MONETARY CRISIS REPORT
CLIMAX OF FINANCIAL FRAUD
COMPREHENSIVE GUIDE

* Monetary Fragments
* Chinese Shadow on the US
* Domestic Screws Turn
* Financial Fraud Gone Wild
* MFGlobal Coverup
* Zero Interest Rate Damage
* Europe & Greece Sparks


HAT TRICK LETTER
Issue #95
Jim Willie CB, 
“the Golden Jackass”
19 February 2012

"Massive fiscal and monetary stimulus, along with unprecedented market interventions, has completely overwhelmed the capacity of the markets to effectively price risk. Instead of learning from past mistakes, policymakers are more determined than ever to dictate market pricing. Rather than recognizing the prevailing role Activist central banking has played in fomenting dysfunctional markets, policymakers believe market outcomes beckon for only greater activism. Until governments can begin to extricate themselves from the manipulation of interest rates and risk market pricing more generally, this long cycle of destructive booms and busts will run unabated." ~ Doug Noland (Prudent Bear, the current bust is a systemic failure and the climax of capitalism having run its American course, worse than endless boom & bust)

"When you add that no default will be declared a default by the Intl Swaps & Derivative Assn, you have a guarantee that QE will go to infinity at the cost of the US currency market first and the US bond market second. I put this epic event in the year 2015. I give the US dollar no longer than June of 2012 before the cracks in its armor are visible to all." ~ Jim Sinclair

"But please, to our friends in the Big Media, could we stop saying that we don't know the location of the missing $1.6 billion of client funds from MFGlobal? The money is safe and sound at JPMorgan and other counter-parties. As with Goldman Sachs et al and American Intl Group, the banks have been bailed out at the cost of somebody else. And the various agencies of the federal government are complicit in the fraud. The effort by former New Jersey Governor and MFGlobal CEO Jon Corzine to save his firm by stealing customer funds seems to warrant further discussion, yet instead we have silence. So why is it that the Large Media has such trouble reporting this story? The fact seems to be that the political Powerz that be in WashingtonDC are protecting JPM CEO Jamie Dimon from a possible career ending kind of stumble with respect to MF Global." ~ Chris Whalen (Institutional Risk Analyst)

"European leaders repeat the same kind of platitudes, [like] we need to get growth going, [like] austerity will not be enough, but no country has policies that will achieve growth. I have not heard a single thing here in Davos that has convinced me that the European leaders have any sense of what they need to do and will do. Nobody knows who owes what to whom, where the risks of a Greek default are." ~ Joseph Stiglitz (Nobel Prize winning economist, whose words were the only wisdom or story worth reporting from the Davos World Economic Forum, a country club gathering of criminal bankers and their investment fund cohorts)

"Thank God that at this hour I am dangerous to the war profiteers of this country, who rob the people on the one hand, and rob and debase the government on the other. Then with their pockets and wallets stuffed with the filthy bloodstained profits of war, they wrap the sacred folds of the Stars and Stripes about them and about their blatant hypocrisy to the world." ~ Kate Richards O'Hare (1917)

"We are up against the abyss. The psychopaths who ran us over the ledge in 2008 are still doing the shepherding. They are the 5% controlling the herd. Even if the current group of psychopaths went to jail, there would just be another group of Wall Street psychopaths filling their shoes. That is the problem with Corporatocracy. A revolving door turns between these corporations and our government." ~ Davos Sherman Okst (corporatocracy is another name for the Fascist Business Model)

MONETARY FRAGMENTS

◄$$$ BACKGROUND EDUCATION IS URGED TO LEARN ABOUT THE ROGUE INDEPENDENT NATURE OF THE US FEDERAL RESERVE. ITS GLOBAL DOMINATION IN WEALTH CREATION IS CLEAR. ONLY RECENTLY HAS ITS ACCESS TO MONEY BEEN SO BLANTLY EXERCISED. FOR SOME REASON, THE US-PUBLIC IS NOT OUTRAGED BY $26 TRILLION BEING DISPENSED TO THE OWNERS OF THE USFED OWNERS AND ALL THEIR FRIENDS, THE CENTRAL BANKS. $$$

See an excellent historical treatment, with up-to-date entries of the TARP era dispensation of $26 trillion on near 0% loans. The loans will never be repaid, more like grants. One could think the elite prepared for purchasing the world's assets on a gift card replete with privilege. One could also think the elite have suffered major financial blows in the last few years from the Western bust, and required replenishment. Many researchers believe the Western bankers were tripped into the systemic failure that began in 2008 and continues today, in retaliation. Both arguments have merit. The corruption, reliance upon violent crime, and diversification of the elite interwoven system is astonishing and impressive. It extends to the news networks and pharmaceutical industry. The latter should give warning of intentional genocide programs with toxic substances and microbe agents. Monsanto is the food industry agent for poison, at the genetic level. See the Divine Cosmos article, more like a long essay (CLICK HERE). Thanks to JuanC in Argentina for the shared article.

◄$$$ UKGOVT DEBT HAS SURPASSED GBP 1 TRILLION. THE DEBT BURDEN IS EVEN HIGHER IF BANK BAILOUTS ARE INCLUDED. THEY ARE DEAD MONEY INVESTMENTS TO TURN TOXIC, IF NOT ALREADY. THE UKECONOMY WILL CONTINUE TO SLOW, AS THEIR CHRONIC RECESSION CONTINUES APACE. $$$

Naturally, the UKTreasury has blamed unsustainable levels of spending by the last administration led by the Labour party. The British public debt has surpassed the GBP 1 trillion for the first time ever. The figure rises dramatically when bank system bailouts are considered in the tally. The debt is the highest since records began in 1993, and represents 64% of GDP. The debt service costs are estimated at GBP 47.6 billion in the current financial year, rising gradually in future years. The urgency to bring the deficit under control is widely felt, but the ability to handle it is nowhere. The nation suffers from following the American housing & mortgage boom and bust policy toward total ruin. The only good piece of news is that borrowing volume is 10% lower than it was last year. The debt continues to increase. A grand challenge is presented to put the national finances back on a sustainable footing. The situation demands a permanent 0.5% official interest rate, or else the service costs will explode. Tax receipts are falling short of the fiscal forecasts. The national economy is beset by a chronic recession that does not receive proper reporting. Reliance upon rising rabbit hutch cottage homes turned out to be a disaster, exactly as the Jackass forecasted in 2005 and 2006 and 2007. They are bound by the same fictional economic forecasts that the Americans are bound to. See the UK Telegraph article (CLICK HERE).

◄$$$ THE SWISS BANK COMPETITION COMMITTEE HAS BEGUN A PROBE INTO INTERBANK INTEREST RATE COLLUSION. THE CORRUPTION WITHIN THE BANKING SYSTEM IS ALMOST TOTAL, REACHING EVERY LEVEL AND EVERY WESTERN NATION. EVERY COUPLE MONTHS A NEW SCANDAL IN SWITZERLAND. $$$

Swiss banking authorities have launched a probe into twelve US, European, and Japanese banks over claims of rate fixing for their interbank lending rates. The Swiss competition commission COMCO is acting upon information as to potential unlawful agreements. The allegations centre on Libor and Tibor, the interbank lending rates. COMCO believes that collusion between derivative traders might have influenced the rates, used directly as benchmarks for financial products such as mortgages. COMCO said, "Derivative traders working for a number of financial institutions might have manipulated these submissions by coordinating their behavior, thereby influencing these reference rates in their favor."

COMCO has the the listed banks under investigation. The banks under review are UBS, Credit Suisse, Bank of Tokyo-Mitsubishi, Citigroup, Deutsche Bank, HSBC, JPMorgan Chase, Mizuho Financial, Rabobank, Royal Bank of Scotland, Societe Generale, and Sumitomo Mitsui Banking Corporation. See the BBC article (CLICK HERE). The last US-based news source to pick up on this story was the Washington Post. They carefully identified the Swiss banks, but left out JPMorgan. Take note that the scandal has not totally worn off from the central banker wife trading on the currency, after pillow talk. But the biggest scandal is the one kept totally out of the news effectively altogether. The major Swiss banks are fighting to defend against multi-$billion lawsuits for improper usage and depletion of allocated Gold & Silver accounts. Hundreds of clients are in lawsuits since the banks refused to deliver on the bullion metal upon demand. They removed it long ago.

◄$$$ A GIGANTIC MINDBOGGLING COUNTERFEIT CASE HAS BEEN CRACKED IN ZURICH. IN ALL, $6 TRILLION IN FAKE USTREASURY BONDS HAVE BEEN SEIZED. THE INVESTIGATION GROUP FROM ITALY IS CREDITED ON THE CASE, A HUGE MAFIA PROBE. THE BONDS WERE LIKELY BETTER DESCRIBED AS TAINTED OR FLAWED, RATHER THAN COUNTERFEITS. $$$

As preface, in the summer of 2009, a highly unusual story circulated when two Japanese nationals were arrested trying to smuggle $134 billion of US bearer bonds into Switzerland from Italy at the border. The story quickly died down after it was subsequently reported that the bonds were merely counterfeit bearer bonds. Nobody heard much about it since then, the story suppressed. The illegitimacy aspect of the bond story was a lie to permit the story to go away. My sources indicated a Vatican involvement, in a big cross-border transfer from lucrative scam role programs. Zurich Switzerland was the site last week of a major mafia fake bond bust. Bloomberg broke the story. The Italian anti-mafia prosecutors seized a record $6 trillion of allegedly fake USTreasury Bonds, an amount equal to almost half of the total USGovt public debt. The bonds were found hidden in crudely constructed compartments of three safety deposit boxes in Zurich banks, according to the prosecutors.

The police force came from the southern city of Potenza in Italy, long dedicated to chasing the mafia dons, and locating the tainted flawed bonds. The Italian officials arrested eight people in connection with the probe, dubbed Operation Vulcanica. The US Embassy in Rome examined the securities, each dated 1934, each bearing nominal value $1 billion. The bizarre aspect of the story is that those in possession of the imperfect legacy bonds were planned for use to purchase plutonium from Nigerian sources. Bogus US securities have been seized in Italy in the past, including at least three cases in 2009. Italian police seized phony USTreasury Bonds with face value $116 billion in August 2009 and $134 billion in June 2009. Such cases are not rare, but the quantity in Zurich was the largest in history. The US Secret Service handles 100 cases per year related to bonds and other counterfeit or forged instruments. See the Zero Hedge article (CLICK HERE) and the Business Week article (CLICK HERE).

A savvy colleague pitched in for a better interpretation of the event unfolded, providing a light of historical reality. He wrote, "Of course the bonds are not fake in the trivial sense. They were intentionally flawed and used to dupe the Asian Dragon Families decades ago into giving up their metals with the idea they would never be redeemable. The flawed bonds must have fallen into low level criminal hands with the passing years, redeemed at progressively lower value on basement trades. They might have value as collateral even if they cannot be cashed." My conclusion is simpler. Back in 1934, if the entire USEconomy had a Gross Domestic Product more than a few $billion, it would be shock. If the entire USDollar circulation stock was more than a few $billion back then, it would be a shock. If the entire USGovt budget was more than several hundred $million back then, it would be a shock. Therefore, conclude that legacy bonds are very much counterfeit.

◄$$$ THE OLDEST BANK IN SWITZERLAND SHUT DOWN. WEGELIN BANKERS ENDED OPERATIONS AND DISSOLVED. OTHER BIG BANKS ARE CUTTING THEIR WORK FORCE IN THE NATION, WHERE THEIR BANKING CENTER IS IMPLODING. THREE FACTORS CONTINUE TO KILL THE SWISS BANKING CENTER. $$$

Wegelin Bankers is a very old Swiss bank. It had ironically nurtured an anti-US stance in recent years. It served as haven for funds seeking safe haven. The Swiss banks no longer want the safe haven status since it invites the Anglo attacks in retaliation, and furthermore, the fund influx drives up the Swiss Franc currency in unwanted manner. Foreign accounts for Americans are an open book with full disclosure, a far cry from decades past when narco money and Selassi money and Marcos money was welcome. In an unrelated case, a good friend in Zurich contacted me last week to inform that his wife lost her job in a major bank with a big investment arm. She was one of 29 laid off out of a large group of 31 workers. The firm is Clariden Leu, an outfit owned and mismanaged by Credit Suisse. They cut 90% of the FOREX staff even though profitable. By integrating the bank into their own house, they will cut 550 employees, enjoy much cost savings, called striping. The Structured Product Team was retained. The news took many by shock, since the histo ry of the bank is solid as a rock.

My view is that the working capital of Credit Suisse has evaporated, along with working capital of UBS. The Swiss banking sector is imploding by all accounts, as the CS and UBS flagships are both wrecked vessels, stripped of their gold, leasing gold from allocated accounts, stealing from clients, and recently defending against class action client lawsuits. The Swiss banking sector suffers from three important factors attributed to decline and loss. The toxic bonds from mortgages have extended to sovereign bonds. The Eastern European mortgages are a vast wrecking field. The privacy of accounts has been shattered, leading to vast account departures and shutdowns. The first two have led to grand losses in reserves, while the third has resulted in funds departing en masse. In general, where the USGovt leaves its mark from influence, a black hole results.

