GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Introductory Update
* USFed Cornered to Radically Inflate
* USDollar Extremely Vulnerable
* Gold as Money Gains Acceptance
* The Great Exchange Traded Fund Gold Fraud
* The Business of Gold in Review
* The Oil Debate & Barter Systems
* European Union Strains & Fractures


HAT TRICK LETTER
Issue #64
Jim Willie CB, 
“the Golden Jackass”
22 July 2009

"Quantitative Easing, monetary ease, monetization, money printing, increase to the monetary aggregate, increased money supply, stimulus spending, improved liquidity, credit flow, looser lending … it is all the same thing, INFLATION, just elaborate descriptions in high falluting language for what has destroyed the USEconomy, without acknowledgment."
--
bank analyst who prefers to be anonymous

INTRODUCTORY UPDATE

Editor Note: Apparently the connection between Michael Jackson and Austrian reporter Burgermeister is a hoax. The Powerz want to make the reporter lose credibility, as she is on an important mission to expose the global influenza genocide program. See a YouTube on the hoax story (CLICK HERE).

$$$ FORCED VACCINATIONS ARE PLANNED PERHAPS IN AUGUST, SO PREPARE. $$$ Last weekend, an email message came from a subscriber named BarbaraW in Illinois. It warns of actual vaccination scheduled plans, with her personal conjecture. She wrote, "I work for a large health care organization as a respiratory therapist. Late last week, we were informed of upcoming mandatory swine flu vaccinations to be administered in two stage injections beginning in August. I am very unhappy about this as you might imagine. I suspect, as we are useful to the Powerz, we will be given a safe version that may even protect us from the flu. Then we will be left in isolation to take care of the overwhelming number of sick and dying as we witnessed happen to hospitals in New Orleans. I read the stories as told by the hospital workers there, and it convinced me that our government cares nothing for its citizens." In the July Crisis Coverage Report, many potential motives for mass murder and genocide were given. Here is one more, straight from former Treasury Secy Hank Paulson and Congressman Paul Kanjorski during a discussion. They openly discussed the possibility of a breakdown in law and order and the logistics of feeding US citizens if commerce and banking collapsed as a result of the growing banking crisis and economic problems. They thought it possible for a limited time.

A quick comment on Central America. After numerous discussions with friends who have lived in either Costa Rica or Panama for many years, some things have been learned. They are both homes to thousands of retired USMilitary and various US security agency personnel (like CIA, Natl Security Agency, Defense Intelligence, Drug Enforcement Agency). Some run training centers and even survival camps in this area. After the invasion in Panama to oust Noriega over 20 years ago, some strange secret deals were cut between governments and bankers. The prevailing conjecture is that the parties agreed to permit the USGovt to conduct its narcotics banking and its CIA project banking in Panama, along with pension check distribution. In return, the United States generally maintains a 'Hands Off' attitude. With so many ex-service personnel in the two tiny nations in Central America, given special treatment is given them. One ex-USMilitary Army Ranger contact outright told me last February that the virus attacks will not involve Costa Rica or Panama, since the killers do not wish to kill the territory where fellow brothers live and breathe. By the way, the Costa Rican Govt just announced they will NOT participate in any nationwide vaccination effort. Reasons are many, to be sure, that must involve logistics and cost. They must not have received any pressures from the killers.

$$$ P.C.ROBERTS EXPLAINS IN HIGH LEVEL TERMS WHY NO RECOVERY IS POSSIBLE IN THE USECONOMY, AND WHAT HAPPENED. HE MAKES PERFECT SENSE, DESCRIBING LIFELESS SYSTEMS. $$$ Paul Craig Roberts served as Assistant Secretary of the Treasury in the Reagan administration. He delivered a realistic but tragic summary of a killed economy, with a final indictment of Goldman Sachs. The USEconomy has been the platform for a series of mythological chapters, propped by massive inflation engines that eventually failed. In the most recent chapter, Americans spent their equity like burned home furniture, even as corporations abandoned the nation for Chinese shores. When the USDollar begins the process of losing its global reserve status, the nation will enter the Third World among other broken debtor nations. Roberts forgot to mention that the US banking system is broken irreparably, functions not at all, and cannot be fixed with endless debt outlays or a stream of printed money. He points a finger at the Goldman Sachs representatives in the Clinton, Bush, and Obama Administrations. This bankster firm controls the economic policy of the United States. He quotes the Matt Taibbi description of Goldman Sachs as "a great vampire squid wrapped around the face of humanity, relentless jamming its blood funnel into anything that smells like money." See the CounterPunch article entitled "There is Nothing Left to Recover" (CLICK HERE). He wrote the following scathing obituary and indictment.

"There is no economy left to recover. The US manufacturing economy was lost to offshoring and free trade ideology. It was replaced by a mythical 'New Economy.'

The 'New Economy' was based on services. Its artificial life was fed by the Federal Reserve's artificially low interest rates, which produced a real estate bubble, and by 'free market financial deregulation, which unleashed financial gangsters to new heights of debt leverage and fraudulent financial products. The real economy was traded away for a make-believe economy. When the make believe economy collapsed, Americans' wealth in their real estate, pensions, and savings collapsed dramatically while their jobs disappeared. The debt economy caused Americans to leverage their assets. They refinanced their homes and spent the equity. They maxed out numerous credit cards… And now suddenly Americans cannot borrow in order to spend. They are over their heads in debt. Jobs are disappearing. America's consumer economy, approximately 70% of GDP, is dead… And President Obama has intensified America's expensive war of aggression in Afghanistan and initiated a new war in Pakistan. There is no way for these deficits to be financed except by printing money or by further collapse in stock markets that would drive people out of equity into bonds... Because of the worldwide debacle caused by Wall Street's financial gangsterism, the world needs its own money and hasn't $2 trillion annually to lend to Washington. As dollars are printed, the growing supply adds to the pressure on the dollar's role as reserve currency. Already America's largest creditor, China, is admonishing Washington to protect China's investment in US debt and lobbying for a new reserve currency to replace the dollar before it collapses. According to various reports, China is spending down its holdings of US dollars by acquiring gold and stocks of raw materials and energy. The price of one ounce gold coins is $1000 despite efforts of the US government to hold down the gold price… Nothing in Obama's economic policy is directed at saving the US dollar as reserve currency or the livelihoods of the American people. Obama's policy, like Bush's before him, is keyed to the enrichment of Goldman Sachs and the armament industries."

My view is that the failure of fiat money has its primary point of failure in the United States, since it serves as steward for the global reserve currency. The capital formation engines on Wall Street were recalibrated when the end of the system was within sight, to produce fraudulent bonds and to gear leverage toward obscenity in a late gesture to rape the doomed system. The US financial and economic systems are far beyond fixable, huge errors made in grand sequence. The US banking and industrial structures are tragically hollowed out, rendering a recovery a veritable impossibility. The Powerz have 3 to 5 big balloon balls held deep underwater with brute force. They can control only a few balls if they are lucky, but not all. The ones they cannot control will become new monsters, which the markets and the people are not prepared to deal with psychologically. They believe some kind of recovery will eventually arrive, when the objective might be just more and greater fraud. Each financial finagle flop from imposed policy has a limited timespan for impact and duration. The real Green Shoots come from California in a hopeful venture, with proposed marijuana legislation (CLICK HERE). Not really a joke!

$$$ GOLDMAN SACHS HARSH CRITICISM CONTINUES. $$$ An old colleague on Silicon Investor's vast bulletin boards from 1999 to 2003 has his own website. SliderOnThe Black, as he is known, was always a solid analyst and at times opposed my views in strong debate. He raised some great questions that indict GSax and mock their supposed genius in a rant. He wrote, "The Genius of Goldman? What's up with the mainstream media acolytes who keep alluding to the genius of Goldman Sachs? What genius? If it wasn't for their former CEO Hank Paulson bankrupting their competition (Bear and Lehman) and then extorting Congress behind closed doors under the threat of martial law, they would not even be in business today. Does having your former CEO being able to choose who among your competitors lives, or dies, make you a genius? Does having your former CEO bail you out via the backdoor of AIG, make you a genius? Does running the latest shadow government version of INSLAW, PTECH, PROMIS software and front running the market (not mention their own clients) as the defacto trading arm of the Plunge Protection Team make you a genius? Was former Goldman Chairman and NY Fed head Stephen Friedman a genius, or just another front running, inside trader? Since when does front running and shearing the sheep make one a genius? Goldman is no more a genius than is the IRS. One robs you blind under the protection of the law of the land, and the other robs you blind while operating outside of it." See his rant and more (CLICK HERE). He adds weight to the Ultimate Insider Trading software tools.

Independent journalist Max Keiser assails Goldman Sachs as a criminal firm. He said, "They are literally stealing a hundred million dollars a day. Goldman Sachs is stealing every day on the floor of the exchange. They should be in the Hague. They should be taken on financial terrorism charges. They should all be thrown in jail." See his video on ZeroHedge (CLICK HERE).

$$$ C.I.T. WILL LIVE ANOTHER DAY, OR ANOTHER FEW MONTHS. $$$ The prominent commercial lender CIT Group confirmed that it has secured a $3 billion bailout from its bondholders. It has averted a bankruptcy filing, with sufficient time granted to attempt to restructure its debt. The reprieve does not come from the USGovt. The deal marks the first time since the banking crisis hit the scene that private investors saved a big financial firm from the bankruptcy courts. CIT still has challenges, like $7.4 billion due in the first quarter of next year. They will also have to contend with interest payments 25 times that of LIBOR, oppressive rates. The terms are egregious. They agreed to pay a 5% initial fee to the creditors and annual interest of at least 13%. On top of that, they pledged assets worth over five times the loan amount as collateral. New guarantees for CIT might not prevent future bankruptcy. CIT must retire $1 billion of debt maturing next month. See the Yahoo Finance article (CLICK HERE). See the Bloomberg article (CLICK HERE).

$$$ CALIFORNIA HOUSING PROBLEMS WORSE THAN SEEN, BUT NEW JERSEY SHOWS HOW TO RESPOND WITH TAXES, AS SMALLER BANKS CONTINUE TO FAIL. $$$ Briefly, California banks have kept between 23 and 28 thousand bank owned homes off the market each month. Real Estate Owned (REO) properties dominate in home price issues. For the past few months, foreclosures have been logged at a record pace, yet the official MLS home inventory falls lower. A close examination of the data reveals that banks are taking them back into their own private inventory. A mountain of supply hangs overhead, certain to push prices down in the future. The banks might be anticipating (praying) for a grand USGovt bailout. See the Feedburner article (CLICK HERE).

