MONETARY CRISIS REPORT
CLIMAX OF FINANCIAL FRAUD
COMPREHENSIVE GUIDE

* Monetary Fragments
* LIBOR Scandal Blooms
* Banks & JPMorgan Crime Center
* Shadow Banks Given Sunlight
* Foreign Bank Runs
* Coordinated Central Bank Desperation
* Endgame Heartbeats


HAT TRICK LETTER
Issue #100
Jim Willie CB, 
“the Golden Jackass”
15 July 2012

EDITOR NOTE: Many thanks to subscribers, as the Hat Trick Letter celebrates its anniversary for 100 months. The business has exceeded all expectations and dreams. Deep gratitude is extended to all subscribers, past and present. Also, a special thanks to my many friends and colleagues who are part of several important circles where we share vital articles, opinions, and stories. They are critical to research in an ongoing learning process. And a big vote of gratitude to my valuable sources who spill extremely important developments in progress from inside the control rooms, asking little in return except to get the word out.

"Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants, but debt is the money of slaves." ~ Norm Franz

"Monetary policy by itself is not going to solve our economic problems." ~ Ben Bernanke (discredited Princeton Univ Economics professor, and Orwellian student of revisionist history. Yes, Ben, amplified liquidity cannot overcome insolvency, but you will ramp it up like Weimar anyway due to desperation and an empty toolbox.)

"It is rather obvious. Given that almost half the reported inputs that help establish the LIBOR rate are discarded immediately, Barclays simply cannot have manipulated the LIBOR rate alone, period. Whats more, to effectively ensure the rate is set at the price required, you would need not only to establish the highest and lowest 25% of prices, but then to ensure the remaining 50% average out to the required rate. Based on the fact that there are 16 banks that submit rates, that would mean about 13 of the 16 involved would need to be complicit. As a very good friend of mine put it earlier this week. At best this is a cartel, at worst it is outright fraud on a scale that is completely unprecedented." ~ Grant Summers (financial author)

"The device that can bring down the corrupt structures are the Interest Rate Swap contract and LIBOR that funds it. The press is focusing on how LIBOR funds mortgages and simple corporate swaps, a minor point. The major point is that the rigged low rate funds IRSwaps to maintain the official 0% rate against a backdrop of chronic annual $1.5 trillion deficits and absent USGovt bond investors. Tiny demand and huge supply should mean very high rate. Generally the emphasized topics centered upon by the US press are the meaningless." ~ the Jackass

"I wish I could say I am shocked, because it is shocking. But regulators have not been particularly effective or aggressive in the past two decades of finance." ~ Frank Partnoy (professor at the University of San Diego School of Law)

"In doing Operation Twist, the Fed has effectively doubled their yield curve risk while artificially rewarding and encouraging the holder of the longer term maturity. The twisting engineers at the Fed never tell anyone about the additional risk they are taking, nor tell anyone that the outcome of such additionally ensures that they will never allow rates to increase in a material sense. It is a confirmation of Zero Interest Rate Policy forever, and no exit strategy." ~ Rob Kirby

"Operation Twist cements ZIRP and closes the door on any Exit Strategy. It it also ensures a systemic failure with capital destruction, rising costs, falling profit margins, deterioration in the USEconomy, continued speculation instead of production, growing federal deficits, and finally a USGovt debt default. The nation has moved from a permanent housing decline and lost legitimate income (factory exodus to China) as principal cause for systemic failure, to a failure based upon capital decay and absent profitability. The USFed in its infinite wisdom has been attempting to control the rising cost structure by means of a steady concerted effort to render harm to final demand through economic damage. They will succeed and cause the economic recession to be permanent, caught in its own dowward spiral with overwhelming momentum. They will win a USTreasury Bond rally to bring about the final collapse in a Black Hole. The ensuing USGovt debt default is written in stone." ~ the Jackass

"Liquidity does not produce solvency. Bailouts from one insolvent entity to another insolvent entity do not produce solvency. Efforts to stimulate growth will not produce solvency if a large fraction of the economy is overburdened with debt obligations that cannot be repaid. What will produce solvency is debt restructuring. The best hope is that global leaders will recognize the necessity and move ahead with debt restructuring in an orderly way, particularly in the European banking system. The worst nightmare is that global leaders will deny the necessity and belatedly discover that they have squandered the last opportunity to avoid a disorderly finale." ~ John Hussman (omitted how US industrial base dispatched to Asia removed all potential traction from monetary policy)

"JPMorgan Chase is a petri disk for problems to arise. The Board sees its responsibility as protecting the interests of management, not share holders." ~ Bill Cohan (former employee of JPMorgan, Chase Manhattan, and the merged bank entity, including the merger of Bank One, who also authored a scathing exposure of Goldman Sachs criminality)

## MONETARY FRAGMENTS

◄$$$ SWITZERLAND WILL DEFY THE USGOVT EMBARGO AGAINST IRAN ON OIL SHIPMENTS, AND GO AGAINST THE EUROPEAN UNION BAN AS WELL. EXPECT A SLOW REBELLION IN EUROPE OVER COMPLIANCE WITH THE UNILATERAL BAN SET BY THE USGOVT WITHOUT UNITED NATIONS APROVAL. $$$

Switzerland announced defiantly that the small European nation will continue to purchase Iranian oil. They will not take orders from the European Union or the USGovt. The sanctions against the Islamic Republic went into effect on July 1st. The Swiss Federal Dept of Economic Affairs issued the formal statement. The nation made it clear that any decision on the import, sale, and transport of Iranian crude oil and petro-chemical products and their insurance coverage should be made by the parties to the trade themselves, namely Switzerland and Iran. Good relations with Iran will be maintained. In April, the Swiss Govt exempted the Central Bank of Iran from the asset freeze as part of EU sanctions initiated by the United States in unilateral manner. On July 1st, a new round of sanctions directed against Iran, its oil shipments, and its banks went into effect. My firm expectation is that one by one, the nations of Europe will break ranks and defy the US-led sanctions. As the European Union becomes more shaky by the month, their willingness to follow the US into chaos and retribution will slip away.

◄$$$ GLOBAL RECESSION IS CONFIRMED WITH A LOUD GONG FROM JAPAN ON A MASSIVE MACHINE ORDER DECLINE. THEY SERVE AS THE FACTORY NUTS & BOLTS. CHINESE FACTORIES HAVE HALTED EXPANSION, PERHAPS EVEN A CERTAIN DEGREE OF MAINTENANCE. JAPAN MUST CONTEND WITH A NEW EMERGING TRADE GAP. ANY BANK OF JAPAN MONETARY RESPONSE WILL CAUSE PRICE INFLATION, IN VIEW OF ABSENT TRADE SURPLUSES. TIMES HAVE CHANGED FOR JAPAN. PREPARE FOR UNBRIDLED PRICE INFLATION IN JAPAN, SINCE EASING WILL BE DONE WITH VANISHED TRADE AND CURRENT ACCOUNT SURPLUSES. $$$

Japan machinery orders have imploded as the global economy exhibits extreme recession signals. The stunning 14.8% decline in Japan's core machinery orders was five times more severe than the modest 2.6% drop expected. The collapse is actually worse than what was seen in the aftermath of the Fukushima disaster. The macro pain was evident in the massive plunge by 62.6% in the Current Account surplus. The C/A deficit was also expected to decline much less. Rather than blame being directed at any natural disaster, the finger is squarely pointed at the global economy in general and China more closely. Bear in mind that the impotent central bank actions of repeated QE bond monetization ad nauseum has resulted in zero relief. Japan invented QE and proved it is the painted corner. The trumpets will blast, but hollow results will come. It must be time for another QE748, with the result no different after 22 years of failures. 

Hiroaki Muto is senior economist at Sumitomo Mitsui Asset Mgmt in Tokyo. He wrote, "Machinery orders from both manufacturers and non-manufacturers fell a lot. External demand looks weak. Many companies have turned cautious about overseas economies. The global economy is weaker than we thought. Machinery orders suggest capital expenditure is weaker than what companies indicated in the most recent Bank of Japan Tankan survey. This suggests that capital expenditure plans in the Tankan are likely to be downgraded. The Current Account surplus took a hit from imports of liquefied natural gas. Prices for these imports should start to follow oil prices lower. There are increasing worries for the Japanese Economy. The BOJ looked like it would be on hold this week, but given weak US economic data and monetary easing by central banks in China and Europe, there is now a 50% chance that the BOJ could ease this week." So what? Who cares? No effect will come.

Anyone who believes more QE easing by the discredited Bank of Japan is a monetary moron and financial ignoramus. To me, this is the most clear vivid definite evidence of China slowing. The other offshore story not told in the West is that Japan moved a considerable amount of factory space to China. They produce myriad consumer products, undermining the Japanese trade surplus. It has been eliminating over the years, but due to massive inflow of Asian funds seeking safe haven in Jap Govt Bonds, the Current Account is still in surplus. The USEconomy has been in a rigid fierce recession for over four years. Nothing the Bank of Japan does will result in stopping the slide. They have been stuck with 0% ZIRP poppycock for 22 years, stuck in a painted corner. They are living proof of QE doing nothing to fix the constipation, made worse in an era with Chinese competition.

The key to comprehension is the Chinese competition. A nasty asterisk can be put on the upcoming central bank actions. Any BOJ monetary response will result in direct price inflation, since the current account surplus has largely vanished. Their new money is not to go to cover banker black holes like in the United States to feed the derivatives. It will go to cover capital leakage in trade at a time when their federal deficit is a huge portion of their domestic economy. Any BOJ easing will be pure bond purchase, to cover their own federal debt. See the Zero Hedge article (CLICK HERE).

◄$$$ OBAMACARE AGENTS WILL COST $1.3 BILLION FOR ENFORCEMENT. WELCOME THE HEALTH CARE GESTAPO, A VAST CREW OF AGENTS. THE BENEFITS WILL BE ILLUSORY IF THEY EXIST AT ALL. CALL IT MYOPIC JOB GROWTH. $$$

Maine Governor Paul LePage blasted the Supreme Court decision to enforce ObamaCare as the law, thus approving a $500 billion tax increase as part of the program. He called the 16,500 new IRS agents hired to enforce the tax the New Gestapo. Some quick arithmetic. With average salary & benefits of $80 thousand, the new 16,500 Healthcare Gestapo agents will cost US taxpayers an additional $1.32 billion. But those count as job growth in the USEconomic recovery. The nation has promoted, fostered, and built a deep dependence upon the state, but that is precisely what the Fascist Business Model is all about, merger of state and large business. Some critics call the ObamaCare program the TARP for the insurance sector benefit. See the Silver Doctors article (CLICK HERE) and the Yahoo News article (CLICK HERE).

