GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Golden Potpourri
* QE2 & Currency Effect
* USTreasury Bubble Risks
* BIS Gold Swap & LBMA Drain
* Gold Demand Goes Global
* Gold Enters Best Season


HAT TRICK LETTER
Issue #77
Jim Willie CB, 
“the Golden Jackass”
22 August 2010

"Don't say WE. Say the US government. I do not consider myself part of the problem. Americans have to learn that the government is not US. It is an entity that has its own interests, its own life, its own agenda. It views citizens as milk cows, or perhaps even beef cows, strictly as a means to its ends." ~ Doug Casey (maverick gold investor)... USGovt interests & agenda include harbor for a giant private syndicate with deep involvement in banking, bond fraud, crude oil, weapons, narcotics, news media, and recently the pharmaceuticals

"It was the English bankers who were all about forcing the colonists onto a Gold/Silver standard, but Benjamin Franklin knew that the overseas trade would leave no physical money for the colonies to conduct domestic commerce with. It was probably the TRUE cause of the American Revolution! ... which was actually a rebellion against the banksters!"
~ Bix Weir (Road to Roota)

"Interventionism does WORK very well, for those who aspire to or who already have and do not want to give up political POWER. In fact, it is a prerequisite for gaining such power in the first place." ~ Ludwig von Mises

"I wish free money was really free, and that there was a painless way to move from severe recession and high leverage to robust and sustainable economic growth, but there is no shortcut." ~ Thomas Hoenig (Kansas City Fed President, ideological rival to Bernanke)

"JPMorgan took a short position so enormous that it was oversized relative to the global coal market, and second quarter losses reportedly were in the hundreds of millions of dollars. The commodities division is not the only area in which JPMorgan is vulnerable. Credit derivatives, interest rate derivatives, and currency trading are vulnerable to leveraged hidden bets."
~ Janet Travakoli (in Huffington Post)

"Being gold investors is like having a midsized sailboat with a long centerboard, where we tilt our sails into the monetary winds. Those winds will blow harder with each predictable QE cyclone, after each initiative fails, until the USTreasury bubble hits the wall." ~ the Jackass

GOLDEN POTPOURRI
◄See the Special Report entitled "Monetary Alchemists: Many Faces of Ruin" for the August Hat Trick Letter. Cries of Ponzi Scheme, systemic failure, and inflationary depression are coming from respected corners. Eliot Spitzer calls the USFed activities an outright Ponzi Scheme. Bond fraud and financial decay are its hallmarks. Dylan Ratigan makes an effective mockery of the bankers with props in a tragic comedy setting. Doug Casey provides some meat on the bones of breakdown and default, as he described many frightening consequences that seem assured to occur. They go beyond economics. William Pesek gives warning that the system is failing and the people are losing faith in the monetary system. Doug Noland of the Prudent Bear identifies the USTreasury Bond bubble, as the climax of asset bubbles over 25 years. Egon von Greyerz of Matterhorn Asset Mgmt offered a bold assessment. He makes a stern warning about the end of days. He adamantly proclaims no Double Dip recession will take place, but rather a slide into the abyss, better described as a hyper-inflationary depression. The Jackass concurs. With choices of rabid monetary inflation versus painful austerity spending programs, the United States will choose inflation without a blink of the eye, without a hint of hesitation. He points to the accelerating debts as feeding an identifiable Ponzi Scheme in the USTreasurys. He describes the financial foundation as precarious and lethal, and the slight deflation in progress a prerequisite for hyper-inflation, a point in full agreement. He anticipates the Quantitative Easing response will accelerate in the US and worldwide all together in harmonious policy, a process never seen before. He calls the American sovereign debt situation much worse than the European version, which has been exploited by the US Admin as a diversion. These respected men refer to what the Jackass has described as systemic failure for over two years.

Contrast the above financial denizens to a cast of clown charlatans who fail to understand money or capitalism. Their viewpoints lack substance. Their failures are in the open. Yet they remain in charge of the monetary stores. They sing in unison songs of reckless stupidity, lacking any thread of capitalism or capital formation, surely not legitimate income sources. They promote fascism instead. They remain fixated on empty notions like inflation expectations, when industry should come into focus. Witness the head clowns in economist suits, the main money alchemists, the destroyers of economies. Modern Western economists are the whores to the bankers. A grand experiment continues, with complete destruction and ruin assured, maybe the master plan. The important banker posts are filled by lackeys of low stature who follow orders from the watch tower. The field engineers print and dispense phony money, making sure to channel it through Wall Street. They manage inflation, and preside over the resultant wreckage. These fools are experimenting with the entire USEconomy, unable to observe the damage that liberal free money off the Printing Pre$$ inflicts.

USFed Chairman Bernanke serves as a bank industry facilitator, seen in the dozens of liquidity funds that actually have replaced the banking sector itself. Ben serves as a Congressional ombudsman, seen in the endless parade of meetings where he justifies his heresy before fawning and feisty representatives and senators. Rising costs and falling asset prices lay the groundwork for another powerful round of Quantitative Easing, the movement of the inflation engine into second gear. The tipping point of both USEconomic depression and Price Hyper-Inflation is near.

◄$$$ GOLD MADE A TWO-MONTH HIGH AFTER THE OBVIOUS MULTI-FACETED RECESSION BECAME APPARENT TO THE MASSES. THEY FOCUS SQUARELY ON THE JOBLESS DATA, THE MOST VISIBLE HARPOON INTO THE HEART OF THE PROPAGANDA MERCHANTS. STIMULUS HAS FAILED. NEXT COMES A POWERFUL QE2 INITIATIVE, WHICH WILL LAUNCH GOLD AGAIN. $$$

Last Thursday, the Gold price reached $1234.5 per ounce, its highest level in seven weeks. The trigger was the lousy jobless claims data, over 500 thousand new claims, the highest level in nine months. The USEconomy is visibly entering a recession again in full view, hardly a debatable point any longer, a correct Hat Trick Letter forecast. A weak economy will render harm to the USDollar, the national traded stock certificate. A Second Quantitative Easing will render harm to the USDollar, after additional debasement. The spread of panic is likely to occur, from failed monetary policy, from failed fiscal policy, from insolvent bank condition, from insolvent household condition, in a process toward systemic failure. Talk has risen of a USTreasury default. All these important factors add to uncertainty and perceptions of crisis without end, which LIFTS THE GOLD PRICE. The gold price will react to global attitudes of growing crisis and the advent of panic. For the first time in the modern era, a persistent near 0% interest rate offered for 18 months has failed to provoke a response toward economic recovery. No remedy is even sought, since it would remove bankers from power.

Debate over a bond bubble continues while the Gold price climbs. As for Deflation, those assets formerly locked inside asset bubbles, now busted, will continue to decline in price. As for Inflation, those items needed to carry on life, such as food & energy, as well as many material items including commodities, will continue to rise in price. USTreasury auction failures are happening, but are disguised. The grotesque inefficiency of incremental credit exhibits economic failure in progress, the deterioration of the economy is growing worse. Positive cash flow enterprises are drying up. The Gold price has recently begun to move in the opposite direction to the US stock market. It benefits from the conventional view of deflation taking grip. The Gold price is rising due to the growing perception of central bank failure, the collapse of the global monetary system. The Gold price is rising as a hedge against a USTreasury Bond bubble, and its eventual bust. All bubbles burst, a lesson the reckless alchemists who occupy central banks fail to learn.

Robert McHugh has been on the trail, sniffing out Hindenburg Omens in the US stock market. He made this observation about 90% days, which are identified when 90% of the market volume is linked to stocks sold, the down volume. He wrote, "Thursday's decline was a 90% panic selling down day, the thirteenth since the April 26th 2010 top. They keep on coming, which is not good. These thirteen 90% down days have been interspersed with eleven 90% panic buying up days, telling us the same thing the Hindenburg Omens are telling us. That this market is in a state of flux, an unhealthy condition, lacking uniformity, a state of condition where stock market crashes can happen at any time." The public senses the rising risk and has been exiting for 14 consecutive weeks, seen in equity fund outflows.

◄$$$ THE USFED IS ON THE HOTSEAT TO MAKE GOOD ON ITS PROMISES TO GENERATE INFLATION VIA THEIR PREFERRED TOXIC SOLUTION. THEY CANNOT SEE HOW THEIR METHODS DESTROY CAPITAL, AND INHIBIT CAPITAL FORMATION. THE OUTCOME WILL ENCOURAGE SPECULATION BUT NOT JOB GROWTH. THE COST OF THEIR REVERSAL FROM THE EXIT STRATEGY IS LOST PRESTIGE AND CONFIDENCE. $$$

The US Federal Reserve is being called upon from numerous corners, businesses, bankers, and politicians, to ramp up the Printing Pre$$ and do something. Their policy is increasingly helpless to bring about anything healthy and sustainable. Their actions invariably produce asset bubbles, and develop lastly economic tentacles to the bubbles. The USFed is blowing their last asset bubble, with USTreasurys, but it does not provide liquidity for the USEconomy. Rather, it drains liquidity into the Black Hole. See the home equity drain that enabled consumption in the last decade, followed by foreclosures from job loss aggravated by absent home equity. The myopic USFed Chairman, burdened by his string of wrong economic forecasts and banking analyses, continues to babble about the USEconomic recovery continuing, though at a modest clip. Despite the weak labor market and the associated discouragement, he does not yet believe that additional monetary stimulus is justified. His base requirements for renewed action are a perilous path toward deflation, or an economic recovery painfully lacking the gusto to generate private sector job growth. Recall that in the spring months the dominant talk was about when to start tightening monetary policy and selling assets on their bloated pregnant wrecked balance sheet. In doing an about-face maneuver, they have shred whatever remains of their credibility, prestige, and leadership.

My forecast for the last several months was no Exit Strategy but rather a second round of monetization in QE2. It happened on cue. A more widespread reaction has prevailed in a general recognition that their tightening talk was premature. The risk tolerance for monetary policy is making a big comeback, albeit born of desperation, as they will throw caution to the wind. What failed will be repeated, but with twice the power, a criterion of insanity among psychologists. They are slowly turning desperate. Almost without exception, regional Fed Presidents seem blockheaded, ignorant of money, and without business experience. They sound intelligent, but litmus tests prove stupidity. These are arrogant idiots in charge of the paper store, better suited to run community service programs, church group charities, or lemonade stands.

◄$$$ RISING COMMODITY PRICES POINT OUT THE TROUBLED CURRENCY SETTING. HOWEVER, THE TREND THROWS A WRENCH IN THE FALSE USFED STORY OF DEFLATION TAKING CONTROL, USED AS DISTRACTION. WHILE THE BANKERS TALK ABOUT DEFLATION, WHAT WE HAVE INSTEAD IS RUINED MONETARY PLATFORMS THAT LEAD TO HYPER-INFLATION. $$$

Take Ambrose Evans-Pritchard, who explains capably the conditions that must change toward the next monetary gear shift into QE2. The monetary engines will fire, but only after recognition of the pain from higher costs. Ambrose misses a major point. Prices within the cost structure for food & energy can indeed rise, even if the people cannot afford them. In his logical world, Ambrose believes the erratic price spikes for various commodities "queers the pitch for Bernanke's QE2" program. Nice phrase, wrong focus. The decline in housing prices and urgent need for Fannie Mae to gobble up all toxic mortgage bonds is the real driver to this QE program, not prices for essentials. Banks are choking on REO home repossessions. The USEconomic queer growth from 2002 to 2006 was built upon the housing bubble and related mortgage finance bubble. The recession since 2007, coupled with the banking system reduction to an insolvent vacant scaffolding, has been caused by the housing & mortgage continued extreme distress and decline. Therefore, the QE2 launch and highly destructive next round of monetary inflation will be driven by the many areas of bloat and toxin. Ambrose points to what he calls the latest thriller, a report entitled "Seven Faces of Peril" by James Bullard, ex-hawk from the St Louis Fed, who fears US is now just one accident away from a Japanese liquidity trap. See the UK Telegraph article (CLICK HERE). Ambrose is usually sharp, but his opening premise is absurd. Alarms are sounding across the land, from banks to labor market sentinels.

◄$$$ FOOD PRICE CRISIS IS AT THE DOORSTEP. THE FIRST AREA IS LIKELY TO BE SOYBEANS. ITS PRICE MIGHT DOUBLE OR TRIPLE VERY SUDDENLY. FOR THOSE SEEKING OUT THE TRIGGER TO HYPER-INFLATION, FOOD PRICES COULD BE THAT TRIGGER. $$$

Last December, Eric deCarbonnel published a major article entitled "2010 Food Crisis for Dummies" in which he explained the global course toward a major food crisis in 2010. Several months ago, perhaps a year ago, the Hat Trick Letter cited numerous false forecasts and false inventory levels for agricultural products. The deception seemed coordinated, with markings traced to the USDept Agriculture. A price threat was directly mentioned. Eric deC stands up to hereby announce that the Great 2010 Food Crisis is here!! Shortages have driven up prices. The next stage of the food crisis has been entered. In a March update, he laid out the three stages of the food crisis. Stage A: shortage-driven price spike has occurred. We are now entering stage B: confusion, growing doubts in government estimates, accelerating price rises. He points to the soybean niche as the major crisis patch. Stage C is fast rising prices and panic.

