CRISIS COVERAGE REPORT
BAILOUTS, MERGERS, CORRUPTION
EXTENDED BREAKDOWN ANALYSIS

* Critical Tidbits
* Swine Flu Virus Sham Now Exposed
* Central Bankers Desperate Over Exit Strategy
* Systemic Failure Endorsed & Affirmed
* Gaping Cracks in US Empire
* US Third World Debt & Syndicate Props
* USEconomy Still in Shambles
* US States Worse Than Greece


HAT TRICK LETTER
Issue #71
Jim Willie CB, 
“the Golden Jackass”
14 February 2010

"Nothing justified these [TARP big bank] bailouts. It was nothing more than corrupt politicians stealing our money to pay off the bad luck and skill of their gambling friends." -- Paul Volcker (former USFed Chairman)

"If something cannot go on forever, it will stop." -- The Stein Rule (named after Herbert Stein, Chairman of the Council of Economic in the Nixon Admin)

"The global economy is currently taking the Botox Cure. A flood of money from central banks and governments, the financial botox, has temporarily covered up unresolved and deep-seated problems. The surface is glossy and smooth, the interior decayed and rotten." -- Satyajit Das (global credit derivative superstar analyst)

"Apparently heroin addicts can become so drug dependent that their bodies cannot withstand the shock of withdrawal, and failure to continue taking the drug triggers multiple organ failures. I just wonder how apt that analogy is to our government debt dependency today." -- Dylan Grice (Societe Generale bank analyst)

[Editor Note: the entire global financial system, in particular the United States, has entered a crisis mode, with every conceivable element and plank broken, corrupted, or artificially propped by government supports. Therefore, no Macro Economic Report is given.]

CRITICAL TIDBITS

◄$$$ THE SUBPRIME DEBT ISSUE OF 2007 BLOSSOMED INTO A GLOBAL CREDIT CRISIS. THE DUBAI SOVEREIGN DEBT ISSUE WILL BLOSSOM INTO A GLOBAL SOVEREIGN DEBT CRISIS IN SIMILAR PATHOGENESIS. THE START & END POINTS ARE LOCATED IN THE UNITED STATES AND UNITED KINGDOM. WITH THE GLOBAL CLIMAX COME DISRUPTION, RESTRUCTURE, AND CHAOS. $$$

The subprime mortgage problem was grossly under-estimated. The Hat Trick Letter called it the beginning of an absolute bond contagion, a global credit market collapse correctly forecasted. The Dubai debt collapse represents the start of a global rotation of government debt collapse. Dubai has more then $385 billion in debt that has not been disclosed yet, so claims an informed source. Furthermore, Kuwait is among other Persian Gulf nations with major debt problems, soon to become clear. The sovereign debt eruption in Greece will be followed by Italy, Spain, Portugal, and even France. The German wellspring will not rescue Greece, despite all spun political niceties. Recall my great vicious circle of debt shown two months ago, whose crises begin in the US & UK. The debt ripples will end in the AngloSphere also, with a US$-centric global monetary crisis and their own sovereign debt defaults. Monetization of USGovt debt will soon be isolated, in full view, and serve as the focal point for a global monetary crisis. The Dollar Death Dance began in autumn 2008 with the US$ exchange rate rising. The US$ rallied because it died. The Dollar Death Dance part II began in December 2009. It rallies again because fiat currencies are all dying. As monetary crisis comes full circle, pushed by gargantuan government deficits on a global basis, the US$ will again resume its powerful decline. The Enronization of US financial structures is gradually being exposed, replete with false accounting, diverse hidden tentacles, and prolific slush funds. The credit climax will be a global shock wave, a grand restructure of financial structures, tremendous disorder & chaos, dislocations of important supply chains, and enormous challenge. Prepare! Gold, silver, and platinum will be survivors left standing!!

◄$$$ THE SWISS FINANCIAL CENTER IS SUFFERING A COLLAPSE ON THREE IMPORTANT FRONTS. THE PROCESS IS NOT REVERSIBLE. $$$

The Swiss banking sector is suffering mightily from three large factors, each significant, together crippling and devastating. Their banks purchased far too much US-based toxic mortgage bonds, with huge losses. Their banks underwrote far too much Eastern European mortgages. The losses are huge, but further amplified since the collateral has fallen worse from local currency devaluations. Their banks are seeing record outflows of money from the once safe haven accounts. While the Swiss Govt and Courts attempt to stave off the assault from the USGovt, the banks continue to appear to cave in. The actual shared data is miniscule, compared to what exaggerated US press reports indicate. Here is a quote from a banker contact with close ties to several important German and Swiss banks. He said, "UBS and CS are in deep deep trouble. Swiss banks are losing 100 billion CHF per week in assets under management. Most money is flowing out to Asia, with some coming back to the Persian Gulf. It is still a huge outflow, reaching 170-175 billion CHF last week. The outflow peaked in January a month ago, when a sum over 100 billion CHF exited Swiss banks on given single days." Within several months the Swiss financial sector will experience major shakeups. By the way, CHF stands for Swiss Francs, UBS is Union Bank of Switzerland, and CS is Credit Suisse.

◄$$$ S.W.I.F.T. REFUSES TO COOPERATE WITH USGOVT BANK AUTHORITIES. THE BANK NAZIS CANNOT PENETRATE AND SUBVERT THE GLOBAL TRANSACTIONS FIRM. $$$

Swift refuses to share European banking data to the USGovt. SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. When a bank wire is ordered, the older bank ABA routing number formerly was used in a common manner, an identification number. But global bank wire transactions currently involve the smoother usage of Swift codes, an alphanumeric code. For example, Citibank has CITIUS33 as its code. The defiant Het in België gevestigde bedrijf Swift, dat internationale betalingen verzorgt, weigert om bankgegevens van burgers uit de EU over te maken aan de VS, in het kader van de strijd tegen terreur.company is based in Belgium, with headquarters in La Hulpe. It handles the financial transactions of more than 8000 banks worldwide. Volgens de woordvoerder is de uitwisseling van bankgegevens naar de Amerikaanse autoriteiten al onderbroken sinds 1 januari.Its spokesman mentioned that the exchange of bank information to the USGovt officials has been suspended since January 1st.Swift wil dat er eerst een duidelijke juridische basis komt. It has refused to share data on citizens from the European Union to the USGovt, under the pretext of the contrived battle against terrorism. An agreement was apparently forged with the company which would have gone into effect by February 1st. Maar Swift gaat dat akkoord niet toepassen, aldus de woordvoerder in de krant.But a spokesman from Swift has announced the deal will not be implemented, according to the German newspaper Handelsblatt. A terse statement was made, "Zolang het Europees parlement het akkoord niet heeft goedgekeurd, treedt het niet in werking", is de uitleg."While the European Parliament has not approved the agreement, it shall not take effect." Last November the European Ministers of Justice debated the Swift agreement pressed by relentless US bank nazis.De bedoeling was om de VS negen maanden, vanaf 1 februari 2010, inzage te geven in de uitwisseling van Europese bankgegevens. The European Parliament strongly protested because its advice had not been sought. In the balance, weighing above any accord on bank data shared, is the Treaty of Lisbon. De justitieministers drukten de beslissing door, één dag voor dat Verdrag in werking trad.De voorzitter van het Europees parlement, Jerzy Buzek, heeft reeds verklaard dat het parlement het verdrag wil ongedaan maken.The President of the European Parliament, Jerzy Buzek, has already declared that the parliament would reverse the treaty. Op 10 februari zou het zich uitspreken.See the clumsy translation from Dutch of the De Standaard article (CLICK HERE).

◄$$$ GOLDMAN SACHS BLED A.I.G. OF CASH BEFORE ITS DEATH. GSAX WAS FIRST IN LINE FOR INSURED BOND PAYOUTS, JUST LIKE IT WAS FIRST IN LINE ON RECEIVING FULLY REDEEMED T.A.R.P. FUND HANDOUTS. THE BATTLE REACHED A FIERCE PITCH UNTIL THE USGOVT WAS COMPELLED TO BAIL OUT THE GIANT INSURER. GSAX IS THE OBJECT OF SCRUTINY IN THE USCONGRESS, BUT IT WILL BE GLOSSED OVER. A CLOSER LOOK REVEALS SECRET DEALS CUT BY GOLDMAN SACHS WITH OTHER BIG BANKS, AS IT GATHERED A.I.G. CONTRACTS, USED MEN FROM THE OPPOSITE CAMP, AND FORCED OVERLY FAVORABLE DEALS. $$$

A contentious battle with Goldman Sachs pushed the American Intl Group (AIG) into bankruptcy. A key date was 28 January 20008, when a conference call was convened bwteen 21 executives of Goldman Sachs and AIG, intended to try try to resolve a rancorous dispute that had been escalating for months. AIG had for years insured complex mortgage securities owned by Goldman Sachs and other firms against possible defaults. The contract is called the Credit Default Swap. As mortgage defaults rose and related bonds were ruined, AIG had already paid GSax $2 billion to cover anticipated losses in progress suffered by the investment bank. Later the payouts increased to $7 billion from AIG. The executives at AIG demanded some of its money back, insisting that GSax had exaggerated the potential losses. GSax countered with loosely stated claims of even grander insured losses. Showing the dark side of the great vampire squid, GSax resisted urges by AIG to consult with third parties toward estimating securities losses, as their contracts required. A November 2008 analysis by the asset management firm BlackRock noted that the GSax valuations of the insured securities in question were consistently lower than third party prices. GSax based some payment demands on lower rated bonds that AIG insurance did not even cover. After more than an hour of debate, the two sides closed off deliberations with nothing settled, according to internal AIG documents. The dispute lies at the heart of entire credit market crisis, actually the tip of the iceberg. GSax has been exposed with deep conflict of interest, selling mortgage bond securities, earning vast fees, but collecting vast insurance payouts from AIG when the housing bust occurred. AIG became its biggest casualty while Goldman Sachs (vampire squid) became one of the biggest beneficiaries. They do after all, control the USGovt finance ministry, totally.

The deep disputes behind the scenes over huge sums, and the standoff between AIG and Goldman Sachs stand as one of the most momentous in Wall Street history. GSax demands for billion$ from the insurer placed it in a precarious financial position. AIG simply ran out of cash, but GSax was first in line on payouts. Ultimately the USGovt was compelled to step in or face an economic nightmare so as to avert a situation where hundreds of thousands of companies would be forced to operate without insurance. The credit derivatives underwritten naively by AIG, without much knowledge other than they collected nice premiums in the good times, put the entire USEconomy at risk for lack of insurance. The USGovt aid to AIG currently totals $180 billion. Regulatory and Congressional scrutiny of the GSax role in the its downfall has increased. The Securities & Exchange Commission is examining the payment demands that a number of firms, most prominently GSax, made during 2007 and 2008 as the mortgage market imploded. But the SEC is run by friends and alumni of GSax and Wall Street. See the New York Times article (CLICK HERE).

More scrutiny has come over GSax being given full 100% parity on CDSwap contracts in AIG insurance redemptions, when no other bank was given full parity. More Congressional hearings, but no action taken, typical. Corruption abounds, favored treatment is the rule, and total control of USGovt finance ministry is the key. The syndicate rules and will skate through the scrutiny easily. Goldman received $12.9 billion, more money from TARP Funds than any other firm. The hidden strings reek of worse collusion. In addition, according to two people with knowledge of the positions, a portion of the $11 billion in TARP Funds that went to Societe Generale, a giant French bank that worked with AIG, was later transferred to Goldman Sachs under a deal the two banks had struck. Perhaps narcotics funds is involved in intertwined money laundering operations. Complex arrangements were used in debt financed by SocGen and Calyon to structure their straddled bull & bear portfolio at Goldman Sachs, but with mortgage bonds insured by AIG out the back door without their knowledge of the GSax role. Thus AIG was unaware of its single client GSax exposure. In fact, some protected informant evidence points to the AIG underwriters working too closely with the housing bears at GSax, too cozy. See the names Sundaram and Egol. With agents in the opposite camp, GSax negotiated aggressively with AIG, often requiring the insurer to make payments when the value fell by just 4% in mortgage bonds. Most other banks dealing with AIG received no payments until losses exceeded 8%, according to insurance records. See the Jesse Crossroads Cafe article (CLICK HERE) that reveals more Goldman Sachs crime syndicate inner workings. The GSax activity extends to covering up Greek Govt debt risk.