◄$$$ A LOT OF TALK IN THE US-FINANCIAL PRESS ABOUT GERMAN MANUFACTURING PROWESS AND ECONOMIC STRENGTH. THE AMERICANS FIND IT MYSTIFYING. IT IS SIMPLE. THEY DID NOT OUTSOURCE TO ASIA. THEY BROUGHT DOWN LABOR COSTS WITH UNION COOPERATION. IN DOING SO, THEY RETAINED THEIR WEALTH ENGINES. THEY FORGED A SUCCESSFUL PARTNERSHIP BETWEEN THE EXECUTIVE AND LABOR CLASS. $$$

A certain legitimate fascination has come in recent weeks to the German success story. They have wealth, savings, industry, and trade surpluses. They earned their AAA debt rating, whereas the United States coerces its undeserved longstanding merit badge. My belief is that the resistance to outsource to Asia, combined with bringing down labor costs via national compromises with challenges, these are the major factors for the success. In the 1990 decade, a tough series of contracts were made with labor unions, even with 10% to 15% pay cuts with stubborn but cooperative German workers. The Central Europe stronghold nation kept the engines of wealth at home, did not betray the workers, and let the economy continue to go to work. The US corporate leaders engage in constant betrayal, if not open lies, to justify their devotion to offshore and outsourced solutions. Response to labor unions and fierce environmentalists was to depart for Asian shores. A quick story has Cisco Systems, whose CEO speaks openly about growing jobs at home. But an employee is a Hat Trick Letter subscriber, who reported that ten thousand jobs are being outsourced to Asia. The German industrial executives stress another key feature to their economic success. It is education at the broad table in the university and school system, coupled with extensive ongoing training within the corporate walls. This ensures both innovation and high quality. They set goals and meet many of them. Germany did not grow its financial sector out of proportion like the US did, led by Wall Street asset inflation maestros and their demagoguery laced with bond fraud. Chronic war and lost industry, followed by serial asset bubbles and bond fraud, these factors killed the US nation. Not so in Germany. Anyone who has known exchange students in US high schools coming from Germany can attest to them being competent, organized, and intelligent. The Jackass has had the pleasure of knowing three such German exchange students attending high school with children of two good friends in the Boston area.

◄$$$ ALTERNATE PERSPECTIVE ON ENGLAND AND GERMANY ARE WORTH A LOOK. MUCH OPINION HAS BEEN BANDIED ABOUT CONCERNING INTERNAL CONFLICTS BETWEEN GERMANY AND FRANCE, BUT ALSO VERSUS THE OUTSIDER NATION ENGLAND WHOSE LEADER CAMERON HAS ACTED AS A REBEL AT THE RISK OF ISOLATION. $$$

To be sure, the AAA core in Europe is shrinking like an eroding island beach. Pressures are acute for Germany to prop up the EFSF bailout fund alone, to the point of contingent liabilities endangering Germany itself. The burning of Athens will prompt Italy to work out deals more palatable to the public. Portugal and Spain are next on the firing line. Watch for a rebirth of the colorful charismatic Silvio Berlusconi in a gambit to return to a position of power in Italy. But the real game is being played in Germany, where the power lies. Chancellor Merkel is twisting in the wind with no power base. Many mistakenly believe she will make a grand display to restore her power. They are wrong. She will be discarded.

A German banker source provided a perspective on the European interplay, as well as a revealing glimpse into England. Clearly an edge is evident. He wrote, "Many errant analysts choose to misread the hard cold numbers and ignore the interdependencies between Germany and France. The Germany standard of living has reverted back to 1983 levels. Greeks enjoyed an increase in their standard of living by fully 50% since the Euro introduction, courtesy of transfer payments from the EuroCB financed by Germany . Half of French exports go to Germany and half of German exports go to France. But a sizeable 85% of the French national debt is held by the Bundesbank in one form or another, a fact not well-known. It is time that all these Club Med deadbeats face the music. Here are some startling facts about England. Bentley is owned by VE. Rolls Royce is owned by BMW. Land Rover and Jaguar are now owned by TATA. All of these companies make money and are successful now. Without this influx of finance and technology, the British would not have the industrial base any longer to manufacture bicycles or anything else of value added industrial production. The island is losing their significance on matters pertaining to the Western European mainland. The only one of merit still standing in Britain is HM Queen Elizabeth. In London they now have Mercedes busses. Sometimes one wonders what they fought for during WWII."

◄$$$ THE USDOLLAR-BACKED CANADIAN GOVT BOND IS AN EXERCISE IN ABSURDITY AND COWTOW. FINALLY CANADA LACKS CASH FLOW DUE TO PAIN HITTING FROM THE HIGH CANADIAN DOLLAR. $$$

Minister of Finance Jim Flaherty announced that the Canadian Govt has submitted plans to issue a US$-denominated global bond in February. The bond issue will provide funds to supplement and diversify the country's foreign exchange reserves and to meet foreign currency requirements. Therefore, funds will be available to purchase the elevated bubbly USTreasury Bonds, as part of a backdoor Global QE program. The commodity rich nation is in possession of bountiful minerals and resources. It already has flow of FOREX funds. Perhaps this policy move is a response to the encroachment of significant Chinese contracts for commodities ranging from metals to energy to agricultural products. They might no longer make payment in USDollars, thus creating a sudden vaccum in Canada. See the Canada Govt Finance article (CLICK HERE).

Another perspective came from a high level consultant from Toronto. The lack of US$-based cash flow appears to be the direct economic impact of two years near parity. He said, "As long as the Canadian Dollar was at 0.75 to 0.80 versus the US$, Canada could camouflage its inefficiencies, especially from productivity slack. With the currency near parity with the Canadian Dollar, the secondary industries in Quebec and Ontario are being systematically wiped out. Also US movie productions in Toronto have come to a grinding halt since there is no cost advantage any longer. Canada and the US have a daily trade volume of around $8 billion going both ways. That trade will shrink by 50% over the next 24 to 36 months. Flaherty is an lowlife reprobate, an opportunist who sacrifices everything on the altar of opportunity. Canada will eventually recover much quicker than the United States, since the introduction of a commodity backed money system in Canada will be an easy process."

◄$$$ A GROTESQUE ANOMALY ON FEBRUARY 13TH DISPLAYED IN FULL VIEW THE ILLICIT ARBITRAGE IN THE CRUDE OIL MARKET. THE U.S.O. EXCHANGE TRADED FUND IS TIED IN CORRUPT FASHION TO RIG THE CRUDE OIL PRICE. THE MARKET SHUT DOWN FOR ONE HOUR, WITH NO EXPLANATION OFFERED. JUST ANOTHER ETFUND TO RIG A MAJOR COMMODITY PRICE. EVERY US-BASED MARKET IS BROKEN, CORRUPTED, AND A CONTROLLED PLAYGROUND. $$$

Monday February 13th, the honest watchers patrolling the crude oil market could witness a magnificent rare event. The crude oil market has been corrupted for a decade or more. The crush from $140 to $40 in 2009 was a gigantic vivid signal for the corruption, never properly reported. In no way did demand vanish or supply reappear to justify the price movement. The CME crude oil market was halted for over an hour on the 13th during what seemed like a heart attack event. An errant trading pattern occurred. It did not cause a crash. But the irregularity was stark and revealing of a tethered line between crude oil and the USO fund that tracks the oil price, enough for officials to shut down the crude oil market temporarily. The USO fund was controlling the crude oil price, not tracking it, and the evidence was visible in the open. It went offline for a full 75 minutes. An algorithm went berserk for certain. Some block orders choked the system. The tethered line to the USO fund went awry, its control box used to short crude oil with client investor funds. The quote stuffing went out of control. Notice the crude oil price has gone over the $100 mark after many months. If the US$ DX index is making a nice move up, then the oil price should go down and relax. The hedging against a broken USDollar is a major trend. The Boyz have been trying to keep the oil price under control, and the USO fund is a main control panel tool. Check out the Nanex visualization of what occurred in those seconds between 13:59:57 and 14:04:55 when "a blast of quotes corrupted a memory queue causing the software to believe the queue was full all the time." Those are the official market words. Back in May 2010 the fabled flash crash hit several markets simultaneously. This time another rogue algorithm hit. Do not expect the incident to be brought under review, or for any precautionary action to be taken. No need to label the market as corrupt and in need of examination.

Tyler Durden offered the following account. "On February 13, 2012 starting 13:59:57, quotes for crude oil began queuing. At 14:00:35, all of the queued quotes were sent at once. Again at 14:01:08, the same 38 second block of quotes sent earlier was sent again, old timestamps and all plus a few new quotes. Again at 14:01:18, all quotes since 13:59:57 were sent again. This repeated 12 times. From a programmers perspective, it looks like a system problem caused a blast of quotes that corrupted a memory queue, causing the software to believe the queue was full all the time. Tick chart of bid prices (red) along with quote age (blue). Note that as the cycle repeats, it includes a few more quotes (the new quotes + those since 13:59:57). There are 500 quotes between time axis labels. The 500 millisecond chart of ETF US Oil Fund (USO) showing massive quote traffic as it reacts to stale futures quotes." See the Zero Hedge article (CLICK HERE). Some might argue of no proof for USO controls evident. The entire incident could not have occurred without the control linkage. If the USO exchange traded fund truly tracked the crude oil market, then the USO would have simply shut down and gone quietly. It too reflected the cardiac fibrillation. See the quotes in blue and bids in red.

◄$$$ FOR UNITED STATES, THE PATH TO THE THIRD WORLD NATION IS PAVED ON A ROAD THAT HAS BEEN STRIPPED OF INDUSTRY. THE TREND CONTINUES TO REMOVE AND DISMANTLE INDUSTRY. THE UNITED STATES IS THE LEAST INDUSTRIALIZED AMONG THE MAJOR LEADING NATIONS. WITH THE GLOBALIZATION MOVEMENT, THE U.S. TRADED DEBT DEPENDENCE TIED TO ASSETS FOR ITS INCOME GENERATORS SENT TO ASIA. THE RECKLESS MOVE LOWERED COSTS BUT RUINED THE NATIONAL FINANCES. THE CLEAN INDUSTRY OF FINANCE TURNED DESTRUCTIVE. $$$

The Third World is guaranteed for the United States, not even in debate. Rigged elections and rampant fraud are bitter fruits from the trees grown wild in recent years. Heightened monetary inflation will keep the finances going for a while, until the consequences enter. The American Tragedy is built upon lost industry, steadfast devotion to war, devotion to asset bubbles, permitted fraud, central bank errant ideology, and abysmal economic guidance. But the foremost factors in my view are the Vietnam War, the heavy cost, the inflation impact, the rising wages, the built-in cost of living adjustments, then the resulting lost industry from seeking out lower cost outsources. They were easy to find in Asia. Few economists connect the heavy war cost to the USEconomy in gutting its domestic industry. The environmental movement offered cloud cover for the migration, or dismantlement. Clean industry turned out to be basic asset inflation dependence and bond security paper shuffling, laced with profound fraud. The bust has been in place with painful effects for four to five years, with no end in sight.

The following data details about the de-industrialization of America is shocking, hardly new to astute observers but nevertheless worthy of mention. Steel, cars, and electronics are the main thrust, all being lost. The dangerous wrecking ball trend is that the consumption accounts for 70% of the USEconomy, while legitimate income from factories has dwindled. The direction is toward China for that income base. The source of American consumer funding has increasingly come from inflating assets and debt. The USEconomy has lost 42,400 factories since 2001, whose average factory worker count was typically over 500 people. More recently, the US has lost 32% of its manufacturing jobs, over 5.5 million workers since October 2000. In 1959, manufacturing represented 28% of US economic output. In 2008, it represented 11.5% only, and by the end of 2009, under 12 million Americans worked in manufacturing, a level equal to 1941.

Ford Motor Company recently announced the shutdown of a Ford Ranger small truck plant in Minnesota, where 750 good paying jobs will be lost. Dell Computer will expand its Chinese operations with a massive investment of over $100 billion in the next decade. Dell will close its last large US manufacturing facility in North Carolina in November, booting down 900 jobs. Printed electronic circuit boards are used in myriad different products. Asia now produces 84% of them worldwide. In 2008, 1.2 billion cell phones were sold worldwide, with zero produced inside the United States. According to Tax Notes, between 1999 and 2008 employment at the foreign affiliates of US parent corporations increased an astounding 30% to 10.1 million, aided by tax benefits put through by the USCongress. During that exact same time period, the US job count at American multi-national corporations declined 8% to 21.1 million. See the effect in the last 25 years in net worth. While not a class distinction, it is an age distinction that reveals an obstacle to young families in climbing up through the tattered middle class. The payback for college education has diminished also. In the last decade, no gains have come in income to college graduates while educational costs have risen 24%. See the MyBudget360 article for more information on climbing the class ladder (CLICK HERE).

The Economic Policy Institute estimates that the USEconomy will lose over half a million jobs in the current 2012 year alone. The US trade deficit with China has risen 18% compared to the same time period a year ago, still rising in trend. The United States spends approximately $3.90 on Chinese goods for every $1.00 that the Chinese spend on goods from the United States. On one hand the US does not produce much, but the Chinese are the world's most prodigious thieves of intellectual property related to movies, books, music, and software. In 2001, the United States ranked fourth in the world in per capita broadband Internet use. in 2012, the nation ranks 15th. That level is converging with educational proficiency in schools among leading nations. The US Census Bureau estimates that 43.6 million Americans are living in poverty, the highest number on record. The flight of industry goes hand in hand with the rise in poverty, something the national leaders cannot comprehend.

Recall that China was granted Most Favored Nation status in 1999, the motives for which must be questioned. In my view, it had to do with breaking the global power structure, and as part of a complex hidden contract to lease the Mao Tse Tung era gold hoard by Wall Street. The economic treason of the banker elite in the United States is astonishing. They refused to return the Chinese gold bullion under lease, earning their deep anger. Retribution follows, the enemy made. The morality of the United States has eroded significantly in the last 15 to 20 years, as part of the Fascist Business Model emerging. Notice the rise of the financial sector since the Clinton Admin, the rise of bond fraud, the rise of endless war, and the climax of skyrocketing USGovt deficits. It is all inter-related. But the underlying cause is de-industrialization, with major symptom lost income.