The soybean prices are going way up. The potential high price depends on the duration of the current over-consumption. Eric estimates it would take a 50% to 80% rise in price to ration and reduce demand until the next harvest. On the other hand, after two or three more months of the current over-consumption, he declares it would be TOO LATE. Soybeans prices would have to double or triple in price so as to ration demand. The USDept Agriculture is being forced into a Madoff Moment, when the Ponzi Scheme jig is up. Their vast deception requires catch-up in price rise. In the next three to four months, the grain market must face the reality and admit that the world lacks 20 to 40 million metric tons of soybeans. This is not market shorting, but rather basic under-supply. A bright reader on the Market Skeptics website summarized, saying "Hyper-inflation always shows up in food prices first. I do expect hyper-inflation and USTreasurys to crash within months. That will have a perfect timing with your calculations. I think many big investors expect the same. That is why all commodities are bullish (denominated in dollars)... Events accelerate at an exponential pace usually and can go to extreme levels in just days, not weeks nor months." See the Market Skeptics article (CLICK HERE).

The Deflation Knuckleheads do not get it, have not gotten it, and will not get it. The deflationist crowd rebutt with claims that monetary expansion of extraordinary volume does not touch food prices, even with a consequent undermine to currency exchange rates, or even hedging against currencies. They observe a basis of drought, minor pestilence, and under-supply. Watch for government subsidies to enter the picture before long. However, the fate of farmers has been bizarre, counter-intuitive, and ugly. US grain elevator operators are NOT offering farmers the market price, since no shortage has been evident in the Heartland. They offer farmers $1.60 to $1.80 less per wheat bushel than financial markets dictate. Worse, farmers who hedged on output, reducing risk supposedly, were whipsawed, not realizing the wheat price gain at the elevator upon delivery.

◄$$$ CHINA IS IN RETREAT, WITH FACTORIES AND WITH PROPERTY. A SHOCK WAVE HAS FINALLY HIT. THEIR BUBBLES ARE DISSIPATING FAST. $$$

The chapter of Chinese industrial retreat has begun. Over 2000 factories are shutting down. Not only economic impact but social impact comes, as migration to the cities is halted or impeded. Chinese manufacturing contracted in July. The China Investment Corp, a leading Chinese sovereign wealth fund, sold 5.1 million shares of Morgan Stanley stock in a recent week, followed by the sale of 4.6 milion more shares the next week. CIC owns 9.5% of the common stock in Morgan Stanley. So China is shedding USTreasury Bonds and stock in Wall Street firms. The great Chinese sweater is unraveling from a long string pulled from its property market. Vacancies are matched by unpaid bills, as trillion$ are unrepayable on project loans. Chinese banks might struggle to recoup about 23% of the 7.7 trillion Yuan (=US$1.1 trillion) they have lent to finance local government infrastructure projects. US debt rating agency Fitch recently disclosed that the China suffers from 66 million vacant homes. Meanwhile, against the grain, home prices in China are at their all time highs. A price index was developed at the Tsinghua University for newly constructed homes in 35 major cities. Their measurement of a residential land price index for Beijing shows a doubling in prices in just the last year. Much dispute has come over the method of measurement. Beijing property developers were allegedly cutting prices in order to find sufficient demand. Now Shanghai prices are reportedly plummeting. Indeed, Shanghai property prices have been cut in half in a single week, with district price declines ranging form 71% to 94% in one week. Transaction volume of commercial residential properties in Shanghai quadrupled in a single week. Even with scattered distortion from property mix, clearly prices are plunging.

QE2 & CURRENCY EFFECT

◄$$$ THE USDOLLAR COLLAPSE IS LAID OUT WELL, WITH BOTH INFLATION AND DEFLATION FELT WITHIN CERTAIN DIFFERENT ASSET GROUPS. THE USECONOMIC RECESSION WILL BE THE FOCAL POINT. THE GROWTH OF DEBT, ABUSE OF THE PRINTING PRE$$ TO MONETIZE DEBTS, ENDLESS DECLINE OF MORTGAGE ASSETS TIED TO THE SINKING HOUSING CEMENT SLAB, LACK OF BOND FRAUD PROSECUTION, AND ENDLESS WAR WILL ERODE FOREIGN CONFIDENCE IN THE USDOLLAR. THEY WILL ABANDON IT. EXPECT A SUDDEN GLOBAL REACTION TO VOMIT THE USTREASURYS, LEAVING THE USGOVT ALONE IN ABUSING THE MONETARY PRESS. ENTER HYPER-INFLATION. ENTER THE THIRD WORLD. $$$

For four decades, the USDollar has been the mainstay of foreign capital reserves, and often the standard from which to peg weak currencies. The Greenback has been sought by foreign corporations, foreign hotels, and taxi drivers the world over. Its former popularity has transformed into a curse controlled by hostile barbarians. Over time a glut of USTreasury Bond holdings in foreign central banks has been accumulated, while an unserviceable national debt grew into a domestic monster impossible to tame at home. The precarious illusion of fiat currency cannot continue indefinitely. The monumental rise in USGovt liabilities will no longer have the guaranteed buttress coming from perpetual USTreasury investment. Foreigners are actively seeking a USDollar alternative, even if an IMF "Straw Man" in the Special Drawing Rights, a currency basket.

The United States no longer would receive the busloads of foreign capital needed to continue functioning. The foundation of the US debt machine is slowly disintegrating. Even without additional debt, the USGovt is exposed and vulnerable. In the last several years the government sector has expanded, the wars expanded and blessed as sacred, and consequently costs rose dangerously, while interest payments mount. The high borrowing cost potential is a very large reason why the 0% rate will perpetuate without end, or at least until a USTreasury default. The undisciplined debtor hits a zone of critical mass inevitably, as it cannot outrun bankruptcy. The events are in progress with the USGovt, which relieves itself by printing money. The events are also in progress in California, New York, and Illinois. The growing insolvency in states is a direct reflection of the growing insolvency in the federal core. They too will heap costs upon the USGovt, perhaps $200 billion soon, really soon.

The United States will continue to see symptoms of both deflation and inflation, even simultaneously, as has been the case for years. Deflation in jobs, stocks, real estate, and wages. Inflation in energy, food, and commodities. This is the dreaded Jackass forecast, falling assets and rising cost structure. The USEconomy has become a Frankenstein monster with froth and deep aberration that has already turned on its citizens, rendering them poor. Job security and pensions are missing in action. At the heart of this nightmare is found the USDollar. Despite the fraudulent fiat nature, it is still a representation of a sovereign drive that blocks global power forces. The challenge to institutions seeking an alternative is to create a counter-balance force to those global powers. Ironically, after most US industry was shipped overseas, and the USEconomy stocking retail shelves with foreign made products, leaving the nation completely reliant on a 70% service based system, the USDollar is almost the last homemade product America actually makes. However, its production is from a Printing Pre$$, and its output kills domestic capital. The USDollar is fading with the Empire, and near outright collapse. Very little coverage has come in the financial news of the streak of nine weeks for the US$ decline, the longest consecutive weekly decline since 2004. The huge outflows from the US stock market, another streak of 14 straight weeks, indicates something big, something ugly, this way comes. The USDollar is falling at the same time as stocks, a dour deadly signal for the Greenback. Foreigners have turned hostile, and a trade war brews with the largest US creditor.

China has stopped new USTreasury purchases, and has shed all USAgency Mortgage Bonds. Chinese sales prompted the nationalization of Fannie Mae, under a massive dumping exercise in the summer 2008. China has aspirations of world reserve status, which could occur in a gradual dishoarding of US$-based assets in favor of the Yuan currency. China has undertaken a great challenge to develop its economy so as to become a consumer based hub for the East. In recent months, the hostility has grown. Members of the Chinese financial community, including former central bank advisers, have openly called for the Chinese Govt to end its investment in American debt. A great threat to the USDollar comes from the next chapter of Chinese evolution.

Fannie Mae & Freddie Mac are adopted toxic children that stand in Black Holes, wards of the USGovt state. They hold $5 trillion in toxic assets tied to mortgages. They hold the excrement from a housing & mortgage busted bubble. The unlimited credit line pledged by the USDept Treasury in their commitment to Fannie & Freddie has placed the USGovt debt structure dangerous close to an endless debt vacuum. The USDollar is attached to the vacuum hose. The real estate decline is set to continue its lethal crumble. The waves of job loss and home loan default continue without end or abatement. Thus, the USGovt will be compelled to continue bailing out Fannie & Freddie. The potential looms for trillion$ of debt to be monetized by the USFed acting as USGovt agents. The deeper the United States goes into the debt darkness, the more tempted other nations will be to officially create distance from their USTreasury investments. At first they will halt growth, then they will sell outright. The vast majority of USTreasury purchases by foreign buyers are short term, maturing in at most a few months. The USGovt will be forced to use the Printing Pre$$, monetize rollover debt, and sustain what foreigners abandon.

The US is at the cusp of lost faith globally in the USDollar, as a result of its debt growth, its endless fallout from the mortgage crisis, and its grand investment in Black Holes (Fannie Mae, AIG, Wall Street, Pentagon) that are not properly identified as gigantic fraud centers. A sudden loss in global confidence for the USDollar will likely occur soon. Some sage sources tell of how the USGovt might pre-emptively devalue the USDollar by 50%, in order to quickly achieve stability. They will not succeed, since a $450 billion sudden bond writedown imposed on China, a sudden $400 billion writedown imposed on Japan, and similar sudden imposed writedowns will invite an historically unprecedented backlash. The result will be isolation of the United States, a cutoff of supply from unwanted US$ payments, and rapid entry into the Third World. See the insightful NeitherCorp article entitled "US Dollar Now Ripe For Catastrophic Devaluation" by Giordano Bruno (CLICK HERE). He discusses many factors summarized above, mostly meshing well with Jackass viewpoints.

◄$$$ HUGE OPPOSITE FORCES WILL PUSH THE EURO DOWN, AT A TIME WHEN THE USECONOMIC RECESSION BILLBOARDS PREVENT THE USDOLLAR FROM RISING IN RESPONSE AS BENEFICIARY. INSTEAD, GOLD WILL RISE VERSUS BOTH MAJOR CURRENCIES, AS THE MONETARY SYSTEM CONTINUES TO CRUMBLE. THE FOREX MARKET WILL SEEK STABLITY, BUT IT WILL BE QUEER SINCE ALL MAJOR CURRENCIES WILL FALL VERSUS GOLD. $$$

The USDollar DX index is so dominated by the Euro component, that any analysis, forecast, or chart of the clownbuck must cover the Euro. Given its precarious position, the Euro deserves focus. The Euro has completed a short cover rally lasting a few weeks. Great imbalances have been lessened and tensions allayed, but nothing resolved as usual. The rally has permitted a counter-trend rally that defies the deterioration of EU sovereign debt, as their bonds are in pathetic condition. Even the German Economy, given lower borrowing costs as a result of bond arbitrage, cannot save the Euro. The common currency is ready to resume its decline, before it fractures into pieces and gives way to the New Nordic Euro, backed by a gold component. However, given the horrendous condition of the USEconomy, the recognition of a resumed recession, the advent of QE2 with all its monetary excess glory, the USDollar is in no position to gain ground. Instead, some stable lower ground will be attained for the Euro. The range between 125 and 127 seems a comfortable level to park, to look over its shoulder, and to avoid the falling rubble. Look for the USFed and USDept Treasury to use the European resumed bond problems as political cover for advancement of the next powerful round of Quantitative Easing. Some of the new phony money will aid Europe, and thus keep the currencies a little more stable.

◄$$$ QE2 WILL BE MORE CANCEROUS THAN QE1, AS MONEY GROWTH WILL BE AWESOME AND INEFFECTIVE PROGRAMS WILL FLOURISH. SINCE THE OFFICIAL INTEREST RATE CANNOT BE REDUCED, FULL DEPENDENCE UPON MONETARY INFLATION WILL BE THE WEAPON DEPLOYED. QE2 WILL PRODUCE THREE MAJOR EFFECTS, ALL RUINOUS. ALL DEBT IS POTENTIALLY SUBJECT TO COVERAGE BY NEW MONEY. NEXT COMES HYPER-INFLATION, AS CONFIDENCE IN ALL THINGS PAPER EVAPORATES. $$$

The arrival of QE2 will be an extremely loud and highly controversial global signal of growing panic, hopelessly errant monetary policy, hopelessly errant fiscal policy, and the total lack of policy alternatives. Look for timing of announcements for major USDollar monetary growth to coincide with renewed European bond crisis tumult and distress. The USFed cannot reduce the official interest rate. Therefore monetary inflation will be the sole weapon to be deployed in utter desperation. The challenge by banking leaders will be to conceal their desperation and panic. It is not clear to me yet that the bankers recognize the failed system under their feet. Rampant monetization has been in progress for several months. However, the financial maestros can order greater volume in money production if done in the open. While less panic is to come from the greater volume that can be managed in neutralized schemes, a risk is accepted in coming into the open. They risk lost confidence and recognition of broad failure. The present monetary system is breaking in front of our eyes. The franchise central bank system has failed, except for its efficient distribution of Printing Pre$$ operations in multiple channels. That does not mark success, but rather equitable distribution of failure and capital contamination. QE1 did not succeed. So QE2 will surely not succeed either, even with increased volume. We are heading toward USTreasury default, a public professional suicide of the King of Monetary Alchemy, Benjamin Bernanke. His past arrogance, ignorance, and heresy will be matched by shame, ruin, and failure.

