* Introductory Update
* China Shuns USDollar & Seeks Gold
* USDollar & British Pound Face The Axe
* United Kingdom Fights the Abyss
* Coiled Spring For Gold & Silver
* Commodity Markets & Barter Threat

Issue #65
Jim Willie CB, 
“the Golden Jackass”
23 August 2009

"Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects." - Warren Buffett

"Hyperinflation, a non-classic inflation, is always and will be again be the consequence of a CURRENCY EVENT that no one understands now or will understand when it happens, which it will." - Jim Sinclair

"The US bankers have put together a nasty cocktail. They expect to force foreign creditors to drink it, but those who developed on Wall Street and the US government ministries will have to drink it themselves." - Petr from Germany (a banker und subscriber)


$$$ See the Special Report entitled "Non-Existent Exit Strategy" for the August Hat Trick Letter. While Professor Ben Bernanke congratulates himself for saving the banking world, the banking sector girds for a powerful second wave of crisis. He is a clown without a suit who fails to notice that he has painted himself into a corner. The more respected global bankers like Axel Weber of the Bundesbank caution that more trouble lies ahead. The practice of USTreasury monetization, after colossal bond fraud in recent years, will not be tolerated by foreign creditors. Its open recognition will lead to greater abandonment, even failed auctions. The US will soon suffer curtailed credit or a USDollar devaluation or both, hallmarks of the Third World. Confidence and faith in the USDollar is highly likely to diminish to crisis levels. Recent higher profile bank failures like Colonial and Guaranty will deplete the FDIC by more than $5 billion. The Federal Deposit Insurance Corp will very soon be exposed as broken. Several hundred other midsized US banks limp along, not having been shut down by the FDIC, since its rescue fund is depleted. A New Resolution Trust Fund is needed for bank asset cleanup, but it cannot be formed due to massive trillion$ fraud. Details are given. More bank failures and wreckage cleanup render an Exit Strategy as a distant proposition at best, and an impossibility at worst.

A deflation cocktail backfire is in the works. The preoccupation with falling prices of products and assets has distracted attention from the colossal monetary inflation and credit creation in USTreasury debt. A declining money velocity again ignores the bank sector. Prepare for price inflation. John williams provides a theory on the path to hyper-inflation from falling demand for money. A pictorial sequence tells the story sure to lead to powerful political pressures. The call to produce price inflation will become a loud scream soon. Pressure is relentless to turn on the inflation spigot full blast. The process is well along without much further push. Apparent stability precedes hyper-inflation, as floodgates are gradually opened over time, actively or passively.

$$$ MARTIN ARMSTRONG IS A FINANCIAL MARKET ANALYST, JAILED FOR KNOWING TOO MUCH ABOUT INNER WORKING WALL STREET CORRUPTION. HE IS PRESCIENT, AND GIVES FURTHER WARNINGS. $$$ The latest analysis by Martin Armstrong has found its way from his prison bars. He cannot be totally silenced. He warns in an August 7th release entitled "Cycles & Pattern Projections" of a consolidation stage soon to end that lifts the gold price to triple its current level, first from a global monetary crisis, then a follow through due to the arrival of price inflation.

Armstrong wrote, "Gold continues to consolidate below $1000. This is a critical sign that confidence is swinging away from the government. Just as China is concerned for the dollar, they speak the truth, unlike the BS from Washington. They are speaking from self-interest and so is Washington. China is concerned about its holding in dollars and has been reducing the maturity of their holdings. The Washington crowd has been speaking out of their self-interest insofar as they do not want to face reality. They keep telling everyone 'don't worry-be happy.' It appears that gold is building a base from which a rally up to $2500 to $3000 area is very likely. There is even a possible rise to the $5000 level, but that is the most extreme projection. This is suggesting that confidence in the dollar is declining. This is not the classic inflation nonsense, but a collapse in currency value consequence." See the Scribd article (CLICK HERE).

$$$ GOLDMAN SACHS CONTINUES ITS PARASITE ROLE OVER THE STOCK MARKET WITH FULL AWARENESS AND COMPLICITY BY REGULATORS. $$$ The guys at Zero Hedge are not amateurs. They are four ex-Wall Street pros with over two decades of corporate financial advisory, investment, and operational experience. They subscribe to the 'critical importance of anonymity and its role in dissident speech.' Max Keiser and Tyler Durden (their pseudonym taken from the hit counter-culture movie "Fight Club" with Brad Pitt and Ed Norton) tear into Goldman Sachs during an interview. They reckon GSax siphons off $100 to 200 million per day from the NYSE through high frequency trading. Their fraudulent scam is committed in broad daylight, fully exposed since the theft of their illicit software. Law enforcement officials at the FBI have protected their illicit software tools and refuse to prosecute them. Regard the NYSE and SEC to be fully complicit with the full knowledge. The game is perpetuated, even endorsed by the press, moronically justified under the guise of providing liquidity to financial markets. Then a mosquito provides liquidity to the human body in northern New England in summetime. Durden calculates their siphoned efforts earn at least a 40% risk-free rate of return!! This is crony capitalism and more evidence of The Mussolini Fascist Business Model at work. See the Seeking Alpha video with Max Keiser and Tyler Durden (CLICK HERE).

◄$$$ THE COUNCIL ON FOREIGN RELATIONS CONTROLS THE US FOREIGN POLICY, AND THE STATE DEPT IN PARTICULAR. EVEN SECY STATE HILLARY ADMITS IT DURING A GENUFLEXION. $$$ Those who think the USGovt is 'of the people, by the people, and for the people' are naïve to a shameful level, living in darkness. The Council on Foreign Relations(CFR) is the crucible, the nerve center, and the puppeteer for US foreign policy and control. It wields tremendous influence and power over the USGovt in direct and more subtle ways. Its tentacles extend to the USMilitary and beyond, with almost no policy made without consultation by other USGovt ministries that extends beyond the US borders. They are a populist grassroots union. Their constituents are some of the most powerful people in the nation, with a clear leaning toward global concentration of power and other objectives toward supra-national sovereignty, led by David Rockefeller (in person or in spirit). They undoubtedly picked Hillary to serve in office as puppet. She met with them recently to acknowledge her controllers. The organization is among the Elite with global scope and reach, hardly secretive anymore, but membership is invitation only. Speaking at the CFR a couple months ago, Treasury Secy Geithner stated that he was amenable to the idea of a global currency to replace the USDollar. Unlike the Bilderbergs, the Council on Foreign Relations is more open to the press. They have energetically promoted the Globalist agenda that serves to weaken American sovereignty.

Hillary Clinton openly admitted CFR control over USGovt Policy, all but in actual words. Her remarks came during a recent speech at the CFR's new WashingtonDC branch, at an opening ceremony. She showed deference to CFR President Richard Haas, saying "Thank you very much, Richard, and I am delighted to be here in these new headquarters. I have been often to the 'Mother Ship' in New York City, but it is good to have an outpost of the Council right here down the street from the State Department. We get a lot of advice from the Council, so this will mean I will not have as far to go to be told what we should be doing." Her admission was posted on the US State Dept website. Clinton essentially described herself as ready to take CFR orders. Whether her remarks were intended to show appreciation for guidance or outright control is debatable. Important truths often are revealed under many guises. This one stands as one of the more obvious unspoken truths in how major American Foreign policy is shaped and controlled by the CFR. See the entire InfoWars video clip (CLICK HERE).

$$$ JAPAN MARKETS ITS GOVT BONDS TO THE PUBLIC IN A WAY CONSIDERED SHAMEFUL, MORE A FARCE. THE UNITED STATES AND ENGLAND COULD CONSIDER THE SAME APPROACH. IF THEIR PEOPLE ARE LARGELY BROKE OR WOUNDED, THEY ARE DEEPLY DISGUSTED AND DISTRUSTFUL. $$$ Japan is clearly leading the way! 'Peace of mind. Piece of happiness.' Such is the promise the Japanese Govt makes to its citizens if willing to finance a small hunk of their ballooning debt. The Japanese Finance Ministry has called in advertising experts to help drum up Japanese Govt Bond demand. Their landscape will soon find the commercials plastered on taxis and television screens.One must wonder when the USGovt will running late night infomercials to sell its debt? As Craig McC in San Francisco urges, "Obama could be the host with Geithner, Bernanke, Summers, Wall Street banksters, even Pelosi as the enthusiastic co-hosts. Fill the audience with Acorn, UAW, SEIU, political party hacks, and other plants. Get Oprah to produce it." What an absolute farce! Reality is stranger than fiction! See the UK Telegraph article (CLICK HERE).

$$$ MYTH BUSTING SEEMS A NEW PURSUIT. $$$. The fine folks at have produced a few more mainstream busted myths. They all make sense, but their list is kindergarten material directed mainly to investments. It is still worth thinking about. They overlook the major myth chapters that actually sustained an entire USEconomy for three decades. They cite Myth #1) Need to be in the safest stocks to make any money, Myth #2) Bonds are the safest place to be, Myth #3) When the stock market rises, the recession is over, Myth #4) De-coupling has made some countries safer investments during a recession, Myth #5) Real estate is a safe place to be during a recession, Myth #6) Dividend stocks do not fall as much during a recession. Finally, they conclude: "Bottom Line) Investing during a recession is a humbling experience. Many well-respected money managers had the worst year of their careers in 2008, proof that even those most familiar with the markets can be caught completely off guard." Tragically, the majority, even the Investopedia folks, fail to recognize that the US financial system has broken irreparably, never to be revived with its current US$-based foundation. See the Yahoo Finance article (CLICK HERE).

$$$ A CLIMAX OF EVENTS IS IN PROGRESS, AS SIGNALS MOUNT, AND CLIMAX SEEMS NIGH. $$$ A close friend of a close friend has numerous connected contacts within the power structure. He passed along a note that caught my attention, when not many personal notes do so. It follows with his descriptions, and only minor edits. His points will be summarized without quote, with much gratitude for his shared message. Several key events are lined up simultaneously, enough to warrant greater perceived likelihood of at least a declaration of state of emergency in the United States. If could result easily in martial law. He pointed out astutely that the Chinese stock market is under pressure, so the Chinese might have political cover (an excuse) to call some money home and withhold on some credit supply to the hapless flailing out of control Americans. They might deliver a 'Ripple Effect' passively or a 'Direct Message' more actively, as they call money home, or as he says remove chips from the tables. He cited the 'Investment Banker' scuffle taking place in Europe with Porsche/VW, but that seems minor. The endless skirmishes between the crude oil hedge versus the beleaguered USDollar speaks volumes when clearly demand has fallen and supply has risen. The smart money is hedging against the US$ clearly. The effects of both the criminally administered TARP Funds and the mindlessly vacant Stimulus Plan have run their course, unable to give any further assist to the USDollar. His USMilitary intell contacts have suddenly turned silent at a time when the Pentagon has let it be known of a need for 400 thousand troops to keep the peace inside the United States. Rumors fly that the Pentagon want all 'ready by the end of August' without anything to refute. In the USMilitary command for Afghanistan, a major change has begun. And in Iraq, an Army General has said 'all significant troops out by the end of August and back home in America.' Rumors also report how another False Flag Attack is en route, in the planning stage. This attack is mentioned by a certain source as aimed for WashingtonDC on October 19th.