◄$$$ C.I.A. TORTURE TAXIS DISTRIBUTE NARCOTICS. NO OPPORTUNITY IS LEFT UNEXPLOITED. DEFENSE CONTRACTOR JETS ALSO TRANSPORT NARCOTICS. BUT THE MOST OFFENSIVE METHOD OF TRANSPORT IS FROM DEAD SOLDIER COFFINS, A COMMON PRACTICE SINCE VIETNAM. $$$

Evidence points to aircraft used by the CIA to move captives through London Gatwick and other airports in the European Union being used for drug distribution in the Western hemisphere. Of course, this practice is to keep America strong and safe, even the envy of the world, in defense of liberty! Captives are typically seized in its kidnapping or 'extraordinary rendition' operations. The smoking gun was a Gulfstream II jet aircraft N9875A crashed in Mexico in September 2008 while en route from Colombia to the United States with a load of more than three tons of cocaine. It has been identified by the British Govt and the European Parliament as being involved in narco trafficking. The past is littered with such cases. In 2004, another prisoner transport crashed in a field in Nicaragua with a ton of cocaine in cargo. Authorities monitor and identify the transport, but are powerless to stop it. A British and European Parliament committee convened to examine the allege abuse of European countries by the CIA. It has been involved in the illegal transport and detention of prisoners in 2004 and 2005 to British, Cypriot, Czech, German, Greek, Hungarian, Spanish, and other European cities with its cargo of captives for secret imprisonment and torture in Iraq, Jordan, and Azerbaijan. The aircraft are called 'Torture Taxis' widely. See the UK Independent article (CLICK HERE).

The innovative practice of ferrying dead US soldier bodies all over the world loaded with narcotics was a particular clever American innovation, introduced during the Vietnam War. The shipments still escape all formal paperwork. A contact with British Army Intelligence connections commented in a message recently. He said, "One of our corporate US pilots used to fly those planes back and forth during the Vietnam era. He told me that each coffin had a bodyweight in excess of 150 kilograms, far greater than a typical man, loaded with heroin. You do the math." OK, the average man size is around 180 lbs, equal to 111 kg. That leaves roughly 40 kg per dead soldier for heroin and cocaine in each coffin. Sitting next to me watching the 2008 Super Bowl at a restaurant was a nice fellow from Grumman. He told me that thousands of corporate jet flights include sizeable shipments of cocaine packs that elude customs, all being defense contractors. They too keep America strong, as in protect & serve.

◄$$$ DOCTORS IN THE UNITED STATES GRADUALLY ABANDON THE MEDICARE PROGRAM, A MOVEMENT CERTAIN TO GAIN CONSIDERABLE MOMENTUM. THE NEW HEALTH CARE PROGRAM WOULD ADD TO THE EXODUS. $$$

Doctors are leaving Medicare for numerous basic business reasons. The USGovt shows stunning ignorance on the business model. For the past decade Medicare consistently paid physicians 20% less than traditional insurance companies for identical service, apparently a discount on high volume. On the first of January 2010, aggravation came when the USGovt made further hidden cuts to Medicare by altering its billing codes. Medicare will cut physician reimbursement by another 21% on March 1st. The tactical motive was to reduce the deficit in the Senate healthcare bill. The USCongress pledged to cut Medicare by yet another $500 billion over several years. Many analysts including the Jackass have long argued the insolvent path toward budget wreckage that is Medicare. Many physicians were operating at a loss even before the series of massive cuts. For example, in 2008 the venerable Mayo Clinic in Minnesota posted an $840 million loss on its Medicare services. No businesses can survive when patient care expenses exceed revenue. CLGray (MD) is president of Physicians for Reform. He argues a second motive for physicians to abandon Medicare. It is more ominous, an increasingly abusive posture toward physicians by the USGovt. See the FoxNews article (CLICK HERE). In my view, the impoverishment of America is a plan on schedule, with many fronts and mostly success, which in the next decade has seen a significant decline in income for the medical profession. Check tort law, spawning lawsuits, and national programs to cover losing business.

SWINE FLU VIRUS SHAM NOW EXPOSED

◄$$$ SWINE FLU HOAX GRADUALLY REVEALED, BUT STILL A PHARMA PROFIT SUCCESS STORY. THE GENOCIDE MISSION HAS BEEN PUNCTURED. SIGNIFICANT MOMENTUM HAS BEEN LOST, AS THE MOVEMENT IS IN THE PROCESS OF BEING DERAILED. THE TRUTH IS MOVING OUT IN THE OPEN. $$$

The forces of Good have the clear upper hand. The Word has been spread. The Genocide project has been derailed. The Big Pharma congame has been exposed. In high places, the truth is being told, but not yet widely in the Western press networks. A quick review from important sources paints a prima facie case of global corruption. FoxNews reported that Dr Wolfgang Wodarg, a leading health authority in Europe, charged that large pharmaceutical firms "organized a campaign of panic to put pressure on the World Health Organization to declare a pandemic." Wodarg calls the Swine Flu initiative 'one of the greatest medicine scandals of the century' and has called for an inquiry with the European Parliament. The outspoken Dr Wodarg warns about the inadequately tested vaccines. He said, "The vaccine developed by Novartis was produced in a bioreactor from cancerous cells, a technique that had never been used until now." So cancer cells are being injected into the population as part of a vaccine campaign, a concept somewhere between lunatic and criminal. FoxNews reported that the Great Swine Flu hoax of 2009 is falling apart, as one country after another unloads hundreds of millions of doses of unused vaccine vials. The story claims no informed person wants the injection anymore, and the entire fear campaign to promote the vaccine usage has been exposed as outright bad medicine and propaganda. Even doctors are now calling the pandemic a complete hoax.

Next is a Reuters story about how the Big Pharma embarked on a marketing campaign to sell vaccines. The Center for Disease Control in Atlanta and the World Health Org (WHO) are both in on the fraud. The story reported that, "H1N1 swine flu was never dangerous, and it never should have been escalated to a level-6 pandemic in the first place. It was all a big marketing scam whose purpose was to simply sell vaccines. And it worked!" They continued by explaining how Big Pharma firms earned billion$ in profits for a useless vaccine. The vaccines were bought with taxpayer funds. Reuters calls the Great Swine Flu Hoax of 2009 an elaborate financial scam whose goal was to transfer wealth from the People to the shareholders of Big Pharma. For instance, in 4Q2009, GlaxoSmithKline sold $1.4 billion worth of vaccines. The story is not quite right, since people have been badly harmed by the vaccine, many dying from it. In fact, some damaging side effects of the vaccines have come to light, cited here in the Hat Trick Letter for months, like Guillain-Barre Syndrome (a brain neuro disorder). Some conclude properly that the vaccines actually result in a net increased mortality. But the USCongress managed to remove all legal liability to the drugmakers before the campaign began. The vast sums spent on deadly or worthless vaccines could have been spent on nutrition, vitamins, real health care, even bridges and sewer lines.

Next is a Natural news story about the harmful side effects. They wrote, "Meanwhile, countless people were harmed by the swine flu vaccine frenzy ('countless' because nobody is counting). In addition to those who were nearly paralyzed after receiving the vaccine shots, grade school students in Massachusetts who lined up to receive swine flu vaccine shots were instead injected with insulin." The story continued with death count data. Total Swine Flu deaths for 2009 were much lower than the number of deaths from regular seasonal influenza. Worse, it turns out that thousands of Americans who died from the Swine Flu had been previously injected with the vaccines. So why did the World Health Org declare a pandemic? The answer centers on Big Pharma bribery, collusion, and corruption.

The British Broadcasting Corp (BBC) has reported that mass cancelations of vaccine orders have taken place. They report that the Swine Flu hoax has fizzled out, and countries like Greece, France, and the United Kingdom have cancelled orders for vaccines. Despite the fizzle in sales, the victory can be declared by Big Pharma, which raked in huge profits with government and key agency collusion. See the Global Research article (CLICK HERE).

◄$$$ SWINE FLU VACCINE DEATHS NUMBER OVER 10 THOUSAND FOR AMERICANS. THE DEBATE IS ON WHETHER THEY ACTUALLY DIED FROM H1N1 VACCINE SHOTS. MANY SURELY DIED AFTER RECEIVING THE VACCINE. $$$

Natural News does yeoman work in reporting the genocide plan, otherwise known as the Swine Flu vaccination project. The US-based Center for Disease Control (CDC) has used consistent deceptions in the statistical reporting of Swine Flu fatalities, as a devious spin campaign is underway. Most journalists in the mainstream media remain deceived and asleep at the wheel.

Take the CDC recent release of new statistics about cases, deaths, infection rates, and vaccination rates. According to the CDC:

  • 61 million Americans were vaccinated against Swine Flu (20% of US population)
  • 55 million people became ill from Swine Flu infections
  • 246,000 Americans were hospitalized due to Swine Flu infections
  • 11,160 Americans died from the Swine Flu.

The CDC calls the program a success even though it means 4 out of 5 people either rejected the vaccines or were not exposed to information. Based upon these statistics, the CDC still urges people to be vaccinated because the pandemic might return. Vaccines are the best defense, the public is told. My view is that the vaccination spread the disease itself, so that further vaccines could be bought and used, in a circular fraud. However, the BIG STORY is the number of people who died from the Swine Flu despite being vaccinated. The CDC is intentionally not tracking the fatalities who were previously vaccinated. All the better if the public and mainstream media journalists mistakenly believe that zero deaths occurred from those who were vaccinated. But this is blatantly false. Being vaccinated against H1N1 Swine Flu offers absolutely no reduction in mortality from swine flu infections. It probably added to the risk of death. One can deduce that 2200 deaths came to people vaccinated!

Swine Flu vaccines have not been proven to reduce infection mortality for the simple reason that the number of such clinical trials is zero, as in no clinical trials to date. Clinical tests for vaccines that target seasonal influenza indicate a reduced mortality rate by 1%. So out of the 2200 deaths that took place in 2009 in people who were already vaccinated, the vaccine potentially may have saved 22 people. This is bad math and points to yet more serious USGovt corruption. The 61 million vaccine injections add up to bad public health policy, especially since any injection disturbs the human immune system. These vaccines also contain nervous system disruptors and inflammatory chemicals that can cause serious health problems, not likely to become manifested for years to come. For instance, future Alzheimers victims will almost certainly be those who received regular vaccines, predicts Mike Adams, editor of Natural News. A USGovt policy would have been more effective handing out bottles of Vitamin D to 61 million people, Adams suggested. At no more cost than the vaccines, the bottles of vitamin D supplements would have saved thousands of lives and offered tremendously importantly additional benefits such as preventing depression and even cancer. Tough questions remain, like how many unvaccinated people were probably exposed to the H1N1 virus at some point over the last six months because the virus was disseminated by the actual vaccination. The author Adams concludes that the media networks are culpable, as serve the financial interests of the corporations, just like the CDC and WHO. They spew rhyming propaganda with their distorted stories about H1N1 Swine Flu and much more. The pandemic is a grand congame for Big Pharma profit and an aborted effort to thin the population. The threat has not passed totally, but the truth is slowly emerging, soon fully out in the open. See the Natural News article (CLICK HERE).