The arrival of QE2 will produce three major effects. 1) The reliance upon new money growth to monetize rapidly growing debt in the US financial system will undermine value in all things US$-related. The continued artificial support of the USTreasury will transfer risk to the USDollar. 2) Whatever respect and prestige in the USFed will vanish quickly. The bravado of helicopter drops will seen hollow, amateurish, and invite mockery in the open among respected brain trust. 3) The smartest people in the room will begin to declare that the current global monetary system is irreparably broken, and that past and future response, even if amplified, will be doomed to fail. We are on the doorstep of hyper-inflation. No debt in major Western institutions will be spared from coverage by phony money. The floodgate release is vulnerable to lost confidence in the system, resulting in extreme defensive measures by the wealthy. Even with hyper-inflation, the US-centric systems will implode anyway. They have been imploding since the Lehman Brothers failure, the AIG ruin, and the Fannie Mae nationalization. The systems are all propped up artificially.

◄$$$ DEFLATION TALK IS INTENDED AS STRONG DISTRACTION FROM THE POWERFUL MONETARY INFLATION AT WORK, SOON TO INTENSIFY IN AN INVISIBLE MUSHROOM CLOUD. FALLING ASSET PRICES AND RISING COST STRUCTURE LAYS THE GROUNDWORK FOR A POWERFUL SECOND ROUND OF MONETARY INFLATION, CALLED QE2. $$$

The deflation talk is designed to fool the misled public sheeple ignoramuses into thinking massive mammoth high-tech USDollar monetary inflation, executed by financial engineering, the likes of which history has never laid eyes on, is no big deal. The Gold price acts as barometer for the monetary system destruction. The Gold price will head to $2000 in the next 12 to 18 months while the braindead worry about deflation, a concept they cannot define, and comprehend even less. Gold provides the signal for where the entire set of major currencies is going. That destination is the DUSTBIN of history. But the path must be painted with more detail, and made less harmful with large billboards written of deceptive slogans and messages. Gold is telling a loud message that the USDollar is heading to the dustbin, that the monetary system is slowly being eroded by mammoth debt burdens gone out of control, aggravated by assaults on sovereign debt in the bond market. It is possible that another round of Euro currency decline could easily lift the USDollar quite high, before a collapse of currencies. Those who focus on the USDollar during such the collapse are Mr Magoo lookalikes who miss the entire background of monetary ruin. People must try to expand their viewpoints, since the world is changing, and is no longer US$-centric. Gold has taken a position as a reserve asset, an important toehold of renewed respect. That is a major change in the last year.

Many contemporary analysts fail to realize or acknowledge the absence of sound money. They point to outsized deficits and alarming USFed balance sheets, but miss the illegitimacy of money itself. They comprehend neither money nor income. The growth of money, the monetary aggregate (high falluting term) goes beyond the narrow 'M' metrics. Measurement of monetary creation must include the various guarantees and promises made by the USFed and USGovt and USMilitary. The downward financial spiral assures that those guarantees will be called upon. It must include the more complete adoption of a toxic cesspool that has turned into radioactive swill, namely Fannie Mae & Freddie Mac. We have even more immense inflation that the strict monetarist inflation watchers calculate.

◄$$$ THE MASSIVE SHORT POSITION IN THE USDOLLAR IS A RUSE STORY. THE CURRENT LOCATION OF THE USDOLLAR INDEX IS STABLE, WITH NO GREAT FORCES LURKING BEHIND THE LEVERAGED FUTURES MARKET. $$$

Wall Street not only deals in frauds, but in delusions too. Morgan Stanley put out a supposed research report that masked its true nature, a propaganda piece replete with fabrications. They claim, as though their word is gospel not to be doubted or dismissed, that the USDollar had a massive short position. Usually that means the USDX index will rise with the drop of any handkerchief bearing the semblance of bullish snot on it. The MS Report was a ruse. They wrote, "Going into the FOMC, we flagged in our MS FX flows publication that the market was positioned very short of USDollar. We have seen nine straight weeks of USD selling, and it is at an extreme. The IMM positioning data showed USD shorts approaching December 2009 levels... We are looking for a weekly close below 1.30 for confirmation of a top in EUR/USD." The Euro zipped up past 132 with ease in the next week. That was early August. These guys need to be stripped of all clients. See the Business Insider article (CLICK HERE).

The Morgan Stanley work has no bearing on the Commitment of Traders, easily found. Ed Steer of GATA and the Casey Gang rebutted loudly two weeks ago. He wrote, "My first order of business today is to set straight a story that appeared in my column yesterday. It was headlined 'Morgan Stanley: There's A Massive Short Position In The Dollar Right Now.'  I told you to pay close attention to the graph. Well, I thought I would post the COT graph for the dollar short position in my column today, just as icing on the cake for this Morgan Stanley piece... The chart shows that there is no massive short position in the US dollar in the COMEX futures market. It also shows that total Open Interest is heading back towards the zero point.  I am not sure what this analyst at Morgan Stanley was looking at."

Notice the extreme opposition between the Commercials versus the Non-Commercials in January and February and March. The contrasting sides dwindled down into a net neutral situation with small Open Interest. The USDollar is therefore cool calm and collected in its current range. No great force lurked to push the US DX index much higher, as Morgan Stanley suggests. That was two weeks ago.

USTREASURY BUBBLE RISKS

◄$$$ NAKED SHORTING OF USGOVT-BACKED BONDS HAS ANOTHER EXPLANATION IN ADDITION TO WALL STREET FRAUD TO REPLACE ABSENT LIQUIDITY. ENTER THE INTEREST RATE SWAPS, LONG WARNED AS BEING ON PERILOUS GROUND DURING LONG STRETCHES OF 0% RATES. THEY REQUIRE HUGE BACKGROUND USTREASURYS TO FULFILL AND COMPLETE THE TRADES. SUPPLY DOES NOT EXIST. CONSEQUENTLY, A COUNTERFEIT APPEARS THAT HIGHLIGHTS THE WRECKED USTREASURYS, PROPPED BY CREDIT DERIVATIVES THAT MAINTAIN THE ARTIFICIAL 0% RATE. $$$

My investigation in the last week has revealed the likely answer as to who ultimately supplies the urgently needed USTreasurys in Failures to Deliver. NOBODY DOES. The demand is the byproduct of massive MASSIVE Interest Rate Swaps, executed to maintain the current 0% environment. It is artificial to begin with, and unsustainable to end with. A moronic bond trader once objected to Rob Kirby's arguments on heavy handed USGovt leverage to sustain the free usury (0% cost of money). The trader said "If a connection exists between the Interest Rate Swap and the USTreasury Bond, then we would see really large Failures to Deliver on the USTreasurys." Bingo!! We have seen $1.5 trillion over two years in USTreasury Failures to Deliver and $1.34 trillion in a single late July week in USAgency Mortgage Bond Failures to Deliver. Proof positive of a 0% bond market that cannot be sustained are the IRSwaps gone out of control, whose visible part is the Failures to Deliver bonds. Infinite leverage is required, when infinite supply of USTBonds does not exist. To be sure, the Wall Street naked shorting is ALSO in progress and in high volume. They are broke and without valid liquidity.

Every IRSwap contract includes an implied underlying USTreasury to support it. Any new IRSwap contract requires a new USTBond to back it up. So the gigantic tail is wagging the large dog. Imagine a dog with body 3 feet long but a tail 20 feet long and one foot thick. The USTreasury credit market has grown into a total abomination. It is not a product of a chemistry lab, but rather out of a financial engineering lab. Credit experts know well that the US banking sector became heavily dependent upon credit derivatives, both Credit Default Swaps and Interest Rate Swaps, in the 1990 decade. Some experts go so far as to claim the US banking sector might have run aground and risked collapse without the brisk trade in leveraged products during that decade. This topic was touched upon in early 2009 in the Hat Trick Letter reports. The bottom line is that the Failures to Deliver and the trillions in IRSwap contracts are abused to the hilt to enforce a 0% rate bond environment, certain to eventually blow up. The USDollar will face anihilation, along with all fiat currencies.

◄$$$ UNITED STATES CONDITION RESEMBLES GREECE. THE USGOVT TOTAL DEBT IS LESS THAN IN GREECE, ONLY IF FUTURE OBLIGATIONS (SOCIAL SECURITY, PENSIONS) ARE IGNORED. ON AN ANNUAL FISCAL DEFICIT BASIS, THE USGOVT DEBT LOOKS WORSE THAN GREECE. $$$


The Congressional Budget Office (CBO) has confirmed that the USGovt fiscal condition is actually worse than Greece. The latest (surely too conservative) projection puts the federal debt rising to 62% of the Gross Domestic Product in the USEconomy by the end of the year. Its level was 40% before the housing decline became the mortgage crisis which became the credit crisis which became the monetary crisis. Many myopic deceitful dumb & blind US economists build a wrongful consensus that a Greek style debt crisis is unlikely to take place in the United States. They actually cite the size of the economy, the single currency structure, and international USDollar prestige as a deterrent. After all, Greek debt totals 120% of GDP, twice the US total debt burden. The better benchmark of fiscal fitness, strength, and robustness is the fiscal gap, the annual federal deficit. Greece future expenditures are listed as 11.5% of their GDP, after incorporating the new austerity measures. The US figure is 12.2%, based on the CBO projections, indeed worse than that of Greece. And the US deficit is stuck as a huge level while the recession shrinks the economy. However, the CBO projections are loaded with the usual garbage assumptions, like a 7.2% of GDP spending reduction by 2020, and also a substantial rise in tax receipts from wage growth tied to the fictional recovery whose illusion is evaporating.

Enlightened economists and DaGong, the largest credit rating agency in China, seem to be in agreement as to the fiscal position of the United States. DaGong pointed to fast rising debt and the lack of economic power to pay it off. They downgraded the USGovt debt from AAA to AA. The United States will avoid a Greek style debt crisis, but it will suffer a different type of crisis. The over-usage of the Printing Pre$$, the excessive monetization of USGovt-guaranteed debt, endless costs for an endless war to secure oil and narcotics, and an economy mired in quicksand, these factors will invite hyper-inflation in the United States and a global rejection, a denunciation of the USDollar by global creditors. The implications are far reaching, and include a cutoff of supply chain of imported goods, both finished products and raw commodities. The USDollar will be rejected in payments. The age of the United States paying for hard goods with trash paper bearing US$ labels is coming to an end. Most Americans do not realize it. The USGovt and USDept Treasury, along with its cancerous agent the USFed, will choose inflation at every juncture, rather than to put its fiscal house in order, rather than to put down its military machinery. Toss in the intellectually corrupt notion of Too Big To Fail mentality on bank liquidation refusals, and the inflation choice is a lock. Gold will respond to the active energized choice of inflation, as a willing or desperate option taken. See the Zero Hedge article (CLICK HERE).

◄$$$ THE LATEST T.I.C. DATA REPORTS SHOW CONTINUED JUMPS IN USTREASURY HOLDINGS BY ANGLO FRIENDS, AND A REDUCTION BY CHINA. THE SAME STORY CONTINUES. EVIDENCE SHOWS FOREIGNERS BOUGHT PRECISELY WHAT THE USFED WAS MONETIZING, NAMELY LONG-TERM USTBONDS AND USAGENCY MORTGAGE BONDS. THEY FRONT-RAN THE USFED... SMART. $$$

The Treasury International Capital (TIC) data had some unpleasant disclosures about the flow and size of international capital flows. Inflows came in at $44.4 billion. The net flow $33.9 billion in net foreign purchases of long-term securities. Three important points must be made. 1) The total foreign holdings of US securities surpassed the $4 trillion mark for the first time ever, at $4009 billion. 2) The annualized net would be $407 billion if the net inflow repeated for twelve months. That amount is only one-third of the USGovt stated deficit, as the remainder must be monetized. Think Printing Pre$$ again, and debasement of the USDollar. 3) Foreigners were frontrunning the USFed already in June. Foreign sources bought $33.3 billion in long-term USTreasurys, and $18.2 billion in USAgencys, exactly what the USFed promised to monetize. The USGovt does not object to the extra push, since they are the USGovt-guaranteed bonds after all. Also, another detail. Foreigners sold $13.5 billion in corporate bonds, the highest amount since January 2010. They sold $4.1 billion in corporate stocks, the most since July 2008. They oppose the High Frequency Traders, the Plunge Protection Team henchmen, and the bound Primary Dealer group,

Lastly, the Chinese USTreasury holdings were reduced to a 15-month low of $843.7 billion. The task of shedding US$-based bonds is formidable. The Chinese ditched all USAgencys last year. China holds almost $100 billion less in USTBonds compared to the peak of $940 billion in July 2009. See more details in the Zero Hedge article (CLICK HERE). China is buying up the world of commodity supply, the upstream supply chain, vast energy & mineral deposits, investment in infrastructure with port facilities, and much more. They are bulding a tangible noose around the US neck. The United States is investing in dead corporations, corrupt Wall Street banks & bonuses, clunker cars, over-supplied houses, the medical industry, the pharmaceutical industry, the vast war machinery, and bridges to nowhere.