Amidst the many changes toward Third World status in the United States, notice the many trend changes in life and business. The post office is giving way to insolvency, as couriers dominate and email expands. The personal check will be next to fade slowly away, as online banking and even cell phone access to bank accounts grows. The newspaper is an artifact that the younger generation has no use for anymore. The online sources again flourish. The published book is slowly becoming an expensive dinosaur, what with online segments and Kindle devices flourishing. The landline telephone will be a fixture for corporations and not much more before long, as cellphones dominate and inter-cel features are made cheap. The music industry is dying a slow death, not only from pirated online downloads but from record label self-destruction. Over 40% of music sales are from older catalogues. The television networks are fading away gradually, as cable takes over and computer downloads take root like with NetFlix. Ownership of stuff is giving way to using and renting items on the Cloud. The applications (like word processing and spreadsheet applets) are prevalent in shareware. The storage facilities in Cloud Servers have become popular, as Amazon has thrived in developing this business segment. Welcome to the virtual world. But the most destructive trend is that of the removal and forfeit of industry in America, thought by the arrogant financial sector to be dirty factories. The rust belt has become a badge of economic policy failure. See Germany for a success story in the same avenue.

◄$$$ THE NEW USGOVT TAX PROPOSALS AGAIN ARE PUNITIVE AND DAMAGING. APART FROM THE ARGUMENT THAT SPENDING IS ABSURDLY HIGH AND SUPPORTS A VAST SOCIAL SAFETY NET AND A GRAND ENDLESS WAR, THE TAXES RENDER HARM. THE WRECKAGE PROCESS CONTINUES. $$$

On page 73 of the Green Book pertaining to the USDept Treasury, the benefit for the tax proposals is stated as $584 billion, when the Congressional Budget Office estimated it at only $293 billion. Taxes would be levied on a new category of taxable income, including the municipal bond income, contributions to 401k retirement plans (like IRA & Keough), and the entire health insurance premium regardless of who pays it. The only good part is the tax rate applied for these incremental punitive taxes will be calculatd as the top statutory tax rate minus 28%. For example, a taxpayer subject to a top statutory rate of 35% would pay a 7% tax on this income, the difference. So municipal bond investment supply will go down, harming state finances. So retirement funds will go down, thanks to the USGovt tap. So health insurance costs will rise from the tax back door, leaving less for basic household essentials. This is not progress. These measures will assure the USEconomic recession worsens by tightening the noose a little more. Observe the American austerity poison pill. See the Zero Hedge article (CLICK HERE).

CHINESE SHADOW ON THE UNITED STATES

◄$$$ THE CHINA PERSPECTIVE IS STILL SHROUDED IN MYSTERY. CHINA IS AWAKENING, BUT THE NATION SEEMS FRAGILE IN ITS RECENT REBIRTH. GREAT STRESSES EXIST, BUT GREAT WEALTH FUNDS CAN SUSTAIN IT. THE MAKEUP OF ASIA WILL BECOME VERY IMPORTANT IN FUTURE TRENDS. THE WESTERN FINANCIAL STRUCTURES ARE CRUMBLING. IN THEIR PLACE WILL BE BARTER SYSTEMS WITH ASIAN PARTNERS IN THE FOREFRONT. $$$

China will continue to be an enigma wrapped in a puzzle. But with the added perspective of a veteran global consultant, some light can be shed on the emerging giant nation. Jesse of Cafe Americain provided a preface by saying "China is still the product of the US financiers and would struggle to stand without their indulgence. But that could change if China is willing and able to internalize consumption and create a middle class. They fear their people, which is a serious obstacle." The communist party leaders have strived to build factories and to provide an expanding labor market in order to enable some prosperity to develop in China. Their efforts have succeeded to some degree, but they hitched their fortunes to the USDollar branded wagon. A rising Yuan currency threatens the progress to date, as it breaks away from the defective wagon. As marginal businesses shut down with a stronger Yuan valuation, workers are increasingly without work since export prices rise. Such is the internal stress in China. To be sure, vast problems in real estate, financial markets, and pollution exist, even water supply for Beijing.

A global consultant from Europe has had ample experience with China and their trade practices. He offered a unique unexpected quick assessment in response to Jesse. He has several high ranking contacts in China involved with setting up trade distribution channels and making business purchases. He wrote, "Jesse makes a correct assessment. China needs to create internal consumption to sustain its industries. To do that, disposable income needs to be created within China, which means allowing an upper lower class, a lower middle calls, and a a middle class to develop, which will start consuming large parts of the Chinese industrial output. However, this creates a dilemma for the current political system since it will not be able to deal with such a development and its political consequences. Asia is ruled by eight Chinese families. The entire Beijing elite is part of that family pool. Some have assumed other names to disguise their true lineage. The Chinese are between a rock and a hard place. I am confident that they will eventually find a solution for their country. That solution will not be anything close to what the West might think it should be. As more time passes the West will disintegrate and eventually collapse onto itself. The pendulum is swinging back towards the East. The nations of China and India, together with Africa, make up the majority of the global population. Combined they have the brains and the markets. It is not about the fiat money system any longer. Its about a new, commodity based money system and sophisticated barter. The banks as we know them are becoming obsolete. They will be reduced to a role of a utility that provided a transmission and transfer service, but that is about it. It is like the little Indian boy with his little stick commanding and elephant. If the elephant elects to shake the boy with the stick, it is game over."

Note the sheer size of Africa, where entire large nations are but a fraction of its size. Africa is a primary overtly stated target of China for development of commodity supply channels. China must lock in supply chains to nourish its growing economy. Africa is a secondary secretive target of the United States for development of smuggled minerals of various type, thus earning a price discount. The US is exploiting the Dark Continent for syndicate profit and security agency enrichment. Africa is the current battleground for minerals and the trade, often the smuggling trade. Actual bloody battles with soldiers being killed is happening here and now in Africa over the control of the trade. The United States and China find themselves on opposite sides, with locals like Congo in the middle. The USGovt is knee-deep with the illegal Congolese gold trade. If war breaks out between China and the US, it will be triggered on the African continent.

◄$$$ US GOVERNORS WENT TO CHINA TO DEVELOP BUSINESS TIES. BACK HOME FREE TRADE ZONES ARE TO SPRING INTO LIFE FOR CHINESE BUSINESS VENTURES. ON UNIVERSITY CAMPUSES, IN-STATE STUDENTS ARE MOVING INTO SECOND CLASS STATUS BEHIND PAYING CHINESE STUDENTS. $$$

Governors from Washington, Georgia, Hawaii, North Carolina, and protectorate islands met in Beijing last week to participate in the second China-US Governors Forum. It is organized by the US National Governors Assn and the Chinese Peoples Assn for Friendship with Foreign Countries. The focus of the gathering was on economic development and job creation, done through strong bilateral relationships. They will strive toward a more predictable market environment where access to capital is strong, workforces are skilled and educated, while regulatory and business processes are transparent. The governors will strive to develop the US export firms. On the other side of the fence is establishment of free trade zones. Over 250 official Free Trade Zones are being planned and constructed, the first in Idaho. They will strangely have legal status as foreign soil, where executives and workers will ply their trade. Tax breaks on corporate levies and export fees will be removed to encourage the trade.

On university campuses within California, the new trend is for smaller enrollments of in-state students and greater influx of foreign students, in particular Chinese. They have the money to pay for tuition. High test scores matter little in a time of stressed finances for the state, when considering local student applications for admission. The University of California system has reacted to budget cuts by enrolling record numbers of out-of-state and international students, who pay twice the tuition as in-state residents. Squeezed out are many Asian-Americans with strong achievement. The Asian quota is tilted toward foreign Asians. In 2009, the University of California at San Diego will reduce its number of in-state freshmen by 500 to about 3400 and fill the spots by the higher paying students. As a result, almost 200 freshmen from China enrolled in 2011, up from 16 in 2009, a 12-fold increase. At the same time, the number of Californians enrolled of Asian-American descent fell 29% to 1230 since 2009. Americans are fast becoming second class citizens in their own states, due to fiscal ruin. See the China Daily article (CLICK HERE) and the Daily Paul article (CLICK HERE) and the Bloomberg article (CLICK HERE).

DOMESTIC SCREWS TURN

◄$$$ ROMNEY HAS THE BIG BANKS ALIGNED IN A CONDUIT. IF VICTORIOUS HE WILL PROBABLY HAVE ANOTHER GOLDMAN SACHS CAPTAIN AT THE USTREASURY POST. WITH OBAMA POPULARITY FADING, THE SYSTEM MIGHT BE BACKING A NEW HORSE. $$$

The Obama Admin might be eating leftovers at the banker banquet, compared to four years ago. Compare the Romney donation support by the Wall Street banking community in 2011, stronger than those of Obama in 2008. One might conclude that Romney would perpetuate the Goldman Sachs dominance at the USDept Treasury, my steadfast signal for continued corruption and control. Notice the stern talk by Romney lately about maintaining such a strong national defense that no nation would dare challenge the United States. He is openly courting the entrenched power structure. He might not realize the risk lies within the internal master offices. The NeoCon Santorum is surging, whose rhetoric is almost as aggressive as George W Bush. The Syndicate is grooming its horses. Remember, the anomalies in the vote counting are so egregious, with discrepancies from recent polls and mismatches from exit polls, that my firm belief is that it matters not how people vote. The foreign consulting firm El-Con enlisted to do the official vote count probably has the outcome already determined, in a close exciting race that captivates attention. The Powerz will not permit Diebold machine scrutiny and challenges this time. Too much is at stake, with profitable wars to protect and bold financial fraud to defend against, if not control of the USDollar machinery itself. In fact, it is illegal to challenge the vote count nowadays, an unimaginable factor in a leading so-called democracy. Who counts the votes controls the outcome. Enough said, since beyond the scope of this report.

◄$$$ SECURITY MATTERS HAVE BECOME CONFUSING WITH THE MANY UNCLEAR ATTACKS. THE ALLEGIANCE OF THE SOURCE FOR VIOLENCE IS NOT SO CLEAR. THE RECENT INTERNET CENSORSHIP BILL MIGHT SERVE AS A MILESTONE EVENT WITH BROAD IMPLICATIONS. LOOK FOR IMPORTANT BACKFIRE EVENTS THAT DELIVER SERIOUS BLOWS TO THE POWERZ WHO WISH TO INSTALL A TOTALITARIAN POLICE STATE. $$$

When the US Defense contractors were hacked last year, my ears noticed it as a significant event. To be sure, the Sandia Labs under the second Clinton Admin marked a seminal point as the Chinese snatched some important weapons systems right off the poorly secured website. When the defense contractors were hit last year, it seemed the Boyz (aka CIA) might have been involved to exploit the original breach, to expose the problem to the mainstream and legislative process, to cause some significant damage, in order to prompt legal action for broad controls. But with controls come censorship and pushing the channels toward website registration into the corporate mainstream. Imagine not $32 for annual registration of a website name, but $2000 or more. One could conclude the hacks would continue in order to aid the Internet Control Project known as Stop Online Piracy Act. Two separate legal issues are at issue, the raids of intellectual property such as books, music, and software, even patents. The other side is censorship itself, the active removal of content deemed unsavory, offensive, or critically on the mark. Banning websites has nothing to do with online piracy. So watch the scope grow in the bill as it hatches. Refer to internet journals that feature regular stories about USGovt corruption, Wall Street fraud, legislative collusion, agency involvement in narcotics, environmental violations, and regulatory coverups during absent prosecutions.

Other significant events have been WikiLeaks of questionable type. Lately Anonymous has pitched in some powerful messages. It is unclear whether major factors are indeed run by White Hats or Bad Boyz wearing favorably colored hats in a deception to further a hidden agenda. The Tea Party has been totally coopted in my view. To be sure, it contains some tough minded politicians who refuse to yield on budget tightening, but over 90% of them voted to continue the extreme powers of Homeland Security in an exercise to tighten security at the expense of liberty. This was a major copout. The Tea Party has lost its original plank of zooming in on Wall Street bond fraud and its engrained corruption in two USGovt branches. Once in the USCongress, its members receive the gravy from the bank sector in donations, thus silence in control, or perhaps threats to avoid obstruction. A big backfire against the Empire seems underway outside the US defended walls. Iran is the major turning point. Keep in mind that Iran committed the similar sins of Iraq, but the rogue nation has gathered allies against the Empire in non-US$ usage within the all important crude oil industry. Backfires might actually come against the Internet control movement, or to the Gold confiscation initiative (liquidation forced) in the coming months, akin to the Iran backfire. The elite goal of a totalitarian police state is aided by banking system breakdown, by sovereign bond breakdown, and by economic breakdown. They appoint saviors called technocrats to repair the mess supposedly, but they are mere unelected Syndicate dons.

The next ugly chapter seems hellbent on the Stop Online Piracy Act, designed to take control of the Internet, but disguised to protect intellectual property. A sage global consultant with strong ties to certain Western but non-US security organizations made a comment. He knows what he is talking about, a veteran in two decades of high stakes security battlegrounds. He said, "Anonymous is like Al Qaeda, an invention of and run by the Langley Boyz at the CIA. Most of the people working with the Anonymous organization do not know whom they serve. However, this one could very well backfire for the Boyz big time."

Let it be known that Facebook has sold out to the Syndicate. Recall the Goldman Sachs investment last year, their calling card for control. Billionaire status has its price. Numerous Facebook invitations come to the Jackass, but when investigated, the people usually did not send them. The USGovt agencies have coopted it, using the social network to track and monitor people of interest. My policy is to refuse all invitations without thought. All online commercial transactions are also coopted since the old flagship Motorola chips went away and the Pentium chips took the dominant role. The newer chips have a backdoor for agency monitors. All innovative technology is coopted. Notice that Blackberry had some severe technical glitches last year, a direct response to their refusal to be coopted. They command unique leading edge telecom technology. They will stumble until their value is so low that they will sell out.

