GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Paralyzed Economy in Quicksand
* Housing Market Deadwood
* Petro-Dollar Outflanked
* Gold Storm Clouds
* Gold Price Consolidation Ending


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

 "The Fed is not content to let interest rates find their levels. They must repress them. They are not content to let housing prices find their levels. They seek to intervene to prop them up. The results of all this intervention is not to cure what ails us, but to prolong the symptoms of what distresses us. What is discouraging about the Great Recession is that it seems not to end. The historical comparison is useful to invite us all to consider the present day orthodoxy and to question whether possibly that it is wrong. I think it might be wrong." ~ Jim Grant (of Grant's Interest Rate Observer)

"The USFed used the Euro Central Bank as a beard for global QE3. The IMF will most likely become a beard for more global QE3. The Gold will be used to lend credibility to the new and forthcoming virtual reserve currency." ~ Jim Sinclair

"A run-away Gold price would certainly be the end of the current fiat money system in very short order if the free market was allowed to operate unchecked." ~ Bill Gross (PIMCO, who has one ear inside the policy chambers but who acts as gadfly rebel)

"We put such a heavy gun on the hill yesterday that we overshot and dozered the Gold cartel all the way on the edge of the cliff. We did not know how weak they already are. The Boyz have hardly any firepower left. We cannot push them over the cliff just yet, since not all contingency plans have been agreed on. The Asians and others are disengaging from the Western banks as fast as they can. We shall see wild fluctuation. On another note, the Persians are cutting off oil shipments to Europe, effective immediately, which will kill Greece, Italy, and the other Club Med deadbeats. The West screwed itself royally." ~ connected Gold trader source from Europe

"The dispute over Iran's nuclear program is nothing more than a convenient excuse for the United States to use threats to protect the reserve currency status of the dollar. Recall how Saddam Hussein announced that Iraq would no longer accept dollars for oil purchases in November 2000, and the US-Anglo invasion occurred in March 2003. Similarly, Iran opened its oil bourse in 2008. So it is a credit to Iranian negotiating ability that the crisis has not come to a head long before now." ~ Tehran Times (difficult to read better reflections of reality in foreign camps, rather than the typical slanted US press reports that obscure the USDollar defense motive)

"I am saddened that it is politically inconvenient to acknowledge what everyone knows: that the Iraq War is largely about oil." ~ Alan Greenspan (whose knighthood might be removed)

"Americans are motivated by money, not ideals. Washington is the home of despicable trickery at elections, under-handed tamperings with public officers, and cowardly attacks upon opponents, with scurrilous newspapers for shields and hired pens for daggers. I am disappointed. This is not the republic of my imagination." ~ Charles Dickens (1842)

"There are two ways to bring down the unemployment number. Unemployment can go down if someone gets a job, and unemployment can also go down if a guy out of work stops looking for a job. So from two ways, the easier is to just stop looking for work." ~ Costello (of Abbott & Costello comedy team, thinking like an economist)

PARALYZED ECONOMY IN QUICKSAND

◄$$$ NOURIEL ROUBINI HAS TURNED INTO A PROMOTIONAL TOOL FOR WALL STREET, AND A BAD ONE. HE SOLD OUT A FEW YEARS AGO. HE WAS A SAGE WARNING SIREN BACK IN 2004 THROUGH 2006 CONCERNING THE HOUSING MARKET AND USECONOMY. CHECK OUT THE NEW ROUBINI STOCK MARKET CONTRARY INDICATOR, WHOSE TRACK RECORD IS FLAWLESS. $$$

In the first week of February, Doug Kass from Seabreeze Partners sent out an important bear market call, where he urged investors to sell everything, all stocks. Central to the Kass sell call was news that the consistently wrong Nouriel Roubini had turned bullish on stocks. Doug Kass has been a clear voice worth listening to. A year ago, Kass said the S&P500 stock index would end flat in 2011, a near perfect call. Back in March 2009, it was Kass who called a generational low in the stock market. This is an absolutely damning contrary signal. Imagine being a client of Roubini's, giving the Economics professor credit for past good work. He turned so stupid in 2008 on the mythical USEconomic recovery, ignoring his own excellent analysis in the previous years concerning the powerful housing market bust, that his work was no longer worthy of attention. He has graduated to the bottom of his class with an signal bearing ignominy. Notice his perfect record in wrong calls in the Roubini Stock Market Indicator. The guy is a tool and a fool. His egregiously wrong calls are shown in green, where he turns negative exactly at stock market bottoms.

◄$$$ CONSUMER CREDIT IS EXPANDING, BUT CONFIDENCE IS FLAT. THAT TRANSLATES TO RELIANCE UPON AND ABUSE OF CREDIT CARDS FOR ESSENTIALS. THIS IS NOT PROGRESS, CERTAINLY NOT A RECOVERY. NO JUMP IN CONFIDENCE, NOR THE USECONOMY, ALL A TEMPORARY SLUG OF WHISKY. $$$

The credit card is saving the day, but delays the reckoning. A whopping $20 billion in additional credit card debt in the last month has fueled the consumption parade that supposedly keeps the USEconomy on track. It needs business investment, return of factories, better worker training, and removal of regulatory obstacles, not more credit. The American consumer is addicted to the leverage of debt. The recent data points to abuse of credit cards clearly. So much for the nonsense stories about warm weather inducing commerce. It was more debt abuse at the consumer level. In December the US population jumped head first right back into the credit frenzy, experiencing the largest leap in unadjusted consumer credit since the peak of the credit bubble. With savings at record lows, US consumers have no choice but to dig deep into their credit card stash merely to pay for necessities of non-discretionary spending. The chart from John Lohman demonstrates the recent reincarnation and revival in a burst, like a Last Hurrah. The consumer credit bubble has done absolutely nothing for consumer confidence. Nor will it do anything of substance for the USEconomy. The Univ Michigan data showed a decline in confidence, more linked to the S&P500 stock index than any reality of tangible factors. See the Zero Hedge article (CLICK HERE).

◄$$$ RETAIL SALES PLUNGED IN JANUARY. THE MASK OF SEASONAL ADJUSTMENTS DOES NOT JUSTIFY THE OFFICIAL REPORT OF A FLAT MONTH. THE USECONOMY IS STILL GOING DOWN HARD. $$$

The usual suspect is again the heavily leaned upon seasonal adjustment. It should never be altered every month, but rather every two or three years in a responsible fine tune process like done at Staples during my tenure. The ramped up adjustment fudge factoring produced a flatline for the January headline retail sales data, the object of wondrous smoothing. The USGovt stat rats reported on an adjusted basis, retail sales rose from $399.9 billion in December to $401.4 billion in January, but they failed to hide the nasty side. The unadjusted retail sales data plunged from $459.8 billion in December to $361.4 billion in January. The adjustment process makes no sense anymore. Notice the steady decline in the last four January months, with lower lows. This is not a recovery.

◄$$$ GASOLINE AND PETROLEUM DISTILLATE USAGE HAVE DECLINED SHARPLY IN THE LAST FEW WEEKS. THE STORY OF A USECONOMIC RECOVERY IS THE PRECISE OPPOSITE OF REALITY. THE WARM WEATHER ARGUMENT IS EMPTY, MADE LAME BY THE GASOLINE USAGE DECLINE. $$$

Hat tip to Michael Shedlock for fine economic reporting. Some unprecedented data has come out in petroleum distillates, a slap in the face toward some very nasty economic trends at work. They contradict the recovery sham argument. The biweekly data dropped like a stone for petroleum usage, while gasoline usage has turned down hard in trend. Both trend down noticeably in the exact opposite of a recovery. The petroleum distillate data point, which includes diesel and other fuels, fell a ripe 2000 barrels per day from the previous reading. The gasoline usage is down 1000 barrels per day from the norm of 2009 and 2010. Efficiency of bicycle usage and carpooling to the work sites and shopping malls does not explain it. No way! In fact, in two of the last three weeks gasoline usage has dropped below 8 million barrels per day. The last time usage fell that low was the week of September 2001, after the World Trade Tower shock wave. One must go back to 1996 for a consistent reading below 8000/day. The Obama stimulus plans and the USFed QE programs mask the underlying systemic problems. The nicely fitting quadratic curves show the trend, all down in clear terms. Actually, the trough of the recent recession was followed by a rebound, but a sudden plunge in gasoline and petroleum usage again adds weight of evidence to recesison. The mild winter is dismissed by the accompanying gasoline usage decline. See the Global Economic Analysis article (CLICK HERE). It is not just gasoline and diesel on the sharp demand decline. Charles Hugh Smith presents evidence that all energy classes are in decline. See the Financial Sense article (CLICK HERE).

◄$$$ CAR SALES REVEAL JANUARY CHANNEL STUFFING. THE FRONT STORY IS THAT CAR SALES WERE GREAT. THE REALITY IS THAT INVENTORY LEVELS WERE STUFFED AT NEAR RECORD LEVELS. THE LOSERS ARE DEALERS. THE RECORD PROFITS COME AT THE HEAVY EXPENSE AND RISK TO ITS DEDICATED DEALERS, WHO RESENT THE PRACTICE. $$$

Back in 1991 a personal college friend introduced me to compulsory channel stuffing at his Ford Dealership in Vermont, precisely when a recession was hitting. The event followed the First Gulf War, and my friend was bankrupted. He was so overloaded with inventory shoved down his throat, that he had overflow on his dealer lot, on the adjacent rented lot, and worse, he had to park the cars along a quarter mile of a state highway. My friend rented the Ford sign that rose 40 feet off the ground for $100 per month. He was deeply bitter at having his young business destroyed by Ford Motors policy. It was a travesty and he was ruined. He moved to Idaho, then Virginia, seeking greener pastures. He turned deeper to alcoholism in retreat. The story was ugly. The practice has never stopped, as dealers must respond like Detriot vassals, never to refuse or else lose the franchise. The better December car sales are followed by miserable January car sales, having fallen by 6% versus same month 2011. Retail deliveries were worse, down 15% from a year ago. However, the critical month end dealer inventory catches the attention to tell the story. The General Motors dealer inventories rose by over 36 thousand units, the second highest in its post-reorganization history, to a near record 619,455 vehicles stored. So much for the evidence of USEconomic expansion and recovery. Most every single piece of data contradicts the deceptive mainstream bluster. The wretched details are summarized for the Big Three of Detroit. The Ford month-end inventory was a 86-day supply at end January, equaling 492k vehicles, versus a 60-day supply (466k units) at end December. The Chrysler month-end inventory was a 83-day supply (349k units) at end January, versus a 64-day supply (326k units) at end December. The GM month-end inventory was a 89-day supply (619k units) at end January, versus a 67-day supply (583k) at end December. The baseline inventory has grown from 400k by end 2009 to 600k by end 2011. That is not progress, not evidence of recovery. See the Zero Hedge article (CLICK HERE).

