place, ready for operation in a complex dangerous world.

The conference held in India permitted an opportunity for the BRICS to press toward the rapid realignment of control for international funding. Notice the G7 and G8 Meetings have been suspended due to irrelevance, or their gatherings are much ado about nothing. The sovereign bond collapse can be fingered as the proximal cause. The G20 and BRICS conferences have wrested global center stage. Watch for marginal nations like Indonesia, Andes nations, the Persian Gulf nations, and even Turkey to work toward the BRICS alignment. In the background, the Shanghai Coop Organization works on hidden important projects, some harmless in cultural theme but others critical in gold reserves demanded in return. As the United States dedicates itself with complete conviction to the Weimar solutions of ruin, with full faith placed in the printing press, watch for some of Western nations rich in savings, such as Germany and Norway, to make significant gestures toward joining the BRICS movement on trade accords. The common denominator in desire is their drive for a new system based on more sound money without potential for unilateral debasement and abuse toward aggression in war. The days of paper money seem destined to rain confetti, while the prospect of Gold & Silver will take control. The impact to price systems within individual economies will be devastating, higher for those still working on paper mills, but more stable and lower for those choosing a better more honest path. See the 321Gold article entitled "BRICS Plan for the Future" by John Browne of Euro Pacific Capital (CLICK HERE).

◄$$$ CHINESE USDOLLAR COULD BE COMING, AS THE B.R.I.C. NATIONS PREPARE TO UNSEAT THE GLOBAL RESERVE CURRENCY IN TRADE SETTLEMENT. THEY MUST DEFEND THEIR INDUSTRY AND RESERVES SAVINGS. WITNESS THE BEGINNING OF THE FINAL CHAPTER WRITTEN ON THE USDOLLAR. $$$

Regard the BRICS global conference as a special session of the G20. Much is stated about their impressive size. These countries make up 42% of the world's population and a quarter of its landmass. The BRICS account for 20% of the Global GDP and possess an impressive 75% of the foreign reserves held worldwide. In direct response to extreme financial storm conditions, these five nations and their leaders are struggling to produce a solution for the situation. As the BRICS summit has concluded in India, the agenda to create an alternative global lender and to create distance from the USDollar as a reserve currency were their primary objectives. Sreeram Chaulia from the Jindal School of Intl Affairs, believes that institutions like the IMF and the World Bank are obsolete and have outlived their uselfulness. For the USDollar and its corrupted managers, a massive fecal hailstorm is in progress that cannot halt. What follows is not a certainty, but rather a pathway toward a solution that has both merit and potential, compiled by self-styled analyst Alexander Higgins.

Brazil, Russia, India, China, and South Africa have launched what could become a lethal attack to replace the USDollar with a single Chinese denominated super-sovereign global currency. Look closely, as it would bear the name USDollar, more exactly the Chinese USDollar. The risk of having too many USDollars floating in circulation outside the United States, combined with over half of the USGovt debt held by foreign entities, has raised the risk to far beyond acute. China is leading the initiative to create a new super-sovereign currency that could rival and displace the USDollar in certain trade and reserve banking spheres. The BRICS nations are moving forward with their plan to unseat the USDollar from its throne as the global trade currency and to replace it with a Chinese denominated super-sovereign international currency. Doing so requires a critical mass, and the BRICS with their huge industrial output, massive trade, and significant reserves accumulation, appear equal to the trask. But it is early. They have yet to endure the counter-attack by the United States, which usually includes economic volleys, banking penalties, and even elements of terrorism. Precedent abounds over the past two decades. The battles to establish global monetary dominance is not limited to displacement of the USDollar in revolt. Instead this initiative is the first strike of a concerted campaign of worldwide economic warfare which seeks to bring the United States and its Western allies to their knees. Ultimately the BRICS collective is staging a revolt to overthrow the current global financial regime which has dominated the world for six decades following World War II and the Arab Oil Embargo. The primary financial pillbox targets are the World Bank and the Intl Monetary Fund. The disarray in both institutions is obvious. Christine Lagarde joined the IMF several months ago after Dominique Strauss-Kahn was unseated in the most bizarre scene. Robert Zoellick has announced his retirement from the World Bank, leaving a new vacuum. Let's see if the $400 billion in new funds committed to the IMF last week is a ruse, a pack of false promises to placate the US/Anglo fading regime.

Brazil, Russia, India, China, and South Africa have significant if not vital motivation to replace the USDollar with a Chinese denominated single super-sovereign global currency. For the last two years, the entire world has endured unspeakable unprecedented actions taking unilaterally by the US Federal Reserve in hyper monetary inflation for the purpose of monetizing the USGovt and USAgency Mortgage debt. The United States (via Wall Street  handlers and the USFed syndicate) has acted without consultation to creditor nations, has debased the global reserve currency to the extreme, has granted multiple $trillion grants to elite bankers, and has caused massive disruption to the entire global economy's cost structure. The costs for food and industrial input have risen to the point of causing social unrest and strained profit margins. The world has been forced to react in self-defense and self-preservation. My Jackass call has been steadfast and consistent, that the major nations of the world had to develop and implement an alternative to the USDollar, or else face obliteration, that the last nations to do so would be mortally wounded, and that the first nations to do so would be the leaders of the next chapter. The development and implementation is happening, but without press coverage since it centers upon replacing the axis led by the United States, England, and France as the global powers.

The new global super sovereign currency initiative comes in retaliation for the endless rounds of monetary abuse directed by heretic monetary policy. The fixed 0% rate (ZIRP) and the bond monetization (QE) are tagteam emblems of ruin worn proudly. The motive is clear, to jump start the USEconomy, to support the low borrowing costs for the USGovt, to fill the vacuum of departed creditors, and to provide welfare for Wall Street speculation. The end result is to induce the risk trade by shoving investors into the next subprime fiasco, to force a USDollar devaluation shared by all major currencies, and to lift the cost structure for the global economy. The BRICS nations, in commanding an oversized share of global reserves (savings), have born the pain of the USDollar debasement at the hands of the USFed. Worse, they have done so without a vote of monetary policy. They are angry and resentful, even highly motivated. They have been diverting some reserves into Gold, into commodity stockpiles, and into properties like energy deposits. But the problem has remained unaddressed for the entire two years of the profound abuse to the USDollar in Zero Interest Rate Policy and Quantitative Easing directed by the New York and London bankers. The recent multi-$trillion channels to aid European banks has proved a failure, with recognition soon to come. The collapse of European sovereign debt and the Iran sancations together have pushed the BRICS nations to the point of taking very bold action. One cannot minimize the added motive that has come from the Iran sanctions and various heavy handed tactics used by the USGovt, including restricted usage of the SWIFT bank transaction platform.

Never before in modern history has a nation had to face the shame and embarrassment of losing control of its own currency. What comes is potentially two USDollars, one managed by the United States Govt and another managed by the Chinese Govt. When China surpassed the $1 trillion mark in US$-based reserves, a serious warning signal was made. When China surpassed the $2 trillion mark in US$-based reserves over a year ago, a second dire warning signal was made. The current figure is somewhere around $2.7 trillion, a veritable critical mass. China has finally decided to take action, not coincidentally during a transition of power within the Chinese Communist Party. The leadership is changing. The patience is gone. The trade war with the United States, fully forecasted by the Jackass in 2005 and 2006, is here with volume raised. Nations have gone to war for far less than $trillions of debt gone bad, rendered unpayable. At issue is more the preserved economic sovereignty of the BRICS nations under siege by the US$ debasement and its aggressive defense for exclusive usage.

The debasement of the USDollar translates directly into lost value of the massive reserves that underpin those nations and their banking systems. The devaluation of the USDollar translates into real and direct economic impacts on the BRICS national economies by making their products relativity more costly to produce and with lower profit margin to sell. Clearly debasing and devaluing the USDollar forces the BRICS nations to pay the tab for the economic and debt woes of the United States and Europe while destroying the economies BRICS nations in the process. It also requires the BRICS nations to subsidize the incredible fraud and thefts perpetrated within the US, London, and European financial sectors. The BRICS nations are angry to the extreme and China has been the most outspoken nation about it in recent months and years. China has already issued calls for international supervision over the United States, a demand of sorts for bankruptcy receivership via a tribunal council. My belief is that the process is underway. China finally has issued demands for a single global currency due the combination of the United States debt problems, currency devaluations, and outrageous illegitimate scandalous mismanagement. The USGovt has abused global agencies such as the World Trade Org to apply pressure on China, to make them play by the double standard rules. The number of key focal points is growing, not just Iran sanctions and SWIFT bans, but extended to the rare earth metal trade war. China holds most of the cards, and is using them.

An unusual sequence of events has unfolded. The rich but somewhat crippled nation of South Africa has taken a lead baton with which to hit the United States over the head. Few have paid attention to Africa, the new ground zero for the BRICS attack. Despite its own marxist core of mismanaged leadership, the Union of South Africa is taking the collective lead in pushing the Chinese currency, the Yuan (aka Renminbi), as part of a pilot program to make the currency the new defacto standard for international trade in emerging markets. At a later date, sooner than commonly anticipated, the Chinese Yuan might merge with external USDollars held in reserves to convert into a single super-sovereign global currency. Keep in mind that mountains of USDollars are held in reserves outside the United States, where the US leaders are fast losing control and influence. Higgins concludes, "The hope is this new currency will strip the global financial regime it rules of its power and hence relieve the United States of its role of imposing political and economical views on the rest of the world. Clearly the United States is well aware of this plan and has been making preparations to head off the attack for years through AFRICOM. The is obviously apparent in the use of USAFRICOM to militarize the entire continent of Africa to fight off China's imminent economic encroachment. While we consider all of this, let us not forget that the currency war of the 1930s culminated into and only ended with the greatest military war ever fought, World War II." See the Higgins weblog article (CLICK HERE).