◄$$$ THE NEW YORK TIMES HAS PUBLISHED AN ARTICLE WRITTEN BY F.B.I. OFFICIALS TO THE EFFECT THAT GOLD OWNERSHIP AND CRITICISM OF THE USDOLLAR IN WEAK POSITION AS GLOBAL RESERVE CURRENCY COME FROM FINANCIAL TERRORISTS AND EXTREMISTS HARMFUL TO THE NATION. THEY ADDRESS MANY LEGITIMATE THEMES LIKE DISSENT AIMED AT POLICE OFFICERS AND TAX COLLECTORS (NOT BANKERS) DURING A TOUGH TIME FROM FEDERAL RENEGADES, RESULTING IN VIOLENCE. $$$

The FBI has gone public with warnings that extremists pose a security threat. Anti-USGovt extremists opposed to taxes and regulations pose a growing threat to local law enforcement officers in the United States, the FBI warned. These extremists, sometimes known as sovereign citizens, believe they can live outside of government authority. The extremists may refuse to pay taxes, defy government environmental regulations, and believe the United States went bankrupt by going off the Gold Standard. Numerous incidents has occurred, where seemingly routine encounters with police have turned violent. Many police officers have been killed or injured, like when sovereign citizens were pulled over in traffic stops. Such incidents are deviant to the extreme and serve no useful purpose except anarchy. On the rise are white collar crime convictions of such defiant citizens. The FBI complains of being swamped by requests for training from state and local law enforcement on sovereign-related matters. JJ MacNab is a former tax and insurance expert working an analyst of the sovereign movement. He estimated the movement has 100,000 members, who express outrage at tax collection, federal reach, banker fraud, and war stance. See the Reuters article (CLICK HERE). Such violence is aberrant and destructive. However, the FBI has gone further in declaring the movement against the USDollar, in favor of Gold and a Gold Standard, in opposition generally against the USGovt financial helm, as being terrorist in nature. This label is extremely disturbing and dangerous. If deep criminality hides behind the US Flag, it must be rooted out.

◄$$$ NEW MORE STRICT CAPITAL FLOW REPORTING REQUIREMENTS ARE SOON TO KICK IN. BANKS WILL BE REQUIRED TO REPORT LOWER AMOUNTS IN MOVEMENT. THE RULE WILL APPLY TO THE GROUND LEVEL ACTIVITY IN PICAYUNE VOLUME. $$$

A source with USDept Treasury information access has informed that starting in a couple months (unsure of exact time), the $10 thousand lower limit will change to $2500. Banks that move over $10k must report the transactions to the USGovt. That amount is to be cut by a factor of four soon. Furthermore, on basic MoneyGram or Western Union small wire transfers, the limit of transfers will be imposed at $250. The limits will come way down, causing an uproar. The new directive will render inconvenience or harm to poor families sending cash back home, like immigrant workers. The clamps are coming down hard. Regard these changes as capital control methods, forewarned by the Jackass for the last three to five years. They are arriving in ugly glory.

◄$$$ INCREDIBLY, PIMCO IS BEING REVIEWED FOR WHETHER IT IS FORMALLY TO BE DECLARED A SYSTEMICALLY IMPORTANT FINANCIAL INSTITUTION, SUBJECT TO HIGHER OVERSIGHT. IT HAS GROWN TOO BIG. THE NET IS FALLING ON THE PRIVATE INVESTMENT SECTOR. THE WALL STREET CONTROL APPARATUS IS SPREADING ITS TENTACLES. $$$

It seems the Pacific Investment Mgmt Corp has grown so big that it endangers the USTreasury Bond. What might soon follow is mortgage regulatory oversight, perhaps inclusion of USDept Treasury officers on PIMCO strategic decision teams. The concern is that the giant manages so much money for pension funds that it could render deep damage to the USEconomy if it ever suffered a failure. The firm has doubled in size to $1.36 trillion in assets since the collapse of Lehman Brothers in 2008. Furthermore, decisions to abandon the USTBond under control could send bond yields higher, rendering other damage. The veil appears to be in the making to justify placing controls on PIMCO since it could abandon USTBonds and USAgency Mortgage Bonds and inflict great damage, even harm national security. Its flagship fund relies heavily on derivatives to place risk insurance against bonds. The fund's size and scope have become so unwieldy as to possibly be unmanageable. If a trading party should fail, some ripple effects could come. Bear in mind that a year ago, Bill Gross disliked USTBonds due to the rising USGovt deficits. Maybe he did not appreciate the corruption laced throughout the top tiers, or the basic abuse of leverage devices like the Interest Rate Swap contract to keep bond yields under control. He might be seen as a renegade who requires a lassoo.

Also the Goldman Sachs lieutenant Neil Kashkari came to serve as head of global equities in December 2009, a move that seemed odd since he had no great experience in such investment circles except for being in charge of Goldman's Information Technology Security Investment Banking, advising public and private companies on mergers and acquisitions and financial transactions. That post seems more like an apprenticeship before moving directly to a director post of a premier fund firm. The bond giant PIMCO decided three years ago to build an active equity management business from nothing. Kashkari did earn his syndicate stripes when he served on the TARP team, officially the Interim Assistant Secretary of the Treasury for Financial Stability. That was a colossal fraud and effective distraction. It seems that he has been installed within PIMCO to serve as eyes and ears, but with an official substantial role to serve. Kashkari comes from the Chicago connection, like Rahm Emanuel who still leads in the White House visit list indicator despite no longer serving an official function. Rahm still serves as liaison to the command center from afar. See the Reuters article (CLICK HERE) and the Business Insider article (CLICK HERE). One should bear in mind that the Wall Street syndicate would savor the opportunity to control all large financial firms in the private sector. Anyone who regards that as a positive development is braindead with a blind spot in the Fascist Business Model entirely. Rather, anyone who holds integrity and fairness in high regard would oppose spreading the Wall Street control apparatus.

FINANCIAL FRAUD GONE WILD

◄$$$ LAX PROSECUTION GOES HAND IN HAND WITH THE FASCIST BUSINESS MODEL. THE CRIMINALS ARE THE USGOVT PARTNERS, IF NOT MASTERS WHO RUN THE AGENCIES DIRECTLY OR THROUGH THEIR HAND-PICKED LACKEYS. AS CRIME IS THEIR MAIN MEAL TICKET, IT IS PERMITTED, ENCOURAGED, ORGANIZED, PROTECTED, AND HARDLY EVER PROSECUTED. $$$

Almost all prosecutions of heavy fraud in the financial sector has been of people outside Wall Street. See WorldCom, Health South, and others. The goal is to give the appearance of fighting crime, but to protect the criminal fortress where the power lies. The higher profile cases focus on patsies and irrelevant side shows. A patsy is the UBS rogue trader. A side show is the Galleon case out of Connecticut. In the last twenty years, the prosecutions have dwindled in number. The volume of bond fraud is at least $2 trillion with numerous Wall Street firms involved. Search deeper to find at least $4 trillion in bond fraud. Barry Ritholtz calls the current investment bank arena a target rich environment. Bank fraud prosecutions seem like a dodo bird going into extinction. Either those in charge are Keystone Cops wading in vast incompetence, or they are part of the criminal latticework turning a blind eye. My firm belief is the latter, of deep culpability. During George W Bush Admin, which Ritholtz calls a reign of error, the USDept Justice looked the other way at rampant diverse fraud, but most especially securities fraud on Wall Street. During his presidency, the cases plummeted 87%. Some called it a curious incompetence.

The Obama Admin is even more unwilling to prosecute high financial crimes, which would probably bring down the system. That is because the power center for the USGovt itself lies in the big banks responsible for the fraud. The Obama cops are no better when it comes to corporate, securities, and bank fraud than the predecessor. Prosecutions of these three categories of crime are best linked to the causes of the broad deep lingering crisis that plague the United States and make recovery absolutely impossible. The Too Big To Fail bank mantra is part of the entrenched problem. These banks are criminal organizations worthy of RICO prosecution. Such cases declined last fiscal year 2010 by 39% from 2003, the period long after some popularized accounting scandals. Enron was a JPMorgan and Citigroup creation with patsy Arthur Anderson taking the fall, the brains being lent by Harvard University.

The US Attorney General has not simply dropped the ball. The office has decided not to carry it at all. Conveniently, or with clear motive, following the 911 events, many FBI agents were reassigned to anti-terrorism projects. Given that function was under a different budget, the USDept Justice should have demanded more fraud investigators with forensic skills. The 911 card is too easy, actually a rather lame excuse for successful fraud prosecutions having dried up. Ritholtz identifies three obstacles for fraud prosecution. 1) Failure to attack the problem as a systemic issue rather than isolated cases, with the RICO weapon used the organized nature of the fraud and vast profits. 2) Conflict of interests from the still enormous stakes the USGovt has in banks and insurers. The incentives to find malfeasance is undercut, since convictions would harm the taxpayer funded portfolio. 3) Lobbying and campaign donations from financial firms would vanish. The USCongress is often fingered as a wholly owned subsidiary of Wall Street. Increased pressure has come from Congressional members on the Justice officials not to bring legal action. He concludes the best hope for obtaining any form of post-crisis justice will come from the State Attorneys Generals. See the Ritholtz article (CLICK HERE) and the YouTube video of New York AG Eric Schneiderman on mortgage investigations (CLICK HERE). Irony is evident. If a RICO prosecution was successful and vast assets were seized, they would be placed under USGovt ownership, but the control would remain with the Syndicate in violation, since they control the USGovt. The assets would merely change closets in the same infested house. Ugh!

The volume and type of fraud cases would require 1000 pages to enumerate and elaborate. The latest gigantic crime is the absent payouts on Credit Default Swaps from European sovereign bonds after their valuation whacks, a clear default that has avoided awards by pure force levied upon the investors. The cohort complicit banks in the grand government bivouac, again the mainstay of the Fascist Business Model, complain little since they receive so much above board and below board aid. The hedge funds are the angry betrayed parties, who might someday have their day in court since often excluded from accords struck. The result is ruined system integrity on debt insurance fraud. The Obama Admin has a particularly stained USDept Justice under Eric Holder. He is so dirty that laundry cycles could spin to eternity without a cleansing. Each successive Justice team seems more devoted to crime than the previous. Holder has some fingers pointing at him for bribery to avoid USGovt prosecution. The Fast & Furious weapon sales to Mexican drug lords should have resulted in his dismissal, if not prosecution for sedition. See the Daily Caller article (CLICK HERE).

See the Jackass public article entitled "Corruption in Fascist Business Model" for a descriptive outline of the climax of corruption within the partnership model that covers several important pieces on the chess board. They seem to move together. The vast bond fraud is permitted, encouraged, planned, and executed with the direct cover of USGovt agency and regulator protection. See the Goldman Sachs insider trading UNIX box on flash trades, where the FBI confiscated the software and made certain the evidence was not published. The stories are truly endless. Best to view the Justice track record from afar to see the inaction, rather than ineffectiveness.

◄$$$ ANN BARNHARDT CALLS IT 'GAME OVER' ON FINANCIAL MARKET LEGITIMACY AGAIN. THE DERIVATIVES CONTRACTS WILL BE DISHONORED. THEY ARE A ONE-WAY STREET OF REVENUE GATHERED WITHOUT AWARD PAID OUT ON SUPPOSED BOND DEFAULT INSURANCE. ONCE MORE THE TOO BIG TO FAIL PRINCIPLE IS AT WORK, BUT NOT MENTIONED SINCE THE INSURANCE FRAUD IS SO OBVIOUS. THE BIG BANKS LIKE GOLDMAN SACHS AND JPMORGAN COLLECTED $TRILLIONS IN CDSWAP CONTRACT PREMIUM AND WILL AVOID ALL INSURANCE PAYOUTS SINCE THEY CONTROL THE REGULATORY BODY. $$$

Ann Barnhardt continues her tirade, providing good perspective on the rapidly deteriorating situation of US financial system integrity. As preface, the ISDA is on the verge of justifying once again why a 70% accepted bond loss on Greek Govt Bonds does not qualify as a bond default to its investors, or to its bond insurance contract holders. She calls it Game Over again with strong arguments and clear contract definitions in rough terms. Incredibly, the top 5 banks account for 99.99% of the roughly $300 trillion in underwriting for US OTC derivatives. They have built a one-way revenue stream which finally has received the spotlight of scrutiny. Here are her main points.

Integrity within the system is vanishing, spelling the end of big US banks and the financial system. The Credit Default Swaps (CDS) are insurance policies that investors have traded, very similar to options. Buying a CDS is essentially like buying a put. The buyer pays a premium as fee to the writer, the seller of the CDS. It dictates that the seller will guarantee and make whole the buyer's position in a specific bond if the entity behind the bond (such as Greek Bond) defaults. In exchange for paying the premium and being made whole after a default, the buyer of the CDS would surrender the bond position to the seller of the CDS, and the seller would then be entitled to keep both the premium paid plus any salvage value of the defaulted bond. The bond is thus swapped. The CDS buyer pays a premium fee. The seller guarantees against a default and takes swapped ownerhsip of the bonds if a default occurs. The bond can at that time be salvaged for some minor financial recovery. That is how it works.

Barnhardt suspects the bondholders are going to take the full brunt of the 70% haircut. The Intl Swaps & Derivatives Assn (ISDA) is charged with the decision on whether or not a default has happened. She expects the ISDA will declare that this credit event is NOT a default. They might even hint that payouts would threaten the entire US financial structure, as in a national security issue. The raft of banks and financial firms that believed their European debt positions were hedged with CDS contracts will find out that they have no protection at all. Then comes the uncertain backlash. The ISDA position is strongarm, dictated by bankers on their regulatory staff, much like with the SEC on stock fraud cases. The derivative regulatory body has never been in the news until recently. Their ruling that a 70% bond haircut is not a default is pure nonsense and more fraud. Barnhardt points out that payment of only 30% toward a home mortgage would immediately result in a default and action to seize the property, even boot out the resident. The motive exists to retain 30% on the impaired bonds in order to make the legalistic argument that a full default has not occurred. Salvage is indeed a core concept in CDS contracts. She returns to the key issue, on which big bank entities wrote all of these Credit Default Swaps. They will make off like bandits since they received the hefty premiums and will never be forced to pay out awards. It is like denying a home fire insurance claim since only two rooms were destroyed, and the entire house was not burned to the ground.