◄$$$ US-LABOR MARKET DECLINED WITH A HORRENDOUS 1.2 MILLION DECLINE IN PARTICIPATION. THE RATE OF PEOPLE IN THE LABOR FORCE IS AT 63.7%, THE LOWEST IN DECADES. THE SPIN WAS FOR A GAGGLE OF NEW JOBS CREATED, BUT THEY CAME FROM ADJUSTMENTS AND VAPOR. $$$

To be honest, the deceptions behind the Non-Farm Payroll are so consistently doctored and in departure from reality, the usual methods used repeatedly, that doing a solid analysis is a waste of time and effort and space. Some pictures and descriptions are provided. The number of able bodied people no longer considered in the work force in the United States is growing, from an official standpoint. The labor participation rate is falling badly, evidence of workers no longer collecting state unemployment insurance. They have run out of 99 weeks eligibility, and fell off the train. So the USGovt tallies a reduction in work force and an associated fall in the jobless rate. No progress nor recovery evident here, a pure deception, done for several years, the same Modus Operandi. When reading the jobs reports and employment analysis, try not to laugh. The Jackass does regularly and almost on cue.

Economists and business reporters who cite the jobless recovery disqualify themselves as competent in their field. One cannot fornicate for virginity, nor spread fascism for freedom. For all the misdirection, false series, and otherwise basic deception, consider the following graph. The continuing claims do not receive proper emphasis. Only the new jobless claims are mentioned usually. After a surge in continuing claims beginning in 2009 and extending to 2010, due to the extension to 99 weeks ordered by the USCongress, many workers have dropped off from the statistical tally. They no longer qualify for the finite benefitss, even though still without jobs. Notice that even after a significant reduction, almost cut in half, the continuing claims are at previous peak levels. My view is that the USEconomy suffered a double recession, and as a result of its intensity, breadth, and power, has destroyed its foundation. Try not to cry, and if you must, just laugh.

The official NonFarm Jobs report data cited a rise of 243 thousand jobs, which should draw laughter rather than favorable impression. The fabrication report measured that 111.9 million people had full time jobs in January. That compares with a peak level of 119.3 million in January 2008. This is no recovery by any standards. Given the confusion inherent intentionally laced within these numbers, the proof comes from other correlated series that bear light. My favorite labor indicator is the federal income tax withholding series. If workers are actually working, then they are lined up to pay taxes automatically through the employers in routine systematic fashion.

Lee Adler summarized the labor market report in a conclusion. He wrote, "I like to look behind the headlines at the real unadjusted, unmassaged, unmanipulated numbers to get some idea of what is really going on. Here is where things get strange. Total reported employment and full time employment plunged in January, as is normal for that month. So the Gummit [translated: USGovt] survey data does not square with the tax collections. Had we based our forecast for the headlines (which is the only thing that matters to the market in the short run) on the withholding data, we would have gotten it right, but for the wrong reasons. It is a head scratcher that suggests that the Gummit's employment numbers should not be trusted, which is not news. What we do know for sure is that there was a gigantic surge in withholding taxes from late December to mid January, and that surge disappeared completely in the last week." Try not to cry. Watch the downward momentum in the early months of this new year. See the ML Explode article (CLICK HERE).

Much hubbub was stirred by the integration of new Census numbers to account for some mythical rise of 243 thousand jobs in January. Try not to laugh. David Stockman from the Reagan Admin has proved to be an refreshing old voice from the honest winds. He directly accuses the tool Larry Summers of making gross misstatements, and the deception goes much deeper. Stockman wrote on the Wall Street Examiner, "All of these mainstream economists treat the BLS and BEA data like it is holy writ, when it is evident that the reports are so massaged, estimated, deemed, revised, re-bench marked, and seasonally adjusted that any month-to-month change has a decent chance of being noise. What deep secret might they be hiding? So on the labor force participation rate they say, "NO, IT DID NOT GO DOWN IN JANUARY BECAUSE THE 2012 NUMBERS ARE RE-BENCHMARKED FOR THE 2010 CENSUS' but for some reason the BLS did not bother to update the 2011 civilian population numbers, including December. Thus, the BLS published apples to oranges numbers [for comparison purposes] on this particular variable and the footnote says the December participation rate would have been the same as January, if they had revised it! Yet on another variable, the establishment survey jobs count, they were also busy re-benchmarking, but here they did update the originally reported numbers for every month of 2011. Even then, it is hard to say what got updated because the originally reported numbers each month are then revised during the next two reporting months, with any excess or shortfall reallocated to earlier months outside the three month window, which are not published on a revised basis, even though they have been revised! This reflects a whacko thing called the concurrent seasonal adjustment method." Try not to laugh at the methods, since the Jackass does. Constant seasonal adjustment is a mortal sin in my statistical analysis world. See the Zero Hedge article (CLICK HERE). For a further castigation, see the Before It's News article on the general topic of statistical artifacts and meaningless reporting (CLICK HERE).

◄$$$ THE SOURCE OF PRICE INFLATION ON MAIN STREET IS EXCESSIVE WAGE GROWTH IN A CONSISTENTLY AND UNIFORMLY RISING SWIMMING POOL OF MONEY. THEREFORE WITH POOR WAGES, IDLE WORKERS, SHUTTERED BUSINESSES, AND EVERPRESENT COST STRAIN, THE USECONOMY IN NO WAY CAN BE SUBJECT TO SYSTEMATIC PRICE INFLATION. WORKERS SIMPLY DO NOT HAVE IT TO SPEND FROM THE JOB SITE. THE REALITY IS THAT THE EXTREME MONETARY INFLATION IN PROGRESS CAUSES LOST JOBS FROM HIGHER COSTS. $$$

The Zero Interest Rate Policy is killing the USEconomy. In no way whatsoever will price inflation ravage the system on the street level. The hyper monetary inflation offered has gone almost exclusively to the banking system, to cover the black hole of mortgages, to cover the powerful vortex of derivatives, and to ensure big bank executive bonuses. Higher wages drive price inflation, but in our real world wages will continue to lag. A worker without money cannot push up prices in the stores, where liquidation becomes the norm on business failures. The entire cost structure has risen from the powerful coordinated central bank debasement of money via monetary expansion. With higher costs, the capital equipment tends to go idle since marginal businesses must shut down, as they succumb to unprofitability. The norm has been firmly entrenched, the American higher wages are on a powerful downtrend since industry shipped out to Asia. That factor will be reversed only by the return of factories and industry to the United States, NOT BY MORE MONETARY EXPANSION BY THE USFED. This concept is entirely backwards to the conventional thinking.

◄$$$ YOUTH IN EUROPE SUFFER MAJOR JOBLESS WOES. SPAIN SHOWS HINTS OF A POWERKEG, HAVING OUTPACED EVEN GREECE FOR OVER THREE YEARS IN IDLE YOUNG PEOPLE. THE YOUTH OF A NATION HARBOR HOPE, OR NOT. IF NOT, THEY TEND TOWARD VIOLENCE. $$$

While Portugal and Greece are reeling with youth unemployment at 30.7% and 46.6% respectively, it is Spain where the youth pain is most acute. Their youth jobless rate runs at 51.4%, a travesty and shock to the hope of the nation. The opportunity cost is low of doing something stupid and quite irrational today, like rioting or looting or burning down banks, when hope in the future does a slow disappearing act.

◄$$$ THE ILLINOIS FISCAL WRECKAGE STORY IS JUST AS BAD AS GREECE, MAYBE WORSE. MANY US-STATES SUFFER FROM FISCAL RUIN. THE STORY FROM THE LAND OF LINCOLN HAS SO MANY UGLY SIDES, IT IS WORTH TELLING. THE GAPING HOLES ARE IN ALL CORNERS. $$$

Illinois is roughly the same size as Greece. Its finances are in the same generally shape, in total ruins. Its leaders are just as ineffective and crooked. It owes tens of $billions to various investors and stakeholders, who will likely be stiffed. Like New Jersey, California, Nevada, and Arizona, the state of Illinois is far beyond fixable. Its resolution will be so ugly as not to be adequately described. The state has been covered before in past reports for two years. Its budget mess cannot be repaired. Its legislators doubtfully have the political will to enact remedy and put it on a righted course. The measures imposed seem way off, like a temporary 67% state income tax increase due to expire in 2015. The new levy has driven businesses to neighboring states like Wisconsin and Indiana, a sure backfire. Governor Pat Quinn forecasts a $500 million budget deficit this year. He is calling for a 9% cut in most areas of state government, except education and health care. Action must be taken to control not only Medicaid costs but also pension costs. Without more such controls, all other areas of government will continue to be squeezed. The state of Illinois carries the extra load of $8.5 billion in unpaid bills. Its outstanding bond burden is $27 billion. The state public employee pension fund has an estimated $80 billion shortfall. On the table are cuts to Medicaid and state pension contributions, through more rigid eligibility on the former and benefit decreases on the latter. Remarkably, Illinois is a state with a constitutional mandate to balance its budget. So conditions went badly out of control. Also, exclusion of growing unpaid bills from the budget seems worse than reckless. To be sure, anyone investing in state municipal bonds or entering a state service contract must be either dumb or daft. See the Dollar Collapse article (CLICK HERE).

HOUSING MARKET DEADWOOD

◄$$$ THIS HOUSING MARKET CRASH IS ONE FOR THE AGES. IT COMPARES WORSE TO ANYTHING EVER WITNESSED IN THE UNITED STATES. MY POSITION IS FIRM, THE MARKET IS PERMANENTLY DESTROYED. THE CURRENT DOWNWARD PHASE WILL SHATTER ALL NOTIONS HELD IN SELF-DECEPTION. THE SOLUTIONS POSED ARE FOR GOVERNMENT OWNERSHIP, A COLLECTIVIST AVENUE. COMPARE TO PAST BEAR MARKETS. $$$

◄$$$ THE BIG BANKS ARE EAGER TO COMPLY WITH THE RUSE OF A HOME LOAN MODIFICATION SOLUTION IN ORDER TO DUMP MOUNTAINS OF BAD LOANS ONTO THE FEDERAL HOUSING ADMIN. THEY ARE PENDING FORECLOSURE, DELAYED. THE FREDDIE MAC VEHICLE WILL BE CLEARED OFF THE ROAD, REMOVING COMPETITION FOR THE DUMP ON THE MARKET. THE FEDERAL HOUSING ADMIN WILL COME TO THE RESCUE. BUT THE REALITY IS THAT HOME LOANS WILL NOT BE MARKED DOWN IN BANK LOSSES. INSTEAD USGOVT GUARANTEES WILL ENABLE LOAN-TO-VALUE RATIOS OF 140% FOR THE PERMANENT DEBT SLAVES WHO PARTICIPATE. $$$

The new housing refinance plan put forth by the Obama Admin has nothing to do with lowering monthly mortgage payments so that responsible borrowers can stay in their homes, the spin. The real story is a path for the banks to offload their garbage mortgages onto Uncle Sam to avoid hundreds of $billions in losses. It is a grand Refi Ruse Plan. An estimated 3.5 million people with private label mortgages will be eligible to refinance into loans backed through the FHA. Never overlook how refinanced home loans remove past bond fraud risk, washing them away. Many loans heading to the FHA mills would have been assuredly gone into foreclosure. Some bonds would have been challenged in investor clawback lawsuits. Fannie Mae & Freddie Mac own 3 million home loans with negative equity associated. However, another 20 million have been underwritten by private lenders, of which 35% struggle under the weight of negative equity. That is over 7 million homes in quicksand from the housing bubble and mortgage finance swindle. The Washington Post reported, "The biggest culprits in the housing fiasco came from the private sector, and more specifically from a mortgage industry that was out of control. These included lenders who originated home loans, investment bankers who packaged them into securities, rating agencies that misjudged these securities, and global investors who bought them without much, if any, study."