The Jackass has mentioned Africa as the hidden next hot war battleground in several past Hat Trick Letter reports. The spearhead of South African calls to replace the USDollar in trade settlement is a battle counter-offensive in the war that stretches across the vast virtually untapped Dark Continent. The battles in the Congo are part of the war, steeped in US agency smuggling. The irony is thick, as South Africa is marxist and the Obama Admin has hidden marxist pillars throughout its policies. The Obama wayward paths have produced greater economic weakness, grander deficits, matched by extreme aggression on financial platforms. Little South Africa is tossing spears at the US like Massai Warriors.

◄$$$ IRAN HAS ESCALATED THE WAR ON SANCTIONS IN A LIMITED COUNTER OFFENSIVE. THEY CUT OFF OIL SHIPMENTS TO SPAIN AFTER CUTBACKS ELSEWHERE ACROSS EUROPE. THE NATIONS ON THE CONTINENT MIGHT SOON BE FORCED TO CHOOSE WHICH CAMP TO RESIDE IN, ONE LED BY THE UNITED STATES OR THE REST OF THE WORLD. $$$

As bank sanctions continue, Iran has reacted to non-payment and to principle. The Iranian Govt in Tehran has cut oil supply to Spain after previously halting crude export to Greece. The counter-sanctions have begun. Tehran is considering the cutoff of oil supply to Germany and Italy. The insolvent industrialized nations are shooting themselves in the feet and legs, as they follow the United States down a dead end alley. One must wonder how much more Iranian crude in the real world China and India are importing despite promises to the contrary, and open US warnings. Reminders of the CPI being near 3% are vivid, the reality being more like 10% to 11%. The US has put itself in an impossible situation. China will not follow any warnings from Hillary. Witness the paper tiger whose paper mache is chipping off quickly, revealing a mere wire mesh that lacks muscle or bite.

Defiance reigns. President Mahmoud Ahmadinejad (aka I'm Your Dinner Jacket), claimed his nation can last for years without exporting oil. The defiance lacked credibility on its face. He actually stated that even without oil sale revenue for two or three years, the economy could still manage and adapt easily. A reference was made to a United Nations Security Council meeting in mid-April that will include Germany in a special session to discuss more strict sanctions. A ban by the entire European Union on Iran oil purchases could come into force by July. Already Iran has halted oil sales to two Greek companies, Hellenic Petroleum and Motor Oil Hellas, after failure to make payment. The Oil Ministry in Tehran cut exports to France and the United Kingdom in February, in a gesture that pre-empted the EU ban. See the Zero Hedge article (CLICK HERE) and the Bloomberg article (CLICK HERE).

◄$$$ MAJOR GLOBAL NATIONS STEEPED IN TRADE HAVE REACTED TO FEARS OF FUNDS TRANSFER CUTOFF. THE AGGRESSION OF THE UNITED STATES IN FINANCIAL COMMERCE HAS LED TO BILATERAL SWAP ACCORDS. THEY SERVE AS PRECURSOR TO REMOVAL OF THE USDOLLAR FROM TRADE SETTLEMENT. THEN FINALLY COMES LOST GLOBAL RESERVE STATUS. CONSIDER THE OIL SWAP BY AUSTRALIA & CHINA. $$$

Veteran Robert Fitzwilson is founder of the Portola Group, one of the premier boutique firms in the Unites States. In a King World News interview, he explained how countries are engaging in currency swaps out of fear of being cut off from international transfers. Fitzwilson believes Gold & Silver are preparing for a major price move. The well traveled experienced Fitzwilson commented on recent developments pertaining to the global banking warfare and the domestic US monetary debasement, with allusions to crude oil stockpiles, the labor market, and precious metals. Counter-attacks are being motivated by US actions. Notice the reference to barter. He said, "Another development that has been happening in recent days is swaps being made. China and Australia just recently completed a $31 billion swap of their currencies. To me that is tantamount to barter. These countries have essentially pre-positioned their currencies, probably because they are worried about being cutoff from international transfers. Jim Sinclair has pointed out what is taking place with the SWIFT system. Let me add that SWIFT has now become a weapon in the currency wars and as Sinclair correctly stated, unfortunately the United States is now threatening other countries. The US is saying if they do not do what we want, we will cut them off from SWIFT, which will effectively shut down their economy. We have already seen this with Iran. So India and Iran were trying to do an oil for gold swap. Evidently we have warned the Indians because we are not happy about that. So SWIFT is being used to threaten our trading partners and allies.

As we now know, South Africa is actively trying to participate in dethroning the dollar as the reserve currency. If you look at the pattern of what is happening, these are like mini earthquakes all over the world. When you add these seismic events together, it suggests that something may be imminent, perhaps in the next month or two. Saudi Arabia is suddenly sending 22 million barrels to the United States. Why did they do that? Are they trying to get paid for it before there is some sort of eruption in the Middle East? Is the US stockpiling oil ahead of war? There are military assets being positioned all over the Middle East, on all sides. So something is building and these countries are taking action ahead of that for self-preservation which is understandable.

The part of Bernanke's speech that really rang true for me was him describing the unemployment as being cyclical, instead of structural. The Fed has, in the past, been communicating that unemployment has been structural for some time. By overtly switching to cyclical, that means they are admitting they need to do some form of Quantitative Easing, and a lot of it. The implication is that QE can solve cyclical unemployment, but that is patently false. However, to me this was a sea change, where he is now saying unemployment is cyclical and we need to print a bunch of money to solve problems, and we are going to do that.

My observation of the patterns in Gold & Silver is we have been involved in long range trading. There is a limit that central banks have imposed on the price of Gold & Silver. When it gets to that limit, the central banks pile in and drive the price of gold and silver back down. The smart central banks then buy the bullion at incredibly cheap and subsidized prices. The market feels to me like it is getting ready to enter a new higher range. The new short-term cap on silver as an example, might be $60. The bottom line is the advance in gold and silver is being managed. So it is going up, but it is not time for the mania. We will not see the mania until they lose control. But we are getting close to something that should provide tremendous upside fuel for both Gold & Silver." See the King World News interview (CLICK HERE). The Jackass disagrees on a key point regarding precious metals. The gold cartel buys the bullion at lower prices on the paper market, while the same cartel banks are forced to sell bullion on the physical market at the same low prices. Fitzwilson makes it sound like the gold cartel benefits from the price ambushes generates by naked shorting. Instead, quite to the contrary, the gold cartel is forced to shed its physical bullion and replace it with evermore mounds of gold paper. The banks are weakened, hollowed out, and rendered vulnerable to the next attack. Metal walls are stronger than paper walls during storm sessions. He seems a good soldier but oblivious to the powerful new obscured movement to kill off gold cartel member banks like UBS.

## CENTRAL BANKS & BUSTED BONDS

◄$$$ SPAIN, FRANCE, AND THEN ITALY ARE READY TO REJECT THE AUSTERITY POISON PILLS. THE WEST IS ON THE CUSP OF SOME VERY SERIOUS MAIN STREET HYPER MONETARY INFLATION FINALLY. THE QUANTITATIVE EASING TO DATE HAS BEEN A BANKER ORGY WITH BENEFITS GOING ALMOST EXCLUSIVELY TO THE ELITE BANKERS. WHEN EUROPE BUSTS WIDE OPEN WITH THE AUSTERITY BUDGET REJECTION, THE GATES WILL FLOOD WITH NEW MONEY IN AN UNMISTAKABLE POPULIST ORGY. AT THE SAME TIME, THE BANK RECAPITALIZATION INITIATIVE MIGHT KICK IN. AT LONG LAST, SIGNIFICANT PRICE INFLATION MIGHT SOON COME AFTER A FEW YEARS OF FIREWALL ENFORCEMENT AT THE ELITE FENCES. THE INITIAL PINPRICK WILL BE FROM FRANCE AND ITS NEW LEADER HOLLANDE, WHO HAS BIG CHANGES IN MIND. $$$

A series of editorial comments is warranted. The French presidential election is imminent. Challenger Francois Hollande is gaining ground against the establishment horse in Sarkozy. My firm belief is that the Hollande victory and ensuing policy actions will serve as the lance to pinprick the entire austerity budget requirements, those bitter poison pill suicide pacts, and toss them aside. The consequences will be severe in a change of the guard. It will be interesting to watch, full of intrigue as the bankers attempt to hold back the throngs (of money). The public can eat no more cake. This is after all a financial global war. My expectation and hope is that Sarkozy goes down in flames, and as he does, his links to security agencies is revealed. What follows will be even more powerful and significant to foment change. Spain and France, then Italy will all reject the Austerity Poison Pills. The world is on the cusp of some very serious Main Street hyper monetary inflation. The Euro Central Bank has been feverishly replenishing the big European banks, but doing so with new toxic bonds to replace old toxic bonds. A more vigorous meaningful bank recapitalization could occur at the same time as massive new budget deficits approved for the purpose of social relief, business relief, and infrastructure repair, even reconstruction after riot damage to cities.

Hollande has raised concerns in Berlin and other capitals by criticizing a European Union accord on debt and deficit control. The misguided ineffective fiscal compact forged in an effort to counter the EuroZone debt crisis has been demonstrated as ineffective and disastrous in Greece, yet it continues. It is about to be rejected by a host of nations. Hollande calls for a renewed pro-growth commitment. It will be costly, leading to bigger deficits. It also will interfere with the elite plans to collapse the economies in order to impose dictatorial rule. Hollande said, "Germany understands that it cannot remain an island of prosperity in an ocean of recession. The changeover in France will pave the way for a change of direction in Europe." The CSA poll showed Hollande taking 57% of the vote in the final deciding round, up from a score of 54% previously. In France, they conduct runoff elections, whereby the top two winners in the overall election face each other, if neither wins over 50% of the total vote. The first vote is Sunday April 22nd. See the Yahoo News article (CLICK HERE).