◄$$$ THE BANKERS ARE USING THE USTREASURY CARRY TRADE HEAVILY. THE END RESULT WILL BE A 2% LONG BOND YIELD AND A BUSTED USFED BALANCE SHEET. SO BERNANKE IS LEADING THE BANKERS BY A LEASH TO FOLLOW A COVERT QUANTITATIVE EASING PROGRAM. BANKS ARE NOT LENDING. INSTEAD THEY ARE PILING UP USTREASURYS AND USAGENCY MORTGAGE BONDS. CONSUMERS ARE UNWORTHY BORROWERS. THE USECONOMY IS DYING ON THE VINE. $$$

The amount of Treasury securities held by banks has skyrocketed dangerously, since the USFed set the official interest rate at 0% in early 2009. The USFed has the illusion of injecting free liquidity into the banking system. The banks respond by buying the long-term USTBonds and selling the short-term USTBills, earning a carry trade differential gain of 2% using the 10-year or 3.5% using the 30-year bond. Also, the USGovt is given an ultra-low cost source of funding. They suffer the nasty effects of a trap, since the near 0% rate cannot be permitted to increase. Consider the amplified profits to the privileged banks, when they devote leverage in the process.  In other words, with a near 0% Fed Funds rate, banks can print and do print their own cash flow. They clip USTreasury Bond coupons. The USFed has publicly stated approval of the practice, which in their view recapitalizes the insolvent banks. It also promotes a bond bubble, whose next chapter will be ugly, as in USTreasury default following monetization gone haywire. The USFed is thus engaged in an indirect QE program for the banking system benefit. The result is a flattening of the yield curve. The 10-year USTreasury yield has moved into the 2.5% to 2.6% range quickly. It will continue to 2.0% without a doubt.

This will end badly. The principal winner will be gold, and silver too. The USFed and the Big Banks are in a race of time, to recapitalize before:

  • the USTreasury asset bubble bursts
  • their counterfeit of naked bond shorting is discovered
  • the rest of the world enters a boycott
  • an Interest Rate Swap explosion occurs
  • the USGovt is stuck in a monetization corner
  • the USDollar is rejected in global trade.

The bank balance sheets produce dubious and problematic profits, as they mark up in value  their toxic, untradeable, illiquid securities like mortgage-backed securities and off-balance-sheet securities like CDOs and OTC derivatives. Those securities have no markets, and thus those assets should be declared worthless. The carry trade produces actual income. So does naked shorting of USTreasury Bonds, a common practice done with impunity. See the Truth In Gold article (CLICK HERE).

Since the end of June, the banks have purchased $83 billion in USTreasury and USAgency Mortgage Bonds. The total return on these USGovt-backed bonds has outperformed the stock market by 19%, no small feat. The Elite let the consumers eat cake, as Marie Antoinette once said before she lost her head. The banks hold Excess Reserves over $1 trillion at the USFed. The banks are still riding on the USTreasury curve, whose shape is displayed as more flat with each passing month, a loud recession signal. Banks are not lending, but rather handing over money to the USGovt for guaranteed bonds, a seemingly better risk. The phenomenal rally in the USTreasury market comes amidst reductions in commercial & industrial loans, home equity lines of credit, residential mortgages, commercial property loans, and credit card extensions.


◄$$$ THE LIKELIHOOD OF A USTREASURY DEFAULT GROWS BY THE MONTH. NOTABLY, POCKETS OF ANALYST CRAFT ARE BEGINNING TO SEE THE LIGHT ON THIS TRAGIC INEXORABLE OUTCOME, AS THE JACKASS SCREAMED IN SEPTEMBER 2008. THE SEQUENCE LEADING TO DEFAULT WILL BECOME THE NEXT OBJECT OF DEBATE. THE PATHWAYS COULD BE DRIVEN BY DEBT, MONETIZATION, CURRENCY SHOCK, TRADE ISOLATION, OR A DEBILITATED USFED. THE PATH TO RUIN WILL SURELY INVOLVE A COMBINATION OF ALL FACTORS. $$$

My trusted colleague CraigM is loaded with insight, sound judgment, and tireless spirit. He shared his view of the end pathway, saying "It would seem to me the most probable way for a default would be via a collapse of the USDollar. My logic is as follows [in a sequence cycle]: 1) As long as the Fed has the printing press, it will continue to print and will monetize all USTreasury debt either directly or covertly. 2) The Fed & USTreasury will control interest rates via Interest Rate Swaps. 3) As the Chinese and others sell their USTreasury holdings like they are doing now, the Fed will buy them via the printing press. 4) This cycle will continue as the Fed continues to print endless Federal Reserve Notes and will only stop when the USDollar becomes worthless." So he sees a cycle of debt, leveraged derivatives, foreign dumping, heavy monetization, and the effect on the USDollar."

My friend and colleague Rob Kirby is loaded with insight, deep bond market experience, and a keen eye for the devious, a true financial forensic analyst. He shared his view of the end pathway, saying "A nasty cycle will grip the USTreasurys while the Fed prints endlessly in reaction. I believe that the failure of the US dollar will not manifest itself by a crashing bond market, at least not at first. What will be observable is a spinjob by our subservient press, centered upon trade war issues, where certain countries will place Export Bans for various key strategic goods. Think Russia for wheat and China for rare earth metals, for instance. As time passes, the list of goods that will be unavailable in international trade for Dollars will grow. This way, the utter destruction of the Dollar will be explained away in trade terms, where the Anglo American banking maestros and their media servants will avoid speaking about the failure of the currency. Instead they will speak in terms of unfair trade by all of their enemies in foreign countries." So he sees a systemic breakdown from isolation in trade, steered by a rejected USTreasurys, heavy monetization, as the USDollar gradually becomes a pariah, and foreign products are rendered unavailable, during a heated trade war.

A highly reliable sage source from the gold banking world and international consulting is loaded with deep insight, vast experience, solid connections, ongoing relationships, privileged insider information, and diverse industries tied to banking. He tipped the Jackass off in early August 2008 as to the weekend of September 15th being one to mark in history as three great failures would occur. He gave one month advanced notice of a locus of failure in three places, with great urgency. My guesses of Lehman Brothers and Fannie Mae were correct, but a blank came on the third which turned out to be AIG. He has frequently shared a viewpoint on the inevitable USTreasury default in the coming years. He first enlightened me as to the USFed resignation pathway to default, after it was loaded to the gills in toxic irredeemable impaired assets that no banks wanted. As buyers of last resort, the USFed would choke to death. Rather than a citation of path to default, he shared a great risk of a major event. He said, "The USGovt will devaluate the US$ by 50% overnight in the not too distant future. They need 11 days to do this. If they push it, they can do it in 6 days. So look for a long holiday weekend as an opportunity. The best time to do this is the Christmas / New Year time window. They tried to do it in 2005/2006, but the Chinese put a gun to their heads in Washington and they backed down. You can slice and dice it as you like, but the USDollar is dead and so is the Euro. The systemic change will be a cataclysmic and traumatic event for the West, since all it stands for will go into the toilet in a blink of an eye. The period immediately following the collapse will be filled with violence and total breakdown of law & order. Keep an eye on Greece. It is the guinea pig and incubator for what is coming to Western societies." He went on to mention some positive regenerative power left in the US people to reclaim their country and to restore its legal framework. Soberly, he warned it will be ugly, but loaded with great opportunity. So he sees a sudden massive USDollar devaluation with grand shock waves from vengeful reaction.

The Jackass view is similar, but with subtle nuance differences. My focus on default is not the USTreasurys directly. The parabolic yield rise should have happened a year ago in rising long-term bonds, due to $trillion supply. That was an error of mine made in the early months of 2009, as monetization and heavy Interest Rate Swap usage created a bond rally in the face of mammoth debt supply. Prepare instead for 2.0% on the 10-year USTreasury, again from monetization, but aided by an unwelcome return to a nasty recession. The USDept Treasury is openly talking about their purchases of TIPS, the perversion of bond-like securities. Imagine monetizing an inflation adjusted security, the insanity! The Powerz must keep down those dimwitted inflation expectations, and thus maintain order in the credit market that trades USGovt debt. The USTreasurys are a grand bubble, and its end does not result in spikes in long-term bond yields. It results in a USTreasury default during a USEconomy seizure. Other major currencies will experience similar monetizations, if not directly, then from the vast till of resupplied USDollar swap facilities. See the October 2008 and June 2010 versions. The pressure will be shifted from the controlled USTreasury to the USDollar, but it will not decline radically, unless by a major devaluation decision decree. All currencies will decline simultaneously versus gold. Ergo, the Gold prices rises toward $2000 as the gold market fractures wide open.


Then comes the climax, as part of my default scenario. The housing market does not recover, nor does mortgage bond market. The USFed resigns its commission when the cornered central bank is over $1 trillion in the hole, as they conclude a systemic failure has occurred, with no recovery in any critical propped market. They have somewhere between $500 to $700 billion in red ink saturated on their balance sheet right now, by my estimation. They will do their dead level best to stick most of their toxic ruinous assets from the wrecked balance sheet into Fannie Mae, under the USGovt roof. They will walk away onto a ship leaving the US shores with suitcases of USTreasury Bonds bearing uncertain value, surely not reinforced by gold bullion. The USFed resignation means a sudden unexpected USTreasury default, whereby the hopelessly corrupt USGovt will simply lose their agent in the credit market. The shutdown and lost creditor confidence globally will shatter the USTreasurys and send them into sudden total disarray, where creditors rush to salvage what they can of their near $trillion holdings. Only utter fools will be buyers, even at discount.

◄$$$ THE USTREASURY DEFAULT LIES DIRECTLY AHEAD, BUT WHOSE TIMING IS UNCLEAR AND UNKNOWN. THE POWER STRUCTURE ASSURES IT. THOSE IN CONTROL ARE BANKRUPT. THEY WILL NOT GIVE ORDERS FOR THEIR OWN REMOVAL OR RUIN. $$$

Some basic questions yearn to be hurled onto stage. A year ago, the Hat Trick Letter elaborated the USFed insolvency and prospects to worsen. My theory and forecast of a USFed resignation seems more likely and acceptable with the coming arrival of QE2 and its next heavy monetization. The USFed balance sheet will be loaded with more toxic garbage assets tied to mortgages. The buyer of last resort is choking to death in a toxic sea of bad debts, the charred ruins of busted bubbles. So ponder these questions:

  • Why does nobody talk about how the USFed has gone insolvent ?
  • Why does nobody talk about how the USFed's toxic balance sheet has gone worse ?
  • Why does nobody talk about how the USFed assets will not be restored in value ?
  • Why does nobody talk about how the USFed is busted and will surely quit ?
  • Why does everybody assume the USFed has an unlimited tolerance to lose money ?
  • Why does everybody assume the USFed is benevolent toward the United States ?

◄$$$ EUROPEAN BANK STRESS TESTS WERE A CLUMSY FARCE. NATIONS ARE SLIDING INTO A DEFICIT TRAP WITH REMEDY. A HUGE STACK OF SOVEREIGN DEBT MUST BE REFINANCED IN THIS CALENDAR YEAR. DEBT DOWNGRADE THREATS CONTINUE. THE GREEK GOVT BOND YIELD IS WORSE THAN JUNE. $$$

The European bank Stress Test was an equal farce and travesty to the American version. Some banks that passed the low hurdle criteria are insolvent and seeking claims. The process did not require that banks write down impaired assets. In the United Kingdom, fund asset manager M&Gm of Prudential harshly criticized the Stress Tests as being easy and using the wrong types of stress. The tests ignored the Basel III requirements on capital and liquidity, to be enforced by 2012. A gaggle of crippled banks pass the supposed tests, but they are failing the market's funding test, since they cannot continue without government support. The Stress Test is an irrelevant distraction. The bigger European Stress Test comes later this year, conducted by the bond market. The banks in Europe's most distressed nations must refinance $122 billion of bonds this year. The process will reveal the dead banks and stress charade. Spain is falling into a treacherous place, with over 20% unemployment. Their structural problem will surely persist for some time, as they tilted their economy toward housing bubble construction. The UKEconomy is faltering badly, just like the USEconomy, except that the British are more honest about the relapse. Despite a silly official rosy view, Ernst & Young believes a hike of rates past 0.5% will not occur for the next three years. The Bank of England reported that consumer prices rose 3.5% in 2Q2010. The upcoming insane increase in the standard VATax to 20% will go into effect soon.

