MONETARY CRISIS REPORT
CLIMAX OF FINANCIAL FRAUD
COMPREHENSIVE GUIDE

* Intro Monetary Fragments
* Central Banks Divided
* Debt Limit Wall & Sinkhole
* Derived Risks at Big Banks
* Triggers to Financial Disorder



HAT TRICK LETTER
Issue #106
Jim Willie CB, 
“the Golden Jackass”
20 January 2013

"The budget should be balanced. The Treasury should be refilled. The public debt should be reduced. The arrogance of officialdom should be tempered and controlled. And the assistance to foreign lands should be curtailed, lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." ~ Cicero (55 BC, proof that mankind has learned nothing in over 2000 years)

"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government cannot put its own bills. (said 2006) To even entertain the idea of not raising the debt ceiling, of the United States of America not paying its bills, is irresponsible. It is absurd. (said 2013)" ~ President Obama (the contrast is two-faced)

"Our fiscal problems are enormous and yet the Federal Reserve, that is The Bureau of Money Materialization, can print money (materialize dollars on a screen), removing the fiscal constraint too. So what we have is a fiscal problem when the underlying problem is monetary." ~ James Grant (of Grant Interest Rate Observer, who is slowing discovering gold)

"There is not a hope in hell that the Fed will stop buying the bonds, because who is going to buy the bonds? There is nobody who is going to buy the bonds. Japan cannot buy the bonds. China cannot buy the bonds. Europe and the UK have their own problems. There is no one left to buy these bonds." ~ Eric Sprott (a testament to Ponzi, as the USFed is forever stuck as lone buyer, until the inexorable debt default)

"Well-capitalized banks and opportunistic investors will come in and fill the gap, restoring credit flows to non-financial businesses and to the vast majority of households that can service their debts." USFed Vice Chairman Donald Kohn (August 2007, as the USFed clowns had no clue that the nation was beginning the worst financial disaster since the Great Depression)

"A great civilization is not conquered from without, until it has destroyed itself from within. The essential causes of Rome's decline lay in her people, her morals, her class struggle, her failing trade, her bureaucratic despotism, her stifling taxes, her consuming wars." ~ Will Durant (1944, ditto for today)

## INTRO MONETARY FRAGMENTS

◄$$$ MORE INFORMATION ON THE OBAMA RE-ELECTION FRAUD, WHICH WAS RAMPANT, BUT WITH A PATTERN. NOTE THE STATISTICS IN OHIO, FLORIDA, AND PENNSYLVANIA, CONSIDERED SWING STATES. THE CORRUPTION IN THE ELECTION WAS VERY FOCUSED. THE EVIDENCE IS COMPELLING. NO ACTION HAS BEEN TAKEN BY ANY FEDERAL OFFICIALS, NOR STATE SIGNATORY OFFICIALS, EVEN THOUGH THE EVIDENCE IS BLATANT. $$$

How do I expose you? Let me count the ways! A full exposure would require 200 pages in documentation. Although a very objectionable fellow, Bill O'Reilly has provided a message board from the fascist camp to give some measure of discredit to the marxist camp. It is always great theater to observe the extreme right versus the extreme left, much like Hitler versus Stalin, a streak across the national conflict that 99% of Americans miss altogether. Allow a cursory pass over the corrupt landscape, with facts collected from the O'Reilly factors. The details are compelling if only brief. Even my very docile father (age 93 years) has read of voter fraud, and has recited some details in parallel. He acquired the information in mainstream journals and newspapers.

As each state reported final election results, the evidence of voter fraud is astonishing and overwhelming. Massive voter fraud has been reported in areas of Ohio and Florida, with Pennsylvania, Wisconsin, and Virginia as well. All are deploying personnel to investigate election results. A powerful footnote. Barack Hussein Obama won in every state that did not require a photo ID to vote. He lost in every state that did require a photo ID in order to vote. Reports are widespread of caravans of buses deployed in Ohio, shipping in alien Somalis to vote for their man, Obama. Thanks to Bill O'Reilly, a notable abusive arrogant self-aggrandizing hero from the right, who prefers to report the facts in supposedly a fair and balanced way. Here are just a few examples of what has surfaced in preliminary analyses. To be sure, if an exhaustive check were done, the list of similar anomalies would triple in size, maybe more.

  • In 59 voting districts in the Philadelphia region, Obama received 100% of the votes with not even a single vote recorded for Romney. (a mathematical and statistical impossibility)
  • In 21 districts in Wood County Ohio, Obama received 100% of the votes where GOP inspectors were illegally removed from the polling locations. Not one single vote was recorded for Romney. (another statistical impossibility)
  • In Wood County Ohio, a total of 106,258 votes were cast in a county with only 98,213 eligible voters.
  • In St Lucie County Forida, a total of 175,574 registered eligible voters are on record, but 247,713 votes were cast. (a very heavy turnout indeed)
  • The National SEAL Museum, a polling location in St Lucie County Florida had a 158% voter turnout.
  • Palm Beach County Florida had a 141% voter turnout.
  • In Ohio County Florida, Obama won by a margin equal to 108% of the total number of eligible voters. (a landslide of historic proportions)

A shocking fact embedded within the process is that each state capitol must submit a signature by the secretary of state, that pledges approval of the vote count to render it legal and final. So the depth of vote corruption is profound and diversified to widespread crime centers. The task for Florida in year 2000 was simple, since the soon to be inaugurated president required the cooperation of his brother Jeb Bush who took residence in the Florida governor mansion. One can only imagine the level of intimidation, threat, and bribery that honest state officials must succumb to, and reward with graft and privilege for dishonest state officials who cooperate with the vote corruption. For so many precincts to have the vote process corrupted, to integrate deceptive software to change votes, to permit dismissal of vote officials, to permit big thugs to intimidate potential voters at doorways, to look the other way to zero count precincts, and to organize busloads of Africans, the conclusion is simple. The United States of America is no longer a bastion of freedom or liberty. It is a cesspool of corruption and a seedbed for cabal powers, fast sliding into the Third World with little recognition from its sheeple masses. Voter fraud to maintain the positions of power is one of a dozen hallmark traits in the Third World. Welcome to the Third World, America! (even if the majority not even remotely aware)

◄$$$ THE DUTIFUL AND WAYWARD USCONGRESS HAS A PLAN. IT WILL REQUIRE MORE CONNIVANCE AND BREWING. THE PROPOSAL IS TO REPEAL TERM LIMITS. THE PATH FOR DICTATORSHIP IS BEING PAVED. $$$

NY Congressman Jose Serrano introduced HJ Resolution 15, which proposes an amendment to the Constitution. It would repeal term limits for the office of President of the United States. Imagine a series of continued events to extend the un-natural hurricane damage and the degradation from the endless wars, together with the massive economic damage from the permanent 0% rate and colossal bond monetization that brings back memories of the Weimar abuse on monetary matters. If some National Emergency emerges in the next four years, the nation would be prepared to deal with the challenge in a swift totalitarian manner. A dictator would be ready. If the nation could not organize enough to have an election, a leader is ready to serve forever. You know the drill, provided in tune with the pathogenesis toward a fascist dictatorship, a police state, and military rule. Goebbels, Huxley, Orwell, and Thoreau understood the path better than the American masses. Maybe another hurricane will mysteriously appear before autumn 2016, with the same telltale signs of extreme microwave activity in the upper atmosphere over the South Atlantic Ocean. Like in September 2012, that is not natural. See the Beta Congress website (CLICK HERE). Someday we might find out how much Serrano was bribed to make the obsequious gesture. So remove the Amendment on guns, but add an Amendment on dictator who reserves the right to kill citizens without charges or due process. Understood here! My belief is that 90% of Americans do not know who those four men were.

$$$ THE USFED ROLE IS CRIMINAL, A VIOLATION OF SOUND MONEY, AND A GREAT DESTROYER. THE USFED IS A MACHINE TO CREATE COUNTERFEIT MONEY UNDER LICENSE, TO MANAGE THE SYSTEM AMONG ITS CLIENT BIG BANKS, AND TO DISTRIBUTE IT TO FRIENDS OFTEN IN THE FORM OF CHEAP LOANS (NEVER REPAID), WHILE IT ENABLES THE THEFT OF REAL MONEY IN GOVERNMENT OWNED GOLD BULLION VAULTS. IT EMPLOYS ROUTINE COLLUSION ON NAKED SHORTING OF GOLD CONTRACTS AND GRAND ASSISTS IN ILLICIT CONFISCATION (LEASING) OF ALLOCATED GOLD ACCOUNTS. $$$

The central bank of the United States does not redistribute much of anything. It operates the counterfeit paper mill factory. It makes unilateral decisions on false money creation that would bring a smile to the old Weimar operators. It passes around the false money to the large banks. It runs cover for the big US banks, with cooperation given by big London and big European banks. It greatly assists in narco money laundering too. A closer look would find its primary operator JPMorgan with a key role connected to the USFed in the Iraqi Export Bank, where the clearing house function of the Afghan narcotics is conducted. It is valued at between $800 billion and $1.3 trillion per year, although some amateurish estimates arrive at a figure one tenth as large. The USFed has actually been sacrificed as it has purchased $3 trillion in toxic bonds, of USTBond variety and US Mortgage bond variety. Since serving as buyer of last resort, it will become the slaughterhouse pig of first resort. Or else it will be the principle landlord for half the residential homes in the United States, working side by side with equally corrupt Fannie Mae. Recall the 2005 Jackass forecast that Fannie Mae would enter the rental market on behalf of the USGovt landlord. The USFed finds itself awkwardly sitting on the toilet that is flushing its own occupant, while it might declare itself Lord of the Flies in a Third World setting.

◄$$$ CITIGROUP CONDUCTS REGULAR SCAMS ON CREDIT CARDS. THE OTHER BIG BANKS DO THE SAME THING. A STORY FROM A PERSONAL FRIEND. $$$

A friend interrupted me recently when the name of Citigroup was merely mentioned. He was eager to explain a scam on his own credit card account. My reply was that all the major banks run the same scum, since protected. The banks receive a credit card payment in the mail, but delay its deposit. So the promptly made payments to the account are recorded as late. The delay results in a late fee like $30 due to the bank, which is difficult to fight, and almost impossible to reverse. We concluded it is best to close all accounts at the bank, like checking account, credit card, stock funds, and any savings certificates of deposit. The big US banks must be starved out of business, which would isolate their derivative casino destructive games and narco money laundering, along with USFed grants. In fact, the big US banks act like Third World financial institutions, with better technology to steal.

◄$$$ FITCH CUT THE SOUTH AFRICAN BANKS ON A CREDIT DOWNGRADE, FOLLOWING AN EARLIER SOVEREIGN DEBT DOWNGRADE. THE BANK ACTIONS WERE A RIPPLE EFFECT. THE MARXIST LEADERSHIP HAS BEEN GIVEN SOME FAILING GRADES. $$$

Fitch Ratings has downgraded the debt issued by Absa Bank, First Rand, Investec Bank, Nedbank, and The Standard Bank of South Africa (SBSA) in addition to their respective rated holding companies. The action was taken directly after the recent downgrade of the South African Govt debt sovereign rating. As a result, the long-term IDRs of FirstRand, Nedbank, and SBSA have been downgraded to BBB from BBB+ and those of Investec have been downgraded to BBB- from BBB. The downgrade of the sovereign debt bore the consequence of a re-calibration of the South African National Rating Scale, which has affected several other institutions in the country. See the Reuters article (CLICK HERE). The marxist clowns finally has been given their due grade, after disrupting the electrical grid, and then proceeding to tax and render great harm to their largest industry, mining. The South African leaders are total buffoons in charge of the national decline. History has many similar chapters.

◄$$$ SOME DIVERSE SYSTEMIC BREAKDOWN THOUGHTS. THE EVENTS AS PART OF BROAD FAILURE ARE POWERFUL, FAR REACHING, AND UNSTOPPABLE. THEY REQUIRE PLANNING IN DEFENSE. THOSE WHO DO NOT CONSIDER AND EVALUATE THE BREAKDOWN ARE NEGLIGENT, PROBABLY TO BECOME DEBT SLAVES. $$$

The Zero Interest Rate Policy (ZIRP) is forever. It cannot be altered due to USGovt borrowing costs, big US bank carry trade, derivative structure implosion, and economic costs. A rise would cause an implosion on several fronts. The QE to Infinity will continue forever, unless some provisions are put into force like mandatory private pension conversion into USTreasury Bonds. Any abrupt halt would cause  an implosion on several bond fronts. They will play great games with the debt limit. Next come some vicious domestic solutions to close the budget deficit, led by the forced USTBond investment. All federal pension programs will also go to USTBonds. Watch the seizure gesture by spring or summer 2013 to take private pension funds amid uproar, perhaps joined by a bank holiday event. The grand act of desperation could be forced managed pension funds to convert to USTBonds also, such as Fidelity and Vanguard. It would cause further uproar, but the rule could close the deficit considerably. They are making absolutely impossible rules on foreign corporations for taxable status, which assure 30% withholding. Return of withheld tax from refunds will become extremely difficult, if not impossible. Everybody will be guilty unless proved innocent, a pattern that has shown itself in the last four years. The foreign accounts are being essentially seized and stolen. Defense against charges of money laundering are very difficult, since citizens are presumed guilty and evidence is dismissed. All will be considered terrorists unless they feed the monster, and talk nice about the monster. The police state with the security agencies lighting fuses for mayhem disorder and massacres has entered the active brutal stage. Genocide has moved from foreign targets to domestic, in a grand paradigm shift.

Quite the formula that Washington, Jefferson, Adams, and Hancock had no vision for. They set no provisions in the Constitution for security agencies that turn into parasites, vampires, and executioners, forming a crime syndicate above the law, financed by a global narcotics monopoly after a merger with organized crime syndicates like the mafia. The Afghan War was to supposed to rid the faraway land of terrorists, to establish an oil pipeline, to secure minerals. It was all a ruse, long forgotten. The only business venture to take hold has been a developed vertically integrated heroin industry managed by the Langley gang, complete with elaborate chemical process centers and transportation routes. Welcome to the manifestation of Fascist America, in tight control by the national socialists with all their destructive influence on financial structures, their permitted crime by merged corporations, and their assault on liberty, together with redefined patriotism.