Hollande has some basic sledge hammer plans that will shake up France and possibly turn it upside down from the bottom up. Outgoing Sarkozy turned the nation upside down from the top down, with big bank welfare and strict attention paid to the elite channels. Hollande has many plans like capping executive pay packages, a stiff 75% tax on all income over $1.3 million, a tax on all financial transactions, a repeal of EUR 35 billion in tax breaks, and a higher 35% corporate tax (to rival the US, highest in the world). Hollande also wishes to scrap the 1.2% VAT imposed by Sarkozy, to permit pensions only after 41.5 years of service, to limit executive pay at state owned companies, to limit leveraged buyouts of corporations, to hire in schools, police forces, and give attention to the young. He wants to reduce nuclear power usage from 75% to 50% nationally, but freeze gasoline prices. He urges the removal of French troops from Aghanistan in the current year. He wants to hand over more central power to the regional centers. The plans of Sarkozy do not matter, since the present course is the only important indication. See the Bloomberg article (CLICK HERE). The Hollande plan is a direct slap in the face of the elite, a grass roots vintage socialist slam.

◄$$$ EXPECT SOME CURVE BALLS OF UNEXPECTED EVENTS FOLLOWING THE ELECTION OF HOLLANDE, OR DURING THE ELECTION PROCESS. THE SARKOZY TEAM, WITH WALL STREET AND US-SECURITY AGENCY SUPPORT, MIGHT HAVE LAID SOME UGLY TRAPS. BUT THE EUROPEAN CURRENCY MARKET IS RIPE FOR SOME SUDDEN SHOCKS. $$$

A trusted German banker made comment. He wrote, "Hollande may win in France. Once in office, 98% of all his actions will be dictated by circumstances. These guys are all a bunch of clowns. Over ten years ago, I remember well when Germans told French President Mitterand that forcing Kohl to introduce the Euro currency in exchange for France consenting to German reunification would destroy Europe politically and economically over a timeline of 25 years maximum. His reply was 'WELL, YOU DESTROY IT AND YOU FIX IT. YOU ARE GOOD AT IT. YOU ARE ACTUALLY THE ONLY ONES WHO CAN DO IT.' The rest is history. In the next several weeks, the potential exists for some disruption, in reflection of the currency regime and bank balance sheets in Europe. There are strong indications that the restructuring and re-calibration of the Euro currency is to happen a lot faster than anticipated by many observers. Look for a shock wave in the next chapter, as the event driven Spanish and Italian scenarios gain momentum. At the same time Beijing will make their Renminbi freely convertible, which will inflict deep damage to the USDollar with lightning speed. All these actions are self-defense measures by the countries that need to fill the power vacuum left by the implosion of the Anglo-American-French axis. As their last stand the United States will promote and instrumentalize radical Muslim groups in China, Russia, the former Soviet Union, and Africa to create as much instability and trouble as they can." The radical Muslim weapon was first used on 911 in New York City and WashingtonDC, in the false flag attacks. The USGovt has a very long extensive history of false flag attacks that goes back over 200 years, such as the USS Maine in Cuba, the Gulf of Tonkin in Vietnam.

The new French debt bond futures market (FOAT) might have some immediate land mines well placed by the usual suspects, the Americans on Wall Street. Despite obvious danger, the new FOAT market could easily permit Morgan Stanley, the typical derivative monster active in the last two years, to hedge its Greco-French debt exposure in a manner steeped in French disadvantage. The market's April 16th debut has proceeded, and has created some speculation as to whether Sarkozy and his cadre have built a booby trap for Francois Hollande, to be triggered when the upstart wins the election. Across to Germany, a different perspective prevails. Francois Hollande in mid-April requested the German Federal Financial Supervisory Authority to prevent the Eurex launch, but the Germans turned his request down flat. The Chancellery in Berlin might be pleased to weaken France's financial outlook during the election window, and to demonstrate that socialism and rejection to austerity budgets cause worse problems. The old guard of politicians in Sarkozy and Merkel could have devised a sabotage that roils markets and displays a continental treason in high office. The big question is whether some dire damaging event could occur between the initial presidential election and the run-off against the Socialist Hollande. See the WordPress article (CLICK HERE).

Colleague and sharpy Craig McC in California pitched in a great comment. He said, "If Sarkozy loses the election to Hollande, I do not see any hope for France to be included in a new Nordic Euro currency pack since Hollande will not provide the needed austerity measures. Should Sarkozy win, but France is rejected from being included in a Nordic Euro, Sarkozy might curry enough political and financial support for a Club Med Euro. However, if Hollande wins, I believe the most likely currency outcome is for the non-Germanic countries to revert to their historic currencies, namely the Franc, Lira, etc." A savvy German banker pitched in a reply, saying "The final decision is a political one. You do not want the French to be running amok in the Mediterranean sphere." The Jackass adds that France could easily find a significant role as Lord of the Flies, the leader of the broken PIGS nations, in a dispatched role approved by Germany. More importantly, a Euro currency without Germany will fall in value like a stone in a pond. The resulting Latin Euro will not stand of its own without severe devaluation. Each country will want to control the devaluation, to dictate the budgets, and to press on with nationalism, which will lead to several domestic reverted currencies. Just my thoughts, based in practicality and national pride. When systems fracture, nationalism enters the picture.

◄$$$ THE STRANGE PART OF THE FINANCIAL CENTERED HYPER MONETARY INFLATION IS THAT IT HAS BEEN CONTAINED WITHIN THE FINANCIAL SECTOR. VAST SUMS COVERED NUMEROUS SPUTTERING PITS, TO HIDE THEIR EFFECTS. $$$

Truly vast sums of newly created money have covered the vast derivative losses, redeemed the vast bond losses, and replenished vast losses in bank reserves. The newly created money has also enabled continuation of huge banker executive bonuses, their reward for presiding over the historic bond bust and successful fraud programs. The notable pain comes from the incomplete but still sizeable leakage to the entire financial system, including the commodity markets, which has resulted in higher global cost structure, including food. One should expect that will change soon when austerity budget measures are rejected in Europe, starting in France and Spain. The United States rejected them last summer with the Super Committee fiasco, a public display which could not agree on a mere trifling $150 billion per year in spending cuts. The USGovt demonstrated itself as a verifiable laughing stock of corruption, greed, and incompetence. Its leadership is like from Mad Max with suits and limos crashing barriers.

◄$$$ OPERATION WEIMAR WAS WITNESSED IN THE L.T.R.O. PAPER MACHE PROGRAM. IT IS THE FINAL ACT, THE FRACTURE IN FULL VIEW, THE CLIMAX IN LIFTING THE CURTAIN ON THE FIASCO. SPAIN, ITALY, AND PORTUGAL VIVIDLY DISPLAY THE ABUSE OF NEW TOXIC BOND PAPER. THE L.T.R.O. FIASCO WILL MAKE CLEAR THAT NEW DEBT CANNOT REPAIR THE DAMAGE FROM OLD DEBT THAT SUFFERS PROFOUND IMPAIRMENT AND RUIN. THE L.T.R.O. PROGRAM IS DEEPLY FLAWED, IN THE PROCESS OF BEING WIDELY RECOGNIZED. $$$

The Long-Term Refinancing Operations, steeped in new immediately toxic bonds, is not a solution. The data from Spain underlines the LTRO downside and deep flaws. The new Draghi Euro Central Bank has pursued the LTRO solution since December. In the last four months, the ECB has pumped over $2 trillion of liquidity into the EuroZone banking system via cheap, three-year loans. More bonded debt at ultra-low yields is not a solution to the systemic damage wrought by decades of other bonded debt gone toxic. The LTRO solution was hailed for easing fears of a near-term banking collapse. It simply bought weeks. That in turn spurred investor risk appetite, contributing to the global equity rally of the first half of 2012. Bank stocks in particular have lifted in value, but the meter of value, namely the USDollar and Euro, is broken. The supposed success was noted by pointing to Spanish and Italian Govt bond yields pulled down from crisis levels. The big Euro banks have used the cheap funding to snap up the high-yielding peripheral debt. We were told that the LTRO bonds were merely a method for ensuring its monetary policy measures were successfully transmitted to the market. The bond surge was proof. Yet the success was fleeting, and the viral fever in the Spanish Govt Bond market has returned. Expect a renewed rupture in Spain and Italy, enough to spew toxic secretion pus everywhere and expose Draghi as a hack wizard using tainted bond paper much like chicken bones and rooster feathers and incantations.

The weather vane has turned dangerous and ominous. Monthly data from the EuroCB and the Bank of Spain showed that gross borrowing by Spanish banks jumped to more than EUR 316 billion in March, up 50% in a single month, a new record high level. The breakdown of the data confirms the anticipated tally. The second LTRO round run by the ECB in February was dominated by Spanish banks. They gobbled up almost EUR 200 billion of the total volume of EUR 529.5 billion. Published figures disrupted financial markets, pummeling the Spanish IBEX stock index and pushing up Spanish Govt Bond yeilds. The exposure is in the open, on how the LTRO solution merely patched over the toxic bond lifeline to the toxic banks. The reality appears easy to perceive, that the LTRO funds were used to refinance maturing bank debt, and to purchase a sizable amount of Spanish Govt debt. A big red warning signal is flashing on the Spanish banking system. Van Vliet of ING Brussels noted that net purchases of government securities totaled EUR 61 billion in the three months to February. He said, "Funding liquidity is one thing, but solvency is another. The ECB 3-year LTRO's have done little to fundamentally improve the solvency situation of either the banking sector or the sovereign, which is what recent investor concern has centered on. For this to happen, we would likely need to see a sustained return to economic growth and an imminent end to the real estate slump, both of which currently seem a long way off." Nice reality check. See the Market Watch article (CLICK HERE) and the Zero Hedge article (CLICK HERE).