A reported hidden provision in the health care program might be an implanted RDIF chip in the upper arm, but confirmation is difficult to achieve. The elusive national ID pursuit continues toward Big Brother. My perception is that health care will control decisions not to deliver care, and to manage death in many cases. Some prudent policy might come. The poor might no longer clog the Emergency Room facilities of most inner city hospitals. The Obama Admin is credited with increasing the USDept Treasury agent staff by a 30-fold increase. They are fanning out across the world searching for ex-patriot bank accounts and gold purchase trails. They confiscate accounts, seize the funds, arrest the individuals, and place a large hole in the passports. Quite the benefit when burden of proof is on the citizen, since it is ignored. This is not progress toward a stable nation. It is Nazi in purity. At least five such cases involving friends of friends and colleagues have been passed on.

◄$$$ LATIN AMERICA IS MAKING DISTANCE NOTICEABLY FROM THE UNITED STATES. THEY ARE MOVING TOW ARD CHINA AND RUSSIA WITH HANDSHAKES AND EMBRACED TRADE. KEY TECHNOLOGY IS BEING PROVIDED BY RUSSIA, BUT BIG PROJECTS AND TRADE DEALS ARE BEING BUILT BY CHINA. THE US-GOVT EMPHASIS ON DRUG CONTROL AND BANK CONTROL, RATHER THAN TRADE, IS CAUSING A BACKLASH. $$$

The regional summits are institutionalized gatherings of the heads of state and government of the Western Hemisphere where leaders discuss common policy issues, affirm shared values, and commit to concerted actions at the national and regional level to address continuing and new challenges faced in the Americas. That is the stated agenda. Recently, a summit took place for the Organization of American States in Cartagena Colombia. The mid-April conference was a disaster. The Hat Trick Letter reported on the details like divisions over Cuba inclusion. Other divisions were clear, like over socialist concerns. The USGovt leader Obama was virtually snubbed.

My sources tell of solid momentum by many Latin American nations in developing ties with China and Russia that has accelerated. They are making distance from the United States, seen as a bully, replete with corruption in banking, and owner custodian of the USDollar which has rendered harm to their nations. The Chinese are busy building trade ties and swap facilities that enable barter trade. The Russians are busy sharing technology and installing consumer telecom networks. In the last decade, tremendous pressure and bully tactics were used to declare online gaming websites illegal on Caribbean and Central American soil, an extension of US jurisdiction on the grounds that American citizens were participating. The resentment went deep. Ulterior motives were at work, related to the massive online transactions of other underworld types.

## LIBOR SCANDAL BLOOMS

◄$$$ AS PREFACE TO THE ENTIRE L.I.B.O.R. SCANDAL STORY, THE OBSERVER MUST NOTE THE FIRM PATTERN. THE LONDON INTERBANK OVERNIGHT RATE IS ESSENTIALLY THE FEDFUNDS RATE WITH NOISE. BY PROXY ANY LAWSUIT ABOUT TEAM-LIBOR WILL BE AN ATTACK AGAINST THE US-FEDERAL RESERVE. THE TWO RATES ARE INTERCHANGEABLE. $$$

Expect the path of legal torts to end up at the USFed doorstep, and the Bank of England also (its master). The bankers must fund all their insane props with free money, the prop machinery that supports the entire crumbling financial structures.

◄$$$ THE FINANCIAL TIMES CONFIRMS THE MANIPULATED LIBOR RATES AND INTEREST RATE SWAPS. THE HIGHEST LEVELS OF BRITISH BANKING IS COMPLICIT IN THE L.I.B.O.R. PRICE RIG SCANDAL. THE BRITISH BANKERS ASSN LIED ON NUMEROUS OCCASIONS, AND HAS BEEN EXPOSED. INTRIGUE HAS ENTERED THE PICTURE, AS THE BANK OF ENGLAND IS AT RISK. THE POWER OF THE HIGH EUROPEAN CASTLES IS UNDER SIEGE. $$$

For a preliminary opening salvo to come up to speed, check the Financial Times article (CLICK HERE) from the heart of London itself. The dam is breaking on the big banks and their incredibly deep corruption that touches several types of markets, from derivatives to mortgages to credit cards. One can detect a global imprint to the investigation so far underway, as jurisdiction issues are evident. No nation has claimed sovereign jurisdiction in the cases, which have crossed borders from Great Britain to the United States to Germany and to Japan. Mention of the Serious Fraud Office indicates involvement by the World Court in the Hague. All major financial centers are involved. The authority is global, and the sheriff wears a global badge, a topic not yet discussed anywhere. This is an endgame factor. The Western banking corruption is the target. The authority is as high as it goes. Some claim the Western castle dwellers are bringing down the system, burning the financial houses, in order to install a new system with centralized powers in the London and Swiss castles. Not so clear, not so sure. My suspicion is that the badges bear the same marks as those powerful entities in the East which have claimed over 6000 metric tons of gold bullion from the cartel banks since March. The delivered shipments of gold did NOT go to London and Swiss castles, but to Asia!! Besides, the pattern has been de-centralized activity, the opposite for the fascist monolith power centers.

The Slog does outstanding work in sifting through the confusion. He summarized well the incredibly deep corruption in London banking. He wrote, The idea that LIBOR as generated by banks reporting estimate rates on a best guess basis to the British Bankers Assn, has been a standing joke in the industry since about mid-2007. As the now old joke runs, 'LIBOR IS THE RATE AT WHICH BANKS USED TO PRETEND THEY WOULD LEND TO EACH OTHER.'I remember working on transactions in 2008 where some of the smaller UK banks or building societies would borrow on a secured basis at rates of around LIBOR+2% or +3%, which is obviously absurd if LIBOR is the rate that banks are supposed to lend to each other on an unsecured basis. After mid-late 2007, banks largely stopped really lending to each other on an unsecured basis. In the terminology of the industry, the inter-bank market froze up. It remains largely frozen across Europe to this day. In this context the banks and the BBA had a challenge on how to report LIBOR. To admit that this freeze-up had happened would risk a credibility crisis, bank runs, and more, as the media caught on the the scale of the crisis which, at this point, everyone was trying to ignore. So the banks and the BBA chose (or were told, maybe) to keep reporting LIBOR as if everything was alright, business as usual, even though it was essentially un-anchored from the real world. The British Bankers Association (BBA) denied any [manipulation], stating that the BBA OBSERVES RIGOROUS STANDARDS IN OUR SCRUTINY AND GOVERNANCE OF THE LIBOR MECHANISM, AND WORKS WITH THE INDUSTRY TO ENSURE THEIR CONTINUED FULL CONFIDENCE IN ONE OF ITS MOST ACCURATE AND RELIABLE BENCHMARKS. But in the four years since, the world at large has grown up bigtime about this kind of denial bollocks. Indeed. Or again put another way, the BBA release was a catalogue of lies from start to finish."

◄$$$ THE L.I.B.O.R. SCANDAL HAS CROSSED THE ATLANTIC TO REACH BOTH JPMORGAN AND CITIGROUP. EXPECT SOME EFFECTIVE DEFLECTION OF THE PRESSURE. THE CONTRASTING TREATMENT OF LONDON BANKS TO NEW YORK BANKS WILL MAKE GREAT THEATER. THE CASES INVOLVE ACTIVITY IN JAPAN BY CITIBANK. THE LAWSUITS ARE STACKING UP. THE US-PRESS ATTENTION DIRECTS FOCUSED ATTENTION ON LONDON. $$$

The French press reported that the LIBOR investigations have hit the doorstep of both Citigroup and JPMorgan Chase, as requests for information have been given to them in preliminary probes. The financial market reaction has hit those bank shares, along with those of Bank of America, as heavy imposed fines are feared. Barclays has been fined $452 million by British and US regulators for manipulation efforts in the LIBOR and EUROBOR benchmark interest rates between 2005 and 2009. Perhaps a key to understanding the enforcement is that the Serious Fraud Office is a division of international investigation from Interpol and the World Court. Suspicion of the new sheriff in town grows. The purity and sanctity of the London banking sector has been lost, as the tarnish is applied with a broad brush. Citigroup and JPMorgan also acknowledged private civil and class action lawsuits filed against the LIBOR related banks in April over the issue. The lawsuits have been assembled together into one action put before the New York federal district court. At risk is potentially many $billions in claimed higher improper costs paid, cited in lawsuits for damages. Since the rate device is so widely used, the damages could actually reach the $trillions. That is when the Too Big To Fail card is to be played again, since legal tort enforcement would bring down the US bank kitchen where the books are cooked.

The LIBOR rate is set based on information from 16 international banks, which means collusion is obvious, not only implied. The rate is the work of the group of banks working together, dropping the highest and lowest, and settling on a consensus. The final rate is an average of claimed cost for funds in London's interbank market. They lied egregiously, and pocketed small differences off $trillions in volume. It is a group process and effort, therefore collusion is blatantly clear. The sheriff went after the most vulnerable team effort of banking corruption in LIBOR and EUROBOR. Also, these funding rates dictate the cost for numerous derivatives that go unregulated, and mortgage rates for a damaged housing market, and credit card rates for a struggling household sector. Therefore, the Interest Rate Swaps and other bond control mechanisms will be undermined. The damage could continue for many months during a grand unraveling of bond markets and corrupted mechanisms. Commercial and retail borrowers around the world are affected. JPMorgan, Citibank, and Bank of America are three of the 16 banks that fix the rate. They will attempt to deflect the scrutiny, but the prosecution pressure is one level higher than single nations. My hope is that the higher jurisdiction authority is revealed, as is their agenda. The US banks have for years operated with impunity, but from US prosecution of fraud, theft, and misrepresentation. The new sheriff at work appears to wear a global badge, carry more clout, and push around the bank cartel executives. This is very new!