## CENTRAL BANKS DIVIDED

◄$$$ THE F.O.M.C. MINUTES FROM THE USFED READS LIKE AN APOLOGY, A CONFESSION, A BREAK FROM REALITY. INTERPRET IT WAS A EULOGY WITHOUT THE PRAISE. THEY REVEAL DISSENSION, NOT UNITY. SOME USFED OFFICIALS SEE THE DESTRUCTIVE POLICY AND INFLATION DAMAGE. OTHERS SEE THE MIRAGE OF GROWTH. THEY ARE DELUSIONAL AND SOON WILL PRESIDE OVER AN DERELICT NATION ADRIFT. $$$

As preface, be sure to know that the formal bond monetization cannot be stopped, since nobody attends the auction as a buyer. The formal bond monetization cannot be stopped, since the central bank is the sole growth stimulus. The formal bond monetization cannot be stopped, since the toxic bonds if left unredeemed would burn a hole deep into the visible portion of the banking system. The FOMC from December read: "The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions." They speak of the labor market, with no formal commentary on bond buyers, the destructive influence of the zero bound rate, and the toxic bonds laced throughout the system. They engage in delusion and self-deception, as three officials including James Bullard believe the stimulus should end with the recovery evident in the USEconomy. It is unclear out of which bathroom window they base their observations. Realism is part of Jeffrey Lacker's position, as he sees no impact of bond purchases on the real economy. The ongoing chatter of price inflation risk was not reported, given as background noise.

See the statement from the Federal Reserve website (CLICK HERE), the FOMC transcripts (CLICK HERE), the CNN Money article (CLICK HERE), and the Zero Hedge article (CLICK HERE). All that is missing from the FOMC Minutes release is accompanying background music by Bennie and the Jets. That is ink jets, as in printing press. Ben is no Gutenberg. Expect that the USFed will soon pretend their QE bond purchases are being reduced, but it will be a grand lie. They will maintain an enormous level of purchases in secrecy, embarrassed to admit its enormity. To do otherwise would result in a sudden collapse. Even Interest Rate Swaps require some basis for leverage, even if extreme leverage.

◄$$$ THE USFED MUST CONTINUE TO EXPAND ITS BALANCE SHEET, OR ELSE RISK IMPLOSION OF THE USTREASURY BOND MARKET. THE CENTRAL BANK IS THE SINGLE PROP, USING INTEREST RATE DERIVATIVES AS LEVERAGE UNDERNEATH THE PYLONS. THE MAJORITY OF TYPICAL TRADITIONAL BUYERS IS LARGELY GONE. THE PONZI SCHEME IS IN FULL BLOOM. ANY PAUSE WILL FORCE THE USECONOMY TO CLOSE ITS YAWNING TRADE GAP, WHICH WOULD BRING A MASSIVE USDOLLAR DEVALUATION. $$$

Simply put, the USTreasury Bond bubble cannot be sustained without continued massive $trillion support from the USFed, which is already stretched and exhausted. The critical leverage is provided by the vast Interest Rate Swap complex, which fabricates artificial demand reported to the ignorant masses on the propaganda boxes and wirelines. The USTBond complex is vulnerable to collapse without the USFed continued role. The central bank is setting itself up to become the bagholder at the designated occasion when the USGovt debt default occurs. It could happen at any time. It could happen next month without a hyper-active USFed. It could happen in two years, even with the USFed's heavy participation. It could happen overnight with a consensus rebellion by foreign trade partners. The IRSwap machinery is overworked and tired. It has probably been sabotaged in the past summer, when JPMorgan lost control in a public way. The breakdown takes time, too much time, since the JPM control room can work feverishly and conjure up hundreds of $billions in mythical USTBond demand without any checks or balances.

President Bambrough from Sprott Asset Mgmt made an astute observation on the Ponzi scheme and its inevitable exhaustion of the USFed itself. Recall that a Ponzi requires evermore input capital, actually an exponentially growing amount of capital funds, in order to maintain itself. Remove the exponential growth in the feeder system, and the monster cannot be properly fed. Pressure is right now to keep the acceleration, precisely when the USFed talks of a reduction. Thus the extreme risk. Like the housing market, it runs out of idiot buyers willing to buy the overpriced top. In the case of USTBonds, the demand dried up two years ago and the system is strained.

Bambrough stated, "The burning question that I always have, I am amazed at their ongoing willingness to continue to accumulate, and hold, such large amounts of US denominated bonds. It has been my view that they are basically playing a Ponzi scheme. I have had that confirmed when I have had long discussions with different sovereign wealth funds and different government agencies around the world. They have been willing to play this game, but more and more now, as their domestic economies have grown and the US portion of their exports becomes smaller, and with the amount of T-Bills that they have already accumulated, I believe they have reached the boiling point where they are really going to be unwilling to grow their reserves [of US Treasuries]. Just the process of not growing their reserves is going to be very disruptive. If they are not willing to accumulate more T-Bills, this is going to force the trade deficit closed. I think that is really going to rock the financial world at some point in the near future." Removal of foreign USTBond demand forces the inflation engine and derivative machinery to fill the gap, which bring a quantum higher level of risk.

The Sprott executive claims that eventually the USEconomy will be forced to bring its trade deficit, even Current Account deficit, back into balance. That is achieved in the usual way, a gigantic staggering highly disruptive currency devaluation. Imagine the US competing again with 50% cheaper labor, due to a USDollar cut in half. The sudden price inflation impact will be 25% to 30% higher prices across the board in a grand shock. Of course, my firm belief, stated before on several occasions, is that foreign held USDollars will be honored at full value, while domestic held USDollars will be devaluated with open brutality. Bambrough does not address the mechanisms for bringing the US trade back into balance. But one can infer with some certainty. The Chinese in some future year will invest in the US, build plants, hire people, take risks, produce things, and do so only because the USDollar will be devaluated by 50% to 60%. The life savings of Americans will be torched for tremendous losses.

◄$$$ BILL GROSS OF P.I.M.C.O. REALIZES THE EXTRAORDINARY MEASURES IN DEBT FINANCE SUPPORT ARE ARTIFICIAL AND CANNOT BE SUSTAINED. HE CITES THE USFED BUYING THE USGOVT DEBT. HE CITES AN EMPTY FORT KNOX, WITH NO GOLD BULLION TO BACK THE USDOLLAR WITH TRUST LONG AGO LOST. HE CITES THE DAMAGE TO THE USECONOMY FROM WRECKED BUSINESS MODELS. HE DOES NOT CITE THE EFFECT OF DESTROYED CAPITAL FROM THE Z.I.R.P. AND Q.E. DOUBLE BARREL OF USFED SHOTGUN MONETARY POLICY. THE OFFICIAL 0% RATE AND ENDLESS BOND MONETIZATION DESTROY THE CAPITALIST SYSTEM SLOWLY BUT COMPLETELY. IT IS HAPPENING WITH LITTLE RECOGNITION. $$$

Bill Gross of PIMCO wrote, "Well, the answer is sort of complicated but then it is sort of simple: They just make it up. When the Fed now writes $85 billion of checks to buy Treasurys and mortgages every month, they really have nothing in the bank to back them. Supposedly they own a few billion dollars of Gold Certificates that represent a fairy tale claim on Fort Knox's secret stash, but there is essentially nothing there but trust. The $54 trillion of credit in the US financial system is based upon trusting a central bank with nothing in the vault to back it up. Amazing! When the Fed buys $1 trillion worth of Treasurys and mortgages annually, as it is now doing, it effectively is financing 80% of the deficit for free. The future price tag of printing $6 trillion worth of checks comes in the form of inflation and devaluation of currencies either relative to each other, or to commodities in less limitless supply such as oil or gold.

Zero bound interest rates, QE maneuvering, and essentially costless check writing destroy financial business models and stunt investment decisions which offer increasingly lower return on investments and lower return on equity. Purchases of paper shares as opposed to investments in tangible productive investment assets become the likely preferred corporate choice. Those purchases may be initially supportive of stock prices but ultimately they constrain true wealth creation and real economic growth. At some future point, risk assets (stocks, corporate and high yield bonds) must recognize the difference. Bernanke's dreams of economic revival, which would then lead to the day that investors can earn higher returns, may be an unattainable theoretical hope, in contrast to a future reality." Gross has delivered a death warrant notice. See the PIMCO Media research report (CLICK HERE). Gross paints a picture of US Federal Reserve failure, of USEconomy in systemic failure, of the illusion of inflation as the cure.

◄$$$ THE MOST DANGEROUS ASSET TO OWN IS SOVEREIGN DEBT FROM THE UNITED STATES AND UNITED KINGDOM AND GERMANY, THOSE BONDS WHOSE YIELDS ARE NEAR ZERO. THE HERD HAS FOLLOWED THE GUIDED HAND OF INTEREST RATE DERIVATIVES INTO THE DANGER ZONE. EVEN WITHOUT A QUICK RISE IN BOND YIELDS, THE WRECKAGE FROM THESE BONDS IS CLEAR IN THE ULTRA-LOW RETURN, WHICH HAS WRECKED THE ECONOMY AND PENSION FUNDS AND CAPITAL ITSELF FROM IMPROPER ASSET PRICES. THE TNX CHART LOOKS FOREBODING. A RISE IN BOND YIELDS COULD COME, IF THE INFLATION ENGINEERS AND THEIR GEAR ROOM OPERATORS DO NOT AMPLIFY THE REQUIRED LEVERAGE. $$$

A growing chorus of  warning sirens has hit in recent months, as the financial analysts awaken to the biggest asset bubble in modern history, bigger than the preceding housing & mortgage bubble of a decade ago. The potential is present for a bond market crash, if not for the ample machinery to print money, and the sturdy machinery to produce artificial end product demand with the derivatives. Enter David Roche, president of Independent Strategy, who regards safe-haven government debt is the most dangerous asset to own. He refers to UKGilts and USTreasurys, as well as to German Bunds. He might be a bit dismissive of either the printing press or derivative mill when he barked, "This year is going to be a story of the big bond market crash, when the safe haven bond markets go to hell in a handcart. All of these safe haven bond markets are about the most dangerous thing you can hold."

These major nation sovereign bonds are geared to props, and should  fall in value, except they will remain propped until it is convenient for the powerful syndicate to inflict losses where they wish, after they put in place their own leveraged short options for generating illicit windfall profits. However, that opportunity might be long gone, a faded desire. To be sure, the USFed Chairman Bernanke is worried about the bond bubble under his seat, whose released gas might later be confused with excessive flatullence by the good myopic professor and his team of inflation engineers.

The USFed's hawkish tone sent bond yields climbing higher in early January, with the benchmark 10-year USTNote hitting an 8-month high at the beginning of the month near the 2.0% resistance line. The smart money knows of the machinery and leveraged gearboxes, and took advantage of the upward misstep in bond yield. A disturbing technical signal should worry the bond control room at JPMorgan and Goldman Sachs. The 50-day moving average is almost ready to cross above the 200-day MA, an important signal. Both the stochastix cycle and the MACD cycle appear stronger also. The bond control room operators will have to work extra hard to maintain the stable appearance of a bond yield between 1.6% and 1.9% in order to avoid nasty attention. The low point came in July, when as the Jackass forecast two months earlier, the TNX yield went below 1.5% to set the low. The jig might soon be up on IRSwaps supporting the large steel beams of weight pulled down by a fresh $trillion each year. The interest rate derivatives were probably sabotaged last summer. The interest rate derivatives will be given more emphasis, and control of the USTBond market will grow in importance and urgency. The London Whale caused much embarrassment for CEO Dimon and the JPMorgan corrupt crew last summer. They do not like such attention, even though the majority of foppish market observers still believe the losses were related to the claimed European sovereign bonds, and not the real source, the USTBond derivatives that were badly strained with bond yield volatility.

Roche (not to be confused with Stephen Roach) points to several factors hinting of a bubble bust in 2013. He expects some trouble in USTBond land from an early return of recognized price inflation in the second half of the year, reflecting past sins on easy monetary policy. He expects some profit taking blowback on extreme valuations in the lofty bond asset class will drive the crash. He also makes a great point, perhaps without full realization of its profound depth, concerning a lessening impact of Quantitative Easing on sovereign bond markets, as he describes. Marginal returns have begun to strike at the grand bond bubble asset structure. He does not put the problem in a Ponzi Scheme perspective, where accelerated rising fund flow is required to maintain a constant bubble position and bloated structure. True to his point, the numerous USFed bond monetization programs, three rounds plus a deceptive twist, have not only played a critical role in suppressing debt yields, but also dulled the senses of the market itself. The effectiveness of quantitative easing is now being called into question.

Roche concluded, "The talk is of changing tack. Even in the Fed according to its last minutes and at the Bank of England, where it is almost consensus that QE is a spent force. Once central banks stop buying, the bull market bond story is over because it is central banks that have been rigging the bond market, buying between 30% and 40% of all net new issuance." On his call of damage from a USTBond swoon, Roche assessed that a 200 basis point increase in 10-year Treasury yields would cause a 15% to 20% decline in their principal value. Roche is not alone in his predictions for a collapse in the USTreasury market. In March 2012, billionaire Wilbur Ross told CNBC to prepare for a bust in 10-year bond prices and longer-dated Treasurys, because the idea that inflation is gone and artificially low rates can last is silly. Ross is a wise old fox, prone to powerful understatement. See the CNBC article (CLICK HERE).

◄$$$ THE USFED IS GUILTY OF MONETARY MALPRACTICE. IT HAS NOT ONLY HARMED THE PATIENT, BUT HAS KILLED THE SYSTEM. A NEW SET OF SPECIAL INTERESTS GIVES THE ORDERS, A SYMPTOM OF THE FASCIST BUSINESS MODEL AT WORK. THE MORAL HAZARDS ARE ENGRAINED IN THE ENTIRE SYSTEM, WITH UNINTENDED CONSEQUENCES BECOMING THE NORM, AND DYSFUNCTIONAL MARKETS THE FOUNDATION FOR THE USECONOMY. THE ULTRA-LOW INTEREST RATES CONSTITUTE A DEAD BRAIN E.K.G. SIGNAL, A DEAD PULSE FROM THE BODY CAPITAL. $$$

A scathing devastating targeted indictment is made by Gordon Long, founder and principal at LCM Groupe. He has past experience as former senior group executive with two Fortune 500 international corporations, IBM and Motorola. He is an advocate appropriately enough of chaos theory and Mandelbrot generator algorithms. In a powerful article entitled "Monetary Malpractice : Deceptions, Distortions & Delusions" comes a thorough overview of criminal collusion with devotion to special interests and the undermine of the monetary system through a longstanding pattern of monetary abuse that has brought the financial system to the point of breakdown. The author Long stresses how special interests have shifted in the past decade to the military industrial complex, the banks & credit complex, and the security & surveillance complex. The system serves them.