Spain captures most of the incremental crisis news, but the abuse of LTRO borrowed funds extends throughout the pen of PIGS. My old colleague sharp analyst Russ Winter provided some summary points. He believes both the USFed and Bundesbank have recently awakened to the Merda Storm of a Portuguese type. The Jackass prefers the term Scheiss Storm with my one-eighth part German roots. But in Spain los bancos estan comiendo mucha mierda. Let's get serious. The major financial press networks are beginning to detect that the heavy application of the LTRO program has been highly damaging already to the European banks, again in the South. The Spanish banks borrowed LTRO funds to speculate on Spanish sovereigns at prices that have moved to negative ground. They might have expected a similar outcome to the USFed sponsored carry trades, except in Europe they came with a backfire of PIGS flatullence. The artificial buying frenzy has come and gone, but in a dangerous bond pen. The return of Spanish and Italian Govt Bond yields to warning signal levels is proof positive that the Draghi LTRO approach is flawed. Once again, the central bankers, not knowing any other recourse, prescribed a better label of Jack Daniels to the alcoholic patient. More bank delirious tremens is the result. The sovereign bond guarantors will not be able to cope with the bank needs when the bond paper turns toxic again, with ever shrinking half-life. The upward move in bond yield might not look alarming, but bear in mind that the solution was supposedly applied in the last couple month. It did not cure the malady. The bought time is used up.

In 2008 the Banksters assessed the total PIIGS problem would cost $10 billion. As time went on the figure was revised to $50 billion, then $100 billion, and then $500 billion. Then they said $1 trillion and no more. Then rumors spread it would be $2 trillion. Wait, now the frustrated banker elite mouthpieces are saying the final figure is $4 trillion. They need to print tens of $trillions as the Extend & Pretend rolls on. Soon the deception and incompetence among central banker will be seen by the accepted crowd from these High Priests of Finance. They are more like Mayan Priests of sacrifice to money itself. The system is imploding, as people are slowing awakening to the greatest fraud in human history. The syndicate hand is all over the place. The Jackass said at least $2 to $3 trillion from the start would be required to fix European banks and bonds, earning ridicule, which in my mind was confirmation. Reasonable on the mark forecasts result in a lot of scorn by the mainstream thinking crowd.

◄$$$ AS POLITICAL LEADERS LOYAL TO THE ELITE ARE OUSTED, THE DEBT GAME WILL CHANGE. THE CENTRAL BANKERS ARE GIVING HINTS OF THEIR DESPERATION TOWARD A BOND MARKET REFUSING THEIR REMEDY. AS SPAIN AND ITALY REACH FOR THE RED WARNING LIGHT SIGNAL, THE CENTRAL BANKERS WILL HAVE NOTHING TO OFFER EXCEPT DENIAL OF RESPONSIBILITY. BANK RUNS IN ITALY AND SPAIN ARE IN PROGRESS (TURKEY TOO), THE IMMEDIATE THREAT BEING IN ITALY. THE FOREIGN DEPOSITS ARE IN FLIGHT. $$$

Without less publicity, the Italian banks took EUR 354 billion in LTRO funds, slightly more than the Spanish banks. Portuguese bank dependence on fresh EuroCB borrowing rose to a record EUR 56 billion. Hence, just these three PIGS swine placed over EUR 710 in fresh tainted capital into their critically insolvent banks replete with effluent odor. Russ Winter believes the signal of shut down financial markets every few days means the EuroCB essentially owns the broken banks and will inherit their losses, new and old. Their rotten collateral should never be accepted for new loan approval, except in sustaining the broken system. Expect the central bank to pawn off the accepted collateral in discounted dumps to private equity firms and big banks later on, a long shot perhaps. The Long-Term Refinance Operations continue the heretical theme laid out by the European Financial Stability Facility (EFSF) of 2011. Perhaps next year, a third equally flawed facility will be created, but time is running out. The nations to backstop the LTRO new tainted funds are Spain, Italy, France, and Germany. Given that the first two are recipients of funds, the actual practical backstop comes from France and Germany. The tide will turn with ousted political leaders who act as bankster agents and proponents of greater budget austerity. Those leaders proposing more powerful poison pills will be tossed out. The key date of April 22nd is when France will conduct its first round of presidential elections. But another key date is May 6th for elections in Greece and Germany. France's first round of elections begins on the day of this report posting. Follow the viral fever on Spain bond yield (CLICK HERE) and Italy bond yield (CLICK HERE).

◄$$$ THE IMMEDIATE BANK THREAT IS IN ITALY. THE BANK PORTFOLIOS ARE SUFFERING BIG LOSSES. THE FOREIGN DEPOSITS ARE IN FLIGHT IN WHAT CAN ONLY BE DESCRIBED AS A RUN ON ITALIAN BANKS. $$$

Italian non-performing loans are surging to the highest level since 2000. Concurrently, foreign deposits are plunging. This is a run on the entirety of Italy. On April 18th, on a single day the Bank of Spain announced that Spanish bad bank loans have risen above 8% of total for the first time since 1994. In a chorus rhyme, the bad debts in Italy have beached EUR 107.6 billion, equal to 6.3% of total. That is the highest level since 2000, a shocking double from 3.0% in June 2008. The data gets worse. Domestic banks benefited from the LTRO bank loans from the Euro Central Bank. They stuffed the banks with fresh loans, some in conversion of old toxic to new soon toxic bonds. Domestic Italian bank deposits rose by a sturdy 1.6% in February. However, the foreign deposits declined a staggering 16% in February on a year over year basis. That was the eighth consecutive monthly decline. Observe the bad debt chart, which resembles Greece far too much. My Jackass forecast has been for Spain and Italy to follow the path of Greece with a fixed time lapse, a forecast made over 18 months ago and repeated often. It is happening, no surprise. The external funding of Italian Govt debt is vanishing rapidly and completely. The nation of Italy is fast becoming a ward of the EuroCB, as will Spain next. Net funding from foreign sources stood at EUR 182 billion, down 32.5% year on year. Without external money, the central bank must step in to save the Italian Govt Bond from collapse. The signal is rising bond yield. It is rising.

The Italian Economy is mired in recession, no debate, unlike the liar infested United States. The gross Non-Performing loans in Italian banks rose 16.5% to EUR 107.6 billion in February, quite an impressive step backwards. Credit quality deterioration is horrendous, a quantum level worse than the levels seen before the start of the financial crisis. Within the enclosed world of lending, the bad loan percentage went from 6.3% in February (among all private sector loans) from a mere 3.0% in June 2008. The orgy of EuroCB loan grants clearly covers the toxic bonds held by the big European banks, not to be made available for the overall economy. The same is true of the biggest pig beyond the PIGS pen, the United States. The de-leverage environment continues to act like a giant wrecking ball in Europe. The phony accounting permitted by FASB in the United States avoids such an outcome, which means the US lives in a fantasy world. It has for over 25 years. An IMF study reported that European banks could be forced to sell as much as $3.8 trillion in assets through 2013 and curb lending if governments fail to stem exploding budget deficits. Shocks are in progress that challenge the firewalls in place. Prices of bonds in Europe will surely plunge. See the Zero Hedge article (CLICK HERE).

## USFED AS TOXIC CENTRIFUGE

◄$$$ BIG WARNING SIGNALS ARE FLASHING FROM THE CENTRAL BANK PILLBOXES AND CASTLE TOWERS. THEY ARE SCARED WITLESS ABOUT THE LAUNCH OF NEW STRONG VIABLE CURRENCIES. EXPECT DURING THIS CLIMAX OF CRISIS FOR THE LAUNCH OF AT LEAST TWO NEW CURRENCIES, BOTH STURDY STRONG. IN SUCH A SETTING, TWO OTHER UNEXPECTED CURRENCIES MIGHT ALSO ARRIVE, TO ENSURE BALANCE AND TO MINIMIZE THE CURRENCY EXCHANGE RATE IMPACT AMONG THE WINNERS. $$$

Pay close attention to some recent USFed language uttered by Bernanke lips. New words have entered the lexicon, indicative of extreme crisis. They paint a picture of a wrecked monetary system not responding to heretical solutions that solve nothing. Tying the loose ends together is Chairman Bernanke, who has suddenly used words like shadow banking and collateral and vulnerabilities in his speeches. For those with a functioning brain stem, and an elementary ability to piece together a mosaic picture, the language suggests that collateral in general toward LTRO loans has caused deep indigestion for the tagteam of Bernanke at the USFed and Draghi at the EuroCB. The hotlines surely have been very active on secure phone lines. Expect a central banker schism to come soon, where Bernanke criticizes the bad collateral taken in Europe, even though the USFed has accepted similar equally toxic paper. The USTreasurys simply have the advantage of heavy debt monetization at the same time, from control of the printing press. In the deep division, Bernanke will argue that owning several $trillion in ultra low yielding long duration sovereign bonds in the United States, even with an approaching 105% debt to GDP ratio, is nothing like what the ECB has done.