CENTRAL BANKERS DESPERATE OVER EXIT STRATEGY

◄$$$ THE EXCESS RESERVES HELD BY BANKS AT THE USFED ARE ACTUALLY A SHIFTED LOAN LOSS RESERVES ACCOUNT. THEY COVER A COLLECTION OF HORRENDOUS LOAN LOSS PORTFOLIOS. NEXT IS A USFED PLAN TO INCREASE THE INTEREST PAID ON SUCH ACCOUNTS. THUS, THE USFED IS DISCOURAGING BANK LOANS TO COMMERCIAL BORROWERS, AND GREATLY HINDERING ANY ECONOMIC RECOVERY. $$$

The first part of the USFed Exit Strategy in the planning stage is reportedly an increase in the interest paid on so-called excess reserves. They are not excess though, as shown in recent Hat Trick Letter reports. The funds held equal the required but non-existent Loan Loss Reserves which banks usually have but whose balance sheets do not now contain. They are called excess reserves only because the bank holdings are far greater than the amount required by regulatory rules. The USFed currently pays 0.25% interest on such accounts. The USFed's new exit plan will call for increasing this interest rate, which encourages the banks to keep more money in excess reserves instead of lending it into to customers. They avoid expansion of the money supply, thus forestalling price inflation. This is queer deviant banking. Indirectly, the USFed policy will result in a reduction in funds loaned out to businesses and consumers, many with good credit. Think a tourniquet around the USEconomic body, slowing the blood flow throughout. Consider the USFed tactic as a bribe to big banks not to lend. Increasing interest paid on excess reserves will also delay the USFed process of selling its badly impaired mortgage bonds back to banks, a process that would raise mortgage rates. They are very reluctant to drain liquidity today, tomorrow, or the next day. The USFed is caught in a trap of their own making, stuck in a corner without options. They are actually defending a USTreasury Bond bubble, attracting funds into the Black Hole. See the Yahoo Finance article (CLICK HERE).

◄$$$ THE MONEY SUPPLY FIGURES INDICATE A STRONG ECONOMIC SLOWDOWN, EVEN A DOUBLE-DIP RECESSION. BANK CREDIT AND COMMERCIAL PAPER ARE BOTH SHRINKING. SUCH CONDITIONS NEVER HAPPEN IN A RECOVERY. $$$

The USFed data shows a Monetary Multiplier that fell to a record low of 0.809 in mid-December. The typical level is 3 or 5 or more. The multiplier calculates the amount of money that an initial deposit can be expanded with a given reserve ratio, the multiple of held reserves disseminated as loans. Thus, new money is not efficiently providing much assist to the USEconomy. Money is being tightly held, not even lent as fast as produced. See the Wikipedia description of the Monetary Multiplier (CLICK HERE). The financial aggregate is on the decline. Commercial paper has shrunk by $280 billion since October 2009. Bank credit has dropped from $10.844 trillion to $9.013 trillion since November 25th, a stunning 16.9% drop. It has been on a decline since June. The MZM money supply is contracting at a 3% annual rate. It represents a pure cash circulation monitor, not including money market funds or checking accounts. The broad M3 money is contracting at over 5% pace. See the UK Telegraph article (CLICK HERE). Once again, the London financial press provides more solid information than compromised US sources. To claim a USEconomic recovery is underway is Orwellian, ass backwards, and the opposite of reality.

The inflation adjusted annual M3 money supply rate of change signals a strong downturn in USEconomic activity. The leading indicator is well established in modern economic history, and a reliable signal for a double-dip recession. The above graph of year-to-year change in real M3 versus annual change in payroll employment displays a forward shift in M3 by six months. Doing so highlights the embedded correlation between money supply contractions and employment pullbacks. The January 2010 real M3 declined an estimated 5.2% versus January 2009, following an annual contraction of 3.3% in December 2009 and 0.3% in November. Conclude that the monetary forward indicator is growing worse by the month. A recession lies ahead, just when the engineered 5.7% on GDP growth for 4Q2009 was so filled with USGovt props, unstable devices, phony supports, replete with the artificial sweetener of orchestrated optimism. An estimated 2.2% of that fallacious growth was attributed to inventory growth, not final sales. After the December trade gap was revealed as $40.2 billion, much larger than anticipated, more calculations can be made. The GDP will be adjusted by 1.1% downward. So a 4.6% figure with half the lift from inventory, not much economic vitality there, especially after all the productivity and hedonic double counting typical atop the temporary prop programs. The Powerz took the news as a sign the USEconomy would be first to emerge from a recession, and thus sold down the USDollar, even though bigger trade deficits mean more downward pressure on the USDollar.

Bear in mind that all inflation adjustments to the money supply growth are all wrong. Price inflation is several percentage points higher than the annual 2.6% CPI-U inflation in January. All USEconomic statistics are loaded with garbage. Most economic statistics in the past few weeks have been presented by the financial press with the lead sentence denoting surprising weakness. No surprises here at the Hat Trick Letter. Thanks to the Shadow Govt Statistics for the above chart and data.

◄$$$ THE HEAT RISES FROM THE DEBATE OF A USFED EXIT STRATEGY FROM 0% INTEREST RATES AND MASSIVE MONEY GROWTH TO ENABLE MONETIZED USTREASURY BOND PURCHASES. $$$

Once more is seen the return of the 'Second Half Myth' as talk has begun of the USFed hiking interest rates in the second half of 2010. Far enough away to forget, close enough to be imminent, always forgiven when wrong, with new wrong revisions given. Chairman Bernanke is well aware he is stuck in a policy corner. More scary is the proposition that he might NOT be aware. A formal interest rate hike would torpedo the already weak vulnerable housing market, when mortgage rates have been creeping upward. A reduction in the USFed balance sheet would drain the system of funds, when lending is sparse, unresolved loan losses litter the balance sheets, and banks still hold massive toxic bonds and actual home inventory. The entire banking system depends heavily upon a cornucopeia of liquidity facilities, without which the system would have ground to a halt many months ago. Soon money market funds will augment the demand for USTreasurys for bubble maintenance, as redemptions become difficult to receive for trapped investors. Worse, a rate hike would pop the USTreasury Bond bubble the USFed has manufactured. Their legacy is a sequence of asset bubbles, the latest being USTreasurys. The good Chairman, Secretary of Inflation, would never agree that in September 2008 the US financial sector died. What he accomplished since then is vast pumping of blood through a dead corpse. To expect an Exit Strategy to succeed is to demand a dead man to walk without the gigantic crutches attached.

USFed Chairman Bernanke outlined his plan for removing the historically unprecedented monetary stimulus of 0% rates and mammoth money printing. It lacks credibility and seems like endless chatter without prospect of action. Their strategy is talk. He began with clear indication that the USEconomy remains sufficiently weak, and that no interest rate hike or other steps to reduce the money supply are imminent. That is precisely his Exit Strategy, NONE!!! He attempted to spell out the HOW but without the WHEN. One key step toward change, rather than an exit, is to remove the emphasis on Fed Funds rates which banks pay to borrow from the USFed. Instead, the USFed will focus on the rate paid to banks for funds they deposit at the USFed. These are fund the banks need in Loan Loss Reserves, so hardly extra or excess funds. Interpret this change as encourage for banks not to lend, flatly stated. Banks would be given extra incentive to deposit money with the USFed instead of loaning even to good customers, a clear constraint on growth of the USEconomy and the money supply.

Bernanke is not a good student of banking or economics, perfect for the job of Wall Street syndicate monetary gatekeeper. Ben said, "By increasing the interest rate on reserves, the Federal Reserve will be able to put significant upward pressure on all short-term interest rates." What total nonsense! The ultra-low interest rate will accomplish little at the margin of demand outside the bank-to-USFed corrupted link. The low rate is urgently needed to maintain the ultra-high bubble bond principal valuation. The low rate is the product of powerful JPMorgan credit derivatives without bound. This is a grand bubble. Non-participants with pension funds, money market funds, foreign institutions, and elsewhere would experience slight losses on the asset held if rates rose. Another tool proposed is not new. The USFed wishes to begin Term Deposits. These are illegal bonds sold to the banks, without proper authorization by the US Constitution. They represent a drain to the USEconomy, and an offset to the USFed's insolvent balance sheet, a desperate attempt to restore its own solvency at the expense of the USEconomy vitality.

Unlike other members on the US Federal Reserve Board, Bernanke does not wish to sell mortgage backed securities and other assets leveraged to mortgages on their balance sheet. WITH GOOD REASON!!! Many of the assets are worth 50% to 70% of the booked value on the USFed balance sheet, and in the case of Collateralized Debt Obligations they are worth nothing at all. Bernanke is unwilling to provide direction in clear terms the much lower mortgage bond values in the credit market. Doing so would not only drain the banking system of cash liquidity, it would kill off numerous banks from the proper reset in impaired credit assets on their books. The whole idea of FASB accounting rule changes was to permit phony valuations of ruined bank assets. Sale of USFed mortgage assets would torpedo the FASB congame. In fact, the USFed will continue buying and complete the $1.25 trillion in mortgage backed security purchases, which might terminate on March 31st. That is pure monetization in hyper-drive. Great strain would come to the mortgage bond market generally if the USFed makes good on its threat to terminate. The USFed will find a way to continue the vast monetization scheme. They are almost the only buyer, and their removal could send mortgage rates rising steadily. They are stuck in supporting this vital market. Ben said, "I currently do not anticipate that the Federal Reserve will sell any of its security holdings in the near term, at least until after policy tightening has gotten underway and the economy is clearly in a sustainable recovery." That could indeed be a long time. The test could come with Reverse REPOs, where the USFed can monitor credit market response to the sale of USTreasurys in varying quantities. Other tests are the USTreasury auctions, which usually go badly. The lift in the Discount Rate will be a minor test also for system fragility. See the Washington Post article (CLICK HERE). Sorry, but nothing is normal, and nothign will become normal for a long time.

◄$$$ THE LONG-TERM USTREASURY BOND IS THE MOST CONTROLLED PAPER SECURITY ON THE PLANET. REGARDLESS, IT SHOWS WARNING SIGNALS OF HIGHER YIELDS AND LOWER PRINCIPAL VALUE. THE USGOVT MIGHT HAVE A GRAND TASK TO KEEP IT CONTROLLED. $$$

Thanks to TheChartstore for a vivid bearish Head & Shoulders displayed pattern on the long-term USTreasury Bond yield. It indicates a 6% to 7% yield in the future. Translate to mean the USGovt will have to fight the powerful current with even greater monetization than just phony bids on USTreasury auctions from its central banker cohorts. The attempts by the free market to push bond yields higher must be met with evermore powerful monetization by JPMorgan, the usual suspect and assigned market manipulator by the USFed. My best description is the JPMorgan machinery will be forced to work much harder to achieve the same stable result in long-term bond yields. They are crucial for mortgage rates, and thus must continue to be managed by outright USTBond monetization and Interest Rate Swaps. In good eventual time, the USTreasury and USFed will be totally isolated with their monetization machinery, for all the world to see. Their devices are barely hidden anymore. Only then will the global shun of the USDollar be carried out. Until then the USDollar benefits from the Competing Currency War, where all other currencies are seen as rotten and are dealt with.

The US Federal Reserve wrestles with its Exit Strategy, but the floundering stumbling USEconomy does not permit an exit. Most of the strategy discussed for exit will be pure 100% talk, as the USFed is stuck for several more months, maybe without end. The US financial markets desperately need a resumed USDollar decline. A higher USTreasury Bond yield would assist in financing newly issued debt, but it would greatly increased the borrowing costs of all debt. It would also lead to a cave-in from foreign bond selling of an asset in decline. The USTBond bubble sustains the USDollar valuation and its queer counter-trend rally.

The USTreasury Bond auction last Wednesday February 10th went very badly. Rick Santelli of CNBC pointed out its miserable traits. Others graded it an F score for failure. The dismal $16 billion 30-year auction closed at 4.720%, with a record direct takedown of 24.07% in the final tally. The horrible 30-year bond auction saw the bid/cover ratio plunge from prior auctions. The worst and most dangerous feature of the auction was the Direct takedown at 24%, almost as high as the Indirect takedown at 28.5%, for twin pillars of monetization evidence. The Indirects were significantly lower, as the average registered at 39.9% for the last four auctions. Foreign buyers are fleeing. Tyler Durden, always bloodied but never beaten, claimed that something is very wrong with the demand dynamics of the long-end, as has been often speculated. He said, "Algorithms care not that we just had as close to a failed auction as possible." The direct bids come from the obligated primary bond dealers. The indirect bids come from the foreign central banks, who often used USDollar Swap Facility funds in self-dealing. This is pure monetization. Listed are the auction details. See the Zero Hedge article (CLICK HERE).