The mortgage contract fraud has forced official reaction. The banks have waited four years for the bailout on private label mortgages because the widespread Robo-Signing mortgage contract fraud cases have piled up into a new monster in almost all 50 states. The court dockets are clogged. The State Attorneys General did roll over and comply as expected. They won a concession. Some gray area remains, like State challenges in faulty mortgage underwriting, based upon faulty prior assignments. The concession is to permit States to proceed with criminal violations only. Foreclosure sale rates in non-judicial states are about four times those in judicial states. A State is called judicial if it abides by strict laws on the foreclosure process. The backlog of distressed homes is much greater than the data would indicate. Neither the official nor the shadow inventory accurately accounts for the bulging 10 million homes currently in the foreclosure pipeline. This is an endless American Nightmare.

The USGovt bill allows for foreclosures to convert to rentals within the Fannie & Freddie world of toxic paper. An explosion of Fannie Mae rentals was a Jackass forecast back in year 2005. The banks wanted and will achieve a goal to remove the GSE stock of distressed homes from the competition, so that REO homes owned by banks can fetch a better price when their they hit the market. The needs of the banks will be met at the expense of the people, whose awards won from liability will be severely limited. The FHA is yet another insolvent firm, an agency harbored by the USGovt. It guarantees about $1 trillion in mortgages but holds only a $1.2 billion dollar cushion to cover losses. A separate fund will be created, adding to the FHA's current 100:1 leverage. Again, more debt solves debt problems in a patchwork on non-solutions.

To be eligible for Obama Admin Refi program, borrowers will need a FICO credit score above 580, actually a low hurdle. They must be employed. They must be current on their mortgage payments for the last six months. Not all distressed homeowners will qualify, but the bar has been lowered, the lending standards eased so the banks can dump as many high-risk mortgages on the FHA as possible. Here is the proof on non-solution. Applicants will be permitted to refinance under the program with loan balances up to 140% of the value of their home. This is not home loan modification, but rather sugarloaded home loan finance to aid the banks and further burden the USGovt. The program actually formalizes the process of converting debt slaves, since homeowners will remain in deep negative equity territory. They must instead walk away, since the true home values will not be as high as the new refinance loans. The few $billion in costs to the banks are well worth it, whether $5 billion or $10 billion, since they will jettison the hundreds of $billions in toxic loans on their books. They will be safely put under the USGovt roof. See the Counter Punch article (CLICK HERE).

◄$$$ THE ACTUAL COURT SETTLEMENT IS SHROUDED IN CONFUSION AND LACK OF FINALITY. A POSSIBLE CASE OF STATE SIGNING WITHOUT A FULL DOCUMENT MIGHT HAVE OCCURRED. WITNESS A SETTLEMENT THAT ITSELF CONTAINS ROBOTIC SIGNING BY STATE ATTORNEYS GENERAL. $$$

The rough cuts of the fuzzy ill-defined official mortgage bill have been described as providing $17 billion in loan balance forgiveness, $3 billion for locked low mortgage rates, and $1.5 billion for the 750 thousand people who lost homes. However, the story turns bizarre. It appears that many State Attorneys General signed suddently and hastily a foreclosure legal settlement that does not exist, or at least has not been released after assurance of legality, as in the taste test. Keep in mind that the objective all along is to severely limit the capability of the aggrieved homeowners in the public domain from suing the criminal banks and achieving remedy, to punish for widespread mortgage contract fraud. At the same time the objective is to severely limit the liability of the big US banks, which my opinion are exposed to $1 or $2 trillion in fraudulent deeds, to address mortgage bond securities fraud.

Tyler Durden in his usual edgy style summarized. He wrote, "It is only appropriate, and so ironic, that a politically motivated settlement whose purpose is to squash any claims of pervasive defective document fraud is itself found to be defective. America's cohort of AGs just all, pardon the pun, robo-signed a piece of paper that does not exist." For recent contract law violations, see the GM bondholder travesty two years ago. The banker body source reported that the so-called historic foreclosure settlement deal has yet to be made public, "because a fully authorized, legally binding deal has not been inked yet." American Banker has the more complete story. They wrote, "The implication of this is hard to say. Spokespersons for both the Iowa Attorney General's office and the Department of Justice both told American Banker that the actual settlement will not be made public until it is submitted to a court. A representative for the North Carolina Attorney General downplayed the significance of the document's non-final status, saying that the terms were already fixed." So the legality from a court review has not been done, and the terms were not fixed. Hmmm. See the Zero Hedge article (CLICK HERE) and the American Bankers report (CLICK HERE).

◄$$$ THE US-HOUSING STOCK HAS SIGNIFICANT PENDING AND LOOMING FORECLOSURES STILL HANGING OVER THE SUPPLY SIDE. NO CLEARANCE WHATSOEVER IS POSSIBLE FOR ANOTHER TWO YEARS AT LEAST. THE NEW HOME LOAN MODIFICAITION LAWSUIT SETTLEMENT CASE COULD HAVE AN UNINTENDED CONSEQUENCE OF PUTTING FORECLOSURES BACK ON FAST TRACK, WITH REMOVAL OF SOME SIGNIFICANT CONSUMER CASH FROM SCOFFLAWS. THE REAL MOTIVE WAS TO CAP BANKER LIABILITY. THE STATES RETAIN THE RIGHT TO PROCEED WITH CRIMINAL CASES THOUGH. $$$

To be sure, the settlement for the largest US banks guilty of massive mortgage bond fraud and mortgage contract fraud is a boon for the banks. They committed $1 to $2 trillion in fraud, but will cap their liability at a trifling several $billion. The more immediate effect is to unclog the pipeline of foreclosures in process. A mountain of foreclosures will take place, lifting the national numbers in a grand tragedy. The price discovery process will run its course, as the flood of supply must be tempered. Too many and the housing prices will plummet. Too slowly and the market will continue not to clear. My expectation is the housing market is ruined permanently, not to revive for many years, with clearance a constant frustration. But the new accord permits the flood to resume and the home price to fall with more momentum. A key damage characteristic is that mortgage rates are at historical lows under 4%, yet the market is struggling mightily under huge supply and weak demand. These are telltale signs of ruin. People will continue to wait for make their next purchases, and permit the market to fall further in a self-fulfilling ruinous manner. Moreover, the current supply of homes under mortgage, badly underwater (negative equity), and on the verge of going delinquent is enormous. The new bill will push the process toward delinquency more rapidly.

Expect a strange unintended consequence to come. A grand redirection of discretionary spending is overdue, from the legion of squatters who have lived mortgage free in their houses for years back. Everyone knows somebody who is living rent-free, scoffing at the mortgage payment owed to the bank. The banks have not forced them out for non-payment since they are burdened by huge supply on the balance sheets, the infamous REO (real estate owned). The squatter economy benefits from an estimated $50 billion per year in consumer benefits, the result on not paying mortgage and rental bills. This source goes into discretionary spending. It will gradually be lost, but surely replaced to some extent as new foreclosures are put on track. No solution exists. Paradoxically, by instituting a housing fix, Obama could have popped the consumer discretionary bubble. His greater motive was to limit the banker liability from lawsuits. What remains though is criminal cases brought by the States, a compromise. Be sure to know that private equity funds have been swooping down to purchase delinquent homes at discount, by the basket. See the Zero Hedge article (CLICK HERE).

◄$$$ IF THE FORECLOSURE PROCESS IS PUSHED FOR MORE AGGRESSIVE ACTION, THE HIDDEN COST COULD BE THE $50 BILLION PER YEAR FROM LOST SQUATTER SAVINGS. THAT SUM ACCOUNTS FOR THE  BOOST TO PERSONAL INCOME UNDER THE TABLE. THE AMOUNT OF NON-PAYMENT FROM MONTHLY MORTGAGES IS A NATIONAL ECONOMIC STIMULUS AT RISK. $$$

Defiant deadbeat squatters, or battle weary heros (depending upon perspective), boost the USEconomy by an estimated $50 billion per year. Bank assets will suffer on the balance sheet from the ledger item Special Servicing floated by the handy 0% rate which keeps the mountain of homes in bank inventory. Watch for auctions to push home prices lower, and put an end to the amazing average 573 days of a home being in delinquency before foreclosure proceedings. Enter Michael Feroli of JPMorgan, who estimated in a research paper the Rental income and Squatter's Rent. First, he debunked the myth that rental income is surging. That dispells the nonsense promulgated by the mainstream press as per personal income. Feroli explained, "This [personal income] rise has little to do with landlords getting more from their tenants. In fact, it has very little to do with what speakers of the English language would normally consider rent. Instead, it mostly reflects mortgage payments of the household sector coming down, in part because of the aggregate decline in household mortgage debt due to net cancellation of mortgages associated with foreclosures." Hence the surge in rental income is merely squatter's rent saved by mass avoidance of mortgage payments and property taxes, augmented by successful legal challenges and court forgiveness of home loans. Ferroli had estimated it at an annual $60 billion boost to the USEconomy a year ago. That is a remarkable 0.5% of GDP. The under table artificial boost is finally declining, estimated by him to be worth a still huge $50 billion on an annualized basis. It is at risk from any broad home loan modification program. See the Zero Hedge article (CLICK HERE).