The case of Citigroup involves activity in Japan with the TIBOR, the Euroyen Tokyo interbank rate. This scandal is indeed global. The emergence of a face on the global prosecutor team will be intriguing to observe. Administrative action against the Citigroup Global Markets Japan unit has been taken by the Japanese Financial Services Agency, working in conjunction with several cross-border regulators involved in the investigations. Two traders at the Citigroup office in Tokyo are at the center of rate fixing regarding LIBOR and TIBOR, focus given to certain communications made. Their activity was suspended back in January without much publicity. The Japanese Financial Services Agency took administrative action against Citibank Japan for the rate fixing actions. See the Raw Story article (CLICK HERE). Not much coverage of the offshoot cases appears in the US press, only the London cases. This is precisely the kind of slant the Jackass expected a month ago with Europe blamed and even sabotaged in order to deflect attention from the US banks, corrupt to the core. London is the initial focus, but it will spill onto US soil.

◄$$$ THE L.I.B.O.R. SCANDAL HAS REACHED GERMANY'S LARGEST BANK. DEUTSCHE BANK HAS ENTERED THE PROBE AS AN OBJECT OF THE PRICE RIG SCANDAL. THE BIGGEST GLOBAL BANKS ARE ALL IN COLLUSION, NOT JUST OVER RATE SETTING, BUT OVER BOND FRAUD AND GOLD FRAUD. ACTION AGAINST THE L.I.B.O.R. SHOWCASE IS THE CROWBAR THAT BRINGS VIEW ON THE ENTIRE ASSORTMENT OF BANKER CORRUPTION. $$$

German markets regulator BaFin is conducting a special probe of Deutsche Bank as part of a wider investigation into possible manipulation of the London InterBank Offered Rate (LIBOR). The German regulator only admitted to investigate possible manipulation of LIBOR rates by domestic banks. Since a big team player, D-Bank is suspected by those with active brain stems. Results from the probe are expected to emerge in mid-July. The investigation in Germany is a special probe initiated by the regulator, which carries much more weight than routine probes initiated by a third party such as a bank. The giant German bank has received various subpoenas and requests for information from certain regulators and governmental entities in the United States and Europe, in connection with setting interbank offered rates for various currencies. That means LIBOR, EUROBOR, and TIBOR. The spotlight, scrutiny, and pressure is global, which indicates a clear global hand like with a new sheriff. See the Reuters article (CLICK HERE). The little Metzler Bank is also suing D-Bank over corrupt LIBOR practices.

◄$$$ ROB KIRBY LINKED BACK IN 2008 THE USFED & JPMORGAN TO THE L.I.B.O.R. MARKET PRICE RIGGING. THE US-BASED REGULATORS HAVE BEEN AWARE OF THE CORRUPT PRACTICES FOR FOUR YEARS. THIS IS NOT A NEW PRACTICE, ONLY A NEW PROSECUTION. $$$

If truth be told, the LIBOR anomalies have persisted since late 2008. The intrepid first class forensic bond analyst Rob Kirby linked the sordid trails and mismatched discrepancies of the LIBOR to the JPMorgan monster, the US Federal Reserve syndicate ring leader, and the USDept Treasury haven for Goldman Sachs lieutenants. Regulators have done nothing for four years, sitting on their hands, taking orders from the bank cartel, bowing when required. See his 2008 article on Financial Sense (CLICK HERE).

◄$$$ THE SEQUENCE OF FINANCIAL SCANDALS MUST BE NOTED. IT IS DIFFICULT TO DISCERN EXACTLY THE FORCES BEHIND THE SEQUENCE OF CASES, BUT THE CHAIN OF DOMINOS ON EFFECTS IS INTENSE AND BLATANT. THIS CHAIN WILL CONTINUE FOR MANY MONTHS. $$$

The scum channel is full. The exposure is glaring. The fan to distribute shame is revved up. The scandal is widening.  The pressure is mounting. The corrupt bankers have never been on the defensive this much in the modern era. Their most vulnerable points are under attack. Big damage is done. Event #1 was MFGlobal. Event #2 was JPMorgue losses tied to IRSwaps. Event #3 is LIBOR price rigging. They are all related, from vast insolvency and illiquidity that built over three years time. Other events will come, only later to discern their connection to the sequence. Maybe event #6 will be Gold Allocated Account raid scandal. This deadly chain all began with Lehman Brothers, whose killjob involved a pure skate on the deeply corrupt and mischievous activity by CEO Fuld that should have resulted in a gigantic scandal in 2009 and 2010. In truth, event #0 was the TARP Fund and the $700 billion gift never fully scrutinized or prosecuted for its fiduciary violations and extortion angles. The events will continue to occur in a sequence, probably managed much more than we are told. The assured direction is for dismantling the Western bankers and their historically unprecedented corruption and magnificent protected profiteering.

◄$$$ THE BIG US-BANKS WILL BE PAYING OUT AWARDS IN NUMEROUS TYPES OF LAWSUIT CASES. EARLY SETTLEMENTS WILL ONLY ENCOURAGE MORE CASES. LAWSUITS WITH US-CITIES IS WORKING ITS WAY ONTO THE LEGAL DOCKETS FOR THE COURTS. APART FROM LAWSUITS BASED UPON MORTGAGE RATE CASES, MANY CITIES ARE AGGRIEVED FROM THEIR SWAP CONTRACTS. EXPECT HUNDREDS OF LAWSUITS, MAYBE NOT CLASS ACTION, WHICH WILL GIVE MORE EMPHASIS CASE BY CASE. THE ENTIRE ADJUSTABLE RATE MORTGAGE MECHANISM IS BASED UPON L.I.B.O.R. PRICES. EXPECT THOUSANDS OF LEGAL CLAIMS AND HUNDREDS OF CLASS ACTION CASES. THE PUBLICITY WILL BE ENORMOUS. $$$

The big US banks are lined up like ducks at a carnival shooting gallery. They are still reeling from legal rulings against their mortgage bond misrepresentation and home foreclosure contract fraud. Losses will mount quarter after quarter for perhaps a few years. The losses could eclipse those from mortgage bond fraud cases. The city of Baltimore has prepared lawsuits involving interest rate swaps and LIBOR against notable Wall Street firms like JPMorgan, HSBC, Bank of America, Credit Suisse, and Deutsche Bank. The parade has just begun. See the Baltimore Sun article (CLICK HERE). Meanwhile, on the Left Coast the City of Oakland California has told Goldman Sachs to drop dead regarding its Interest Rate Swap contract payments. Oakland has been losing $4 million per year, as a result of an interest rate swap deal they made with the venerable syndicate firm. Now the city wants out, but the penalty is $15 million. The city council has decided to terminate all business with Goldman and renege on the exit clause cost, daring the firm to make a public spectacle, which would surely include scrutiny and an underlying layer of filth. Expect many other municipalities to follow the Oakland route. See the Naked Capitalism article (CLICK HERE).

The moment Barclays announced its $450 million LIBOR settlement, the lawyers moved into action. The precedent was set in stone. The task of proving LIBOR fraud will be much easier, but not automatic. A big plaintiff  feeding frenzy could ensue. The 900,000 outstanding US home loans indexed to LIBOR were originated from 2005 to 2009, many of which were adjustable rate mortgages. The key lending gauge may have been rigged, resulting in mismatched risk. Those mortgages carry an unpaid principal balance of $275 billion, according to the Office of the Comptroller to the Currency. The potential for lawsuits is vast.

The US states will be lining up in a parade also. State attorneys general are examining whether banks manipulated benchmark international lending rates that harmed their states, which could open a new front against the top global banks. At issue is jurisdiction over the banks. Numerous state agencies are lining up also. The Massachusetts Dept of Transportation is reviewing its portfolio to look for underpayment on its bonds. See the Zero Hedge article (CLICK HERE) and the Financial Times article (CLICK HERE).

The financial press seems unaware of the great potential for lawsuits globally in several areas, like those cited above but also credit cards. The hidden lawsuits might be for banks who were victimized by the LIBOR rates paid in derivative contracts, which is in the Jackass view the biggest motive of all for the fraud. The volume of derivatives is an order of magnitude greater than all the mortgages and government agency bonds plus bank credit cards. Refer to the colossal Interest Rate Swaps that support the entire USTreasury Bond tower, funded by the cheap LIBOR rate. The bankster gangsters wanted to limit their payments on derivatives and fund their own derivatives for free.

## BANKS & JPMORGAN CRIME CENTER

◄$$$ A COMMON DEFENSE IS HEARD THAT THE JPMORGAN LOSSES ARE MINOR AND NOT INDICATIVE OF LIQUIDITY STRESS. BOTH ARGUMENTS ARE WRONG AND DESPERATE LIES. THE LOSSES ARE MULTIPLES GREATER. THE LIQUIDITY STRESS MOTIVATED THE MFGLOBAL ACCOUNT THEFTS, AND NEXT THE PFG-BEST THEFTS. $$$

JPMorgan Chase lies at the heart of most corrupt schemes. They are deeply tied to the colossal short manipulation in Gold & Silver markets, the Interest Rate Swap devices to defend the USTreasury Bond complex and its unjustified 0% cost. They are deeply tied to the mortgage bond misrepresentation with accompanying investor lawsuits, the robotic mortgage contract fraud, and much more. They undoubtedly had a big hand in the looting of Fort Knox during the Clinton-Rubin Admin. They manage the silver price suppression almost singlehandedly with the corrupt SLV exchange traded fund. They sit at the apex of the Fascist Business Model to form a financial crime syndicate, one of the largest in the world outside the Bank of England and its many lord vassals.

JPMorgan operates the Export Bank of Iraq, the clearing house for Afghan narcotics and payments. Keep in mind that 70% of all narcotics that enter the United States comes from Afghanistan, as opposed to 6% ten years ago. Also, in the infamous Building #7 in Lower Manhattan on 911, many records were kept for JPMorgan regarding Enron deals for offshore companies and for the $2.3 trillion in additional counterfeited USTBonds sold over and above USGovt issuance. JPM at one time had sold twice as many USTBonds than were issued, much like Italy with duplicate serial numbers. It will be interesting to watch the demise of JPM and the potential prosecution of its executives. If not, observe how many of their upper staff go missing. See the Jackass article entitled "Exposure of Banker Corruption" on Gold Seek (CLICK HERE), which a couple of my favorite website editors refused to publish.