The US Federal Reserve has embraced moral hazard to the extreme, making the hazard an integral part of its entire monetary policy. Low interest rates and massive transfers of capital from USFed to banks have allowed banks to become hedge funds, making most of their money through proprietary trading and the creation of ever-more exotic instruments (moral hazard). The result has been malinvestment and corruption gone amok. Bad bankers have run good bankers (those reluctant to lend to bad credits) out of the business. Hence, the banks become hedge funds, predatory, oversized, and corrupt. Big banks use their preferential status to borrow more cheaply than well-run smaller banks, and then proceed to push the latter out of mortgages and other lucrative business lines. Hence, the big banks then accelerate their growth. The financial oligarchy has merged into the one gigantic organization which the Jackass includes in the syndicate, comprised of the big banks, the USGovt finance ministry, the military industrial complex, the security agencies, the pharmaceuticals, and press networks. Benjamin Shalom Bernanke, Jamie Dimon, and Barack Hussein Obama are division heads in this empire. Their accomplishments are the creation of a police state in which the Bill of Rights is trampled and technology is used to suppress dissent while inflation siphons wealth.

MALPRACTICE: Low interest rates lead to a vast oversupply of houses. But instead of letting prices fall to market clearing levels, the USFed lowered rates even further and is now buying mortgage bonds as part of QE3. The housing market remains distorted.

RESULT: Mortgage rates are at near record lows and home building is rising again, even though we still have too many houses (malinvestment). Flipping is back (moral hazard). First-time home buyers are being priced out of starter homes (unintended consequence). And mortgage debt is beginning to rise again (moral hazard). Important to understand that homes are not productive assets. They eat capital and the more big houses we have the less productive we are as a society (unintended consequence).

MALPRACTICE: Low interest rates are pushing pension funds and individuals into riskier assets. Neither risk nor savings bring a reward.

RESULT: They have been forced to buy equities and junk bonds to achieve decent yields. Now the yields on those two classes have been lowered to the point where they do not perform in income generation. So pension funds are moving back into collateralized loan obligations (CLOs), and securities created from pools of corporate loans. JPMorgan forecasts three times as many CLOs will be created this year as in 2011.

MALPRACTICE: The USFed's willingness to monetize debt prevents the US from living within its means. The nation continues to operate on a lavish credit line.

RESULT:  Without a printing press we would have to prioritize and limit spending. But with a printing press we do not. The US can run a global military empire and a cradle-to-grave welfare state, and simply print the money it needs (moral hazard). An ongoing, accelerating debt is built up (unintended consequence) that makes it harder to live within our means, because we first have to pay interest on this rising debt. This increases the odds of a catastrophic meltdown as rising debt renders the system more unstable (unintended consequence).

Gordon Long concludes, "We must question the morality of Fed programs that trick people (as if they were Pavlov dogs) into behaviors that are adverse to their own long-term best interest. What kind of government entity cajoles savers to spend, when years of under-saving and over-spending have left the consumer in terrible shape? What kind of entity tricks its citizens into paying higher and higher prices to buy stocks? What kind of entity drives the return on retiree's savings to zero for seven years (2008-2015 and counting) in order to rescue poorly managed banks? Not the kind that should play this large a role in the economy." See the Zero Hedge article (CLICK HERE).

◄$$$ JACK LEW WILL GO TO THE USTREASURY POST. CITIGROUP'S CAPTURE OF THE USDEPT TREASURY IS ALMOST COMPLETE. JACK LEW OF CITIGROUP IS LIKELY TO BECOME THE NEXT TREASURY SECRETARY. AN EXECUTIVE FROM A DEAD BIG US-BANK HAS BEEN TAPPED FOR THE POST, ANOTHER BANK THAT RECEIVED MULTI-$BILLION BAILOUT. LIKE GEITHNER, HE IS A LOWER LEVEL FIGURE WITH STRONG WALL STREET LOYALTY. THE KEY STRINGS HAVE CHANGED IN A SUBTLE MANNER. THE CONTROL HAS CHANGED HANDS FROM GOLDMAN SACHS TO CITIGROUP UNDER THE AEGIS OF ROBERT RUBIN. $$$

The Jackass forecast was for another Wall Street devotee to take the helm at Treasury. My expectation was actually for a person of higher stature from a stronger past resume to offer, with broader ties to several firms. Instead, chosen was a mail clerk errand boy (like Geithner) with a small splash of project management on a foreign resume (unlike Geithner). Jack Lew of Citigroup will not bring much past foreign currency and hegemony project work to the office. He will strictly be a domestic ombudsman to build bridges and to put out domestic fires. However, a key change in control strings has come. The Goldman Sachs chambers will no longer provide hidden direction. Instead, the strings of control will move to Citigroup. Like with the Clinton Admin, Robert Rubin will take control again, but remain out of the spotlight. The GSax control lines continued through 2008 with Geithner due to the ongoing nature of the crisis. After stealing Fort Knox gold, Rubin will defend the nation against debt default, in a very appropriate role although hidden. The Wall Street Journal offered, "But Lew has been close for decades with former Treasury Secretary Robert Rubin and has been in close contact with Mr. Geithner for the past four years, likely giving him an inside view of how the agency operates and the range of issues that a Treasury chief must juggle."

Unaffectionatly called Citigov, the too-big-to-fail bank formally known as Citigroup, will take control in a passing of the hidden baton. Sources confirm the selection of Lew, complete with loopy signature, whose formal announcement on the nomination is imminent. Jacob (Jack) Lew served as managing director and chief operating officer of Citigroup Global Wealth Management from 2006 to 2008. He held the same titles at Citigroup Alternative Investments from 2008 until early 2009, at which time he was tapped for service in the Obama Admin as director of the Office of Mgmt & Budget. Interestingly he came from a Citigroup investments unit that profited from bets placed against the subprime mortgage market. It is important to note, that as White House chief of staff, Lew succeeded William Daley, formerly of JPMorgan Chase, another from the group of protected sanctified gigantic insolvent ruined too-big-to-fail banks that happen all to rely on narco money laundering for survival. The smear of Wall Street remains on the USDept Treasury, as Obama chose to pick someone compromised by the financial crisis, someone tainted by the official bailouts, someone from the guilty end of bank criminality. Then again, they were clear in 2008 that they did not wish to provide on-the-job training to a neophyte on high level USGovt and Wall Street criminal operations and syndicate protection. See the Bloomberg article (CLICK HERE).

Some obscure details on the man Jacob Lew. As preface consider his childlike signature, which might be easy to forge, and might not qualify for a legal signature at all since just a series of circles. Here are six things to know about Lew: 1) He is a debt ceiling debate veteran, which might have been the most important detail on his resume. His defense of entitlement programs like Medicare endears him to liberals, but angers Congressional conservatives. 2) He is credited for reducing the budget cuts sought by Republicans. They learned from the details that savings were one third of what they actually thought they won. Expect a renewed fiscal cliff battle soon. 3) Although a Wall Street guy and a WashingtonDC wonk, he was Chief Operating Officer at New York University, having also worked for Bella Abzug, the colorful social activist and New York Congresswoman. 4) His first big USGovt job was working for Thomas (Tip) O'Neill, the former House speaker. He also served on the House Democratic Steering and Policy Committee, which in 1979 oversaw matters such as appropriations, the USGovt budget, and taxes. 5) He once was in favor of raising the Medicare eligibility age. The ongoing fiscal fights between the White House and Congressional Republicans have been over entitlement spending. In the pressure packed rooms to make budget cuts, he might concede in at least one area to save money. In the past, he was willing to raise the Medicare eligibility age from 65 to 67 years. 6) Jack Lew brings his lunch to work. The routine midday meal consists of a cheese sandwich and an apple, according to the New York Times, usually taken at his desk. See the Market Watch article (CLICK HERE).

◄$$$ THE EURO CENTRAL BANK EXPERIENCED A FAILURE TO FULLY STERILIZE THEIR BOND PURCHASES. THEY ARE SUFFERING FROM OPERATIONAL FAILURES AND A FARCE OF MONETARY DIRECTION. IF THEIR BOGUS L.T.R.O. BONDS ARE NOT WRECKING THE BANKS THEY SEEK TO AID, THEN THE HERETICAL OFFICE POSING AS A CENTRAL BANK IS UNLEASHING PURE MONETARY INFLATION ON THE ECONOMIC FIRES. THE SYMPTOMS HAVE BEEN COVERED UP BY EURO CURRENCY INTERVENTION, WHICH GIVE A SIGNAL FOR SAFETY TO JUMP INTO A FIERY SCORCHING SWIMMING POOL (FINANCIAL MARKETS). $$$

The Euro Central Bank is a micky mouse outfit with no standing. The European continent is short on liquidity. Thus the placement of more monetized bonds acts like pure gasoline to produce monetary inflation on the tangible EuroZone Economy. Their official Securities Market Program (SMP) is a wreck, defunct, a sharp blade to render damage rather than an intravenous tube to supply nutrients. Their Long-Term Refinance Operations (LTRO) is an efficient destructive weapon that helped to wreck the Spanish banking system. It was rightly labeled the Draghi still-born baby by the Jackass, and should have warranted the dismissal of Mario Draghi from his EuroCB post as fast as he entered from the Goldman Sachs pedigree wing. The newly designed Outright Money Transactions (OMT) might work effectively as long as it never has to be used, so claim some clever analysts. But its aftereffects linger on. Draghi might be the best alphabet soup kitchen cook in Europe, rivaled only by Bernanke with all his 2008 and 2009 liquidity programs in the United States. These men are hacks, architects of weapons of mass financial destruction, and charlatans, who have rendered more harm (including Greenspan) on capitalist economic structures than any 100 plutonium thermo-nuclear weapons. Whew, enough!

Each SMP application consisting of bond purchases that provide liquidity in open market operations requires the mandatory sterilization, namely soaking up liquidity in order to produce a net zero effect on the monetary aggregage (money supply). The foppish Euro Central Bank had recently purchased EUR 208.5 billion in bonds. Once again the EuroCB failed to find enough demand to sterilize the full amount of rolling peripheral bond purchases. They managed to sterilize only EUR 197.6 billion in bonds, with just 43 bidders for the total weekly allottment. It was the lowest bid in twelve months. The last failure to sterilize occurred in November 2011, one day before a coordinated global central bank bailout. The embarrassments and fiascos in the EuroCB offices are difficult to enumerate.

The European banks are suddenly facing a major liquidity shortage, born out by the surge in marginal lending facility usage in Euro repatriation. Their banks are desperate for Euro liquidity to settle debt and move on. They urgently need domestic liquidity. The sterilization failures seen recently were designed not to happen following the stillborn baby LTRO flushing of cash. The baby defecated all over the big Euro banks. Their banks are supposedly loaded down by a cool EUR 1 trillion in excess liquidity. In the last 13 months, the trend is down in ability of the Euro Central Bank to sterilize its vast official monetary inflation. Notice the lack of a seasonal pattern, but instead a gradual deterioration since November 2011 in a straight line downtrend. A bar below 1.0x (black horizontal line) means a sterilization failure as there were not enough bids tendered to cover the full required amount. The result is unleashed price inflation as quick secondary effect.

The paradoxical rise in the Euro exchange rate in the aftermath of the sterilization failure can possibly be explained, by the dogmatic irrepressible Tyler Durden of Zero Hedge. He offers two explanations in 1) The Bank for Intl Settlements is actively manipulating the EUR higher in hopes of making market participants ignore this development, with precedent in past timely interventions, or 2) The surging Euro currency is nothing but a function of accelerating asset repatriation as European banks scramble to procure liquidity in their common currency. The rise in global markets occurs for the wrong reasons. Clownish fools are quick to misread the signal, and order a RISK ON for traders. Durden likens the forced anomaly to quarterly bank firm earning shenanigans, where they push onto the earnings side the Debt Value Adjustment fudges. So the bank bottom line improves in correlated linkage to the worsening bank current equity standing defined by its credit spread risk. This is a brilliant point made, a deep deception unmasked. See the Zero Hedge article (CLICK HERE).

◄$$$ THE COMPETING CURRENCY WAR IS FAST ENTERING A NEW DANGEROUS PHASE. THE VARIOUS NATIONS ARE MAKING MONETARY POLICY DECISIONS THAT INFLICT DAMAGE ON OTHER NATIONS, AND RAISE THE RISK TO EXTREME LEVELS FOR MASSIVE RESERVE LOSSES. THEY ACT IN SELF-INTEREST NATURALLY TO PROTECT THEIR ECONOMIES, IN PARTICULAR THE EXPORT TRADE. NATIONS WILL SOON BE REGARDED AS HAVING TURNED HOSTILE TO EACH OTHER. THEY SEEK A GLOBAL SOLUTION TO THE WRECKAGE OF FLOATING CURRENCIES AND A TOXIC USDOLLAR. THE PRESSURE POINTS ARE NOW SWITZERLAND AND JAPAN, WHO MIGHT SERVE AS SWING STATES TO TAKE ACTION IN A GLOBAL ACCORD AGAINST THE USDOLLAR. $$$

The danger level just rose. The well hidden new trade settlement system is taking shape after four years of development, appearing slowly without attention drawn to its many facades. The highly important theme of Competing Currency War ramping up will be developed in the Gold & Currency Report for this month. Swiss extreme risk continues to rise toward a break point. Their Euro-Swiss Franc peg cannot be held firm, even as their balance sheet is over 70% of their GDP, an untenable stress factor from wild exposure. Investors in Europe are flocking to the Swiss hills. Details of the interventions are full of intrigue, if not highlights of the futility. Huge losses await the small nation dominated by its banks. The Swiss National Bank has a large short SwFranc position and long Euro position, with other major currency long positions. They will assuredly break. The currency war makes it certain, having entered a new dangerous phase in competitive devaluations, as each major nation will manage according to their own national priorities. The war is on with pitched battles sure to escalate, and damage done to other nations rising. The result will be big disruptions coming very soon to both the FOREX currency market and the Gold market. Strangely, the prop of the Euro will keep the US$ DX index up, since the Euro has an absurd overweight in the queer index. The Gold price rise will come like a sudden burst. Watch for the Swiss and Japan to become drawn as new members in the Eastern alliance, which will produce the USDollar alternative. It requires a critical mass for success. The stress felt in these two nations will motivate their pursuit of the a solution.