The last False Flag Attack was World Trade Center and Pentagon on 911 for all those whose brain stems are not disconnected, or brain cavities unused. Be sure to know that Sinking the Maine off the Cuban coast is well known to be another False Flag Attack to trigger the Spanish American War. The signing of the TARP Fund bill also coincided with a threatened martial law by then Treasury Secy Paulson, and an unannounced threatened attack on WashingtonDC in late September 2008. The signing of the Patriot Act also coincided with an actual threat of Anthrax Attack of the Congressional ventilation systems. It seems that legislation to terminate the Republic and alter the pathways for the benefit of the syndicate have staged events and real threats surrounding them. Some argue that 911 coincided with a hidden Coup d'Etat.

The sad part is most American people do not seem to notice. Perhaps they will when the Republic is turned into a communist state or into a police state, the internment camps given some attention. For a brief exposure to Intelligence agencies gone amok, check out the well studied GLADIO project, which has been reactivated by the CIA in Europe in July. The bombings started a few weeks ago in Spain, with the latest bomb having gone off under a Guaria Civil police car in Mallorca. This is the beginning of a series of staged incidences to destabilize governments and society in general. See the YouTube video clip (CLICK HERE) that chronicles briefly the 'Stay Behind' Forces that were originally intended to fight Soviet attacks on Western Europe, but whose splinter groups began a wave of terrorism to undermine various government structures. The project has been revived!

A sage contact who forewarned of the September 2008 sequence of failures and crisis almost one year ago sent a message of update this weekend. He said, "We are in the middle of the breakdown. Just watch the US budget disaster that is killing all and everything. Things are coming apart at the seams since the entire global banking system is breaking down. Trade is breaking down as well due to banks being in shock freeze. This shock freeze will not go away, it will destroy the system. Different systems will soon spring up to facilitate trade. We shall see the tail end of the financial economic political hurricane touch down sometime at end of August and early September with an never ending downward spiral that will destroy assets on a grand scale. I still expect the breakdown to be in the time frame we have been discussing. The pump and dump market manipulations by the BOYZ are fascinating to witness. Its like watching a head kill shot in slow motion. Only real hard assets will survive, Gold, Silver and a basket of essential commodities grouped around this precious metal core."

Notice the anticipated timeframe, an anniversary of the crisis last year. My response to him was brief and simple, but to the point. "I notice tectonic shifts in the currencys in the last two weeks. The USDollar is stuck in a tight range, soon to exit in unstable fashion. The British Pound Sterling moves up and down with much volatility. More US banks are falling. Big ones like Colonial and Guaranty just died. Soon much bigger ones will fail. The types of credit losses are soon to broaden into Commercial and Prime Option ARM mortgages. Banks are still in a nightmarish situation, unprepared, while clown leaders proclaim an end to the storm."

$$$ THE NATIONAL GUARD INTERNMENT CAMP ADVERTISEMENT WAS YANKED FROM THE MONSTER JOB BOARD. IT STILL APPEARS IN SOME FORM ON THE NATIONAL GUARD JOB BOARD. $$$ The advertisement that appears and is removed like a guerrilla warrior showing himself in the brush and then retreating, can be seen at times on their job website board (CLICK HERE). It is an advertisement by the National Guard promoting the Military Occupational Specialty (MOS) of 'Internment/Resettlement Specialist.' One must ask the questions: Why does the National Guard need to recruit such specialists? What do they know that we should know? The Examiner wrote an excellent article about the growing police state. They wrote the following.

"Some suggest that these facilities are being prepared for large numbers of illegal immigrants. This seems extremely doubtful, however, considering the propensity of the federal government to (1) do next to nothing to seriously curtail the flood of illegal aliens into America, (2) do virtually nothing to apprehend illegals known to be in the US, and (3) do everything it can to facilitate the release of those illegals incarcerated by State and local authorities. To think that the federal government intends to place thousands of illegal aliens in internment camps borders on lunacy. If anything, the federal government (with either Democrats or Republicans in charge) has done everything it can to (1) entice illegals to come to America, and (2) provide every incentive for them to stay illegally in this country after having entered. I feel safe in saying that we can eliminate the possibility that these camps are being prepared for illegal aliens. Others suggest that these internment camps are being constructed to accommodate 'enemy combatants' from the Iraq and Afghanistan wars. Yet, the total number of these types of detainees is miniscule compared to the detention space being constructed… Then, of course, there are those who continue to deny that these internment camps exist at all. But then, were there not thousands of Germans who denied the existence of concentration camps during World War II? These types of people would refuse to believe the sun came up in the east if the government spinmeisters told them it did not."

This camp existence denial is yet another parallel to the events in Nazi Germany 70 years ago. Other parallels can be listed. Reichstag burning and Krystalnacht events were the World Trade Center demolition and Pentagon missile attack rolled into one. The Security Act that heralded the fascist movement was the Patriot Act, which abridged rights and unleashed the hunt. The War against the invisible Zionist Army was the War on Terrorism against Islamic Armies. Denial of death camps is the next item in synch. One must ask where many of the US leaders came from. See the Examiner article (CLICK HERE).



In the USTreasury TIC Reports, China is cited for having sold $25.1 billion of USTreasury bills in June to bring its holdings down to $776.4 billion. The Beijing bankers have clearly removed far more than that, but such is the official data. If the Chinese Govt uses their vast hoard of USTBonds in grand purchases, like for European industrial property, the USTreasury might actually be the last to know in their record keeping. Or if China uses USBonds for grand investments in Africa for mineral properties, the USTreasury might actually be the last to know in their record keeping. The Beijing leaders have openly expressed an urgent need to adjust the structural imbalance of its FOREX reserves, so that the value of reserve assets could be preserved and enhanced. They actually have the largest volume of USGovt debt securities in nearly nine years (Treasurys & Agencys), according to the June data. They also have the biggest position in USTBonds, having surpassed Japan in recent months. Japan and the United Kingdom, second and third largest holders of US debt, increased their holdings over the same period.

Despite the small cutback, Chinese holdings of US debt are about 7% higher than at the start of the 2009 year. In 2008, the Chinese increased their holdings in US debt by a whopping 52% over 12 months. Beijing leaders have pushed aggressively for a new global currency regime, in particular for the super-sovereign IMF basket of currencies to supplant the USDollar. They are openly concerned about enormous erosion to the US$ valuation, from the parade of USGovt stimulus and rescue programs. The British Broadcasting Corp correspondent reported, "China has said it would like to establish an alternative to the USDollar as the world's favoured currency for foreign exchange reserves. So far there is no evidence that there is a suitable alternative. But these figures suggest they are exploring ways to diversify their investments where they can." China is buying a lot of gold, very quietly. They are also jockeying to buy a hoard of IMF gold, with political astuteness. See the BBC article (CLICK HERE).


The Chinese Govt has for years slowed the tide of a rising Yuan currency by refusing to permit the USDollars to convert to Yuan, keeping them held in USTreasury form, unconverted. Yu Yongding is the most influential Chinese economist, a former member of the central bank's monetary policy committee from 2004 to 2006. He celebrated this week with a chest pounding to note a 21% gain in the Yuan since July 2005, when it began to float but with linkage to a basket of currencies. Yu Yongding now urges the Chinese Govt to reduce Yuan sales aimed at keeping the currency weak so it can someday float freely. He said, "The Peoples Bank of China should try to reduce intervention on the exchange rate as much as possible. Eventually, the yuan should be demanded as a reserve currency, and we are far away from this stage." Yu acknowledged that more overseas investment must be encouraged, even as exports must be reduced to a degree. He urged the sales of Yuan-denominated debt by foreign companies to be done as part of a transition away from managing the Yuan currency and piling up US$-based assets. Chinese FOREX reserves rose 9.1% in 2Q2009, jumping a record $178 billion, to reach a total of $2.13 trillion (=$2130 billion) on June 30th, according to central bank data. A double-edged sword is evident. Chinese bankers do not wish to accumulate more USTreasurys or other US$-based bonds. However, they do not wish to see their Yuan currency rise either, since that would crimp exports from a price standpoint. Their unstated goal is to maintain a Yuan value near 6.83 per US$ since July 2008. Holding the Yuan from further gains also prevents losses to their vast US$ denominated bond portfolio. The central bank reiterated its goal on August 5th to keep the Yuan stable at a 'reasonable and balanced' level.


The credit needs for the United States Govt and USEconomy will soon spawn a major crisis. The USGovt and UKGovt deficits and debt issuance are fast growing out of control. The next stage of the crisis will isolate the USGovt as debtor. Disarray in the Persian Gulf from failed construction projects, and vanished Japanese trade surpluses will present China as the only potential bailout source. Arab sheiks have been burned too many times. Acting with motivation to preserve the majority of value in its US$-based reserve holdings, China might agree to assist the USGovt and USEconomy, but at a very steep price that thrusts Chinese power to the banking arena and elevates the Yuan currency into a global reserve alternative along with the Euro. In the template for US-China relations, where they claim to forecast America's destiny, Generational Dynamics pitched in. They point out the culpability of China in building an industrial base with exported US debt, and now face an unstable economic situation themselves from transmitted bubbles. They wrote the following.