To the contrary, the JPM losses are between 10 and 100 times larger than the figures tossed around. Their Interest Rate Swap losses alone in failed defense of the USTBond will go higher than $1000 billion, as in $1 trillion. Expert estimates already have them surpassing the $100 billion mark. Lastly, JPM suffers from grand liquidity distress. As with Greenspan, listen to the topics, not the denials. Their cash shortage and profound insolvency will lead to numerous thefts. Another MFGlobal event has occurred, with JPMorgan as the custodian. The PFG-BEST brokerage firm has its owner sit as regulator.

◄$$$ THE JPMORGAN LOSS IS ESTIMATED NOW AT $9 BILLION, WITH MORE EXPOSURE, MORE DETAILS. IT WILL FLY PAST THE $100 BILLION MARK BEFORE TOO MANY MORE QUARTERS. THE GREAT UNWIND IS NOT POSSIBLE EASILY IN THE ILLIQUID DERIVATIVES MARKET. VULTURES OPPOSE THE JPMORGAN POSITIONS, COMPOUNDING THE LOSSES. THE COLOSSUS BANK OPERATES WITH IMPUNITY, CRUSHING RIVALS, EXPLOITING SITUATIONS, BUT HAS SUFFERED MASSIVE LOSSES WITHIN ITS HIGHLY ILLEGAL ROLE OF GAMBLING WITH DEPOSITOR ACCOUNTS TO SAVE THE SYSTEM. $$$

JPMorgan is trying to manage a staggering derivatives loss. The Jackass called it $18 billion in mid-May, almost two months ago. When $trillions are involved, the realized loss when things go bad are never only a couple $billion. The latest is that insiders (possibly not happy with the Morgue) have revealed the losses will in time exceed $9 billion. At center stage is the CIO mansion with IG9 and DV01 contracts, highly illiquid contracts in the murky derivative arena that goes unregulated, by design. The New York Times has leaked the higher loss estimate, using the word bungling after CEO Dimon used the word stupid. The bonus for Bruno Iksil (aka The Whale) is not to come. The NYTimes wrote, "The bank's exit from its money losing trade is happening faster than many expected. JPMorgan previously said it hoped to clear its position by early next year. Now it is already out of more than half of the trade and may be completely free this year." Once more the financial media has deceptively reported on the story, since they stated that JPM has fully unwound its trade, either by novating, or by transferring it over to helpful hedge funds. The loss will grow and grow and grow.

Expect Dimon to pull strings and finagle on the next quarterly earnings report, using slippery masking techniques like as Debt Value Adjustments on their corporate debt, and raids on Loan Loss Reserves, for what is left of it. Losses are pushed to past quarters so the current quarter looks better. Mark Williams is Finance professor at Boston University, who also served as a Federal Reserve bank examiner. He assessed, "Essentially, JPMorgan has been operating a hedge fund with federal insured deposits within a bank." That is downright illegal, but in the Fascist Business Model framework, the big bank can do anything it wants, including steal private accounts. See MFGlobal and now PFG-BEST. See the Zero Hedge article (CLICK HERE) and the New York Times article (CLICK HERE).

◄$$$ YET ANOTHER NEW FRAUD INQUIRY HAS COME AS MORE JPMORGAN LOSSES MOUNT. THEIR CREDIT CARD DIVISION COULD SUFFER A $7 BILLION LOSS. IN THE ROOM ADDITIONS, THEIR MORTGAGE DIVISION HAS A $8 BILLION LOSS OVERHANGING LIKE A ROTTEN ROOF FROM MORTGAGES THAT STOPPED PAYING, SCOFFED BY HOMEOWNERS WHO SMELL A RAT IN THE LOFT. $$$

JPMorgan Chase disclosed last week that losses on its botched credit gambles could escalate. Over $7 billion could result, after it was learned that its traders may have intentionally tried to obscure the full extent of loss from the disastrous trades in the securitized bond market. Proper accounting efforts (laughter?) led the company to put its Q1 earnings under doubt. When deemed reliable they would be restated. Federal regulators are examining whether traders of the colossus bank by assets exempted by law intended to defraud investors. Another ugly lurking loss comes from a source that is hardly new. It is the stinking nest of rats in the loft from the mortgage division. An army of homeowner clients has stopped payments on $8 billion in home loans. They will mostly go to foreclousure, unless the titles declared to be falsified. The losses will range from liquidation value to complete from fraud and court ordered loan forgiveness.

Mastermind CEO Jamie (the Demon) Dimon is on the case to contain the fallout. Maybe the nation will see a repeat episode of Dimon before the USCongress, where they will again kiss his ring and genuflect before him, putting aside their role to represent the citizenry. In time the JPMorgan Board will seek to sack Dimon in an attempt to appear responsible, then to blame him for most of the bank's problems, losses, and shame. So JPMorgan is not the best in class. Dimon had been working overtime to prove that any flaws in risk management were limited to the Chief Investment Office, no longer an obscure office in London with tentacles to New York. Risk controls are in focus, but if too much scrutiny is given, the facts behind their support of the 0% FedFunds policy and their support of the sub-2% USTBond will be revealed. That scandal comes another day, the Interest Rate Swap machinery scandal and the false flight to safety in USTreasury Bonds. See the New York Times Dealbook article (CLICK HERE).

◄$$$ AS THE FINANCIAL WORLD TURNS, IT IS ROCKED AGAIN BY ANOTHER FUTURES BROKERAGE THEFT. THE DEED BECAME NECESSARY TO KEEP JPMORGAN THE HUNGRY CORNERED MONSTER ALIVE. LOOK FOR PFG-BEST CLIENTS NOT TO RECEIVE DELIVERY OF GOLD & SILVER CONTRACTS. INSTEAD, LIKE WITH MF-GLOBAL, THEIR ACCOUNTS HAVE VANISHED. ONCE MORE, JPMORGAN IS CUSTODIAN OF THE PFG-BEST FOREX CURRENCY ACCOUNTS. ALL SUSPICION FOR THE THEFT IS WITH THE COLOSSUS. $$$

Enter Peregrine Financial Group and BEST-Direct, which merged to become PFG-Best. The names are different, but the story is amazingly similar to the MFGlobal heist that was permitted and protected by the USGovt and US regulators. In December, they called a brokerage bust a financial firm failure, in order to put clients last in line (enabling pilferage), in direct violation of US law. Clients in a brokerage bust are put first in line for preserved accounts. No matter though, since JPMorgan is exempt from the law. Lawsuits have not yet sorted out in the courts, the trail far from cold, when another case of theft and vaporized segregated accounts has occurred. The new PFG-Best client account vanishing act has come with the CFTC finding no material breaches of customer funds protection requirements since January, the procedures in place to assure integrity. At the scene of the crime once more is the same custodian for the PFG-Best foreign exchange FOREX accounts, none other than JPMorgan! Look for the venerable giant JPMorgan to discover another $400 million in mysterious profits or precious metals deliveries soon from a murky source. They were prominent (to say the least) in the MFGlobal case, implicated as the thief. In fact, JPMorgan realized a sudden silver delivery after the MFG theft almost exactly equal to the size of the requested Notices for Delivery by the MFG clients whose accounts were stolen. The Hat Trick Letter reported the story in detail. US authorities are still looking for the money, like Keystone Cops. MFG clients have still not be reinstated on account loss from pilferage, despite the public story of 60% restitution. The Jackass has a colleague who was a victim. He has seen not a dime, nor does he know of anybody who has.

As the wheels of crime turn, the National Futures Assn and other officials have put all PFG-Best funds on hold, where only liquidation of accounts is permitted, with their clearing house Futures Commission Merchant. No clients are able to trade except to sell out of positions. Until further notice, PFG-Best is not authorized to release any funds. A story has come that one such PFG client had moved his account several months ago from MFGlobal to seek safety. Ironically, his account remains frozen under the PFG crime tent, apparently safe and apart from the victims. He must be both angry and happy. PFG-Best plans several hundred layoffs.

The same drill. Segregated accounts at PFG-Best have been raided. After the MFGlobal fiasco, they were supposedly made safer. Not so! No solutions come to the US financial system, only whitewashes and continued thefts. The regulators were put on the spot in the aftermath. But the regulators at the CFTC, the SEC, and the CME assured such an event would never happen again. Wrong! The Jackass warned of its inevitability. Ann Barnhardt warned all to exit such futures brokerage accounts. The National Futures Assn has filed notice prohibiting PFG-Best from operating further, thus freezing all of its accounts. Their public statement read, "On July 9, 2012, the NFA made inquiry with US Bank and learned that rather than the $225 million that PFG had reported as being on deposit at US Bank just days earlier, PFG had only approximately $5 million on deposit at US Bank." The translation is simple, that another $220 million in segregated accounts had been stolen, the Modus Operandi looking strangely familiar to the trails left behind by Jon Corzine and MFGlobal. See the Zero Hedge articles (CLICK HERE and HERE).

The events have a progression, with money in accounts vaporizing:

  • On or about June 29, 2012 the firm PFG reported to NFA that it had approximately $400 million in segregated funds, of which more than $225 million were purportedly on deposit at US Bank.
  • On or about July 9, 2012, the regulator NFA received information indicating that PFG's Chairman may have falsified bank records.
  • On July 9, 2012, NFA made inquiry with US Bank and learned that rather than the $225 million that PFG had reported as being on deposit at US Bank just days earlier, PFG had only approximately $5 million on deposit at U.S. Bank.

Due to all the stress, Russell Wasendorf attempted a suicide at the firm's Iowa compound. He is part of the criminal deed. The PFG-Best brokerage located in Cedar Falls Iowa had about $400 million in customer segregated funds at the end of April, but now is frozen. Wassendorf sits on the NFA advisory committee, which regulates his own firm. Seems on its face to be a conflict of interest. See the Silver Doctor article (CLICK HERE).

Much confusion exists around the PFG Best disaster concerning the timing of events. From withdrawn salary cuts at the firm to liquidation-only orders to forced liquidations after the yellow tape showed up to make a formal crime scene, the sequence is dizzying to be sure. It was not the least surprising to the Jackass, who has forecasted numerous times for the next chapter of the great vanishing act in private accounts. Rick Santelli of CNBC provided a vivid shocking insight into the MFG replay. He said, "We are just hearing rumors. It could be, on a percentage basis, worse than MFGlobal." The entire case actually smells worse than the MFGlobal crime scene. Not all that shocking, since USGovt legal teams did more to cover up the MFG case and to protect its JPMorgan criminals than to protect against the next account pilferage case. For a rich rendition of the sequence of events, follow Rick Santelli at the Chicago Pits (CLICK HERE).