New Jersey is probably in worse shape than California on a relative basis. Unburdened by a stupid 2/3 rule to assure deadlock, the Trenton legislature simply adds to the tax burden in response, while the Sacramento crowd cannot. The Golden State lost its golden luster, yet the Garden State remains fertile with newfound tax fertilizer. Case in point is the shore town of Loch Arbour. To close a budget gap, their property taxes doubled overnight. One can only imagine the desire to sell homes rather than pay oppressive taxes. See the Mulshine NJ article (CLICK HERE).

Meanwhile, regulators last shut two banks in California and two smaller banks in Georgia and South Dakota, boosting to 57 the number of federally insured banks to fail this year. See Temecula Valley Bank and Vineyard Bank in California, First Piedmont Bank in Georgia, and BankFirst in South Dakota. The number of banks on the FDIC official list of problem institutions jumped to 305 in 1Q2009 from 252 in 4Q2008. It stands now at the highest number since 1994 at the end of the Savings & Loan crisis. The FDIC expects US bank failures to cost the insurance fund around $70 billion through 2013, which in my view is wrong by a factor of 50 to 100 times, not percents.

◄$$$ BANK OF AMERICA CREDIT CARD WRITEOFFS JUMP TO ALMOST 14%, BUT BASIC ACCOUNTING FRAUD KEEPS THIS DEAD BANK LEVITATED. LOSSES AFTER 2009 ENDS WILL EXPLODE TO $12 BILLION, AS THOSE PHONY ACCOUNTING RULES REVERSE. $$$ The largest bank in the US (by bank assets) announced that credit card charge losses rose to 14.1% in June from 9.6% in March. The charge-off rate jumped by almost 50% in the past three months, now the highest among all US credit card issuers. Their credit card bond ratings may be cut by Moodys, which said "The steepness of the recent trend in charge-off rates was unexpected and falls outside of our recently revised expectations." Their condition stands out as worsening, yet their stock remains levitated between 12 and 13 per share. After all, they passed the Stress Test, and did manage to sell a boatload of stock to the unsuspecting investor crowd. See the Bloomberg stories (CLICK HERE1) or (HERE2).

The story with reality laced in grows worse, when the phony accounting rules expire at the end of 2009. Bank of America has a whopping $150 billion of credit card receivables, home equity loan bonds, and queer leveraged asset backed contracts that must return to its balance sheet. They have raised the equity needed in stock sales, by hiding such losses. Jefferson Harralson of Keefe, Bruyette & Woods expects the total pre-tax charges (losses) will total $12 billion in 1Q2010 so as to comply with accounting rules. BOA will have to spend its paltry loan loss reserves, try to raise more equity capital by fraudulent means somehow, and obtain more USGovt bailouts. BOA is so dead. The USCongress only granted them time. See the CNBC article (CLICK HERE).

$$$ HOLLYWOOD ACTOR NORRIS OPPOSES THE USFED. $$$ He can whup foes face to face, but can he stop a bullet? The financially literate actor emboldens the Conservative Republicans with his call for the abolishment of the US Federal Reserve. Two factions in the Republican party compete for power: Libertarian Republicans and Conservative Republicans. The Libertarians among them have an imposing pedigree traced back to Thomas Jefferson, whose views extended back to the ancient Greeks who invented the concept of republic, the idea of communal, controllable government at a grass roots level toward a goal of betterment. Jefferson (a Founding Father) would have allied with Ron Paul and the Libertarians, but would have received mockery by the US press. He would recognize the correct sound emphasis given by Paul toward the Invisible Hand of the marketplace, contrary position to central bankers, and anti-war posture. Let's see if Norris joins the planned September Tea Parties, whose focus will be on oppressive bankers and their predatory mortgages that have separated millions from their homes.

$$$ THE TRUE SIZE OF FINANCIAL DAMAGE IS SLOWLY COMING INTO VIEW, AS HUNDREDS OF TRILLION$ IN CREDIT DERIVATIVE LOSSES ARE COMING. THE USGOVT RESCUE TOTALS WILL INDEED BE MINDBOGGLING. INSPECTOR GENERAL BAROFSKY'S ESTIMATED $23.7 TRILLION IS ONLY AN INITIAL DEPOSIT IN MONEY CREATION REQUIRED. THE US BANKERS HAVE CREATED A $1,250,000,000,000,000 CREDIT DERIVATIVE MONSTER WHOSE COSTS ARE COMING DUE. $$$

One and a quarter quadrillion$ looks like that on paper in numerals. It is $1250 trillion, quite the pyramid monster. The losses hit Wall Street, Fannie Mae, and especially AIG. Losses will be offset by unbridled unimaginable money creation. Two years ago, my forecast was for total bank and financial firm losses over $2 trillion, with further $2 trillion in home loan rescues eventually, not even counting derivative losses. It is all in progress. The credit derivatives are like a series network of TNT explosives with fuses criss-crossed in the dark, triggered by financial failures and unexpected big price movements in a host of 'controlled' markets (corporate bonds, USTBonds, USDollar, gold). When they explode, they can bring down the entire system. That is exactly what is happening. Saving the system, or attempts to save it, will be costly, much more than a mere $23.7 trillion, which is under 2% of the pyramid's notional value. An inflationary depression amidst financial structure collapse is what comes, now in its early stages. Give credence to Barofsky. The Shedlock compilations are overwhelming, but very much on the mark, worth a peek. See the Global Economic Analysis article (CLICK HERE) that is chock full of damage data.

$$$ MOBIUS OF TEMPLETON EXPECTS A NEW CRISIS TIED TO CREDIT DERIVATIVES AND STIMULUS SPENDING ITSELF, WHICH ARE BOTH OUT OF CONTROL. $$$ Mark Mobius anticipates a fresh new financial crisis will develop from the failure to effectively regulate derivatives and the extra global liquidity from stimulus spending. It will take time for the eruption. He is executive chairman of Templeton Asset Mgmt in Singapore and manages $25 billion. He said "Political pressure from investment banks and all the people that make money in derivatives will prevent adequate regulation and assure the new crisis. Banks make so much money with these things that they do not want transparency because the spreads are so generous when there is no transparency… Definitely we are going to have another crisis coming down." Mobius favors commodities and select large mining companies.

Credit derivatives contributed to $1.5 trillion in financial firm losses since the start of 2007. The Bank for Intl Settlements estimates outstanding credit derivatives total $592 trillion, easily 10 times global Gross Domestic Product. Mobius puts a timeframe of a new crisis at five to seven years, as stimulus money adds to new financial instability. Governments have pledged about $2 trillion in stimulus spending, in runaway response. Plans to regulate the derivatives market is part of a wider overhaul of financial industry rules meant to prevent any possibility of a repeat of last year. This is of course too late and ill-footed.

Other leading figures agree. Venkatraman Anantha Nageswaran is global chief investment officer at Bank Julius Baer in Singapore. He said, "Banks have lobbied hard against any changes that would make them unable to take the kind of risks they took some time ago. Regulators are not winning the battle yet. I am not sure if they are making a strong case yet for such changes." See the Bloomberg article (CLICK HERE).

$$$ MERIWETHER IS A SERIAL HEDGE FUND FAILURE, THE SAME SUPERSTAR OF LONG-TERM CAPITAL MGMT FAME. $$$ John Meriwether plans to shut the hedge fund he started after the collapse of his LTCM in 1998 roiled global markets. The decline of his current firm, JWM Partners, has resulted in a 44% loss from September 2007 to February 2009. The firm is based in Greenwich Connecticut, and managed about $1 billion to begin 2008. Tammer Kamel is from Iluka Consulting Group in Toronto, which advises in private capital pools. He said, "For many investors, John Meriwether is by now just another hedge fund manager. LTCM's infamy was a big story in 1998, but the events of 2008 might finally relegate LTCM and 1998 to footnote status."

USFED CORNERED TO RADICALLY INFLATE

◄$$$ THE CHINESE CAMPAIGN AGAINST THE NOTION OF A GLOBAL SAVINGS GLUT, WHICH THE USGOVT CLAIMS CAUSED THE US BANK AND ECONOMIC CRISES, SAYING THE GLUT WAS NONEXISTENT. A CLOSE LOOK AT THE TIMING REVEALS HOW THE CHINESE TRADE SURPLUS EXPLODED PRECISELY WHEN US HOUSING PRICES BEGAN A MAJOR DECLINE. $$$ Total agreement here, of wrong-footed US blame game. USFed Chairman Greenspan was openly pleading for the long-term interest rates to fall in 2002, even displaying anger. He might have been the principal agent for ushering in Wall Street money, which led the overall market trend channels. The Chinese have bristled at the accusation of acting as primary cause to the US collapse, a charge doled out by fraud king former Treasury Secy Paulson a few months ago. To be sure, big trouble came after the global recycle of trade surplus into USTreasury Bonds, but foreigners followed the orchestrated path paved by Greenspan and Wall Street.

Asian officials and scholars resist strongly the notion that their high savings helped cause the US financial crisis by flooding the world with money. The United States failed to properly utilize capital, choosing to devote it to reckless leveraged games that imploded. The Asians argue that lax US financial regulation bears most blame. Supachai Panitchpakdi is the head of the United Nations Conference on Trade & Development, and a former Thai Govt official. He recently said, "Asians financed cheap consumption in the rest of the world, this is what they say. This is something I just cannot understand. This is another theory we have to debunk. Asians have not been over-saving and under-consuming." The real difference between Asians and Americans, he claimed, is that American consumers borrowed heavily to finance their spending while those in Asian nations largely chose not to do so. Asian growth in investment and exports has been very strong, not because consumption has been weak.

The idea of a 'Savings Glut' was first publicized by Professor Bernanke in 2005, before he was governor of the Federal Reserve. It is an excess of cash in Asian countries and oil export nations that pushed down global interest rates after recycled back into USTBonds. Instead, my interpretation is that the USEconomy generally failed to provide viable opportunities for capital formation, choosing reckless financial engineering leveraged devices instead, which led to ruin. The Bush Admin team of crack hack economists later climbed aboard the glut theory. Critics of the Savings Glut thesis have correctly argued that it shifts responsibility for failed US policy onto other countries. Supporters reply that China's huge trade surpluses clearly had real effects on the global economy. Chinese central bank governor Zhou Xiaochuan made the excellent point that focusing too much on macro issues like savings imbalances risks diverting needed attention from micro factors like financial regulation. He said, "The crisis originated from Wall Street and many indisputable facts have established that micro factors had played an overwhelmingly important role in causing this crisis." He specifically cited issues such as reckless accounting rules, collusion among credit rating agencies, leveraged securitized lending, and lax lending standards at banks.