"Today, as the level of public debt increases exponentially, there will come a time when America will face a currency and financial crisis similar to Iceland, and the Chinese will be forced to try to bail out the United States in order to save themselves. The Iceland situation provides us with further guidance in predicting how this coming crisis might unfold… Will China be as vengeful and vindictive as the British and the Europeans toward Iceland? There is no doubt about it. We can see a sample of China's vengeance in their policies towards the Australian company Rio Tinto, the second largest mining company in the world… The Chinese were furious, and in recent weeks have arrested four employees of Rio Tinto in Shanghai. At first it appeared that the employees would be charged with stealing state secrets, which would have been punishable by death. But after international pressure, led by the Australians, the charges were reduced to corporate espionage and bribery.

This incident provides just a tiny taste of the kind of vengeance we can expect from the Chinese in the case of an inevitable default by the United States. The Chinese will angrily agree to 'bail out' the US, by forgiving some of America's debt. But the Chinese will also jail Americans on various charges, and will make onerous fiscal demands on the US, as well as demands for greater international control over the dollar currency. This will frighten and infuriate the American people, and the charges and counter-charges will eventually spiral into full-scale war. From the point of view of Generational Dynamics, a war between America and China is 100% certain… All scenarios lead to the same place, a Clash of Civilizations World War, with China versus the United States in the lead." See the Generational Dynamics article and complete list (CLICK HERE). One should also expect a wave of colonization, that includes residential property, commercial buildings, industrial plant, and farmlands. Never forget that China has little arable land and many mouths to feed. They are increasing their USAgency Mortgage portfolio, for likely conversion.



In an August article by the Jackass entitled "Monetization of USTreasurys In Isolation" (CLICK HERE), the ominous condition behind foreign creditor abandonment in its early stages is described. Disaster upon revolt is a better depiction. "I find this simple chart so ominous I had to send it. Decelerating year-over-year inflows and outflows across the board. Stick your head in the sand if you like, but string this trend out a little longer and you are going to have flight from the dollar." So wrote CIGA Eric DeGroot. See the article that displays this graph and his few words (picture says enough) on the JSMineset weblog (CLICK HERE). It is very brief.

The chart below delivers a powerful message. It covers several important types of US$-based bonds, their inflow and outflow, and the aggregate GrandNet. The financial data is publicly available from the USGovt Treasury Intl Capital (TIC) Reports. Inflows of foreign funds are dwindling almost across the board. In the case of USAgency Mortgage Bonds and USCorp Bonds, the nation is witnessing something unprecedented, the net outflow of funds. This is outright rejection in flight. The chart exposes the isolation problem for the USDollar in the bond world, clearly the most important market beneath the currency market. The printing press is the last option, hardly hidden any longer except to the loyalists and the blind. The USGovt is exposed as insolvent actually. The USDollar stewards are NOT demonstrating control, discipline, or even anything remotely resembling honesty or integrity. Worse, the USGovt plans gigantic new programs loaded with new spending, adding to the deficit, and infuriating China in particular. See the costly Health Care program. If federal deficit reduction were a high priority, the endless war would be cut short. Fiscal responsibility is nowhere a priority. A gathering storm of revolt comes.

The foreign creditors are moving away from the United States, as is plainly evident. The big bold red series shows the Grand Net US$-based bond reduction in net flow change from a high around $950 billion in early 2007 to a figure now approaching only $200 billion, thus a severe cut in net inflow. The greater alarm comes from the USCorporate Bonds in the yellow series, whose net flow change is down from a plus $600 billion high at the same time to a slight net outflow negative figure now. The USAgency Mortgage Bonds in chartreuse/mauve/pink have net flow change with peak of plus $300 billion at the same time to a net outflow of a frightening $150 billion now. Since the important peak for mortgage and corporate bonds, the USTreasurys in blue series have recovered from a $200 billion net positive inflow to a $400 billion net inflow. However, one should suspect that the USFed is purchasing its own USTreasurys. It does so directly from primary bond dealers as well as from convenient accounts bearing foreign names, using American funds, and laced with sinister motives founded in deception. Foreign institutions in all likelihood are not the main purchasers.

$$$ A HUGE SCARY FOREX DISCOUNT IS BEING USED RIGHT NOW BY MARKET INTERMEDIARIES FOR CASH CURRENCY TRANSACTIONS. THIS IS A CLEAR LOUD PREVIEW OF FUTURE US$ AND BRITISH POUND STERLING DEVALUATION. THE DISCOUNTS PROBABLY OCCUR ON GRAND ACQUISITIONS, SPENDING US & UK DEBT, IN CONVERSION TO HARD ASSETS. $$$ Last week, my email INBOX was abuzz. A query came from me to a reliable regular banker contact with connections to Europe, Asia, and the Persian Gulf. My query specifically commented on the frenetic British Pound Sterling, which has risen or fallen by almost 200 basis points on a several days in the last week or more. It shows great unstability, my point, likely a prelude such as any initial tremors before a big earthquake. What came back was a shock, as news of actual liquidation activity have come his way.

***He wrote, "Really substantial transactions in buying USDollar are done at a 38% discount, and British Pound Sterling are done at a 42% discount. The big off market transaction guys are already factoring in the coming devaluation. Hundreds of billions are involved, including outright cash transactions where those discounts are being applied." ***WOW!! He had mentioned just days before in another exchange that a big event comes on the near horizon having to do with angry USGovt creditors. They have run out of patience. They feel the USGovt pays no heed to their concerns, in displayed arrogance.

The global banker said a coordinated group of foreign creditors are planning to sell several hundred billion in USTreasurys in the months of September and October. If executed, then a US bank holiday is assured, and a significant devaluation of the USDollar comes. We might even see the first hint of a temporary USTreasury default. In the same line of exchanged communications, that also involved a couple other fellows who are respected, questions came as to when this charade would end. The US$ had bounced yet again on vaporous news and heavy interventions. My comment was simple: GOLD WILL RISE AND THE USDOLLAR WILL FALL, IN A POWERFUL WAY, WHEN CHINA DICTATES IT, WHEN CHINA IS READY, WHEN CHINA DECIDES IT. My connected banker contact agreed totally. Furthermore, Chinese agency organizations have been gathering considerable information from the Gold Anti-Trust Action committee, probably to make the case that the USDollar is not legitimate even on US Constitutional terms. When they slam the US$, they will likely make the case for an illegitimate USDollar operating as the currency by a financial sector ripe with corruption and fraud.

The British Pound seems to be acting schizoid, with the Euro also making some big moves but of lesser magnitude. Notice the Euro is right back to the 143 level again. The Pound sterling fell hard versus the US$ early last week when the incompetent managers at the Bank of England announced they do not want a high currency. Why should it matter what they want? The next phase will see the US$ and BPound both drop hard together versus everything on the planet. That was the Euro2020 forecast, and it seems on the mark. IF THE 40% CITED DISCOUNTS ARE ROUTINE ON LARGE US$ TRANSACTIONS, THEN A SIGNIFICANT ARBITRAGE COULD PUT TREMENDOUS PRESSURE ON THE FOREX, if it refuses to send the US$ down. We are in my opinion, and in the opinion of a few key contacts, with two to three weeks away from major financial earthquakes founded in the monetary foundation structures. When they begin, all nonsensical talk of inflation versus deflation ends. That talk will be replaced by questions like 'What happens to the United States now? A debt default? Entry into the Third World? Who will rescue us?' The answer is either NOBODY or THE CHINESE WITH HEAVY PRICE.

Bear in mind the magnificent initiatives to shed USTreasurys by China on their continuing world tour. They are using USTBonds to acquire a sizeable slice of industry in the damaged southern nations of the European Union, unloading $6 to 12 billion per month. Also, the wreckage among the failed construction projects in Dubai has resulted in huge USTBond positions held by Abu Dhabi bankers, eager to unload much of their liquidation funds used as currency. Lastly, the African and South American nations have sold a laundry list of properties and projects to China, surely using USTBonds again. These poorer nations will spend the currency as fast as they receive it, hardly set to build a savings account. They live in true 'Hand to Mouth' economies.

$$$ USTREASURY AUCTION CAN BE TIMED WITH USDOLLAR RISE. A RELAXED US$ CAN BE TIMED WITH END OF AUCTION IN INCREASINGLY OBVIOUS FASHION. $$$ Tyler Durden at Zero Hedge noticed an immediate connection on August 17th. He wrote, "Call it a pure coincidence, but the second the Open Market Operation closed at 11am, someone sold a boatload of dollars." The Powerz lifted the US$ exchange rate for the USTreasury auction. Right afterwards, the US$ fell. The USFed purchased $7.016 billion of USTreasurys with the auction closing at 11am EDT. Given the decline right afterwards in the US$ versus the Japanese Yen, it looks obvious that the Bank of Japan and others pumped up the US$ overnight but then dumped it suddenly. Some collateral damage to gold and silver occurred, but it is surely temporary. See the Zero Hedge article and intraday chart (CLICK HERE).

◄$$$ THE PRIVATEER BILL BUCKLER SENSES AN IMMINENT USDOLLAR CRISIS, WITH CHINA AT THE CONTROLS. PROLIFIC USGOVT DEBT PUTS THE USDOLLAR AT GRAVE RISK ON SEVERAL FRONTS. $$$ He calls it 'The Fast Approaching US Dollar Crisis' correctly. He also believes in the strong potential for China to demand that USGovt debt issuance be denominated in Chinese Yuan denomination. He points out the foreign creditors are under natural pressures to quit the credit supply to the United States in US$ terms. An alternative protects the foreign creditor but at a higher risk to the debtor, something eventually the USGovt might have to accept. Right now, USTreasury demand is aided by hidden monetization on large scales, both on the domestic front with primary dealers and the foreign front with collusion among central banks.

Buckler wrote, "As already stated, China holds an estimated 70 percent of its $US 2.13 TRILLION of currency reserves in US Dollar assets, mainly US government bonds. That is about $US 1.45 TRILLION and that is why China has repeatedly asked for assurances from the US that it will not try to inflate itself (by printing US Dollars) out of the crisis. The US itself is on the horns of a dilemma. If it tries to balance its fiscal budget with spending cuts, it sends the US economy into a depression. If it does not, then the Treasury has to keep borrowing to fund the budget deficit, adding to its debts to the point where ALL lenders simply give up. When that happens, the US Treasury will have to go over to the Fed's printer. The Chinese know all this. That is why there are proliferating rumors in the background that China will offer the US Yuan bonds, which would at least remove the currency risk for China. The US Dollar can then fall without affecting China, since it will be repaid in Yuan. But any move in that direction would prompt the MANY other nations which have lent to the US Treasury to demand that their loans to the US be made in their own national currencies. That will destroy the US Dollar as a reserve currency. All it will take to bring this about is that the China/US talks in Washington break up in mutual anger."