◄$$$ ANOTHER MFGLOBAL CASE WITH SIMILAR FINGERPRINTS. PFG-BEST AND $220 MILLION IN ACCOUNTS ARE GONE, A SMALLER SIZE THAN MFGLOBAL. PROBABLY IDENTICAL MOTIVE FOR THEFTS, INABILITY TO MEET COUNTER-PARTY OBLIGATIONS. JEFFERIES IS IN CHARGE OF THE LIQUIDATION OF THE PFG POSITIONS IN ACCOUNTS. WATCH THAT ACCOUNT THAT HOLDS THE PROCEEDS FROM SALES. $$$

The MFGlobal playbook has proceeded with another re-enactment. Liquidation of private accounts has been done in an orderly manner. No losses are to come to Jefferies, which will keep the PFG liquidation proceeds in a segregated account. Segregated from whom or what? Jefferies confirmed that it has a clearing relationship with Peregrine Financial Group regarding trading positions held on behalf of PFG clients. The event kicked into gear when PFG was unable to meet a margin call issued by Jefferies, made in response to National Future Assn's Member Responsibility Action. Thankfully, the Jefferies crew have acted expeditiously in a fair and reasonable manner. All can rest from that worry (puke). See the Zero Hedge article (CLICK HERE).

A veteran Chicago futures trader pitched in. He was a victim at MFGlobal. He wrote, "The CFTC and NFA stepped aside and let it go into an SEC looting exercise. My response was that all regulators and banksters were complicit in MFGlobal. They all stepped aside and threw 35,000 commodity customers into an SEC bankruptcy in order to save at most a few hundred stock accounts. Those were probably almost entirely employees of MFGlobal. This is just another blowup which we all knew was coming. Here is the key to motive. The halt came, the freeze came, the accounts vanished, because what they are holding are obligations with counter-party risk that could not be met." In time the types of trades halted will become known, with a suspicion of gold & silver positions. Probably many grains, soybeans, and other agricultural contracts were in the mix, given the Iowa location. Instead of completing a raft of trades that might have exposed a COMEX default, the same JPMorgan master bank simply pilfered the accounts in an MFGlobal redux. Let's see how the financial press treats the case. My guess is the story will be snuffed out as best as possible.

◄$$$ JPMORGAN IS COMPLICIT IN VATICAN BANK MONEY LAUNDERING. JPMORGAN PERMITTED THE EUR 3 BILLION FLOW BEFORE ASKING QUESTIONS IN A MANNER THAT INDICATED IT WAS TRYING TO MAKE A FALSE FRONT OF PROPRIETY. BOTH MILAN ITALY AND FRANKFURT GERMANY ARE INVOLVED AS LOCATIONS. $$$

No financial institution is sacred. The Council of Europe presented a preliminary report in Strasbourg on massive money laundering by the Vatican. Yet another scandal has emerged for JPMorgan, as it served as the chief Vatican bank until the scandal broke. A big mea culpa in a string of banker sins. JPMorgan is complicit in money laundering fanned across Europe, having abetted Vatican flow of high volume funds and fraud. It permitted the rigidly defined IRS suspicious transactions to pass through their institution for an eternity. The financial account in question allegedly processed more than 1 EUR billion for the Vatican bank through year 2011. Italian investigators suspect the account was used to launder funds from dubious sources in their words, surely diabolical. According to the strict laws against the practice, the large US criminal banking organization should be considered a primary suspect in massive money laundering operations in Europe, centered at the Vatican bank.

Yet another egregious moral hazard has been committed, with a papal ruling on whether it is a mortal sin soon to come. Banking officials at JPM were caught naked in bed with the pope's temple merchants, the gender of bedmates soon to be disclosed along with the sex toys. The dark history is the Vatican is an age old story. Whether JPM will be implicated in legal arenas is unclear, as the jurisdiction might be thorny and the penance lengthy. The smoking chalice was large wire transfers with no information regarding account holders or purposes for the transfers. Involved were GBP 20 million apparently heading to a Vatican account at JPMorgan in Frankfurt. The other EUR 3 million was heading for an account at a different bank in Rome. John Pierpont Morgan would turn in his grave. See the Silver Doctors article (CLICK HERE) and the Der Spiegel article (CLICK HERE).

◄$$$ BANK OF AMERICA IS IMPLICATED IN A BIG MEXICAN COCAINE RING FOR MONEY LAUNDERING. NOTHING NEW EXCEPT FOR THE REVELATIONS, THIS BY THE WALL STREET JOURNAL. NO CHARGES WILL BE LODGED AGAINST THE BANK, VITAL FOR KEEPING AMERICA STRONG. $$$

A farce of an investigation and prosecution is taking place. The FBI has revealed that a major Mexican cocaine trafficking cartel called Los Zetas (The Z's) used accounts at Bank of America to hide money and invest ill-gotten drug trade profits in US race horses. The alleged ties between the violent drug gang and the second largest US bank were described in an affidavit filed in federal court in Texas in June. A business operating as a front to purchase thoroughbred horses and to conduct training was created to launder drug money through Bank of America. Of course, the Too Big To Fail and amply protected financial firm, known as Papa Bush's CIA Bank, is not accused of any wrongdoing. Officials at BOA are cooperating with authorities in the case. Expect any fines to be very small fractions of a penny per dollar processed, just like all past precedent such as Wachovia in 2008. Nothing changed, nothing to see, keep moving along, people. The Fascist Business Model is at work. See the Wall Street Journal article (CLICK HERE).

## SHADOW BANKS GIVEN SUNLIGHT

◄$$$ THE INVERTED SHADOW BANKING SYSTEM SIGNALS A QUIET WARNING, THAT PRICE INFLATION COULD BECOME A NEW ARRIVAL ON THE SCENE FINALLY. IT ACTUAL BANK DEPOSITS DOMINATE IN BANKING ONCE AGAIN LIKE IN DECADES PAST, THEN NEW MONEY CREATION WILL END UP HAVING THE OLD EFFECT TO CAUSE RISING PRICES. FOR THE LAST TWO DECADES, THE SHADOW BANKING SYSTEM HAS DOMINATED. IN RECENT YEARS, THAT EXPLAINS THE JIST OF MONETARY POLICY. THE ZERO PERCENT COST OF MONEY IS DESPERATELY REQUIRED. $$$

An important inflection point occurred in December 1995, one that should have signaled a path to destruction to come in the Western banking system, with New York and London as its primary axis for ruin. At that time, liabilities in the US Shadow Banking system (having no deposit base) for the first time ever became larger than liabilities held by traditional financial institutions (with deposit base). Tyler Durden of Zero Hedge has been extremely thorough and diligent in covering the perverse shadow system for over two years. He contends that this massive and rarely discussed component of the USEconomy is the most important one, since monetary policy is made on the margin to accommodate it. Consider the need to fund the Interest Rate Swap in an enviroment of runaway USGovt deficits, done at zero cost from the indefensible 0% official FedFunds rate.

The shadow system explains monetary policy. It explains why despite $trillions in new money having been created electronically, the flow through into the general economy has been negligible. Obviously, the bankers spend their bonus checks on vacations, summer homes, yachts, lavish clothes, high end restaurants, and diamonds, for a trickle down benefit. For a quick look at the many components of the Shadow Banking system, check out the following breakdown by Deloitte, which is incomplete but very illustrative.

The total Shadow Banking liabilities within the United States alone hit a gargantuan $21 trillion in March 2008. They are comprised of a combination of money market funds, GSE & Agency paper, asset-backed paper, funding corporations, open market paper, and repos. They have been on a major decline ever since, holding at under $15 trillion at end March 2012. This is a ripe $6 trillion in flow removed from credit money circulation, with a $143 billion drop in Q1 alone! It prompts recession and stagnancy. See the blue line on the chart below. Since the destructive events in the summer of 2008, when the subprime mortgage bond explosions hit the bank balance sheets (after being contained in the view of hack Bernanke), not a single increase has been logged from 16 quarters in the total notional contained within shadow banking liabilities. The chart below shows precisely when the credit bubble popped. The havoc and impact has affected shadow banking far more than normal credit transformational conduits. They are hitting JPMorgan in the last few months in a big way.

The USFed does all it can possibly do to defend against the contraction. It has opened numerous liquidity facilities to aid the big US banks, but they are dying anyway a horrible death. The US banking system is stuck in sideways mode, trying desperately to replenish itself with enabled USTreasury carry trade. For two years in a row, consolidated US financial liabilities amount to just shy of $30 trillion and have barely changed. That explains why the US stock market is stuck in a range. The US total financial sector is still a huge $3.8 trillion below its all time highs, standing at $33 trillion. Unless and until this $3.8 trillion hole is plugged, one thing is certain. Adoption of risk will not take place. The big bank consolidated liabilities in Q1 declined by $86.2 billion at a time when the USFed was engaged in the deceptive program known as Operation Twist.

Durden calls the shadow banking system an inflation buffer. It performs all the traditional credit intermediation and basic transformations that conventional banking entities ordinarily do, namely manage maturity, facilitate credit, and provide liquidity. However, the warning is that without benefit of deposits, the entire rickety shadow banking system is built upon the good faith and credit of re-hypothecated assets, converted into liabilities, courtesy of fractional reserve credit structure. What functioned well in the expansionary phase of the Ponzi in a leveraging environment, no longer works when systematic de-leveraging is the order of the day. The circular aspect of shadow banking could turn out to be the vortex in the Black Hole during an economic collapse.

The big danger arises. As the US financial system reverts to a more conventional system step by step, the risk that incremental money creation by the USFed will trigger a serious bout of price inflation rises exponentially. Increasing amounts of money find their way into conventional bank deposit accounts. Consolidated deposits across the US financial system currently account for almost $10 trillion, versus total liabilities of $30 trillion. As the blue line on shadow bank liabilities declines lower much more, the advent of price inflation could arrive once and for all, with a vengeance. For that to occur, money velocity must pick up speed, something to remain a giant challenge. See the Zero Hedge article, complete with many useful graphs (CLICK HERE) to further paint the picture of the shadows.