Lawrence Lau is a leading economist and vice-chancellor of the Chinese University of Hong Kong. He rebutted the absurd charges by Americans in the debate. He argued that Chinese trade surplus had not grown sufficiently to contribute to the US housing bubble, the timing all wrong. He cited how China built a large trade surplus only in year 2005, but US housing prices peaked in 2006 and declined afterwards. Technically, the Chinese trade surplus hovered around 2% of GDP for several years, then leaped to about 5% of GDP in 2005. The housing market in the US had been fed easy money beginning in 2002 and 2003, when Greenspan directed the grand channels. Furthermore, the decline in US housing prices began precisely when the Chinese trade surplus continued to expand dramatically, proving a disconnect.

$$$ THE FACT THAT GLOBAL FUNDS ARE INADEQUATE TO FINANCE THE USGOVT DEBT IS FAST BECOMING ALARMINGLY CLEAR. $$$ The World Bank estimates the global GDP in 2008 was $60 trillion. The United States faces a huge potential shortage of capital to fund USTreasury debt issuance. At $1 or $2 trillion in new annual debt, the USGovt needs to capture 1.66% or 3.33% of global savings. That is so unlikely, that monetization of USTreasurys is the obvious alternative. Factor into account the need for corporate borrowing, new corporate equity issuance, real estate debt, capital inflows and outflows, household savings, and more. Foreign trade surpluses are vanishing. US household savings will be minimal. Reduced US corporate borrowing translates to slower growth or prolonged recession. Perhaps higher US rates will attract foreign capital. NO! The answer is the printing press, and the USDollar stands vulnerable. The Congressional Budget Office provides information and a chart, which emphasizes the obvious shortfalls.

$$$ USFED HAS NEW PROBLEMS FINANCING LONG-TERM DEBT SINCE BANK RESERVES ARE SLIDING DOWNWARD, MAKING MONETIZATION AGAIN MOST LIKELY. $$$ Some call it a run on the USFed as a bank, but they can always resort to printing money. The USFed is losing the short-term financing for its long-term liabilities. The buildup in the banking system of its excess reserve holdings at the USFed served as a funding source for the acquisition of balance sheet assets. The extent to which the assets are funded reduced the need to engage in inflationary liquidity creation to acquire them, namely monetization. As of mid-May, $895 billion of $1200 billion in asset growth at the USFed since last September was financed by growth of excess reserves. The offered yield to major US banks was a hidden ploy to finance the bloat in the USFed balance sheet, the safe harbor at a mere 0.25% return. Until the offered lure last autumn, thei bank reserve holdings totaled under $2 billion. The USFed assets have now grown since last September by $313 billion more than the liabilities that finance them. The accumulation of excess reserves from banks has been the largest factor in protection against runaway liquidity growth (monetary inflation). That source is draining away, now less available. Since the May peak, excess reserves have fallen by $212 billion. The asset side of the balance sheet has contracted less over the same period, by only about $74 billion, as various liquidity facilities liquidity swaps have been dwindling. The current value of USFed assets not financed by liabilities now stands at $1.15 trillion, their commitment to acquire $1.75 trillion in USTreasurys and USAgency Mortgage Bonds notwithstanding. The black hole known as the Term Asset-Backed Securities Loan Facility (TALF) is still set to fund purchases of legacy assets (i.e. leveraged worthless mortgage bonds). That could result in another cool $1 trillion in asset purchases. Bloat, bloat, bloat!

Banks are NOT lending more, but instead are locked in a bizarre USTreasury carry trade. They can easily capture an arbitrage without venturing too far out on the maturity level, as they borrow near 0% and invest in longer term USTreasurys earning much more. The USFed is financing its assets by means of a near 0% rate for short-term USTBills. The steeper yield curve keeps the USTreasury bubble inflated and going. As banks see better destinations for the funds, the excess reserve drawdown will likely accelerate. If the USFed were a normal bank, this would be a serious problem known as a Run on the Bank. Such runs killed off Bear Stearns,, Lehman Brothers, and Washington Mutual. But the USFed is not an ordinary bank, as it can respond by printing money onto its balance sheet, known as monetary inflation. Pressure is on the USFed from the makeup ot its accounts, pressure to inflate bigtime. The USFed is setting the stage for a repeat of the kind of bubbles experienced as it exited the last cycle of hyper-accommodative policy just a few years ago. The drawdown of the excess bank reserves will only worsen the problem.

The USFed has two choices, to curtail its asset acquisition program tied to rescues, or to finance its balance sheet by direct liquidity creation. IN OTHER WORDS, THEY MUST SLOW THE USECONOMY OR PRODUCE PRICE INFLATION. They will resort to money creation, monetary inflation, their best friend. They cling to absurd broken economic models, which falsely foretell of no price inflation threat due to excess capacity. Their models assume a constant USDollar and no linkage to base prices within the supply chain. They are lost. In my view, one of the most remarkable aspects of the current monetary actions is the enormous destruction of capital due to strike as a future consequence of monetary abuses in heavy volume from numerous emergency programs, i.e. too much inflation. The bankers do not comprehend this capital destruction, precisely at a time when capital formation is desperately needed to create new jobs.

$$$ THE USGOVT FEDERAL DEBT IS RUNNING OVER $2 TRILLION BY SHADOW GOVT STATISTICS ESTIMATES, WORSE THAN PUBLICLY STATED. PRESSURE TO MONETIZE INTENSIFIES. THE FIRST STIMULUS HAS FAILED, AS FORECASTED HERE. THE SECOND RELUCTANT STIMULUS WILL BE EVEN MORE RIDICULOUS AND OFF THE MARK. $$$

As of end June, on a 12-month rolling basis, the USGovt federal debt reached $2.1 trillion. The June total debt was $244 billion. The Shadow Govt Statistics folks wrote, "The pace of growth in both federal debt and the gimmicked federal deficit has continued to accelerate, with prospects for both remaining bleak. Rapidly increasing market reluctance to hold USTreasuries eventually will pummel the USDollar and force heavy Fed monetization (overt or covert) of the Treasury's soaring obligations, along with dire consequences for broad money growth and domestic inflation." The decline in federal tax revenues worsens, declined by 17.1% in June versus the same month 2008, after a 5.7% annual decline for May. Fiscal year to date, the first nine months show 2009 revenues down by 17.9% from a year ago. The recession bites hard. Gimmicks stem from the outlays for the USGovt bank bailout program, an ongoing expense. Before newly installed accounting gimmicks, the April 12-month moving deficit was $1278 billion. Without chicanery, one can observe a better indicator of actual net cash outlays by the USGovt, tied to require funding. Gross federal debt stood at $11.545 trillion as of end June 2009, up by $2053 billion from June 2008. The rise from June 2007 to June 2008 was only $634 billion. The perverse combination of falling revenues and rising costs ensure renewed monetization of debt, despite of public denials. The USGovt, USFed, and USDept Treasury are cornered. A formal debt default grows by the month in likelihood. And the latest, the United States Postal Service faces an October default, as a giant gap in the forward funding of their retirement benefits comes due in the autumn.

Global investor icon Marc Faber sits down with Newmax TV host Dan Mangru for an exclusive interview about the second USGovt Stimulus Plan, price inflation, Cap & Trade legislation, federal deficits, the real estate market, and the USFed predicament. He calmly and clearly explains what kind of Disney Show the USGovt is putting on, with supporting cast played by the entire G8 nations. The USGovt federal deficits will continue to skyrocket without benefit of economic or banking recovery. See the Bright Cove video (CLICK HERE).

◄$$$ PUBLIC FOCUS ON THE PREDATORY NATURE OF CENTRAL BANKS MIGHT GROW, UNSURE. THE SERFDOM OF THE PEOPLE HAS CLEARLY BEEN LAID BARE, AS THE ELITE CONTINUE THEIR POWER GAMES, AIDED BY THEIR DUTIFUL INTELLECTUALS TO PREACH DOGMA. $$$

An excellent essay is worth reading by Howard Katz. Lies and deception are increasingly clear, regarding price inflation, benefits of inflation as a policy, attack on savings, even implicit encouragement of gambling with life savings and pension funds. The Ruling Elite control the banks, which control the creation of money. They are aided by intellectuals, like Greenspan and Bernanke and Paulson and Geithner and Jamie Dimon and Lawrence Summers and Lawrence Meyer and Martin Feldstein and Bill Gross and Warren Buffett and Robert Rubin, who preach the ideological dogma that has ultimately destroyed the system along with our industry and our investments. Money in the United States is un-Constitutional, a fact that does not cause any unease for politicians, bankers, fund managers, or corporate executives. Next the USFed will proceed with vast additional monetizations. No precedent exists for monumental federal debt growth in high volume without powerful broad monetization, which is the seed for price inflation that could someday in the near future grow out of control. Debt repayment is greatly overshadowed by debt collapse with ruin of businesses and households. See the Katz article entitled "Why the Fed is Depreciating the Currency" on Kitco (CLICK HERE). As to whether vile banker behavior becomes a focus of public attention, watch the September Tea Parties scheduled.

USDOLLAR EXTREMELY VULNERABLE

$$$ USDOLLAR BREAKDOWN IS FINALLY IN PROGRESS. THE 78.50 LEVEL IS CRITICAL. TECHNICAL SIGNALS GALORE POINT TO A POWERFUL IMPORTANT NEAR-TERM BREAKDOWN IMMINENTLY. IT IS IN PROGRESS, AND WILL PUSH THE US$ DX INDEX UNDER 70. ANALYSTS WILL CRY GLOBAL CURRENCY CRISIS. $$$ The tipoff was shared in a public article last week, word coming from Asia, which did happen! What follows is not a recovery for the USDollar at all, but a death process, destroyed by monetary debauchery, failed USEconomic recovery, broken US banks, and lost global confidence. The 50-day moving average (in blue) crossed below the 200-day MA (in green) in early June. The 100dMA (in red) is soon to cross below the 200dMA also. Momentum has shifted down, shown in the MACD cyclical index. The key feature of the daily chart is the clear bearish triangle. Its top at 89.0 and two-point base at 78.5 provide significant power to push down to a target of 68, but not without pitstops along the way. Those rests will permit short covering and false stories to occur. The bizarre rally this past winter was based upon a USDollar liquidation, next to be used against it in powerful downward momentum. The 72 level serves as 'disaster' critical support, the point at which analysts will mention 'Death of the Dollar' which is not shown. Most important now is the defense of the 78.5 level, which should fail soon. The downtrend is too strong to deny. A currency crisis comes, which follows a bank crisis like night follows day!