The problems in Europe are being signicantly under-estimated, starting with Spain. The nation has 4.645 million jobless, over half a million more than a year ago. Proposed austerity measures on top of a collapsed housing bubble accomplish nothing except distribute pain and job cuts. The Spanish Economy has been one of the worst performers in Europe during the recession of 2008 and 2009, retreating 3.6% with more contraction to come. Its total debt to GDP ratio has risen to 55.2% in 2009. Deficit targets will not be met, a trend across Europe. In fact, Spain will restore project cuts of 500 million Euros from the state infrastructure investment budget for next year in a slight easing of its austerity plans. Take France. Debt rating agency Moodys threatened to cut France's AAA rating, issuing a bleak credit report. In response, President Sarkozy summoned his ministers to discuss cuts like a hasty college sorority meeting. Little will likely be done and deficits will spiral further into the red zone. Take Italy. Italian Govt bonds declined as demand fell at sales of 2015 and 2025 debt, but at least the bonds were taken down by the market. The Govt Bond yields are not going lower, even after the $750 billion EU Bank Bailout. Like the Americans, they fixed nothing. They only gave giant aid to banks, many of which should be liquidated. The prevailing 10-year Govt Bond yields are horrendous in Greece at 10.65%, wretched in Ireland at 5.37%, bad in Spain at 4.07%, and less bad in Italy at 3.87%, but in Germany at 2.28% they are actually lower than in the United States for Treasurys. The reason is simple. Arbitrage is active within the European credit markets. Investors buy the German Bund and sell the weaker EU member debt, which pushes down the Bund yield and lifts the others. The march toward sovereign debt default continues, amidst loud echoes from the United States.

Nowhere is the trend more evident than in Greece. The nation requires continued focus, since its economy and financial foundation are disintegrating. The EU statements read like writing on the shithouse wall, a total scribble of meaningless jibberish. They mention controls, deficit ceiling targets, economic scenarios, and reached goals, but not systemic failure or Jennifer's phone number. In spite of all the supposed progress and banker relief from bailouts, the Greek Govt Bond yield gradually rises upward. They are higher than before the vacant springtime bailout that accomplished nothing, but from which hope sprung eternal. The main lesson in the US and Europe, especially Greece, is no remedy, no restructure, no liquidation, no forward movement. In fact, in a highly visible manner, the nation of Greece is running out of gasoline literally. Their supply chain feels the impact of a supply chain disruption, due to a strong backlash. Although somewhat resolved, in reaction 35 thousand fuel truckers went on strike in late July against plans to open the industry to non-certified workers.

B.I.S. GOLD SWAP & L.B.M.A. DRAIN

◄$$$ L.B.M.A. IS DEAD, DRAINED, AND DEFUNCT. LIKE THE BIG BANKS, IT IS A ZOMBIE SHELL OF A MARKET ENTITY. A MAJOR RUN ON THE BULLION BANKS HAS BEGUN IN EARNEST. ITS PHONY STRUCTURE IS BEING REVEALED. SETUP STORIES ARE COMING TO HIDE ITS EMPTY INVENTORY. THE DATA DARK EVEN IN LATE JULY WAS PROBABLY DUE TO A SUCCESSFUL LEGAL RAID. $$$

It has come to my attention that coordinated raids of the London Metals Exchange have taken place, all very legal, but done in a manner that its officials do not realize the scope of the organization. Several buyers acted in organized coordinated fashion. The raids took place in July and continue. The buyers went into the market with a massive volume compared to what can be considered normal. The buyers were ringed around the globe, in direct communication. In at least two instances agents within the inner sanctum of the London gold market worked in collusion with the buyers, the agents volunteering valuable information where certain quantities existed. This data enabled optimal positioning for the trades, where demand was made where supply laid. The buyer then cleaned all the physical out in one sweep, with pressure given by attorneys when necessary. The sellers obviously had misjudged the buyers financial resources and inside knowledge. A degree of military precision was demonstrated, along with seemingly unlimited financial resources. Hints of hidden unconditional political backing was mentioned, for applied pressure, although in vague terms. No trace of their activity was evident, as would be expected with numerous high volume demands for delivery. No insurance register spikes were permitted, as the buyers flew under the normal radar screens when lifting the gold bullion without protection. The raid, or legal surgical removal, might have been the largest ever. They took advantage of deep insider knowledge, even deeper pockets, and precise execution team to pull off the event. In doing so, the LBMA members inventories were nearly drained. The London officials scrambled to replenish their raided gold supply. Members of the exchange are in the process of having cut off their entire raw precious metal supply at the source. On the following week, the LBMA shut down all trade data.

THE LONDON METALS EXCHANGE SUFFERED A MAJOR HEART ATTACK FROM A GLOBAL GOLD RAID, VERY LEGAL. LONDON SUFFERED MAJOR DEPLETION OF ITS GOLD INVENTORY DURING THE COORDINATED RAID. THEY SHUT DOWN ALL DATA REPORTING UNTIL THEY COULD REJIGGER AND DOCTOR THEIR PHONY INVENTORY DATA. The financial press reported data darkness, but omitted the story about global coordinated legal raids on gigantic gold supply at numerous supply sources. They undoubtedly did not know about the raid, or were ordered not to report it. That would have been damaging for the gold cartel.

In the aftermath, a note came from a well established trusted gold banker source. He hinted at knowing at least one or two participants in the coordinated raid. He said "The Boyz at the LBMA probably had digestion problems, and are putting their inventory books back in order after some of their member inventory was raided the other day. From what I hear, they did not see that one coming. A second wave should hit them not before long. They are absolutely defenseless. It is called feeding one's adversaries their own medicine while turning the tables on them." Incredibly, the group has managed to solicit the cooperation of two agents from inside the LBMA, exploiting a division inside. People within the LBMA are working to destroy the LBMA. My guess is that 15 to 20 parties worked closely together, with military precision and without telltale insurance contracts that would serve as warning flags internally.

Some direct questions were delivered to this source, who has 25 years of experience in the gold trading business. My question was: "Did the London dark data problem have anything to do with the Bank For Intl Settlement Gold Swap?" His answer was LIKELY YES. My question was: "Did the BIS have to bail out London in supplying them urgent gold inventory?" His answer was SURELY YES. My question finally: "Was the story permitted to be incorrect regarding the Portugal Central Bank as distraction?" His answer was COULD BE YES. Very intruiging!!

Two analogies make sense. One is of a big car whose engine lubrication is slowly drained. The temperature of the moving parts is rising, as the engine grinds, and a seizure comes. Another is a man with a bad case of chronic diarrhea, who cannot stop emitting the nether substance. He continues to lose his inner juices as effluent until he passes out. Eventually he dies from dehydration and electrolytic starvation. The gold market is living on borrowed time. The window will soon close for private citizens to purchase gold bullion in any form. Time is running out. Seizures and magnificent deceptive cover stories are to come. Let's see how much credibility the mainstream stories contain. The flimsy stories, in my view, will be shot full of holes, shot to hell. The Gold price will skyrocket when it becomes clear that the gold inventory is non-existent in the gold metal exchanges. The Powerz might evade legal responsibility by means of assorted lies and stories, but the end result will be absent gold supply in inventory. No supply, huge demand, and price rises without resistance.

◄$$$ A DRAIN ON THE L.B.M.A. INVENTORY IS WELL ALONG. EVER SINCE THE DEATH EVENT OF WALL STREET, THE MOVEMENT BEGAN TO TARGET LONDON. THE L.B.M.A. TEMPORARILY SHUT DOWN THEIR DATA REPORTING. THEN IN FOUR DAYS, IT WAS RE-OPENED. A SHOCK WAVE PROBABLY STRUCK THEIR INTERNAL STRUCTURE, FORCING A QUICK RECOVERY. ADRIAN DOUGLAS OFFERS HIS VIEWPOINT ON THE DATA DARK EVENT. HE CITES THE FAILING NATURE OF THE FRACTIONAL RESERVE MANAGEMENT. $$$

Adrian Douglas of the Gold Anti-Trust Action suspects something is very fishy in the precious metals market. The elaborate game of price manipulation, naked shorting, and supply falsification is under great stress and in the process of breakdown. On the weekend of July 24th, the London Bullion Market Assn decided to block access to activity data relating to the trading activities of its member bullion banks. Only members could access data. The conclusion reached by Douglas is, "There is a cover-up of back-door injections of liquidity of physical gold, and the LBMA now is trying to conceal trading information. I interpret the LBMA's move to secrecy as a sign that the opportunity to get real metal is closing fast." His comments are valuable but lack specifics.

Douglas went on to explain. He wrote, "I have recently written a series of exposes of the LBMA using the association's own data to show that the LBMA's bullion banks are operating on a Fractional Reserve basis. My analysis indicates that the bullion banks are holding only one real ounce for about every 45 ounces of gold that they have sold, a reserve ratio of just 2.3 percent. At the March 25th public hearing of the US Commodity Futures Trading Commission on precious metals futures markets, I cited the LBMA's own statistics to label the 'Unallocated Gold Accounts' of the bullion banks as a Ponzi scheme. There were bullion bank representatives at the hearing but no one expressed an objection. That hearing was videotaped and posted at the CFTC's internet site, but the bullion banks have not made any public statement rebutting what I said. In fact at that hearing Jeffrey Christian, CEO of the CPM Group, acknowledged that what is widely called the physical market is in reality a largely paper market trading gold and silver as if they are financial assets and not physical metals. Christian stated that 100 ounces of paper gold are traded for every 1 ounce of physical gold... The LBMA has now commenced a cover-up with respect to the gold trading activities of its member bullion banks, withdrawing statistics from the public domain. This appears not to be the only cover-up going on in the gold market...  Similarly it was recently discovered that the Bank for International Settlements did not feel it necessary to announce its involvement in the largest Gold Swap in history, 346 tonnes. The BIS swaps instead were discovered only because a market analyst dug through the footnotes of the bank's financial statements."

Observe the hallmark evidence of a gold run with coverup. The LBMA data showed that in May 2010, the average net daily trading in gold by LBMA member banks jumped a massive 50% that month. It rose to 24 million ounces per day from 16 million ounces per day, on course if stable to reach a staggering $7.5 trillion annually. Next factor in the razor-thin fractional reserve basis the London exchange runs on. Douglas firmly believes that a run on the bullion banks has commenced, a dangerous one given its fractional reserve scheme. He suspects a grand coverup of desperate emergency shipments of gold to meet demands, and thus avert a default. It was the BIS that supplied London the gold bullion. Their lack of transparency raises the risk of sudden financial crisis, like all events in the recent couple years. The criminal syndicate hides its actions, declares its losses, then demands the public to bail them out, while preventing legal prosecution. The gold market is not only an extension of the criminal activity and corrupt schemes, it is the center since it supports the monetary system. The bullion banks have sold mountains more precious metal than they can deliver, at a time when customers accelerate their demands for gold & silver delivery. When the LBMA resumed data reporting, it clearly demonstrated that the gold price was dominated by the paper contracts and not by supply & demand in the metal.

The status of Unallocated bullion accounts is precarious, as owners should be worried. The LBMA gives away their intention to swindle them. The LBMA describes owners of Unallocated bullion accounts as Unsecured Creditors much like the arrangement with credit card debt. The creditors lose out with zero recourse to be compensated. These Unallocated account holders have no claim or title to any bullion, only a promise without legal binding. The bullion banks are required only to settle in cash for non-performance, under agreements (fuzzy). Hence, as Douglas explains, if and when the major physical squeeze evolves further, and takes the gold and silver price to multiples higher, the hapless holders of Unallocated metal accounts will find they do not own any bullion, nor will they be compensated at the prevailing market price. They will be given a force de jeure price, much lower, actually at any level the exchange decides. He interprets the LBMA's move to secrecy, even if shortlived, as a sign that the opportunity to obtain real metal is coming to an end, if even the exchanges are challenged to locate gold supply. Gold investors are soon to receive a painful and costly education on the nasty distinction between Unallocated and Allocated accounts. The latter will grow wealthy, while the former will be screwed and watch it all unfold. See the Zero Hedge article (CLICK HERE).