◄$$$ BANKS ARE PAYING HOMEOWNERS TO AVOID FORECLOSURES. THE CASH GIFT INCENTIVES WILL WORK OFF THE DELINQUENT HOMEOWNERS IN A SLOW PUSH. THINK OF IT AS A KIND GENTLE BULLDOZER. THE PRACTICE HAS ALL THE EARMARKS OF A BRIBE TO PUSH RESIDENTS OUT. IN MANY CASES TITLE AND MORTGAGE CONTRACT PROBLEMS ARE LODGED IN THE FAULTY PAPERWORK, LEADING TO MOTIVE TO CLEAR. $$$

Banks must move troubled mortgages off their books. The banks have begun a direct marketing plan, offering up to $35,000 in cash to delinquent homeowners to sell their properties for less than the bank is owed on the home loans. Lenders had delayed or blocked such transactions, known as short sales, since they resulted in instant bank losses. No longer. Such greased deals are less costly than foreclosures. Also, banks can work around legal probes on contract fraud as well as clawback cases from investment bonds on poor disclosure and underwriting. The closing process on short sales is being streamlined. Banks also pay a few $thousand to the owners of second liens, whose loans are wiped out by a short sale, to encourage them concede on the deals. They had previously blocked the short sale process. Refer to second mortgages and home equity lines of credit. Losses for lenders are about 15% lower on these bribed sales than on foreclosures. Averted are taxes, legal costs, maintenance, and other costs, even repairs from sabotage. This kind of greased sale accounted for 33% of financially distressed transactions in November, up from 24% a year earlier, according to CoreLogic. To put the terms of the deal clearly, consider a form letter from JPMorgan. It read, "You could sell your home, owe nothing more on your mortgage, and get $30,000" in a sweet deal. The cash is pocket money for the next chapter in life. The $30,000 cash could cover moving costs and the rental deposit for the next home. Some banks call it relocation assistance, but it seems more like a bribe when title or contract problems might enable a resident to squat literally forever.

A mountain of pending repossessions inhibits any hint of a recovery in the housing market, where prices have fallen for six straight years, as the Jackass has long forecasted. The USEconomic growth prospects are weighed down by the housing disaster. Owners of over 14 million homes are in foreclosure, behind on their mortgages, or owe more than their properties are worth, claims RealtyTrac. Short sales represented 9% of all US residential transactions in November, the most recent month for which data is available, up from 2% in January 2008, according to Corelogic. Bank-owned foreclosures and short sales sold at a discount of 34% to non-distressed properties in 3Q2011, according to RealtyTrac. Homeowners have won this recent battle in the waiting game. They risked repossession while they wait for a loan modification, knowing the banks suffered from inventory glut. They risked foreclosure, but knew many home loans were badly defective.

While JPMorgan is giving the largest incentive payments, other financial firms are participating in similar programs. The states include Arizona, California, Florida, New York, and Washington. Lenders also provide incentives on loans they service but do not own when the hedge fund investors request it. Bank of America sent letters to 20,000 Florida homeowners as part of a pilot program, offering incentives of as much as $20,000 to clear inventory. The program expired in December, awaiting decision on continuation in other states. Here is an ugly wrinkle on motivation by the banks involved. Inside Mortgage Finance poses the hypothesis that lenders are making big payments on properties with underlying title problems. Evan Berlin is managing partner of Berlin Patten, a real estate law firm in Sarasota Florida. He reports that officers of a large unnamed bank told him the incentives are primarily given to borrowers when the bank cannot produce the proper paperwork needed to win a foreclosure case. The banks are engaged in a race against time and the States, whose Attorneys General are investigating foreclosure practices. See the Bloomberg article (CLICK HERE).

PETRO-DOLLAR OUTFLANKED

◄$$$ THE HOLDINGS OF USTBONDS BY RUSSIA AND CHINA ARE DROPPING QUICKLY. THE USFED IS INCREASINGLY ISOLATED AS MAIN PURCHASER OF ITS OWN BONDS, IN AN INFLATION DEPENDENCE. EVEN HONG KONG IS SHEDDING USTBONDS. COUPLED WITH MOVEMENT AWAY FROM USDOLLAR SETTLEMENT IN TRADE, THE DIVERSIFICATION MAKES SENSE. $$$

Russia has dumped USTreasurys for 14 consecutive months, an item not in the news. China has slashed its holdings rather abruptly since last summer. The dumping process like this has never occurred before, seen in unprecedented volume. The vacating has taken place from the USFed's custodial account. Notice the demonstrative selling of US debt by Russia. The Putin-led account has declined to a multi-year low of $88.4 billion, half of the $176 billion in October 2010. The shedding tends to confirm that the Asian anti-USDollar axis has a coordinated pattern. The stepwise dump of US debt by Beijing is evident in $32 billion in USTBonds sold in December alone, bringing its total to a new post 2010 low of $1100.7 billion. The observer is left wondering what China and Russia are buying, even stockpiling with all their surpluses not recycled back into USTreasurys. It is foreign sovereign bonds at a discount and Gold bullion done quietly.

The Chinese Treasury holdings steadily trend lower, as they execute their plan for diversification. They might also be making preparations to invest more heavily in Europe, in a big bailout with grappling hooks set in collateral. Policy makers in Beijing have long advocated diversification of their ample FOREX reserves away from US$-based assets. China has in the past supported Europe through channels such as the Intl Monetary Fund, the European Financial Stability Facility, and the European Stability Mechanism, cites the Peoples Bank of China Governor Zhou Xiaochuan. He said, "China will always adhere to the principle of holding assets of EU sovereign debt. We would participate in resolving the Euro debt crisis." China increased its position in shorter-term USTBills by $600 million to $2.9 billion. So China is selling long-dated USTBonds and buying more short-term USTBills, which are set to mature. Foreign investors held 47.6% of outstanding public USTreasury debt as of December, the smallest proportion since October 2006, as per USDept Treasury data.

Often neglected from the analysis is Hong Kong. It is unclear the degree of synchronization and coordination between them and Beijing. Hong Kong has considerable leeway and independence. While Mainland China dumped a ripe $73 billion in USTBonds, their cousin Hong Kong dumped a peak $29 billion more during the last twelve months. Together that duo eliminated a ripe $100 billion, which surely makes a dent. Given the broad bilateral alliances to settle trade outside the USDollar framework, one can see the absent need for a USTBond foundation in matching form. The entire world will gradually remove its national USTB foundation underlying the banking sectors. Worse, it isolates the USGovt with its dutiful inflation management team at the USFed to create a magnificent inflation dependence to cover the USGovt debt. Without such machinery, the United States debt funding would resemble the Italians, Greeks, and Spanish, broken. See the Zero Hedge article (CLICK HERE) and the Bloomberg article (CLICK HERE).

◄$$$ THE BIRTH OF PETRO-DOLLAR WAS HATCHED AS A PACT TO RECYCLE FROM THE 1970 DECADE. ADD IN THE VIETNAM WAR COSTS AND THE USECONOMY WAS STRIPPED OF INDUSTRY. CREDIT THE SAUDIS, EXCEPT THAT GERMANY DID NOT GO DOWN THE SAME PATH. THEREFORE WAR MUST BE RESPONSIBLE, ALONG WITH RUGGED US-LABOR UNIONS WHO WON TOO MANY BATTLES THROUGH STRIKES. $$$

In 1973 the Arab Oil Embargo was executed against the West for its steadfast support of Israel. The oil price quadrupled and a great shock hit the West. A powerful economic recession struck quickly and with duration. The United States responded by constructing the Petro-Dollar Standard with the Saudis, whereby their crude oil would be sold in US$ terms, and the windfall profits for Arabs would primarily be recycled into Western banks but in USTreasury Bond form. The US was coming off the costly effects of the Vietnam War, yet another with dubious underpinnings and again with narcotic overtones. More bombing took place in Laos than Vietnam ironically, to secure the Cambodian Triangle of its opium trade for the USGovt security agencies. The oil cost shock plus the huge war cost lifted the price inflation within the USEconomy in a powerful manner. Wage inflation followed in step. Europe suffered cost shock also, but they were more accustomed to expensive gasoline and energy products, much more efficient. The US produced 60% of its domestic oil needs. Since Germany did not have price inflation from associated war costs, it kept its industry much more effectively. The outsourcing initiatives were born in the US from the oil shock and war costs. Labor union victories in the United States resulted in continued outsourcing, and the abandonment of US labor. The Germans formed alliances with government, redoubled productivity, and retained their industry. The Petro-Dollar sustained the demand for USTBonds by force. The defacto standard is the only vestige plank holding together the USEconomy, except for the monetary inflation press machinery operated by the USFed.

◄$$$ THE CRUDE OIL PRICE IS THE LOUDEST SIGNAL IN OUR MIDST OF AN IMPORTANT MOVE UP IN COMMODITIES. THE FINANCIAL COMMODITY (ALSO KNOWN AS MONEY) IS GOLD, WHICH WILL RISE WITH CRUDE OIL. THE ENTIRE WORLD IS HEDGING AGAINST THE USDOLLAR AND THE WESTERN BANKING SYSTEM WITH CRUDE OIL. IT HAS BUILT STRONG SUPPORT AT 100. $$$

◄$$$ INDIA HAS AGREED TO USE GOLD BULLION IN IRANIAN OIL PAYMENTS. THE DEATH OF THE PETRO-DOLLAR IS A PROCESS WELL ALONG. MY BEST GOLD SOURCE HAS CONFIRMED THE INDIAN PAYMENT PLAN AS A DONE DEAL. THE IRAN SANCTIONS COULD NOT HAVE SUFFERED A BIGGER AND MORE CRUCIAL BACKFIRE. BY PUSHING IRAN, THE USGOVT BROUGHT ABOUT A UNION OF EASTERN PLAYERS. THEY WILL NEXT OPPOSE THEN DEPOSE THE USDOLLAR. $$$

DEBKA is not a source widely regarded as reliable. But in this case, they broke a critically important and very crucial story. A major crack has formed in the Petro-Dollar, the defacto standard where crude oil is paid in USDollar terms, which dictates many standard banking practices like setting up reserves systems based in USTreasury Bonds. The standard is breaking slowly but surely. The consequences will change the world. This has been a steady Hat Trick Letter topic for at least four years. The climax is approaching. India has become the first buyer of Iranian oil to agree to pay for its purchases in Gold instead of the USDollar, according to DEBKAfile intelligence and Iranian sources on an exclusive basis. The same sources expect China to follow suit and pay for crude oil with Gold. India and China receive about one million barrels per day, or 40% of total Iranian exports of 2.5 million barrels per day. Both are superpowers in terms of gold assets. By settling the trade in gold terms, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its central bank's assets by the USGovt, together with the oil embargo imposed by the European Union foreign ministers (January 23rd). The EU currently buys around 20% of Iran's oil exports. The high volumes involved in these transactions should boost the price of Gold and depress the value of the USDollar on world markets. Furethermore, the process will extend the crack in the Petro-Dollar standard that has stood firm since the 1970 decade.