The Competing Currency Wars are to reach a fever pitch. The USDollar weakness will force other currency custodians to wreck their own in response, so as to avoid the further damage from a rise. My theory is that the Great Currency destruction will arrive in three stages. In stage #1 the USDollar will falter and the Euro will be the first beneficiary, since it serves as the primary global reserve alternative. The Commodity Currencies and Gold will surely benefit too. In stage #2, somewhere around 6 to 9 months later, the Euro will falter, but the US$ will not benefit. The Commodity Currencies (Canadian Dollar, Australian Dollar, even Brazilian Real) all will rise. Gold will be a big beneficiary again. In stage #3, perhaps two years from now, the Commodity Currencies will falter, as all hard assets will suffer except for Gold & Silver. All funds worldwide will chase real money, namely Gold & Silver, since the currency system will have been shattered.

◄$$$ EURO CURRENCY IS READY TO CHALLENGE THE 160 HIGHS. THE EURO IS RELUCTANT BENEFICIARY TO A CRUMBLING USDOLLAR. THE 143 LEVEL IS CRITICAL. TECHNICAL SIGNALS GALORE POINT TO A POWERFUL RUNUP. $$$ The custodians of the Euro want a stable currency, not a too strong currency. They will not have their wish. As the USDollar suffers the shameful global rejection, the Euro benefits. What is good for selling EuroBond debt is also bad for European export industries. A rising Euro keeps economic costs down across the continent, a vital buffer. However, the engine of Europe is Germany, and its export trade depends on a Euro not rising out of control. That export trade will continue to suffer badly. All cyclical indexes show strength. The reversal pattern dictates a target of 160, thus a challenge of 2008 highs. The base from last winter at 126 was a reaction low. The impulse high at 143 must be overcome, but all signs point to surpassing it. Hue and cry will come from Europe when the runup occurs. After 143 is overcome, a sudden scary fast move will come to 155, almost a 10% move. In the currency realm, that is VERY DISRUPTIVE. Thus the pain expressed from both bank officials and political leaders to come. They will mention currency failure openly and grope for solutions.

$$$ WELDON LIKES COMMODITIES, BEARISH ON USDOLLAR. $$$ Investment advisor superstar Greg Weldon sees huge continued negative news lying ahead for the USDollar. He points to opportunities in several commodities such as gasoline and sugar, but recommends the XME for its industrial metals components. He loves Brazil, which is in trade surplus and is self-sufficient, a rarity indeed. As some commodity products sell off, Weldon stresses the great opportunity for investment. Weldon warns that the USGovt is highly likely to continue monetization programs for the USTreasury Bond, which will be extremely bearish for the USDollar, but will push up commodity prices. This linkage between US$ weakness and firm commodity prices is almost totally missed in the mainstream financial media networks.

Since Greg Weldon appeared to explain his currency & commodity position, let's share it. Weldon wrote, "Key to the commodity bull story is the bear story in the USDollar. We are bearish, having spotlighted on 'Fast Money' (CNBC show), the new bull market highs in a variety of commodity export linked currencies, particularly in the New Zealand Dollar, and the Chilean Peso, with the latter linked directly to the copper market. We expect the spot USDollar Index to violate its intermediate-term low, spotlighted in the intraday chart below at 78.33 … with a potential push below the near-term low at 79.13 providing a shorter-term bear signal. We note the interplay between the two intraday moving averages, with the shorter-term average moving lower at an accelerating pace, relative to the med-term average … with the price below both averages, and both averages trending to the downside. We remain bearish on the USDollar, with bullish currency positions focused in the Euro currency, the Chilean Peso, the Brazilian Real, the Thai Baht, the Czech Koruna, and the [New Zealand] Kiwi Dollar, while we remain bullish on the commodity complex, with continued focus on gasoline, sugar, cotton, soybean meal, copper, and platinum." Weldon points out the moving average crossover often cited in my analysis, as an important bearish technical US$ signal.

$$$ PRICE STRUCTURES ARE STILL BUILT AROUND THE USDOLLAR, A POINT CONTINUALLY MISSED BY DEFLATIONISTS. $$$ The World Bank released a report about global factories running below capacity. Chief economist Justin Lin repeats correctly the further financial distress, but wrongly calls it a deflationary spiral. His implications to price structures overlooked their US$-based nature. He should refer to lost wealth and continued downward pressure on asset prices. USDollar weakness will put a floor on commodity prices across the entire spectrum in the USEconomy. Economist Lin cites a vicious cycle from idle factories, creating a trap that results in further spasms of financial stress, sure to require yet more rescue packages. He said, "Significant excess capacity has been built up, and unless this issue is addressed, we will face a deflationary spiral and the crisis will become protracted." The data backs his point about the horrible excess capacity, covered in the Macro Economic report from the July Hat Trick Letter.

Manufacturing capacity utilization has fallen to 72% in Germany, 69% in the US, 65% in Japan, and as low as 50% in some developing countries, often reaching lows not seen in modern times. Lin cited $30 trillion in wealth removed from global stock markets, and a further $4 trillion from US house equity. He called them powerful deflationary headwinds, when they are economic losses in the collective asset base. His perspective is backwards. The continued vicious faltering of the economies within major industrial nations will prompt continued extreme monetary inflation by both central banks and associated governments, enough to propel the magnificent storms based upon the extreme differentials. Once more, economists do not know what deflation is. They do not bother to report that their black boxes have proved wrong for almost 15 years, yet they make no changes to them. Price structures are built around the US$ reinforcement rods. They were formerly made of low quality steel, but now are rusted and worse. We find out that the USGovt contractors used paper & plastic tubes made to look like steel throughout the entire US financial foundation. See the UK Telegraph article (CLICK HERE).

$$$ DESTRUCTION OF CURRENCY CONTINUES IS IN HIGH GEAR IN SWEDEN, WHICH COULD BE A PREVIEW OF MAINSTREAM CENTRAL BANK BEHAVIOR. $$$ The most drastic of signals was given earlier in July that central banks are indeed desperate. The debt collapse has caused quite the vortex of destruction. In response, Sweden's central bank and the world's oldest central bank, the Riksbank has effectively cut interest rates to minus 0.25% and has started a program of vast quantitative easing. That is a euphemism for printing money at breakneck pace. This is the most dramatic move yet by a major central bank. Japan dabbled with slightly negative interest rates in 2007 and 2008, but they are largely ignored, permanently hobbled by a lackey role to serve as the financial sector funding wellspring for the United States with zero cost funny money. See the Creidt Writedowns article for details (CLICK HERE).

$$$ THE CHINESE REMAIN A DOMINANT FORCE IN DISPLACING THE USDOLLAR FROM ITS THRONE. THEIR NUMEROUS INITIATIVES HAVE GATHERED SUPPORT FROM BRAZIL, INDIA, AND RUSSIA. GLOBAL TRADE IS EXPERIENCING A POWERFUL PARADIGM SHIFT HIDDEN FROM AMERICAN VIEW. MEANWHILE, THE SAUDIS ARE REDUCING USTBOND HOLDINGS. $$$

The Chinese Govt and bankers pursue a path to establish the Yuan as a global reserve currency, from broadened global commerce. They hold the spearhead to dethrone the USDollar as the sole global reserve currency. During the year 2010, the Intl Monetary Fund will recalibrate the Special Drawing Rights, and reset the weights for the currency basket according to actual trade. Beijing wants higher trade to prompt a higher Yuan weight in the SDR officially. The installed Yuan swap facilities and sponsored Hong Kong banks loans pave the way, intended to further trade. The Peoples Bank of China has solicited 440 firms in Shanghai and Guangdong for current participation with the Yuan loan program. The Peoples Bank of China has arranged six bilateral currency swaps in large volume. They currently total 650 billion Yuan (=US$95.12 billion) since December with Malaysia, Argentina, Hong Kong, and several European nations. It acts like an Import-Export Bank. Chinese exporters are thus paid in their own currency, eliminating exchange rate risks and reducing the cost of fund transfers. Thus the bypass of the US$ in settlements. The bilateral trade pact announced by China and Brazil this spring is coming to fruition with created platforms. The development has been blessed from the high priests of bankers at the Bank For Intl Settlements in a formal meeting in Basel Switzerland last week. Watch China gobble up the majority of the Tumi oil & gas output when Brazil ramps up production in future years. See the Julian Phillips article entitled "Currency Crisis: the Yuan to Go Global Soon! Gold Will Rise!" on Financial Sense (CLICK HERE).

The strategy deployed by China is to replace and undermine the USDollar in global trade. Their government ministers send lipservice comments to the USGovt, such as those by Deputy Foreign Minister He Yafei. Before the G-8 Meeting in Italy, he spoke of ongoing USDollar support. The same man told a group of visiting business executives in China, that "The financial crisis has fully exposed some shortcomings in the international currency system. China is not seeking discussions but wants a diversified reserve currency." The Peoples Bank of China renewed shortly thereafter its call for the creation of a supra-sovereign reserve currency (the IMF concept defined as a basket of currencies) to lessen the USDollar's sole reserve status. Note that India has put its weight behind the supra-sovereign reserve, and has announced diversification away from its uniformly US$-based reserve assets. They stress usage of the G-20 Meeting for decisions. They join the steady shrill calls by Russian President Medvedev and Chinese leaders. An underlying power shift to emerging markets from the developed nations responsible for the financial crisis. THIS IS A MAJOR POINT IN THE PARADIGM SHIFT UNDERWAY. With it comes clear movement in the financial structure underpinning away from the USDollar and toward hard assets. Big changes are coming, like grand tectonic shifts in the global financial mantle of plates. USGovt and Wall Street public serpents (nice name, Ty) are no longer in control of global finance and gold anymore, with British squires in assistance.

In a couple years, the US$, Euro, and Yuan will be dominant reserve currencies, made possible perhaps by means of the IMF SDR currency basket device. Less US$ demand will be seen in international trade contract settlement, a significant change. Eventually, OPEC will accept Yuan for oil payments, even without US-style military pressures exerted on Arab nations. Barter systems are on the horizon also. All these new systems will enable trade from region to region, designed to cut out entirely the profligate 'deadbeat' nation like the United States, which has erected vast fraudulent devices atop the system. No longer will worthless debt paper purchase valuable commodities. The deadbeat will be cut off from the rest of the world, a downright scary proposition, as new pathways are creating in bypass routes of trade.

Recent data from the Monetary Agency, the Saudi central bank, reveal the recent withdrawal of $50 billion in Saudi assets. "The Saudi government is very worried about the deteriorating value of the dollar and the mounting debts of the US in the medium and long-term," said a Saudi economist. The Saudi Govt has ignored British and US pressure to give added funding to the IMF. They prefer a home solution, choosing instead to pledge a $400 billion investment in the coming five years on its infrastructure and petroleum industry, a tremendous commitment. They wish to revive the decimated Persian Gulf region, hit hard by the global crisis. The USDollar remains the dominant currency within the nations of the Gulf Coop Council, which includes Saudi Arabia. Last week, Treasury Secy Geithner met leaders in Abu Dhabi, the capital of the United Arab Emirates and clear financial center of the Arab world. Abu Dhabi is center and home to several sovereign wealth funds with billions in US$-based investments. Sultan Nasser al-Suweidi, the governor of the UAE central bank, mentioned that Geithner had reiterated his reassurance of the USDollar. Last month Geithner went to Beijing to offer assurances, and was ridiculed. It is doubtful al-Suweidi respects any USGovt finance minister. See the Financial Times article (CLICK HERE).