Expect that Goldman Sachs and JPMorgan wrote the CDSwap contracts in large volume. The MFGlobal crime scene shows JPM illictly hypothecating and leveraging the customer funds into European bond positions hedged with Credit Default Swaps. My theory is that MFG was the JPMorgan lackey, covering the big bank exposure in netting to zero the risk. All the large financial firms are making grabs at the available customer collateral, an ugly consequence of their deep insolvency. They are broke, and do not have the collateral on the important contracts that serve as structural planks in the broken financial system. The GSax and JPM banks of the world are happily gathering $trillions in CDS insurance premiums. They know Europe will collapse. They eagerly sell insurance since they control the ISDA on payouts, never to happen. The ISDA is populated by their own people, and the ISDA will therefore never declare a default unless bond valuations fall to zero. They would therefore pocket the premium received, but most importantly would then swoop in and buy up all of the banks and brokerages destroyed by their unhedged net long-Europe positions. The crime scene to come will be double barreled, as the fraud kings will attempt to purchase the wrecked financial field and all its major players with the same money that should go to the insured firms, all to be denied.

The reality regarding the CDSwap contracts extends from their binary nature. CDS are not like regular options. Either there is no default, or there is, and the payout required would be massive, with no legal middle ground. A partial bond loss is a technical default, as the debt rating agencies have competently and boldly declared. No moderate CDS payouts are part of the insurance contract, since all or nothing. The CDS outcome is to swap ownership of the bond for full reinstatement of their insured value. The size of the CDS market is in the tens of $trillions. It is a fraud in progress bigger than the housing bust and mortgage bond debacle. Again, it is Game Over.

MFGLOBAL COVERUP

◄$$$ THE MF-GLOBAL TOTAL STOLEN WAS PROBABLY CLOSER TO $105 BILLION, IF THE MOVEMENT OF MONEY IS ANY INDICATION. THAT IS THE FIGURE OF SUSPICIOUS MOVEMENT IMMEDIATELY LEADING TO THE DECLARED BANKRUPTCY. THE STORY IS FINALLY COMING OUT, BUT STILL NOT GIVEN EMPHASIS OR PROPER LIGHT. $$$

The Trustee to the MFGlobal case cannot be trusted. Finally after two months more actual relevant data has emerged. The original $600 million figure of missing client funds was at one time doubled to $1.2 billion. Last week the missing figure rose again to $1.6 billion in a fresh look. The word is that $700 million is trapped in London, where the Trustee is stuck in the long haul with the British administrator. The funds are not missing, as people in London realize. It lies in the London accounts of JPMorgan and their collusive partner banks, according to their newspapers (which US folks do not read). Apparently the official word is that MFGlobal did not do a good job at recording cash movements. They after all were subservient to their JPMorgan master, and the confusion enabled large scale commingling of funds, all very illegal. Confusion is always a handy lever to pull when flushing a story. According to Bloomberg, the MFGlobal trustee has announced that MFG had a shortfall in commodity related clients funds as early as five days prior to bankruptcy announcement on October 31st. The Trustee claims that MFGlobal did not always record cash movements.

The Trustee has traced $105 billion in cash movement in the days leading up to the bankruptcy. Also, the MFG executive misled the public directly, claiming it held $4 billion in cash and $500 million in excess capital right before it went bust. Like with the Madoff movie, the cited figures in estimated theft are one or two orders of magnitude below the reality. Tens of  $billion in improper cash movement were made in the days leading up to the MFG filing. That bears repeating. The financial press and the lapdog Congressional mouthpieces repeat the $600 million figure like parrots. See the Bloomberg article (CLICK HERE). My contention is that more MFG cases will erupt before long, showing the tangles of hypothecation and illicit asset grabs to cover the vast inter-network of collateralization and derivative coverage by insolvent busted financial organizations. The US public will not awaken until millions of private accouns go missing, not just 140 thousand like in the MFG case.

Brother John provided a great exposure interview of the lead attorney for the Commodity Customer Coalition. Warren Pollock interviewed James Koutoulas. They explored how JPMorgan, former FBI director Louis Freeh, and the USDept Justice are working against MFGlobal customers interests and the pursuit of justice through a transparent and truthful bankruptcy process. The role of Freeh stinks of corrupt influence, like a syndicate liaison inserted to ensure the coverup. The bank syndicate interests are again protected by the USGovt and its agencies working in concert. Notice the obstruction and official ploys. 1) Customers are prevented from discovery, under the rationalization that there is a meaningful investigation underway by the USDept Justice. 2) At the same time Louis Freeh has refused to hand over information that may indicate fraud and malfeasance on the part of major players including Jon Corzine, under the justification that he is protecting the interests of his client JPMorgan. 3) The USDept Justice has not prosecuted mortgage securitization fraud and financial fraud, which contributed directly to the 2008 financial collapse.

The documents and records that customers need through discovery are being kept top secret by the enemies of transparency in the form of the DOJ, JPM, and Louis Freeh. Lead counselor Koutoulas from the class action lawsuit estimates that customers could be made whole to 85% without bickering. See the Brother John article from which the above is directly taken (CLICK HERE). Bear in mind that the MFGlobal fraud is built upon calling the bankruptcy a financial firm failure (where investors are last in priority), when it is actually a financial brokerage firm failure (where investors are first in priority). At issue is investor account restoration. The Commodity Futures Trading Commission has ruled in a declaration of a financial firm failure, in direct opposition to the Trustee and Bankruptcy procedure playing out in a travesty. Look for injustice served in the class action lawsuit outcome.

◄$$$ THE POPULAR LIE STORY IS BEING PROMULGATED THAT THE MFGLOBAL FUNDS ARE INDEED GONE FOREVER. THEY WERE STOLEN, THE FUNDS KNOWN IN LOCATION, AND THE COVERUP WELL ALONG. AN ATTEMPT IS BEING MADE TO BURY THE THEFT WITH A MANHOLE COVER. THE STORY IS BEING TOLD, SO AS TO GIVE IT MORE CREDENCE, SO THE US-PRESS WILL RUN WITH IT. $$$

The Wall Street Journal would have people believe that the MFGlobal funds are missing, never to be recovered, blown away in the hurled winter wind. People familiar with the investigation are giving up on the hunt for the missing $1.2 billion in client funds, or $1.6 billion. They do have their orders, to make a good appearance, then leave the crime scene, certainly do not divulge what turns up in the hunt. Obstruct the records flow. Let the trails go cold. Look the other way when required. The gaggle deeply devoted to the coverup probe grinds on, which includes regulators, criminal and congressional investigators, and court-appointed trustees. Their findings so far suggest that a significant amount of the money could have vaporized as a result of chaotic trading at MFGlobal during the week before their October 31st bankruptcy filing, so goes the official word. Investment funds do vanish from basic bond loss, to be sure, but it was MFG positions that should have been ruined, not sideline customer accounts. The new spin sounds like a solid conclusion after an army of legal beagles and private eyes plied their trade. The story must be told and given credence. The venerable Wall Street Journal is doing its level best to paint the walls the proper color to cover the blood stains and grafiti.

The vulture funds have descended on the field of bodies with missing bones. They have confronted the aggrieved MFGlobal customers with offers between 72 and 85 cents per dollar for their claims. The Wall Street Journal certainly cast gloom on their prospects for any recovery and hopes of justice. A truly queer new angle must be dealt with, casting a strange light. The losing party clients must settle their income tax obligations for 2011. Until they can prove the funds are not recoverable, they bear the responsibility for their tax obligations on the full amount. If they call their investments worthless, then they will have a difficult time working against their own accounting. If they settle with the vulture funds, they can take the loss and move on, having capitulated to the despair and lost sense of justice. They can blame once more the seamy partnership between the USGovt and Wall Street. The manner in which the exchange, the regulators, the court, and the Obama Admin have dealt with the entire case is beyond despicable. This is the Madoff movie sequel, starring Jon Corzine, who will never see one day of prison before, during, or after any trial that will likely never occur. See the Wall Street Journal article (CLICK HERE).

◄$$$ ANOTHER ANGLE TO THE MFGLOBAL CASE POINTS A FINGER AT MELLON BANK, GIVEN SPECIAL TREATMENT BY THE C.F.T.C. IN ITS BACK DOOR FOR PILFERED FUNDS. MANY ARE THE DOORWAYS THROUGH THE WALL STREET SEWER LINES. $$$

The implication is that financial regulators have gone rogue. Reports have come that the corrupt Commodity Futures Trading Commission (CFTC) is permitting Mellon Bank of Pennsylvania to hold large foreign currency positions that are currently on margin call. These foreign currency positions are associated with illegal compounded derivatives and the London LIFFE Exchange. The Goldman Sachs preppie tool CFTC Chairman Gary Gensler met in early February in Naples Florida with representatives and lawyers from CME Group. The emboldened Gensler told the CME Group representatives to ignore the margin calls on Mellon Bank. The over-extended Mellon Bank currency positions have a backdoor link into the Federal Reserve Bank of New York, with a direct bearing on the alleged missing $1.2 billion of missing MFGlobal customer segregated funds. This is a protected Ponzi scheme. Other grand irregularities are visible. During the MFG bankruptcy, whose fiasco intertwined with the Syndicate stronghold JPMorgan, the same Gensler signed an emergency edict, which allowed banks and security firms to be exempt from the rules of the CME Group. The case was quickly transformed into a financial firm bust rather than the actual brokerage firm bust. Curiously, the USDept Justice attorneys have ruled the action of the CFTC Chairman to be illegal. But they have yet to receive phone calls from the Wall Street lieutenants. See the MySpace article by Tom Heneghan (CLICK HERE). Division exists in the USGovt everywhere among agencies versus elected officials, as checks & balances have turned confrontational. The Syndicate rules while the People's Representatives twist in the wind.

ZERO INTEREST RATE POLICY DAMAGE

◄$$$ USDOLLAR IS CAUGHT IN A COLLAPSE, DUE TO EXTERNAL FORCES FROM REVOLT ON TRADE, AND TO INTERNAL FORCES ON MONETARY INFLATION ALONGSIDE BROKEN CREDIT ENGINES. THE USFED SPREADS HERESY AND TOXIC POLICY AMONG FOREIGN CENTRAL BANKS TO ENSURE THE MONETARY DESTRUCTION. THE FIXED RATE BY THE USFED AT 0% UNTIL 2014 IS A CLEAR CALL FOR ALL CENTRAL BANKS TO STAY ACCOMMODATIVE. THE RESULT WILL BE LESS COMPETITION TO THE USTREASURY BONDS, BUT MORE IMPORTANTLY DESTRUCTION OF CAPITAL GLOBALLY. IN EFFECT, THE USFED DECLARED CURRENCY WAR LOUDLY AGAINST ALLIES AND GOLD ALIKE. THE  HIDDEN DAMAGE IS TO WORKING CAPITAL. $$$

Doug Noland of the Prudent Bear provides a fine preface for the latest FOMC Meeting directive to maintain the 0% rate policy for another two years. He wrote, "The Fed committed yet another major error this week. The worsening European crisis last year created a major artificial bid to perceived safe haven Treasury (and related) securities. This amounted to a major loosening of financial conditions for the commanding sector of US credit expansion. The Fed should have recognized how this dynamic had created heightened bubble risk throughout our government debt markets (Treasury, Agency, MBS, Munis, etc). Instead, the Fed has administered gas to the fire, along with pronouncing that it is content to stand gas can in hand for some years to come. The Bernanke Fed has created a backdrop further supportive of speculative leveraging, and global risk market speculation more generally. Worse yet, our central bank is determined to punish savers into submission."

USFed Chairman Bernanke publicly built the basis platform for more bond purchases. He pointed to high unemployment and low price inflation. He fails to realize that the continued sustained 0% official kills the economic apparatus and eliminates jobs en masse. He cannot measure price inflation, his error being at least 8% too low. The central banks are far out of control. The official statement from the FOMC read, "[The committee] recognizes the hardships imposed by high and persistent unemployment in an underperforming economy, and it is prepared to provide further monetary accommodation." One should wonder if they comprehend the effect of their monetary policy even remotely, in killing marginal businesses and thus its working capital (machinery, equipment, labs, buildings). The policy statement was widely regarded as an unambiguous aggressive statement. Most analysts anticipate the next large scale announced bond monetization program, apart from the secretive flurry of bond purchases.

Notice the identification of the Bond Bubble with a USTreasury core. With continued easy money policy and heavy bond purchases, done in secrecy in huge volume, the effects are profound. The principal effects are to create the USFed as a virtual banking system, offering low yields to banks for security, to pressure the cost structure in a constant manner, thus leading to capital destruction from retired equipment in marginal businesses, but with the supposed benefit of reduced price pressures from prevalent liquidation. The bank deleverage process only adds fire to the liquidation factor. The USFed is trying avoid a massive financial system liquidation, and therefore puts the tangible sector at great risk. The consequence of monetary policy is to push costs higher. The business shutdowns work to push end product price pressure lower, the worst possible business environment. Meanwhile the big banks operate as broken credit engines, suffering from the hangover overhang of home inventory and profound insolvency.

The nation is witnessing a powerful capital rot from the inside, during a global attack from the outside against the USDollar itself. The dependence is engrained and rooted for the Printing Press in USDollar output that is hardly wealth. The dependence is engrained and rooted for the Interest Rate Swap for keeping the bond yields down at the periphery, a basic leverage device. Trust among banks has been eroding for over four years, since the advent of the commercial paper fiascos in 2007. Inter-bank lending is a constant challenge. The contagion in the decaying rot process is sent across the oceans via Dollar Swap Facilities. The USFed has assured the continuation of the Competing Currency War melded with hyper monetary inflation. No major foreign central bank will dare to hike rates, experience a currency valuation rise, and endure the harmful impact on the export trade. The USFed has declared currency war on its allies, while sustaining its war against Gold, all the while maintaining a war against capital. See the Bloomberg article (CLICK HERE).