  • Yields 4.720% vs. Expected 4.687%
  • Bid To Cover 2.36 vs. Average 2.54 (Previous 2.68)
  • Indirects 28.5% vs. Average 41.07% (Previous 40.77%)
  • Indirect Bid To Cover: 1.44
  • Allotted at high 61.57%
  • Direct Bidder Take Down: 24.07%
  • Indirect Bidder Take Down: 28.53%

◄$$$ A HIDDEN WAVE OF MID-LEVEL BANKER MURDERS HAS COME. THE NEWS NETWORKS DO NOT REPORT IT, NOR DOES MUCH OF THE INTERNET. THIS IS HIGHLY DANGEROUS INFORMATION. THE DIFFERENCE BETWEEN THE CURRENT SITUATION AND A YEAR AGO IS THE VOLUME OF MURDERS AND THE RANK OF THE VICTIMS. $$$

Very little information will be provided. To be honest, not much is known. The source is highly reliable. The data is too dangerous for shared details. The sources are at grave risk. A titanic battle has escalated, fully announced here in the Hat Trick Letter reports over a year ago. The battle is over global control by the powerful billionaires whose national allegiance is vague, whose control of governments is clear, and whose next chapter is uncertain. Murders have ramped up tremendously. Since the victims are loyalist henchmen of press network owners, the stories are suppressed. Some describe it as White Templars versus Dark Templars. Unfortunately, the West, led by the United States and England, is not on the side even remotely described as good, at least not in consequential numbers. The Rockefellers, Bushes, Clintons, Blair, Soros, they are not on the side of good, nor is Goldman Sachs or JPMorgan or other key Wall Street firms, not even many US defense contractors. The next chapter for the Dark force plans feature war, narcotics, bank fraud, counterfeit fiat money, killer viruses, seismic weapons, and much more. The Dark force is suffering interruptions. My personal viewpoint is that the Eastern forces, such as Asia, want their turn at the positions of global dominance. They have been host to much of the global industrial base in the last decade, and have accumulated vast wealth. The disappearance of a mid-level Rockefeller in Australia is a recent episode in January. My source tells of numerous other murders and disappearances, key interviews with details not to be shared, with the volume sharply higher than in 2009, and a new element being much higher ranks of the attacked bank elite victims.

Reports have circulated that the Chinese Triad syndicate served warning to the Western bank nazis that they will be systematically killed, since Asian billionaires have no interest in virus genocide or further trillion$ bank frauds that lead to global political centers of control. Also, reports are widely available about Goldman Sachs executives arming themselves during travel to and fro. They might fear abduction and murder, perhaps ransom. GSax in my view is the financial headquarters of a vast Western financial syndicate. Apart from details, be sure to know the war among the ultra-wealth supra-nationals has ramped up. Either the next decade will feature Asian capitalism dominating in a flourish of economic development, with the Western nations playing a supporting cast role burdened by a backfire of impoverishment, or it will feature a monolith of power in a consolidated Western fascist nightmare where liberty has vanished, wealth is surrendered, and loyalty to icon leaders is demanded.

SYSTEMIC FAILURE ENDORSED & AFFIRMED

◄$$$ WHEN A SYSTEM REAFFIRMS ITSELF WITH AN ENDORSEMENT OF FAILURE AND CORRUPTION, IT GUARANTEES ITS FAILURE. LAWMAKERS IN ACTION, COWARDS IN THE USCONGRESS, PUPPET LEADERS, THEY ARE AN INTEGRAL PART OF THE PROBLEM, NOT THE SOLUTION. SEVERAL KEY STEPS AND DECISIONS MARK THE TRAIL, LIKE CANCEROUS BLOODY SORES, BEST SEEN IN THE U.S. SENATE. $$$

My book to follow the systemic failure trail started with Step #1, the approval in October 2008 of the TARP funds totaling $700 billion to be distributed like a vast slush fund to Wall Street banks. Goldman Sachs was in charge of dispensation and first in line for reception. They covered their criminal fraud, relieved pressures from extortion, and provided themselves critical funds to continue bank minimal operations with heavy executive bonuses. Step #2 was the selection and confirmed appointment of Tim Geithner as Treasury Secy in January 2009. Indeed, any change would start with a break in the long line of Goldman Sachs alumni. Geithner is a mere lieutenant, whereas Paulson was a general. In his service as head of the New York Fed, Geithner was involved in bank regulatory oversight within reach of Wall Street, fully culpable. Step #3 was the decision made at several points in time to continue the wars in the Middle East and West Axis. The USCongress approved the sacred status of warmongering, the amplified deficits from war costs, and the refusal to rebuild the US economic structures. The many fraud cases do not deter the war machine, not Halliburton thefts, not the missing $50 billion from the Iraq Reconstruction Fund. The Obama campaign regularly featured promises to wind down the war. Step #4 was the empty Economic Stimulus Bill signed into law in February 2009, when it was known to contain almost no direct stimulus, no meaningful encouragement for small business, no urgent infrastructure construction. It did contain important plugs to the massive state budget shortfalls. In this sense, the bill was merely a grand band-aid patch applied to a hemorrhage wound.

Step #5 was the blessing given to the relaxed accounting rules offered by the Financial Accounting Standards Board, approved by the USCongress effective April 2009. The rule change enabled big banks to declare any value for assets they wished, according to any model they chose, without scrutiny, without any connection to reality of markets. The market essentially vanished for many such assets, ergo zero value. Step #6 was the confirmed reapointment of Bernanke as Chairman of US Federal Reserve two weeks ago. Bernanke was confirmed for a second term on January 28th, but by the weakest vote (70 - 30) in the history of the USFed. He is thus condemned by weak support. Threats of calamity accompany calls for full disclosure of the USFed itself. A NO vote would have signaled an unseating of the USFed as center for the financial syndicate, whose twin operator locations are Goldman Sachs and JPMorgan. Lastly, Step #7 was the Senate approval for a $1.9 trillion increase in the USGovt debt limit recently. The binding resolution cobbled from small but huge debt limit increases has been overtaken. Any serious 'Deficit Task Force' was averted by the expedient alternative. President Obama, who had publicly supported the force, shifted his support to a gutless toothless equivalent task force. No change.

Many more events could be cited, dozens actually, but the above serve in my view as important milestones on the road to ruin with full endorsement after the important breakdown. Nations often are given opportunities to change course. The United States with these seven important decisions, has chosen to maintain the path of ruin, marred by corruption, even after fraud has been exposed, never having been prosecuted, failed policy recognized, and participants identified. At the end of the road lies a USMilitary dictatorship and USTreasury default, my ongoing unswerving forecasts. Both might be disguised. The fascists turned communists in power will surely spin a different story, possibly laced with more self-inflicted disasters, attacks, and virus outbreaks perpetrated by our own leadership and in-security outfits. The interpretation of a CIA Coup on 911 with key cooperation from a tiny allied nation bears much credibility. The US Senate, starting with passage of the Patriot Act, a deed that shredded the Constitution, has acted consistently like a pack of corrupt whores.

◄$$$ USGOVT SPENDING AND TAX REVENUE ARE DIVERGING. THE PATH IS ACTUALLY A PATHOGENESIS, NOT SUSTAINABLE. A MONETARY CRISIS COMES, ACCOMPANIED BY A SOVEREIGN DEBT CRISIS. THE UNITED STATES WILL NOT BE SPARED. FOCUS ON WAR IS THE RUIN ON THE EXTERIOR, WHILE DESTRUCTIVE FOCUS ON INFLATION IS THE RUIN FROM WITHIN. WITNESS THE CLIMAX OF THE FASCIST BUSINESS MODEL, A FINAL CHAPTER. $$$

The status of USGovt finances reads like a Banana Republic. Often a picture is 1000 times more clear than any concisely written paragraph. The red line is spending. The blue line is tax revenue. If a physical structure were place in between, spanning the gap, it would snap. Yet the paper money machinations keep the system turning. The US recovery is nowhere except in the propaganda splashed on banker billboards and throughout the distorted official economic statistics. The difference between spending and revenue is deficit, and the USGovt will rack up well over $1-1/2 trillion in fresh 2010 deficits. Two major points stick out, one in view and a second hidden. The spending to date by the syndicate in control of the USGovt financial purse have wasted, squandered, and pilfered countless funds for broken financial entities. See General Motors, AIG, Fannie Mae, GMAC, TARP, and state budget plugs. Economic stimulus is sorely absent, despite the chatter. The hidden element is the everpresent $1000 billion defense military budget considered sacred. Remove it and the potential for a balanced budget and near zero deficit could actually happen with even the most modest economic recovery.

Despite stupid talk divorced from reality, the USGovt deficit will be in the $1.5 to $1.6 trillion range this fiscal year. Recall throughout most of last year the false forecasts of a reduction in the federal deficit to ONLY $1.2 or $1.3 trillion, the great improvement and cause for a misplaced USDollar rally. That was pure misdirection to public perception. The huge deficit must be borrowed or printed with more phony money, as it must be financed in full view or monetized in hidden view. The biggest creditors are China and Japan, which hold $1.5 trillion in debt securities. What the above graphic does not show is the additional $250 billion in debt service cost. In a typical Ponzi Scheme, that heavy interest cost will be printed to cover the cost. Total USGovt military and related spending exceed $1 trillion, broken down as $880 billion in Pentagon budget, $70 billion in covert CIA operations, $50 in foreign & military aid (largest recipients are Egypt, Israel, Pakistan), and $75 billion for 16 intelligence agencies with 200 thousand employees. The $1T military budget must be brought into context. Its total for 2010 is equivalent to $1 million per day from the start of the Roman Empire, continued for 2738 years well beyond today. The Pentagon now accounts for half of total world military spending, and military spending consumes 19% of federal spending. The Afghanistan and Iraq wars have cost $1 trillion so far, will cost $200 to $250 billion more this fiscal year, including known and indirect expenses. These wars are financed through supplemental authorizations, off budget items deemed sacred. President Obama just ordered a massive increase in nuclear weapons contracts. This is the same Obama who won the travesty of a Nobel Peace Prize and who spoke at the Oslo podium of the need for war against terrorism. Can Idi Amin from Uganda be given a similar award posthumously? The USMilitary maintains 750 military bases in 50 nations, staffed by 255 thousand service members stationed overseas.

The Cold War has extended to a fabricated War on Terrorism that offers effective cover for a vast narcotics organization. The people least aware are the American public. Defense Secretary Robert Gates believes "[America needs] a broad portfolio of military capabilities. [The US must] prepare for a much broader range of security challenges on the horizon. [Threats] transcend the familiar contingencies that dominated US planning after the Cold War." He boasted that the proposed budget justifiably exempts defense from spending freezes sought by President Obama to control other government agencies and activities. As Darryl Schoon writes, "The dawning realization of what is happening has come too late to save the nation. The warnings by America's founding fathers were ignored by all and the consequences are coming to pass as predicted. America's military drained America of its once considerable wealth and private bankers have indebted the nation, its businesses, and citizens beyond their ability to repay. Thomas Jefferson warned it could be so. We ignored his warnings and, now, it is too late. The political process has proven singularly inadequate to prevent the collapse of the nation." See the Kitco article by Schoon entitled "Davos: The Bomb Shelter" (CLICK HERE).

We are witnessing a late chapter of the Mussolini Fascist Business Model in action, perhaps its final chapter. The corrupt merger of state and large corporation has resulted in the conglomerate of the narcotics & banking syndicate in full bloom, sacred and sacrosanct, protected by its Goldman Sachs mastermind gatekeeper. The chapter is a climax of fascist corruption. The cancer is starving the host. Gates is the only Defense Secretary in 60 years to continue his term of service with a new president. In his appointment and another Goldman Sachs planted alumnus as Treasury Secy, President Obama brought Zero Change in the syndicate control and operations. Same bankers in control, same sacred endless war, same national insolvency, same political cesspool, same path.