GOLD AS MONEY GAINS ACCEPTANCE

$$$ THE LONG CONSOLIDATION OF GOLD TESTS PATIENCE. A BIG BREAKOUT COMES BEFORE LONG. PRESSURE BUILDS INTERNALLY AND EXTERNALLY. $$$ A long consolidation tests patience, but will be hugely rewarded for those who remain with true money and shun the paper charade. Generally, the longer the arrival of the breakout, the bigger its move when it occurs. This time will be no different. Internal pressures come from the heavy demand for physical gold, the removal of gold from the commodity exchanges from both distrust of US & UK custodians, and the basic physical preference over paper instruments. External pressures for gold comes from global revolt against the USDollar, distrust of currencies and sovereign debt, and massive government money creation. The target for the breakout is 1300, often repeated but still relevant. The passage of time assures the breakout, not the opposite, which is false analysis by the cartel.

$$$ THE HUI STOCK INDEX SHOWS STRENGTH AND RESILIENCE. $$$ The HUI reversal continues, unwilling to budge, showing great resilience. Notice the highly unusual bullish crossover of the 20wMA going above the 50wMA at the start of June, only to have a downdraft suffered. But recovery has come on firm footing. Watch for a stochastix crossover in its early stages. The moving averages provide a reliable base foundation. Notice the support provided by the 50wMA (in blue) in the last several months. Challenge of highs comes soon.

$$$ SINCLAIR WARNS THAT BEFORE MID-NOVEMBER, THE USDOLLAR WILL SHOW CLEAR FAILURE. $$$ The irrepressible and chronically optimistic Jim Sinclair gave a 130-day warning in early July, for a collapse in global USDollar confidence, and the onset of deeply damaging price inflation. He perceives the crude oil price as the key telling signal, more a anti-currency play than an economic play. He wrote, "Yes, that is right. You have a little more than 130 DAYS before MOPE (management of perspective economics) falls into the abyss of loss of confidence in the US dollar. The event will be the birth of hyper-inflation in the US and elsewhere to the horror of the spin media. Crude oil has been trying to explain this to the public, but so far they have not gotten a clue. Crude strength is being called a hedge against the dollar, as fundamental energy analysts are hard pressed to explain a rise from $30 into the $70s with NO pick up in US economic activity and NO massive drawdown on supplies. The oil price is an example of the arcane and exoteric mechanism of hyper-inflation soon to take gold to $1224, $1650 and then on to Alf and Armstrong's numbers. This phenomenon is something that the murderous Children of the Corn that run the hedge funds will not accept until it happens. Happen it will, 130 days is no time at all. Are you prepared?" The corn descriptor is to the Powerz, the gold cartel, the evil destroyers of financial markets from chronic intervention, profound fraud, and insider trading.

◄$$$ INTERNAL OFFICIALS URGE CHINA TO CONTINUE TO ACQUIRE MORE ENERGY AND RESOURCE ASSETS, IN ADDITIONAL TO MORE GOLD IN LIEU OF USTBONDS. $$$ In an unequivocal public statement, a key Beijing research analyst advised the Chinese Govt to take much stronger measures to hedge against the doomed USDollar. Li Lianzhong heads the Economics Dept of the Communist Party policy research office. He stressed how the USDollar is poised for a powerful decline, and that in order to solidify the Yuan as a global currency they must purchase far more gold bullion. Respected widely in Beijing, senior researcher Li urged Chinese bank officials to use more of its $2 trillion in foreign exchange reserves toward heavy purchases of energy and natural resource assets. Chinese companies, under direct influence by Beijing leaders, are grabbing energy and commodity resources around the world in order to supply its growing economy. Speaking at a foreign exchange and gold forum, Li also boldly stated that buying property in the United States was a better course of action for China than buying USTreasury Bonds.

Li might or might not have publicly professed the consensus party line. Debate is a whirlwind inside China lately, centered upon how the country can reduce its hefty FOREX reserves to US$ exposure. The path of extraordinary accommodation is welcomed inside the United States, but inside China it is considered a radical policy disease. The US regards such ultra-loose policy as part of the solution, while China regards it as the spark to kindle dangerous price inflation and major devaluation of the USDollar itself. Both factors work to reduce the value of USTreasury holdings. American policy makers think about screwing creditors, but creditors think about self-protection. Li said, "Should we buy gold or USTreasurys? The US is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the dollar will fall. So gold should be a better choice." The maneuver to purchase $50 billion in I.M.F. bonds is a start at hedging against the USDollar, especially if the gesture results in securing a vast hoard of gold bullion from the back door.

China, by announcing its increased gold reserves from 600 to 1054 tonnes, has indirectly given open cannon warning to the USTreasurys in order to obtain a mountain of IMF gold as booty. Itself low on funds, the Intl Monetary Fund finally approved the transfer of $13 billion in gold bullion in exchange for various paper owned by China, probably USTreasurys and USAgency Mortgage Bonds. Beijing values the mortgage bonds even less. Choosing the lower labor intensive route, using the global banker tables, China will acquire 400 more tonnes of gold. Their talk against the USDollar simply enabled the approved gold sale, as Western bankers succumbed to pressure. Refusal would have meant purchase of gold in the open market, an option still open to them.

$$$ RUSSIA'S MEDVEDEV DISPLAYS THE NEW GLOBAL COIN, WHICH SHOULD BE TAKEN WITH A GRAIN OF SALT. $$$ It is impossible to judge how seriously to take this news. Russian President Medvedev provided a visual aid during his call for a supra-national currency to replace the USDollar. He demonstrated by revealing a sample coin of a 'United Future World Currency' with the observe claiming 'Unity in Diversity' on it, shown to the head of the G-8 Meeting. Maybe a virus insignia on the obverse would be more fitting. The coin itself was minted in Belgium. Preparations might be in progress for the supra-national currency, but my firm belief is that it will serve more as a banking reserve role, clearly not a legal tender role. Medvedev has been a stern firm figure in his call for creating a mix of regional reserve currencies as part of the drive to supplant the USDollar from its entrenched position as a global reserve currency. Russia proposed at the London G-20 Meeting in April the wider bank reserve usage of the Intl Monetary Fund basket currency, the Special Drawing Rights. See the new coin, a symbol.

$$$ THE USDOLLAR & USTREASURY COMPLEX FACE RUIN AND SOON. THE BUST OF THE GOLD CARTEL WILL OCCUR SIMULTANEOUSLY WITH THE US$/USTBOND RUIN. $$$ Some people wonder why the Chinese do not use some of their vast savings and simply purchase vast gold and silver call options from the COMEX through major agencies, then forcefully take physical delivery with grand publicity. Doing so would crush the COMEX quickly and permanently. Maybe that is a late phase plan actually. My fine gold trader veteran source from the financial inner nest was asked a few questions on given days, with attention directed to the corrupt price movement in the gold and especially silver prices. He commented, "You do not know how the Chinese are wired. They will get it their way. No one seems to get it. They will just pull the plug and catch whatever they want during the crash before it hits the ground, while all others get killed off. This is essentially war, and in war there are always plenty of casualties. Troops in the field and collateral damage coming to innocent bystanders. Relax and don't even bother to look at Au/Ag listed prices, except when you are buying. All precious metals will go through the roof once the system will come apart. It will come apart not before long, starting this September, which will be the point of no retrun. Always remember the 4 functions of money that need to be present. a) medium of exchange, b) measure of value, c) standard of value, and d) store of value. Only precious metals and commodities fulfill all four of these requirements and deliverables. Scrap yard dogs are now fighting over bare bones. They will pretty much all be washed out in the next 24 months starting this September. I cannot tell you how totally irrelevant most comments and analysis are [on daily price gyrations]. These scribes measure against reference points and assume events to take place in an environment that is about to disappear in its present shape and form. Its called Paradigm Shift. It is actually quite comical to watch this unfolding. One should anticipate and plan for unusual sudden events that disrupt the entire Western financial system."

This unusually well placed source within the gold and banking centers made numerous references to a September bust, as systems break in open view. In a conversation, notes were scribbled with care. When asked directly, what specific arena will provide the initial important fractures, he answered "The banks. They will suffer additional losses in the current quarter. They are at the end of their rope, with no more games to play. One by one, the big banks will admit they are ruined, broken, and cannot be fixed. After that, many other systems will be revealed as broken, while scandals are made public." Here is his scenario to unfold, his thoughts and description, my words. The entire economic, financial, political, and social system will either begin to come apart or suffer fractures around September. The energy level of the systemic breakdowns has grown in intensity. Scandals of US systemic structures will inevitably come to the surface, some worse than the Madoff scheme. The desperate defensive measures will gain unwanted publicity, as the guardians of propaganda lose control. They have too many balls to juggle, and the balls have begun to weigh much more as well as being greater in number. The Powerz cannot muzzle the internet, which exposes them and enables the breakdown to accelerate from rapid information flow. During the upcoming shutdown of US banks, money will go missing, some accounts will vanish (especially idle accounts), and bank mergers will be compulsory (a firm expectation of mine). What occurs will have multiple breakdown epicenters, much like volcanos and dams in a global upheaval sure to include social events like riots seen last year in Athens and France. Thus it will be impossible to control. A communications blackout is likely, but it might actually render harm to the cabal. Businesses will direct anger at any internet shutdown. Alternative communication systems might spring up in marvelous fashion, as private networks are hatched. The cabal in power just cannot think or perceive outside 'their own cup of coffee' in his words. Think sphere of influence.

He (the source) went on to explain that US leaders suffer from delusion, that they are in control at the table, but control lies elsewhere among the US creditor nations. The US people have much to offer, decent kind people, but they are under control by a vile micro-minority. The anti-establishment sentiment is growing inside the US. On the gold front, numerous gold bullion bank audits have been ordered by the largest of account holders, the multi-billionaires. As is their right, they have ordered independent third-party auditors to prove existence of the account holdings. Many banks are simultaneously in trouble for bullion shortages, including Union Bank of Switzerland and HSBC. The principal parties involved in ordering these audits are the sovereigns in the Middle East, who have the US-UK bankers by the balls. Coming soon is a financial embargo directed against the United States and possibly England, marked by credit denial and isolation in response to both criminal fraud and basic bankruptcy implosion. The United States will respond before long with capital controls, in what could be described as the Birth Pangs of The Third World. Wow! My comments next. Bear in mind that the September timeframe is not bound in cement. Reactions, defensive measures, deeper corruption, and strongarm tactics might extend the time span. To be sure, know that breakdown is occurring for the US-UK system in force for 50 years. It will not exit smoothly, but it is destined inevitably to exit.