◄$$$ MAJOR CENTRAL BANKS ARE HELLBENT ON MAINTAINING THE FLOOD IN HYPER MONETARY INFLATION. THEY DO NOT COMPREHEND THE CAPITAL DESTRUCTION AND ECONOMIC DAMAGE. YET THEY CONTINUE, KNOWING NOTHING ELSE BUT THE MISSION OF INFLATION MANAGEMENT. THE GLOBAL Q.E. MOVEMENT PERSISTS. $$$

The USFed is stuck at 0%, cannot raise rates or else shatter both the USGovt debt service and the USEconomy. Worse, higher rates would implode what remains standing in the US financial sector, led by the big banks. They have committed for another two years at zero cost money. In doing so, the USFed has forced all major central banks to join 0% or else face a gradual currency rise and its wreckage. A mouthpiece urged the USFed to do all it can to reduce very high unemployment and bring inflation back up to more desirable levels, but with a flawed policy. John Williams of the San Francisco Fed said, "It is vital that we keep the monetary policy throttle wide open. That will help lower unemployment a little bit quicker, and raise inflation back toward levels consistent with our mandates. And importantly, we want to do so quickly to minimize total economic damage." Wrong on all counts. The accommodative low rate will push working capital out of action, shut down marginal businesses, lead to job cuts, and cause continued widespread economic damage. The USEconomy will never enter a recovery phase with a 0% millstone around its neck. The capital destruction effect is the greatest blind spot in central bank monetary history. The intentionally talk down price inflation, but they are not too aware of systematic destruction of working capital. Furthermore, the ultra-low rates offered to the entire saver class slows the USEconomy tremendously. See the Reuters article (CLICK HERE). The Black Hole that is the USDollar funnel will continue to suck value and integrity from the system, including personal wealth and all it touches. Nations and entities that attempt to avoid it have been labeled as rogue or worse.

The United States has moved from crisis to crisis without recognition that monetary policy is a root cause. The tech/telecom bubble in 1999 was followed by sharp interest rate cuts in 2001 and 2002. The housing boom was encouraged in 2002 so as to lift the USEconomy out of the mires of recession. The housing bubble in 2005 was followed by sharp interest rate cuts in 2008 and 2009. Nothing has been learned. Under the Bernanke, the USFed has reduced rates to zero, kept them at zero for over three years, and followed the egregious errors with more daft action in purchasing of $2 trillion in USTBonds and US Mortgage Bonds. The cental bank talks of easing borrowing costs and stimulating growth, but they do the opposite. They know nothing else but aggravated monetary inflation, having painted themselves in the corner, deeply dependent upon easy money. They have developed a deep dependence upon asset bubbles, whose aftermath assures a systemic failure. It is in progress, little recognized. Two years from now, the US will still be talking about justification of 0% rates, if the system can last that long given the global revolt against the USDollar and the rising isolation of the USGovt for its debt finance, as in dependence upon the ultimate asset bubble, the Printing Press for USDollars. The path to USGovt debt default is the current path.

◄$$$ COMMITTED TO SUPPORT THE AILING BOND MARKET, THE BANK OF ENGLAND WILL ADD $79 BILLION OF FAKE MONEY INTO THE UKECONOMY AS STIMULUS. GLOBAL Q.E. CONTINUES UNINTERRUPTED BUT NOT FULLY RECOGNIZED. IT NEVER STOPPED LAST YEAR. $$$

On February 9th, the Bank of England announced it will pump another GBP 50 billion (=US$79 bn) into the economy. They called it protection of a budding growing recovery. The Monetary Policy Committee raised the target for cumulative bond purchases to a total of GBP 325 billion, more than a quarter to be current outstanding UKGilts. Dissent was registered from Albert Edwards of Societe Generale, who accused the British of mimicking the USFed's ruinous polices, upon directives by BOE head Mervyn King. The policy led to the current financial crisis but they continue in place. Former Fed Chairman Alan Greenspan cut interest rates at the start of the last decade in a move critics believe helped create a debt bubble years later. The current Bernanke Fed reduced rates to a record low, kept them at near 0% longer than at any time in central bank history, and embarked on a policy of monetized bond purchases (Quantitative Easing). He talks about easing the cost of borrowing and growth stimulus, but the monetary policy achieves neither. See the Bloomberg article (CLICK HERE).

Edwards, the top strategist at Societe Generale, is no slouch. He delivered an extremely critical and surprisingly effective lambasting of the Anglo central bank villains. He wrote, "There is a healthy debate in the United States about the culpability of the former and current heads of the Fed for the inevitable debacle. [Bank of England head Mervyn] King is similarly responsible for presiding over a copycat catastrophe. It is the monetary authorities in both the US and UK who are almost wholly responsible for allowing this lax monetary environment and the boom and bust in their respective economies. Not the over-exuberant actions of lenders and borrowers. Central bankers have been working very hard. Working hard that is, to deflect blame away from themselves. If knighthoods are being removed for those held primarily responsible for the 2008 economic collapse, Sir Alan Greenspan and Sir Mervyn King should also be stripped of their honors. King is largely more responsible than Goodwin for the collapse in the UK banking sector, and should be held to account. Instead, the man and the institution are being given more power."

◄$$$ COMMITTED TO HALT THE RISE IN THE JAPANESE YEN, THE BANK OF JAPAN WILL ADD $128 BILLION IN MOSTLY JAP-GOVT-BONDS ON LONG-TERM TYPE. THEY REACT TO A STUBBORNLY RISING YEN CURRENCY THAT PERSISTS IN THREATENING THEIR VAST EXPORT INDUSTRIES. $$$

Some shock came as the Bank of Japan announced on February 14th a big add-on to their Quantitative Easing program that has extended over 20 years in time. Notice Japan never exited the 0% corner, a lesson for Americans to observe. They join the USFed, the Bank of England, and the Euro Central Bank in Global QE. In late January, the Japanese Govt surpassed the JPY 1 quadrillion mark in total debt, a major milestone. The BOJ has relied in recent months on asset purchases to stimulate the economy. The recent addition has expanded that plan by JPY 10 trillion, equal to US$128 billion. The Japanese Economy at $6 trillion is in slight decline, the damage from the earthquake & tsunami, and interruptions to the export industries & supply chains. In US terms, in similar proportions, the QE add is like the USFed putting in place a $325 billion new QE package, which is big enough. The JapYen currency is rising in response, up over 400 basis points from its low two weeks ago. That lifts the export sails. The other continent moved in lockstep also, as the Euro Central Bank remains committed to its own EUR 500 to 1000 billion bond purchase program. The global central bank balance sheet reads like a shopping list by Alphonse Capone in purchase of liquor during the Great Prohibition. The string of QE orders with the February 14th climax in Japan paints the entire picture of a Central Bank Valentine's Day massacre, the killing done to capital by the respective national monetary stewards. See the Zero Hedge article (CLICK HERE).

A quick view from the ground by a subscriber in Tokyo. My question focused on the validity of recession in Japan, against a backdrop of a rising Yen currency. He replied, "I cannot speak to the quality of the numbers, especially since the government was caught years back cooking the books on their GDP numbers, but anecdotally a contraction in the 4th quarter of 2011 does make sense to me as most restaurants have had fewer customers. A few Japanese people that own restaurants were complaining how poor it was. Traffic in general has seemed lighter than usual in December, which is generally a very busy time of year with bonenkai (year end parties) which were scrapped in deference to the victims of the quake/tsunami. The Japanese lifetime labor covenant with employees is now dead as more and more firms are hiring arbeito (part-time workers) who work full time hours but have few if any benefits. So it is obvious that if jobs are not off-shored, domestic employees receive less pay and few benefits. [Case in point,] Citibank is offshoring from Japan to China. Japan is well on its way to being hollowed out like the United States has been over the past 25 years. It has been happening in slow motion, but picking up speed with the strong yen now. Let me make it clear that I am impressed with your work. You called the Japanese Yen rising bang-on against all others last May."

◄$$$ THE DEMISE OF THE USDOLLAR WILL BE WRITTEN IN TERMS OF TRADE. THE PETRO-DOLLAR IS THE MAGNIFICENT FOUNDATION FOR GLOBAL TRADE BASED IN THE USDOLLAR. TIMES ARE CHANGING. NEW ACCORDS ARE BEING FORGED. THE FOCUS IS ON THE PERSIAN GULF NATIONS, NOT ONLY SAUDI ARABIA. EVENTS IN RESPONSE TO IRAN SANCTIONS HAVE MOVED THE INITIATIVE FORWARD. $$$

Words are difficult in describing the importance. The Persian Gulf nations are in the process of changing the global financial structure as a result of altering the defined fixed enduring global trade payment system. In the most risk filled and profound financial conversion in recent Middle East history, the Gulf Arabs are planning to end US$ payments for crude oil. In accords being struck with along with China, Russia, Japan, and France, they are moving toward a basket of currencies including the Japanese Yen and Chinese Yuan, the Euro, Gold and a new unified currency. It likely will not emerge from nations in the Gulf Cooperation Council, since the group possesses no great military strength. Expect the emerging currency to come from Europe, agreed upon by Germany, Russia, and China. Typically the United States defends the Petro-Dollar fiercely, even with war, using various sabotage projects, and by falsely stated causes. Secret meetings have taken place every year toward a replacement goal for the Petro-Dollar, having outlived its effectiveness. The plans continue apace, but slowly, while the players grow in number, along with what the new nations bring to the table. In April 2010, more meetings took place (Arab royals only) to forge the other half of the accord, the security protection for the Persian Gulf. The function will be provided by China and Russia. The two nations completed the accord, not publicized since so dangerous. The Iran sanctions have pressed the initiative toward a basket for crude oil payments, or Gold payments, or other barter payments. See the 2009 UK Independent article that is increasingly relevant today (CLICK HERE).

◄$$$ JIM SINCLAIR ANTICIPATES SOME SEVERE REACTIONS TO BERNANKE'S DECLARATION OF THE OFFICIAL PERMANENT 0% RATE. SINCLAIR BELIEVES THE MAINSTREAM WILL NEXT ENTER THE GOLD TRADE AS AN INVESTMENT TO STORE CASH IN A SAFE MANNER, AS HEDGE TO THE CURRENCY DEBASEMENT, AND AS SAFE HARBOR AGAINST FRAUD. THE CASH POSITIONS OF CORPORATIONS WILL FIND GOLD AFTER BEING BURNED BY COMMERCIAL PAPER AND MONEY MARKETS. $$$

The populist gold advocate Jim Sinclair believes the recent FOMC meeting where the USFed announced the Zero Interest Rate Policy (ZIRP) virtually almost forever marks a milestone. When every several months the ZIRP is assured farther into the future, it begins to look permanent, the result of policy failure, even mushrooming systemic failure. Their admission reeks of desperation and being lost in heretical textbooks. Here are Sinclair's thoughts. He believes the mainstream entities like insitutions and the public will next enter the gold market. The USFed turned the light on for QE to infinity. The announcement itself is a game changer. Expect a significant mindset change among investors, corporations, and companies with extra capital in the mainstream.

Gold will be found and accepted as a hedge against current debasement policies. Until now the fringe retail crowd and the international central bank crowd have been the primary entities in Gold. Look for new demand to come from mainstream investment, mainstream pensions, mainstream life insurance companies, mainstream health plans, which must employ a strategy to preserve and grow buying power. This represents huge potential new demand, a total new definition as he calls it. Public companies with significant resources, like tech companies, will soon start to recognize that Gold is an important part of protecting their cash position, which cannot earn a satisfactory yield. Corporate America and corporate global Western finance will begin to look at Gold as an alternative to the normal cash and debt instruments they would use to hedge themselves. Many like commercial paper, mortgage bonds, and money market investments have burned them with unexpected losses, since traditionally so safe. No more.

This new 2012 will become a year of action, not necessarily toward a solution, but of action. Actions like with the USFed swap line, the IMF loan distribution, the major central banks ramping up QE bond purchases, these are examples of action taken. A lulu action would be a bank recapitalization initiative. Sinclair believes the ZIRP Forever call by Bernanke marks the beginning of a great rise in the Gold price after almost a year of consolidation. He forecasts Gold to trade this year at a price between $1700 to $2100 in a conservative range. When Gold next breaks out to new highs, it will be powered by lost confidence, primarily in currencies. The monetary system continues to crumble this entire year with focus on Southern Europe, but the US has its own budget nightmare, without a funding nightmare, due to printing press abuse in hidden fashion. Sinclair warns that the USDollar, not the Euro, is the specie in danger. See the King World News interview (CLICK HERE).

◄$$$ THE USFED TALKS OF NEGATIVE INTEREST RATES, TO EXTEND THE INSANITY FURTHER. REAL INTEREST RATES HAVE GONE CHRONICALLY NEGATIVE. GOLD LEASE RATES HAVE BEEN OCCASIONALLY NEGATIVE. MONEY MARKET RETURNS HAVE BEEN NEGATIVE AT TIMES. HOW BIZARRE! $$$

An unnamed USDept Treasury official commented that the Federal Reserve Board will discuss negative short-term interest rates at a May meeting. Some actually wish it could be. Imagine if the current ZIRP (zero interest rate policy) was pushed into the negative zone. Money deposited at a bank would require a payment to the bank to keep it safe. Stored savings would be cheaper in a safety deposit box or a mattress, even a hole behind the refrigerator. So brokers would pay clients who borrowed funds. What lunacy, but not without precedent. Japan a few years ago experimented briefly with negative rates. The USTreasury Bond bubble is struggling at its apex valuations, unable to go higher. The value rise is not due to final demand, but from Interest Rate Swaps gone amok as they create artificial gigantic demand. JPMorgan owned $61.53 trillion in OTC Swaps in 2007, the figure surely higher over four years later. The top five banks owned double what JPM alone held. One must ask why, and for what purpose, and to achieve what end. The answer lies in prevention of a USTBond meltdown from aggravated high debt issuance in supply, due to the maintenance of the 0% bond yield.