The war machine has bankrupted America every bit as much as economic stupidity practiced by its leading bankers and economists, who are basically inflation engineers and apologist high priests preaching heretical ideology. The great syndicate business model requires continual propaganda in support of endless war. The United States clearly has reached the point of imperial overreach. Bloated sacred military spending and grotesque debt servicing cannibalize the USEconomy at best, and gut it into a skeleton like an armada of  parasites at worst. Economic and financial strength are the real basis of world might. Eric Margolis said, "America has become the Sick Man of the Western Hemisphere, an economic cripple like the defunct Ottoman Empire... Besides the late USSR, the United States also increasingly resembles the dying British Empire in 1945, crushed by immense debts incurred to wage the Second World War, unable to continue financing or defending the imperium, yet still imbued with imperial pretensions." See the Toronto Sun article from north of the border entitled "Wars Sending U.S. into Ruin" (CLICK HERE). They correctly state in the title that wars are sending the United States into the abyss, but in slow motion. Paul Craig Roberts is a former Asst Secretary of the USDept Treasury and former associate editor of the Wall Street Journal. He outlines the collection of traits that makes the case for "It Is Now Official: The U.S. Is a Police State" (CLICK HERE). His work makes a parallel argument.

◄$$$ LOST CONTROL BY THE USFED AND F.A.S.B. RULE ELIMINATION ENABLED A PHONY GLOBAL RECOVERY. RISK AND LEVERAGE HAVE BEEN SHIFTED TO THE GOVERNMENT FROM BIG BANKS. IN THE AFTERMATH, THE USFED IS LEFT WITH A TON OF GARBAGE AND NOWHERE TO DUMP IT. FROM HERE ONWARD, SOVEREIGN DEBT DEFAULT IS THE DOMINANT CHAPTER. THE UNITED STATES HAS THE GREATEST GENERAL RISK OF DEFAULT, BUT THE LOWEST CHANCE OF OCCURRENCE IN THE IMMEDIATE FUTURE. NO EXIT STRATEGY IS AVAILABLE FOR THE USFED TO HIKE INTEREST RATES. $$$

Two important major factors predicate a return to financial stability, without question a false uneasy condition. Without dispute, the USFed has lost control of the Federal Funds rate since September 2008, when the triple failure occurred, centered upon Lehman Brothers, Fannie Mae, and AIG. By imposing a lowered target of 0.00 to 0.25%, the USFed admits it imposes zero cost of money between banks and the USFed itself. This screams of grand failure. The near zero rate will remain for probably the entire 2010 year, despite empty deceptions. The USFed further lost control by serving as buyer of last resort for bank bonds taken at full parity. Then the USFed went on a buying spree to grab all the deeply impaired mortgage bonds. Therefore, in supporting both big banks and the mortgage foundation, the USFed in the process rendered itself insolvent and broke. The second mirror image of desperate action was taken by the Financial Accounting Standards Board (FASB). The USCongress blessed the policy shift, whereby big banks and financial firms can declare their own fictional value for major slices of their balance sheets. Presto, poof! The US stock market has staged a recovery. Just as the USEconomy was built atop a housing bubble, the US financial markets are built atop an insolvent foundation. In fact, the insane risk levels and leverage in the private sector before 2007 have now been replaced by insane risk levels and leverage in the government and central bank arena. Thus the movement to default on sovereign debt. The next crisis will be more systemic, with full assurance.

Bubbly inflation via vast monetization, purchase of last resort, and ruined market valuations have placed the USFed in the corner without any options. The USFed has no Exit Strategy, just like the European Union has no Exit Strategy for aiding Greece, Spain, and Italy. The USFed must find a way to rid its balance sheet of toxic bonds without permitting them to enter the bond market. So big banks hold reserves at the USFed in the form of USTreasury Bonds, an effective offset to the carcenoma of toxic mortgage bonds and their derivatives (like Collateralized Debt Obligations) held by the USFed itself. Those CDO bonds are less than worthless, leveraged mortgage securities. The main point to take away is the USFed engineered a phony financial recovery. But in doing so, it absorbed over $1 trillion in toxic bonds with nowhere to dump them. At the same time, they lost control of the Fed Funds rate, stuck at zero. We are seeing history repeat itself, a bubble in USTBonds, after a fabricated bubble in housing that Greenspan so desperately pushed in order to save his legacy and provide him an exit from the stage. The banker heretics, syndicate chiefs, and government minstrels have a grand challenge to sustain the bubble in USTreasurys. Its bust means a USTreasury default, that no established banker or economist dare cite as likely. The USTBond bubble is their final bubble.

Treasury Secy Tim Geithner claims the USGovt is in no danger of losing its Aaa debt rating, regardless of gargantuan deficits. In an ABC News interview, he said "Absolutely not. That will never happen to this country. We have much, much lower risk of [double dip recession] today than at any time over the last 12 months or so. We are beginning the process of healing." He is delusional. He still defends the Obama Admin efforts to help homeowners avoid foreclosure through subsidized mortgage modifications. He still defends the AIG bailout and the redemption of Wall Street credit derivative contracts. These are but two symptoms of the systemic breakdown. See the Bloomberg article (CLICK HERE).

◄$$$ SYSTEMIC FAILURE IS WRITTEN IN THE MANY SYMPTOMS OF DISTRESS. COLLECTIVELY THEY ARE INSURMOUNTABLE, ESPECIALLY BECAUSE ALL REMEDY IS ORDERED WITH MORE DEBT OINTMENT APPLIED OVER THE DEBT WOUNDS, AND MORE PHONY MONEY PRINTED TO COVER FEDERAL DEFICITS. $$$

The Business Insider has provided an excellent synopsis of failure symptoms, listed as 20 in number. They are comprehensive but definitely not the full picture. They overlook the syndicate control of USGovt finances, the stranglehold of the US Security establishment in the narcotics trade, and the dominance of foreign policy diversion to maintain the war footing of the USEconomy elite defense contractor sector. My analysis has focused on the deterioration of the USEconomy, turned disintegration in 2009. It has focused on the lack of bank asset liquidations. It has focused on lack of housing price bottom process toward stability. It has focused on absence of any initiative to return the industrial base of factories to US shores. It has focused on continued Goldman Sachs stranglehold of USGovt finances. It has focused on the chronic unresolved credit derivative permeation into all things financial. It has focused on the rampant monetary inflation that has attacked and destroyed capital inside the USEconomy. No direct effort is being ordered for a recovery, reform, prosecution, change of leadership, altered policy, movement to sound money, control of rampant counterfeit, control of hidden monetization, and coverup of trillion$ fraud. Instead, devotion to the syndicate (banks & war machine) continue unabated, amplified, and defended. The start in my view of the decline in the US Empire was the Vietnam War. The continuation of the war machine kickstarted the inflation in price structures, which lifted US wages nationally. The globalization process then exposed the uncompetitive US labor force. The financial syndicates responded with a deep dependence upon bond fraud in a stunningly pervasive manner over a 20-year period. Regardless, the list below is an effective array of horrendous conditions that beg for treatment, yet receive almost none. Worse, even after the system visibly broken down in the autumn of 2008, the system has made almost no moves toward reform or true remedy, in my view an EPITAPH on the imperial tombstone. We just see bigger funding lifelines to the same syndicate locations that caused the problems and committed $trillion fraud crimes. See the Business Insider article (CLICK HERE).

The USEconomy is dying and is simply not going to recover, the Business Insider claims. The symptoms of systemic ruin are 1) Second wave of foreclosures, 2) Tighter lending standards, 3) Hard to find jobs, 4) One million discouraged workers, 5) Depression in some cities, 6) More jobs going overseas, 7) Much worse job loss than 2001, 8) Unemployment funds running dry, 9) More food stamp recipients every day, 10) Bankruptcies skyrocketing, 11) The decline of the USDollar as a reserve currency, 12) State & local governments dead bankrupt, 13) No money for pensions, 14) The Social Security & Medicare crisis, 15) The Federal debt already out of control, 16) Now the debt nightmare, 17) Corporate tax revenue way down, 18) The challenge of debt finance, 19) Reckless inflation, and 20) The day of reckoning here now.

GAPING CRACKS IN US EMPIRE

◄$$$ ITALY SEIZED BANK OF AMERICA ASSETS. AT ISSUE IS THE CREDIT DERIVATIVES SCHEME THAT UNRAVELED ON FOREIGN SOIL. A REGIONAL GOVERNMENT IN ITALY WAS VICTIMIZED, AN EVENT THAT TRIGGERED AN ITALIAN GOVT RESPONSE. $$$

Special financial police from Italy seized ¬73.3 million (=US$102 million) of assets from Bank of America and a unit of Dexia SA as part of a probe into an alleged fraud in credit derivatives contract trading. Deep losses were suffered in 2003 and 2004 by the the regional government of Apulia, located in the heel of Italy. The charge is that the banks misled the municipality on the economic advantages of the transaction and concealed their fees, claims the prosecutor in Bari. The region, also known as Puglia, combines more than 519 Italian municipalities that face ¬990 million euros in derivatives losses, according to data compiled by the Bank of Italy. This is not the first such action taken by Italian authorities. Last April, the Milan prosecutors seized assets from four banks including JPMorgan Chase and Union Bank of Switzerland, followed by demands for a trial on alleged fraud. Hearings commenced this month. All funds surrounding the case have halted for further investment. The magistrate also asked that Bank of America be forbidden to do business with Italian municipalities for two years. Merrill Lynch, the dead entity, was involved in the bond sales with Apulia in the two years when losses hit. At issue is an undisclosed relationship between Merrill Lynch and an international law firm. The Apulia investors were recommended to seek counsel from the firm. Misrepresentation is claimed, as the banks arranged the swaps to their advantage to hide grand fees, claims the prosecutor. No comment came from either the London office of Bank of America or the Rome office for Dexia Italian unit called Dexia Crediop. See the Bloomberg article (CLICK HERE). The legal action and clawbacks against Wall Street firms has begun on foreign soil, where cushy relationships do not protect the fraud kings.

◄$$$ A YEMEN FACT SHEET READS LIKE AN ECONOMIC TRAGEDY SOON TO TURN A NEW WAR CHAPTER. THE USMILITARY COVETS A GUARDIAN POST AT THE MOUTH OF THE RED SEA, AS PASSAGEWAYS AND TRADE ROUTES ARE QUIETLY BECOMING STRATEGICALLY PURSUED AND DEFENDED. $$$

Without a staging ground against Saudi Arabia, without piracy, without proximity to strategic passageways in trade routes, Yemen would remain a destitute sleepy sandy state on nobody's radar. What is not mentioned in the US media, fully obsessed with contrived bomber incidents, is the horrendous decline in the Yemen oil industry. In 2009, they ranked as the 36th largest producer with 300k barrels oil output per day. Oil drives their economy, responsible for over 70% of Yemeni Govt revenues and 90% of export revenues. During the first 10 months of 2009, crude oil exports brought in $1.4 billion, a collapse from the $4.1 billion in the first 10 months of 2008. Its oil reserves range between claims of two and three billion barrels. The sudden poverty makes them ripe for a deal with the USGovt, selling their soul. The sun parched nation is almost the size of France, with the same population of Iraq at 23 million. At a paltry $800 annual per capital income, it is the poorest Arab country, burdened by a 35% unemployment rate a few years ago and probably worse now. Suddenly the United States cares about the nation. It is a strategic point near the Persian Gulf that could control shipping lanes. See the Energy Bulletin article (CLICK HERE).

Without any doubt, Yemen has sprung onto the geopolitical stage of importance for its strategic location, at the helm of the Red Sea. The major ocean passageways will in the future become the object of fierce battles over control of trade routes. The USGovt has a unique knack, bordering on the Orwellian bizarre, to thrust an obscure area into a position of importance, with contrived stories straight out a childhood library comic book theme. Another absurd USGovt terrorism story, to be sure! No end to their creative script capability.