A few years ago, a $trillion portfolio of toxic mortgage bonds would have been considered a big deal. But the United States and the West have passed through the tunnel and entered the Land of Insolvency and Toxic Ponds, populated by Ugly Trees, the banks deemed Too Big To Fail. Regard TBTF banks to mean corrupt syndicate insolvent zombie masters that serve aggressive militaristic governments. Yet Bernanke is treated like a demi-god, put on the cover of popular magazines as a hero, despite numerous analytic blunders (many caught by the Jackass in stride, real time) and denials proved wrong quickly. This is pure Orwellian and signals a profound fascist dictatorship era coming, or here already. The calendar will be suspended also. Moodys has postponed its announcement on European bank ratings until early May. Previously, it had Italy scheduled for April 16 and Spain for April 23. Additionally, rumors floated that the ECB will engage in more Jack Daniels, Wild Turkey, and Southern Comfort by purchasing even more Spanish and Italian bonds for benefit of Southern periphery nation glue. Spain sold two-year and 10-year bonds on April 19th, which will verify the rumor. The financial markets find themselves painfully addicted to central bank largesse. The calls of joy are heard when more funny money flows from the central bank effluent pipes after their toxic brew has fermented sufficiently. The chorus of analysts, sages, and quacks has begun to sing negative tunes, like Mohammed El-Erian of PIMCO, like Michael Steinhardt, and like the clown Barton Biggs (with horrendous track record).

Eyes are more open wide this time around, as the large group of Spanish and Italian bondholders will be totally aware of how the game is played, having seen how Greek private debt holders were subordinated to the ECB in the bond restructuring. The conclusion is clear, that the LTRO could be the layer of paper mache that truly fractures in full view since it was designed as the grand solution. Many like the Jackass have been waiting for a grand solution attempt ever since in late 2009, when Greece broke wide open. The LTRO seems to be it, since touted as the ultimate debt repair. It will fracture in full view, at the same time two to four new currencies might arrive on the monetary landscape. Watch for the new German Mark (Euro Mark, Nordic Euro), the fully convertible (possibly soon gold-backed) Chinese Yuan, the new Russian Ruble, and the new Gulf Dinar. The important pre-requisite to a newly launched currency of better grade and higher quality ingredients submitted by more honest brokers is that they must arrive in unison. This concept is not discussed even in the gold community. If not, then the best of the class because a victim of its own success. Its exchange rate would rise to the point of damaging the export trade with a vicious cycle hitting its domestic industries. Therefore, when a new competing currency is launched, expect it to arrive in a group. They know the Competing Currency War game, having been victimized by it for two decades.

◄$$$ YELLIN BLESSED THE USFED EASY POLICY, AND IN DOING SO LIT A SMALL BRIEF FIRE UNDER GOLD. THE CENTRAL BANKERS ARE ENACTING EVERY CONCEIVABLE POLICY TOWARD HYPER MONETARY INFLATION. BUT THEY HAVE LATELY BEEN FLIPPING THE NAKED SHORT SWITCH ENFORCED BY JPMORGAN TO KEEP THE PRECIOUS METALS TAME WHENEVER BERNANKE SPEAKS. $$$

The USFed is proclaiming its easy monetary policy to be appropriate, in a sick endorsement of extreme historically unprecedented accommodation. The near 0% policy has been in place for three full years, a set situation never before seen. It is evidence of failure. The banks are insolvent. The USGovt cannot afford to finance its debt at normal levels of borrowing costs. Speculation requires free money. And war without cost is exploited to pad the narco baron accounts. Janet Yellen is a reliable mouthpiece for the Open Mouth Fed. She called attention to high unemployment and the headwinds facing the USEconomy, in justifying continued 0% money. What a travesty! She actually stated if necessary, that the central bank has a variety of options were it to engage in further asset purchases. She repeated the equivalent of beauty pageant pursuit of world peace as high priority when she repeated the USFed willingness to take whatever actions might be necessary to achieve its mandate of promoting employment and keeping inflation in check. Instead, its track record since the Greenspan Era has been gallopping unemployment over 20% with annual 10% price inflation, failure to the extreme. Yellen deemed the economic outlook as particularly uncertain, as she highlighted concerns about unemployment. Still, Yellen fell back to the usual cockeyed refrain of expecting the economic recovery to continue and even strengthen somewhat over time. It is stuck in a powerful recession, if truth be told. She defended the indefensible heresy, stating that the USFed will keep benchmark interest rates near zero through at least late 2014. She admitted being prepared to react to conditions if the United States exited quicksand or insolvency. Upon leaving, the crowd genuflected in deference, thinking thoughts of sainthood,. uttering words of high admiration. What a farce!!

◄$$$ NEGATIVE REAL RATES ARE THE MAIN FIRING CYLINDER TO THE GOLD BULL. THE OFFICIAL USFED RATE NEAR 0% ENSURES A VERITABLE PERMANENT GOLD BULL MARKET. IT WILL BE INTERRUPTED BY THE USGOVT DEBT DEFAULT ENSURED BY SYSTEMIC FAILURE. $$$

This point on the gold bull power pack deserves repeated mention every three months, as a reminder that artificially cheap money powers the bull market on its primary cylinder, marked by negative real rates. Jeff Clark calls it gold's critical metric, the Jackass the main firing cylinder. When the official interest rate is reduced by the prevailing price inflation, the resulting real adjusted rate dictates the gold bull gear and speed. It is at high gear and has been for three years. In 2009 when the USFed dropped the benchmark rate to near 0%, the CPI was around 9%. Take the 10-year USTBond yield instead since it drives the interest rate for savers. Even at 4%, subtract the 8% CPI to arrive at minus 4% in 2009. In year 2010, the USTBond yield (TNX) was still around 3%, with CPI moving up to 9%, producing a real adjusted rate of minus 6%. In year 2011, the TNX was around 2% with CPI up to 10%, for a real rate of minus 8%. These latest weeks, the TNX is still around 2% with the CPI between 10% and 11%, for a real adjusted rate of minus 8% to minus 9%. The reality based CPI is taken from the excellent work by John Williams and the Shadow Govt Statistics crew. The USGovt CPI is an insult to any normal person's intellect, and the best friend of nitwits who are devoted to the investment world, selling paper. The negative real rate is growing more negative.

Many other reasons work to make gold a favored investment, from fears that the monetary hyper inflation will jump the gates and hit Main Street. There is also the sovereign debt concerns over bond breakdowns, an important factor since the debt structure serves as foundation for the entire global monetary system. Also the ruinous headwinds harm the system seen in the perma-bear market in housing, once thought the wondrous engine for the entire USEconomy. Gold had a great decade in the 2000 years. It will continue since the main cylinder is stronger. But the paper gold market must be destroyed first, a process well along, helped by the MFGlobal thefts and the High Frequency Trading dominance. The corruption of Wall Street has become almost a mainstream topic. The fraud accusations and flimsy defenses are daily, alongside the constant backdrop of court settlements for fraud in the housing mortgage finance sector. The only safe money anymore is Gold & Silver bars, surely not bonds piled in any kind of assortment. The best indicator that signals the gold bull market remains on course is negative real interest rates. The real interest rate is simply the nominal interest rate minus the prevailing pr ice inflation.

The chart below calculates the real interest rate by extracting annualized inflation from the 10-year USTreasury nominal rate. But it relies upon the amusement based CPI proffered by the stat-rat agents of deception at the USGovt agencies. They depend heavily upon hedonic value adjustments to claim prices are not rising, when almost all components within their calculation exceed the overall weighted sum result that is reported as the CPI-U. The adjustments have become laughable and the object of common criticism, if not scorn. So the negative real rate indicator is effectively foretelling of a continued gold bull market, even before reality infusions. The accurate indicator is actually 6% to 7% more negative! The true CPI is 6% to 7% higher than the official dumkopf CPI issued by the USGovt. Gray highlighted areas are the periods when the real interest rate was below zero, when gold has performed well. Gold climbs when real interest rates are low or falling. Notice how the gold bull market took off in 2003 and 2004 and 2005, when the officially calculated real rate was listed as plus 1% to 3%. The group of Western central bankers actually make the real rate of interest more powerfully negative every single year. As long as the USFed and Euro Central Bank and Bank of England and Swiss National Bank maintain near 0% rates, they will keep price inflation strong. As long as the USFed continues to promise 0% for as far as the eye can see, the real rate will be big bold and negative. The gold bull indicator will remain flashing strong signals of powerful movement for a few more years at least, especially since all their vacant solutions involve the debasement of money and the increase of budget deficits. Thanks to the Casey gang for a fine chart.

Analysts like Jeff Clark lose some credibility by using the official nonsensical CPI. But his reasoning is sound. He concluded, "The reason for this phenomenon is straightforward. When real interest rates are at or below zero, cash or debt instruments (like bonds) cease being effective because the return is lower than inflation. In these cases, the investment is actually losing purchasing power, regardless of what the investment pays. An investor's interest thus shifts to assets that offer returns above inflation, or at least a vehicle where money does not lose value. Gold is one of the most reliable and proven tools in this scenario. Politicians in the US, EU, and a range of other countries are keeping interest rates low, which in spite of a low CPI, pushes real rates below zero. This makes cash and USTreasurys guaranteed losers right now. Not only are investors maintaining purchasing power with gold, they are outpacing most interest bearing investments due to the rising price of the metal." One can safely conclude that the gold price has risen three times faster than the prevailing price inflation rate. Gold is doing far better than keeping pace with purchase power of money itself, because it is slowly removing the longstanding suppression mainstay cord lines. Clark loses further credibility by permitting advertisements of the corrupted SPDR Trust gold exchange traded fund. It is a tool used by the Wall Street and gold cartel to keep down the gold price. They used shorted shares to deplete the gold held in inventory, with frequent raids. The GLD fund is not a gold investment at all. See the Seeking Alpha article (CLICK HERE).