China is the biggest customer of Iran's oil. However, India purchases around $12 billion of Iranian crude oil per year, equal to 12% of its consumption. DEBKA reports that Delhi plans to execute the transactions through two state owned banks, the Calcutta-based UCO Bank, with central bank connections, and the Halk Bankasi (Peoples Bank) of Turkey, with government ownership affiliation. Previously the plan was to complete settlement in Yen and Rupee currencies. The switch to gold was kept dark and quiet. In doing so, India has joined China in opting out of the US-led European sanctions against Iran. Turkey announced publicly that it would not adhere to any sanctions against Iran's nuclear program unless they were imposed by the United Nations Security Council. The EU decision imposed an immediate ban on new oil contracts with Iran, while phasing out existing transactions by July 2012. At that time, the European embargo will become total. The European foreign ministers also approved a freeze on the assets of the Central Bank of Iran which handles all the country's oil transactions. Damage to Iran and its economy is clear and visible. Yet the damage to the Petro-Dollar could be far more significant. In addition, Tehran has set up alternative financial mechanisms with China and Russia for making payments for its oil in currencies other than USDollars. Both Beijing and Moscow are keeping the workings of those mechanisms top secret. See the RT News article (C LICK HERE). Other trade by Iran features barter of crude oil for Australian wheat. Expect more such high level deals.

The United States and Europe, if not England as well, continue to masquerade as though solvent and still potent. They are neither. Asia has awakened to the crumbling foundations in the West. The entire USDollar reserve status is being hollowed out by insolvency, fraud, and abandonment. The bilateral agreements to avoid US$ settlement are growing. They include China and Japan, China and Russia, China and Iran, India and Japan, Iran and Russia, finally India and Iran. Expect South Korea to climb aboard when it seems safer to do so. The American and British observers who dismiss such important developments and carry on are doing so recklessly and irresponsibly, clinging to illusions. The Western power center is fashioned much by the Petro-Dollar. The consequent victim will be the USTreasury Bond, no longer required and deemed essential in the Eastern financial structure as a reserve in need. The USGovt pushed Iran into a corner, from which it found partners and allies, not exactly friends.

The Iranian sanctions have backfired in magnficent fashion, making worse the cracks in the Petro-Dollar. The next big victim will be the USDollar itself. Its main supporter is the USFed, isolated increasingly on the world stage, backed into a corner of its own making, stuck at the deeply damaging 0% rate, left to operate a vast Printing Press machinery to spin out phony money with US$ markings. The hyper monetary inflation engines will move to the next higher gear, all in time. The destruction will be vast, but out of control price inflation will NOT be the outcome. That is a major error committed by analysts and investors in the gold community. The constant 0% rates enforced by almost all major central banks is systematically destroying the complex economic framework and structural integrity, killing capital slowly. Jobs will continue to be hard to find and easy to lose. The absent wages will ensure no rising prices. The shuttered businesses will result in liquidations and lower prices in numerous product classes.

◄$$$ IRAN IS TO BE DROPPED FROM THE SWIFT SYSTEM IN BELGIUM. THE PRESSURE IS RAMPING UP, BUT THE MANEUVER HAS LEAKS. THE USGOVT IS INVITING AN ESCALATED RESPONSE. $$$

Jim Sinclair reported that Iran is to be dropped out of the SWIFT system in Belgium. The intented implication is for Iran to be obstructed from both sending and receiving bank money wires. SWIFT Standards, a division of The Society for Worldwide Interbank Financial Telecommunication (SWIFT), handles the registration of these codes used in inter-bank transactions. They involve alphabetic codes of six to ten letters to signify a bank, the last codes indicating the country. Because SWIFT originally introduced what was later standardized as Business Identifier Codes (BICs), they are still often called SWIFT addresses or codes. Sinclair expects the SWIFT code interruption to slam Iran's economy. To be sure, this is economic war at the highest level of conflict. He anticipates a possible backlash, where Eastern central banks will ramp up their retrievals and seek the return of their gold positions held in increasingly distrusted Western banks.

A savvy global consultant with deep banking expertise offered a critical view of the SWIFT blockade, which he believes is a futile gesture that invites further retaliation. He wrote, "Very stupid and shortsighted move. You can wire money without using SWIFT. A SWIFT alternative wire mainframe will soon go live out of Hong Kong in very short order. The central bankers have their own systems. Hence China, Japan, Korea, India can pay for their oil with a new device already in place. All it takes for them to set up CPD accounts in the buyer countries, which they have already done. Then if the Iranian banks are licensed in foreign countries like Germany, UK, France, Switzerland etc, an easy workaround potentially. I cannot see how they are going to block Iran in such a way. Sanctions like that never work. The United States is setting itself up for a very important and significant painful backfire with coordinated vengeance doled out not before long. Too many nations are sick and tired of their fascist tactics and generally waged tyranny."

◄$$$ THE EASTERN COALITION IS A GROUP OF TASK FORCES. THE EASTERN ALLIANCE IS A GROUP OF NATIONS. THE COALITION AND ALLIANCE ARE DESIGNED WITH AN OBJECTIVE TO CONFRONT THE USDOLLAR HEGEMONY, IF NOT CORRUPTION. BEHIND THE ENTIRE MOVEMENT IS RUSSIA AND THE KREMLIN LEADERS, WITH IMPORTANT COUNSEL LEADERSHIP COMING FROM GERMANY. $$$

Russia is behind everything in opposition to the USDollar. The Cold War never ended. It merely transformed into a financial conflict with constant confrontations and never-ending battles in a global campaign for pursuit of a fair system. The USGovt presidencies became a series of narcotics barons who emerged from the security agencies. The Kremlin leader came directly from the KGB. The current system is not fair. The nation of Russia conceals effectively its foremost leadership presence in numerous arenas. Russia leads the Shanghai Cooperative Organization, for security pacts extended from the old Soviet Republics. The SCO objectives in recent years have more secretively centered upon Gold matters. The SCO group advised Chavez in Venezuela to demand return of the nation's gold bullion held in London. The Russians are a key player in the Eastern Alliance, which is formulating a USDollar alternative, with strong counsel offered by Germany. The Barter System that emanates from their work, now in its third year, will feature Russia as a major player, given its riches in minerals and energy resources, a vast commodity fountain. My source tells me that Russia is the leading player in Project Retaliation, a $50 billion funded project to combat the naked shorting in the Gold & Silver markets conducted by Wall Street & London. The Russians and Chinese are the central figures offering and providing the security blanket in the Persian Gulf. It seems Russia works the military angle while China focuses more on the commercial angle.

GOLD STORM CLOUDS

◄$$$ EASTMAN KODAK FILED FOR BANKRUPTCY. A MONUMENTAL BLUNDER IN MANAGEMENT FOR US-HISTORY BUSINESS ANNALS. THEY ATTEMPTED TO PROTECT THE OLD LINE PHOTOGRAPHY BUSINESS FROM THE PREDATION OF DIGITAL TECHNOLOGY. THEY LOST BOTH SEGMENTS. THEY DIED. THEY DID NOT LEARN THE ART OF CREATIVE DESTRUCTION IN THE FAST MOVING TECH WORLD. THEIR DEMAND DROPS, THEN WILL BE GOBBLED UP BY ASIANS. $$$

In the wake of the MFGlobal bankruptcy, the world's largest consumer of silver has filed for bankruptcy. Eastman Kodak is dead, a failure in maneuvering the fast moving tech waters. Kodak could not manage to enter the digital camera world while protecting their enormous film development business. The clumsy giant fell and could not rise up. Eastman Kodak filed for Chapter 11 bankruptcy on January 19th. The 131-year-old company manufactures photography equipment, developing paper, printers, and other products. According to Bloomberg News, the firm consumes 8.5 million ounces of silver per year, equal to $300 million worth, for its manufactured goods and supplies. A transition channel must be navigated for the market. This amount is relatively small in consumption globally each year, but the void will not remain. It will be filled by Fuji and other developers. They will grab the unmet demand. Asia will benefit. A respite in the silver price could last for weeks possibly, until the supply chains are rebuilt. Expect it to be done rapidly.

◄$$$ THE CHICAGO MERCANTILE EXCHANGE CUT MARGIN REQUIREMENTS FOR SILVER. WITH SUCCESS IN DEEP DAMAGE FROM THE MFGLOBAL THEFT, THE COAST WAS CLEAR TO REDUCE MARGINS. THIS IS NOT NECESSARILY A BULLISH SIGNAL, MORE LIKE A BOAST IN DEFEAT OF PRIVATE INVESTORS. HOWEVER, THE C.M.E. SUFFERS FROM EMPTY STALLS AS RISK MANAGERS AND SPECULATORS CLEARED OUT. EXCHANGE OFFICIALS WISH TO ATTRACT THEM BACK. GIVEN THE GUTTING AND PILLAGE OF PRIVATE ACCOUNTS, NOT GONNA HAPPEN. $$$

The thoroughly corrupted and smeared CME slashed its initial and maintenance margins for Gold & Silver futures contracts in early February. Some analysts correctly view the move as an obvious sign that the CME suffers from a massive exodus of investors in the wake of the CME stonewall. The exchange refused to restore MFGlobal clients accounts that were pilfered and stolen. MFG, JPM, and CME are all thick as thieves working in criminal collusion. The effects of the sequence of manipulative margin hikes last May have also run their course, precious metals price pushed down despite slowing volume at the time. The smeared CME is attempting to attract speculative traders back into the paper paper discover market by slashing margins. The CME has just announced initial and maintenance margin 13% cuts for silver, and 12% for gold, platinum, and copper. The silver maintenance margin was reduced to $16,000 and margin for gold to $7500. See the Silver Doctors article (CLICK HERE).

A victory is on the wall by the gold cartel, and a victory is on the wall for the honest money investors. The gold cartel has successfully pushed Gold far below the $1900 peak, and pushed Silver far below the $50 peak. They have taken much enthusiasm out, the animal spirits blown away. The CME margin hikes in a barrage last spring crushed the mining stocks too. Much damage has been done. Conversely, the MFGlobal consequences are severe, possibly fatally damaging to the COMEX. Time will tell to what extent the legitimate risk managers like farmers and ranches and exporters will vacate the COMEX. Numerous scattered risk managers have ordered clients to avoid the COMEX due to pilfered accounts and the illegal aftermath. The compliance departments forbid further activity in the corrupt exchange. Refer again to the declaration that the bankruptcy process treated MFGlobal as a financial firm failure and not a brokerage house failure. The client funds should have been treated as top priority instead of the bottom priority. Status during bankruptcy proceedings is critical. It was done illegally and might be challenged.