The next natural chapter to the insanity is negative rates, but to halt the newfound role for the USFed in serving as the entire banking system. The real rate of interest has been negative for years. Take the long-term bond yield, like at 2% or 3%, and subtract the price inflation rate, like at 8% to 10%. The real interest rate is in the minus 5% to minus 7% range. Naturally, the short-term bond might be pressured to seek a negative return in a nominal sense. The gold lease rate has been negative often. To keep the broken monetary system on course, bullion banks pay investors to borrow their Gold in order to sustain the high gold volume for sale. Better yet, in order to avoid nasty gold shortage episodes. The return on some money market investments has been negative at times. Every Ponzi Scheme has an end chapter. With so many types of instruments flirting with negative returns, the financial markets might soon face some bizarre anomalies. See the Economix weblog article (CLICK HERE).

◄$$$ SHOSTAK FROM THE VON MISES INSTITUTE MAKES A FOOL OF NOBEL PRIZE WINNING HACK ECONOMIST PAUL KRUGMAN. THE ISSUE IS A DEPLETED POOL OF SAVINGS, THE RESULT OF ABSURDLY LOW INTEREST RATES. THE CONSUMER IS OVER-EXTENDED. THE PRODUCTION APPARATUS IS COMMITTED TO PRODUCE IN EXCESS. THE SAVERS CANNOT SAVE ADEQUATELY. THE BANKS LACK SAVING DEPOSITS FROM WHICH TO FORM LENDING CAPITAL. MOST COMMON KEYNESIAN APPLICATIONS ARE BACKWARDS AND DESTRUCTIVE AS APPLIED IN THE UNITED STATES. $$$

In his New York Times article of mid-January, the Nobel laureate economist Paul Krugman shared his lack of wisdom. He wrote, "If nothing else, we have learned that the liquidity trap is neither a figment of our imaginations nor something that only happens in Japan. It is a very real threat. If and when it ends, we should nonetheless be guarding against its return, which means that there is a very strong case both for a higher inflation target, and for aggressive policy when unemployment is high at low inflation." He concludes that the USFed almost surely will not and cannot start raising interest rates. He implies that the USEconomy could be pulled out of the liquidity trap by means of more inflation. What trash in thought pattern. What doggerel. Krugman is incorrect about almost everything on a consistent basis, clearly the dumbest blockhead ever to win an Economics Nobel Prize. In my view, it was bestowed in order to create some legitimacy to the wreckage that has become the USFed monetary policy and to offer cover for its harmful economic effect.

The liquidity trap has been in full force for the last three years. If the USFed were to attempt to execute an Exit Strategy from the 0% corner, it would not attract sufficient savings since next to nothing is still almost nothing on returns. Higher rates would have the double barreled harmful effect of forcing up mortgage rates and consumer loan rates and commecial loan rates, while also running up the USGovt borrowing costs in signficant manner. The struggling USEconomy, mired in an unidentified recession, could not withstand the hike. Worse, the hidden chambers, where Interest Rate Swap contracts lurk, would experience a shock wave. The deleverage process in banks has a powerful effect. But the deleverage of IRSwaps would be catastrophic for both the big banks that put them to work and the economy where they are placed.

Frank Shostak on the Von Mises Institute disputes most of Krugman's vacant utterances. He argues that the heavy backfire on the ground level has been felt with the Liquidity Trap, in the form of a shrinking pool of real savings. As long as the rate of growth of the pool of real savings stays positive, the pool can continue to sustain productive and non-productive activities. However, when loose monetary and fiscal policies work their magical destruction, trouble erupts. The structure of production emerges that ties up much more consumer goods than the amount it releases. This excessive consumption relative to the production of consumer goods leads to a decline in the pool of real savings, at a time when the horribly low rates offered to savers depletes the bank deposits. A grand double whammy comes from the so-called consumer economy, long an object of Jackass ridicule. The result is weakened support for economic activities, resulting in the USEconomy falling into a slump. The banks lack capital and converted savings from which to lend. Without an expanding pool of real savings, any expansion of bank lending is going to lift bank nonperforming assets. The shrinking pool of real savings contradicts directly the commonly accepted fallacy that the loose monetary policy of the central bank can grow the economy. Then again, the USFed promotes heresy, and operates with vast blind spots. The near permanent 0% rate guarantees a gradually falling pool of real savings, despite the talk of stimulus. The USFed high priests have been wrong about every single pronouncement and assessment since 2006.

Shostak rebutts Krugman effectively, making a fool of the prize winning quack charlatan. He wrote, "Contrary to Krugman, we suggest that the US economy is trapped, not because of a sharp increase in the demand for money, but because loose monetary policies have depleted the pool of real savings. What is required to fix the economy is not to generate more inflation but the exact opposite. Setting a higher inflation target, as suggested by Krugman, will only weaken the pool of real savings further and will guarantee that the economy will stay in a depressed state for a prolonged time." See the Von Mises article (CLICK HERE). More inflation will cause higher costs, more retired capital equipment, fewer jobs, and less savings, in a vicious circle not recognized.

EUROPE & GREECE SPARKS

◄$$$ JOHN TAYLOR EXPECTS A POWERFUL LEHMAN EVENT IMMINENTLY. THE DAMAGE WILL DIRECTLY RESULT IN BANK SECTOR WRECKAGE AND DEEPER INSOLVENCY. WHAT FOLLOWS WOULD BE THE BANK SECTOR BEING VAPORIZED, THEN EXTREME MONETARY INFLATION DURING AN HISTORICAL RECESSION. $$$

John Taylor is an outstanding economist with one foot in the system pond, but whose work tends to put an accurate spotlight on that distorted system. His Taylor Rule helps to explain the relationship between the official FedFunds rate and the USEconomic growth rate, as in control room dynamics. He commented on the European situation that defies solution. He wrote, "Major losses should apply not only to sovereign borrowings but also to accounts receivable for cars, electronics, and other consumer goods. The market has not opened its eyes to the impact this Greek unraveling will have. The EuroZone will be mortally wounded and the world will suffer a significant recession, maybe as deep as 2008. European banks will lose much of their capital base and many should be bankrupt, but just as in the Lehman aftermath, the governments will try to save the banks and the bank bondholders, solvent or not. As the bank appetite for Eurozone sovereign paper will be decimated, austerity will probably follow shortly, followed by deflation and uncontrollable money creation. The European recession should be one for the record books." He spells ugly. My belief is that he only covers half the damage. The ripple effects will hit London and New York banks, but worse, due to the corrupted interpretation of bond default, the system will suffer integrity problems as participants distrust anything and everything imposed by leaders. The lost trust will translate into more Gold ownership and demand, if not a financial rebellion of sort, which will put incredible pressure on the LBMA and COMEX. The focus will undermine the exchanges further.

Rob Kirby offers a perspective, always valuable. His knowledge of bonds, derivatives, and banks is superlative. He believes the United States is in virtually the same insolvent terrible situation as the PIGS, but masked by the Printing Press running overtime at the 0% rate. He describes the hyper monetary inflation final chapter. He wrote, "The Lehman incident was stealth recapitalization of JPMorgan. EuroZone sovereign debt paper is fundamentally no worse a bet than USTreasury Bonds, which owe their sustenance to criminal activities of the USTreasury & Fed Complex via the Interest Rate Swap mechanism. Funny thing no one wants to talk about, as in if the PIIGS could fund themselves at 0% [official interest rate] like the United States, they and EuroZone banks would appear to be as solvent as the United States. The reality is that all countries hooked on the irredeemable fiat debt money system are toast. This has everything to do with the very nature, or life cycle of fiat money, which dictates that at some point money supply or debt must grow vertically. Anyone who takes the time to read the Feds own data can see this is exactly what is happening. What we are witnessing in the failing EuroZone countries is exactly what will happen to the United States if they are ever forced to abandon ZIRP. Put another way, the US Government cannot afford to pay market rates of interest any more than Greece, Italy, or Portugal. The [situation] dictates that we will hyper-inflate. It is only a matter of how much pain is inflicted on humanity first." Only when the public begs for a solution, even if a destructive one, will the hyper monetary inflation spigot be turned on in a very public and demonstrative manner.

◄$$$ REPORTING ON THE GREEK AND SOUTHERN EUROPE PROGRESS TOWARD A VIABLE SOLUTION IS FRUSTRATING. THE SITUATION IS SO UNSTABLE AS TO DEFY DESCRIPTION. SOME CONSTANTS EXIST AT THE TOP IN INTRACTIBLE SOLUTION. IN CONTRAST NOTHING IS CONSTANT AT THE BOTTOM WHERE THE PASSAGE OF TIME BRINGS CHANGE. $$$

Attempting to report on the ongoing development concerning the Greek Govt Bond aid packages, compromise deals, and austerity plans is like reading a month-old newspaper. What seems news today changes so radically in a matter of a day or two, especially one week. The news becomes so obsolete, so quickly, that the wisdom of reporting specifics makes little sense at times. Sometimes before lunchtime in the US and Canada, a deal struck in Europe comes apart on the same day. The constant during the entire unfolding episode is a simple mosaic of destruction of the bank sector and bond market from insolvency, failure of austerity budgets forced into place to remedy deficits, a steady stream of debt downgrades, far more central bank bond purchases than desired or preferred, and increasing violence on the street. More importantly, the other magnificent constant is the absence of stability in solutions agreed upon. The observer is left wondering what parties actually are in control, as the politicians and EU technocrats forge deals that the bankers and hidden powers reject almost as quickly as the deals are struck. The march is on toward a March showdown on the next big $19 billion payment due by the Greek Govt on their debt, which itself is the result of a deal struck that seems unstable. My attitude is a bit defiant and unusual. If one were to read the previous monthly report on the European and PIGS debt problem, nothing much has changed at the top in stable fashion, but almost everything changes at the bottom with agreements, budget battles, bond controversy, asset grab attempts, and buildings burning.

◄$$$ A PLANNED GREEK GOVT DEBT DEFAULT EVENT IS COMING. AN EXCLUSIVE BY THE SLOG. SENIOR US-BANKERS HAVE BEEN GIVEN AN EXPLICIT TIMETABLE FOR THE ATHENS DEFAULT. THE PROJECT SEEMS URGENTLY REQUIRED YET PRACTICALLY IMPOSSIBLE. THE CONTINGENCY RESULTS, THE BREADTH OF EFFECTS, AND THE UNINTENDED CONSEQUENCES CANNOT BE ADEQUATELY FORESEEN OR PROPERLY PLANNED. THE POWER CENTERS (BANKING, POLITICS) REALIZE SOMETHING MUST BE DONE. $$$

For an accurate depiction, think herding 100 cats let loose off a truck in an open field. A solution is required, since the current situation with solutions and breakdowns and changes and rejections has proceeded on course for two full years. The tragic truth is that without exit from the Euro Monetary Union (common Euro currency usage), Greece will continue to sink into a deep dark hole while at the same shed forfeit its prized assets to foreign bankers. Greek as a nation desperately requires not a bailout, but a debt restructure followed by a currency devaluations. This reality is understood by both the power centers and the people who run Greek businesses and walk Greek streets. The harsh reality is sinking in finally. The extension of bailout negotiations, the tough butchery to the economy from budget cuts, the ruin of domestic banks, the risk of big asset seizure, these all seem pointless to the public on a growing basis. So violence has erupted in Athens, pictures for which will not be shown. The Hat Trick Letter chooses not to display burning buildings and people being gassed. The Greek Military and police have made two important points. They will not carry out widespread arrests. They will though, arrest European Union commissars if they set foot on Greek soil.

The Slog (aka Hat4UK Wordpress website) has reported a blueprint for the Greek default. It is worthwhile reading and seems highly accurate and credible. The existence and need for a plan is of the utmost urgency, absolutely required, since the demolition will have to be as carefully planned and executed as bringing down a 50-story hotel in Las Vegas. The risk of ancillary damage is great. If the planners figure out successfully even 75% of the reactions and contingencies, they will be geniuses. The Wall Street leading banks have the plan in their possession, probably principals in the plan since JPMorgan is a huge CDSwap contract under-writer on all PIGS sovereign debt insurance. They have a stake in blocking out the hundreds of $billions in awards upcoming. Permit a complete quoted section from the Slog, rather than paraphrase since too important. Notice immediately the emphasis of timetable, not contingency, which means the default is a known assured event. The Greek Economy will no longer use the Euro currency after the March date. Some credibility comes from recent identified events that appear to fall in synch with the development. The Slog reports the following in full. See the article for scattered details on events as they have occurred, apart from the planned default, an implosion event. The Slog reported the following on a post from Thursday February 16th. No italics will be used for convenience. What follows is by the Slog in verbatim style.

A written document giving firm dates and detailed actions for a planned Greek default has been in the possession of two top Wall Street bank currency trading bosses since the second week in January. The Slog has separate but corroborative sources affirming the existence of the document, and a conviction among senior bank staff that, at least at the time, the plan represented A TIMETABLE, NOT A CONTINGENCY. The plan gives a firm date of March 23rd for default to be announced after the close of business. Senior bankers on Wall Street have been given detailed documentation setting out a timetable to Greek default, including firm dates and technical orders about last use of the Euro as a currency there. The revelation arrived at Sloggers Roost last Monday, since when I have been trying to obtain corroboration. This arrived in the early hours of today (Thursday). One of the banks is Barclays Capital (Barcap) run by controversial figure Bob Diamond. The other must remain anonymous for the time being, in order to protect sources.

The document asserts that Greece will officially be declared in default by all the ratings agencies after the close of business on Friday March 23rd. At the weekend, all Greek bank accounts will be frozen, with emergency measures detailed to prevent the flight of capital. Included in the paperwork is a list of very limited exceptions to the no withdrawals order. All major banks are instructed not to deal with Euro exchange as of open of business in Greece on Monday 26th March. All Greek markets will close for one day at least. As yet, I have been unable to establish the source of the documents. But one of my informants admitted, 'I HAVE STRONGLY SUGGESTED TO GREEK BUSINESS FRIENDS AND CLIENTS THAT THEY SELL UP FAST, DO A SALE AND LEASEBACK ON PROPERTY, EMPTY BANK ACCOUNTS, AND CHANGE TO A HARD CURRENCY.' I have little doubt that such a critical path analysis leading to default in Athens can be easily brushed aside as contingency planning. But this is not the impression Slog sources were given. Its existence is bound to further raise suspicions in ClubMed about the real intentions of EU Nord, Washington, and the Troika, especially the IMF. In particular, the alleged creation of the document both supports (and/or coincides closely with):

1)      Washington going cold on further IMF funding

2)      IMF intervention in the Athens debt talks

3)      Persistent rumors surrounding Wolfgang Schauble's plans

4)      Evidence previously assembled by The Slog concerning Americo-German coordination

5)      A string of delaying tactics by senior EU and Troika officials since mid January.