◄$$$ CONVERSATION WITH TY ANDROS COVERED THE BIG BANKS AND CENTRAL BANKS, WHICH USE BRIBERY TO ENABLE CONTINUED CONTROL. $$$ The following are thoughts by Ty Andros, which closely parallel mine. The big banks made a $27 million bribe to the Financial Accounting Standards Board (FASB) in order to achieve accounting rule changes. By endofyr 2009, the banks must bring the ruined and nearly worthless off-balance sheet assets back onto their balance sheets. The foreign central banks do not wish to purchase more USTreasurys, but are coerced. Furthermore, central bankers as a group will never approve of any new global currency. They do not wish to relinquish power to print money, to control currencies, to corrupt their system, and to exploit it. There will be at best a very slow movement to a hard asset currency, maybe never. Regional currencies will emerge, each corrupted by the dominant nation in residence.

THE GREAT EXCHANGE TRADED FUND GOLD FRAUD

$$$ THE GOLD EXCHANGE TRADED FUNDS CAN AND ARE BEING USED TO SATISFY GOLD SHORT FUTURES CONTRACTS IN THE G.L.D. INFAMOUS FRAUDULENT FUND. SUCH PRACTICE BUILDS IN AN INEVITABLE 25% TO 50% PENALTY FOR STREETTRACKS SHARES. EXIT THEM AND PURCHASE PHYSICAL GOLD, BEFORE THE EXPOSURE AND DEEP CONTROVERSY, MAYBE LAWSUITS. $$$

The BestWayToInvest revealed (CLICK HERE) that the Exchange Traded Fund called GLD StreetTracks, also called SPDR Gold Shares, can be used to offset COMEX gold contracts, confirmed by Chris Powell of the Gold AntiTrust Action group. Commodity exchanges like the COMEX can dump gold debts on ETFunds. Buying a 'GLD' share is NOT the same as buying physical gold. Instead, one would be buying into the gold cartel's paper maze after all, a perspective put forth by the Hat Trick Letter for over two years. Chris Powell wrote, "New York and Tokyo commodity exchanges have been permitting their gold futures contracts to be settled not in real metal but in shares of gold exchange-traded funds (ETFs). This essentially allows the gold shorts (and the exchanges themselves, which guarantee futures contracts) to transfer their obligations to third parties that may not have the metal they claim to have and that, in any case, are operated by the investment banks running major short positions in gold. Thus it is likely that the paper claims to the world's supply of gold are greater than even GATA has suspected, that the gold supply is even more oversubscribed and that 'paper gold' is being created at an ever more frantic rate to suppress gold's price. The ability to offload futures contract gold obligations to the ETFs could become the principal mechanism of the gold price suppression scheme." See the Jesse CrossRoad Café article (CLICK HERE).

Jesse himself elaborated upon the grotesque ongoing fraud. He wrote, "It appears that a lot of investors believe and trust that investing in GLD is the same thing as buying physical gold bullion. A close reading and analysis of the GLD Prospectus, however, reveals that investing in GLD is drastically different from owning gold. This analysis will show why GLD is nothing more than another form of a derivative security which is loaded with counter-party default risk."

Alex Stanczyk of Your Financial Future and frequent contributor to Seeking Alpha provides interpretation of the custodian device for the GLD fraud. He wrote, "GLD does not even promise that the gold is in the Trust. The biggest problem with GLD is there is no way to legally force the Trustee/Custodian to prove that the gold being kept by the Custodian is in the Custodian's vault. The Custodian has the ability to use 'subcustodians' to safekeep the gold. The subcustodians are permitted to use their own subcustodians to safekeep the gold. The Trustee/Custodian/Subcustodian relationship is where the validity of GLD disintegrates into a maze of legal barriers which ultimately prevent anyone from physically verifying that the GLD Trust holds anything more than promises of gold. In other words, GLD has been set up by the Sponsor and Trustee, and the structure approved by the Securities and Exchange Commission, in a manner which would allow GLD subcustodians to lease out the gold being held by subcustodians, thus leaving nothing in GLD but lease-receivables."

Bill Downey from the Technical Commodity Trader website adds further to documentation of the GLD fraud. He wrote, "Buried deep within the rules of the COMEX and the TOPIX (Japanese Market) are delivery specifications that have been modified for gold. As incredible as it may seem, the rules now allow the EXCHANGE to use ETFs as contract settlements via the purchase of the GLD and AU gold ETFs that are available. In other words, THEY HAVE FIGURED OUT HOW TO SUPPLY PAPER GOLD to the exchanges." He provided a GATA link to verify (CLICK HERE). See the Safehaven article (CLICK HERE).

Mexico Mike is a sharp analyst who posts his work on bulletin boards. He wrote, "The COMEX states: 'Delivery: Gold delivered against the futures contract must bear a serial number and identifying stamp of a refiner approved and listed by the Exchange. Delivery must be made from a depository licensed by the Exchange.' This seems unequivocal until you find this exception: 'Exchange of Futures for Physicals (EFP) … The buyer or seller may exchange a futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position.' End."

The debate over Exchange For Physicals rages. A dissenting opinion is provided by Tom Szabo of Silveraxis, who appears to be part of the cartel establishment, not certain honestly. He operates the paid website Metal Augmentor. Szabo wrote, "The author, Adrian Douglas, has a fundamental misunderstanding of how Exchange-for-Physicals (EFP) works and what they are used for. It is not for delivery of metal in order to EXTINGUISH a futures contract, but rather it is for delivery of metal to ESTABLISH a futures contract. The actual exchange of metal is between two parties that have an agreement, OFF THE EXCHANGE, to initiate the EFP transaction. The point of allowing ETFs to serve as Physicals is to accomodate the two counterparties wishing to engage in EFP transactions and has nothing to do with contract deliveries and zero impact on defaults, manipulation or anything of the like. I note that the EFP newly created contract can still only be delivered against out of metal held in a COMEX approved warehouse." To me it seems like EFPs are mere extensions of the same vast paper game loaded down by paper certificates designed to defraud investors in a further maze of confusing paper. See Mexico Mike's addition (CLICK HERE).

The conclusion in my best analysis, based upon conversations and absorption of the expert work of analysts is the following. The StreetTracks GLD Exchange Traded Fund is a vast fraud which someday is extremely likely to suffer a 25% to 50% penalty in share price to account for its fraudulent inclusion of gold paper certificates, wherein gold bullion is not held as is widely perceived. Later on, lawsuits are extremely likely to enter the equation, resulting in further price penalty, in order to cover legal fees and fraud lawsuit payouts. In the end, it is extremely likely that investors in GLD shares will be redeemed in forced redemptions vastly lower than the current gold spot price. The final price paid would be a combination of the lower paper gold price (differential from physical gold), and the sharply lower GLD share price after the penalty is built in. The commodity exchanges in the United States (New York & Chicago), in London, in Toyko Japan are all snakepits of fraud with their gold contracts. Their inventory claims are a fiction, with countless contradictions revealed in the past several years. Their Open Interest gold contract data is also an exercise in fiction designed to cover up the lack of physical gold in the commodity exchanges.

By the way, the Silver SLV Exchange Traded Fund has yet to receive any horrendous negative attention directed at fraud. That is extremely likely at some time, since just another grand fraud. Barclays of London manages the SLV fund, and they are a key player in the gold cartel also.

URGENT MESSAGE: STICK WITH PHYSICAL GOLD & SILVER, AFTER SELLING OUT THE EXCHANGE TRADED FUNDS THAT DEFRAUD INVESTORS. Doing so would add pressure on the physical gold market. Investments in the GLD fund are probably neutralized to a great extent, and put nearly zero upward pressure on price from the demand.

◄$$$ JAMES TURK PROVIDES VITAL INFORMATION ON VAULTS FOR PRECIOUS METALS ACCOUNTS. SWITZERLAND REMAINS ALONE IN PURITY OF INDEPENDENT BONDED DEPOSITORS. $$$ Two highly relevant comments are provided, in order to shed light on the legal standing of vault service firms. One is by the manager of GoldMoney, Geoffrey Turk, while the other is from a veteran gold banker with ties and lengthy experience with both Germany and Switzerland. The ultimate in excellence, independence, and security remains VIA MAT in Zurich, used by GoldMoney, and my recommendation for your stated choice in accounts. One should always be aware that nations where vaults are stored do have the ultimate last word in control.

Geoff Turk at Gold Money wrote a personal note, when asked by me about the status of expanding vault service to Singapore and Hong Kong. He replied, "We were focused on Singapore but ultimately decided against it, because the only service in town is a vault controlled by the Singapore government. It is not possible even for a private company to operate a vault in Singapore without hiring Singapore government employees to have ultimate control over the keys to the vault. This is why private companies like VIA MAT no longer operate there. We are focused now on Hong Kong and hope to have something available in the coming months.

Regards, Geoff"

My contact, the veteran gold banker, added by saying, "What the so-called experts seem to miss is the fact that all bonded depositories are operated under a poorly understood clause that the sovereign of the country where the vault is operated can seize them at any given time. The Swiss have been reluctant to ever move in that direction since it would be like Evian water poisoning their own soft drinks in an effort to sell more product. The safest places are Switzerland, Luxembourg, and Austria, followed by Russia. All other places I would not trust, since you can never reach and access them in a case of emergency. Turk runs a AAA outfit."

$$$ GOLDMONEY HAS EXPANDED INTO PLATINUM ACCOUNTS $$$. The bullion bank firm located on the Jersey Island, with sovereign protection, has branched from gold and silver into platinum. GoldMoney has introduced platinum bullion stored at the VIA MAT vault in Zurich for purchase. Investors will be able to buy platinum with currency balances or exchange currently held gold or silver for platinum, thus diversifying their holdings into another precious metal. See the official GoldMoney announcement (CLICK HERE). Those subscribers who open an account through the Members area of the Golden Jackass website will benefit from a discount on vault fees

THE BUSINESS OF GOLD IN REVIEW

◄$$$ GOLD INDUSTRY IS TOPSY TURVY, WITH HUGE DERIVATIVES OVERHEAD, DECLINING PRODUCTION & YIELDS, BUT NO RECENT DECLINES IN CENTRAL BANK HOLDINGS. THE PROSPECT OF RISING ASIAN GOLD RESERVE HOLDINGS IS BOTH PROMISING AND CLEAR. $$$ Since early 2008, the divergence between the physical gold market and paper gold market has widened. Coins routinely were priced 20% to 30% above the corrupted paper market that improperly claims true price discovery. Coin sales worldwide grew sharply, up almost 125% in the US but up over 20% in Austria, where favorable laws enabled such sales. Due to tax differences, German citizens are induced in great volume to purchase Austrian coins, such as the beautiful Philharmonic gold coin. South African, Australian, and United States official mints could not keep up with demand, as growing demand overwhelmed short supply. In silver, where shortages are much more acute, coin prices were often at 100% above spot prices. At a recent calculation, under 3% of COMEX gold positions were backed by real physical gold. At the end of 2008, the nominal value of all open derivative positions was an incredible $605 billion.