Russia spoke out on the growing global awareness of an open currency war. Events are not of a fresh war, but rather a climax. It could result in a Gold Standard implemented in place, with the Anglo-Americans deposed. Nations strive for economic stability and growth, while forced to protect their export trade. The practice of competitive devaluation has turned routine. All actions taken by individual nations invite quick reactions by affected partners. Conversely, the successful nations do not tolerate punishment with a higher exchange rate. What is remarkable is the growing list of nations taking a role in the currency war. They are banding together. A Gold Standard would provide reward instead of punishment. The new global trade settlement system is fully ready, as it seeks a launch event. It will have a Gold core on short-term trade notes, used in formal Letters of Credit. The hostile nature of the currency war will bring support to this viable alternative that has been in full-bore preparation to implement for the last three years. The planning has been kept secret, to avoid sabotage by the US, UK, and their trusty ally nation on the Southern Med. Much precedent exists in the last 10 years, with other precedent in deterrents for basic diversification away from US$-based reserves.

The cooperative ventures went into hyper-drive in early 2009 after the Western banking collapse marked by the Lehman Brothers incident. Projects have been divided among expertise of certain nations. For instance, the Finns took charge of electronic wiring between commodity and currency markets. One German-Russian project was to manage the USDollar kill switch for turning off the Saudi sales of crude oil exclusively in USDollars. These projects are complex, intricate, and require great care to execute. It will be a major shock to the world when the USDollar is no longer the standard for trade settlement. The day is nigh, and Gold will be a principal beneficiary.

## DEBT LIMIT WALL & SINKHOLE

◄$$$ SUMMARY OF FISCAL CLIFF VACANT DEAL. EXPECT MUCH MORE IN TAXES, MINIMAL SPENDING CUTS, AND HUGE DEFICITS TO CONTINUE. THE IMPACT TO THE USECONOMY SHOULD BE AT LEAST A 1% DECLINE, TO WORSEN THE CHRONIC RECESSION. THE BATTLES HAVE BEEN OVER POWER, NOT FISCAL PRUDENCE AND BUDGET MANAGEMENT. THE AGGRESSIVE COSTLY ENDLESS WARS WILL REMAIN ENDLESS AND COSTLY, A FASCIST FIXTURE THAT DEMANDS A DAILY SALUTE WITH A FINE GOOSE STEP. $$$

Individuals earning more than $1 million will pay an additional $122,560 in federal taxes. Those making between $500,000 and $1 million in annual income will be given an extra $7000 in levied tax. Under one percent of the US population will endure a tax hike at all. However, the broad pain felt by most wage earners will come in a 2% increase in the FICA payroll tax towards Social Security. Many more provisions arrived in the final budget package, which contained far more taxe hikes than spending cuts. The bill extends long-term unemployment benefits for two million Americans that were scheduled to expire, while avoiding a scheduled cut in pay for Medicare doctors. Many tax credits remain unchanged, including Earned Income Tax Credit, Child Tax Credit, and American Opportunity Tax Credit. Extensions are given of renewable energy incentives, along with other tax credits and business incentives. The sequestration tied to the Budget Control Act was deferred for two months. No cuts will come to the Obamacare business tax or to its beneficiaries, an onerous burden on all businesses large and small. Extension of the farm bill are ordered through the end of the fiscal year.

The Congressional Budget Office estimated that the fiscal cliff agreement will see a projected total of $620 billion in increased revenue, but only $15 billion in spending cuts. The president clearly won the battle, which will slow the USEconomy in a significant additional way. The ratio of revenue enhancements (euphemism for new taxes or tax hikes) to spending cuts for the package is 41:1, a tribute to taxation without representation. In recent presidencies, the effective ratio has been 1:2 or 1:3 in reverse for new plans.

Jim Rogers, the self-styled financial guru and razor sharp critic, remains justifiably skeptical. He commented that the deal reached in Washington is meaningless since nothing will change within the Congress. The spending and debt will each continue apace, virtually unchecked. Retiring outgoing Texas Republican Congressman Ron Paul, who did not take part in the final vote, told CNBC this week that the fighting between the GOP and the Democrats was not focused upon tax increases or spending cuts, but rather about power and control, if not blame. Paul said, "We have passed the point of no return where we can actually get our house back in order. They pretend they are fighting up there, but they really are not. They are arguing over power, spin, who looks good, who looks bad. They are all trying to preserve the system where they can spend what they want, take care of their friends, and print money when they need it." How sad but true!

With fiscal cliff rhetoric and debate on pause, the USGovt faces a debt limit crisis. The federal borrowing limit has already hit the ceiling. Although the USDept Treasury has started to locate $200 billion in savings for a couple of weeks, the president has said that he will not be participating in negotiations to raise the debt ceiling. He might have a better more autocratic solution. The national debt stands at $16.4 trillion. The CBO projects the debt will rise rampant to $20.3 trillion by the end of the Obama II Admin term. See the Economic Collapse News article (CLICK HERE).

Michael Feroli at JPMorgan published his analysis on economic impact. He quantified the impact of the 2% payroll tax cut expiration being $125 billion lost revenue, no more tax holiday. Feroli gave an overall economic impact estimate is a 1% decline to the USEconomy, which requires a footnote that states the chronic powerful recession will be at least 1% worse. The US Gross Domestic Product has been stuck in recession, between minus 3% and minus 5% each year since 2008. The central piece of the final bill is the extension of lower-income and middle-income Bush tax rates, combined with a variety of rate and non-rate upper-income tax increases. The so-called tax breaks for the wealthy are removed. The projected upper income tax revenue of $624 billion over a ten-year period is tiny compared to the deficits projected by the CBO over that period, estimated at $9.975 trillion. Their forecast is not necessarily from Fantasy Land, since the annual deficit will be on the order of $1 trillion for as far as the eye can see. My belief is that the deficit will rise above $1.3 trillion annually unless and until the endless wars are halted, with the associated ravaging costs. My belief is that the deficit will rise above $1.3 trillion annually unless and until the zero bound interest rate is eliminated, since it kills capital, shrinks profits, reduces businesses, and eliminates jobs like a cancer. No forecast incorporates the ongoing strangle to business capital from the permanent 0% interest rate, compounded by the infinite bond monetization. This is the gigantic blind spot by the popular economists and those who run policy. See the Zero Hedge article (CLICK HERE). Thanks to RobH of Washington state for timely research.

◄$$$ THE JOINT COMMITTEE ON TAXATION ESTIMATES THAT THE NEW FISCAL CLIFF BILL WILL MARGINALLY KEEP IN PLACE TAX MEASURES THAT RESULT IN $3.85 TRILLION IN ONGOING DEFICITS IN THE NEXT 10 YEARS. ATOP THIS AMOUNT, ADD THE USUAL FARE OF OUTSIZED DEFICITS AND OFF-BALANCE SHEET WAR COSTS. THE NEW TAX LEVIES WILL FURTHER DAMPEN THE USECONOMY AND RESULT IN A DEEPER RECESSION. NOTHING SOLVED ON THE DEFICIT FRONT. THE ENTIRE CHALLENGE WILL BE REVISITED LATER IN 2013. AT THE END OF THIS ROAD ARE MASSIVE ICEBERGS, WHERE THE USGOVT DEBT DEFAULT WILL OCCUR. $$$

Relative to what would have occurred under the laws previously in effect, the new emergency legislation will increase budget deficits in coming years. They must have an effective gauge on the recession drag impact from higher taxation, plus higher impositions for the ObamaCare to businesses. The Congressional Budget Office issued the following statement. "Like all of CBO cost estimates, our estimate for this legislation shows the effects of the legislation relative to current law at the time we did the estimate. Relative to the laws in place at the end of 2012, we estimate that this legislation will reduce revenues and increase spending by a total of nearly $4.0 trillion over the 2013-2022 period. Also, like all of CBO cost estimates, the estimated numbers for the effect of changes in the tax code, which represented the bulk of the bill, were produced by the staff of the Joint Committee on Taxation. They published the details of their tax revenue estimates separately." The biggest items on the JCT estimate are the extended relief for Alternative Minimum Tax, for estate tax, and for dividend tax. See the Joint Committee on Taxation published report (CLICK HERE).

◄$$$ JIM GRANT WARNED OF DANGER FROM GROWING DEBT WITHOUT LIMIT, AND THE RISK OF FOREIGN REACTION. HE HAS HATCHED THE TERM "BUREAU OF MONEY MATERIALIZATION" FOR THE USFED. HE MOCKS THE CREATION OF FALSE WEALTH. HE WARNS OF A SUBMERGING AMERICA AS THE NATION HAS NO GOLD TO COVER THE USDOLLAR NOR A REALISTIC INTEREST RATE TO GOVERN THE FINANCIAL SECTOR AND USECONOMY ITSELF. DEBT IS GROWING MUCH FASTER THAN INCOME TO THE USGOVT, AN UNSUSTAINABLE BUT IGNORED CONDITION. $$$

Grant is permitted to appear on major financial networks as a designated hitter to slam the system. His bow tie detracts from his message, which makes him seem like a brilliant dufus professor. He simply makes too much sense, seen as a sort of mad financial scientist. He provided a tangible context of the $16 trillion debt, not in pallettes of $100 bills stacked for several city blocks the height of a skyscraper. Instead he describes the debt as 360 million pounds of $100 bills. That means each $1.3 annual deficit amounts to a cool 29 million pounds of $100 bills. Grant explained that no constraints are at work anymore. In decades long ago where the Gold Standard enforced activity, a finite amount of gold limited a finite production of USDollars, which worked to limit the exuberance, excess, and worse. After recent years of rampant monetary growth under the guiding hand of Bernanke, who took over the wrecked field from Greenspan, the situation has gone far beyond out of control. Grant summarizes the deeply wayward condition. Grant makes a tremendous point that the underlying monetary problem has been transformed into a fiscal problem, for presentation to the public on treatment toward policy. He gives an urgent warning.

"Now we have neither the Gold covering the dollar nor interest rates constraining us. The only thing remaining to constrain us is some sort of civil discussion, a numerate discussion about the debt. The debt has increased twice as fast as federal receipts. The United States is truly submerging. Our fiscal problems are enormous and yet the Federal Reserve, that is The Bureau of Money Materialization, can print money (materialize dollars on a screen), removing the fiscal constraint too. So what we have is a fiscal problem when the underlying problem is monetary." The financial markets have no requirement for proper discipline, and seek a Weimar repeat episode without any concept of risk or danger. The entire arena of participants urgently beckons for continued Weimar chapters that they believe rescue the financial markets. Time between urgent pleas has been reduced, just as the fleeting benefit. Instead, the Weimar policy is killing the system. The debt markets cannot react properly, since it has no idea what $1 trillion really is. Money has been too distorted. See the Zero Hedge article (CLICK HERE).

◄$$$ A DEBT LIMIT INCREASE BY EXECUTIVE ORDER WITHIN DICTATORSHIP REMAINS A POSSIBILITY. THE REPUBLIC IS DEAD. THE CONSTITUTION HAS BEEN SHREDDED. THE POLICE STATE IS NEXT. THE GLOBAL REJECTION OF THE USDOLLAR IS THE PLUG PULLED. AFTER A LONG LIST OF EXECUTIVE ORDERS, A DEBT LIMIT INCREASE BY ANOTHER DECREE SEEMS VERY MINOR IN IMPORTANCE. $$$

USCongressional leaders are eager players in the trampling of the Constitution, which has already been shredded by the Patriot Act. Honoring the truly venerable and sacred document is paramount in my ideals. It calls for Gold as money, and a slow deliberate approval of war, with preserved liberties. The nation has entered a toilet bowl vortex as a result of departing from its rules and strictly stated guidelines, beginning with departure from the Gold Standard in 1971. The string of wars without declaration of war has added unspeakable debt to the nation, enabled the security agencies to build a vast narcotics global monopoly, and made easy the pilferage of $billions for Halliburton and the gaggle of defense contractors. My preference is not to refer to defense any longer, but rather to aggression and heightened motivated acts of war with designed aggressive motive. The executive orders to kill citizens, jail citizens, seize citizen assets, and force citizens into slave labor would easily be followed by executive orders to permit an unlimited debt, if not permit a permanent leader in the White House. The nation proceeds on the Third World path, precisely as the Jackass foresaw in 2008 and 2009. It is indeed ugly. Powerful forces have targeted the United States for destruction, in order to pave the way to Western fascism.

Nancy Pelosi and Harry Reid have almost formally invited President Obama to raise the debt ceiling by means of another in a long line of Executive Orders. The sitting resident of the White House has issued far more executive orders than Bush II. Senate Majority Leader Reid has reportedly told President Barack Obama that he would back the president overriding congressional authority and unilaterally raising the debt ceiling. Nothing can stop them except conscience and fear of public outcry. House Minority Leader Pelosi was more forceful. She stated, "I have made my view very clear on that subject. I would do it in a second. But I am not the president of the United States." While the current project is to shred the Second Amendment on bearing arms, the next step might be to risk a Constitutional crisis by trampling over the 14th Amendment, which states that the validity of the public debt shall not be questioned. The framers stipulated very clearly that debt decision shall be decided upon by the Congress and only that august body. Too bad it is populated by male and female whores and harlots, in the pocket of bankers, warmongers, and syndicate dons.  

White House Press Secretary Jay Carney has attempted to defuse the debate. He has tried to take the 14th Amendment option off the table. The Obama Admin, "does not believe that the 14th Amendment gives the president the power to ignore the debt ceiling, period." Take a step back and consider that the leader of the land has issued executive order to kill, jail, seize, and enslave the populace. An additional step to increase the credit card limit unilaterally seems small by comparison. Those who object can be rounded up, jailed and slaughtered, their wealth confiscated. In rejoinder, Obama said "I will not have another debate with this Congress over whether or not they should pay the bills that they have already racked up through the laws that they passed." Such forceful words indicate an open door to taking control of the debt ceiling in order to rescue the nation from the USCongress.  On the last day of 2012, the United States Govt hit the $16.4 trillion debt limit. A White House decision to break a deadlock on the national debt limit seems natural at this point. Third World tyrants have done worse. See the Breitbart article (CLICK HERE).