◄$$$ BIG PROBLEMS ARE BREWING AGAIN IN THE O.T.C. DERIVATIVE MARKET. A GIGANTIC FINANCIAL ACCOUNTING INVESTIGATION IS UNDERWAY THAT HAS SEQUESTERED THE MAJORITY OF TOPLINE EXPERTS. A WALL STREET FIRM IS IN DEEP TROUBLE. THE STORY IS KEPT UNDER WRAPS, BUT NOT IN THE ACCOUNTING CIRCLES. ANOTHER LEHMAN BROTHERS INCIDENT IS SOON TO POP, WHICH COULD BRING FORWARD A SYSTEMIC CHANGE EVENT. THINK MORGAN STANLEY. $$$

Jim Sinclair has shared an important commentary. He wrote in late June, "There is a big problem brewing again in the OTC derivative market. A major international financial auditing firm is currently involved in a massive project on Wall Street that presently has over 900+ consultants involved, which is massive and beyond even the size and scope of the Fannie Mae restatement several years ago. They are grabbing any senior financial analyst and software expert that they can to help this unnamed major Wall Street bank calculate valuations for a suddenly devaluing portfolio of Credit Default Obligations that they have heavily invested in. This auditing firm is charging nearly double their normal billing rate and is getting it, no questions asked." My educated guess is that Morgan Stanley is on the ropes, facing a death experience. It could also be that an important JPMorgan subsidiary is also on the ropes, possibly closely aligned to their Chief Investment Office. In all likelihood it is both. Another Lehman Brothers incident is nigh. This time, the Wall Street and London City bankers have plenty of time to prepare, to shore up their weakened walls, to raid private accounts, to falsify records, and to orchestrate the event. They might have been able to exploit the situation by killing a weaker rival, except they have run out of rivals to kill. Be sure that Europe will be blamed for the extreme damage linked to the event. An imminent event is tied to the sovereign bond losses and bank losses in Europe, tha t include France and Germany, but the big fat finger of blame will eventually be revealed that the USTreasury Bond complex is breaking. Its Interest Rate Swap buttresses are fractured and falling to the ground with unspeakable losses that could enter the $trillions.

◄$$$ WALL STREET AND LONDON BANKS ARE BEING COERCED TO PRODUCE MORE GOLD, LIKELY FROM PRIVATE EXECUTIVE ACCOUNTS. A SLOW DEATH MARCH IS BEING FORCED, A JACKASS THEORY. $$$


The Jackass holds a theory, that gold is loosely connected to balance sheets of the major banks. However, that gold is available only from channels that extend to personal executive private accounts holding gold. Some are in bullion banks. Others are in Wall Street and London investments and in big money center commercial banks. A great many bank executives own private accounts in the Carlyle Group, which has been in the process of going public in stages. Back in March 2009, Jim Sinclair with hesitation revealed at a PDAC conference in Toronto Canada that bank executives serve as counter-party to massive bank short futures positions in the COMEX. The bankers are invested in gold. Their bank firms will be gutted, redeemed at government expense, while the bank leaders own the profitable long positions.

My theory is that the raids for 6000 tons gold now gone East this spring has produced extraordinary pressure for the banks to bring privately held gold from executive accounts into the banks and financial firms. If they do not, the banks face a death experience with full blown failure in the public eye, complete with lost political power, legal prosecutions, and long prison sentences. If the banks do indeed move privately held gold, then they buy time. The prevailing theme since 2009 has been to buy time. Wall Street is expert at buying time. They buy time and fix nothing. The Eastern Coalition realizes the big banks own plenty of gold, but in private accounts. To plow under the New York and London banks, the Eastern entities must draw out whatever gold bullion can be produced, almost to the last bars. The process is excruciating and slow. So is the Paradigm Shift over power and wealth moving East. It follows productive capacity and income from a generation of offshored industry.

## FOREIGN BANK RUNS

◄$$$ B.N.I. BANK WILL REMAIN SHUT DOWN IN ITALY UNTIL END JULY. THE PATTERN WILL EMERGE THAT BANKS SHUTTING DOWN WILL STAY SHUT DOWN MUCH LONGER THAN ANNOUNCED. THEN MANY WILL PUBLICLY ANNOUNCE THEIR FAILURE, COMPLETE WITH PRIVATE ACCOUNT LOSSES. $$$

Bank Network Investments of Italy might provide the model for banker deception in failure and shutdown. When they shut down temporarily in mid-June, word was given that the bank would open again on July 1st. That date has been pushed back to July 31st. Depositors are left in the lurch, unsure of their money's safety, which has probably vanished. The pattern might be established. Announce a temporary shutdown, extends the date for reopening, then string along that date until a bank failure is announced, with total loss to customer accounts. The window created enables much chicanery and shenanigans, like snatching some accounts, especially black market accounts but also idle accounts or retail accounts. The Bankia case in Spain shows how the reality of financial accounting in time reveals losses much deeper than originally thought. The accounting games turn real when nationalization occurs or when failure is in progress.

◄$$$ ALL POSTBANK AUTOMATIC TELLER MACHINES IN GERMANY HAVE STOPPED DISPENSING CASH. IT IS THE NATION'S BIGGEST RETAIL BANK. THE GREEK AND SOUTHERN EUROPE BOND CRISIS HAS SPREAD ITS ILLIQUID TENTACLES TO GERMANY FINALLY. $$$

Deutsche Postbank is a German retail bank with headquarters in Bonn. Postbank was formed from the demerger of the postal savings division of Deutsche Bundespost in 1990. It became a wholly owned subsidiary of Deutsche Post in 1999, and was partially spun out on the Frankfurt Stock Exchange in 2004. Deutsche Post retained a controlling stake of 50% plus one share until September 2008, when 30% of it was sold to Deutsche Bank for EUR 2.8 billion. Let that serve as background for a bank not well known outside Central Europe. Although not in the news yet, my Central European banker source shared the information. He wrote, "Just getting word from Germany that no Postbank ATMs work. It is one of the biggest retail banks. It is a total system freeze. The scheiss is hitting the fan bigtime now." To be weak, illiquid, and damaged, a bank must not necessarily be located in Southern Europe. Add Germany to the list of nations that include Spain, Italy, France, and Great Britain. It can simply have a balance sheet that touches the South. The contagion is spreading for bank holiday. When it occurs, the losses to customer accounts will be incalculable in a very real sense. Civil disorder will result.

◄$$$ MANY DETAILS ON THE RBS-GROUP PROBLEMS WITH SUPPOSED GLITCHES HAVE COME TO LIGHT. MUCH ATTENTION WAS GIVEN TO NORTHERN IRELAND, THE COLONY. IT WAS A KITING SCHEME THAT SAVED THEM GBP 73 BILLION. JAMMED A.T.MACHINES AND FOOT DRAGGING WERE THE UNSAVORY SOLUTION. THE DECEPTION MAKES FOR A GOOD STORY AND CLEVER FRONT. IT WAS A HALTED BANK RUN, ONE TO BE REPEATED. THE HEADQUARTERS INTERRUPTED THE BANK RUN WITH SOFTWARE. $$$

The Royal Bank of Scotland committed a clever kiting game late last month. They froze money in movement, and permit the standard flow to overcome the backup in system. Some types have been delayed by a few months, like with purchase orders processing. The Slog (intrepid analyst) long ago identified RBS Group as the leading wobbly UK banking consortium. The atmosphere inside RBS is especially unusual for its open desperation. The Slog has been downright diligent and dutiful in airing grievances by suppliers and customers. The trail is littered with stories of foot dragging, delay tactics, and other methods that attempt to hide a condition deeply insolvent and illiquid. Either the bank lower officers are a legion of incompetent paper pushers, or else the bank conglomerate is in illiquid tattered ruins. The obvious conclusion is ruin, on the brink of open breakdown and failure. The forensic layout is stark and clear. Income in March 2012 was down almost GBP 1 billion year year over year. Credit adjustment losses quadrupled over the same period, an accounting gimmick that does not address liquidity. The corporate loss before tax was ten times higher than a year ago. Daily statements showed RBS cash assets to stand at GBP 82 billion, whereas net loans were recorded as GBP 476 billion. It adds up to big stress.

Here might be the clincher to give away their game. Total deposits came in at GBP 476B, the exact amount as loans. The stated difference between total assets and total liabilities was around plus GBP 60B. Two factors could easily tip the balance in a harsh way. The delays in toxic asset writeoffs within the entire RBS Group could be catching up to them, especially with pressures to deleverage and meet reserve demands with Basel III. Also, a public rush to grab their accounts in cash following a formal debt downgrade would gobble up the net difference rapidly, given how enormous the client base is. The RBS Group is the largest retail bank chain in Great Britain. With total fluid assets standing at around GBP 930B, zero outgoings over five days under the thin cover of an ATM computer glitch would give the bank a GBP 73B gain in liquidity flow, plenty sufficient to defend against an illiquidity storm. It was a pathetic excuse but an effective ploy. As for restoring creditor confidence, that is a much harder task. The European public is witnessing a defensive measure of extreme nature but a effective tactic to prevent a bank run.

The Slog opened up his Roost weblog for entering private and business user comments, to shed light on the game RBS has been playing. The results are striking and consistent. The overwhelming finding is that problems in RBS go far beyond pure technical snafus. Rather than provide quotes, the messages are conveyed. Check the link in reference for the full commentary. The Ulster Bank has been guilty of extreme delays that go beyond unprofessional. They put clients through runarounds on purchase orders and invoice payments for work that dates back to February. Requests for added data and endless minor corrections are the tactic. A deliberate policy of holding back payments to suppliers is evident. Excuses for non-payment have grown sillier by the day at NatWest, in some cases where insurance limits are almost hit. Rival banks are making direct inquiries to make a grab at customers.

RBS/NatWest in some cases allowed days to pass between commitment for payment made, but not payment received. Problems resulted, as shipments were held back. The streamline payments were not being processed on time. The transactions are not clearing properly, as partials were cleared rather than full payments. Customers at Ulster Bank who play close to the vest on maintaining positive accounts are seeing more orders bounce unpaid for insufficient funds. They conclude an acute cashflow problem at the bank in aggregate. An RBS automatic teller machine in Manchester dispensed very old 5 pound notes with a restriction of only 50 pounds on the withdrawal. When RBS officials claim they debugged the technical glitch, yet normal service is not restored for over 48 hours, then one can conclude the problem goes far beyond the IT department, and smacks of backup issues and illiquidity. Since most of the bank's IT folks are competent, the problem is obviously that too many balls are in play, with liquidity pressures everywhere.