Global mine output for gold has been in steady decline. If 2009 continues on course, it will make for the seventh decline in global gold output in nine years. The peak of 2650 tonnes produced in 2001 will not be easily exceeded anytime soon. Demand has been satisfied often by central bank gold dumping and recycled meltdown (see India). The new trend of note is that production has shifted to the emerging markets. While China, Peru, Russia, and Indonesia were responsible for 19% of world production a decade ago, their share in global output has now almost doubled to 34%. The considerable decline in production among the largest mining nations was compensated by growing output by smaller nations regarded as less stable. Neither Russia nor China in the last few years has contributed toward global gold output, since kept internally. They either consume it industrially or store it in their own central banks.

In the meantime, the gold content from gold mine ore has been gradually declining, as deposits become more challenging. They are also deeper in locations, thus costlier. The average gold yield in year 2000 was slightly above 2.0 grams per tonne of ore, but the ratio had fallen to 1.2 grams in 2008. Two explanations account for the lower yield. High grade deposits have largely vanished from the earth, or at least visibly so. But also, higher gold price in the last few years has rendered lower grade deposits more profitable to exploit.

Collectively, central banks around the world have shed much of their gold, with private hands taking the delivery. They have vigorously and destructively defended their currency values. In the 1940 and 1950 decades, gold comprised up to 70% of central bank reserves worldwide. Early in the 1980 decade, the figure fell below the 50% level. Since 1997, the proportion of reserves held in gold bullion has stabilized, but at a very low level at 10% or slightly above that level. What colossal irresponsibility of central banks, which have chosen the assured debauchery of paper currencies. The blame is equally on shedding gold bullion in small to medium quantities, as it is on growth and expansion of foreign exchange reserves. The variation is alarming, as only ten central banks hold almost 80% of worldwide gold reserves. According to the IMF, an alarming 51 nations hold no gold reserves at all. Among those nations with very large foreign exchange positions held in gold are China, South Korea, Japan, Brazil, and Singapore, in contrast to the usual suspects. See the central bank allocation of reserves, according to the Financial Times and World Gold Council.

China clearly has signaled an intention to markedly increase its gold held in reserves. Due to their rapidly growing total reserves, the share of gold among reserves has actually fallen. A stunning fact is that China has the greatest quantity of foreign exchange reserves, yet the lowest gold proportion. China's gold coverage ratio remains at 1.6% only. Even more stunning is the fact that if China were to acquire the entire 3200 tonnes of gold claimed by the Intl Monetary Fund immediately, their gold ratio would be around 5.0% still, below the international average for larger nations. Asian accumulation is on the march, as they command the trade surpluses, and their distrust of the USDollar grows by the day. Their gold share of reserves all uniformly low. Both the Chinese and Russians are pushing for a supra-national currency, like the IMF basket, as a temporary alternative to the US$ standard.

THE OIL DEBATE & BARTER SYSTEMS

$$$ THE CRUDE OIL PRICE HAS RECOVERED FROM THE USGOVT SPONSORED SHOCK LAST YEAR WHEN S.P.R. OIL WAS RELEASED. NEXT THE CRUDE OIL PRICE WILL RESPOND TO EXTREMELY DISRUPTIVE US$ CONCERNS AND TECHNICAL CHART SIGNALS. $$$ Look for some stability finally with the crude oil price. In falling over 75% from the $145 peak last year, tremendous instability was inserted into a vital commodity. The USGovt not only released Strategic Petroleum Reserve oil, but it authorized its attack dogs on Wall Street to pull credit on a targeted basis from hedge funds with crude oil and other commodity positions. The objective was to yank hard down the oil price for a benefit to the USEconomy. Now a powerful upwave has begun, urged by US$ hedge practices in foreigner accounts. Sovereign wealth funds and major investment firms sense the frightening prospect of a crippled USDollar and USTreasury Bond market suffering from monetization bloat, and later constipation.

China has announced they have enough crude oil in stockpiles. Yet they build more storage facilities. They are experts at altering price through mere press releases in the commodity market, just like the Americans are expert in such tactics in the financial sector. Back in the 1990 decade, they used to complain publicly about mold in grain shipments, thus winning a lower price. As dark clouds enter the picture on the global front, supply routes and delivery contracts might experience severe disruption, cancelation, and outright defiant actions like regional cutoffs. The trade wars are highly likely to center upon crude oil, the commercial lifeblood. Right now the crude oil price is drawn to the stable moving averages. The 20-week MA (in blue) provides current support just above the 60 level. The stochastix index points to near-term stability from approach to a midrange level, but might be on the verge of a meaningful crossover. Its clear relative strength confirms that likely crossover. The crude oil market has recovered from shock. It is stabilizing after the reversal. It must be watched closely. In my analysis, the crude oil price foretells the degree of monetary inflation, indicates perceived currency risks, and offers red light signals to sinister monetization hidden from view.

Two other major factors must be drawn into any price forecast equation. My cynical view is that experts are often paid well to be wrong, with unstated political purpose. For instance, crude oil is being increasingly used as a hedge against a weak USDollar. Nations with big US$-based asset exposure find crude oil a legitimate and effective hedge against the US$. China is busy building new oil storage facilities, and buying virtually unlimited quantities of crude oil. They are locking in future supply both with bilateral contracts and futures paper contracts. Also, the entire US Strategic Petroleum Reserve factor is ignored. It was probably the most crucial factor that pushed crude oil prices from $145 to $35 per barrel last year, which have found recent stability. The SPR event received no publicity, since the USGovt corrupted the activity and concealed the transactions in future delivery contracts with Mexico. A new program to replenish the SPR could happen.

$$$ VAST OIL RESERVES (SEE 'THE BAKE') APPEAR TO EXIST INSIDE USA, AVAILABLE BUT AT HIGHER PRODUCTION COSTS, BUT THEIR VOLUME RECOVERABLE IS EXAGGERATED. $$$ It seems the Northern Plains of the United States contain vast oil deposits locked in shale, located in the western North Dakota, western South Dakota, and eastern Montana. It could be the world's biggest. The US Geological Survey issued a report in April 2008, a revised report from 1995. The Bakken reserve in the Williston Basin is estimated to contain 503 billion barrels by the Energy Information Admin (EIA), called 'The Bake' by the industry. It could be the largest domestic oil discovery since the Prudhoe Bay in Alaska. Even if just 10% of the oil is recoverable, at $60 per barrel, the resource base worth more than $3 trillion. Recent technological breakthrough has opened up the Bakken massive deposits.

Back to reality, however. The OilDrum is an expert source of information. They bring estimates down to earth. They wrote, "Using the round numbers of 300 to 500 million barrels of oil discovered resources, we can then say that the mean USGS undiscovered resources are 7 to 12 times the size of the already discovered resources. Using the combined undiscovered and discovered resource estimates, we can take a stab at the implied recovery factor. If we choose the value of 500 million barrels for discovered resources, we find that the implied recovery factor (oil produced / oil in place) is 1.0 % to 2.1%. Will Bakken ever produce as much as 4.1 billion barrels (= 3,649+500 million barrels), the amount suggested by the USGS estimate? It seems very unlikely. Production so far has been 111 million barrels. If the industry is able to discover several more prolific areas such as the Elm Coulee field in Montana (43 million barrels, or 38% of the Bakken oil recovered to date), it might be possible to increase this recovery to 500 million barrels, or 4.5 times the current production. Is total production of 500 million barrels likely? It is difficult to say. The USGS estimate is vastly higher than this, so much less likely." See the OilDrum report (CLICK HERE).

Some level of controversy has emerged, as the United States contains over two trillion barrels of oil within its borders (USGovt claims), when all forms are considered, such as the oil trapped beneath the Rocky Mountains. For reasons derived from Big Oil dominance, their relationships with Middle East sources, obstacles to off-shore drilling, and environmentalist concerns, the US-based oil production has stalled for a couple decades. The volume of domestic oil might greatly exceed what Saudi Arabia contains, but huge development costs stand in the way, as well as major geological challenges, not to mention legal obstacles.

$$$ FUTURE SHOCK ON ENERGY. $$$ The major Western energy firms are about as serious in developing alternative energy sources, including nuclear power, as the Jackass is serious in the following presentation. This graphic depicts the future hope of private transportation devices in the West after much research. Sorry, could not resist, just too cute. We need some laughter to break the tension and anxiety. Just add beans!

EUROPEAN UNION STRAINS & FRACTURES

$$$ THE GERMAN ECONOMY HAS SERVED AS THE ENGINE OF EUROPE. NOW IT SPUTTERS BADLY, AS BANK LENDING IS CURTAILED, BANK NATIONALIZATION PLANS ARE ADVANCED, AND COMPANIES FOLD. IN A MAJOR MOVE TO REMOVE DEADWEIGHT, THE GERMAN HIGH COURT KILLED THE LISBON TREATY. $$$

The German Govt is preparing for the next phase of economic crisis, expected to arrive in the autumn. Companies find it increasingly difficult to borrow money. Leaders are coming up with increasingly desperate ideas to enable resumed liquidity flow. Due to banker reluctance to lend, even healthy smaller companies lack the necessary funds for required investments and new projects. Blame comes to the bankers for hoarding funds, whether on target or not. Lending institutions appear to prefer investments and speculation, claims Finance Minister Peer Steinbruck. A bitter political battle comes. Actually, the German Govt is mainly to blame since liquidity has yet to return to important segments of their credit market. See the Spiegel article (CLICK HERE).

The German Govt is considering a plan to force banks to accept state aid, while pursing partial nationalization in the face of a nationl credit shortage. Leaders are evaluating a plan to forcibly take equity stakes in banks, similar to the policy adopted in the United States and England, but without any choice for banks. The government has not made any decision yet on nationalization, as many remain skeptical about the effectiveness of forced initiatives. They point to how US and British major banks had not increased lending operations either, despite the government stakes in them. See the Spiegel article (CLICK HERE).