◄$$$ USFED SWAP BAILOUT OF EUROPE IS YET ANOTHER HIGHLY DISTURBING EVENT. NO POPULAR APPROVAL OCCURRED. THE RISKS ARE SHARED FOR SYSTEMIC FAILURE AND BANK SYSTEM COLLAPSE. THE MONETARY SYSTEM IS IN THE PROCESS OF COLLAPSE BEFORE OUR EYES. THE USFED AND EUROCB ARE BECOMING GIGANTIC TOXIC PAPER MILLS AND VAULTS. BY PREVENTING THE EUROPEAN UNION FROM DISSOLVING, AND PREVENTING THE MEMBER NATIONS FROM REVERTING TO THEIR DOMESTIC CURRENCIES, THE TWO CENTRAL BANKS ARE DEBASING THE USDOLLAR. THUS THE ENTIRE GLOBAL ECONOMY COST STRUCTURE IS RISING. THE GLOBAL ECONOMY IS DRAGGED DOWN BY A RECESSION EXTENDING FROM THE WEST. $$$

On March 26th, a meeting convened of the Domestic Monetary Policy & Technology Subcommittee of the House Committee on Financial Services. The topic was the USFed aid to the EuroZone and the impact on the United States and the USDollar. Chairman Bernanke was not at the meeting, a busy man. The USFed was represented by William Dudley of the New York Fed and Steven Kamin, a USFed board director. The hearing dealt mainly with the USFed currency swap with the Euro Central Bank, a covert bailout of European banks. Last year, the European banks had been pressured by their governments to buy their own sovereign bonds. In the wake of the crisis that ensued, European banks had difficulty renewing their short-term US$-based loans. As the ECB can only print Euros, not USDollars, European banks were in a bad bind. The big US banks did lend to European banks, but they reached a limit. In September 2011, the USFed stepped in and bailed out European banks through currency swaps. Through the swap device, the USFed assumed its role as the international lender of last resort. Do not be fooled by idle empty talk about the USGovt no longer funding the IMF for the purpose of bailing out European banks. This is the public face. The hidden face is the multi-$trillion Dollar Swap Facility usage, the primary critical lifeline to Europe. It has prevented a systemic collapse in full stark view. Draghi at the EuroCB has tapped the facility for a cool $3.1 trillion in the last six months for big bank rescues, which conceal the sovereign bond prop bailouts. See the Zero Hedge article (CLICK HERE).

During the financial crisis between 2007 and 2009, the USFed had bailed out European banks but through the back door. They used direct loans to bank subsidiaries located in the United States. In order to conceal the newest bailouts, the USFed deploys the gigantic currency swaps, using attractive discounted rates. The USFed claims it is easy money, when in fact the loans turn toxic rapidly. The EuroCB uses the money to lend to desperate European banks whose failure has been imminent, burdened by sovereign debt once thought secure. The entire system is collapsing. The hearing was to discuss the hidden bailout of European banks by the USFed. To the surprise of Congressional members, the bankers claimed that the bailout was basically a free lunch for US taxpayers, as interest would be earned. They maintained that the bailout was necessary to avoid a default of European banks, and all that stress in financial markets. The contagion would reach the United States with action taken, as its banks would be damaged through the interconnectivity. The USFed promised to end the swap activity when the costs and risks rose too much. They already have. They just lie since the central banks collectively are desperate. The systemic is breaking down. See the Philipp Bagus article entitled "The Fed's Swap Bailout Of The Eurozone" from the Von Mises Institute (CLICK HERE).

The rebuttal to clownish pollyanna nonsense is easy to formulate and list. Consider:

  • The USFed lent to the European banks indirectly even though the big US banks refused. The risk was too high. The counter-party risk is the real issue. The Euro banks could go bust, and the EuroCB balance sheet could suffer toxicity trauma, its balance sheet the most highly leveraged in the world. Truth told, the ECB is grotesquely insolvent. The ECB holds all types of wrecked sovereign bonds from Southern Europe, much accepted a while back before significant bond principal loss. The support ultimately comes from the printing press, thus the argument to own Gold as major currencies rot from lying in debasement with oily bond rags.
  • A vicious circle exists. The USFed hopes the EuroCB is recapitalized by the EuroZone governments, but they turn to the ECB, which turns to the USFed. The USFed acts as though it is not the lending of last resort. The recapitalization initiative will be done on the back of the USFed Dollar Swap Facility (chapter 86) in order to repay the USFed its own loan. Reminds a person of using a credit card cash extension to pay off another credit card balance, except carried by the same owner.
  • The USFed is a bad investor, operating like an business bank with inverted rules for profit. They purchase securities that nobody wants, that lose value, and thus make their balance sheet toxic. The USFed and EuroCB together are ruined insolvent broken banks without regulatory oversight. The USFed never makes good investments like Apple stock, or Dakota energy deposits, or Iowa farmland, or Canadian water, or even GOLD. The USFed and EuroCB are gigantic cousins to Fannie Mae for the abuse of government debt gone toxic. Fannie is their deformed legless child.
  • The moral hazard has gone nuclear and is raging globally. The financial markets rely on the central banks to purchase toxic bonds and to flood the banking system with cash that finds its way to the stocks and bonds of all stripes. The motive for prudence is nowhere. That is why the subprime loans are making a comeback. The hazard is acute. The political extension is a trade-off of more hazard for more centralized rule. The greatest risk might be liberty in Europe. It has already vanished in the United States from executive decrees.
  • The USFed is essentially bailing out the most insolvent elements of Europe, and in doing so, it debases the USDollar. In fact, they are lifting the cost structure for the entire global economy, since most commodities are priced in US$ terms. The USFed is preventing capitalism from working, a process that could come from big bank liquidation, even sovereign bond liquidation tied to broken governments in a failed European Union experiment. The USFed is preserving the broken European Union. The continent of Europe has never been successfully united, and never will without pure evil fascist rule.

For more light reading, check out "Astounding Facts About Fed Treasury Purchases" by Chuck Butler (CLICK HERE). History is being made, but of total systemic ruin.

◄$$$ ANOTHER DEBT DOWNGRADE FOR THE USGOVT, THIS FROM AN INDEPENDENT AGENCY. THE FACTOR OF GROWING DEBT WITHOUT A GROWING USECONOMY IS COMING TO THE FORE. THE UNITED STATES RESEMBLES THE P.I.G.S. NATIONS OF SOUTHERN EUROPE. THE USGOVT DEBT CAN NEVER BE REPAID, A REALIZATION TO BE MADE FIRM IN THE NEXT YEAR OR TWO YEARS. $$$

Egan-Jones is the most independent rating agency in the United States. The background has been seen before. The USGovt debt limit is near another breach, but this time few care. The progression of US debt/GDP ratio surpassing the 100% mark is nigh. The Standard & Poors rate analysts warned in February that their agency plans to downgrade the USGovt again within six months if there was no budget plan. No budget plan is in the works. No break from the deadlock is visible. Plans are presented in polarized fashion. The USGovt is on the verge of having its debt ceiling fiasco repeat all over again by September. Then came the debt downgrade by Standard & Poors that caused a splash. Egan Jones is a small but respectable debt rating agency, among few that are not tainted by politics and Wall Street pressure. Egan Jones downgraded the United States Govt from AA+ to AA, with a negative outlook further. The data reads like the US being the biggest pig among the PIGS.

The official statement issued by Egan Jones made some glaring arguments with startling data to back it up. Their focus was on debt and the power to repay from economic vitality that is lacking. The USCongress embarked and failed on a path to reduce the deficit by a small token, failing on stage in full global view. Egan Jones wrote, "Inflection point: when debt to GDP exceeds 100%, a country's financial flexibility becomes increasingly strained. For the first time since WWII, US debt exceeds 100%. From 2008 to 2010, debt rose a total of 23.6% while GDP rose a total of 1.6%. Unfortunately, with an annual federal budget deficit in the area of $1.4 trillion, debt is likely to reach $16.7 trillion as of the end of 2012. While assuming GDP grows 2.5%, total GDP is likely to reach $15.7T. Therefore, as of the end of 2012, the debt to GDP ratio is likely to be in the area of 106%. Assuming the federal deficit for 2013 remains at $1.4T and GDP growth is 2.5%, the total debt will rise to $18.1T and GDP will rise to $16.1T, resulting in debt to GDP of 112%. In comparison, France's and Italy's debt to GDP are 81% and 117% respectively. Regarding efforts to address budget problems, the Super Committee was seeking spending cuts of $1.5 trillion over 10 years or merely $150 billion per year, and was a failure. Obviously, the current course is not enhancing credit quality. Without some structural changes soon, restoring credit quality will become increasingly difficult. Yields on 10-year Treasury Notes have fallen to their lowest since early February 2010 with US Federal Reserve's aggressive purchases of USTreasurys. A concern is the rise in interest rates placing higher pressure on the US's credit quality. Excess growth of money supply (debt monetization) harms creditors and ultimately the economy. Weak debt reduction efforts force a negative watch." See the Zero Hedge article (CLICK HERE). Someday a debt rating agency will dispute the GDP officially stated, and bring attention to the chronic recession and negative GDP growth.