◄$$$ NEGATIVE SILVER LEASE RATES ARE PART OF A VAST CHARADE OPENING THE NEXT ROUND. NO BIG SILVER SUPPLY EXISTS ANYMORE. THE WINDOW DRESSING CONTINUES IN A BANK FRAUD SCHEME. WHAT LITTLE SILVER AVAILABLE CAN BE LEASED AT VERY ATTRACTIVE RATES, LIKE ABOUT MINUS 0.30% ON A ONE-MONTH LEASE. WHAT CRAZY POLICY TO SUPPORT THE SUPPRESSION GAME, MAKING IT EASY TO BORROW TO DUMP. THE NEXT CHALLENGE FOR THE CARTEL IS RUNNING OUT OF BULLION TO LEASE AT ALL. $$$

The short-term Silver lease rates returned to negative ground in February. With the successful theft of MFGlobal accounts, and the scaring off investor demand in December, conditions went back to normal in pursuit of Silver bullion bars. Typically a financially distressed institution can find giveaway rates to access physical Silver, only to dump it on the market. In the first week of February, the Silver lease plunged for the 1-month and 2-month rates into negative ground. The 1-month silver lease rate has gone below -0.3%, and the 2-month rate has gone below -0.2% as rates seek the mid-September and early December lows. Notice that the important Silver price declines happening exactly at those times of negative lease rates. To be a bullion bank able to borrow Silver in volume, with good reputation and relationship, the lender will pay out over 0.3% for the privilege of delivering the unwanted physical to other hot hands wishing to sell and dump it on the market. How incredibly corrupt! In the recent couple weeks, the intention of the cartel has been to prevent a move over the $34 and $35 price in Silver, to cap the market. They do so by dumping massive quantities. Notice also that the CME lowered margin requirements to draw in investors, while out the back loading dock, they turned the lease rates negative to encourage dumping in opposition. The criminality is much more in the open in the past year.

A veteran gold trader source pitched in a brief comment, to instill some reality. He claims the supply line is dry. He stressed the Libyan gold deliveries to handle some heightened demand in the past couple months, which is largely depleted. He wrote, "There is no Silver (Ag). Like the allocated Gold (Au) the banks have sold bullion to the tune of 60 thousand metric tonnes. The precious metal has been swapped for certificates. Once the wheels come off and the physical demand expands further and delivery time is strained, the brown stuff will hit the fan big time. It is all an incredible window dressing in the midst of a fraud scheme that is perpetrated by the central banks and the commercial banks. By the way, the cartel banks just increased their shorts by 71 million ounces in past three weeks. What a corrupt game they play!" The Gold lease rates are similarly negative for the 1-month and 2-month arrangements.

◄$$$ HANG SENG BANK IS TO LAUNCH A YUAN-DENOMINATED GOLD EXCHANGE TRADED FUND. DO NOT BE TOO ENCOURAGED OF GREAT ASIAN DEMAND COMING INTO THE FUND TO BUST THE CORRUPT LONDON GRIP ON THE GOLD PRICE. $$$

The Hang Seng Bank out of Hong Kong plans to launch the region's first Yuan denominated Gold fund by late February. The Exhange Traded Fund is designed to provide returns in Yuan currency, closely tracking the price set from the London Gold Fixing Price in US$ terms. The Hang Seng Bank ETF will be listed on the Hong Kong Stock Exchange in February. See the Fox News article (CLICK HERE). A certain level of suspicion must be harbored, as time will tell if the Rothschild family is in the picture. They undermined the Hong Kong Mercantile Exchange, where some hope has resided. The gold trade at that new exchange has been neutralized by evil corners.

◄$$$ THE SPROTT SILVER TRUST HAS HAD AN EFFECT IN PREMIUM VALUE. LITTLE KNOWN, FIRST MAJESTIC HAS BOUGHT A STAKE IN THE TRUST (PSLV). THE TREND OF STORING CASH BY MINERS IN SILVER FORM HAS BEGUN. IN DIRECT OPPOSITION, REPORTS SWIRL THAT JPMORGAN HEDGES WITH THE SPROTT FUND, HELPING TO DRIVE UP THE PREMIUM. $$$

Straight from the First Majestic offices came confirmation that the mining firm has taken part in the PSLV. Sprott placed CAD $349 million in the recent finance deal, being the only silver miner to do so. First Majestic placed Canadian $10 million of the financing. Apparently Eric Sprott's message to the silver miners of holding excess cash in silver taking shape. Regard another nail on the coffin for COMEX as miners seek to end the manipulation, turning away from artificially low prices for their precious metal in the exchange. Together the rise of the Sprott Funds and the gutting of the GLD & SLV funds will hasten the demise of the COMEX. The action taken by First Majestic will embolden other mining firms to follow suit, and enter the Sprott vehicles in order to form a united front against the corrupt COMEX. See the Implode Explode article (CLICK HERE).

A contact DavidA in California engaged in a personal conversation with John Embry of the Sprott Asset Mgmt staff. Embry confirmed that JPMorgan is using SLV to short silver, attempting to raid the silver bar supply out the back door. JPMorgan also uses the Sprott Silver Trust to hedge against their short positions. The JPM folks must believe they can tap the SLV for easy silver metal, and snarl the Sprott PSLV by driving up its premium. David wrote, "I just returned from the trip to Newport Beach.. John told me that JPMorgan is using SLV to short silver. They are also buying PSLV Sprott shares, hedging against their own short silver positions, driving up the share premium. I mentioned how 25 million was not enough to manipulate the price, and he said they are doing it through other measures as well. He just does not know which ones. Then Bill Murphy of GATA chimed in saying, 'WE HAVE NO REAL IDEA HOW THEY ARE DOING IT.' So not much of an answer, but in the end they cannot keep this up forever. It is hard to see how dumping another 100 million ounces of paper on the silver market does anything other than cause more contracts who can stand for delivery of silver that we all believe they just do not have."

My belief comes from all the different sources reporting on SLV fund abuse, from Harvey Organ to the Silver Doctor to Brother John to GATA to Rob Kirby and Max Keiser. The monolith criminal bank factory JPMorgan is using some kind of leverage from SLV metal taken from inventory and COMEX futures for the leverage. They are arbitraging the metal locations, using COMEX leverage and SLV inventory from shorted sales. Remember back in May, the volume of SLV shorted on a single day equaled its entire outstanding float. That stinks of leverage. COMEX is where such leverage is wielded. The crime scene details are hard to obtain, not my bailywick.

◄$$$ GAMES WITH GOLD ARBITRAGE AGAINST SILVER ARE BEING PLAYED. SOME NATIONS LIKE RUSSIA MIGHT BE USING THE HIGH GOLD/SILVER RATIO TO THEIR ADVANTAGE IN ACCUMULATING SILVER BULLION. COMING TO THE TABLE IS VERY OLD GOLD BARS. PRESSURE HAS COME TO BRING FORTH GOLD BARS SO OLD, LIKE A CENTURY OLD, THAT ABIDE BY DIFFERENT RULES. $$$

A great deal of discussion routinely comes concerning the source of Gold bullion and Silver bullion to relieve the heavy demand pressures. The naked shorting by the big Wall Street and London banks, even Swiss banks, possibly does not fully explain the price equilibrium process, as corrupt as it might be. Some of the gaps are explained by arbitrage in place between Gold and Silver that takes advantage of the lost ratio. The heavier gold tilt in the ratio gives steep favor to the accumulating silver in recent years. Rob Kirby added some light on the subject. He said, "I have long suspected that Swaps of physical gold are being done between countries that have gold and those that have silver. The West, who by and large controls the pricing mechanism of both metals, has kept the price of silver cheap relative to gold, in a high Gold/Silver Ratio, so they can maximize the amount of silver they receive in exchange for gold which they have had. I suspect China is opening new metals exchanges much to do with narrowing this spread. Historically, the West has played strategic monetary games with China involving the two metals." He means apart from the opium games played upon China by the British a century ago. A veteran gold trader source confirmed this point. He said, "No one seems to factor Russia into any equation. The Russians hold an order of magnitude more Au and Ag then most analysts and experts can imagine."

Aaron Krowne added a brilliant point, rarely considered, that brings some valid light on cobwebs from decades ago when the power centers were very different. He commented on Old Gold abiding by different rules from older forces at work in another era altogether. He wrote, "The answer may be simple: The Powers That Be do not have access to the Deep Buried stashes of gold, assuming they exist.  If they have been untouched for so long, they are governed by a different set of rules than the gold that has been apportioned for public official use in the last couple decades." Excellent point. The shortage of Gold is so acute that very old gold is being pressured to come forth and surface. It is governed by old rules, old players, and old dynamics, much more stern in enforcement. The veteran gold trader confirmed this comment's validity also, calling Aaron's argument brilliant. Krowne met the Jackass in Vancouver at a Cambridge House Conference in June 2008. He has been a great team player and occasional contributor to analysis since, having extended far beyond his original Mortgage Lender Implode roots.


◄$$$ INDIVIDUAL STATES SEEK THEIR OWN GOLD & SILVER CURRENCY, IN CASE OF A FEDERAL RESERVE BREAKDOWN. STATES SEEK CURRENCIES MADE OF SILVER AND GOLD, AS THEY LOSE CONFIDENCE IN THE SYSTEM. STATE LEADERS COMPREHEND THE HIGH RISK TO THE USDOLLAR AND THE MONETARY SYSTEM ON THE BRINK OF COLLAPSE. ALTERNATIVES ARE BEING SOUGHT, AND NOT MUCH THE FEDERALES CAN DO ABOUT STOPPING THEIR MOVEMENT. DUE TO DEEP DISTRUST AND CONTINUED DESTRUCTIVE POLICY, THE STATE MOVEMENT WILL GATHER MOMENTUM. $$$

The chronic huge USGovt deficits, the chronic huge USFed monetary inflation, the chronic huge USDept Treasury dependence upon printed money to cover the debt issuance, the frequent gigantic fraud cases extended from the power centers, all these glaring risk & ruin factors have led over a dozen US States to propose using alternative currencies of Silver and Gold. The States are fast losing the trust in the federal government and its monetary management. Broken asset bubbles, endless war, and deep bond fraud have aggravated the effect. They are considering new precious metal currencies. The practicality is not clear, unless they issue paper currencies backed by Gold. The lawmakers from 13 states, including Minnesota, Tennessee, Iowa, South Carolina, and Georgia, are seeking approval from their state governments either to issue their own alternative currency or to explore it as an option. Only three states had similar proposals in 2009, the movement having grown. The nation struggles with the stark observation of a federal government, a central bank, an investment bank center in control of both, and a finance ministry that is subservient to the syndicate. The ruin of money is policy due to profound constant hyper monetary inflation that is debasing the USDollar valuation. The aftermath has led to historic events in the crush of sovereign debt that serves as the foundation for the Western monetary system itself.

The US States are responding. Let's watch to see the federal draconian reaction, as usual. Maybe some States will be declared terrorist enclaves. Unlike individual communities, which are allowed to create their own currency, like a country club or city center, as long as it is easily distinguishable from USdollars, the Constitution bans states from printing their own paper money or issuing their own currency. But it allows the states to make, as stipulated legally, "Gold & Silver Coin a Tender in Payment of Debts." That is clear enough. However, if banks can print gold & silver certificates, the States might challenge to do the same. At issue is legal tender definition and usage. The collection of state legislators who propose the new in-state currencies believe Gold & Silver to be fair game, according to Edwin Vieira, an alternative currency proponent and attorney specializing in Constitutional law. The gradual erosion and installed process to debase the USDollar has state lawmakers worried, and motivated into taking action.