◄$$$ THE GOLD DRAIN AT THE COMEX CONTINUES, WHICH MATCHES THE ACTIVITY FOR SILVER. INVENTORY DRAWDOWNS MATCH DELIVERY DEMANDS IN CLEAR SIGHT. $$$

Permit the Numismaster to explain a parallel run on gold and silver. They wrote, "A rough rule of thumb to follow is that once is a coincidence and twice is a pattern. There has been a run on COMEX silver inventories since June 16th. Now there are strange developments with COMEX gold inventories. There were unusual movements of COMEX gold inventories on July 28th and July 30th that 1) coincidentally roughly equaled what was needed for the sellers of contracts to meet delivery requirements, and 2) may indicate that unusually large quantities of COMEX gold will be withdrawn by the end of August. These moves of COMEX gold inventories are akin to the run on COMEX silver inventories since June 16th. If both are happening at the same time, as I suspect, they will almost certainly result in much higher precious metals prices by September." See the Numismaster article (CLICK HERE).


◄$$$ A LONDON METAL THEFT SETUP STORY CONTINUES TO UNFOLD. A CRITICAL PART OF THE STORY PERTAINS TO LEGAL LIABILITY. THE WAREHOUSE IS NOT LIABLE UNLESS NEGLIGENCE OR FRAUD IS PROVED, WITH BURDEN ON THE CLIENT. THE ABSENCE OF GOLD & SILVER COULD SOON BE A MAJOR STORY. JPMORGAN EXPANDED ITS SYNTHETIC METAL STORAGE CAPACITY, SUPPOSEDLY TO CREATE FAST ACCESS TO INVENTORY. YET IT SEEMS THEY HAVE ENABLED WAREHOUSE THEFTS, OR WORSE, THE APPEARANCE OF SUCH THEFTS. AN EVENT MIGHT BE IN THE MAKING AS A FALSE COVER FOR ABSENT METAL SUPPLY. $$$

Thieves supposedly struck a Liverpool warehouse and supposedly stole hundreds of tons of nickel and copper in May. The metal sheets were worth several million Pounds. The story of metal commodity heists is blamed for high prices, a tipoff story told. The metal plates were stolen on May 31st in Liverpool's docklands area owned by warehousing company Henry Bath & Son, a unit of JPMorgan Chase & Co. My interpretation is simple in replying to queries of how such an event could occur. Easy! Just switch the paperwork, bills of lading, invoices, whatever tracks the fleet of trucks involved. These are paper criminals, recall. They falsify the paper trails. JPMorgan and Goldman Sachs are behind most grand fraud, all in paper contracts. Odds are they were not heavily armed men in hooded masks. Most likely guys showed up looking like regular contract shipment personnel. JPMorgan bought Henry Bath in July as part of its $1.6 billion purchase of parts of RBS Sempra, a deal that affirmed the bank's entrance into the commodities business.

Consider liability for loss and repayment. The bank is unlikely to pay for the metal lost as liability lies with the material's owners. A warehousing company can be liable for a theft only if it is found to be guilty of negligence or fraud. Up to six brokers using the warehouse face a potential monster bill since not insured, according to warehouse information. The brokers in metal ownership are obligated to pay their client the value of the metal or to replace it. British Transport Police officials report a significant rise in metal theft in the last six months. Thieves are targeting railways, utilities substations, businesses, houses, and even street manhole covers. Authorities in the United States have dealt with unique thefts of copper wire spools and utility pole thefts, like in Colorado and Nevada housing developments and utility yards in recent years. A recent US theft took place in April, when thieves took $500k of copper rod from a mill in Carrollton Georgia. Police later linked that theft with several related cases in Georgia, Florida, and Texas. The copper was believed to have been shipped to Mexico from Miami. Liverpool detectives believe the stolen copper plates will be mixed in with the heavy industry and smelting activities in Teesside, Humberside, or Yorkshire. Scrap yards are the favorite location for criminals to sell stolen metal, often in cash deals amidst confusion. Metal theft costs UK businesses at least 770 million Pounds per year. See the Wall Street Journal article (CLICK HERE).

The intrepid analyst, with years of awareness in deep criminal behavior and inventiveness, might be suspicious. The Powerz might be trying to set up a precedent for the coming default of SLV silver inventories, blamed on massive thefts. Look for stories where thieves targeted silver stored in the same warehouses. Silver is much more valuable by weight. The timing of this story seems to prepare the masses that a major theft in the near future will be responsible for the vanishing act of silver inventory at iShares ETF warehouses. See the exchange traded fund, laced with deep fraud, that trades under the "SLV" symbol. A false attack wrapped around a grand coverup might soon be required, one where the bankers are aligned to escape legal prosecution. Either way, the silver price would soar to the heavens.

JPMorgan acquired a Jewel in the Crown for the silver shell game, criminal price suppression, and grand fraud. It is the global network that constitutes Synthetic Storage of metal warehouses, a term coined by JPM managing director Blythe Masters. Since 2008, JPMorgan has reacted to missed opportunities during price surges, from lack of the essential infrastructure to store various commodities. JPMorgan has been expanding its commodities operations ever since. The gobbled up the Bear Stearns energy business in 2008, and the UBS global agriculture and Canadian commodities divisions, a purchase completed in 2009. In March 2008, they even acquired the UK-based ClimateCare firm, which trades reduction credits and whose clients reduce carbon emissions. The London-based Bath subsidiary is the center for the Synthetic Storage capability. They boast the capability through physical assets at their fingertips to store and ship commodities like oil and metals across the globe. The Henry Bath metals warehousing unit is just one of the jewels in the crown from that JPMorgan deal. See the Bloomberg article (CLICK HERE). Bix Weir of the RoadtoRoota infamy points out that by definition, a synthetic metal storage program is an artificial metal storage program, based upon paper metal! The facitilies acquired enable and make easy the deeper contract fraud in commodities.

◄$$$ ADRIAN DOUGLAS EXPLAINS THE B.I.S. GOLD SWAP. HE CASTS GREAT SUSPICION ON THE EVENT, GIVEN THE THREE-WAY TRIANGLE OF PARTICIPATION. THE B.I.S CAME TO THE RESCUE IN A GRAND ACCOUNTING SHAM TO COVER UP A MAJOR GOLD RUN. HE SUSPECTS A MASSIVE SHORT SQUEEZE IS COMING, TO LIFT THE GOLD PRICE. $$$

Adrian Douglas of GATA believes a great unravelling is taking place with the gold price suppression game. He covered the London data dark event vaguely. This story emerged from the other side, more visibly. The Financial Times published an article headlined "BIS Gold Swaps Mystery Is Unravelled" (CLICK HERE) but they missed how the gold market rig game is unraveling, slowly but surely. Douglas adds much light, but was not aware of the massive coordinated gold raid on the London Bullion Market Assn. It links the two stories. That explains the Bank for Intl Settlements coming to the rescue possibly for several central banks, which might have aided the LBMA from running dry of gold bullion.

Douglas gave an interpretation that the BIS Gold Swaps were most likely a secret bailout of one or more bullion banks that did not have enough physical gold to meet burgeoning demand. In many highly charged high risk situations such as this, lawyers tell their clients to clamp down on all shared information, since the rik of incrimination is great. The Financial Times reported that "Jaime Caruana, head of the BIS, told the FT the swaps were 'regular commercial activities' for the bank." [Also, that] 'the client approached us with the idea of buying some gold with the option to sell it back,' said one European banker, referring to the BIS." What a farfetched fantasy. The BIS is not in the business of casually calling up commercial banks to propose a regular commercial deal that involves a 346-tonne Gold Swap. This was the biggest Gold Swap in history. In no way was it a regular commercial activity. The official story is hogwash bull cookies bullshxx adorned by horse road apples. The BIS does not pro-actively design such deals to earn a puny return on $14 billion. Central bank activity greatly eclipses such volume. The USTreasury conducts auctions worth between $70 billion and $130 billion of debt securities twice per month. A couple months ago, the European Central Bank tapped $750 billion created out of thin air to defend the Euro currency amidst the sovereign debt crisis. The BIS would not ordinarily request that the commercial banks pledge a Gold Swap as guarantee for USDollar deposits the banks accepted from the Basel-based institution. No way, no how!!

The BIS supplied other critical information that sheds light on the picture. Actually, the picture is a shifting scene, hardly fixed, in a state of flux. The Financial Times said, "Three big banks (HSBC, Societe Generale, and BNP Paribas) were among more than 10 based in Europe that swapped gold with the Bank for International Settlements in a series of unusual deals that caused confusion in the gold market and left traders scratching their heads." The original story reported that only one bullion bank was involved. Then the list expanded to more than 10 banks involved. The first on the list is HSBC, the notorious British gold cartel partner. Together with JPMorganChase, they possess 95% of all gold and precious metals derivative positions among US commercial banks. Furthermore, HSBC and JPMorganChase hold a gigantic short position in gold and silver on the New York COMEX. Even more, HSBC is the custodian of the gold bullion that backs the exchange traded fund under symbol GLD. So the players are highly suspicious. The type of activity they deal with is usually devious and illicit. A role was cited of borrowed gold bullion from emerging nations and their central banks.

Douglas postulated that several bullion banks engaged in Gold Swaps with the BIS. He surmises that  the BIS gave the banks $14 billion but the bullion bank did not relinquish any gold bullion to the BIS, possibly as a gentleman's fee. Instead they credited the BIS with a ledger entry of gold in the BIS Unallocated gold account. Hence the bullion banks retained real gold to meet escalating demand while the accounts would show that the same gold had been credited to the BIS. He concluded what he called a confirmed tripartite nature of a shady gold bullion transaction that involved central banks, bullion banks, and the BIS. No gold moved location.

The Financial Times attempted to explain. To be honest, nuclear physics at times seems easier to comprehend, and Cliff Notes are needed. The FT wrote, "The gold used in the swaps came mainly from investor deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called Allocated Accounts, which restrict the custodian banks ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper Unallocated Accounts, which give banks access to their bullion for their day-to-day operations." Remember that Unallocated gold is not gold at all. It is often held on deposit but leased to someone else. Such is the case with the GLD gold fund and the SLV silver fund. Investors hold nothing, no metal, only pieces of toilet paper that bear Wall Street and London promises to locate them some gold, if they are lucky, and if gold is plenti ful. What happened is that the BIS has been credited with 346 tonnes of ledger entry gold in the BIS unallocated gold accounts held with the bullion banks, during events marked by least 10 bullion banks desperately needing physical gold bullion. This makes the BIS an Unsecured Creditor of the bullion banks as defined by the London Bullion Market Assn description.

Douglas sees a strong parallel to the 1960s London Gold Pool fiasco where central banks dishoarded gold to meet massive investor demand in a futile attempt to maintain a gold price of $35 per ounce. A great run on the bullion banks has begun and is gaining momentum. The stories deflect attention from the run on the banks. The motive for the heightened demand is the gradual realization by investors and institutions that Unallocated Gold is not gold at all, since the gold cartel leased it and sold it. Investors and institutions are making demands for delivery of their metal, as their suspicion of criminality grows. The ugly rub is that only one ounce of gold exists for every 45 ounces that are claimed. The situation is turning into what will be a short squeeze of epic proportions. The gold & silver prices will skyrocket.

◄$$$ TURK INTERPRETS THE B.I.S. GOLD SWAP EVENT. PORTUGAL MIGHT HAVE IMPROVED ITS POSITION WITH COUNTER-PARTIES. THE B.I.S. JUMPED IN TO ACT AS A RESERVE BACKSTOP. REPLACE PORTUGAL WITH THE L.B.M.A. THOUGH, SINCE THE PORTUGAL NAME WAS TOSSED INTO THE RING AS A HIGHLY PROBABLE DISTRACTION. LONDON IS EMPTY OF GOLD. $$$

James Turk of GoldMoney has offered an explanation as to why the Bank for Intl Settlements stepped in to provide an accounting credit as backstop. The BIS parent averted a gold repayment demand that would have sent the Gold price skyward. Turk wrote, "The best choice of course would be to demand repayment of the loan and to put the 380 tonnes of gold back in its vault. That action though would drive the gold price sky high, given the dearth of sellers of physical metal at current prices. Sky high prices would blow up the gold cartel and its efforts to continue capping the gold price as it operates its staged retreat, letting gold rise every year but not too much so as to not draw everyone's attention to it and the resulting consequences of ever-depreciating fiat currencies. So enter the BIS. It swaps currency for the gold loan at the commercial bank. In other words, the 380 tonnes of gold is now owed to Portugal by the BIS, improving considerably the quality of Portugal's balance sheet. After all, who would you rather have owing gold to you? Some commercial bank like Citibank or the central bank of central banks, the BIS?" See the Kitco article (CLICK HERE). Great explanation, but the desperate party was not lowly Portugal on the European totem pole, but the LBMA, the London metals exchange. Also, he mentions 380 tonnes of gold, when the amount was 346 tonnes. Either way, LONDON IS EMPTY OF GOLD!!!