End of the Slog quoted report. Some final comments by the Jackass. The European Union commissars have been busy lately in playing down the horrendous outcome and shock wave effects from a Greek default, as though they will promote the planned implosion. They cite a catastrophic impact to be only 20% likelihood at most. New Euro Central Bank head Mario Draghi has been pumping money overtime into the banking system in Europe, which is much larger than in the United States. In opposition, the German camp has been busy in slowing down the commitment of funds. Look for the plan to be tilted in favor of the big US banks from the bond losses and insured debt payouts, as the the plan intends to halt the Greek contagion. The unstated goal is to focus aid attention on the EuroZone, by concentrating the bailout funds available to save the bigger players in Italy, Spain, and France. The catch phrase making the rounds in Brussels at the moment is Amputate and Cauterize. See the Slog article (CLICK HERE).

◄$$$ MOODYS  CUT EUROPEAN DEBT IN YET ANOTHER BROAD DECISION, A VALENTINE DAY SMACK. THEY KICKED OUT ANOTHER PILLAR IN A WEAK UNSTABLE STAGE THAT CANNOT STAND ON ITS OWN STRENGTH. NOTICE THE IGNORED USGOVT DEBT STATUS, STEADILY KEPT UNTOUCHABLE. $$$

Moodys Investors Service, in the latest of an endless process, again cut the debt ratings of six European countries including Italy, Spain, and Portugal. The agency warned it may strip France and the United Kingdom of their top Aaa ratings, citing the damage from the European debt crisis. Spain was downgraded to A3 from A1, Italy to A3 from A2, and Portugal to Ba3 from Ba2, all with negative outlooks assigned. Moodys downgraded the rating outlook for France to negative. Slovakia, Slovenia, and Malta also had their ratings lowered. The ratings company affirmed its top Aaa rating for the European Financial Stability Facility. The announced statement read, "Policy makers have made steps forward, but we do not think they have done enough to reassure the market that we are on a stable path. What will guide long-term ratings is the clarity and the performance of policy makers and the macro picture. [Europe's] increasingly weak macro-economic prospects [threaten the] implementation of domestic austerity programs and the structural reforms that are needed to promote competitiveness. [Market confidence] is likely to remain fragile, with a high potential for further shocks to funding conditions for stressed sovereigns and banks." The European debt crisis has and will continue to deepen despite the regional finance minister summit. It went poorly, as nothing was agreed upon, a waste of time except for the fine meals and hotel comfort enjoyed by the elite donned in suits.

The sovereign bond markets are driven not so much by the legitimately assessed impaired debt status. Instead bond markets are driven by Euro Central Bank injections, the hyper monetary inflation reaction that has become engrained and fixed. Yields on most Southern European sovereign bonds continued to edge lower as a result of the European Central Bank on December 21st allotment of a record EUR 489 billion (=US$643 bn) in three-year loans to banks. Yields on Italian 10-year bonds have dropped more than 1 percentage point since ECB's injection, while French 10-year yields have declined 20 basis points in that period, safely under the 6% mark. In England, the official debt consolidation program has interrupted any immediate UKGovt downgrade. The spending cuts have helped preserve its AAA credit rating at Standard & Poors last year. The respected National Institute for Economic & Social Research forecasts the UKEconomy will decline 0.1% this year. They follow with a vacant unreliable cheer leader forecast for 2013 worth ignoring since baseless. Michael Saunders is chief European economist at Citigroup London. He issued a written comment, saying "A negative outlook statement typically indicates there is about a one in three chance of a ratings downgrade in the next 18 months." The real stone through the front window will be a French Govt downgrade, due sooner or later, all in time. See the Bloomberg article (CLICK HERE).

◄$$$ IN LOCKSTEP, STANDARD & POORS CUT ALMOST ALL MAJOR ITALIAN BANK DEBT RATINGS. FITCH CUT ITALIAN AND SPANISH GOVT RATINGS. THE PROCESS GOES ON AND CONDITIONS CONTINUE TO DETERIORATE. $$$

The credit ratings agency Standard & Poors downgraded almost all major Italian banks. The review covered 34 of the 37 banks monitored by the agency. Italy's biggest financial institutions, including UniCredit, Intesa Sanpaolo, Banco Popolare, Banca Nazionale del Lavoro, and Mediobanca are among them. A credit rating increased the cost of borrowing. The decision followed the S&P two-notch downgrade of the Italian Govt creditworthiness. The official Fitch statement stressed further financial shocks. It read, "The divergence in monetary and credit conditions across the EuroZone and near-term economic outlook highlight the greater vulnerability. These sovereigns do not, in Fitch's view, accrue the full benefits of the Euro's reserve currency status." Fitch cut the Belgium rating to AA from AA+, while Cyprus was cut to BBB- from BBB. Slovenia was downgraded to A from AA-. The Ireland long-term rating was maintained at BBB+. All the countries retained a negative outlook, which implies the possibility of a future downgrade soon. Some analysts attribute the approved austerity plan enacted by the unelected Monti Coalition as being the impetus behind bringing down the Italian Govt Bond 10-year yield below 6%. Actually, the more precise reason is a staggering bid size from the Euro Central Bank. See the BBC article on S&P (CLICK HERE) and the Bloomberg article on Fitch (CLICK HERE).

◄$$$ AN UNUSUAL DEVELOPMENT HAS OCCURRED, AS THE USGOVT HAS DECIDED NOT TO MAKE A REGULAR I.M.F. PAYMENT INTO THEIR GENERAL FUND. IT HAS BEEN THE MAIN TILL FOR EUROPEAN BAILOUTS. THE SIGNAL IS CLEAR FOR SOME UNUSUAL EVENTS TO FOLLOW. REGARD THE JUDGMENT AS A PUNT. $$$

Lael Brainard is the USDept Treasury undersecretary for international affairs. He reiterated that the USGovt will not give the Intl Monetary Fund any additional funds devoted for European bailout usage, designed to solve the European debt crisis. The official statement was read as prepared remarks to the US Senate Banking Committee. It merely pointed out the European awareness of the absent funding, and gave a vacant peptalk to their leaders toward solving the crisis. It cited a risk of a significant adverse impact on the US financial system. It seemed like an official punt of the ball across the Atlantic. Brainard said, "The challenge Europe faces is within the capacity of the Europeans to manage and the administration has been clear with our international partners that we are not seeking additional funding for the IMF. We believe Europe has the will and the capacity to manage these challenges effectively. Nonetheless, if the Euro area were to experience a deterioration of financial conditions, this could pose important risks to our recovery." Brainard praised Italian Prime Minister Mario Monti for laying the groundwork for a more dynamic economy, and Spanish President Mariano Rajoy for addressing Spain's vulnerabilities with a historic restructuring of its financial sector, in his words. See the Bloomberg article (CLICK HERE).

◄$$$ THE ENTIRE DERIVATIVE BUSINESS IS OF DEEP CORRUPTION, FROM THE START. THE NEW YORK & LONDON BANKING SYSTEMS WOULD HAVE COLLAPSED IN THE 1990 DECADE INCREDIBLY WITHOUT THE DERIVATIVE INCOME FLOW. THE INHERENT CORRUPTION IS SOON TO BE EXPOSED IN FULL GLORY. BLACK SWANS RULE THE WAVES. $$$

An associate colleague Greg from Chicago offered a perspective on the derivatives. The corruption of the derivative arena has been covered and analyzed in the Hat Trick Letter. The bond losses, even though agreed upon, represent defaults. Insurance awards from the big banks that have under-written the debt insurance contracts are vulnerable. They are painfully aware, and thus desperate to block the awards process. Greg was a victim of the MFGlobal theft. He is a veteran of the futures contract arena. He knows the ancillary sectors well. He said, "The central banks will print and distribute to cover the derivative loss exposure, just like they have for the last three plus years. The only people at some risk are raptors, like the hedge funds, whom they will not allow to claim Credit Default Swaps on payouts. But they will try insanely hard to work this out so Greece is really the worst, and it goes no further. So over time all the countries will print themselves out. In a static world, one in which sanity and responsibility rules, the bond holders should be restored since insured. However these bankers have neither morals nor ethics, no sense of right or wrong beyond what benefits themselves. Untold power behind the scenes will dictate the outcome, even if corrupt. Checkbooks to buy it all. Desperate people will take ever more desperate moves. Go figure, actually tens and maybe hundreds of things that have occurred in the last two to three years would have been considered Black Swan events only a few years before."

◄$$$ THE HEALTHY CORE EUROPEAN NATIONS HAVE BEGUN TO SNUB FRANCE. THE NEW NORDIC EURO CURRENCY COULD BE CLOSE TO INCEPTION. THE GERMANS DO NOT WISH TO INCLUDE FRANCE. THE SNUB MIGHT BE A CLUE TO UPCOMING EXCLUSION. $$$

On February 2nd, according to Bloomberg, "Finance ministers from the four European area countries with AAA ratings, Germany, Finland, Luxembourg, and the Netherlands, will meet in Berlin tomorrow afternoon, a German Finance Ministry spokesman said." The omission of France has become a well understood feature of Central European future planning. At downgraded AA status, France is no longer a member of this club, regardless of whether the group conducts important decision making. A very long sequence of European summit meetings has taken place, but not much of importance has come of the gatherings that has stuck, nor provided a solution. The public humiliation has made an impact in the Sarkozy court. He must overturn the massive lead gathered by his challenger Francois Hollande in the April presidential elections. See the Zero Hedge article (CLICK HERE) for a comprehensive list of European summits from the last year, and their hollow achievements, courtesy of Reuters. Maybe the French can enlist the same consulting group that the USGovt has hired, from a small ally on the Southern Mediterranean that looks northwest to Italy, so that the vote count can be controlled, altered, and delivered in a manner in keeping with the elite goals, plans, and corrupt needs.

◄$$$ GREECE IS A MESS, OBVIOUSLY UNFIXABLE, HAVING TURNED INTO A TRAGIC COMEDY ON STAGE. GREEK OFFICIALS AND THE EUROPEAN TROIKA ARE WORKING ON THE FINAL DRAFT OF YET ANOTHER CRUCIAL RESCUE PLAN. MEANWHILE, GERMAN BANKERS WITH THE TRUE POWER BLOCK THE AGREEMENTS AFTER MADE BY THE GERMAN POLITICIANS AND UNION COMMISSARS. $$$

As preface, consider several data items. The Greek Govt cuts amount to 10% of the budget. If the USGovt ordered such cuts, the impact would be absolutely enormous. The Greek GDP has declined by 10.6% in the last year. Tax receipts are down by 7% as 60,000 small business have failed. The Greek Govt debt/GDP ratio is 160% versus a nonsensical 120% target. The bond haircut proposed is 70% when 100% is the more appropriate figure.

Prime Minister Papademos has appealed to the Greek sense of responsibility, as the unelected leader turns desperate to avoid chaos, riots, and destruction. His call to sacrifice seems a ploy to aid the bankers further. He cited small sacrifices in order to avoid a total national loss. The March 20th deadline for $19 billion payment looms near. The agreement on funding and budgets seems like an impossible task. Look for any Parliament accord on a Greek budget to blow up quickly and be revisited. A 22% minimum wage cut seems enough to ignite more street riots. The spending cuts equal 7% of Gross Domestic Product over three years. Great sacrifice and great losses are the only assured commodities in Greece. A 48-hour strike crippled the economy again. Some factional leaders are pushing for debt forgiveness. What seems not at all understood is that the austerity measures increase the deficits and inflict further structural damage to the economy as a whole. Interspersed within the debate and commentary is a profound resentment of Germany, with swastika and nazi characterizations, the great predator. Instead, some gratitude should be given to Germany for financing an undeserved rise in the Greek standard of living through massive support of the entire Southern periphery for ten years. German savings have been drained by the PIGS nations, all of them. The impasse in Athens is centered upon bond haircuts, the agreed upon amounts to which Greek Govt Bonds will be written down, the losses absorbed by the creditor banks. See the Bloomberg articles (CLICK HERE and HERE).

Greece has dithered on developing its austerity plan, in resistance to the poison pill. Greece requires EUR130 billion (=US$173 bn) in regular revolving bailouts. Finance Minister Evangelos Venizelos has been working overtime to negotiate satisfactory bond writedowns, while retaining order. Resistance is fierce in Greece to more austerity. Angry union leaders have conducted general strikes. The Athens talks stalled after leaders of the three parties backing Greece's coalition government approved sweeping new austerity measures, but the resistance has been stern on pension cuts and related entitlements. Greek police officials warned of arrests of any European Union officials arriving to force any new concessions by the Greek Govt in austerity programs linked with collateral grabs. See the Yahoo Finance article (CLICK HERE).

Europe moves inexorably toward a Greek debt failure. The events seem obvious. The latest evidence centers on the Germans blocking a final deal struck with the Greeks. The pattern is clear, laid out in the Hat Trick Letter several months ago. Politicians run around, enjoy luxury hotels, fine meals, and limousine service. They forge deals in the spotlight, but the true power center lies with the big German banks and the Bundesbank behind the scenes. The default is coming. The bailouts are viewed increasingly as wasted money, good money after money gone bad. Europe is not saved, but rather divided into rich North and poor South. Resentment inside Greece grows from public reaction to an unelected leader of Goldman Sachs pedigree. The Athens streets suffer burned buildings, vandalized stores, tear gas, and general mayhem. The lack of a European summit with finance ministers is a clear sign that nobody wants to cut a Greek bailout deal anymore. See the Zero Hedge article (CLICK HERE).

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