By far the pioneer State is Utah, the first to introduce its own alternative currency when Governor Gary Herbert signed a bill into law in March 2011 that recognized Gold & Silver coins issued by the USMint as an acceptable form of payment. Coins such as the American Gold and Silver Eagles are legal equivalents to the USDollars for tax purposes, and furthermore eliminate capital gains taxes. The coins are valued at market prices, not the absurd official USGovt dictatorial trifle fractional face value. Account is made for weight and fineness, possibly condition later. Rich Danker is a director at the American Principles Project, a conservative public policy group in WashingtonDC. He offered, "A Utah citizen, for example, could contract with another to sell his car for 10 one-ounce gold coins (approximately $17,000), or an independent contractor could arrange to be compensated in gold coins." A North Carolina Representative Glen Bradley wrote in a currency bill introduced last year, that "In the event of hyper-inflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System, the State's governmental finances and private economy will be thrown into chaos." The bandwagon is forming, hardly a revolt. The sentiment is rotten with distrust. The movement will grow and be worth watching, especially for federal retaliation from the syndicate fortress. See the CNN Money article (CLICK HERE).

◄$$$ THE ACTUAL CHINESE GOLD PRODUCTION IS MUCH LARGER THAN OFFICIALLY REPORTED. THE BEIJING LEADERS LEARNED LONG AGO THAT DOLING OUT TRUTH SERVES ONLY THE USGOVT LEADERSHIP. SO FIRE IS FOUGHT WITH FIRE, THE LICKS OF FLAMES BEING DECEPTIONS. THE CHINESE GOLD OUTPUT IS AN ORDER OF MAGNITUDE LARGER THAN ADVERTISED, KEPT AT HOME, DENIED FOR EXPORT. LONG-TERM PLANS FOR YUAN CONVERTIBILITY AS A GLOBAL CURRENCY WOULD REQUIRE SIGNIFICANT GOLD ACCUMULATION. ALSO, GOLD MIGHT BE REQUIRED AS THE CORE TO A NEW BARTER TRADE SYSTEM. $$$

Gold analyst specialists have concluded that China's gold output and demand could be far greater than official data suggest. Reporting in truthful accurate terms does not serve them well. Recently released statistics by the country indicate a departure from reality. Consider the Mineweb article on Chinese gold production and consumption, where the Middle Kingdom has enhanced its position as world #1 gold producer. Questions are aroused on where the output goes. The precious metals analyst Jeff Nichols, of American Precious Metals Advisors and Rosland Capital, suggests that both Chinese gold production and consumption may be considerably higher than the official and semi-official statistics. Nichols believes that their domestic gold mine output is, without a doubt, much higher than reported. Actual gold mine output could easily be close to 400 tons and possibly more. Nichols justifies his conclusion.

1)      The China Gold Association (CGA) numbers reflect production by their members only, but omit gold mined by non-members. Many small wildcat mining operations are illegal, coming from the underground economy. The CGA data also excludes production from mines owned and operated by the military, which is significant. Lastly, by-product output from copper, silver, and industrial metal mining is also not counted.

2)      In addition to mine output, the estimation proces overlooks secondary supply, coming from jewelry, investment bars, and industrial scrap. The amounts are not paltry small. The global secondary supply from scrap recycling in recent years has contributed roughly one third of total worldwide supply.

3)      Western analysts estimate that China's total gold imports last year were around 490 tons. Illegal imports that include smuggling are significant. It is surely big in both neighboring Vietnam and India. Many tons of gold in the form of  tael bars, wafers, coins, even investment grade jewelry, are toted often on foot by professional smugglers.

Analyst Nichols has stated in formal presentations that he believes the PBOC may be tucking away perhaps 50 to 100 tons of gold per year into an unofficial account. Lastly, consider that the Chinese Yuan might be in the planning stages for a convertible global currency, and a floating value currency. If so, and that date could be in the distant future, the accumulation of gold reserves consistent with levels seen in many Western countries could well be part of the overall strategy. The growth in Gold accounts would come at the expense of its US$-based holdings. My firm belief is that the date for Yuan launch on the global stage is much sooner than most analysts expect. Keep in mind a grand launch of the New Global Barter System, whose finance function might include a Gold core. Its designers are waiting for the Western financial system to break down further, a path well along, with more degradation with each passing month. See the MineWeb article (CLICK HERE).

◄$$$ USGOVT IS ACTIVELY PURCHASING SMUGGLED GOLD BARS FROM THE CONGO. THE OBAMA APPOINTED USGOVT TRADE ADVISER IS LINKED TO ILLEGAL DEALS IN CONGOLESE GOLD. THIS IS A DEADLY TRADE, WITH MURDERS OF THE MULE DELIVERY ROUTINE. WITNESS THE DESPERATION OF USGOVT OFFICIALS (BANKERS & AGENCIES) TO OBTAIN GOLD METAL BARS. THE PROJECTS ARE ONGOING. $$$

A United Nations report claimed the US representative Kase Lawal knew he was dealing with the warlord Bosco Ntaganda, a wanted criminal. Nothing new about USGovt agents working with criminals, since the syndicate itself is a criminal organization with vast sprawl. A US trade adviser appointed by President Obama orchestrated a deal to buy gold worth millions of dollars from a wanted Congolese warlord. Kase Lawal, a Nigerian-born US oil tycoon, transferred $millions to the notorious rebel leader Bosco Ntaganda between December 2010 and February 2011 as part of the deal, according to the report by the UN Group of Experts on the Democratic Republic of the Congo (DRC). The allegation could reveal a contravention of UN resolutions banning individuals or organizations from financing illegal armed groups in the wartorn eastern DRC. The UN report says Lawal, the chairman and chief executive of the Houston-based oil firm Camac, was aware he was paying Ntaganda. Obama put Lawal on the US advisory committee for trade and policy negotiations in September 2010, just months before the deal with Ntaganda. Such practices could be regarded as indicative of how desperate US financial sources are to access physical bullion under the radar. They need hard metal in order to aid in their price suppression schemes. The bankers process the gold in the markets, while the security agencies procure it in the field. The practice is ongoing in Central Africa, and has been happening for two years. It is not a new or fleeting event. It continues. The security agencies are all involved in the smuggling, the profiting, and the murders, an extremely dangerous enterprise, and equally dangerous to report. See the UK Guardian article (CLICK HERE).

A veteran gold trader from Europe with an ear to the ground shared his perspective, gathered from stories heard from afar. He wrote, "As long as one knows and accepts the fact that the entire DRC structures are a swamp of corruption with greedy corrupt politicians running the show, there is nothing that should amaze you. The money involved is huge and all the DRC business people and politicians are nothing but con artists and frauds, all the way to the very top. If all these players were lined up against the wall and removed, there would not be one innocent being taken down. These criminals should be eliminated without warning. The misery they have brought to their people is one of the worst human rights violations ever committed on this globe, and it is ongoing. All this is happening with the consent of the United States, the French, and the Belgians." Wow!

◄$$$ THE USGOVT HAS BEGUN A PROJECT DIRECTED AGAINST GOLD ACCOUNTS, GOLD VAULTS, AND GOLD TRADERS. THE OBJECTIVE IS TO FREEZE GOLD ACCOUNTS UNTIL IT CAN BE PROVED THAT THE BULLION BARS WERE PURCHASED BY CLEAN AFTER-TAX INCOME. ENTER THE CHAPTER OF POLICY BACKFIRES, NEXT FOR GOLD FREEZES, AFTER IRAN SANCTIONS. THEY MIGHT SUCCEED IN THE WEST, BUT NOT IN THE EAST. NATIONS UNDER THE CHINESE PROTECTORATE AEGIS WILL NOT COMPLY TO DEMANDS TO FREEZE ACCOUNTS. $$$

Word has come from a source with Interpol connections that the USGovt has launched a project to attempt to freeze foreign Gold & Silver accounts owned by US citizens. The pressure will be put on gold and precious metals traders and account managers, with enlisted aid by the governments where their offices are located. Threats will be made of licenses pulled, and wrecked businesses for traders. The 30% withholding tax demanded by the USGovt disguises a capital controls tax in thin style. The project demonstrates a bold attempt by the USGovt, but it might lose credibility in time, much like after COMEX and USFed. The other objective appears to be forced liquidation of foreign precious metals accounts, if obtained in legal manner. The official laws cited are the Hiring Incentives to Restore Employment Act (HIRE) and the Foreign Account Tax Compliance Act (FATCA), which appear to be fascist outreaches on personal wealth. The battle lines are being drawn. The USGovt might succeed to some extent in freezing US citizen accounts with locations in nations of the West. For instance, Hat Trick Letter subscribers with bullion vault holdings with GoldMoney might want to be especially careful to ensure that all vaulted bars are stored in Hong Kong, and not in London or Zurich. If in Europe, expect great pressure for liquidations and scrutiny on after-tax legitimacy of the income used to fund metal purchases. Check the GoldMoney website, and order a transfer of all your holdings from London and Zurich to Hong Kong, in a simple move that takes no more than a few minutes on the computer. The entire project is a backdoor attempt by the USGovt to confiscate gold under the income tax figleaf, or force liquidation. It is also a backdoor attempt to exert capital control taxes under the same income tax disguise. Next is the West versus East confrontation. Generally, expect for the USGovt to have almost no success in precious metal acc ount freezes in nations where China is the protectorate. That includes the Persian Gulf. National officials and account managers in Eastern (Asian) nations will not cooperate with even requests for information. It will be very interesting to observe the extent of cooperation in Western nations. See the Gyroscopic Investing weblog (CLICK HERE).

◄$$$ THE WINDS DIRECTED SQUARELY AGAINST WEALTH ARE BLOWING HARD. GOLD WILL BECOME THE STORE OF VALUE, SAYS GROSS OF PIMCO. HIS COMMENTS WERE IN DIRECT RESPONSE TO THE RECENT USFED POLICY STATEMENT, THAT BEING 0% RATE FOREVER. BILL GROSS INCREASINGLY SOUNDS LIKE A REBEL AGAINST THE INFLATION SOLUTION CAUSE, THE SAME EXECUTED IN MISERABLE FASHION BY THE WRECKING BALLS OPERATED BY THE USGOVT. GROSS COMPREHENDS THE UPSIDE DOWN NATURE OF MONETARY POLICY, AND ITS DESTRUCTIVE SIDE. ZERO PERCENT MONEY KILLS CAPITAL. $$$

Bill Gross of PIMCO delivered a response to the Bernanke Fed in his latest summary piece on the economy. He clearly objects to the USFed venturing into an indefinite Zero Interest Rate Policy (ZIRP), into maturity transformation, on the massive blunder by the USFed in treating the liquidity trap. Moreover, he sees the transition from a levering to delevering exerted upon the global economy means great pain, heavy wealth loss, and grand disruption. He commented on the fatally flawed dependence upon free money in high volume, the death of wealth, and the dangers of the Zero Interest Policy and Quantitative Easing both.