In the past, the USGovt has actually boasted of a policy to inflate debts away by permitting inflation, and to pursue its debt repayment in cheaper dollars. The practice is openly cited as prudent, and has become an integrated policy, now regarded as dishonorable. It forces the foreign creditors to take losses on the loan balance in real terms, felt by them as a major betrayal. A double blow occurs when the USDollar falls and USTreasury yields rise, in the foreign creditor accounts. THE FOREIGNERS RESENT THIS POLICY TO THE EXTREME. Many effects come from issuance of USGovt debt securities in foreign currency denomination. The most clear would be a path created to end the reign by the USDollar as global reserve currency. The displacement would be from the top at the banking level, when other initiatives at the international transaction settlement level are actively in progress to end US$ usage at the bottom of the supply chain. See the Jackass article on the subject, entitled "The USGovt Yuan Bond Threat" (CLICK HERE). The direct consequences of USGovt Yuan Bonds would be vast, visible, sudden, unstoppable, and deadly:

  • The USDollar exchange rate would fall with each debt issuance

  • The loan balance in USGovt debt would rise with a declining USDollar

  • The Yuan currency would be further established as a global reserve alternative

  • Continued trade settlement in Yuan terms would be enabled

  • Rise in entire cost structure to the USEconomy from commodity pricing

  • The risk of USTreasury Bond default grows with each passing new issuance.


The Pacific Investment Management Co (PIMCO) is the biggest manager of bond funds in the world. They have made a public statement to the effect that the USDollar will weaken as a result of massive money creation, from the numerous initiatives to deal with the deteriorating USEconomy. PIMCO portfolio manager Curtis Mewbourne expects the USDollar will drop the most against emerging market counterparts, such as China and Brazil. PIMCO fears a rout on the US$-based bonds. He actually admitted that the US$ is fast losing its status as the global reserve currency. One can translate his comments into a public urging to sell into any undeserved US$ strength. He said, "Investors should consider whether it makes sense to take advantage of any periods of US dollar strength to diversify their currency exposure. The massive amounts of US dollar liquidity produced in response to the crisis [have harmed the integrity of the currency.] While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the US dollar as a store of value even in the absence of a single viable alternative." Ouch! Direct slam!

Colleague and manager Bill Gross has also warning the US currency will fall more than a minor amount. Gross manages the $169 billion PIMCO Total Recall Return Fund, and has turned negative on the USDollar. Gross advised US$ asset holders to diversify before the avalanche of action taken by central banks and sovereign wealth funds to diversify on a much greater volume. He cites the widening USGovt budget deficits and consequent supply problems with USTBonds. The gloomy sentiments by Mewbourne and Gross at the prestigious PIMCO are echoed by Warren Buffet. See the Bloomberg article (CLICK HERE).

Nobel Economics Prize winner Joseph Stiglitz is a Columbia University economics professor. At a conference in Bangkok Thailand last week, he mentioned that support from countries like China should ensure orderly discussions on a new reserve system. China, the world's largest holder of foreign-currency reserves, and Russia have both called for a new global currency to replace the USDollar as the dominant place to store reserves. He criticized the USDollar in thorough fashion, citing low value and high risk. He said, "There is a need for a global reserve system. The current reserve system is in the process of fraying. The dollar is not a good store of value. Right now, the dollar is yielding almost no return and yet anybody looking at the dollar has to say there is a high degree of risk. As the balance sheet of the Fed has blown up, as the deficit of the United States and the debt has increased, people have asked the obvious question: will there be inflation in the future? Right now we are facing deflation, but some time in the future, there will be consequences. The liquidity is going to be spent, but not necessarily in America. [Asian economies must] protect against American-led asset bubbles." He referred directly in his speech to Asian property and stocks as objects for inflated prices. See the Bloomberg article (CLICK HERE).

$$$ THE USDOLLAR INDEX IS AT THE CLIFF'S EDGE. TECHNICAL SIGNALS ARE ALL NEGATIVE. THE 77 LEVEL IS CRITICAL SUPPORT, SOON TO BREAK. TECHNICALS, FUNDAMENTALS, AND PSYCHOLOGY ARE ARE ALIGNED FOR AN HISTORIC BREAKDOWN. $$$ The currency intermediary market gives the strong hint of a breakdown in the making, where high volume dumps are taking place. Technical signals abound. The downtrend channel halted the so-called bounce last week, as the US$ DX index cannot recover. The bearish moving average crossover was seen in mid-July, a loud gong for professional traders. Cyclical indexes both show weakness. The MACD cannot seem to run favorably since last December. The banking world is caught in denial, that the USDollar must succumb to lower exchange rates. Last autumn, the deaths of financial firms perversely lifted the US$. This time around, expect the opposite to occur, since foreign opposition has turned into a revolt, as they have removed the machinery for a US$ defense. A monetary crisis comes very soon, one to be centered upon the USDollar. Its first line of defense is the 77 level, which should fall soon. The next important target is 72. It should be touched before the end of year.

$$$ BRITISH POUND STERLING ENTERS THE DOORSTEP OF DEEP DECLINE. $$$. In the Competing Currency War, it is a race to the bottom. The queer dynamic calls for a government to avoid a currency rise, to create stimulus of the economy that induces a lower exchange rate, only to cause a currency crisis. A higher currency both hurts export trade and causes a more painful debt burden. So the leaders actually attempt to push their currency down, eventually resulting in capital flight by foreigners. The sequence is insane, but fits like a political glove. It is happening in a classic sense in London. The pattern occurs over and over and over again in history, with a direct positive response to the global gold price when several nations engage in the destructive simultaneously. Hans-Guenter Redeker is the global head of foreign exchange strategy for BNP. He said, "I am super-bearish on the pound. The Bank of England has made it clear it cannot afford a stronger currency." Weighing down the pound sterling are attempts by Prime Minister Gordon Brown and Bank of England head Mervyn King to revive economic growth with increased borrowing, outsized deficit spending, and actual money printing. The UKGovt will sell a record £220 billion (=US$363 billion) of debt in the year ending March 2010, according to formal statements made on April 22nd. That prompted Standard & Poors to warn in April that Britain may lose its AAA credit rating. The collapse of the pound sterling has been anticipated for some time, and next it comes. The intermediary cash currency market is anticipating the deep devaluation. See the Bloomberg article (CLICK HERE).

The best way to view the British Pound is relative to the Euro currency, not the USDollar. The next currency migration will push the Euro to lofty levels, while both the US$ and BPound will suffer badly in severe devaluations. The US and UK each have dreadful triple threats, with technicals (horrible looking price chart), fundamentals (horrible federal & bank financials and horrible economy), and psychology (horrible global sentiment) all aligned for a historic breakdown. The BPound has moving averages that appear ready to turn down in unison. The last week saw a move below the 20-week MA. The target is parity at 1.00 for the BPound and Euro currencies. In the next phase, their exchange rates should work toward equaling each other.



Great Britain has suffered an £8 billion (=US$13.2 billion) budget deficit in the single month of July, the largest for any month since records began in 1993. Paul Mortimer-Lee is an economist at BNP Paribas. He said, "They are completely disastrous numbers. With the economy in a parlous [perilous] state, not much tax is being collected. The chancellor's estimate for the deficit is going to be overshot by a considerable margin." Like the USGovt, the United Kingdom Govt has a severe case of falling revenue and rising costs, doling out crippling insolvency. Revenue for the UKGovt till dropped significantly in July from a year earlier, the steepest decline since records began in 1998. The decline in federal revenue is on par with that for the United States, joined at the hip with the same yoke of a wrong-footed monetary carriage. Cash receipts from corporate profits fell 38% and value-added tax (VAT) declined 34%. Households fares slightly better, as personal income tax payments dropped 15%. On the other side of the ledger, UKGovt spending rose by 7.5%, with net spending on social benefits jumping 10% in direct response to the climb in unemployment to a 14-year high. Hidden financial bailouts would make the spending figure much higher, but that is a state secret like in WashingtonDC. The rampant destruction to the government finances in Great Britain renders the British Pound Sterling at great risk, income down and costs up. My forecast is for a continued powerful decline against all currencies except the USDollar. Both are due for painful devaluations. See the Bloomberg article (CLICK HERE).

As a reflection of the perilous fiscal condition for the United Kingdom generally, and the UKGovt finances bound in the Gilt bonds, the Credit Default Swap has gone more expensive. It insures the UKGilt from bond default, the cost of hedging against losses. The UK total debt rose to the highest in a month after David Cameron, the leader of the opposition Conservative Party, said high borrowing levels put the country at risk of default. He actually used the word 'default' in his speech, surely to embarrass the dominant party, but to expose the nation for its financially vulnerable condition. The UK debt burden is the highest since 1976, when it requested emergency funds from the Intl Monetary Fund to fight off insolvency. The UKTreasury last April announced it will borrow £269 billion (=US$440 billion) more than previously forecast as conditions worsen. Cameron had a meeting with Black Swan author Nassim Nicholas Taleb, where Cameron said, "You run the risk of not being able to meet your obligations. I am not predicting that it is going to happen, but as government borrowing goes up and up and up, you start running that risk."

Credit default swaps tied to Britain rose 2 basis points to 62, according to CMA DataVision prices last Wednesday in London. That is on par with a PIGS basket case nation in Portugal, and more than double that of Germany. The contracts cost 26.5 basis points on German debt and 63.5 basis points on Portugal debt. The United States CDSwap cost hit a full 100 bpts long ago. One basis point (one hundredth of 1%) on a CDSwap protecting $10 million of debt from default for five years is equivalent to $1000 a year. See the Bloomberg article (CLICK HERE).