German export champions have been slammed by the current economic crisis. The crisis is hitting southern Germany particularly hard, as engineering companies and auto parts manufacturers see orders vanish at rapid rates. Some firms have no specialized workers left, while many employees have been on reduced work schedules since January. Some have idle inventory lying about the plants without buyers. This is dead capital. The German Economy is famous for such medium sized success stories, which have served as an engine for growth and jobs for the nation and continent. Their concentration is centered in southwestern Germany, in small cities and towns along a corridor stretching from Pforzheim to Stuttgart to Ulm. Their prospects have turned sour. Orders at many firms have plunged between 30% and 50%, resulting in massive excess capacity. Temporary workers have long ago been discharged, and fixed-term contractors arrangements have expired. Many remaining workers are now on short-time working schemes, with government subsidies picking up the tab for lost income. See the Spiegel article (CLICK HERE).

The Constitutional Court of Germany suspended the process of ratification of the Lisbon Treaty, calling for a law guaranteeing the rights of the German Parliament. The German High Court decision places the accord in suspended animation, defacto on the blocks where it can wither and die. The judges explained that the accompanying law violated certain legal requirements to the extent that legislative bodies have not been accorded sufficient rights of participation. They found and seized upon legal flaws in the Treaty. It would have amended the Maastricht Treaty on European Union and the Treaty establishing the European Community, plus increased the powers of the European Parliament in the legislative process. With the wreckage in the Southern Europe member states, Germany wants to go it alone, or at least with its Nordic brethren. See the Huliq article (CLICK HERE).

It was Dr Dieter Spethmann and his fellow bank knights who brought about this court ruling, through both counsel and persistence. Gauweiler and other key warriors fulfilled their role by filing complaints in parallel with the court. Spethmann is the former CEO of Thyssen and a prominent European figure. See his personal website (CLICK HERE) in the German language. As a group, they grew tired of the unmitigated arrogance demonstrated by the EU Commissars and the demonstrated ignorance of the German Bundestag acting with the German Govt. By the way, Spethmann is the last surviving member of the London Debt Accord Settlement panel. It is a disgrace for the political class in Germany to be shown the way by an 83 year old gentleman and the small group of professionals. The next project for Spethmann is the official un-hinge of the Euro currency, and removal of dysfunctional elements. The Euro harness, like with a strong Clydesdale horse joined to a pack of mangey mutt horses, has impoverished Germany to the tune of 400 billion per year. The formal European Union equalization and interest payments have driven down the German standard of living to 1983 levels. Thanks to a knowledgeable German contact for the above information on this important story.

$$$ TREMENDOUS ADDITIONAL LOSSES COME TO GERMANY FROM THE APPROPRIATELY NAMED P.I.G.S. NATIONS, CERTAIN TO DEFAULT OR HAVE DEBT WRITTEN DOWN. THE CORE NORDIC EURO LAUNCH CAN COME NONE TOO SOON, BUT WITH HUGE DISRUPTIONS. $$$ Germany, through its primary position, has been drained and exploited for the benefit of the European Union. A single currency cannot properly serve such a heterogeneous land. A highly valued Euro actually does disservice to slower member economies, especially after economic wreckage has led to different type of federal rescues. The destruction of real capital has been painful and broad. Elder counselor extraordinaire Dieter Spethmann has delineated the damaging effects in a personal note. 1) The Current Account surpluses can neither be found in the Bundesbank balance sheet nor can they be used to revalue a national currency. 2) The 'good money' paid for financial 'toxic waste' purchased from abroad is lost in whole or in part. 3) Once the Latin southern nations exit the Euro, the departing members will not honor the German claims from their sovereign bonds and other debts. He estimates is that 2.5 trillion will be destroyed, equal to one year of German GDP. The losses, in my view, must be taken in removed capital, monetary inflation in replacement, higher taxation, impoverishment in income, or negligence of the underclass.

The Chinese might use their US$-based assets to buy German industrial companies, an option at their disposal, suggested by Spethmann. The Bundesbank can accept any amount of these 'Valuables' in exchange for newly issued German X-Euros (codename of the New Euro). Such incoming USDollars from China could flow immediately and directly from the Bundesbank to the Euro Central Bank where they could be used to pay for the Current Account deficits linked to 11 of the 16 Euro member states. The Chinese would be very intelligent to deploy some of their USDollar assets in such a manner. Lastly, Otmar Issing used to serve as a managing director of the EuroCB until mid-2006. The next day he was hired by Goldman Sachs in an unknown role. Today, he holds the highest rank in Soffin, which is the German Govt authority to decide in TARP funding matters. A question is begged: Is he still working on behalf of Goldman Sachs? It seems the vampire GSax has tentacles on two continents.

My biggest curiosity is that France is 'carried' by the German nation, a travesty in my eyes, deemed necessary political baggage to tote. My urgent suggestion is that the price of France set up as a German ward would be to either put a muzzle and leash on Sarkozy, or to force him out of office. He is a loudmouth Napoleon wannabee. The launch of the Core Euro, also known as the Nordic Euro, will generate much excitement, in addition to turmoil. By the time that launch occurs late in 2010, perhaps my American homeland will have made firm steps toward the Third World basement.

$$$ ICELAND JOINS THE EUROPEAN UNION, A BIZARRE MOVE. $$$ With bank system ruin having pushed aside its cherished independence, The Iceland Parliament, called the Althingi, voted 33-28 in favor of initiating membership talks with the EU. One can only guess at their motive. They might seek stability, but they enter a league in flux instead. Iceland is busted broke and faces an ongoing unresolved crisis, at a time when Europe is deciding which nations to sever ties with on a monetary union. Increasing animosity among its members has become visible. The Eastern European countries are in deep debt to the Western European countries, as friction grows. The Western European countries are bickering with increasing anger about interest rates, bank rescue policy, and economic stimulation. Clearly, nations like Hungary are much better off with a forint currency that floats freely at a lower level. The common Euro is a grand problem, a failure.

$$$ THE DECLINE IN SPAIN IS PAINFUL SO FAR, BUT WORSE COMES, AS THE HOUSING PRICES REFUSE TO FALL, RESULTING IN ENORMOUS INVENTORY OF UNSOLD HOMES. THE DECLINE WILL SURELY LAST ANOTHER TWO YEARS FROM STUBBORNESS, ENOUGH TO CAUSE CONSIDERABLY MORE ECONOMIC DAMAGE. $$$

The Union Bank of Switzerland put out a key report to update the disaster that is Spain. Clearly, "the strain in Spain is plainly not on the wane" in the words of the Jackass. Despite some promising data from the labor market, offsetting serious declines in consumption and industrial production, UBS forecasts the worst is yet to come. They expect unemployment will reach 20% of the population by the end of 2010, the same as in the United States (really). Latest figures released "have shown a marked deterioration in the situation" in the words of UBS. The UBS analysts concludedt that the problems in Spain originated with a housing bubble of gigantic proportions. It has finally spread to other sectors, seen in the collapse of industrial production, down by nearly 30%. Remarkably and surpringly, recent declines in factory output contributed more than the construction sector to bring down their Gross Domestic Product. According to the UBS report, the construction sector reduced by a staggering 2.7 million workers in 2Q2007 to 1.97 million in March of this year. That is a hefty column of jobs hacked off their economy in almost two years, enough to reduce it by 10% in magnitude.

The UBS report said, "We see very few reasons to be optimistic [about Spain] in the short term. The future will be much better. The labor market will continue to deteriorate rapidly, with devastating effects on the rest of the economy!" A detail, none of their analysts are from Spain, but a separate report by UBS on the Spanish banking system arrives at consistent conclusions. The fiscal condition for the Spanish Govt has therefore sharply deteriorated, after stimulus schemes like labor projects and much lower revenue income. However, UBS stated that Spain has a relatively low total debt burden and relatively low level of taxation compared to other European nations, but the current fiscal deficit is bloated. This should give their government room to install additional stimulus later, and to raise taxes. Property values have not yet reached a stable range, having only fallen by 6.5% from peak two years ago. Reluctance to accept losses has caused a stagnation in the property market generally, with a standstill in transactions. Such is normal when prices refuse to fall. Their inventory level of unsold homes is huge, and is certain to result in a very elongated housing decline, where gravity will force prices much lower. Experts forecast an overall 20% price decline at the minimum. The American firm GMAC (former finance arm of General Motors) revealed that it has been actively selling Spanish mortgage assets at 14.5 cents per dollar par value. That includes loan portfolios and mortgage bonds. So GMAC has pursued disasters globally, only to unload assets at panic levels that seem inconsistent with experienced declines in Spain. They claim with spin to be withdrawing from global ventures so as to turn focus on the native US market. See the Credit Writedowns article (CLICK HERE).

◄$$$ JAPAN AND AUSTRALIA IMPLODE ON TRADE. JAPAN IS LOSING GROUND IN FINISHED PRODUCT TRADE, AUSTRALIA IN COMMODITY TRADE. THEY SUFFER FROM THE GLOBAL ECONOMY RECESSION, THAT EXTENDS TO CHINA. $$$. Giant Japanese banks have equity bases dependent upon cross shareholdings in other giant Japanese companies, in addition to a base of USTreasury Bonds. They are at risk. Japanese exports continue to fall, a 40.9% downward pace in May, much worse than a year ago. April saw a 39.3% decline. This makes the deepest trade decline since World War II for Japan. Their Gross Domestic Product declined by 14.2% on an annualized basis in 1Q2009, the worst outcome on record. The Japanese Current Account surplus shrank by a whopping 34.3% in May, far more than expected. The Japanese recovery path appears very bumpy, enough to prompt their central bank to extend emergency credit programs beyond their expiration in September. Japan hedged its future in recent years by joining forces with China, now their #1 trade partner. Nonetheless, trade has imploded, punctuated by a sharp decline in earth moving equipment from Hitachi Construction in China. See the Breitbart article (CLICK HERE) and the Bloomberg article (CLICK HERE).

Matching Japan is Australia in economic distress, whose export trade is more commodity based. The value of Australian exports plunged in 2Q2009 by the most in almost 25 years. The Aussie export price index declined 20.6% from the first quarter alone, the biggest decline since the index began in 1974, according to the Bureau of Statistics. Imports fell 6.4%, a record. The nation Down Under avoided an economic recession in 1Q2009 by means of a government stimulus and interest rate cuts. Their GDP rose by 0.4% in 1Q2009, after a minus 0.6% GDP move in 4Q2008. The Aussie Govt is prepared to take even more drastic monetary actions, like cutting interest rates below the current 3.0% level. Central bank Governor Glenn Stevens already ordered a sequence of official rate cuts between September and April. He signaled on July 7th a willingness to lower rates further if needed. See the Bloomberg article (CLICK HERE).

Thanks to the following for charts StockCharts, Financial Times, Wall Street Journal, Northern Trust, Business Week, CIBC Bank, Merrill Lynch, Shadow Govt Statistics.