With breach of the $16.4 trillion debt limit, the USDept Treasury has undertaken what are called emergency measures to keep paying the bills it owes to creditors. The measures involve borrowing from federal funds on a broad basis, much like parents borrowing from the children's college fund, or an inheritance trust fund, or their own pension funds. These measures are limited in scope, and might be exhausted as early as February 15th, raising the potential of a partial default on some US debt. Expect the global financial markets to be disrupted again and again. Also expect a possible debt downgrade by the S&P, Fitch, or Moodys, provided they can muster the nether stones to face off with the USGovt and its resident crime syndicate, replete with threats. Treasury Secy Geithner, the lackey Goldman Sachs clown occupying the lead chair, has reminded the public that he will use extraordinary measures to create $200 billion in extra breathing room under the limit. He warns diligently that tax, spending, and uncertainty makes the duration of such measures unclear. He assures that all such extreme measures are standard procedure, with precedent made during the many previous impasses. See the Zero Hedge article (CLICK HERE). For a sharper commentary, as in acerbic if not caustic, see the Before Its News articles (CLICK HERE and HERE), about the grim reality and the bagmen in WashingtonDC.

◄$$$ AFTER EXTRAORDINARY MEASURES WITH BORROWED TRUST FUNDS TO CREATE ADDED HEADROOM, THE USGOVT WILL LIKELY RUN UP AGAINST THE FIRM DEBT LIMIT BY MARCH 1ST. FEBRUARY IS A VERY HEAVILY INDEBTED MONTH, OVER $200 BILLION USUALLY. THAT IS WHEN THE FIREWORKS WILL BEGIN. A LARGE SCALE FEDERAL SPENDING CUT WOULD BE A POISON PILL SWALLOWED, JUST LIKE THOSE ORDERED SO READILY IN EUROPE. $$$

Alec Phillips of Goldman Sachs has shared thoughts on the background of hitting the limit, the measures taken, and the timing. The formal limit has already been reached on December 31st, but the USDept Treasury has enough headroom to last until around March 1st. January tends to be a relatively low deficit month, in the range of  $20 billion to $30 billion. February is the big heavy deficit month, in the last three years having produced a deficit of $220bn to $230bn. The February deficit this year is likely to be least $200bn. The USDept Treasury has instructed the USCongress that it expects to have about $200 billion in extreme devices at its disposal, ransacking a group of trust funds. With a cash balance at $59bn at year end, the USGovt will be able to pay its obligations without an increase in the debt limit until at least sometime in the second half of February. It seems likely to reach March 1st before it exhausts its special dip funds, but then the limit is hit.

The various devices often described as extraordinary measures come in many forms, but similar themes. The USDept Treasury has used three primary strategies to create additional headroom to borrow under the limit. 1) Partial disinvestment (raid) of the federal employee defined benefit pension fund, worth between $35bn and $90bn. They have declared a debt issuance suspension period (DISP) in the past, which could create between $15bn and $70bn, along with a few $billion more from non-investment of new inflows. Similar delays in postal retirement creates $17bn more headroom. 2) Disinvesting the so-called G-Fund, worth a hefty $156bn in headroom. The Thrift Savings Plan is a defined contribution system for federal employees, which provides several investment options including the G-Fund. It invests only in government securities. 3) Disinvesting (raid) the infamous Exchange Stabilization Fund, worth about $23bn in headroom. It is invested in non-marketable USTreasurys.

If the USCongress does not raise the USGovt debt limit by the deadline, outlays must be reduced immediately in order to balance against income. The USGovt would not have cash on hand to pay obligations as they come due. Over the next three months, the Treasury is likely to spend roughly 40% more than it takes in, the norm. The deficit would have to be eliminated on a current running basis. The priorities are not clear, but be sure that military spending would be the first hog at the trough, the pensions next, and the social net last. My Jackass belief is that the across the board spending cuts will never happen, since the hogs are banker friends. An overall reduction in federal spending would result in a sharp downturn in near-term economic activity, provided it persisted for more than a very short period. My other Jackass footnote is that massive and broadbased spending cuts would subject the US to the same poison pill austerity program that it so eagerly inflicts on nations like Greece or Spain. The recession impact would be powerful, just like in Europe.

◄$$$ GOLD RAMPED UP IN 2011 DURING THE DEBT LIMIT DEBATE AND CONFLICT. THE CONDITIONS ARE MORE EXTREME THIS YEAR, WITH MUCH ELABORATE DEFENSE IN PROGRESS. $$$

More amplified derivative applications (Interest Rate Swaps) and more global bond monetization by every major central bank, these factors differ from past episodes. While the effect might not be as sharp in 2013, the demand for gold might hit a high note as the ruin of money takes a quantum jump in a raised debt limit. While past events are useful prologue for future activity, something more sinister seems at work. The Boyz are doubling and tripling their naked shorts, amplifying their interest rate derivatives, running overtime in Exchange Stabilization Fund activity in the FOREX market, enlisting matched bond monetization initiatives by major central banks, seizing Arab gold, denying repatriation efforts of official gold, and far more that remains obscure behind the curtains. The situation is far beyond unmanageable at this point, the risks rising fast. The entire system is at risk of collapse, to be clear, with the risk ten times greater than it was in 2009, and far higher than it was in 2011. The point is valid on a Gold price response though, worth watching. Thanks to Darrell-D of Colorado for the contribution of annotated chart and reminder of the effect on the gold price.

◄$$$ PUT THAT SMART YOUNG WOMAN FROM TEXAS IN CHARGE OF GOVERNMENT PROGRAMS. SHE HAS A GOOD SOUND APPROACH. IMAGINE HER WISDOM IN CLEANING UP THE BANKS, STARTING WITH BIG BANK LIQUIDATION, FORCING AN END OF DONATIONS TO MEMBERS OF USCONGRESS, AND SPEEDY PROSECUTIONS, IF NOT R.I.C.O. LAW APPLICATION. SHE MAKES FAR TOO MUCH SENSE TO TAKE SERIOUSLY IN A CORRUPTED SICK NATION. $$$

The Waco Tribune Herald of Texas published an editorial in mid-November by a young 21-year old woman, who suggested various solutions to the USGovt fiscal problems. She would address the extensive unchecked dysfunction. The item was entitled "Put Me In Charge" and produced a string of wise policies that King Solomon himself would have approved. The following are her policy suggestions almost verbatim. Note the repeated emphasis on obtaining a job for the extras. See the Zero Hedge article (CLICK HERE).

  • Put me in charge of Food Stamps. I would get rid of Lone Star cards with no cash for Ding Dongs or Ho Hos, just money for 50-pound bags of rice and beans, blocks of cheese, and all the powdered milk you can haul away. If you want steak and frozen pizza, then get a job.
  • Put me in charge of Medicaid. The first thing I would do is to get women Norplant birth control implants or tubal ligations. Then, we will test recipients for drugs, alcohol, and nicotine. If you want to reproduce or use drugs, alcohol, or smoke, then get a job.
  • Put me in charge of government housing. Ever live in a military barracks? You will maintain our property in a clean and good state of repair. Your home will be subject to inspections anytime and possessions will be inventoried. If you want a plasma TV or X-Box 360, then get a job and your own place.
  • In addition, you will either present a check stub from a job each week or you will report to a government job. It may be cleaning the roadways of trash, painting and repairing public housing, whatever we find for you. We will sell your 22-inch rims and low profile tires and your blasting stereo and speakers, then put that money toward the common good.
  • Before you write that I have violated someone's rights, realize that all of the above is voluntary. If you want our money, accept our rules. Before you say that this would be demeaning and ruin their self esteem, consider that it was not that long ago that taking someone else's money for doing absolutely nothing was demeaning and lowered self esteem.
  • If we are expected to pay for other people's mistakes, we should at least attempt to make them learn from their bad choices. The current system rewards them for continuing to make bad choices.
  • Lastly, while you are on Government subsistence, you no longer can VOTE! Yes, that is correct. For you to vote would be a conflict of interest. You will voluntarily remove yourself from voting while you are receiving a Govt welfare check. If you want to vote, then get a job. (This conflict of interest could be the most significant factor in the re-election of Obama, besides vote fraud.)

◄$$$ THE USECONOMY DEBT BUBBLE IS A BIGGER THREAT THAN THE DEBT LIMIT FOR THE USGOVT. BOTH ARE CRITICALLY ILL SYMPTOMS. THE DEBT BUBBLE WILL NOT GO AWAY, PRIMARILY BECAUSE DEBT IS USED TO REPAIR THE PREVIOUS DEBT BUBBLES AFTER THE BUST AND CLEANUP EFFORTS. THE UNITED STATES IS IN A CLASS WITH GREECE, BUT MORE ARROGANT. $$$

While the fiscal cliff dominates the financial news networks, the national debt bubble remains a much greater threat. Rather than treatment such as a moderate uniform tax increase at a bad time and a consequent moderate contraction, a debt bust at the national level would open the door and produce a powerful kick down the staircase into the Third World. The much bigger cliff stems from the fact that the fabled fictitious fanciful recovery is built on nothing but sand and powered by the backside wind of a horse. The underlying systemic fragilities have never been permitted to break, since the vast liquidation process would dissolve the entire USEconomy, but more importantly, dissolve the entire bank leadership crew which holds power. They will never relinquish that power, even as the nation enters a devastating decline and adopts the full embrace of a police state. The police already take orders from the bankers.

The total debt in the USEconomy as a proportion of the national economic output is in stratospheric levels. It cannot be resolved or treated without a collapse. It is the the bubble that will not go away, due to a national dependence of a Jack Daniels version of credit and its widespread abuse. The nation is thus rendered a zombie with zombie banks and zombie households and zombie factories. The accumulating sands of debt merely preserve the existing system by means of evermore massive monetary stimulus programs. Thus the so-called recovery is built upon an illusion, a mirage in the desert of phony money and endless credit oases. The life support actions taken do not serve the nation effectively or equitably. After the 2008 crisis hit with Lehman Brothers, Fannie Mae, and AIG, the bubble burst and the deeply integrated fragile financial system was set to burn. Then the many central banks around the world stepped in to provide absurd levels of emergency funding that essentially monetized the entire credit system. Nassim Taleb calls it overstabilizing the financial system. The unsustainable levels of debt vastly exceeded income. It was put on life support. Today, four years later, the debt ratio remains unstable, putting the system at risk.

Witness a classic Catch-22. The only true panacea for the depression is growth, but the economy cannot grow because it is depressed and zombified. The pillars cannot be liquidated, for fear of derivative nuclear events and the dissolution of the power structure that directs the crime syndicate in power. What is urgently needed is a crash, where the ubiquitous toxic paper is liquidated, clearing the field for new growth, much like turning over the soil in a vegetable garden with a large tiller. That is what the elder Austrian economist Joseph Schumpeter meant when he referred to the work of depressions, a concept many mainstream compromised economists fail to grasp. They are marketing agents for the Wall Street banks, federally funded professors from tainted universities, and blatant think tank harlots with an agenda of power preservation. See the Zero Hedge article (CLICK HERE).

◄$$$ PAUL CRAIG ROBERTS BELIEVES THE FISCAL CLIFF IS A DIVERSION FROM THE BIGGER PROBLEM AREAS. THE FISCAL CLIFF DRAWS ATTENTION AWAY FROM THE DERIVATIVES TSUNAMI AND THE DOLLAR BUBBLE. THE GREAT RISK IS FOR A RAPID ABANDONMENT OF US$-BASED ASSETS BY FOREIGN ENTITIES. THE RESULT WOULD BE A RUN ON THE USDOLLAR ITSELF, AND A SYSTEMIC CATASTROPHE. $$$

Roberts has credentials from previous administrations. He actually believes the fiscal cliff challenge is a hoax designed to shift the attention of policymakers, the media, and the attentive public, away from huge problems to smaller focused versions. The automatic spending cuts and tax increases present a temporary solution that would reduce the deficit by an insignificant amount over ten years if Congress takes no action itself. It is nothing more than a double barreled dose of austerity imposed upon what he identifies as a faltering and recessionary economy. The fiscal cliff pertains to small numbers when compared to the Derivatives Tsunami or to the USTreasury Bond market in a major bubble. The requisite $110 billion annual spending cuts could be accomplished very simply, by taking a three month vacation each year from the USMilitary wars.

Turn to the real problem. The Derivatives Tsunami and the USTBond bubbles are of a different order of magnitude. According to the Office of the Comptroller of the Currency, their 4Q2011 report stated that 95% of the $230 trillion in US derivative exposure was held by four US financial institutions: JPMorgan Chase Bank, Bank of America, Citibank, and Goldman Sachs. Prior to the totally insane repeal of the Glass-Steagall Act, aided by the lack of derivative regulation, JPMorgan Chase, Bank of America, and Citibank had been commercial banks which took deposits and made loans to businesses and consumers, then purchased USTBonds with any extra reserves. The repeal of Glass-Steagall converted these honest commercial banks into hot shot gambling casinos. The result was a mountain of uncovered bets on interest rates, currency exchange rates, mortgages, prices of commodities, and stock indexes. The inherent volume went out of control. Just the derivative volume (gambling bets) of JPMorgan Chase Bank are equal to world Gross Domestic Product. The current state of financial affairs would have been considered beyond science fiction back when Roberts served as a USDept Treasury official in the Reagan Admin. The skein of bond monetization programs by the USFed is designed to cover the USTBond issuance and the toxic assets held by the big banks. The entire financial structure is hopelessly wrecked.

The deception is enormous and significant. The Federal Reserve claims that the purpose of its massive monetization of debt is to help the economy with low interest rates and increased home sales. Such objectives are rubbish, so claims Roberts, agreed by the Jackass. The true purpose of the QE programs has been to support the prices of debt securities, in order to support the gigantic bank bets in the form of derivatives. This purpose is never openly stated. However, the USFed monetary policy renders regular and continued harm to the USEconomy by depriving savers of interest income, especially the retired and pension funds. Interest paid is actually lower than the rate of inflation. Roberts does not notice or direct attention to the other hidden effect to kill capital by raising the cost structure, a huge economic depressant that few economists or analysts are aware of. But Hat Trick Letter readers are fully aware, a constantly stated theme. The nasty effect overseas is to make USTBond holders nervous, in fact enough to bail out, or at least to halt new purchases. The grand risk is for a run on the USDollar by foreign sales of US$-based assets, primarily the USTBond. The only resort left to the USFed would be to support the USDollar by raising interest rates. The catastrophe would follow, as bond holders would be wiped out, carry trade players would be wrecked, and the borrowing costs on the USGovt debt would explode. The grand climax would be the implosion of the derivatives market, often called the financial nuclear event. The real interest rate has been stuck deeply negative for over four years. It powers the Gold bull market.