The UKEconomy will not offer any help to the government financial condition, not with a recession in progress. Like the US and European Union, the second quarter showed about a 1% pullback. Recovery will be a major struggle to bring about globally. It is not imminent. The UKEconomy fell by 0.8% in 2Q2009, the months of April through June. Expect no substantial recovery for several quarters, since no remedy has been put into place, and insolvency of the banks remains the key fundamental problem from systemic shock. The decline for the manufacturing and financial sectors is at record levels, never seen before. The statistical gimmicks managed to make it look like an improvement was registered over the 2.4% GDP decline in 1Q2009. The real figure to hang on is the total 5.6% GDP decline since 2Q2009, the greatest fall since quarterly records began in 1955. Hetal Mehta is senior economic adviser to the Ernst & Young Item Club economic consultancy. A common theme was mentioned when he said, "Recent hopes of recovery have run ahead of reality. With credit still severely restricted, consumers and businesses continuing to retrench, and world trade yet to pick up, it is hard to see any grounds for sustained optimism at the moment." Desire and desperation have badly tilted perception of reality.

A sequence of recent data produced more optimism than economic activity. Data showed a jump in retail sales, a strong rise in new homebuyer inquiries, a smaller than expected increase in jobless claims, and a slowing rate of decline in manufacturing output. Such 'Second Derivative' signals (reduced worsening of data) are often baseless, as a slower hemorrhage is not a good condition to be in. Horrendous hemorrhage must at times moderate. The Society of Motor Manufacturers & Traders said that car production was down 30% from a year ago, but that was better than the 50% collapse for the first six months of the year. Total vehicle production including commercial vehicles was down 34.5% in June. The Q2 economic data figures were pulled down by the construction sector, which posted a 2.2% decline. The sector is down almost 15% from the same quarter last year, the biggest annual decline on record. Their clowns in government have made the same baseless promises of a Second Half Recovery that next must be retracted. Pressure is squarely on Treasury Chief Alistair Darling, who had issued a forecast of a return to growth by the end of this year. It was based upon absolutely nothing but hope, and a deep desire to deceive, just like in the United States. The National Institute of Economic & Social Research expects another five years before income per head to return the same level before the recession hit in early 2008. See the Yahoo Finance article (CLICK HERE).


Bradford & Bingley made a public announcement two weeks ago, admitting a 50% rise in home repossessions in the first six months of 2009, compared to a year ago. At the end of June the bank had 961 homes under repossession, some 300 more than at the end of December. The state-owned B&B expects property seizures to continue to increase, despite an improving national trend. Some 21,102 B&B customers, almost 6% of its base, are over three months in arrears or have suffered repossession. The UKGovt has pressured lending institutions to display more leniency to struggling homeowners, resulting in a decline in national foreclosures. The improvement is likely temporary, seen in the last couple months. Like with California, a torrent builds, only to be released in coming months from pent-up supply. Banks will do what they must when the political leaders leave the room, and quit interfering with basic business commerce in the natural course. In the real world of B&B, managing director Richard Banks warned that repossessions would continue to rise throughout the year, a direct consequence of the sharp rise in the number of customers who fell delinquent in 2008. GOVT CANNOT HOLD BACK THE TIDE!

B&B is in a dicey situation since nationalized last September 2008. Losses piled to £160 million in the first half of 2009. The lender has set aside £270 million to cover fraud and professional negligence from applicants for its failed buy-to-let and self-certification mortgages programs. These were the sanctioned speculative and application fraud programs to further the supposedly beneficial housing bubble. B&B claims to work closely with customers under distress, and to exhaust 'all reasonable efforts' before initiating the repossession process, called a last resort. The UKGovt has a big stake since it took over the B&B giant. They poured £18.4 billion into B&B last September to replace the customer deposits taken on by failed Abbey during the climax of the banking crisis. Failure married failure. B&B was given £8 billion of working capital in the first half directly from government coffers, or printing press.

The Council for Mortgage Lenders (CML) said 11,400 properties were repossessed in 2Q2009 ending in June. That marked a 10% decline from the previous quarter but still an increase from 10,000 in 2Q2008. The number of loans over three months delinquent was 270.4k at the end of June, up from 152.7k a year earlier, but up only slightly from the 264.7k at the end of March. The CML forecasts that 65 thousand people will lose their homes this year and warns repossessions could rise again in the second half of the year. CML's head of policy Jackie Bennett said, "With unemployment rising and the economy still weak, the outlook will remain challenging for the rest of this year and into 2010. But the data shows that lenders are committed to helping borrowers manage their way through temporary payment problems and to get their mortgage back on track over time, avoiding possession where possible." They will fight the tide of default with futility.

Shadow Housing Minister Grant Shapps urged the UKGovt to undertake greater action. He said, "In the first three months of this year, 4200 people approached local authorities to seek help from Gordon Brown's delayed Mortgage Rescue Scheme, but just six families throughout England got any assistance. It is time the Government stopped trying to grab quick headlines and brought in policies to help vulnerable families." Sounds just like the USGovt, with 98% hot air and 2% real action where needed. The US & UK share the same problem, ridiculously lax irresponsible lending practices contrasted against deep mortgage bond fraud. See the UK Guardian article (CLICK HERE).


$$$ RUSSIA ACCUMULATES A GIGANTIC HOARD OF GOLD, SHROUDED IN SECRECY, PREPARING TO ASSIST IN THE CONSTRUCTION OF THE NEXT GLOBAL MONETARY FOUNDATION. OFFICIAL DATA IS A PURE DISTRACTION. $$$ Russia recently updated data on their official gold holdings as reserve assets. Since October 2006, their official gold reserves were at 12.5 million ounces. The Russian gold reserves now are at 18.3 million ounces as of July 2009, for a stated increase of 600k ounces of gold during the month of July 2009. Still, that is their biggest one month increase in recent history. See the Russian Central Bank website data (CLICK HERE).

Then the REST of the story. A gold banker contact with direct past experience inside Russia during the 1990 decade directed a comment after the Russian gold story emerged. He had contact with several of the Yeltsin cadre. He wished to elaborate on the much bigger story that comes from Russia pertaining to gold. A grand plan is in place, one to fill the vacuum when the inevitable collapse of the USDollar and USTreasury occurs. He wrote, "You need to understand and know that the Russians do not disclose their actual Pt, Au, Ag holding at Gochran. It is safe to assume that the numbers mentioned are low-balling big time. Russia and the Gulf States will provide the required precious metal for the core of the new gold backed currency that will emerge after the collapse of the dollar. This is all part of a larger strategy that is poorly or not understood by pretty much all so-called experts. There have been very few people who have had a chance to see what the Russians store at Gochran. It is mind bending. It is like the Kremlin and the White House. The White House is a shabby cottage compared to the Kremlin." Note Pt, Au, Ag mean platinum, gold, silver.

$$$ THE GOLD PRICE PRESSURE IS BECOMING ENORMOUS, WITH A BREAKOUT SOON COMING. THE TARGET IS 1250 TO 1300. A GOLD MOVE UP SHOULD LEAD THE USDOLLAR MOVE DOWN, AS LEADERSHIP SHIFTS. A GLOBAL MONETARY CRISIS IS IN PROGRESS. $$$ The pressure is building. Global revolt is loud and shrill. Gold should take back the monetary leadership mantle of direction, respect, and prestige, as it should during a monetary crisis. A major reversal now spans two years time, which usually means the breakout will be historic, one for the ages. The pennant pause pattern dictates that resolution should occur without much additional passage of time. All signals point to a raucous, unstable, and tumultuous September and October.

$$$ THE SILVER PRICE IS DUE TO FINALLY APPROACH 18-20 VERY SOON. IT WILL NEXT RECOVER ON THE SILVER/GOLD RATIO. ITS PRICE CHART LOOKS VERY FAVORABLE. SHORTAGES ARE ACUTE AND UNADDRESSED. $$$ The uptrend channel displays positive energy. The moving averages remain aligned, offering strong support. The engineered USDollar bounces cannot muster a rebound or recovery. But they do minor damage to the silver price. A major reversal is still in progress, sure to lift the silver price toward the 20 level. Shortages of silver are evident at numerous national coin mints. Furthermore, the lower industrial metal prices (nickel, tin, zinc) have resulted in less silver output as byproduct to mine operations. Silver is much less a target in mine operations than gold, and thus comes as byproduct from other industrial projects.

See the strongly enthusiastic article for silver by Adam Hamilton of Zeal Intelligence entitled "Big Autumn Silver Rally" (CLICK HERE). He makes some excellent points about the restoration of the Silver/Gold Ratio (SGR), which broke down last autumn during a panicky crisis. What was once a 95% correlation in price movement between the two precious metals fell to 53% during the autumn months. So far in 2009, the correlation has climbed back to 82%, a surefire recovery that signals a bigger silver move in conjunction with gold, from basic catch-up. He estimates that if the ratio returns to its recent historical 55, then silver should move above $17/oz without any notable rise in the gold price. Even higher prices are due to come, hinting of a $20 price.

Hamilton wrote, "All this is exciting for silver, but it doesn't offer clues on timing. But other factors are coming into play that I suspect will lead to a substantial acceleration of this in-progress and inevitable SGR [ratio] reversion in the coming months. Silver has incredible potential for one of its biggest autumn rallies ever witnessed. Investors and speculators long this metal and its elite producers would see huge gains in such a scenario. Silver ultimately follows gold, so nothing will get traders as excited about silver as quickly as a major gold rally. Provocatively, we are just entering the seasonally strongest time of the year for gold prices. On average between 2000 and 2008 prior to the panic, gold rallied 14% between August and February. Off of a $950 average gold price, a similar move this year would carry gold above $1075. Gold decisively over $1000, highly likely soon technically, would ignite all kinds of buying in the tiny silver market."

$$$ THE HUI PRECIOUS METAL MINING STOCK INDEX REMAINS HESITANT. IT IS POISED FOR A LEAP TO NEW HIGHS FOLLOWING THE GOLD BREAKOUT. $$$ A notable uptrend channel has formed, offering support and continued pressure on price. Notice three key things. The moving averages are both rising, offering excellent support during downdrafts from illicit interventions. They crossed at the turn of June, a strong bullish signal for this entire season. And in the last week shown, a positive Doji Star is seen, with open and close price equal. The HUI stock index is heading much higher, to new highs, but it is cautious.