The island of Socotra (aka Suqutra) in the Indian Ocean is located some 80 kilometers from the Horn of Africa and 380 km south of the Yemeni coastline. Despite being a wildlife reserve and a World Natural Heritage Site, the islands of Socotra lie at the crossroads of the strategic naval waterways of the Red Sea and the Gulf of Aden. Thus the island is crucial to the USMilitary. In keeping with USGovt strategic objectives toward the militarization of major seaways, both Socotra and Yemen will be seized by coerced contract. The strategic waterway links the Mediterranean to South Asia and the Far East, through the Suez Canal, the Red Sea, from the mouth of the Gulf of Aden. It is a major transit route for oil tankers. A large share of China's industrial exports to Western Europe transits through this strategic waterway. Maritime trade from East and Southern Africa to Western Europe also pass through the Gulf of Aden and the Red Sea. A military base in Socotra could be used to oversee vessels movements. The Chinese control the Panama Canal. The US covets the control of the Red Sea, it seems clear.

On 2 January 2010, the Yemeni president and leading USMilitary general met. Regard both these men as heads of state. Ali Abdullah Saleh and General David Petraeus struck a deal in high level discussions behind closed doors. Soon they will be best friends, like with Karzai of Afghanistan. One must wonder if the Yemen summit was planned before the staged Detroit bomber incident, supposedly ordered by Yemeni terrorists. The sandy stronghold north of Somalia will soon be the staging grounds for US drones and missiles to fight terrorism. The meetings had an agenda to establish a fully equipped military base on the island of Socotra. Saleh reported to have surrendered Socotra for the purpose of combating pirates and al-Qaeda. From a Baghdad press conference on January 1st, General Petraeus confirmed in Baghdad that security assistance to Yemen would double from $70 million to $150 million dollars. The prefatory Detroit airline bomb incident, the explosive laden in the boxer shorts, paved the way for world acceptance of the new accord. The establishment of an Air Force base on Socotra was described by the US media as part of the Global War on Terrorism. The small Yemeni airstrip will be expanded to a full base in order to support the larger aid program as well as battle Somali pirates. The Yemeni forces will benefit from equipment upgrades such as armored Humvees and helicopters. If the new USMilitary base does not traffic in Afghan narcotics, the Jackass will eat your dirty boxer shorts.

A US Naval base is also in the planning stage. Other regional support is tied to the sandy hotbed at the Horn. On 29 December 2009, the Yemeni cabinet accepted a $14 million loan by Kuwait Fund for Arab Economic Development toward the development of Socotra's seaport project. Regard the Detroit incident as a deft brush stroke to sweep Russia from the strategic Socotra, where they once had a military presence, then part of South Yemen. The meeting between Petraeus and Saleh were crucial in weakening Russian diplomatic overtures to the Yemeni Govt. Fortunately, the NorthWest Airline incident and its fortuitous bomber in jockey shorts did not have its origin from Basque Separatists in Spain or Warlords in the Sudan. The expanded militarization of the Indian Ocean is underway. The plan seems to be linking Socotra to the Diego Garcia military base, the largest overseas US Naval base. The US Defense Intelligence has long believed that maritime supremacy in the Indian Ocean would be an important factor on the international scene. See the Global Research article by Michel Chossudovsky (CLICK HERE).

◄$$$ JAPAN TERMINATED ITS SUPPORT ROLE IN THE ALLIANCE WITH THE UNITED STATES AND TURNS TO CHINA. A HUGE SHIFT COMES THAT COINCIDES WITH THE GLOBAL PARADIGM SHIFT AWAY FROM THE USDOLLAR. TOKYO IS MAKING SMALL MOVES, SOON BIGGER MOVES AWAY FROM WASHINGTONDC. $$$

Japan has decided to terminate its military refueling mission in Indian Ocean, a strong signal that the alliance with the United States is in the process of change. Japanese Defense Minister Toshimi Kitazawa in mid-January ordered the Maritime Self-Defense Forces (MSDF) to end its refueling mission in the Indian Ocean that have been supporting USMilitary and CIA operations in Afghanistan. The move is the first from the Democratic Party of Japan (DPJ) in an effort to change the path of its foreign policy. In its strategic statement, the DPJ said that it would aim to "eradicate terrorism and its breeding grounds, study the implementation of economic assistance, strengthening of government institutions toward humanitarian and reconstruction activities, ... and contribute to the eradication of poverty and to national reconstruction." This policy marks a shift from the Liberal Democratic Party, which allowed laws to pass through Parliament amid opposition, allowing for a cooperative role in an overseas conflict for the first time since World War II.

The law, first passed by the government of Prime Minister Junichiro Koizumi in 2001, proved controversial because it went contrary to a long-standing article that obstructed all military activity in the settlement of disputes. The USGovt  has in recent years pushed for more Japanese involvement in international conflicts. Therefore the move to end the Afghan support mission is likely to anger the United States and to cause at least minor disruption to the alliance. The Japanese Govt will probably continue with non-aggressive support, such as through engineers, doctors, and teachers.

Sarah McDowall is an analyst with IHS Global Insight. She wrote, "The DPJ has long stressed Japan's pacifist Constitution, arguing against Japanese participation in American conflict situations. At the same time, the government needs to reflect Japanese public sentiment on the security issue, as there is less support for involvement in Afghanistan than Washington would like... The US-Japan security alliance is likely to remain the cornerstone of Washington's foreign policy in the Asia Pacific region, even though thorny issues such as Japan's decision to halt its refueling mission in the Indian Ocean will place growing strain on the relationship." Tensions have risen in recent months between the United States and Japan over a DPJ decision to review a Status of Forces Agreement (SOFA) signed by the two parties in 2006 allowing tens of thousands of American troops to remain in Okinawa. The SOFA issue is complicated, especially given how the new administration in Tokyo is on course to rescind an agreement signed by its predecessor.

Newly inaugurated Prime Minister Yukio Hatoyama attempted to set the record on his position. The Japanese role is not ending in Afghanistan, but the clarity offered seems in my view to steer emphasis away from narcotics and toward actual nation building. It will be difficult for the USGovt to refuse the assistance, since the US claims to be nation building as it develops a vertically integrated narcotics industry inside Afghanistan. Last autumn Hatoyama said, "The Japanese-US alliance is key to Japanese diplomacy. We are looking to the future to try and improve the situation in Afghanistan. I am sure there are a lot of different motivations for joining the Taliban, but one of them seems to be that people have no other sources of income. Therefore we are looking at offering income guarantees and vocational training, so that people will not have to turn to the Taliban but will be able to support their families in other ways." Japan has pledged to contribute a maximum of $5 billion in aid to the region over the next five years, and in doing so, stressed a new civilian direction. A priority is to assist in restoring stability in Afghanistan, but not by acting in response to pressures from other countries. They regard the best course as providing as much civilian assistance as possible. Newspaper editorials have been championing the nation building civilian causes.

US THIRD WORLD DEBT & SYNDICATE PROPS

◄$$$ THE UNITED STATES RANKS POORLY RELATIVE TO OTHER NATIONS IN ITS DEBT STRUCTURE AND EXPOSURE. THE UNITED STATES IS IN WORSE CONDITION THAN ALMOST ALL NATIONS IN THE WESTERN WORLD, EQUALLY BAD AS THOSE IN EUROPE IN CRISIS MODE. $$$

Left to finance its own debt, the USGovt would suffer an immediate cave-in. It has the Printing Pre$$ at its disposal, and a USMilitary to threaten creditors. The combination does not even remotely spell a stable system. The following quote explains a great chart. The USA is shown not as a dot, but as a range vertically and horizontally since its debt is so vague, wars with secret funding and all.

"What I decided to also show above was where the USA would stand if it were a European country... The reality is [the United States is] now running a fiscal deficit of 11% to 13% of Gross Domestic Product, with no end in sight in the near term... Excluding liabilities of Medicare, Social Security, and now Fannie Mae & Freddie Mac, which the taxpayer has unlimited losses on for the next 3 years, [the US is] has about an 80% debt to GDP ratio. With the recent increase in the debt ceiling which will take us through the end of 2010, we are on pace to reach 100% by this time next year. The GDP is a bit over $14 Trillion in the US. So what does the chart tell us? The US is a disaster and aside from Greece, we are worse than all the PIIGS [nations] we are hand wringing about." See the Fund My Mutual Fund article (CLICK HERE).

The PIIGS nations are Portugal, Ireland, Italy, Greece, and Spain. The chart shows the latest annual fiscal deficit as a percentage of GDP on the vertical scale, and the total debt as a pct of GDP on the horizontal scale. The PIIGS nations are all in the risk-filled upper right quadrant. Notice the often criticized socialist nations of Scandinavia in the lower left strong quadrant. The healthiest nation on display is tiny Luxembourg, alone to the lower left. Reckless decisions, economic mismanagement, chronic inflation, instigated and promoted by US leadership, in coordination with the USFed, has eroded the American living standard in a very stealth manner. The United States is Greece, but with vast money trees and shrill press trumpets.

The 'REST' of the national debt includes the future obligations such as pensions, Social Security commitments, medical coverage, and more. See the much higher total liabilities (gray bars) that tend to be several times greater than the official national debts (red bars). The total liabilities assure the debt will be without end, like the payments for the next car and the children's upcoming college education costs. The sovereign debt is far worse, far more grave than usually described. Furthermore, never lose sight of the fact that sovereign debt and bank sector debt are totally intertwined.

◄$$$ MUCH HUBBUB HAS COME OVER THE END OF USFED PURCHASE OF FANNIE MAE MORTGAGE DEBT. THIS IS A MERE SHELL GAME. THE USTREASURY HAS TAKEN OVER THE PONZI MANAGEMENT DUTY. NO CHANGE IN FUNCTION, ONLY IN FINANCE LINES. $$$

The US Federal Reserve plans to stop buying securities issued by government mortgage agencies Fannie Mae & Freddie Mac by the end of 1Q2010, so the story goes. The public is told that cessation will likely to push up mortgage rates, even USTreasury yields as well. The Council on Foreign Relations should know better. After all, Robert Rubin is their sitting con artist economist. At issue is the enormous $1.3 trillion planned purchases of USAgency Mortgage Bonds that will come to a supposed crash ending. The US banking system will supposedly be restored to sanity, as the reckless Quantitative Easing will finally cease, we are told. The integrity of the USTreasury Bond and the USDollar itself will be preserved, tranquility to befall the once insolvent financial flanks. It is the ultimate haven for responsible funds. What a crock! The USTreasury will assume the responsibility of purchase of whatever Govt Sponsored Enterprise housing debt is required to keep the Great Game going, as a result of the Christmas Eve announcement made by Treasury Secy Tim Geithner. Remember that Fannie Mae boasts an unlimited credit line, according to Tiny Tim. That credit line is backed by the USTreasury, and will be tapped, exercised, and abused to its fullest extent. It is urgently needed to cover up the massive multiple engrained fraud programs. Only the actors change as the USFed will monetize the USTreasury housing debt. The operation merely shifted chambers. It will move from hidden basements to protected secured sub-basements. The accounting books will NEVER see the light of day, and the Printing Pre$$ will NEVER stop until the USTreasury Bond default occurs. See the Council on Foreign Relations article (CLICK HERE), as shallow as it is.

◄$$$ FREDDIE MAC WILL BEGIN TAKEOVERS OF A RAFT OF DELINQUENT MORTGAGES. THE MOVE APPEARS TO BE A FOLLOW-UP TO THE CHRISTMAS DECISION TO ENABLE UNLIMITED FANNIE & FREDDIE CREDIT LINES. THE USTREASURY WILL BE BUYING FAILED MORTGAGES. WHAT HAS OCCURRED OVER TWO DECADES IS ABUSE OF FANNIE & FREDDIE AS THE CENTRAL CLEARINGHOUSE FOR NUMEROUS GARGANTUAN FEDERAL FRAUD PROGRAMS, VALUED IN THEFT WELL OVER $3 TRILLION. $$$

Freddie Mac announced last week that it will purchase substantially all its own mortgage loans at least 120 days delinquent associated with Participation Certificate securities. They run both fixed rate and adjustable rate mortgage types. Finally, after several years of rotten management of the home loan approval and mortgage security process, all the defaulted loans in these packages that Freddie bundled up and recycled into the marketplace are coming home, acid, vermin, red ink, and all. Coming to rest in a cemetery is the Home Ownership Society legacy. Two schools of thought exist. First, any fine examination and scrutiny that discovers misrepresentation, broken warranties, improper titles, or whatever basic fraud might result in the loan returned to its originator, out of fiduciary responsibility. Fraud is laced throughout the mortgage finance industry operating from 2003 to 2007. Many warehouse funded mortgage brokers are long gone, from failed firms or from hit & run firms abandoned long ago. Many surviving banks heavy on the origination side, as loan underwriter or indirect financier, might be flooded with a raft of delinquent loans currently under Freddie Mac guarantee, once rejected. The big banks include Countrywide (now under Bank of America), Wells Fargo, Washington Mutual (now under JPM), JPMorgan Chase, IndyMac (now dead), SunTrust, and others. A large percentage of loans surely contain major problems, some elements of fraud. Technically, such loans within the Participation Certificate program might contain a legal avenue for return, kicked back to their originator.