Gross wrote "When rational or irrational fear persuades an investor to be more concerned about the return of money than on the money, then liquidity can be trapped in a mattress, a bank account, or a five basis point Treasury bill. But that commonsensical observation is well known to Fed policymakers, economic historians, and certainly citizens on Main Street. Where does credit go when it dies? It goes back to where it came from. It delevers, it slows, and it inhibits economic growth. It turns economic theory upside down, ultimately challenging the wisdom of policymakers. We will all be making this up as we go along for what may seem like an eternity. A 30-50 year virtuous cycle of credit expansion which has produced outsize paranormal returns for financial assets in bonds, stocks, real estate, and commodities alike, is now delevering because of excessive risk and the price of money at the zero bound. We are witnessing the death of abundance and the borning of austerity, for what may be a long, long time. Recent central bank behavior, including that of the USFed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside. Still, zero-bound money may kill [capital] as opposed to create credit. Developed economies where these low yields reside may suffer accordingly. It may as well, induce inflationary distortions that give a rise to commodities and gold as store of value alternatives when there is little value left in paper." Let investors in the gold community hope that in due time, the PIMCO $1.3 trillion fund will decide to open a gold fund, preferably in physical gold bullion, convertible too. Gross is the first analyst in my memory to state openly that zero-bound money, which means money costing 0%, kills capital. Finally some awakening by smart folks! See the PIMCO article (CLICK HERE).

GOLD PRICE CONSOLIDATION ENDING

◄$$$ THE BEST PUSH FOR GOLD IS BERNANKE SPEAKING PUBLICLY. HE HAS NOTHING CONSTRUCTIVE TO SAY, PERIOD. HE ONLY UTTERS APOLOGIST COMMENTARY. EVERY SINGLE POLICY HAS A SEVERE DESTRUCTIVE ELEMENT TO IT. HIS WORDS OFFER FUEL TO THE GOLD & SILVER BULLS. THE MARCH TO SYSTEMIC FAILURE IS ON TRACK. GOLD & SILVER ACT AS THE ULTIMATE INSURANCE POLICIES. TOO BAD THEY ARE REGARDED AS TERRORIST RESPONSES TO THE UNITED STATES GOVERNMENT PILLBOX POSITION. $$$

The condition (if not penalty) for official 0% interest rate policy applied in chronically manner should be the Bernanke speaks publicly every week, requiring that he must justify its permanence, despite the wreckage. He is deeply committed to the most extreme heresy in monetary history. The path has been laid since the grand betrayal of the 1971 unilateral decision to negate the Bretton Woods gold pact. The rest is history, easily foreseen, tragically laid out, leading to systemic failure and a USGovt debt default. Many believed my October 2008 forecast of insolvent banks, permanent housing decline, chronic economic recession, systemic failure, and USTBond default as stupid, reckless, and wildly off the mark. Not anymore, after time has passed. It is all happening according to Hoyle.

◄$$$ VON GREYERZ POINTS TO MASSIVE MONETARY EXPANSION BY CENTRAL BANKS, TREMENDOUS GROWTH IN GOVERNMENT DEFICITS, AND ABSENT SOLUTIONS FOR THE GREEK DEBT. HE CONCLUDES THE GOLD PRICE WILL MOVE PAST $1900 PER OZ AND KEEP RISING. HE PREFERS BULLION OVER MINING STOCKS. $$$

Egon von Greyerz is founder and managing partner at Matterhorn Asset Mgmt out of Switzerland. He provides a solid argument in favor of a much higher Gold price. He focuses attention on central bank expansion through coordinated Quantitative Easings, the uncontrolled government deficits, and the endless pursuit of solutions for the Greek Govt debt situation. The only area of disagreement with the Jackass is his expectation of fast rising price inflation. My forecast is that it will not happen since the capital destruction is too great, and the Asian labor competition is too great. Most monetary growth goes into the financial black hole. If not for the deleverage of corrupted bond foundations, it would indeed be perfect conditions. He appeared in a King World News interview (CLICK HERE). He said, "I have been looking at the explosion of the balance sheets of the central banks and it is just astonishing to see how much money they are printing and how their balance sheets are expanding. We have the absolute perfect recipe for hyper-inflation and thus a massive increase in the price of Gold & Silver. It is not just the EuroCB balance sheet that has gone up in the last six months or even the last three months by hundreds of billions of dollars. It is the same with the Fed, the Bank of Japan, the Bank of England, and the Swiss National Bank. They are all exploding. This can lead to only one thing and the market seems to be totally ignorant of this. The repercussions are going to come very soon. As I said, this can only lead to one thing, an explosion higher in Gold & Silver prices and the beginning of the massive inflation, which will lead to hyper-inflation.

[ON GOVERNMENT DEFICITS] The Fed action is totally consistent with what we have said for some time. The Fed knows they have to continue to print money and they will print unlimited amounts of money. On top of this, the US is not taking any measures whatsoever to cut down on spending. Every year the Fed is printing between $1.5 trillion and $2 trillion. As you know, just during President Obama's term the debt in the United States has gone up by about $4.5 trillion. This is about 30% of total borrowing in the US. It is just incredible and it is accelerating. But they are not the only central bank doing this. The ECB is in the same mess. The ECB is meeting again, but I would be surprised if they come to any decision. Greece will probably default because they will not accept the EU having control over their finances. The EU does not want Greece to default because it would be bad for the other European countries, so they will probably come up with a package. I do not expect that package will be now, but at some point in the future.

[ON GOLD PRICE] The move in Gold, so far, looks extremely good. I am always pleased that we do not have a straight move up, although I do think we will have faster moves higher in the not too distant future. This is strong action with small corrections. We are at $1730 today and I think within the next couple of months, we will certainly see Gold touching $1900 and continuing higher from there. I do not think $1900 will be a stopping point for very long. I really like the action of silver. Silver still has not broken out like Gold has, but as I said to you last time, I expect that to happen soon. It will break out for Silver around the $37 level. That is going to happen very quickly because the Gold/Silver Ratio is moving down nicely, but I think it will soon accelerate lower and Silver will move a lot faster to the upside than Gold. So I can see $37 being taken out within the next 30 days and then we will just start flying from there. It will not take long to get up to $50 again. [ON MINING FIRM STOCKS] I like them here. We have started buying them. We prefer physical bullion, but we have now started buying mining shares because they are massively undervalued and they will move a lot faster than the metals. As I said, I like them now and I think it is the right time for investors to buy them or add to positions, because I think an acceleration higher in the mining shares is coming."

◄$$$ THE GOLD PRICE HAS SUCCESSFULLY PUSHED ABOVE A PENNANT PATTERN THAT REQUIRED CONSOLIDATION. GOLD AWAITS SOME MAJOR DECISIONS IN EUROPE. ALL SOLUTIONS REQUIRE TREMENDOUS EXPANSION OF THE MONETARY SUPPLY. GOLD WILL RESPOND. THE CENTRAL BANKS HAVE SHOWN THEIR HAND IN GLOBAL Q.E. WHICH WILL FORCE GOLD UP MUCH HIGHER, AND SOON PAST THE 2000 MARK. MONETARY HYPER INFLATION HAS BECOME ENGRAINED POLICY. $$$

◄$$$ DOMESTIC SILVER PRODUCTION IS DOWN HARD WHILE SILVER EAGLE COIN DEMAND IS UP BIG. THE ANNUAL SILVER DEFICIT IS BIG AND GROWING WITHIN THE UNITED STATES. THE COUNTRY IS ONLY ONE OF SEVERAL IMPORTANT MARKETS THAT DEMANDS SILVER. BEAR IN MIND THAT SILVER DEMAND COMES FROM MORE DIVERSE POCKETS OF INDUSTRY THAN ANY OTHER METAL IN EXISTENCE. $$$

Data is available through October 2011. The United States produced 923,000 kilograms (923 metric tonnes) of silver from all sources. The current total US silver production declined 15% compared to the first ten months of 2010. The US is on track to produce an estimated 35 million ounces of silver this calendar year. Compare the output to the approximate 40 million ounces of American Silver Eagle sold for 2011. The US is in deficit, even without considering silver demand beyond coins.

For the first time in history, fast rising Silver Eagle & Maple Leaf sales will surpass domestic silver production in the United States and Canada in 2011. This is a very significant milestone event. Declines have picked up speed, as US silver mine output declined a staggering 30.5% year from October 2011 to October 2010. According to the USGS in their most recent Silver Mineral Industry Survey, silver production fell to 81.4 metric tonnes in October versus 117.0 metric tonnes at the same time last year. The most prodigious state, namely Nevada, suffered a much worse 40.6% decline in the same twelve month period.

Next consider the demand side of the equation. The American Silver Eagle sales surpassed the total US silver output in 2011. Remarkably the US silver production has declined fully 50% since its high of 70 million ounces (moz) in 1997. The current American Silver Eagle demand has grown from a miniscule 3.6 moz in 1997 to a hefty 40 moz, overtaking the domestic mine supply. Industry has demand for silver too, big demand, diverse demand, irreplaceable demand. The same massive growth in coin demand has occurred in Canada. The demand is spurred by recognition of acute monetary inflation, failed central bank policy, ongoing currency debasement, unfixable bank system insolvency, ruined housing market, grand fraud episodes, and a global USDollar revolt. These factors are sufficient to fuel the silver bull market for another several years.

◄$$$ WORTH REMEMBERING PERIODICALLY THE GLOBAL SILVER DEFICIT, WHICH IS ENORMOUS. DEMAND HAS BEEN EXCEEDING THE GLOBAL MINE OUTPUT FOR YEARS. NOTICE HOW SLOWLY THE PRODUCTION HAS GROWN, EVEN THOUGH THE PRICE HAS RISEN SUBSTANTIALLY, A SLOW RESPONSE MECHANISM. IN YEAR 2001, THE SILVER PRICE WAS $7/OZ. THE CURRENT PRICE IS 5 TIMES HIGHER, WITH NEGLIGIBLY HIGHER GLOBAL OUTPUT. $$$

◄$$$ SILVER IS STABLE, ABOVE ITS MOVING AVERAGES, AND COLLECTING STRENGTH. THE BOLLINGER BAND IS AS TIGHT AS A FIST. THE NINE-MONTH CONSOLIDATION IS DUE TO END VERY SOON. SILVER WILL FOLLOW GOLD IN AN UPSIDE TECHNICAL BREAKOUT. SHORTAGE IS ACUTE. TO KEEP THE PRICE DOWN, RAIDS FROM THE S.L.V. FUND AND C.O.M.E.X. ARE REQUIRED ON A REGULAR BASIS. $$$

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.