The Chinese Govt has added a silver lining to the available investment options, in bullion form. Silver bars are available to the Chinese public in 500 gram, 1 kilogram, 2 kg, and 5 kg with a 99.9% purity. The silver price has fallen relative to gold resulting in an attractive ratio. In the last two years, the price ratio of gold to silver has risen from 50 to over 70 times. Silver is vastly under-valued in the opinion of many analysts, the Jackass included. The Beijing Caibai Shopping Mall is the first to offer silver bullion as an investment opportunity. The price for the first batch of the bullion is intentionally low, near the cost of the raw material. The investment minimum is also reasonably low, suitable for the general public. Silver is an order of magnitude cheaper than gold by weight.

Across the great Pacific, the Royal Canadian Mint has launched the third and final lot of Olympic Game coins. They are the world's first series of bullion coins commemorating the Olympic competition. The Mint's Ottawa facility will produce around 50,000 gold coins for the 2010 issue. The quantity of silver coin output will be determined by demand. Investor and collector demand to the first two issues of its Vancouver 2010 Olympic Winter Games Maple Leaf bullion coins has been strong, in gold and silver. The Vancouver 2010 Olympic Winter Games arrive in only six months. The Gold Maple Leaf bullion coin is one ounce of 99.99% pure gold and bears a $50 face value. The Vancouver 2010 Olympic Winter Games Silver Maple Leaf bullion coin is struck from one ounce of 99.99% pure silver, and bears a $5 face value. The reverse of the coins features an ice hockey player in full stride, flanked by two maple leaves. Both coins are now available through the Mint's extensive network of bullion dealers. See the Commodity Online article (CLICK HERE).

The Royal Mint of Canada has doubled its output to 16,910 ounces in 2Q2009 from 8030 ounces from the same Q2 a year ago. This data comes by means of queries by Bloomberg News under a Freedom of Information Act request. Production in the first half of 2009 leaped by 86% to 45,406 ounces, according to the same source. Demand is soaring, and the motive is surely not numismatic beauty. It is protection against failed currencies. See the UK Telegraph article (CLICK HERE).

Forty years ago in 1959, any Chinese citizen caught with gold in possession was thrown in jail. But now the Chinese Govt is taking radical measures to change widespread indifference and lack of understanding for precious metals as an asset class. The year 2009 is the FIRST year that the Chinese public is permitted to own physical gold or silver. Officials are now trying to drum gold & silver as an investment from city billboards. Beijing leaders realize that public demand aids their strategy to pressure the USDollar and unseat it from the global catbird seat. Banks offer an array of precious metal investment options to the pubilc, far more than are offered to Americans. As Simon Black of the International Man says, "Instead of Maoist propaganda, though, they are attempting to change the entire perception of gold & silver in the Chinese public. Simply put, the Chinese government is trying to trigger a national gold craze, and it is working. The Chinese public now has gold trading platforms on steroids. You can buy silver bullion or gold bars at any Chinese bank in four different sizes. Wealth management products tied to gold are skyrocketing in popularity, and the public can now instantly buy, sell, and trade gold 24 hours a day in five different forms with different eight types of services."

$$$ THE WORLD GOLD COUNCIL RELEASED ANNUAL DATA ON THE GOLD MARKET AND INDUSTRY. INVESTMENT DEMAND IS WAY UP BUT CONSUMER (JEWELRY) DEMAND IS DOWN, A TRADITIONAL BULL MARKET SIGNAL. $$$ George Milling-Stanley is President of the WGC. He recently divulged the results of their annual study on gold during a television interview. Global investment demand in 2Q2009 was +46% annually. Net retail investment growth was +12% annually and +23% quarterly (Q2/Q1). Total global demand in Q2 was 222 metric tonnes, for a -9% change. However, consumer demand fell by 22% in Q2 versus a year ago. This is the key signal distorted by the USGovt-sponsored publicity. Such consumer jewelry demand decline combined with rising investment demand is the most reliable signal of a powerful gold bull market from past history. Chinese consumer demand was +6%, softening the decline.


The preface should hammer home the point that shares of the Exhange Traded Funds are used as settlement on these same COMEX futures exchanges, a fact for both the gold and silver funds managed by the gold cartel. ETFund shares (SLV for silver, GLD for gold) have been routinely used as settlement in lieu of physical delivery of a commodity. Without doubt the corrupt practice affects the silver price the most, as silver has the most concentrated and leveraged short position of any COMEX tangible product. The expedient practice of assigning ETF shares for use as settlement instead of physical delivery, compounded by the increasingly scarce global silver supply considerations, is a consequence of fifty years of industrial consumption in addition to colossal systemic fraud. Since ETFfund share settlement is openly known toward on the futures market, careful accounting is imperative so as to ensure open information in proper price discovery in accounting confirmations. The paper promises to the COMEX should contain a physical asset in support of the paper.

The Project Mayhem Research has detected multiple anomalies in the Silver ETFunds. What an intriguing name for a project! They conducted a computerized analysis of serial numbers. Project Mayhem has released its first working paper on statistical and factual anomalies in silver ETFs. The conclusion is distrubing, they say, more like confirmation of deep fraud in my view. The exposure on these corrupt funds run by Wall Street and London will surely grow over time. Their research indicates prevalent data anomalies in the holdings of the silver ETFunds and possibly even fraud within the certificates.

The Project Mayhem wrote, "During our research into the inventory lists of the iShares SLV and London-based ETFS physical silver funds, we discovered multiple anomalies which cannot be easily dismissed. These included the presence of internal duplicates, rough internal duplicates, weight duplicates, statistical clustering, and cross-reference duplicates. Taken together, these anomalies are cause for concern, and we suggest that more capable teams conduct further research into these issues, as they effect price discovery within the precious metals market, as these ETF shares are being used for settlement and possibly price suppression on the COMEX. If these problems are caused by accounting errors, they are disturbing and perhaps profoundly incompetent, and we suggest both these funds should have their senior management replaced. In our opinions, the only way for all of these anomalies to occur together as noted in this paper, is via systemic fraud or gross accounting error bordering on jaw-dropping incompetence. Unfortunately, our private considerations are for the former, especially considering 'revisions' published to the ETFS bar list after the appearance of Mark Anthony's July 14th 2009 article on Seeking Alpha regarding possible ETF fraud. The ETF securities bar lists were changed after the Anthony's discovery of the duplicate bars in the Great Wall brand. To us, this suggests criminal activity. We suggest immediate future research by others to investigate these findings." The fraudulent paper certificate accounting was discovered, was exposed, and was covered up. The regulators are nowhere to be seen. They are bought & paid for harlots, probably partners in crime. Hats off to Tyler Durden and his Fight Club Team for great investigative work. See the Zero Hedge article (CLICK HERE).


As the global currency system continues to fracture, it will need to be replaced. Gold offers protection at the institutional level, the corporate level, and the individual level in a unique stable and subtle way. Just because the gold price is near the $1000 mark per ounce, some regard it as expensive. It is cheap. Given the insane multiples in increased money inside the United States and globally in the last 3 to 5 years, the gold price has merely doubled. If one factors in credit derivatives, the multiples of monetary growth are even higher. The gold price SHOULD be at least $2000 per ounce now, and even approach $3000, but it is held down with brute force in clear criminal fashion that will not be possible to continue. Investors must not view gold as an inflation hedge. They accept it at an 80% discount in price. They will realize wild gains as the world struggles to install a new monetary system. The current system has failed and will continue to fail to all to see in a global tragedy. The banks need gold desperately in order to create a monetary foundation that is totally absent. A banking system remedy cannot come without such a new foundation. The banksters must steal the gold, confiscate it, or pay for it. It is my belief that any confiscation attempt will fail due not only to public rebellion but to global rebellion outside the US-UK Sphere, thus exposing its true elevated value. Their broken bank power structure will also be exposed, when the USDollar and British Pound decline sharply. We in the Sound Money armada eagerly await the proper pricing of gold bullion.

The purchase of gold and its inclusion in a portfolio is NOT defensive. Gold is real money in a time when a growing segment of the population struggles to conceive of what money is. Officials in power have no idea! Regard gold as authentic when all paper-based investments lack a foundation. Other commodities like crude oil (or copper ore, healthy forest, productive industrial plant, active farmland) find value in defensive manner due to their tangible nature, often called hard assets. They are all offered at extreme discount if priced in USDollar terms. The best advice is not to be concerned about precious metal prices, since presented on the paper discovery corrupt billboard. Precious metal is the ideal store for of value, the reliable standard of value, and accurate measure of value. One can actually say that prices as listed on the exchanges are totally irrelevant. The USDollar has been given a death sentence, and its removal must take its course. Its structural lattice work is crumbling along with its broken levers and cut cables, as time, gravity, and assaults will bring it down. The USDollar is linked directly to the grandest corrupt fortress ever witnessed in mankind's history. Its abuse has encouraged a broadbased revolt that grows monthly. Gold, silver, and platinum will see multiples of today's recognized value, when the global monetary structure continues its degradation and soon crumbles.


China feels slighted for its accomplishments within the global economy. China does indeed have alternatives to the USDollar, and is showing they are in no way captive, as they gobble up foreign assets. They have established the China Trade Bank, opening offices globally. Also the China-Africa Fund has served as a conduit for further investment. The Chinese Govt is the principal guarantor of numerous projects. The Western gold cartel must now fight against the Chinese, an entire nation, a certain lost venture. China is squarely targeting the USDollar, the obvious weakest link in the US-UK fortress. Sinclair compares the $800 billion USTreasury Bonds held by the Chinese as reserves against the $12 trillion badly spent by the USGovt, so as to expose the vulnerability on the US side. He expects if the Chinese lose $400 billion, they will gain much, like coming out the strongest national economy in the world. China will lead the global movement to a super sovereign currency, whose makeup will resemble the DX index but with a touch of gold for fun in his words.