Friend and colleague Aaron Krowne from the Mortgage Lender Implode website pitched in. Again, substitute the LBMA for Portugal though, since the tiny nation is an easy Straw Man substitute. He said, "To ease its own funding crisis, Portugal may have taken a gold loan to a commercial bank (such as Citibank) and pawned it off to the BIS, getting cash par from the BIS, and putting derivative gold on the BIS books. In other words, BIS took over the loan, absolving Portugal. This would achieve three sneaky goals: 1) monetizing a large loan asset held by Portugal (the gold loan), making Portugal more flush with cash and improving subsequent funding as a result, 2) increasing the effective gold supply by making it appear that a large quantity of gold exists at the BIS, and 3) avoiding the need to have the commercial bank pay the gold loan back. Requiring it to go into the market buying physical gold, which if it happened, would likely cause the price to spike. Essentially the BIS is acting as the 'Deus ex Machina' here to smooth over severe sovereign financing, and gold short liabilities problems. The event definitely suggests the central bankers are still in a mad scramble to keep things going." Bear in mind that the entire BIS Gold Swap enables double counting of more than 340 tonnes of gold bullion. The party with gold in possession has gold, but also on the books the BIS has the same gold. This is a standard practice, double counting. The gold supply is orders of magnitude lower than the official publications.

◄$$$ EUROPEAN BANKS REPORTEDLY LENT THEIR UNALLOCATED GOLD FROM ACCOUNTS TO THE BANK FOR INTL SETTLEMENTS. CUSTOMER ACCOUNTS WERE RAIDED, AND UGLY PUBLICITY GIVEN. THE ACTUAL EVENT IS SEEPING TO THE SURFACE. THE EMERGENCY WAS DEALT WITH, PATCHED BY A FALSE STORY. AN END EVENT SEEMS TO BE FORMULATING. $$$

The Gold Swap mystery is slowly being told, the truth finding its way to the surface. The source of the gold provided in the dollar swaps with the BIS came from customers of 10 European banks. Their gold was raided from Unallocated accounts, investor deposit accounts from at least HSBC, Societe Generale, and BNP Paribas. A EuroDollar squeeze was averted. The fractional nature of the banking systems, both cash and gold, was exposed as faulty and non-responsive. Jesse raised a great question. Why did the banks go directly to the BIS and swap their customer's gold, rather then to the Euro Central Bank which is perfectly capable of managing swaplines for currency with the BIS and the USFed? Is the Fed running out of dollars? He answers with, "I have an open tab in my mind that the BIS was seeking gold to balance out demands from other banks for gold, not for dollars, and the Eurodollar swaps were a convenient way to do it. This story that the BIS had lots of dollar lying around and were itching to use them strikes me as being of the whole cloth [i.e. nonsense]. But it is nice to see verification in the mighty Financial Times that if you hold your bullion gold in an Unallocated account, even with a prestigious bank, it may very well not be there when you wish to have it. The prices will soar as the banks scurry to cover, just as has happened twice of late with their US dollar assets." Jesse hits several key points. Big demands for gold among bullion banks had to be met. Excuses and misdirection were relied upon to cover the actual emergency event. Lastly, Unallocated gold accounts are being raided left right up and down. The effect will be to encourage much more physical gold demand at the ruined exchanges. See the Cafe Americain article (CLICK HERE).


GOLD DEMAND GOES GLOBAL

◄$$$ HARVEY ORGAN ON SILVER & GOLD. HE REPORTS THAT THE GOLD DATA LOOKS ALMOST LIKE A WORK OF FICTION. SILVER IS BEING DRAINED ON THE PHYSICAL SIDE. $$$

Organ provides fine commentary on the day to day events, shenanigans, and cloudy spew directed at the metals exchanges, as they scramble to avert their demise. He wrote recently, "So you see a massive difference in gold and silver. In gold everyone reduced their positions. Those that were long reduced their longs. Those that were short reduced their shorts. Even the spreaders reduced their spread positions. This is not normal behaviour and something big has happened. In silver, basically what we expect, as the large specs increasing their long positions  and the commercials like JPMorgan increasing their shorts by supplying the paper. Is it possible that many of the contraction in Open Interest is the receiving of gold notices through the GLD? And not report on this? Ladies and Gentlemen: the gold COMEX figures just do not pass the smell test. Something sinister is going on behind closed doors. The figures just do not add up. Maybe I am wrong, but it is totally different to the silver COMEX market."

◄$$$ BUTLER BELIEVES JPMORGAN IS COVERING ITS SILVER SHORTS LIKE CRAZY. THE COLOSSUS MIGHT BE IN TROUBLE IN LOSSES RANGING BEYOND PRECIOUS METALS. JPM DERIVATIVES AND THE WORLD MIGHT BE CLOSING IN ON THE GIANT CRIMINAL BANK, THE FASCIST BUSINESS MODEL TITAN. COUNTING ON LEGAL PRESSURE MIGHT BE HOPING FOR TOO MUCH. $$$

Independent silver analyst Ted Butler is unique. He sees the present market situation clearly, reports it in depth, and reveals the important nuances. But his forward looking forecasts for eight years have been amateurish. Investors should pay close attention to his analysis of the silver market, and stop there. Butler is screaming from the rooftops that JPMorgan Chase, the largest player on the short side in the silver market, is covering its positions like crazy in his words. Butler openly wonders, given the new financial regulation law, whether JPMorgan will remain so heavily short in silver. The colossus has perennially held a massive short position in silver, some of which it stole from Bear Stearns when they killed it. They did not want Bear Stearns to cover under-water silver contracts and render multiple billion$ in leveraged losses to flagship JPMorgan. Exiting over-extended positions must be done to avoid tremendous losses in this small market, while they play a lead role in price manipulation and suppression. They rely upon the regulators continuing to turn a blind eye to certain trading practices, like illegal naked shorting. They sell silver without benefit of posting metal as collateral, a routine practice. JPMorgan has trouble pushing down the silver price for an exit, as the speculators and hedge funds defend well the long side. They might smell some JPM blood in the water.

Then Butler goes on to mention that he is very encouraged by the comments of Commissioner Bart Chilton of the Commodity Futures Trading Commission and the promise of position limits in the precious metals markets. His work on noticing a mad JPM scramble to cover silver shorts is the present. The Chilton confidence is again a looney tune forward view, since he works under Gary Gensler of Goldman Sachs pedigree. The CFTC has provided and will continue to provide political and legal cover for the major financial syndicate players until an arrest warrant, a hanging, a bullet, or a mob stops them. See the Cafe Americain article (CLICK HERE) which includes a link to a King World News interview of Butler.

JPMorgan has shown some vulnerability, wounds hard to conceal. Profits have been harmed by lower bond yields and flatterning yield curve differentials. Their quarterly report carefully avoided mention of a significant loss from unwise, gigantic, wrong way coal bets. The bank took a short position so enormous that it was oversized relative to the global coal market, and second quarter losses reportedly were in the hundreds of million$. Blythe Masters is managing director of JPMorgan's global commodities group. Before the USCongress, during heavy lobby efforts to weaken the financial reform, she admitted that JPMorgan's recent speculation in coal was taken on corporate behalf without client direction. The new FinReg does nothing to prevent missteps like this that could turn into debacles. JPMorgan is vulnerable elsewhere. Credit Default Swaps, Interest Rate Swaps, and leveraged FOREX currency trading are vulnerable to wrong way bets. Instead of transparent and regulated markets, the pits are nothing but dark markets, with hidden leverage, loaded with proprietary speculative trading, taking advantage of lax regulation with oversized risks. Blythe Masters told her remaining employees that competitors are scared witless of JPMorgan's commodities division, for their reckless activity. She ordered the layoffs of 10% of front office staff, and admitted the coal trade loss from a massive short squeeze against them was a rookie error. JPM tried to play God in a mainstream market, unable to control it, since without the USGovt collusion, without the central bank midnight inventory shuffles, and were burned badly. The release of the JPM conference call transcript was more than a strong warning from the honest broker camps. It remains to be seen whether the tide has turned against the great silver derivative rogue firm at JPMorgan. One can only hope for CFTC hearings and FBI investigations and and prosecution. Such is suspected as possible by Janet Travakoli of Tavakoli Structured Finance. See the Huffington Post article (CLICK HERE).

◄$$$ A GERMAN/SWISS PLAN IS HATCHING TO BEGIN TRADING IN EURO-GOLD FUTURES CONTRACTS. REGARD THE MOVE AS A LAST DITCH DEFENSE OF THE EURO CURRENCY, A DESPERATE GESTURE. $$$

The German/Swiss futures exchange EUREX will launch a gold futures contract denominated in the Euro currency on September 28th. The futures and options will be offered on XETRA Gold, a gold exchange traded commodity (ECT) security issued by the German Deutsche Boerse Commodities. It will provide an option for delivery of one gramme of gold. The EUREX executive board member Peter Reitz said, "The new contracts will be denominated in Euro and will be physically settled with the delivery of the underlying XETRA-Gold ETC. Additionally, in a separate transaction between the holder of the ETC and Deutsche Boerse Commodities, he has the right to request delivery of physical gold." Contract expiration dates are to be similar to the popular dates in March, June, September, and December. The EUREX has offered US$-denominated gold futures and options tied to London prices since February 2009. Silver futures and options tied to London were launched in June 2009. See the Reuters article (CLICK HERE).

My initial reaction was that the Euro-gold contract could be a precursor to the new Nordic Euro currency, backed by a gold component. In fact, it is merely more paper gold, as the Jackass was disabused of his hopeful notion. Note the comments about derivatives and similar $-based contracts for gold & silver contracts associatd with London prices. They are contracts of kindred spirits, not branches of new growing yearning to touch real currencies harnessed by golden ramparts. A gold trader contact remarked, "I reckon they expect the collapse of the USDollar, but still hope to be able to save the Euro. Such is an illusion. The realignment will be a flashpoint event. They need approx 11 days to make the change over."

◄$$$ THE SINGAPORE MERCANTILE EXCHANGE TO START GOLD, ENERGY FUTURES TRADE. THE LONDON & NEW YORK MONOPOLIES ARE GAINING MORE COMPETITION. PREPARE FOR ARBITRAGE, ONE HONEST VERSUS ANOTHER CORRUPT. $$$

The Singapore Mercantile Exchange (SMX) will begin active trading operations on August 31st. It will offer both gold and energy contracts. Futures contracts in gold will be tied to gold physically delivered in the island city-state. The futures contracts in crude oil will be tied to Brent oil denominated in euros and settled West Texas Intermediate crude. The bourse also plans Euro-Dollar futures. The Singapore financial center continues to evolve. It is a leading financial and commercial hub in the region. The SMX launch will provide market participants in Asia the flexibility to trade products endemic to regional trade flows within the Asian region. The SMX is supported by Financial Technologies Ltd of India, which operates the largest commodity bourse in India. The new exchange will complement the Singapore Commodity Exchange in long time operation. See the Bloomberg article (CLICK HERE).

Jesse of the Cafe Americain pitched in, saying "A little competition is just what the COMEX and LBMA need. Wouldn't it be sweet if some master of the universe trader caught rigging the markets and violating the rules were to find himself on the receiving end of an old-fashioned caning? Let's see how the arbitrage develops, because you know it will. I wonder how transparent and liquid this exchange will be. It is certainly in an advantageous location." An honestly run gold trade backed by gold bullion might work to push the gold price higher, in direct opposition to the corruption in London and New York, which is backed by paper gold, double accounting, shell games with central banks, bait & switches with exchange traded funds, and the full collusion of the USGovt and UKGovt.

◄$$$ THE ETHIOPIAN GOLD SCAM DELIVERS DUST AND PLATED STEEL. THE ORDERS CAME FROM UNSECURED LOCATIONS. AFRICAN SOURCES ARE IMPLICATED. SOME CENTRAL GOLD HAS BEEN REPUDIATED. DUBAI INVESTORS HAVE BEEN DEFRAUDED. RETALIATION MIGHT BE UGLY. IT IS UNCERTAIN WHETHER ANGLO FINGERPRINTS ARE DETECTED. $$$

Tonnes of gold imports turn to dust on arrival in the United Arab Emirates. The total volume of the fake gold in the UAE alone is over $200 million. At least five tonnes of fake yellow metal is lying with Dubai Customs. The story blossoms in multiple directions. Recent media reports suggested that piles of gold bars in the Ethiopian Central Bank are fake, in the form of gold plated steel bars which should have been worth several million dollars. Regard this as a branch of the gold-plated tungsten bar story. Emirates Gold has stopped examining gold imported from Africa, considered a waste of time. An official from Emirates Gold said, "A lot of people in the UAE who tried to import gold at lower prices or through dubious overseas companies have been cheated. We have inspected many consignments from African countries, especially Ghana, and found that there is not an ounce of gold in them. For importing pure dust or other metals with yellow color, these traders have paid several million dirhams... A tonne of gold will cost approximately $40 million. Merchants estimated that the minimum loss of fake gold imported by local traders is nothing less than $200 million... Recent media reports suggested that several million dollars worth of gold with the Ethiopian Central Bank turned out to be fake. These bars of gold turned out to be gold plated steel bars."