One must wonder if Egan Jones ever heard of Interest Rate Swaps. These highly leveraged contracts have kept the long-term USTBond yield down in the 2% zone for over a year, despite gargantuan debt issuance. Rules of Supply & Demand no longer apply, since supply is out of control and demand is from the USFed itself. USGovt deficits are skyrocketing but the Printing Press purchases a majority of the debt. Then again, the IRSwap is a taboo topic since a weapon of mass destruction that the US Dept Treasury uses, against itself. Lastly, Egan Jones uses the corrupt GDP growth data. The USEconomy has been stuck in a minus 3% to minus 5% recession since 2009. Time to wake up to the fact that debt grows by $1.5 trillion annually during a chronic recession with little hope of exit! Thus the Jackass forecast of a USGovt debt default in the future.

## BROKEN BANK WALLS

◄$$$ GLASS STEAGAL WALLS ARE QUIETLY BEING REBUILT AFTER THE DAMAGE IS DONE, AND THE ENTIRE US-BASED FINANCIAL STRUCTURE HAS SUCCUMBED TO GROTESQUE INSOLVENCY AND RUIN. THE PROTECTIVE WALLS BETWEEN COMMERCIAL BANKS, STOCK BROKERAGE, AND INSURANCE WERE REMOVED BY RUBIN IN THE LATE 1990 DECADE, WITH NO VISIBLE BENEFIT. LOOK FOR SOME BIG BANK RESTRUCTURING SOON. $$$

This is the barn door being locked after the horses escaped, but worse, the barn has burned down with only a shell remaining. It is my firm conviction that systemic ruin was the designed plan by the nazis and syndicate titans, whose boy Greenspan was willing to lead the way. Formally, the Clinton Admin signed into law in 1999 the legislation known as the Gramm Leach Bliley Act, removing the three-part barriers. They accomplished their mission. After the ruin, the walls are being rebuilt quietly. A return of the 1933 Glass-Steagall Act has been called for during the last few years. According to those sitting on the Securities Traders Assn of New York, the landmark law whose roots trace back to the Great Depression is effectively back on the books. Some sentiment swirls among investment banks that the reform movement has further legs. The firm Keefe, Bruyette & Woods has recently argued that big bank breakups might occur in the near future. See the Yahoo Finance article (CLICK HERE). If so, then expect the most vile and largest to be exempt, like JPMorgan Chase and Bank of America and Citigroup. They have special functions, JPM being the USFed operating agent, BOA being the chief narcotics money laundering channel, and Citigroup being the CIA project and spook pension auto teller machine. Furthermore, big bank breakup does not mean liquidation. Any restructuring would preserve the insidious illicit functions in smaller business units that would actually be easier to manage, made more free from mundane functions. The very banks that control the USGovt and US security agencies are not going to order their own liquidation and dissolution.

◄$$$ JPMORGAN EARNINGS WERE PROPELLED BY RAIDS ON THE LOAN LOSS RESERVE FUND, A FAMILIAR COMMON THEME AMONG THE BIG BROKEN US-BANKS. THE JPMORGAN NON-PERFORMING LOANS IN THEIR PORTFOLIO GREW, WHICH SHOULD HAVE JUSTIFIED AN INCREASE IN LOSS RESERVES. THE NEW CONSTANT WILL BE THE FUNDS SET ASIDE FOR LITIGATION AND LAWSUIT SETTLEMENT. TO BE SURE, JPMORGAN MISSED BADLY IN EARNINGS, AS THE GREAT SLIDE INTO THE ABYSS HAS BEGUN TO GATHER MOMENTUM. TOO MANY WARNING SIGNALS ARE FLASHING FOR JPMORGUE, UNLIKE IN THE PAST. DIMON LOOKS SCARED. $$$

Two weeks ago, the goliath syndicate titan JPMorgan announced earnings results. They were called better than expected, but only with the benefit of a poorly directed raid on loss reserves. In no way was an increase in its dividend to 30 cents per share justified either. In no way was a $15 billion stock buyback warranted either, given that business growth and earnings are absent. Business is on the decline in numerous respects. The key feature was the reduction in Loan Loss Reserves, the most common abuse in recent quarters for the big broken banks to pump up the bottom line. Raids to loan loss reserves accounted for $1.8 billion of supposed profit, equal to 28 cents per share. The firm's ugly blotch was Non-Performing Loans, which increased for the first time in several years, since before the eruption of the subprime crisis in 2007. The NPF loans rose from $10.0 billion to $10.6 billion. The list of one-time items is lengthly. The Washington Mutual bankruptcy settlement cost JPM a ripe $1.1 billion on the quarter, to settle the corrupt abuses, mere costs, no felonies, and certainly prison time for the WaMu gangsters. Curiously the infamous Credit Value Adjustment game went into reverse, costing an accounting loss, as the debt and its insurance tightened in the quarter. A substantial $2.5 billion expense was logged for additional litigation reserves, as every conceivable bank is suing JPM. Expect more legal expenses and settlement costs in future quarters.

The quarterly results would have been truly lousy and the talk of the market without the one-time abuses. Virtually all investment bank revenue items declined year over year. Basic IB fees fell by 23%, year over year. Equity revenue (stock trading) was down 4% yoy. Fixed income (bond trading) revenue was down 2% yoy. The quarter was between horrendous and wretched. Check out the miserable trend of abuse. NPF loans have been relatively tame for four quarters, yet the raids to Loan Loss Reserves have been amplified and vigorous, if not desperate. CEO Jamie Dimon has over the past two years alone generated $12.3 billion in puffy accounting earnings thru the LLR raids! These reserves have been drawn down by $3.9 billion from a year ago, to the pleasure of their dumb investors. Far more troubling on the chart below is an increase in non-performing loans (green segment) to $10.6 billion for the first time in years. Bear in mind that many bank analysts believe the actual reserves exist, to cover losses. But they reside at the USFed, called excess reserves, earning next to nothing. My view is that the excess reserves conceal the insolvency of the USFed itself.

Jim Sinclair reiterated the Jackass arguments in pointed fashion. He wrote, "All the media fell in love with the JPM reported bottom line. The expected number was $1.17 per share, and they reported $1.31. However, if you strip out the 28 cents they recorded by reducing their Loan Loss Reserve, they actually did $1.03, and missed bigtime. This is not a valid decreasing of their loan loss reserve for three reasons. A) Because we know the housing market is plunging again and JPM will soon have to write down a lot more mortgage debt. B) Their non-performing loan disclosure showed that their non-performing loans increased by $600 million to $10.6 billion. C) We know the economy is tanking again, so JPM will likely suffer big loan write-downs across all of its lending lines."

The entire proprietary trading whale story, and the reorganization to elude the restrictions from the Volcker Rule, have also made the financial news rounds. The Iksil Whale and the oddball superstar named Achilles have made headlines. These proprietary traders place multi-$billion bets that cannot be justified as mere hedges against other positions to ensure stability. The client hedge argument is bogus to the core. Never do large firms hedge against every segregated client account position. Stock brokerage does not hedge against client accounts. Utter nonsense! Instead, JPMorgan is entrusted with the substantial and burdensome responsibility to act as principal financial pillar to hedge against collapse of the entire Western financial system, from bonds to currencys to gold. When it involves Gold or USTBonds, the leverage and abuse are illicit and to the extreme. The derivatives pile on with naked short positions for Gold, keeping down the metal price, while central banks apply $5 trillion in whisky money to the big banks. The Interest Rate Swaps pile on to maintain the artificial 2% long bond yield, while the USGovt racks up $1.5 trillion in new annual debt. Sinclair added comments on the proprietary organizational chart. Gold should be much higher in price, and long-term USTBond yields should be much higher as well, just like in Southern Europe, which the United States resembles more with each passing month. The US belongs in the PIGS pen with the rest of the swine.

Comments about the Volcker Rule adaptation came. Sinclair wrote, "JPM has simply moved its proprietary (the in-house hedge fund, aka prop trading) functions into the office of the Chief Information Officer. This maneuver was done in order to move the risk-based capital trading out of the securities unit and into the bank holding unit. Why? Two-fold: 1) It removes the proprietary trading away from the eyeballs of the securities regulators and the Volker Rule. And 2) it shifts this risky trading into a business unit that would be covered by the FDIC. It is what Bank of America did when moved something like $52 trillion in gross derivative positions from its Merrill Lynch securities unit to its holding company. I would bet both of my testicles that the CIO proprietary positions include a heavy does of gold and silver COMEX short positions." JimS is a betting man, and almost always wins his bets. Notice how $1650 is a strong firm robust base of support for the Gold price, after that target was declared by Sinclair back in 2005 and 2006 and 2007.

My gut feeling is that JPMorgue is about to take severe wounds. Note the many curious events. The shifty behavior to avoid regulatory scrutiny over the Volcker Rule. The Blythe Masters absurdities uttered about the precious metals short position being a hedge against client accounts. The accounting abuses to show a quarterly profit. The endless litigation and bond investor lawsuits. The Non-Performing Loans rising amidst the renewed housing market decline. The USEconomic endless recession. This lady Masters truly deals in Pulp Fiction, quite the accomplished liar. A pretty good lookalike for Uma Thurman. This Blythe is no lady.