The second school of thought centers upon creation of yet another grand cesspool beneath the USGovt protective roof. The above argument for punting the fraudulent loans back to the big originating firms has deep flaws, easy to identify. The big banks are already on the dole, a vast life support system for swapped loans gone bad, slush funds coming from the TARP, liquidity facilities from the USFed, preferred stock bought by the Plunge Protection Team, and much more. The whole purpose has been to conceal the fraud, bury the fraudulent loans, cover them with USGovt cement, and prevent a parade of lawsuits from victimized bond investors who lost billion$, which includes some powerful institutions. If too many loans kicked back to the big banks with problems, questions would be asked, debates would arise, and bond investors would hear about it. Worse, homeowners would be exposed to extremely dangerous information regarding frauds. The lawsuits would begin. The number of defiant home loan holders refusing to pay their monthly mortgages would skyrocket, as they demanded to see clear titles. No no no!!! The new Freddie Mac cesspool to bury dead home loans, including their significant fraudulent loans, is soon to be filled to the brim, and kept quiet. On Christmas Eve, Treasury Secy Geithner pledged an unlimited line of credit to cover the bad loans under both Fannie Mae & Freddie Mac. The Freddie Mac announcement to claim ownership seems a natural follow-up step in the execution of the grand cesspool plan. The bad loans and fraudulent loans will be purchased by the USDept Treasury, probably even monetized. That means Printing Pre$$ money will be used to buy the raft of loans. Their location under the auspices of the USGovt will enable cement to cover them, like moss over time. See the Freddie Mac homesite article (CLICK HERE).

Catherine A Fitts once served as auditor for the USDept of Housing & Urban Devmt. Her audits revealed $1500 billion in missing funds. She has an excellent perspective on the entire Fannie & Freddie cesspool layout, its historical operations, the efforts to maintain them, and specifics. She commented by email with the following note. "They are cleaning up the bank balance sheets by moving the below market paper into the government. This has been the process for decades. It is just so big this time, they had to nationalize Fannie & Freddie. The backdoor subsidies are very large. The accumulated subsidies since WWII that have been back-doored out are enormous. However, it is not just the mortgage programs. It is the same with thousands of federal, state, and local programs, as well capital pools from pension funds to debt service reserve funds. The amount of wealth that has been skimmed and is still being skimmed behind the scenes is more than most people can fathom, even financially sophisticated people. That is why there is so much money still flowing, when you shut off and turn around the drain. Imagine the positive productivity that comes from working in a system without a drain. Problem is that any disclosure would raise the question where has all this money gone? An honest answer will cause a major Paradigm Shift."

Wow, summarize for clarity and emphasis!!  THE FANNIE & FREDDIE CESSPOOLS COULD BE THE CENTRAL CLEARINGHOUSE FOR NUMEROUS SYNDICATE OPERATIONS AND AGENDAS TOWARD FEDERAL FRAUD AND THEFT OVER DECADES. Thus F&F must be kept going, funds must be kept flowing, people must be executed, and the cover-ups continued forever. Refer to the Freddie Mac Chief Financial Officer found suicided in his Virginia home last year, probably before he could enter the ranks of whistleblower. The F&F complex appears to be the nexus for the USGovt finance operations in the grand financial crime syndicate. Its network contains vast accounts that shift funds behind the curtains, away from view. Perhaps hidden are some accounts that deal with money laundering of narcotic funds. Fitts is essentially saying that full light of day with disclosure of Fannie & Freddie would turn the nation upside down, perhaps even cause a national upheaval, and possibly a total reworking of international perspectives toward the United Sta tes Govt.

USECONOMY STILL IN SHAMBLES

◄$$$ MORALE IS ON THE DECLINE IN THE USECONOMY. MOVES TOWARD COST SAVINGS AND IMPROVED PRODUCTIVITY ARE BACKFIRING. WORKER MORALE IS A SNEAKY UNDERMINE TO PRODUCTIVITY. $$$

A personal comment on the USEconomy. My inbox has seen a surprising volume of unsolicited emails from people in the United States, concerned about the national direction, the prospect for recovery, their job insecurity, the lack of solutions, the degree of corruption, the level of gloom, and actual decisions made by their employer corporations. The volume is much higher than previous memory, even in the autumn 2008 when the US financial foundation fractured in a manner never to recover. Conditions for American workers have deteriorated. Businesses have reacted in firm tones. The change in policies is not at all prudent and toward more streamlined units. Instead, changes appear to be more desperate as the business units lock in inefficiency and undermine morale further. Talk is replete of removing free coffee dispensors to save money, eliminating supervisory posts as groups increase toward 15 or 20 people instead of the usual 6 or 8 people. Job posts are being slashed in an effort to increase efficiency but productivity is sharply in decline. Duties and responsibilities to the survivors are being increased to the breaking point. Workers are routinely expected to work longer hours, accept lower pay, and not complain. Workers are often captive to their health benefits. In the process, productivity turns much worse as worker morale is at rock bottom and bleeding worse. The most visible decline in productivity comes from the supervisors and managers who must spend inordinate time on performance evaluations, and as subscribers report, on rising disciplinary actions. Worker output is inhibited by what many call 'bitch sessions' as groups huddle to complain, bitch, moan, but not work. My image is of whipping the work crew until performance improves and complaining stops.

The US Ship at Sea is not just listing, it is sinking into the Third World. The denial is thick ripe steady on Wall Street and the USGovt agencies. One could count at least a dozen stories in the last three or four weeks where the word 'UNEXPECTED' appeared with economic news releases when describing the slower activity. The recovery story is pure fiction, as though acceptance of the fable is a requirement for the next policy step like raising interest rates. The unexpected adjective was seen with unfavorable stories concerning jobless claims, retail sales, inventory growth,  home sales, new home construction starts, home foreclosures, credit card delinquencies, federal tax revenues, trade gap, bank credit, Philly Fed, and others. They are not unexpected to those who sift through the data and review it objectively and honestly. To start with a conclusion and work backwards with the data is heresy, but all too common nowadays. Accurate depictions of the USEconomy are diametrically opposite to many USGovt statements and assessments. The stories are unexpected to those who swallow the constant economic propaganda.

◄$$$ USECONOMY SLIDES FURTHER INTO A MASKED DEPRESSION, STILL NOT RECOGNIZED. THE JANUARY OFFICIAL JOBS REPORT HID SOME DEEP WOUNDS. MEANWHILE, HOME FORECLOSURES CONTINUE UNABATED AND BANK CREDIT REMAINS ON A STRONG DECLINE. NO RECOVERY IN SIGHT. WORSE, MONEY SUPPLY SHRINKAGE INDICATES A RETURN TO RECESSION DEAD AHEAD. $$$

The January Jobs Report revealed the US labor force shrunk by 661 thousand workers. Americans are dropping out of the system. The broad U6 index of unemployment rose to 17.3%, a figure steady for at least three months. Often called the under-employment rate, the broad U-6 is more often mentioned in economic news stories, a very favorable change from past years. It is interesting to note that by this point in the recovery from most previous recessions, after a certain number of months, all of the lost jobs had already been recovered. This recession is stubborn and longlasting, due to systemic damage in several key structural parts documented on a consistent basis in the Hat Trick Letter. See the graphic below for the current recession (in red) and the previous 2001 recession (in brown). The recessions are progressively worsening to a great degree, as the systemic damage causes significant deterioration to the entire USEconomic foundation. The current recession is only 25 months along officially, but to date during its course, a whopping 8.4 million jobs have been lost. Its upward revision caused a minor stir, not enough in my view though. The previous recession that began in 2001 lasted 47 months officially. The decline as a percentage of the workforce is the worst since the Great Depression. Time will tell if the job losses will indeed stabilize. The key is housing prices and bank assets, both in dire need of staggering volume in liquidations (like a national enema). Lingering continuing claims for jobless benefits are incredibly persistent. Jobless claims registered 480k for the week of January 30th, and 440k on the week of February 6th, no appreciable progress. A recent poll conducted by the Washington Post of registered voters across the nation resulted in 80% stating they believe the USEconomy is in recession. Thanks to the Calculated Risk for a great historical chart.

◄$$$ THE TRAGEDY OF HOME FORECLOSURES CONTINUES UNABATED EXCEPT BY MORATORIUMS IMPOSED. THE NATIONAL TRAGEDY CONTINUES. FEDERAL MODIFICATION PROGRAMS CONTINUE TO BE INTENTIONALLY INADEQUATE. THE KEY IS MORTGAGE BOND FRAUD COVERUP. FORECASTS CALL FOR MUCH WORSE FORECLOSURES IN THE CURRENT 2010 YEAR. $$$

RealtyTrac data showed home loan defaults and repossessions have been streaming at over 300 thousand per month since February. An incredible one million American families lost their homes in 4Q2009, while mindless USGovt and USBank leaders talk of recovery. The fragile USEconomy is nowhere near ready for an Exit Strategy from 0% prevailing interest rates. The economic forecasting group at Moodys expects another 2.4 million homes to suffer default or enter foreclosure this year. Still 21% to 22% of US households remain in negative equity status. Take Atlanta Georgia, for instance. Foreclosure notices in metro Atlanta leaped 27% in February versus January. They were up 34% when compared to February 2009, according to data released from Equity Depot. Barry Bramlett is president of Equity Depot, based in northern suburban Atlanta. He said, "Residential foreclosures basically run across the board in every price range. Commercial properties are clearly on the rise." In all, 10,357 foreclosure notices were published in February in the 13-county metro area, compared with 8181 in January and 7701 in February 2009. The nation in general and Atlanta in particular are NOT in recovery. See the Biz Beat article (CLICK HERE).

Last Thursday, RealtyTrac reported that the number of US families facing foreclosure in January surged a shocking 15% higher than January 2009. Banks repossessed more than 87 thousand homes in January alone, a staggering 31% increase over January a year ago. An historical record 2.8 million households entered the foreclosure process last year. RealtyTrac expects that number to surge to 3.5 million this year, a nightmarish 40% increase, worse than the Moodys forecast! The numbers are tragic. US foreclosure filings exceeded 300 thousand for the 11th consecutive month as modification programs continue to fail. A total of 315,716 properties received a notice of default, auction, or bank seizure last month in January, or one in 409 households. Filings did drop 10% since December though. Modifications fell short, as only 66 thousand delinquent home loans were permanently modified as of December 31st under the Home Affordable Modification Program, out of a targeted four million by 2012, according to the USDept Treasury. Basic forces of unemployment and negative home equity, where loan balances exceed properties value, contribute to the ongoing foreclosure total. As for foreclosures by state, Nevada had the highest rate for the 37th straight month, with Arizona ranked second. Utah, Idaho, Michigan, Illinois, Oregon, and Georgia rounded out the Top 8. See the Bloomberg article (CLICK HERE).

The commercial mortgage delinquency rate on CMBS conduit and fusion loans increased by more than 50 basis points in January, bringing to 5.42% the overall DQ rate. The total delinquent loan balance is more than $36 billion, a $3 billion increase in a single month. The crash and debt writedowns are coming in full force. The Moodys Delinquency Tracker exposes the sectors. The retail delinquency rate rose 72 basis points and stands at 5.24% currently. That increase was 50% greater than any increase in the history of retail. The office DQ rate rose 34 bpts to 3.53%, the lowest of the five major sectors. The multi-family DQ rate now stands at 8.77%, a 63 bpt increase. The hotel DQ rate increased 75 bpts to the 9.82% level. Hotels and multi-families are in the worst position. Common vacancy rates are what are seen nowadays in delinquency rates. Banks are positioning themselves for commercial losses by shifting as much residential loser loans to Fannie Mae as possible. See the Calculated Risk article (CLICK HERE).