Roberts concludes, "The hyped threat of the fiscal cliff is immaterial compared to the threat of the derivatives overhang and the threat to the USDollar and bond market from the Federal Reserve's commitment to save four US banks. Once again, the media and its master, the US government, hide the real issues behind a fake one. In human history, such a policy [to dismantle the social safety net] usually produces revolt and revolution, which is what the United States so desperately needs. Perhaps our stupid and corrupt policymakers are doing us a favor after all." See the UK Guardian article (CLICK HERE). Also refer to the Zero Hedge article (CLICK HERE) for background on the derivative market, its extreme leverage, and the teetering platforms.

## DERIVED RISKS AT BIG BANKS

◄$$$ THE LEVERAGE DEPLOYED BY THE BIG FOUR US-BANKS IS OBSCENE. THEY ARE NOT BRILLIANT MASTERS OF MARKETS, BUT RATHER FRONT RUNNERS OF MARKETS WITH THE BENEFIT OF HAVING THE USGOVT POLICY SCRIPT IN THEIR POCKETS. THEY OBSERVE THE ACTIONS OF THE EXCHANGE STABILIZATION FUND IN ADVANCE, AS PRIVILEGE, SINCE THEY EXECUTE THOSE ACTIONS. $$$

According to the Comptroller of the Currency, four of the largest US banks hold huge risk every day, from high leverage and linked debt, all related to derivatives. Their exposure is truly obscene. The high Goldman Sachs leverage explains why they have demanded a front seat at the USDept Treasury. After they engineered the theft of Fort Knox gold bars in the Clinton Admin, they replaced the foundation of the US banking system with a cockeyed system of vaporous derivatives in a fragile latticework that requires extreme care to manage. By using the privileged information of the Exchange Stabiliziation Fund, whose policy they execute as a group, they exploit insider information and profit from an overly leveraged derivative book. They are not brilliant, but rather privileged. They are corrupt beyond any essence of the word corrupt. Furthermore, since running the ESFund directly, they are exempt from mark-to-market accounting and can therefore extend their insane risk to levels far beyond control, deemed in the national security interest. That interest is in preserving the banker power, not the system to benefit the populace. Their narco money laundering is also deeply interwoven with assets, debt, overnight loans, and derivatives. Their deployed leverage is in the 30:1 to 40:1 range, far too high to be considered prudent, manageable, or sustainable. The GSax leverage is truly obscene.

BANK

ASSETS

DERIVATIVES

LEVERAGE

JPMorgan

$1.812 trillion

$69.238 trillion

38 : 1

Citibank

$1.348 trillion

$52.151 trillion

39 : 1

Bank of America

$1.445 trillion

$44.405 trillion

31 : 1

Goldman Sachs

$114.7 billion

$41.580 trillion

363 : 1

When the derivatives crisis happens, the financial markets will fracture rapidly and force contagion at lightning speed. During a fast moving crisis, the entire banking and financial system will freeze up. It might start in Asia or Europe, where the experience in market control and intervention is less sophisticated and corrupt. The Americans will wake up some morning to find their markets not functioning anymore. Perhaps the stock markets would remain closed, and money at the banks not accessible. The big banks will be seized up, and a bank holiday will be in progress. See the Economic Collapse article (CLICK HERE).

The points of vulnerability to cause disruption and turmoil are mortgage portfolios turned toxic (with ties to lawsuits and the Fannie Mae acid vats), USTreasury Bonds in bubble formations (with buttress ties to derivatives), sovereign bonds in Southern Europe (not responding to new EuroCB toxic paper), the hyper monetary inflation by the USFed in ZIRP & QE (forcing revolt by foreign bond holders), the Competing Currency War by major central banks (causing self-preservation to rule), and the construction of a new non-USDollar trade settlement system (reported to have a gold core in trade notes).

◄$$$ DAS EXPLAINED A POTENTIAL SCENARIO ON SYSTEMIC RISK FROM COUNTER-PARTY OBLIGATIONS. THE SYSTEM HAS BEEN FORTUNATE TO DATE. DO NOT EXPECT SUCH LUCK TO CONTINUE, SINCE STRESS BUILDS, HOLES APPEAR, AND EQUITY IS ERODING. THE DERIVATIVES SYSTEM HAS CREATED A PHONY VAPOROUS FRAUDULENT NEW FOUNDATION UPON WHICH THE INSOLVENT BROKEN BANKING SYSTEM RESTS. $$$

Satyajit Das is a seasoned veteran, a highly respected expert on financial derivatives and their consequent risks. His work has been followed for years by the Jackass on a sporadic basis. Das sketched a scenario where a large trader fails to make a margin call. This kindles rumors that a bank handling the trader's transactions (a clearing member) is short on cash. Remaining clients rush to suspend their trading accounts and pull cash, forcing the lender into bankruptcy. Then come questions swirling about whether the remaining clearing members can absorb $billions in losses, spurring more runs. Then would come the widespread panic. Das wrote, "Bank customers panic, and they start to withdraw money. The amount of money needed starts to become problematic. None of this is quantifiable in advance. Clearing houses have been oversold as a way of preventing Armageddon. I just do not think that realistically you can exclude the possibility that taxpayers could be at risk." The derivative structure could not stop the panic, since itself so fragile and heavily leveraged. Even Goldman Sachs CEO Lloyd Blankfein, who sits at the right hand of (some pagan) god, agrees. He said, "We have to make sure that something that we do to reduce the risk in a once-in-a-20-year storm does not increase the risk in a once-in-a-50-year storm. The regulatory push might make clearing houses the biggest systemic risk in the world."

The systemic risk is often centered on swaps contracts. The new regulatory rules have made the risk more concentrated, precisely on the fragile insolvent too-big-to-fail banks. On a good day, a risk analyst at the CME Group in Chicago must round up $2.5 billion from the giant traders and banks such as JPMorgan Chase to cover their losses in the $639 trillion derivatives markets. These are truly large numbers. They worry about the effects of a bad day, which would test the new rules in the Financial Regulatory Bill (aka Dodd-Frank Act) designed to prevent a repeat of the 2008 credit crisis. It will not prevent anything, just bring higher risk to fewer stress points. What was supposed to start in March, the swaps that make up about 79% of derivatives trades must be backed by collateral and go through clearing houses such as CME Group. Traders would have had to post $927 billion with CME and other firms like LCH, Clearnet Group, and Intercontinental Exchange (ICE), whose combined role as middlemen is to ensure participants are paid on the swaps contracts. Big money lies in the balance, as well as corporate deaths.

The system supporters claim the current system can withstand almost any shock, including defaults by four of the biggest lenders. Some bankers and researchers are not convinced. When the financial engineering madmen lose control, the USGovt debt rises to cover the cost as insurer of last resort, like the $1.2 trillion of bailouts last time in 2008. Clearing houses have routinely been oversold as a way of preventing Armageddon. To keep the system working safely, clearing houses rely upon the collateral they collect, then on reserves in guaranty funds, and the power in emergencies to demand $billions more in cash from their members. Many analysts like Das and Reggie Middleton (Jackass too) have argued that the risks cannot be adequately covered by real money. The system has gone far out of control. Thus the reason for the suspension of derivative collateral rules. The collateral put up for swaps trades covered by the FinReg Rules typically equals only 0.5% of their notional value, according to Morgan Stanley. The risk is palpable that a big fresh new crisis would burn through those firewalls, which would leave banks unable to come to the rescue. The banks are already hiding deep insolvency.

Derivatives help investors hedge or speculate on commodity prices, interest rates or, in the case of credit default swaps, the financial health of firms or nations. In the last decade or more, the emphasis has shifted toward speculation and generated fees from an unregulated gigantic casino, away from true risk hedge. Many bank analysts argue that in the 1990 decade, the entire system of derivatives was hatched and grew in size, in order to create a highly leveraged foundation for the entire Western banking system to rest. The foundation had grown insolvent. So the financial engineer moral hazard junkies built a fake new foundation based on unregulated trust and fraud and money laundering. See the Bloomberg article (CLICK HERE). Bear in mind that the Europeans expect a delay in the Basel III rules until the end of 2013. The rules would enforce higher placements of  collateral on dodgy loan portfolios, and eventually on risk-filled disastrous derivatives. See the Bloomberg article (CLICK HERE) and the Reuters article (CLICK HERE).

Friend and colleague Rob Kirby pitched in with sage words. He said, "So long as clearing houses like the DTCC (a self-regulated organization) are staffed by the perpetrators of the crimes, any and all systemic crimes which are currently being committed will continue to be swept under the rug. The only way a systemic problem will rise to the surface is if a new clearing house bureaucracy is established where lackeys are hired who have any sense of right from wrong and perform their jobs accordingly. These claims are reminiscent of Volcker who claimed [the internal mechanism governed by a central Gold role] is the enemy of the system. Any new hierarchy that illuminates the truth cannot and will not be tolerated. The system is that rotten, corrupt, and fragile."

◄$$$ BIG US-BANKS WON A REPRIEVE ON WALLING OFF DERIVATIVES AND MANAGEMENT SCHEMES. THE RULE WILL BE DELAYED THAT WOULD ISOLATE DERIVATIVES FROM TRADITIONAL BANK BUSINESS (WHATEVER THE HELL THAT IS). THE BANKS WILL PROCEED WITH IMPLICIT ULTIMATE BACKING BY THE F.D.I.C. BY DEFAULT. THE TWO ARENAS CANNOT BE SEPARATED, SINCE FULLY INTERWOVEN WITH FECAL CABLES AND TOXIC STITCHING. $$$

The big banks led by JPMorgan, Citigroup, Bank of America, and Goldman Sachs won a delay from Dodd-Frank Act requirements that would force them to wall off some derivatives trades from bank units backed by federal deposit insurance. The FDIC demands the distinction, since on the hook for unregulated derivatives tied too closely to the ordinary bank functions. Commercial banks including the Wall Street firms (which are not banks at all), will be given as long as an additional two years to comply with the rules. Delays could be extended for a third year based on consultations with other regulators. Given the 5-year investigation into the silver market, expect the 2015 deadline to be very loose, if not imaginary. The Office of the Comptroller of the Currency made the statement for the extension. The so-called pushout provision (more like firewall) was inscribed in the FinReg Bill in 2010 law as a way to limit taxpayer support for uncontrollable high risk derivatives structures. It had stipulated that stocks, some commodities, and non-cleared credit derivatives be moved into separate affiliates without federal assistance. The naive idealistic Congress does not comprehend the derivatives. Besides, they permitted the big US banks to write the legislation in a way that cannot be applied or enforced.

Regulators including USFed Chairman Bernanke had opposed the provision, saying it would drive derivatives to less regulated entities. He is a liar. The firewall provision would drive derivatives into less capitalized entities, which during any mishap would collapse the entire system. The lies keep the public misinformed intentionally, since the big banks are insolvent. The system is a series of layered empty shells. Hence the FDIC backs the global derivative system in effect. But it is a shell organization explicitly guaranteed by the USTreasury. Therefore the USTreasury backs the global derivative system. But the USFed is the big daddy who underwrites toxic paper from the USTreasury. So one can conclude that the USFed backs the global derivative system, but forces the USDollar to monetize the entire accident insurance payouts. See the Bloomberg article (CLICK HERE).

The entire controversy is muddy, since neither swap dealers nor commodity gamers are directly overseen by the FDIC. The foreign subsidiaries are hardly governable by US agencies. The swaps go unregulated altogether, while the commodities operate under the shadow of JPMorgan, which is immune from any rules, regulations, criminal statutes, with a full pass given to protect national security. Besides, the entire controversy eventually is over valid collateral, yet the topic cannot be touched since too hot. The determined basis for collateral is far too fuzzy and spurious. Since the 0% rate of money was imposed, value is distorted. The banks can claim the risk of their derivatives book are hedge by their own metrics, just like with their own asset value calculations, done at liberty to hide insolvency. As Rob Kirby quipped in a spicey message, "If I post two thousand pieces of premium camel dung as collateral for $10 billion in bets against the 3-month LIBOR, this should be acceptable since the camel dung has been valued conservatively. I am running a fully hedged book, since it is good shit by my own determination."

◄$$$ A POTENTIAL RUN ON MONEY MARKET FUNDS COULD SOON RESULT IN RESPONSE TO NEW REPORTING METHODS BY A MAJOR FUND IN THE SECTOR. IF INVESTORS DO NOT MOVE INTO USTREASURY BILLS, AND SIMPLY REMOVE THEIR CASH, THE BANKS WILL SUDDENLY SUFFER FROM THEIR EQUITY VULNERABILITY. $$$

The GS Asset management (GSAM) will start providing daily quotes for its money market funds with premium/discount to NAV, net asset value. They have a motive in mind, an ulterior motive to force change within the industry. They hope that doing so will force the industry to do the same. The practice will introduce volatility in money market funds, since they will be forced into a more honest Mark-to-Market system. The present method is corrupted, since it permits the more fanciful Hold-to-Maturity system. Many of the instruments are highly rated and very short-dated in maturity. The problem is that the money market funds are often valued below 100 parity in a giant fraud that has the financial institutions taking extra risks to achieve higher yields. When the internal vehicles lose on mortgage bond discovery, the money market investor does not receive the full original amount at redemption. Conclude that cash does not hold its value!

More sinister motives are at work behind the scenes of money market funds. They have their own investment problems. Chairman Bernanke is desperate. He wants retail cash investors to move out of money market funds and into USTreasurys, or even stock funds. The USFed and USDept Treasury are straining to maintain steady values of bonds and stocks, having been using extreme methods in market props for years. The good chairman should be careful what he wishes for. Frustrated with the rigged system, alienated by USGovt debt negotiations, angered by the corrupt bankers, disgusted by huge bank welfare, incensed by big bank collusion in account theft cases like MFGlobal, retail investors might simply ask for physical cash, if sufficiently pushed. The cash withdrawn could cause a run on the fiat banking system. Or worse, rather more wisely, they could start buying precious metals and cause a run on the bullion banks. Observe an act by a desperate system on its last legs.