The RBS Group has taken measures to placate its customers. Overdraft fees and charges were waived on accounts kept current. Open hours at the 1200 branches at member banks from NatWest, RBS, and Ulster Bank across the United Kingdom and Northern Ireland were extended, even on a Sunday for the first time. No reasonable explanations for the supposed glitch have been offered. The fact that all the access problems occurred immediately following a major debt downgrade for RBS points the finger at a bank run, illiquid conditions causing problems, and a bank reaction to stymy its customers, thus removing access to their cash. It was a halted bank run that could have gone out of control. The nasty reality of bank runs is that confidence is not restored afterwards, and the events are repeated. In this case, the cash flow savings overcame the illiquidity challenge and easily covered the generous measures to deal with angy frustrated customers. See the Slog Blog (CLICK HERE).

◄$$$ RUSSIA'S LARGEST BANK HAS HALTED CREDIT CARD AND DEBIT CARD FUNCTIONS. THE BANK HAS $332 BILLION IN ASSETS. THE BANK CONTAGION ON ILLIQUIDITY HAS MOVED EAST OF EUROPE. THE CRUDE OIL PRICE COULD BE A PROXIMAL CAUSE. $$$

Sberbank of Russia has suspended credit and debit card operations due to a technical malfunction, the bank told Interfax. No cards are being serviced, according to an official statement. The bank is not well known outside Russia. Its asset base is almost three times greater than its second position rival VTB Bank, $332 billion versus $127 billion. The better known Gazprom Bank holds $75.5 billion in assets. One must wonder if the lower crude oil price has placed strains across the entire Russian financial system, reducing liquidity flow. See the Zero Hedge article (CLICK HERE)

## COORDINATED CENTRAL BANKS DESPERATION

◄$$$ THREE CENTRAL BANKS TOOL ACTION IN A BIG SIGN OF ALARM. WORLD CENTRAL BANKS ARE TURNING DESPERATE AT THE SAME TIME, DENYING THEIR COORDINATED ACTIONS. THEY HAVE NO TOOLS LEFT. THEY ARE ALL STUCK IN THE 0% PAINTED CORNER. TIME HAS RUN OUT, AS THE FINANCIAL SYSTEM IS IMPLODING. ANOTHER UGLY SYMPTOM HAS RISEN, MARGIN CALLS AT THE EURO ENTRAL BANK. $$$

China, the EuroZone, and Britain loosened monetary policy in the space of less than an hour on July 5th. The signal is powerfully clear, that a growing level of alarm about the global economy is noted. They went out of their way to deny coordinated action which was obvious. The only surprise move was from Beijing, with a lending rate reduction of 31 basis points to 6.0% following an interest rate cut only a month ago of equal surprise.

The Euro Central Bank cut rates to a record low 0.75% following a dire run of economic data, the cut being 75 basis points. The central bank holds implicitly to the notion that cheaper money will pull the system out of insolvency, a lunatic and errant notion proved false in the last four years. They announced no new bond purchase plans or renewed bank liquidity programs. No monetary action taken has resulted in a single improvement on the continent, as the banks implode and the sovereign bonds remain toxic in the South.

A plainly visibly signpost has been written to reflect the failure of the Euro Central Bank policies and practices. The Jackass has been plain in describing the Long-Term Refinance Operation credit line as an utter failure, calling it the Draghi Stillborn Baby. If cheaper credit, if relaxed collateral standards, if amplified liquidity flow were at all solutions, then the margin calls on European banks would not occur. In the last week, the EuroCB official margin calls surged by the most seen in over nine months. It is the worst burst since the last Greek heart attack. Sovereign bond yields have risen in recent weeks, pulling down principal prices. Therefore collateral used at the ECB window has dwindled. Banks have been forced to find cash to cover margin calls. Tremendous pressure has returned to the big Euro banks, as renewed liquidity stress is placed once more on strapped European banks lacking cash. Considering negative Swiss interest rates, scrutiny to LIBOR rates, stressed swaps, and rising ECB margin calls, conditions are going from bad to worse behind the curtains in Europe.

The Bank of England oversees an official rate at a record low 0.5% already. They will stay put on rates. However, the BOE will rev up the monetary ramps to purchase GBP 50 billion (=US$78 bn) of assets with newly created money. The Bank of England has already created GBP 325 billion of new money, until the decision. The result has driven borrowing costs to record lows, but with the UK Economy stuck languishing in recession. They believe big bond buys will help the economy out of recession even though the past four years of similar actions have not. Given the Chinese rate cut action, it is clear the central banks are attempting to act in unison. Perhaps by a unified action, the collective response will be a kickstart of the global economy. However, liquidity and cheaper money do not alleviate the pervasive insolvent condition. Bank analysts remain optimistic that this QE will bring results when the last several have not. That is a manifestation of insanity in the view of psychologists.

Mark Williams is an economist at Capital Economics in London. He said, "It is a surprise that they are moving so quickly. It shows that policymakers concerns about the global economy have only grown. Policymakers may have felt that cutting rates on the day that the ECB did the same would deliver a bigger impact, encouraging talk of a coordinated response to the slowdown in the global economy. Again, though, this might simply underline the seriousness of the downside risks." See the Reuters article (CLICK HERE). Another perspective is that unified policy action might remove from the equation any rising movement in one currency versus the others. The Competing Currency War could be avoided by coordination.

◄$$$ THE USFED DECIDED TO EXTEND OPERATION TWIST THROUGH 2012, AND PROMISED TO KEEP THE 0% RATE INTO YEAR 2015 INCREDIBLY. THE SMELL OF PURE DESPERATION AMIDST FAILURE AND SCORCED EARTH IS PLAINLY EVIDENT TO THE SENSES. $$$

The US Federal Reserve confirmed extreme concern over the USEconomy. It will extend a program where they publicly state a formal shift in USTreasury Bond holdings toward longer-term securities through the end of the year. The move is deceptive, since it conceals vast bond monetization purchases and foreign bond redemptions. The USFed made a meaningless comment that it stands prepared to take further action, when they can do next to nothing except purchase the bulk of USTreasury auctions and redeem foreign bonds en masse. No new QE program has been announced, since it never ended. The deception of the bond world continues. The 0% official FedFunds rate is the cause of much economic deterioration, yet they cannot admit so. The point of capital destruction has been made on numerous occasions within the Hat Trick Letter reports. The USFed has reiterated since January that it plans to keep short-term interest rates at exceptionally low levels (as in 0%) at least through late 2014. The promise into year 2015 is a definitive signal of central bank failure in monetary policy, and utter desperation to keep the banks afloat with the USTreasury carry trade. Notwithstanding, the USFed must continue to feed the Interest Rate Swap engine that enforces the 0% short-term and sub-2% long-term USTreausury Bill and USTreasury Bond yields. Doing so with annual $1.5 trillion deficits to finance among a scarce group of creditors takes hard work, especially when the mantra of a Flight to Safety is sung to the investment community. Yes, 1984 is here firmly in place, seemingly forever.

The USFed opted to extend Operation Twist, a program under which the central bank strives to lower long-term interest rates by selling shorter-term bonds and using the funds to buy longer-term bonds. Announced in September 2011, the program was scheduled to conclude at the end of June. Under the extension of Operation Twist, the USFed anticipates buying and selling about $267 billion in USTreasurys. The USFed made some observations that cause outward worry. They acknowledge the jobless rise, and that household spending is slower. They talk about the growth expanding in moderation ad nauseum, like Mr Magoo, in complete divorce from reality. They celebrated the reduced energy costs. Economic degradation will produce such deadly benefits. See the Truth in Gold article by Dave in Denver, an astute analyst (CLICK HERE) to learn more about how Operation Twist is a disguised Quantitative Easing.

The official USFed statement reads, "NY Fed was directed to purchase Treasury securities with remaining maturities of 6 years to 30 years and to sell or redeem an equal par value of Treasury securities with remaining maturities of approximately three years or less. The continuation of the maturity extension program will proceed at the current pace and result in the purchase, as well as the sale and redemption, of about $267B in Treasury securities by the end of 2012. The FOMC also directed the Desk to continue reinvesting principal payments from its holdings of agency debt and agency mortgage backed securities in agency MBS, and to suspend, for the duration of the maturity extension program, rolling over maturing Treasury securities into new issues at auction." The statement reeks with failure and lack of alternatives.

◄$$$ FRANCE HAS JOINED GERMANY, SWITZERLAND, AND THE UNITED STATES IN SELLING BONDS WITH NEGATIVE SHORT-TERM YIELD. THE SUB-ZERO CLUB ADMITS A NEW ASHAMED MEMBER. THE CENTRAL BANKS ARE AIDING AND ABETTING NATIONS IN REMOVING CAPITAL FROM PRODUCTIVE SOURCES. THE BONDS SOAK UP CAPITAL FROM THE SYSTEM IN TRUE PARASITIC MANNER. CRITICS CLAIMING GOLD PAYS NO YIELD SHOULD PAY CLOSE ATTENTION TO THE BOND PERVERSIONS. $$$

Over the past few months Germany, Switzerland, and the United States have sold bonds with negative yields, meaning that investors are in effect paying to safeguard their capital. When Japan carried negative yields, they were criticized as running a carnival sideshow in the credit market. Nowadays, not only is the Japanese style ZIRP adopted, but negative bond yields are spreading like weeds in the West. The latest entry is France, selling bonds at negative interest rate. How absurd. The spin is that it shows investor confidence in the French Govt despite concerns about their debts and wider EuroZone instability. Better reality would state that investors fear bank runs and lost accounts. Investors have flocked to the perceived safety of larger European economies. Analysts point to the understandable perceived security of Swiss, German, or even US bonds offering negative yields. But French Govt Bonds seem a higher risk, given the socialist leadership and promises to raise taxes and to increase federal spending.

The nation of France is a PIGS nation with borrowed German robes, with rickety bone structure obscured. The economic impact of negative interest rates is perverse. Capital placed in such bonds actually shrinks over time, thus a negative contribution to economic growth. It is a parastic central bank practice. But then again, so has been taking supposed Excess Bank Reserves by the USFed and offering a yield. The effect was to pull the capital out of the big US banks, which was actually Loan Loss Reserves, nothing more. Think drainage.