The slipshod foundation of the gold mail-order business is incredible. The sellers have a virtual license to defraud and steal. All contacts are via anonymous free webmail accounts accessed from Internet cafes and via prepaid mobile phones. After the real estate and stock market scams turned cold, the con artists turned to gold. See the Zero Hedge article (CLICK HERE). Investigators should look closely for some Goldman Sachs consultants in Ethiopia. The African gold fraud sales seem a convenient back end to the Tungsten Gold bars.

◄$$$ IRAN HAS RAMPED UP THEIR GOLD PURCHASE WITH A TURBO CHARGE. THEY MIGHT HAS A STRATEGY TO RETALIATE AGAINST THE US-UK AXIS BY ATTACKING ITS ACHILLES HEEL, GOLD WHOSE ABSENCE WEAKENS THE WESTERN CURRENCIES. $$$

The nation of Iran has imported over 22 tonnes of gold ingots worth over $855 million in the four months ending in mid-July. The amount shows 850-fold increase in terms of volume and 810-fold rise in terms of value, when compared to the same period last year, according to Mehrnews. Iran imported a trifling $1 million worth of gold during those four months last year. The gold imported accounts for 4.6% of Iran's total value of imports during the period. Turkey, Russia, and the United Arab Emirates were the main exporters of gold to Iran. The significance lies in the mammoth rampup in volume, and the additional incremental demand for physical gold at the margin. One can be totally certain that Iran does not touch futures contracts. They go for the real thing, physical gold.

◄$$$ RECORD NUMBER OF FAKE COINS IN ENGLAND, WHOSE VOLUME MIGHT INDICATE AN EPIDEMIC. A REMINT MIGHT COME SOON WITH EMBARRASSMENT. $$$

Law enforcement officials report frightening figures. They have evidence to believe that 41 million Pounds of fake 1-pound coins in Britain, amounting to one in every 36 in circulation. If true, the proportion of counterfeit coins has tripled in the last decade. The ratio of fakes was 1:40 last year. At serious risk of compromise is consumer confidence in Britain's most popular gold coin. The reader should know that the value of the coin is much greater than one Pound, just like the American Silver Dollar is a full ounce, valued near $18. The figures were published in a Parliamentary journal. The biggest losers are small shopkeepers who are not refunded by banks, upon dispatch of fake coins from their shelves. Robert Matthews, the former Queen's Assay Master at the Royal Mint, the most senior coin tester in the country, said "If the number of fakes keeps increasing at this rate, there will have to come a point when the Treasury makes the decision whether to remint or not." A precedent exists for scrapping and reminting, but in South Africa. The 5- rand coin in 2004 was reissued after taxi-drivers and shopkeepers in South Africa refused in numbers to accept them. Fakes reached the 2% level of all coins, compared with 2.81% with the British flagship gold coin.

The fake British coins are difficult to detect. Sometimes they are rejected by a parking meter or vending machine, which contain devices to monitor their the metal composition. However, at least half the fakes are so good they pass monitor tests. A Treasury official statement should strike fear into the hearts of the counterfeiters. It read, "Any level of counterfeiting is a matter of concern and the Government takes it extremely seriously. Maintaining confidence in our currency is of paramount importance and we continue to keep our actions in response to counterfeiting under constant review." See the UK Telegraph article (CLICK HERE). The criminals must gird their loins, and not soak their boots with sweat. The tungsten gold bars that gutted Fort Knox in the United States apparently has a ground level counterfeit with similar profit margins.

GOLD ENTERS BEST SEASON

◄$$$ HINDE CAPITAL HAS OPENLY ATTACKED THE S.P.D.R. GOLD EXCHANGE TRADED FUND (GLD) IN DIRECT UNABASHED STYLE. THEY WONDER ALOUD IF THE G.L.D. FUND IS MERELY A COLLATERALIZED DEBT OBLIGATION FRAUD IN DISGUISE. GOLD EXCHANGE TRADED FUNDS CONTINUE TO HARM LEGITIMATE GOLD INVESTMENTS. ONGOING AMERICAN LAZINESS IN INVESTMENT CHOICES AND GULLIBILITY TO CORRUPTION IS STAGGERING. $$$

Hinde Capital, a London-based gold hedge fund, has mounted a ferocious attack on precious metals exchange traded funds (ETF) and in particular the largest gold fund pushed by Wall Street and run by the cartel itself. Hinde attacked the SPDR Gold Trust run by State Street, and whose bullion bank charade is managed by HSBC. Given the custodians own one of the largest short gold position (surely naked and not economical), investors must be totally braindead to trust the integrity of the GLD fund. Hinde clearly states that precious metals ETFs "should not be owned by serious professional investors." They go further with specifics, accusing with provocation that double counting of gold holdings is endemic within the global financial system. Both the gold metal holder and the gold lease holder claim to own the same gold, thus the double counting on crooked balance sheets. Hinde Capital open questions whether the GLD fund is the new CDO in disguise. Their acerbic targeted criticism hit like a breath of fresh air on a hot humid Panama City night. The story has caused minor waves in New York and London.

Hinde Capital has expanded on a construct gaining acceptance, that the Exchange Traded Funds are merely defacto Collateralized Debt Obligations, a leveraged synthetic concoction. The group of actively traded ETFund products, that include stock indexes (SPY), gold substitutes (GLD), currencies, even energy and agricultural products, are merely synthetic representations of underlying securities, that increasingly permit Goldman Sachs and other corrupt firms to control the pricing systems broadly. The actual securities behind several such funds are losing their trading volume. As a result, a paradox has arisen, wherein a huge tail wags the dog. The fund controls the underlying asset. Hinde coined the name, calling GLD "the new CDO in disguise." They contend a lack of disguise actually, while at the same time defend by claiming that having CDO-like features does not make something evil per se. Hinde hones in on the crux of the issue. A disconnection exists between the concept of owning a hard asset, versus the reality of merely having paper claims to a certificate having no liquid and direct physical collateral. They condemn the fraud-ridden GLD fund along with all non-physical ETFs, by saying "we believe ETFs are a risky way to express a gold view."

In possibly the most effective condemnation of the GLD fund captured in a presentation, outside of total discreditation arguments waged by James Turk three years ago, Hinde summarized the key risks associated with having GLD exposure. Check out the Hinde Capital Investor Presentation, which can be downloaded (CLICK HERE). Those risks include:

  • Alchemy risk
  • Accounting risk
  • Title and ownership risk
  • Indemnification risk
  • Counterparty risk
  • Audit risk
  • Liquidation risk
  • Redemption risk
  • Disclosure risk

The Jackass position against the ETFs for gold & silver is well documented and often cited. They are part of the plan for the Boyz, to deceive with toilet paper posing as stock certificates making precious metal claims. They can boast quite the success the GLD fund, despite the horrible publicity it has received. Many clueless analysts like Adam Hamilton, even carnival barker Jim Cramer on CNBC, and dozens of others extol the GLD virtues and advantages. They usually mention the ease of their investment usage, an obvious trap feature that appeals to the public laziness. Participants in the fraudulent fund are blind to the risks and are guilty of shoddy research. Chalk it up to the extreme endless consistent stupidity of large pockets in the US public. Those who do not learn actually many deserve poverty with iron rule. See the Resource Investor article (CLICK HERE).

◄$$$ GOLD HAS GONE PARABOLIC IN THE LAST YEAR, BUT LIKE A TURTLE. EACH SUCCESSIVE YEAR DISPLAYS A MORE ACCELERATING FITTED CURVE IN THE GOLD PRICE. THE TREND POINTS TO $1500/OZ EASILY. $$$

Zeke Brustkern is a graduate student and apprentice of Henry Smyth from Granville Cooper Asset Mgmt Ltd. Zeke does some fine non-linear curve fitting work to display an evolution in the gold price. Each year, using more data at higher prices, the new fitted curve shows more acceleration and upward thrust. See the SafeHaven article (CLICK HERE). Smyth wrote, "Plotted above is the monthly gold price as well as the annual projection from June 2010. The data seem to trace the plot of the curve very well, but that is because the curve was designed to be inclusive of the given data. The second chart starts with the projection of a fitted curve to the data available in 2005. Each year since then a new projection is drawn, up until the current June 2010. The over-inflation and subsequent correction during 2008 led to the 2008 projection being very similar to 2009 with the curves overlapping, but in 2010 the positive second derivative returns, and pushes the estimated curve even higher. As it stands, even models designed for high growth have been consistently under-estimating the future path of gold. By analyzing the error of each forecast, one can make an educated guess as to what will happen going forward." Look out above, as the gold price is tracking toward $1200/oz by November 2010 and $1500 by April 2012. The turtle is gonna fly!!

◄$$$ GOLD & SILVER CHARTS ARE BOTH BULLISH, BUT IN DIFFERENT WAYS. GOLD IS LIFTING OFF A BASE, WHILE SILVER WILL SURGE UPWARD OUT OF A PAUSE. DISTRUST FOR THE MONETARY SYSTEM HAS GONE GLOBAL. GOLD & SILVER ARE ACCEPTED AS RESERVE ASSETS, THE BEST SAFE HAVEN NOT TIED TO COUNTER-PARTY DEBT RISK. WATCH THE GOLD:OIL RATIO, WHICH IS POISED TO RISE NOTICEABLY. GOLD IS THE COMMODITY KING, NAMELY IT IS MONEY. $$$

◄$$$ SILVER HAS ALWAYS BEEN POPULAR THROUGH THE AGES. HEAVY INDUSTRIAL ROLE AND ABSENT CENTRAL BANK SUPPLY MAKES SILVER FAR SUPERIOR TO GOLD AS AN INVESTMENT. INVENTORY LEVELS ARE AT ROCK BOTTOM, WITH MUCH STATED SUPPLY UNDOUBTEDLY LEASED. $$$


A Hinde Capital report on silver has a clever moniker of HindeSight. It covers historical items like its usage as money in ancient Greece and Rome, later in England. The words for silver and money are the same in at least 14 languages. The French call argent money, and in Spanish speaking societies they call plata money. Its days regarded as the poor man's gold are fast coming to an end. When its price growth eclipses that of gold, prestige will return. My personal preference for silver comes from basic arguments. Demand favors silver. Industry consumes a lot of silver, but industry consumes miniscule amounts of gold. Supply favors silver too. Shortages are acute for silver. The USGovt stockpile of six billion ounces, built by President Teddy Roosevelt, was drained in 2006 by electronics, military, and coinage. Central banks hold tremendous amounts of gold bullion, but no silver. EVERY SINGLE GOLD ANALYST SHOULD DISCUSS GOLD FOR ITS RUGGED ROLE IN THE FINANCIAL WAR, BUT RECOMMEND SILVER AS AN INVESTMENT VEHICLE. Gold investment is often associated with financial hedge against price inflation and protection from monetary crisis. The chemical properties of silver lend it to practical industrial usage where recovery is not currently practical. The uses for silver in modern industry are growing, the latest being a non-toxic insect repellent in pressure treated wood. Better yet, silver has no almost no replacements in numerous critical applications. Watch in awe. The silver price gain will be at least double that of gold, like for instance gold from $1200 to $2400 while silver from $18 to $75.

The world annual silver mine output is 650 million troy ounces, plus another 180 million ounces from recycling, and another 100 million ounces from miscellaneous sources. Demand breaks down to 45% for industry, 25% for jewelry, only 15% for photography, and 15% remaining for investor demand. Investor annual purchases of 100 to 150 million silver ounces amount to a tiny $2 billion. Bear in mind that the Bank For Intl Settlements calculates that banks across the world own $200 billion in silver notional value worth of derivatives (short silver futures contracts) on the books, under the Other Precious Metal category. It aint platinum. The grotesque mismatch points to a huge price suppression imbalance, like a massive coiled spring. The silver price wants to go way past $50 per oz. See the Hinde Capital research report entitled "Silver Velocity: The Coming Bullet" for a fine review on the metal (CLICK HERE). Thanks to CPM Group and Hinde for two fine charts.

◄$$$ FRANK HOLMES CITES THE FAVORABLE UPCOMING MONTHS FOR GOLD PRICE, ESPECIALLY SEPTEMBER. WE ARE AT ITS DOORSTEP. A MAJOR UPWARD THRUST IS LIKELY AS A HOLIDAY PRESENT BEFORE JANUARY. THE PATTERN IS EVEN STRONGER WITH SILVER. $$$

Frank Holmes of US Global Investors is a man of great depth, experience, and knowledge of China. He is undeterred by corrections, and has been consistently on the correct side of the gold trade for a decade. He offered his impressions, the most salient being the seasonal chart for gold. The month of September is especially strong, almost twice as much gusto packed into it as any other month, the next being December and January. In a five-month stretch, three of the 12 best months are lined up, directly ahead. Last year, the 2009 gold price jumped from $950 to $1200 between late August and end December. Expect something similar this year. See the Gold Eagle article by Holmes (CLICK HERE). Also, institutions like the JPMorgan monster queen might face a date with the guillotine in their silver trading desks. If the ultra-strong seasonality for silver does not catapult its price over $20 by January, it will be a big surprise.

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