Sinclair attributes no value to any new proposed Amero currency, since paper cannot replace paper. The natural sequence of monetary evolution is for a debt currency to give way to a commodity currency, and vice versa. He thought permitting the death of Lehman Brothers was a grand error during a transition in presidencies (a perception off target that ignores the $138 billion slush money handed to JPMorgan). He believes a gold rally over the $1000 resistance level is due this calendar year (very soon), and the key for the breakout is the USDollar. The US$ DX index will eventually fall below 72 and plumb toward 62 (maybe lower), leading the gold rally to rocket to new highs. He is critical of Wall Street for their arrogant adherence to management of perceptive economics. My opinion is that such peceptive controlled economics is a chapter taken directly from an Orwellian world. He said "Gold will go to $1650 per ounce, and not a force on earth can stop it" with a likely speed bump at $1250. He regards the foundation for the gold bull market to be a) the extreme levels of debt, b) the extreme levels of credit derivative overhangs, c) their naked issuance, d) increasing levels of debt failure, and e) the rotation of state budget crises. No solution will come since the foundation of credit derivatives will never be properly addressed, in his view. So protect yourself with gold. He likes gold coins. Listen to the GoldSeek radio interview (CLICK HERE)


The heads of the central banks in the European Union met in late July to sign an agreement for a new 5-year accord on official gold sales. They will sell 2000 metric tonnes or a maximum of 400 MT per year over five years. The previous 5-year accord limited their insane reckless gold sales to 2500 metric tonnes or a max of 500 MT per year. The old Washington Accord was set to end on September 27th. They wish to slow the pace of their monetary destruction, and reduce the speed limit as their bank locomotives go over the cliff. Gold bullion in vaults is the only legitimate collateral in their banking system, which is in tatters, yet they view it as moronically an income source. It is as mindless and disastrous as burning the wooden support beams for the entire house for heat in winter. The Swiss showed defiance, and broke from the ranks. They refuse to conduct any more official gold sales. The Swiss National Bank said that it had no plans for any further gold sales in the foreseeable future. Their statement read, "With gold holdings amounting to 1040 tons, it holds a substantial part of its currency reserves in the form of gold." They appear to honestly report their gold reserves on a net basis, after subtracting the amount under lease.

In an unexpected but bizarre fit of monetary wisdom, the 19 central bank heads in Europe called for gold to be the World Currency Reserve. The Swiss Govt already has in law that the Swiss Franc currency must be backed by at least 33.3% gold bullion. A confirmation came that the United States shipped 5000 metric tonnes overseas in 2007 and 2008. The gold transfers are perversely called exports, which has helped enormously to reduce the trade gap. Be sure to know that the accounting practice to close the loops was not honored in the 1990 decade. Back then, the lease of gold was not called an import. The destination is undoubtedly foreign central banks, to Europe in the return of leased gold, to the Persian Gulf nations also to return leased gold, and to China for their gold accumulation. See the USEconomy trade gap improvement, surely due also to severe recession and steep fall in import consumption.

In all, 19 member central banks, including the European Central Bank, signed the agreement. The other banks include those of Belgium, Germany, Ireland, Greece, Spain, France, Italy, Cyprus, Luxembourg, Portugal, Slovenia, Slovakia, Malta, the Netherlands, Austria, Finland, Sweden, and Switzerland. The statement also recognized the International Monetary Fund plan to sell off gold. Recognition is important, since the IMF does not own any gold bullion. It holds pledges from individual nations. The statement read, "The signatories recognize the intention of the IMF to sell 403 tonnes of gold and noted that such sales can be accommodated within the above ceiling." So IMF sales are wrapped within the European member bank sales. See the Earth Times article (CLICK HERE).

The new central bank sales agreement is very bullish for gold. Two possible conclusions come to mind. First, these central banks might have much less gold to sell, hence they must reduce gold sales regardless of any high price. Second, they might anticipate the price of gold to go much higher. Consider it the Gordon Brown backlash. The biggest gold fool on the planet is this man, who was rewarded for his colossal stupidity and mismanagement by being elected Prime Minister. That the UKGovt should hurtle over the cliff toward default should come as no surprise. Even if the reported gold reserve figures of these central banks are taken seriously, European central banks hold just over 10 thousand tonnes of gold, with almost 40% of that amount held by Germany alone. Germany has been adamant that it will not agree to sell any of its gold. The suppression of the gold market is the Great American Game, intended to keep the world's reserve currency stable and to help preserve all the floating paper currencies. Gold has always been the ultimate 'barometer' of the global monetary system, its inflation gauge. Sir Alan Greenspan was much less ambivalent in his willingness to subvert markets. When asked how he would respond to a global monetary crisis, his famous reply was, "We stand ready to lease gold in ever-increasing amounts." The leasing of gold is a central bank euphemism for dumping gold onto the market. His project of suppressing the gold price will inevitably result in blowing up the entire global monetary system, just like his offloaded risk project abusing credit derivatives and mortgage bonds killed the US banking system. Give it time. The climax events might begin soon.

Julian Phillips provides valuable information to highlight how member nations in the European Union sold less than the limit, while some stopped altogether with no intention to continue. The New Central Bank Gold Agreement stipulates a limit on gold sales, not a requirement. Switzerland has joined Italy and Germany to make it clear they will sell no more gold bullion. Furthermore, Portugal, France, and Austria sold less than their permitted limit, with no formal statement that demonstrates any commitment to the program. The Intl Monetary Fund is lined up to benefit from these EU gold sales. They can follow up with sales in order to raise desperately needed funds. One should expect the impact on the gold price to be minimal from IMF sales since very likely to be single lot sales, high volume sales with a transfer of owners, not staggered and scattered market events. Given the behavior of Russia and China in accumulation phase, the net effect of central bank activity is bullish. In aggregate, central banks are buying more than selling gold. See the Phillips article entitled "New Central Bank Gold Agreement" on Kitco (CLICK HERE).

$$$ GERMAN BUNDESBANK GOLD HOLDINGS ARE DELINEATED, BY A DIRECT MESSAGE. $$$ A European gold banker contact inquired directly to the German Chancellor's office for a definitive answer on the status of German gold. His answer was received. Here are the numbers: 3800 MT = 122.170.000 Unzen x US$ 946.2 = $115.597 billion = Euro 81.395 billion (11.August 2009 / 5 Uhr). Translate the response as making reference to 3800 thousand metric tonnes, or 122 million ounces gold as of 5pm that day.



The following information comes from a person closely involved in development of the barter exchange itself. The Jackass is grateful for the source of important information. Welcome the XXX-XX Excess Capacity Barter/Counter Trade & Commodity Exchange, whose formal name is withheld. That is a mouthful, and its punch matches its lengthy name. The XXX-XX is to be a global non-monetary marketplace with independent settlement outside the currency world, and therefore beyond the reach of the bank nazis. As a preface, catch some feedback after the posted July reports that introduced more detail on the barter exchange concept coming to fruition, certain to undermine the USDollar at the grassroots level. A disruption to the current global trade system is vividly clear. The note came in the days after the reports were posted, from one fretful player. It read, "Jim, subscribers to your July Hat Trick Letter are part of very powerful groups in the US and elsewhere. They agree with your assessments and you scared the shit out of them with the mentioning of the barter platform and the new alignment. Especially Americans are already facing the problem of being shunned in their international business transactions and are eager to find a way 'to earn their way back in' as junior participants. This is an interesting, but not unexpected, development."

My reaction was to find it EXTREMELY interesting. My interpretation is that a TOPDOWN approach to displace the USDollar (from banking functions, reserves management) will not work so easily or quickly, since the upper echelons are where the bankers in the United States and United Kingdom maintain control. So the BOTTOMUP approach to displace the USDollar (from international trade settlements) will indeed be the route that proves more effective. Intrigue has entered the room, as power structures are battling each other, evidence being the note above.

The XXX-XX exchange offers some immediate transparent benefits. Its simplicity will enable it to penetrate and grab sizeable market share in global transactions. So much resentment exists in the current system that enables a free unlimited credit and counterfeit access for the USDollar and its custodians. The XXX-XX offers, in the words of my contact, the following: "1) Freedom and total transparency, allowing all serious players to become members on the exchange and engage into multiple party, trans-national transactions without having banks and politicians to maintain a stranglehold on business. 2) It is a fair real marketplace where the interlocutors and trading partners set the value for their capacities, goods & services, and commodities that are being settled in a non-threatening and non-hostile environment. 3) Corruption is almost eliminated since hardly any cash money is involved."

The XXX-XX will be launched in Europe this autumn, and will contain a minimal monetary component. Its structure will contain a 10% monetary foundation. The system will permit producers and buyers to be matched up, where both are vetted and approved. Excess capacity can be converted to working capital by reciprocal trade, by means of efficient standardized systems that reduce operating costs and utilization of capacity as proxy for cash. The supply network is not connected to the established grid. Participation is open for now, but later it will be restricted. Prices are negotiated, with settlement and clearing conducted on the platform. Many very knowledgeable and experienced people are designing, planning, and building the exchange, which contain complicated support systems. Producers are paid upon delivery in source currency to source procurement. Participants to the exchange will encourage their business partners to join the platform, either by relationship trust or by efficiency motive. Super secure servers will control the transactions expected to be in the tens of billion$ by the end of the first year. The initial XXX-XX platform equity is 1 billion, or more precisely an equivalent one billion euros in GOLD.

The liquid unit of exchange is to be called the Non-Monetary Unit (NMU). The transactions will be conducted on a private internet-based exchange with trades completed on the exchange Clearinghouse. The NMU serves as credits for each party among members of the exchange. The Clearinghouse controls governance and risk management of the NMU, and provides collective backing of the NMU to ensure its liquidity. The NMU is a trading unit vehicle for exclusive usage to transfer value from products or services among members. The NMU is a standard unit of exchange, a non-sovereign private trading unit, with no fixed external value. The exchange will offer members consulting services to develop trade strategies. Members will be in a position to exploit under-utilized and available capacity, goods, services, and commodities that might otherwise perish or go unsold.

One should regard the system as cutting deadbeats out entirely in the global marketplace, nations and regions that fail to offer items of value in return for valuable products received. For decades, the United States has exchanged paper debt instruments in return for finished products and refined commodities, both produced by sweat and work. During this time, the USEconomy has systematically removed much of its own industrial capacity. The US leadership crew has often boasted that the US has a great racket going, but it will end very soon, perhaps with shocking suddenness. My interpretation has been consistent that the US will enter the Third World as the USDollar is displaced, as the USGovt loses control, and as the structures in support of both crumble. The process is furthered by the barter exchange systems, and the XXX-XX could become a major factor. It will spawn a lower level system of exchange within another open Internet platform, whose marketplace should give Google headaches in coming months and years. Yahoo and E-Bay must be on the watch also. In time the Hat Trick Letter subscriptions could be sold on this Internet platform that allows for secure transaction management, giving the Jackass credits at participating hotels, department stores, and airlines. All in time. The entire new exchange system and its platforms are extremely disruptive and a grand attack at the very flanks of the global US$-based transaction and banking system. An old way of conducting honest business is being re-launched with 21st century technology, namely BARTER.