◄$$$ MORGAN STANLEY TO CUT 1600 JOBS. THEIR FINAL CORRIDOR WILL POSSIBLY SOON TAKE AN ACCELERATED STEP. THE BUSINESS MODEL HAS RADICALLY CHANGED. WITH THE USECONOMY STUCK IN A POWERFUL RECESSION, THE INVESTMENT BANK BUSINESS HAS BEEN WRECKED. THEY DID IT TO THEMSELVES WITH BOND FRAUD. $$$

The intrepid and fearless Charlie Gasparino, along with Bloomberg, have reported that Morgan Stanley is in for some deep job cuts. The investment bank successfully staved off a death threat last autumn when they cut a cushy $45 billion cash deal with Citigroup over obscure matters. The Jackass has been criticized as alarmist on the Morgan Stanley front. How shallow indeed! They found a silo of cash quickly. It seemed like a slush fund switcharooney (maybe engineered by Rubin and the USFed) to help MS to avoid a default event, even possible bankruptcy. Recall Morgan Stanley had the gigantic influx of interest rate derivatives in late 2010 that enabled the contrived artificial flight to safety in USTreasury Bonds. They are still vulnerable. The cushy deal bought MS time. Well, time marches on. Morgan Stanley will cut 1600 jobs at the bank. Hardly a suprise, since CEO James Gorman has always made it clear that Wall Street had to downsize, his firm no exception. The firm dealt out a 9% compensation cut to its professional staff, including executives. The truly ugly year was 2011, when the firm was running layoff scenarios in the several thousands.

Meredith Whitney made news last year with some sharp comments on Wall Street downsizing. She stated, "You can make great money in a utility type of business by borrowing cheaply and lending sensibly, but that is not what is being done. The basic bank model has, is, and will be attractive. They are combining everything and undercutting pricing in one place and trying to make up for it, effectively having loss leader businesses. That is not a business model that works. You are either making money or you are not. If you are not making money, get out of the business." See the Business Insider article (CLICK HERE) and the Financial Times article (CLICK HERE). Morgan Stanley is not alone in deep job cuts, as Deutsche Bank is doing the same.

◄$$$ JPMORGAN FACES A COURT SANCTION FOR WITHHOLDING MADOFF DOCUMENTS. JPMORGAN WAS DEEPLY INVOLVED WITH THE MADOFF FUND FRAUD, HIDING THE EMPTY SHELLS. THEY EARNED FEES FROM FUND PROCESSING, AND EVEN WITHDREW INVESTMENT FUNDS IMMEDIATELY BEFORE THE MADOFF ARREST. EVIDENCE IS BEING KEPT FROM PROSECUTORS. THE BIG US-BANK IS SLOWLY REVEALED AS A CRIME SYNDICATE CENTER. THEY ARE THEREFORE QUALIFIED TO RUN THE FINANCIAL FUNCTION OF THE USGOVT. $$$

The inspector general to the USDept Treasury has threatened to discipline and sanction JPMorgan Chase for failing to turn over documents to regulators related to the Madoff Fund fraud. The Office of the Comptroller of the Currency is conducting the probe. The syndicate bank actually claims the information is protected by attorney & client privilege. The internal watchdog dismissed the JPMorgan arguments on privilege, stating the OCC could not do its function if banks were legally permitted to withhold information on that basis. Failure to produce the records would be regarded as a continuing purposeful impediment to the authority of the OCC, a sort  of obstruction of justice.

The Madoff fraud was cited as a $50 billion theft, later changed to $65 billion. My source indicates the fraud totaled $150 to $160 billion, a figure the US public would not tolerate. So it was edited downward in revision. The pressure on the Madoff case only adds to the pressure already felt by JPMorgan from the London Whale losses of $6.2 billion on interest rate derivatives, which also contain a giant lie (not sovereign European Bonds).

The trustee liquidating the Madoff firm sued JPMorgan in December 2010, accusing the bank of actively aiding the fraud. The lawsuit is led by Irving Picard and demands damages of $19 billion. The case is under appeal. Team Picard claims JPMorgan had financial reports in its possession that clearly evidenced fraud. The criminal giant JPMorgan was the firm's primary banker for more than two decades. The bank benefited from Madoff accounts while it helped perpetuate Madoff's fraud by ignoring the red flags, and continuing to structure products and collect fees for their own enrichment, according to the lawsuit. JPMorgan probably is responsible for vast concealment of empty shells and flow of funds to the Swiss banks where the stolen funds still reside. The JPMorgan bankers earned an estimated $398 million in pretax profit from Madoff deposits from 1986 to 2008, according to a 2011 study by Linus Wilson of the University of Louisiana at Lafayette. The trustee's lawsuit also claims in direct accusation that JPMorgan withdrew $276 million in its own investments in feeder funds to the Madoff financial pyramid about three weeks before the highly publicized arrest of Madoff in December 2008. The criminal bank justified the withdrawal as a routine review of its hedge fund exposure. See the Bloomberg article (CLICK HERE). Recall that JPMorgan was deeply involved in the MFGlobal account thefts as well as the Peregrine account thefts of a rhyming nature. JPMorgan is a large crime syndicate organization that routinely skates after its large thefts.

◄$$$ BANK OF AMERICA AND CITIGROUP QUARTERLY EARNINGS REPORTS ARE A CONFUSING PILE OF YARN, CHEWING GUM, RANCID SPITTLE, AND OLD TAPE WITH ENOUGH TOXIC PAPER AND ROTTEN CAPITAL TO OBSCURE WHAT LIES INSIDE. THE CHALLENGE GROWS HARDER EACH QUARTER TO SHOW HEALTHY BUSINESS ACTIVITY, TO MAKE THE DERIVATIVE BUSINESS APPEAR INOCUOUS AND MINOR, TO PUT A GOOD FACE ON USTBOND CARRY TRADE, TO MINIMIZE THE ENDLESS SKEIN OF MORTGAGE RELATED LAWSUITS, AND TO AVOID THE APPEARANCE OF INSOLVENCY. THESE ARE BIG DEAD BANK SHELLS, WHOSE MAIN BUSINESSES HAVE BEEN SMASHED BY THE RECESSION THE BIG US-BANKS CAUSED FROM THE HOUSING & MORTGAGE BUBBLE & BUST. $$$

Bank of America reported fourth quarter profits declined by 63% as costs mounted from faulty foreclosures and flawed home loans made long ago. The bank announced an $11.7 billion deal to end disputes with Fannie Mae on bad home loans. It also joined an $8.5 billion industry settlement deal to compensate for fraudulent foreclosures. Thomas Brown (moron hack from Second Curve Capital and Bloomberg contributing editor apologist) has repeatedly overlooked its insolvency, criminality, and morbid status. Net income in 4Q2012 dropped to $732 million from $1.99 billion one year ago. After the gimmicks are put to work, the profit after one-time charges went up from 3 cents per share to a wondrous 29 cents per share. Note that one-time charges seem more like 20-time charges in the last five years with 20 quarterly statements and the same types of charges taken each quarter. The Bank of America quarterly dividend has been a paltry one cent per share since March 2009. During the recent morass, BOA has cut over 14 thousand jobs in just the last twelve months.

Pity not the executives who blame the troublesome manure to clean up each quarter on the takeover of Countrywide Financial and Merrill Lynch. The BOA heirs to the toxic mess have sold over $60 billion of acquired toxic assets in the process. However, the big US banks cut deals to share in the takeover assumption from mergers, which had to cover up criminal bond fraud and criminal contract fraud and criminal conspiracy with MERS title database. The fewer surviving Wall Street banks were forced to swallow a bitter toxic pill, in order to receive flush USGovt aid as they appeared to be heros that saved America. They are part of a vast criminal syndicate that killed America. Let it be known that BOA is the largest beneficiary of narco money laundering in the United States. It receives frequent emergency funds from tainted sources in order to keep avoid defaults.

The firm has booked almost $50 billion in costs since 2007, including refunds and litigation tied to defective mortgages and improper foreclosures. In September, the firm agreed to pay $2.4 billion to Merrill Lynch investors for concealment of losses ahead of its 2009 acquisition. The firm will post $5 billion in pre-tax fourth quarter charges to cover the Fannie Mae payments, the foreclosure settlement, and mortgage litigation. Results were also affected by accounting charges tied to the loony credit value adjustments (accounting gimmick), and a tax benefit from non-US subsidiaries. The accord cut with Fannie Mae compensates them for defective loans that were sold by Countrywide and Bank of America from 2000 through 2008. The bank also agreed to repurchase $6.75 billion in mortgages from Fannie Mae, in painful clawbacks. See the Bloomberg article (CLICK HERE). What a scummy ongoing story BOA writes.

Citigroup reported earnings dragged down by heavy legal expenses that finally appeared in the post-Pandit era. It was Citigroup's first quarter under the leadership of CEO Michael Corbat, who took the helm last October. Pandit had been widely criticized for failure to disclose and to account for a raft of legal expenses. Citi earned $1.2 billion after dividend payouts, compared to $933 million in the same period a year earlier. The corrupt bank known to have a special Rubin imprint of ruin reported $1.3 billion in legal and related expenses in the quarter. The bank agreed to settlements related to widespread industry practices that resulted in illegal foreclosures (called Robo-Signing). It took a charge of $305 million in the quarter to cover an agreement with the Office of the Comptroller of the Currency and the Federal Reserve. The bank released a mere $86 million its loan loss reserves, compared to $1.47 billion a year ago. Citigroup took a charge of $1 billion in the quarter related to its new executive restructure process. Citi earnings for 4Q2012 were deeply affected by legal expenses and small release from its loan loss reserves. It needs more loan loss reserves, not less, as the ledger item has been regularly abused gimmick to produce mythical profits, along with credit value adjustments. The big bank has become more vulnerable and more highly leveraged in the process.

Corbat's first move was a bold decision to cut 11,000 jobs, to close dozens of branches, and to trim its consumer banking business in some countries. More than half of the job cuts were from its consumer banking unit. The bank has cut 7000 jobs since the same Q4 last year, about 3% in its overall work force. Using the same common accounting gimmicks, Citigroup listed a bunch of one-time exclusions, enough to register a nice rosy 69 cents per share in fantasy land. The bank's interest income has been squeezed by ultra-low interest rates and competition for depositors. They are increasingly reliant on fee-based services like investment management and advisory offerings. The problem is that clients are damaged by the recession caused by the big US banks, and few opportunities exist to make bond or stock offerings. Their non-interest revenue, which includes fees and other categories, rose 18% to $6.02 billion from $5.09 billion. No doubt some money laundering items have been transformed as legitimate profits. See the Yahoo Finance article (CLICK HERE).

◄$$$ THE OCCUPY WALL STREET HAS FIZZLED, MISSION ACCOMPLISHED. THE USGOVT LAW ENFORCEMENT, USGOVT SECURITY AGENCIES, AND LOCAL POLICE WORKED TOGETHER TO BRING DOWN OCCUPY WALL STREET. THE LAUGHABLE TERROR THREAT OF OPPOSING BANKER CRIMES HAS BEEN AVERTED. $$$

The crackdown against the Occupy Wall Street (OWS) movement was crushed in an organized systematic coordinated official USGovt project. The Domestic Security Alliance Council was formed, with central core the FBI, the USDept Homeland Security, and local police. A harsh, if not illegal, violent network drew in forces from regional fusion centers and private sector security forces, often coordinated with the big banks themselves. What has been revealed was a merged entity with one centrally planned, locally executed mission. Documents from the Partnership for Civil Justice Fund have produced evidence that police and DHS worked for and with banks to target, arrest, and politically disable peaceful American citizens.

The requested documents were released after long delay between Christmas and New Years. They show a nationwide project in city after city. Six US universities were sites where campus police funneled information about students involved with OWS to the FBI. The banks met with FBI officials to pool information about  OWS protesters harvested by private security. Plans were made one month in advance by the FBI and offered to the targeted banks. Conspiracy plans were hatched to assassinate certain OWS leaders by sniper fire. The USGovt has ample staff to conduct such patriotic duty. Many documents obtained have been redacted (blotted out with black magic marker). Contrary to standard FBI practice to inform the person concerned when there is a threat against a citizen, the threatened OWS leaders were not warned.

No surprise to the Jackass, since civil liberties have been shredded along with the Constitution. The right to free speech, peaceful assembly, and more have been abridged or even abrogated by the growing police state. The crackdown involved violent arrests, group disruption, cannister missiles directed at protesters, invisible microwave irritants, people held in handcuffs so tight they were injured, people held in bondage until they urinated or defecated on themselves. Some groups were rounded up and cleared out, on the grounds that they were creating sanitary problems (garbage and excrement), like at Zuccotti Park in New York City. Several FBI offices around the country were in high gear conducting surveillance against the movement even as early as August 2011. The OWS demonstrations peaked a month later across the nation.

The directors of The Partnership for Civil Justice Fund argue with bitter complaint that the documents show from inception, the FBI designated OWS repeatedly as a terrorist threat, even though it publicly acknowledged the Occupy Wall Street movement as being a peaceful organization. Mara Verheyden-Hilliard pointed out the close partnering of banks, the New York Stock Exchange, and at least one local Federal Reserve office with the FBI and DHS, making loose reference to actions of a police state. She accuses the federal agencies functioning as a defacto intelligence arm of Wall Street and Corporate America. The FBI actually lied openly when it claimed the documents did not exist, before they were finally revealed. See the Business Insider article (CLICK HERE). The USGovt agencies and law enforcement are finally proved as protectors for the crime syndicate run by bankers, just like with the FBI protection of Goldman Sachs when the Russian trader stole their device that enabled skimming on millions of NYSE stock trades.

◄$$$ VATICAN BANKS HAVE BEEN CUT OFF UNDER A MONEY LAUNDERING DARK CLOUD. THE HOLY SEE MUST OPERATE IN CASH WITHOUT ITS VISIBLE WINDOW TO THE BANKING SYSTEM. $$$

Italian authorities have stopped all electronic payments inside the Vatican City after the Bank of Italy ruled on the tiny state's failure to bring in new procedures to prevent money laundering. All bank card payments on Vatican territory have been suspended since January 1st. Also, Deutsche Bank Italia was ordered to turn off its systems. The bank manages electronic payments for the tiny independent country, which operates otherwise with total impunity in money laundering and gold swaps and bearer bond mule trips. The Vatican has routinely scoffed at implementation of new anti-money laundering rules. The report only to God, or Lucifer, depending on whether Jesuit bankers with business degrees or cardinals appealing to the prince of light. Let us not enter discussion of sacrifice, since this is not a newsletter about child abuse.

At issue is transactions for the Vatican museum, the territorial pharmacy and post office, even their gasoline stations. These businesses have all been rendered unable to transfer money and to accept payments. Five million tourists visited the Vatican last tyear and spent EUR 91.3 million (=US$114 mn). Until its payment systems are restored, all transactions must be done in cash. Pope Benedict XVI has pledged to make the Vatican finances more transparent. In the past, the Vatican has been linked to organized crime that had infiltrated its banking operations, not to mention murder of Roman investigative reporters who learned too much. See the UK Telegraph article (CLICK HERE). In reality, the pope is no more the man in charge than the US President. Both take orders from their resident bankers. Recall that religious institutions and security agencies are immune from law enforcement, as they run crucial flanks of the supra-national syndicate across the many lands.