◄$$$ MORGAN STANLEY'S FAILURE TO SEGREGATE CLIENT ASSETS ON A NEW PRECIOUS METAL VAULT INVESTMENT SCHEME CREATES DEFAULT RISK. YET ANOTHER CONJOB BY WALL STREET PERPETRATED AGAINST CLUELESS INVESTORS WHO DO NOT COMPREHEND ALLOCATED ACCOUNT REQUIREMENTS. IF MORGAN STANLEY FAILS AS A FIRM, ALL CLIENTS WILL LOSE THEIR INVESTMENT IN PLEDGED COLLATERAL TO COUNTER-PARTIES IN HIDDEN DERIVATIVE TRADES. ANOTHER IN A STRING OF MFGLOBAL CASES IS BEING ARRANGED. THE WALL STREET CRIMINAL ACTIVITY IS GOING WITHOUT LEGAL OBSTACLE OR PROSECUTION, ON A PERMITTED SERIAL CRIME SPREE. $$$

In a legal warehouse facility arrangement with clients, such as with precious metals, the hard fast rule is of bailment. Client property must be segregated so that it is capable of being identified specifically as belonging to the client. It must be identifiable for every exact coin, bar, and piece of jewelry or art, preferably with serial numbers or certification tags. It is a good customary practice for the warehouse manager to list the weight, manufacturer, bar number, purity fineness, and specified location inside the warehouse. The investment interest among the public has led to new problems. Brokerage houses like Morgan Stanley cannot resist the temptation of big profits levied like taxes on the naive public. The corrupt firm is offering to sell gold, silver, and platinum bars, and to keep them in a storage facility. But they refuse to segregate client assets, and worse, they falsely claim Allocated account ownership. Instead, MS intermingles their own firm's bullion metal, and probably uses client metal as collateral in its shady derivative trades. The unsuspecting naive customers are lined up to be cheated and scammed. They will not be purchasing metal in allocated storage. Instead, they will be purchasing the equivalent of an unsecured bond with repayment promised in the form of gold, silver, or platinum. What MS has designed is a fractional banking scheme involving precious metals, perfectly arranged for future fraud. In investment material offered to potential clients, MS actually uses the term allocated ownership when it is not allocated at all. It is a mere deception designed to lure well-read, cautious, but inexperienced precious metals buyers.

The Morgan Stanley offering is NOT allocated storage, as defined under any industry standard, practice, or relevant law. Yet, its website states, "Allocated ownership means that the physical precious metals (bars and coins) you order from Morgan Stanley Smith Barney's Precious Metals Trading Desk are purchased and stored on your behalf, but no specific metal bar or coin is specifically identified as belonging to you. Your precious metals will be stored together with precious metals that are owned by and stored for other customers. Storage costs are generally higher for allocated metal than for unallocated metal." What grand deception! This is obvious unallocated ownership with the false name and higher price. The invested metal is held in book-entry form in your Morgan Stanley Smith Barney account and is backed by physical metal stored in either the United States or London. Investors are simply being tricked into becoming new sources of precious metal for abuse, even funding for company operations. Wores, the metal involved probably already has a few claims against it.

The scheme appears well designed to allow pledging of such metal as collateral for derivatives trades. Furthermore, if Morgan Stanley ever fails as a financial firm, in all likelihood all vault metals will go directly to counter-parties from the derivative contracts attached. Customers who deposit money are merely unsecured creditors under the scheme. They are not actual bullion metal owners. They hold an unsecured promise to repay in unspecified abstract metal, last in line during problem times, but have no claim on particular bars of gold, silver, or platinum. This is a pure fraud scheme designed to exploit the precious metals enthusiasm and ignorance of legitimate vault business. See the Seeking Alpha article (CLICK HERE).

◄$$$ TURKEY HAS RESPONDED TO FOREIGN CAPITAL FLIGHT AND BANK RAIDS BY ADDING TO GOLD RESERVES. SEVERAL CENTRAL BANK POLICY REVISIONS HAVE BEEN PUT IN PLACE AS PROTECTION. IN RECENT MONTHS, FOREIGN CLAIMS ON TURKISH BANKS HAVE BEEN RISING, WHILE THE ABILITY OF THE BANKS TO MEET THE CLAIMS HAS BEEN FALLING. GOLD IS A PRINCIPAL DEFENSE MECHANISM TO FORTIFY THE WALLS. $$$

In March, the Turkish central bank sharply raised the domestic currency reserves banks can hold as gold bullion, while at the same time cutting the proportion for foreign exchange reserves to zero. The Turkish banks have received approval to hold some of their reserves as gold. The Turkish people have been encouraged to deposit more gold with the national banking system. Like India and Vietnam, Turkey satisfies most of its gold investment demand through imports. They employ gold as a means of addressing a balance of payments challenge. However, more to the story. Turkey's fragile banking system faces a liquidity crisis. The move to boost gold within the banking system could be part of a wider strategy to stave off a liquidity crisis. Banks are challenged to hold insufficient liquid reserves to meet their creditor demands for repayment. Turkey has repeated episodes of inflation and deficit problems every few years, the last occurrence being in 2000-2001. In the past three years, my gold trader source has mentioned Turkey often in gold transactions, a hotbed that never reaches the news. They have been avid sellers of their treasury gold bullion to meet shortfalls.

The Eastern European nation, gateway to Asia, has attempted to avoid the IMF by focusing upon three pillars of fiscal adjustment, structural reform, and a firm exchange rate commitment supported by consistent incomes policies. They have kicked the can down the road like many major nations. The Current Account deficit (trade gap plus investment gap) expanded from $0.9 billion in 1999 to nearly $10 billion by the end of 2000, which has led to built-up foreign currency liabilities. Foreign investors have taken advantage of higher rates, much like they have in Brazil. Capital inflow had already begun to slow down in the second half of 2000, and by September had turned into a net outflow, a critical reverse that has endure. For years the central bank might have been able to sterilize the outflows by expanding the money supply, but they chose not to undermine the Lira currency. With inadequate market liquidity, interest rates rose. Banks with short-term borrowed funds were largely forced out of the trade with margin calls. Rising interest rates made more costly the government debt service, which led to decline in government bond prices. Then money started to flow out of Turkey again. This all happened back in late 2000. The IMF had to step in with a $7.5 billion loan. Tough terms of the IMF loan, whereby it was forbidden to use the money to support the Lira while lowering interest rates, resulted in a second liquidity crisis in February 2001. Their stabilization program collapse. Turkey entered a deep recession, GDP that year falling by over 5%. IMF loans never aid a nation, always a poison pill. Other external factors like a stubborn rise in oil prices put upward pressure on inflation, which aggravated the current account problem. The USDollar rise against the Euro all through the 2000 decade created a big problem for Turkey, whose imports are priced in US$ terms while its export income arrived in Euro terms.

Against this historical background, the central bank issued a November Financial Stability Report in summary. The banking system was judged to be reasonably strong, but concerns had grown concerning adequate liquidity. They cited rising FX assets and rising FX liabilities on the bank balance sheets. The foreign currency value of assets compared to value of liabilities of a similar maturity term has been falling. The Foreign Currency Liquidity Adequacy Ratio has been falling. In other words, foreigners have been building up claims on Turkey's banks, while the ability of banks to meet those claims has been diminishing. This situation is similar in Spain and Italy, which draw on EuroCB swap line funds to meet the US$ obligations. Domestic assets in Turkey could not be tolerated to fall too much, or else bank solvency could be called into question. Even if banks remained technically solvent, they could still face a liquidity crunch if too many of their creditors demanded return of their money at the same time.

Last year, as the EuroZone crisis intensified, Turkish officials responded to a threat of potential migration of foreign funds and of foreign lenders to pull out of the country as they ran into trouble themselves. The likelihood also lurked of rising rates required by foreign lenders, to match the higher risk sustained. The Turkish authorities undertook a number of measures in response intended to boosting banking sector liquidity. Last August, the central bank Monetary Policy Committee cut its benchmark policy interest rate from 6.25% to 5.75%, and at the same time reduced the Turkish Lira reserve ratios requirements. They also provided central bank foreign exchange liquidity to manage currency swing volatility. Banks were permitted to hold up to 10% of their Turkish Lira reserves as USDollars or Euros. The permitted ratio was raised to 20% and then 40% in October. Since that time, banks have been permitted to hold up to 10% of their reserves in the form of gold bullion. In March last month, this measure was adapted further, to where banks were allowed to hold up to 20% of Turkish Lira reserves as gold, while forbidden to hold gold towards their foreign currency liabilities.

The strategy has been to ensure Turkey's banks have sufficiently liquid reserves to meet their liabilities, especially their foreign currency liabilities. Note the fine tune modification to prevent gold being substituted for USDollars and Euros. Similar to events in 2000, the central bank is in a predicament. If it deploys its reserves to provide foreign exchange liquidity, it risks a speculative attack on a currency from the back door like last year, when it lost 16% in value against the USDollar. That bred price inflation on the cost side. Conversely, if it is too aggressive in providing domestic currency liquidity, it will undermine the Lira from the floor. Turkey has possibly encountered the limits of accommodative monetary policy. Remarkably, its central bank has turned to gold bullion as a protection, a sort of potential lifeboat. Clearly the Turkish banks are being encouraged to treat gold as a quasi-foreign currency, but whose depositors are domestic citizens less inclined to pull their money at the first signs of trouble.

Turkish banks have offered gold accounts since the mid-1990s. However, to avoid an excessive lift in spirits, most of the gold is in private hands. An estimated 5000 tonnes (valued at US$260 billion) is still held in physical form outside the banking system. They wish for more gold ownership by the people. Questions linger as to whether the public has the savings, trusts the banks, and continues the trend. The challenge for officials is to ensure the safety of such gold deposits. The nation of Turkey is using gold to fortify its bank walls and border gates during an external threat. The opposite is happening in the United States, which bans gold, attacks its price, and attempts to confiscate foreign gold accounts. Turkey has much higher chances of surviving the financial storms that seem interminable. See the Resource Investor article by Ben Traynor of Gold news (CLICK HERE).

## THANKS

Thanks to the following for charts StockCharts,  Financial Times,  UK Independent,  Wall Street Journal,  Zero Hedge,  Business Insider,  Calculated Risk,  Shadow Govt Statistics,  Market Watch.