For just a hint of this new trend of barter, check out Great Britain. It is just the beginning, as people respond to banker betrayals and ruined money. The Economy Collapse website reports on barter. They wrote, "The global recession has led many countries to come up with new ways of handling their finances, but residents of one European country have gone back in time for their inspiration. People in a number of cities in Britain are swapping goods without using any money at all." See the article and video clip (CLICK HERE).

$$$ GLOBAL TRADE CONTINUES TO SLOW, AS JAPAN HAS REALIZED A STUNNING DECLINE. CHINA COMPENSATES BY UNLEASHING A CREDIT BUBBLE THAT COULD END BADLY. $$$ Zero Hedge provides a disturbing portrayal of Japan and the collapse of its export trade. Japan now has a small trade deficit of $733 million globally, year to date. They wrote, "The Japan External Trade Organization has released its latest trade figures, which paint a grim picture for foreign trade by the world's second largest economy. Year to date imports have dropped by 31.9% to $252.9 billion, while exports have plunged 36.8% to $252.2 billion. Most stunning is the disclosure on trade flows with the United States: exports to the US have dropped by 43.5% to $40.5 billion, resulting in Japan's largest positive trade balance. Another development is that China has now replaced the US as Japan's primary trade destination… To make up for the estimated 20% decline in Chinese exports, and in order to 'maintain' the artifical minimum 8% growth of the economy, the Chinese bank has to redirect consumption to internal sources of demand, which can only be achieved by providing virtually free credit. The problem with that is that practically all of mainland China has taken the free cash and invested it in the stock market. The eventual collapse of this fake liquidity transfer will be one for the ages." See the Zero Hedge article with a table of Japanese trade data (CLICK HERE).

$$$ BRAZIL & MEXICO MOVE TOWARD A FREE TRADE DEAL. $$$ The economies of Brazil and Mexico generate more than 70% of all economic activity in Latin America. The Mexican President Felipe Calderon supports the concept of free trade with Brazil as proposed by the business sector that executives have pushed forward as part of a commercial accord for the two nations. Calderon made a three day visit to Brazil, touring installations of the Brazilian state-run oil company, meeting with Brazilian President Luiz Inacio Lula da Silva. This statement means trade tariffs will not be imposed on such trade. Watch for the currency used in such trade, likely not to be the USDollar. See the Yahoo Finance article (CLICK HERE)


Refineries in the United States have bought million$ worth of crude oil stolen from Mexican Govt pipelines. The oil looks just like the real thing, because it is. Product is smuggled across the border for easy sale, admitted the US Justice Dept. The Mexican drug cartels have expanded their reach, now in my opinion to reach the most powerful entities inside Mexico, including their government, army, police, banks, and corporations. The criminal organizations, often part of drug cartels, tap into remote pipelines, sometimes building pipelines of their own, to siphon off hundreds of million$ worth of oil each year. Even the monopoly Petroleos Mexicanos (PEMEX) acknowledges the criminal practice and lost federal revenue. At least one US oil executive has pleaded guilty to conspiracy in such activity, wherein the oil firm purchased at a discounted price. In early August, the US Homeland Security Agency returned $2.4 million to the Mexican Govt's tax offices to settle a case.

Stolen Mexican oil is often transported across the border in trucks and barges, then sold within the United States. In Mexico, reports indicate the Zetas, a violent drug gang aligned with the Gulf cartel, used false import documents to smuggle at least $46 million worth of oil in tankers to unnamed US refineries. Mexican authorities have frozen 149 bank accounts this year in connection with this ring, as the case continues.

The PEMEX oil output has declined by 7.5% in the first half of the year. The thefts are a devastating blow to PEMEX, which has fallen victim to at least 190 different known thefts, almost half in the Gulf state of Veracruz alone, which has entered chaos. Not only is output down, but theft is up, thus reducing revenue to the MexGovt. The federal revenue machinery has entered a Black Hole, with momentum growing. So far this year, crude oil theft is up 10%, as cases have been confirmed in 19 states, up from 13 in 2008. Oil revenue is Mexico's leading source of foreign income. It finances about 40% of their national budget. President Calderon publicly cited the theft, now a national crisis, hardly a scandal, more like a death blow. He said, "These are Mexican resources, and we do not have to sit back or turn a blind eye. This is our national heritage and we must defend it. [The cartels and other bandidos] are basically working day and night, seeing how they can penetrate our infrastructure." Highly sophisticated thieves actually are using stolen PEMEX equipment, as they build tunnels, construct syphons, and draw supply from unguarded locations remote parts of the country. Even PEMEX officials do not know how much crude oil is stolen. Blame is given to the drug cartels operating and entrenched in Northern Mexico, working in competition with crooked PEMEX agents, sometimes with their agents. The Mexican nation is at war with itself, as the federal govt is battling its own military, its own police, its own oil company, its own banks, and the powerful drug cartels operating inside the nation. The US State Dept has entered the conflict, along with the Drug Enforcement Agency and the USMilitary. Equipment from the USGovt is denied the Mexican Govt in many cases for assistance, since nobody trusts anybody. The US is blamed for supplying weapons to the cartel indirectly. MEXICO IS ESSENTIALLY IN A CIVIL WAR AND IN THE PROCESS OF A FAILED STATE, a correct forecast made in summer 2007 with its basis the depleted and stolen oil supply. The crime wave committed against neighbor states like Arizona is an epidemic, mentioned in previous reports.

Crude oil is fungible, without identification or markings. One cannot really prove oil is stolen from one site, like using matched impurity levels, sulfur content, or other chemical markings like viscosity or acidity. An unethical buyer can continue with the cover of that fungibility. Kent Chrisman is director for global security with Devon Energy based in Oklahoma. He is a former US Secret Service agent. He recently joined the Texas law enforcement agency to capture a ring of thieves in that state. He said, "US refineries willing to buy stolen crude do not care where it comes from. Once the product is at their doorstep, the deal is done. They can pay pennies on the dollar without taking the risk of getting it across the border. We have seen a big spike in recent years because oil prices went up. Every year it seems to get worse and worse. It is a profitable business." See the Yahoo Finance article (CLICK HERE).


The state-owned Jilin Jien Nickel Industry Co has made an unsolicited bid (not yet hostile) for the industrial metal mining firm Canadian Royalties on August 10th, its first pursuit of foreign resource assets without first winning agreement with management. The surprise came with a C$148.5 million unsolicited takeover bid. Jilin Jien Nickel teamed up with its Canadian partner, Goldbrook Ventures of Vancouver, to make the bid. Goldbrook Ventures has a 25% stake in the new firm created as a platform for the formal offer. China has been on an active shopping spree in the last several months, with numerous acquisitions on several continents, converting surplus cash and stored USTreasury Bonds alike for foreign resources, investing in copper, oil, and iron ore. The Chinese Economy has a growing appetitie to fuel its fast growing economy. It has operated under a stated mandate by Beijing leaders to diversify its US$2 trillion in foreign exchange holdings into so-called hard assets such as commodities, properties that produce commodities, and companies that have commodity projects.

The surprise offer came when Canadian Finance Minister Jim Flaherty was in Beijing on a trade mission to encourage Chinese investment in publicly traded Canadian companies. He was given an offer that might have taken him off guard. He said, "China has a need for resources. China has ... substantial USDollar cash reserves. China is looking for investments abroad. Commercial investments, subject to proper governance, are welcomed in Canada." Flaherty had meetings with with Lou Jiwei, chairman of the Chinese sovereign wealth fund with a $200 billion war chest. This is, after all, a global battle to control the global landscape, one that could easily morph into a trade war. Glenn Mullan is chairman and CEO of Canadian Royalties. Mullan remarked that Jien and Goldbrook are taking a run at the weakened company in an attempt to pick up its resources at a bargain price. His public comments indicated a hint of resistance, along with mild excitement that the financial prospects for Canadian Royalties should turn positive. A higher stock price tends to enable more ready financing of projects, with or without bank participation. He responded, "This one has a long way to go. I think you will see lots of interest in Canadian Royalties going forward… At the end of the day, this is all about assets, commodities, nickel specifically, and China's appetite for commodities."

Canadian Royalties is developing the Nunavik nickel project in northern Quebec. At one time in 2007, Canadian Royalties was a market darling. Back then, the price of the metal used to make stainless steel (nickel) soared above $20 a pound. After the commodities crash and the credit crisis last autumn, a sharp reversal of fortune befell the Montreal company. The funds to finance their $500 million Nunavik project collapsed, resulting in Canadian Royalties suspending the project. The Nunavik project contains approximately 20 million tonnes of ore, grading about 1% nickel and 1% copper. Due to the minimal bid size, the offer does not require Canadian Govt approval under the Investment Canada Act.

The track record in the past few years has been spotty for China, hobbled by foreign government interference to the extreme. In 2004, a bid for Noranda (Canadian copper mining firm) by state-backed China Minmetals Corp broke down when pressure from Canadian politicians nixed the deal. In 2005, China National Offshore Oil Corp (CNOOC) withdrew an $18.5 billion offer for Unocal (US-based oil firm with off-shore drilling capability) following a firestorm of protest from the USCongress regarding national security. The Australian Govt recently blocked a $1.7 billion bid for Oz Minerals by the same Minmetals, citing national security concerns. Lately, the bid by Chinese aluminum firm Chinalco to invest a large stake in Rio Tinto failed, as London-based owners balked, again citing national security concerns. In a more more cooperative deal struck last month, sovereign wealth fund China Investment Corp agreed to invest $1.74 billion to become the largest B-class shareholder in Teck Resources, the largest base metals miner in Canada. See the Globe & Mail article (CLICK HERE).


Thanks to the following for charts StockCharts, Financial Times, Wall Street Journal, Northern Trust, USFed, CIBC Bank, Merrill Lynch, Shadow Govt Statistics.