## TRIGGERS TO FINANCIAL DISORDER

◄$$$ THE USFED AND USDEPT TREASURY HAVE RENEWED THEIR PROPAGANDA MESSAGES ABOUT AN IMMINENT END TO THE HIGHLY DESTRUCTIVE BOND MONETIZATION INITIATIVES (Q.E.). THE MESSAGES ARE ECHOS FROM THE SPRING 2009 FALSE MESSAGES. THEY ARE DESPERATE TO PREVENT A COLLAPSE OF THE USTREASURY BONDS FROM EXTREME RELIANCE AND PRESSURES PUT ON THE INTEREST RATE DERIVATIVE STRUCTURE, FROM ARTIFICIAL DEMAND. REGARD IT IS A STRESS TEST OF THE USTBOND ITSELF. THEY RISK A RUN TO GOLD. NOTE THE MILD SELLOFF IN USTREASURY BONDS, WITH THE SLIGHT RISE IN BOND YIELDS. $$$

Regard the USFed gaggle actions and messages as desperation to end the hyper monetary inflation, enough to lie about an advanced recovery, while talking about the labor market, but petrified about a collapse of the USTreasury Bond market but rejection of the USDollar globally. All strains are extremely acute. It is both desperate and laughable, all this talk of the QE programs ending, and a halt to the corrosive acidic bond monetization from new electronic Weimar money. The USDollar has turned toxic and the world is awakening to that reality. The memory should be still fresh from the spring months of 2009, when the USFed spoke openly about an Exit Strategy. The Jackass shot the notion down easily, and no exit has been taken in almost four years. The system is breaking within the control room that manages the false price set for Gold, the USDollar, and the USTBond yields. The triangle is breaking slowly. One might include the price of Crude Oil to make a four-legged stool of corrupt market pricing.

The cabal of bankers has too many levers and buttons to control, as these are truly gigantic markets. It is like asking a group of arrogant nazis to guide a flotilla of large naval vessels through a sea of icebergs, some showing themselves above the surface, many not visible, when they are distracted by their own images in mirrors and key genocide projects. The May 2012 incidents with JPMorgan suffering losses was the great warning signal. It has been forgotten by many sheep in the mainstream, but also by many members of the gold community. In my view, the gold community contains many loyal members, but too many sheep that cannot discern the many confusing signals presented by the cabal like the GLD fund. Far too often they fall into numerous traps, lacking insight, guidance, and intelligence. The war underway is no place to operate with misguided hope in the face of extreme atrocious corruption backed by violence and constant deceptions, using the tainted press as a 1984-type billboard.

By talking of an end to QE, the banker cartel risks a departure from the USTBond safety zone. The float a dangerous trial balloon. The immediate effect would be to lift Gold and encourage its demand, as the bond yields rise more than a trifle. So conclude the banker cabal is confident that Gold has been subdued, beaten up, kicked in the ribs and head, its followers dejected. The cabal misjudges badly. The community of gold investors has been rendered dispirited at a time when QE has gone amok with new monetary expansion that sets world records. Imagine Weimar-style QE on its third and fourth rounds, yet the monetary growth has not reached the golden channels as a hedge against wealth destruction and monetary abuse.

Time is probably running out for the cabal, with a reset probably coming much sooner than most people expect. As the London Siren put it, "The financial markets are on Mercury and the real global economy is on Pluto or maybe in a different solar system. It is one big circus show until it ends. The USFed credibility is very much long gone. Recall they said no QE3 last January." But QE3 was announced, and quickly afterwards Q4 was assured. The effect of each subsequent QE is transitory and illusory if not vaporous. The analogy is excellent, as the financial markets on the first orbiting planet are being burned to a crisp, too close to the source of light and the associated heat of reality. The global economy is far adrift from the anchor of sound money, nearing a lost orbit. A Gold Standard is being demanded gradually to restore the global banking system, to end the competing currency wars, and to keep the pricing of assets based in reality. Not only is money without proper anchor on value, but all assets are distorted to the extreme as well.

◄$$$ NUMEROUS POTENTIAL TRIGGER EVENTS AWAIT ON THE HORIZON, OR ARE ALREADY IN PROGRESS. THEY WILL GROW IN NUMBER AND STRENGTH. THE DISRUPTION HAS BEGUN. FINANCIAL CHAOS WILL FOSTER SOCIAL UNREST. $$$

The London Siren is well situated in the London financial district, and eagerly shares his views. For the new year, he identifies a long list of triggers that could quickly disrupt the balance of value pricing for Gold, USDollar, and USTBonds. He expects a fast run (like a jail break) soon in the physical Gold market. The triggers toward destabilization will come from something none of us can expect, events very difficult to control. He points out the following numerous possibilities, with effects described by the Jackass in embellishment and explanation. His factor, my fuller description.

1. Japanese pension funds or insurance companies buying gold, as a hedge to protect themselves from extreme actions taken by the Bank of Japan. They are in a constant state of desperation to avoid a rise in the Yen currency, which has damaged their export industry to a great extent.  

2. A small private bank being caught up in fraud or going bankrupt due to derivatives. As the big US and London banks continue to receive broad support, even though dead insolvent, the risk has shifted to smaller banks as both intermediaries and counter-parties. The mid-sized banks run some counter-party risk with direct connection to the large broken corrupt banks. But the smaller banks run an intermediary risk from clearance functions. They are not protected.

3. The Euro Central Bank taking deposit rates negative, in a desperate move to preserve the integrity of a system in implosion. Suppression of the Gold price in Euro currency terms is not good for the Euro banking system. Gold still holds a minor role in reserves management. Regard negative rates as a signal that the tangible economy suffers from extreme deterioration, from distorted asset values, diminished capital opportunities, a rising cost structure in response to bond monetization, and ransacked assets from collateral seizures.

4. Italy politics running amok, as Berlusconi has been running a strong second ahead of the GSax bank-scum merchant Monti. Italians are frustrated and vocal, the most emotional of all in Southern Europe. They react to an 11.1% unemployment rate. If Monti is deposed (or tossed from a palace balcony), many props will be discar ded.

5. Technical default by USTreasury market occurring under the sleepy heads hearing the din, mesmerized by the gloss of financial markets. The manmade devices with Interest Rate Swaps have been stuck in hyper-drive for over two full years. The stress put on Primary Bond Dealers is enormous and untenable, since they lack legitimate investors to unload their inventory. Stress is constant.

6. The Allocated Gold Account scandal erupting further from below the surface, on too many fronts to contain with the dome of intimidation and corruption, if not bribery. Several fronts have softened, led by the German demand for gold repatriation. They will soon learn that their gold has been leased or stolen. The allocated account front could be the Achilles Heel of the bank cartel, since the accounts are very large and the players very powerful. Germany holds the pivot vote in a tilt to the East for the next chapter in a grand Paradigm Shift that escapes most Western observers.

7. A sovereign asking for gold audit of its holdings would be a focal point and public exposure test, closely related to the Allocated Gold Account battleground. A formal audit would invite greater publicity in a manner similar to demand for repatriation.

8. Egypt fiscally blowing up, as the breakdown is well along. The Egyptian Pound currency has lost 4% in value just since January 1st. An extreme shortage of USDollars has been noted in circulation within the nation in flux. The Arab Spring boomerang is in progress. Egypt is the great casualty, even while Syria is the visible battleground. The West has lost Egypt.

9. Pakistan destabilizing in unknown ways. It is following Egypt, no longer listening to the Western megaphones, going its own way. It reacts to daily USMilitary drone aircraft attacks on villages, killing civilians, causing a visceral social impact. The vast oversized US Embassy is but a military station with tremendous abuse, permitted by the Pakistani Govt, but perhaps not much longer. It could become another Green Zone under siege.

11. Some big hedge fund collapsing of significant size, not necessarily very large. The fund would be long USTBonds and possibly short Gold. Their USTBond losses could not be swept under the interest rate derivative rug, like with JPMorgan and Morgan Stanley. The impact ripple effect would be the damaging deadly dominoes.

12. The Swiss currency regime falling apart, with control mechanisms breaking in full view. Their long Euro position and short Swiss Franc position is untenable, with the pressures growing with each passing month. The 120 line in the Euro-Franc sand is arbitrary and impossible to defend. Their artificial regime has extended to the other major world currencies like long exposure to the Japanese Yen and British Pound.

13. Apparently some US fiscal report was delayed for release last month. It was supposed to be released in mid-December but was postponed to mid-January. It probably contains some deeply damaging citation of risk about the USGovt debt growth, possibly the Weimar machinery at work which attempts to produce a phony equilibrium in the face of $1.3 trillion annual USGovt deficits, absent foreign bond demand, and over 80% USFed electronic coverage of the official toilet paper USTBond issuance.

◄$$$ ADD SOME JACKASS REJOINDERS TO THE LIST OF HIGH RISK FACTORS AND RELATED EVENTS THAT WILL UNLEASH DISORDER, AT FIRST FINANCIALLY BUT LATER ON A WIDER BASIS. $$$

The London Siren is brilliant in his assessment. Permit my sharing the stage with his fertile mind on a vast collection of risk factors. Although lengthy, it is in no way complete. Even after some Jackass additions, the list is still incomplete, as the Weimar initiatives, toxic sovereign bonds (both foreign high yield and American ultra-low yield), broken insolvent banks, deteriorating economies, sink holes from collateral attachments, and flight to true safe havens all contribute to a nightmare scenario coming to pass. Consider the additional potential triggers toward destabilization, some of which overlap.

A) The failure of an intermediary bank due to a default on some obligation by a larger bank related to derivatives cannot be managed. The problem is a large financial firm that overwhelms a smaller firm, as the size contrast works against the system. The ripple effects would hit faster than the banker cartel could manage them in order to maintain stability.

B) A sudden failure of a large French bank from rapid capital flight away from their frail platforms due to the rising federal debt and growing socialist vaccum. The flight of funds has been occurring for at least three months. The sink holes are forming. The impact would be felt at London banks and big European banks, joined tightly.

C) Saudi suffers a stability setback, from both internal and external forces. The royals react by showing support for the Eastern non-USDollar platform. They announce that non-US$ oil payments are acceptable. The ripples from a fractured Petro-Dollar reach far and wide. The proper interpretation will be that the Saudis would be slowly turning their backs on the broken Anglo-American Empire, thus permitting it to slide into the Third World.

D) The new Turkey annexes Kurdistan, forms a stable state, makes a difficult peace, develops the vast Kurdish oilfields, and presents their bounty to the Eastern non-USDollar platform. Their crude oil sales would enter the new trade settlement embronic system, and even help to define it. The departure of Western oil firms from Iraq is the great signal ignored by the myopic Western observers. Certain murders have paved the way for the new state.

E) Putin and China talk more openly about their gigantic official gold holdings and the inevitable nature of a gold-backed currency. The talk will center on the new non-USD platform that will serve as a trade settlement centerpiece. It will shut out the toxic USDollar, render one quarter of the world isolated in the West to contend with a dying USDollar, and serve warning that the US and its closest trade partners together risk a slide into the Third World. The upcoming G-20 Meeting in Moscow is their potential well-lit stage.

F) Germany openly accuses the London bank cartel of being a criminal organization with direct accusation of stealing their gold bullion, covering up up with false accounting, confusing the markets with vast naked short positions, and concealing the location in private accounts. The Germans might go so far as to accuse the Anglo-American banker regime (banks, government, military) of soliciting wars in order to sustain their crumbling empire. The Germans have an open door to act as a hero state.

G) Several big European banks teeter badly in reaction to numerous effects from toxic paper. The leading factor is the recent toxic bogus EuroCB paper (LTRO) being used to fortify structures. The sequence of Draghi stillborn paper babies finally shows its effect. The ESM mechanism and EFSF facility debt downgrade was a powerful blow that undermined the bond integrity. The Draghi resignation is overdue, despite being nominated for man of the year.

H) Some brave Southern European nations openly consider the Iceland solution of bank liquidation, bond liquidation, and starting anew without banker cords to the executive branch. The leading candidate is Spain, and without the Monti interference, the nation of Italy could join the liquidation path that Iceland has successfully embarked upon. It is very difficult to thumb the nose at the Anglo-American banker cartel, with its crime syndicate, its hordes of agents, and military attack support.

I) One or two Western financial leaders or their closeby ministers show up dead, where impossible to hide their murders. The public outcry for further cleansing (not necessarily hunting the killers) could be extremely disruptive.

J) The cumulative impact of delays to both Basel-3 and Financial Regulatory rules (Dodd-Frank rules) to tighten reserve requirements related to derivatives. Efforts to date have reduced the leverage but exposed the deep insolvency and dependence upon toxic paper. The impact could actually work toward a return to the Gold Standard.

◄$$$ THE LIES ARE ENDLESS AND PATTERNED. THE BANKERS WON THEIR BAILOUTS BUT ARE FAST LOSING PUBLIC TRUST. THE FINANCIAL SYSTEM UNDER THEIR DOMINATION REMAINS FUNDAMENTALLY BROKEN. THEY ARE FAST LOSING CONTROL. $$$

The fundamental problem is that the Western banking system is totally and hopeless broken, insolvent, and corrupt to the core. All solutions have been mirage shell games to direct funds toward the big banks, which cannot be repaired. They must be liquidated. No solution short of a total overhaul is possible, none. The crisis continues toward climax, as pressure points abound. Matt Taibbi, who coined the Vampire Squid name for Goldman Sachs, has been hammering home the argument that the financial system remains fundamentally broken and deeply insolvent. For a good review of the incredibly tilted bailouts, grand deception for justifying the $trillions in bailouts and loans to the big banks, complete with an impressive skein of lies, refer to the bold summary article by Taibbi on Huffington Post (CLICK HERE). Taibbi said the following.

"The lie was the bailout. That was really part of the whole rescue effort, telling the American public that all of these companies were healthy when in fact they were not. They just threw a ton of money at Wall Street, papered over the problems, and waved a wand over it, saying everything will be alright. The only reason investors have not run screaming from an obviously corrupt financial marketplace is because the government has gone to such extraordinary lengths to sell the narrative that the problems of 2008 have been fixed."

## THANKS

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, and more.