◄$$$ ROSENBERG EXPECTS A FURTHER DECLINE IN HOME PRICES, AND A SECOND STAGE OF ECONOMIC RECESSION. HE FORECASTS 50% OF U.S. HOUSEHOLDS WILL BE INSOLVENT ON HOME LOANS BY 2011. $$$

David Rosenberg is chief economist and strategist at Gluskin Sheff & Assoc in Toronto. He is one of my very few respected economists. He said, "Watching the situation in Europe, it is not even clear that the root cause of problems here at home has been solved. We still have a very fragile situation. Household balance sheets, [home loan] delinquencies, defaults, and home prices are still vulnerable to another down leg. People think because you finish one chapter in this post-bubble credit collapse that the book is done... We are in a post-bubble credit collapse and there are going to be periods of calm and stormy weather. Investors will have to navigate through the volatility. Unfortunately, I think we are still in the early stages. The next recession will happen more quickly than people think." Rosenberg expects a further decline in housing prices of 10% to 15% over the next few years. He cites the nine million residential housing units in inventory for sale across the country, a very high home vacancy rate, and unresolved home loans despite futile attempts of USGovt modification. A estimated 21.4% of the US population holding home mortgages has negative equity, owing more than the home value. The figure peaked at 23.0% in 2Q2009, but foreclosures close the book, like a jobless man dying, no longer jobless. He expects that figure to continue to rise in tragic fashion. Rosenberg estimates that the insolvent household rate to reach 50% across the country by 2011, with respect to their mortgage loans. See the New York Times article (CLICK HERE). My view is that if Fannie Mae & Freddie Mac embark on a grand national purchase plan with volume over $1 trillion, the distortion on USGovt ownership could forestall the housing price decline. A plank to communism could be the price for home price stability.

Home prices in the US are due to resume their decline, most analysts believe with a gradual pace. Without extraordinary measures, the downward pace could be faster. The home purchase tax credits are coming to an end. The mortgage loan rates are creeping up. The brick walls that obstruct home loan refinance continue, like insolvency and joblessness. Nationwide, home values fell 5% in 4Q2009 versus Q4 a year ago. Home values fell 0.5% from 3Q2009. One in five housing markets entered a second leg of home price declines in late 2009, according to Zillow.com, a real estate website. See the Market Watch article (CLICK HERE).

◄$$$ SMALL BUSINESSES ARE NOT IN RECOVERY. THEY ARE CUTTING CAPITAL SPENDING. NATIONAL ECONOMIC STATISTICS CAPTURE DO NOT CAPTURE SMALL BUSINESS ACTIVITY PROPERLY. THEIR OPTIMISM IS AT THE HISTORICAL LOW OF THE PAST FOUR RECESSIONS. $$$

Small businesses serve as an excellent weather vane for a USEconomic recovery. They bring forth over 75% of new jobs, yet have almost no voice in the Presidential Cabinet and have not benefited from any Stimulus Plan. Small business might be the Achilles heel within the system, by limiting growth and job creation. Companies with fewer than 500 employees lead the USEconomy out of a recessions. However, in the current cycle, they continue to cut capital spending and dismiss workers. They eliminated 3000 jobs in January, according to Automatic Data Processing, the world's largest payroll processor. A sustainable recovery without strong participation from the small business sector is simply not possible. Andrew Tilton is an economist at Goldman Sachs. He said, "[Reduction in small business payrolls] suggests that a V-shaped economic rebound is even more unlikely than suggested by many standard economic indicators." Many national economic statistics that are not easily doctored actually are biased toward large corporations, which are more favored on credit approval. The Conference Board Leading Economic Indicator rose 1.1% in December, the ninth straight rise. It is overly tilted and influenced by the stock market and sentiment readings, plus large business conditions. The Institute for Supply Mgmt index for manufacturing rose to 58.4 in January, from 54.9 in December, seemingly good news. The Univ Michigan consumer sentiment index fell to 73.7 in February from 74.4 in January. Soft measures are mixed.

Few economic reports capture small business statistics, which lead many economists to be misled about the strength of any recovery from the longest deepest recession since the Great Depression. Ian Shepherdson is chief economist at High Frequency Economics. He said, "[Recent numbers suggest] the official data are too heavily weighted towards bigger companies, which are doing better than credit constrained smaller firms. The latter employ half the workforce." The National Federation of Independent Business index of small business optimism has been near historic lows for 15 consecutive months, declining to 88.0 in December from 88.3 in November, a terrible signal. Take a historical comparison. During the four previous recessions, the index fell below 90 only once. Holly Wade is policy analyst for the NFIB. She said, "Things do not seem to be getting any worse, but they are not getting any better. [Small businesses] are in a kind of survival mode. We just have not seen anything indicating a change." See the Bloomberg article (CLICK HERE).

US STATES WORSE THAN GREECE

◄$$$ THE FISCAL AND POLITICAL PLIGHT OF CALIFORNIA WORSENS. LOOK FOR STATE BOND YIELDS TO REACH AT LEAST 2009 HIGH LEVELS. USGOVT ASSISTANCE SEEMS AT BEST TOO LITTLE TOO LATE. THE BIGGEST STATE IN THE NATION OFFERS MAJOR CLUES TO THE STATE PLIGHT. $$$

California is a critically important state for a great many reasons. Many analysts believe that what happens to California will happen on a grander scale to the nation, all in time. It is the largest in population among the United States, with 37 million inhabitants. It is a trend setting state, with activists aplenty. It hosts several key leading high-tech corporations like Cisco and Qualcomm. Its agricultural output provides roughly 50% of the world food. It contains the greatest mix of ethnic groups in the nation, with significant portions of blacks, latinos, and asians. It is also one of the most gorgeous states with natural beauty. The Golden State is actually two states, the north and the south, with notable friction over water, welfare, and immigration. California is the world's eighth largest economy. California happens to be the largest state of Hat Trick Letter subscribers, one in six (16.6% ) US-based clients and one in eight (12.7%) total clients.

PIMCO and other analysts are forecasting that the California state bond yields could increase relative to other municipal bonds because of the financial strains. It must repair a $20 billion budget gap in the budget during the next 17 months. Look for the issuance of yet more IOU coupons. Even if the Sacramento legislature agrees on a budget, with two thirds required majority, an unlikely prospect, more state bonds must be sold. The state is poised to sell yet more billion$ of bonds after flooding the market with $36 billion in debt last year. A higher yield will be demanded due to the inherent growing risk. Fiscal matters are worsening, not improving, and the political mess is a maelstrom fixated in inaction. The cost of California Credit Default Swaps that insure against default, have risen 97% since late October to $314k to protect a $10 million bond investment. The state has $73 billion of outstanding debt obligations, according to Treasurer Bill Lockyer. A taxable California bond that matures in 2039 traded on February 2nd for an average yield of 7.70%, fully 3.14% above the 30-year USTreasurys. On July 1st, the day before the state issued IOU coupons last year, the yield spread widened to as much as 4.03%, according to Bloomberg data. The state bond spread has grown wider. Big municipal bond traders believe those spreads could easily go much wider still. Right after a budget is forged, the state wants to sell $4 billion of bonds. The CALPERS Board is caught in the middle, with 1.6 million members from state posts bound to its pension fund.

The Schwartzeneggar budget proposal estimates that $14 billion in bonds must be sold in year 2010. An additional $10 billion of notes could be needed to bridge a temporary revenue gap. Last year the bridged gap was only $8.8 billion, this all according to the governor finance office. The muni bond market is saturated with California bonds. Debt rating agencies have downgraded the California general obligations to 'Baa1' by Moodys and to 'A-' by Standard & Poors. These are respectively three and four levels above high yield junk debt levels. Controller John Chiang declared on January 22nd that the state faces another potential cash squeeze crisis in July if lawmakers cannot reach a budget agreement before the fiscal year ends June 30th. Short-term debt rollover is the key. Last year the solution was issuance of $2.6 billion of IOU coupons to taxpayers and vendors from July through September, a desperate move with precedent that precipitated credit rating downgrades. At present a $13.3 billion gap looms in the budget for next year. Governator Schwarzenegger made a plea to the USCongress and President Obama for aid in recent months. It largely fell on deaf ears, as devotion lies squarely with the Wall Street syndicate. The Golden State is highly unlikely to receive the $7 billion he requested, according to the state Legislative Analyst Office. See the Bloomberg article (CLICK HERE).

◄$$$ THE U.S. STATES COMPARE WORSE TO SOME EUROPEAN NATIONS, BUT WITH 35% OF THE POPULATION. GIVEN THE P.I.G.S. NATIONS ARE SMALL, THE UNITED STATES IS HAMPERED BY A MUCH LARGER LOOMING STATE PROBLEM THAN WHAT UNFOLDS IN EUROPE. THE STATE OF ILLINOIS EDGES TOWARD BANKRUPTCY, JOINED BY CALIFORNIA AND WITH SEVERAL OTHER BIG STATES. $$$

Focus on some of the PIGS nation in reference. They have small populations and small economies by comparison to American States. While Spain has a larger population over 45 million, Portugal at 10 million and Greece at 11 million each have smaller populations nearly equal to the US state of Ohio. And Ireland at 4 million has a population similar to the state of Kentucky. The PIGS nations are clearly a problem for Europe. The problems they present for Brussels at the European Union are matched stride for stride by what the USGovt faces, but laden within several larger US states. Seeking Alpha produced a list of seven states in crisis, a list that removes Texas since its unemployment is not quite high enough, and its energy independence offers it some distinction in strength. However, note that Texas has a broad U-6 jobless rate of 13.7% and a state unemployment insurance situation best described as a train wreck in the making. Texas was compelled to borrow more than $1 billion to pay unemployment claims, a step that bankrupted its trust fund. State oil & gas production generates strong income.

The States in the Crisis List are California, Florida, Illinois, Ohio, Michigan, North Carolina, and New Jersey. Each basket case state has a population above 8 million people. Each state has been forced to borrow more than $1 billion dollars, to pay for unemployment benefits. Each state currently registers broad unemployment over 15%. Each state is a large net importer of energy sources. These seven states in debt distress represent a full 35% of the total US population. They face policy clashes between protected state and city workers versus growing ranks of jobless from the private sector. The USGovt could print up money to fund these states, but loyalty is clearly directed to Wall Street banks and much greater funding requirements for the syndicate. The 70 million people in Portugal, Italy, Greece, and Spain are certain to face even higher levels of unemployment, when austerity measures finally slam their systems. Similarly, the 108 million people in these seven large US states face austerity measures, job cuts, project cuts, chronic budget shortfalls, higher selective taxes, and reduced ability to borrow. It is the rollover of debt refinance in short-term debt management that will kill their systems, like with corporations. See the Seeking Alpha article (CLICK HERE).

Take Illinois for example, a very large and important central state. It is not blamed for fiscal spending excesses like California, nor for impact from failed carmakers like Michigan. As the fiscal crisis of Illinois deepens, the state moves toward bankruptcy. Its insolvency grows worse while the cash flow goes restrictive. Its liabilities far exceed the assets, while its generated cash flow is insufficient to pay the bills. Default approaches, like with many other states. Private companies in similar circumstances often shut down or file for bankruptcy protection, but states continue under a cloak of expedience and necessity. Jim Nowlan is from the University of Illinois Institute of Govt & Public Affairs. He said, "We are close to defacto bankruptcy, if not dejure bankruptcy." Legal experts say the protections of the federal bankruptcy code are available to cities and counties, but certainly not to states. Despite a budget shortfall estimated to be as high as $5.7 billion, Illinois state officials have not made urgent moves to raise taxes or to cut spending sufficiently to close the gap. They operate in denial or are stunned frozen. The situation will continue until a vast sink hole is seen. See the Chicago Business article (CLICK HERE).

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