For gold the implications of the trend towards sub-zero interest rates are ironic and encouraging for precious metals advocates. A distortive complaint against Gold has always been that it does not pay a yield. It actually does, from selling option calls, a common practice. Let's make the complaint against supposedly secure Western sovereign bonds from the big stable nations is that they do not pay a yield, in fact cost money. The fast rising deficits across the Western landscape assure a profound gigantic monetary inflation trend to continue for years. Additions to the monetary base will come from the government sectors. The end result for Gold is that despite the confusion and chicanery, the bond trend is wildly bullish upon against the zero percent wall. Some wonder if the end to fractional banking is near. The Jackass expects a new global banking system to come when the USDollar and fiat currency system finishes its assured implosion. The new system will be driven by trade settlement, done with gold-based trade financial vehicles. The brisk growth in swap facilities between nations is the basis foundation for a new barter system. See the Dollar Collapse article (CLICK HERE). Credit to the Intl Herald Tribune.

## ENDGAME HEARTBEATS

◄$$$ KEY UPDATE FROM THE HIGH SUMMIT. LOOK FOR A NEW WAR FRONT, LOST INFLUENCE IN LATIN AMERICA, AND A POWERFUL LAUNCHED GOLD PRICE BUT NOT BEFORE A PRICE SCARE FROM A FINAL SWOON. $$$

The Jackass received an update two weeks ago from the friend of friend with direct contact to a high level man with solid connections to a powerful Eastern Coalition family. He is the real deal, as numerous stories check out accurately, and a curious overlap is evident with other reliable sources. The passed report was like a fresh burst of dragon breath but from a beneficent chamber. Here is what they perceive and expect.

The USGovt will attempt with all efforts to cause a war before September 21st, in order to impose a crisis atmosphere for the election so that the public will rally around the president, but with a secondary motive to censor the internet. However, they expect it to backfire in a big way, much worse than the Iran SWIFT episode. My doubt consistently of a spreading war to engulf Iran has been correct, as cooler heads prevail and as a certain ally nation chooses not be face anihilation. But this administration is far more determined to retain power during a fierce recession, financial degradation, and foreign political rebellion. The United States has lost influence in all Latin America, growing worse by the month in open manner. The substantiation was glaring from the OAS summit in Cartagena Colombia during April. The new players in influence are China and Russia in the region. Certain highly powerful and influenial Eastern entities no longer have any tolerance for the United States to remain a union of 50 states with federal glue. It is not hard to read between the lines for 5 or 6 tribunal territories as their objective.

The surprise on the future Eastern glimpse was their expectation for Gold & Silver to likely decline by 20% in price before both rise at least by 5-fold and possibly as much as 10-fold in price. The final swoon is expected for shaking up the Anglo bankers (gold raid) which will toss off many investors in disgust and dismay. The preliminary decline will scare the piss out of the entire gold community and cause widespread disillusionment, even fractures. The Eastern Coalition will exploit the opportunity to drain the last of the Western inventory and render the bankers bloodless. The price decline will result in part from combined events of Euro currency collapse from the sovereign bond contagion and US derivative breakdown centered upon Interest Rate Swaps and Credit Default Swaps. They expect the Western banking system to implode on its own without any help from the East except for deep damage rendered the gold removals.

◄$$$ GREG HUNTER OF USA-WATCHDOG INTERVIEWED KUNSTLER, WHO EXPECTS A DISORDERLY RESOLUTION TO THE BROKEN GLOBAL BANKING SYSTEM. HE EXPECTS A LOWER STANDARD OF LIVING TO FOLLOW. $$$

Greg Hunter of USA Watchdog interviewed James Howard Kunstler. He is an irreverant no-nonsense analyst with deep insight and keen cutting style. He shared where he thought the world was heading, basically to a lower standard of living and more hardship. He openly wondered how disorderly the adjustment process will be. My belief is that Paradigm Shift is under way, and it will be the most disruptive event since World War II. Already the global financial crisis is called the most devastating event since the Great Depression. The world will be very fortunate to avoid a wide hot war, since the US & British will not go quietly into the night. Their empire has fizzled in grotesque insolvency and debt saturation, burdened by questionable wars that demand salutes at public events before the national eye. Kunstler believes a difficult resolution will come from the broken global banking system. The world powers in his opinion are attempting to conceal the broken condition. See the interview clip (CLICK HERE)

◄$$$ MOODYS DOWNGRADED A SLEW OF US-BASED AND LONDON BANKS IN A MASSIVE SKEWER. THE MASSACRE HAS BEGUN, NO MORE FAVORITISM WITH EUROPEAN BANKS TARGETED. MORGAN STANLEY WAS GIVEN A DOUBLE DOWNGRADE, NOT THE FULL TRIPLE FOREWARNED. THEY SURELY INTIMIDATED MOODYS, OR BRIBED THEM. $$$

Moodys finally delivered a grand bombshell, showing courage. The other two rating agencies, Standard & Poors and Fitch, appear to be cowardly bowing before Wall Street and London bankers, kissing their rings. As most bank analysts will recite, unless all three rating agencies follow suit and deliver similar blows, or at least two of the three agencies, the full impact will be muted in their operations. Nevertheless, the impact from the Moodys multiple downgrade has been sullen and simmering. Ratings agency Moodys downgraded the long-term credit ratings of 15 major banks in the United States, Canada, and Europe. None of the gaggle of banks was hit harder than the forewarning given by the agency, when it placed them on review in February. The action will likely force many of the banks targeted to post additional collateral against asset positions held on their balance sheets. A summary of the major ratings action taken is given. The worst action was slapped at Credit Suisse, downgraded to (P)A2 from (P)Aa2, a nasty insult of shame. The most brutal downgrades to B grade involved the big US banks plus RBS in London, a bold move.

Cut One Notch:

  • HSBC downgraded to Aa3 from Aa2
  • Lloyds TSB downgraded to A2 from A1
  • RBS downgraded to Baa1 from A3
  • Societe Generale downgraded to A2 from A1
  • Nomura and Macquarie downgraded by one level each, to Baa3 and A2 (but action to be taken earlier)

Cut Two Notches:

  • Bank of America downgraded to Baa2 from Baa1
  • BNP Paribas downgraded to A2 from Aa3
  • Barclays downgraded to A3 from A1
  • Citigroup downgraded to Baa2 from A3
  • Credit Agricole downgraded to to A2 from Aa3
  • Goldman Sachs downgraded to A3 from A1
  • JPMorgan Chase downgraded to A2 from Aa3
  • Morgan Stanley downgraded to Baa1 from A2
  • RBC downgraded to Aa3 from Aa1
  • UBS downgraded to A2 from Aa3.

In typical perverse fashion, the Wall Street crowd took the news of a double downgrade to Morgan Stanley as positive news, since it had been placed on review for a downgrade by as much as three levels. The impact would have been severe, thus the reprieve (maybe the benefit of bribery and intimidation). Analysts estimated that Morgan Stanley could have been subject to post more than $5 billion in additional collateral if hit by a downgrade to Baa2, a full three notches. In a short statement afterwards, Morgan formally stated it had made clear progress, particularly with its Mitsubishi UFJ partnership. Rubbish. Most of their actions had been taken before February. Putting together more internal review staff does not change the ruinous insolvency and wreckage from derivative monsters lurking inside their house. It is like claiming improvement over an acid vat by simply having two more officials standing watch over the cauldron. See the Business Insider article (CLICK HERE).

◄$$$ MORE QUESTIONS THAN ANSWERS COME TO MIND WHEN EXAMINING THE COURSE OF RECENT EVENTS. THE PAST PATTERN OF CONTROLLING THE SYSTEM BY THE BANK CARTEL APPEARS TO BE ENDING. EITHER THE BROKEN SYSTEM HAS ELEMENTS COMING TO THE SURFACE IN A NATURAL PROGRESSION, OR ELSE THE RULES CAN NO LONGER BE BENT TO FAVOR THE CRIMINAL BANKER CLASS. THE JACKASS SUSPECTS BOTH FACTORS AT WORK. $$$

The questions stack up, all difficult to answer. Who is investigating JPM and Citi for LIBOR infractions? JPM and Citibank and GSax are the system! On what higher authority is the investigation being done? Who forced Barclays into the open for LIBOR violations? Better yet, who forced the London Financial Authority to force Barclays into the harsh light? Why could JPMorgan not simply hide its derivative losses, shove them under the rug, and tell the regulators to go to hell like they usually do? JPM can always rely upon national security for their deviant accounting. Who is forcing cartel banks into shedding their gold bullion to satisfy margin calls, when stuck in insolvent condition, all done in off-market transactions? Why is not cash acceptable, like off a Printing Pre$$? Howcome Interpol is taking orders from a hidden entity to enforce the law, when the narco drug money available from the USGovt agencies could buy them off? An ethics change appears at work. Is the world dividing into $trillionaire good versus $trillionaire evil with the Western financial centers the axis of monetary evil? Are arrest warrants really sitting on a high level desk to be served against dozens of New York and London bank executives? Who will finally serve those warrants?

Are the vast $trillion role programs in deep fraud by the Bank of England and USDept Treasury finally going to be exposed? Will the fate of fraud schemes like the Madoff Fund be revealed, no longer protected? Will the Western financial system actually implode with a benign neglect hand held over the mess? Will deep systemic secrets be revealed from the World War II? Recall that the victors always write the latest chapter in history. My favorite heart-felt desire is for legitimate forthright revelations to come for the most serious damage to the US nation in modern history, the 911 attack in 2001. Will it be exposed?

The Jackass does not have firm answers to any of the above questions. But they are not rhetorical questions. The mere arrival of so many important questions seems to indicate a significant change in the world winds. In the last three months, great encouragement has come from a few sources, all of which appear to overlap and coincide nicely, never in full confirmation. Numerous hints and veiled confirmations come from my corners that a new global sheriff has arrived, is taking prisoners, is disrupting the balance of power, is hiring Interpol to do its tough tasks, and is planning for a harmonious world. The hold justice in high regard, unlike the current Western regimes. My hope and prayers are with them.

◄$$$ F.O.F.O.A. INTERVIEW IS REVEALING. THE WELL KNOWN FRIEND OF A FRIEND OF ANOTHER PERMITTED A RARE INTERVIEW. HE INDIRECTLY ANTICIPATES TWO HIGHLY DISRUPTIVE EVENTS TO OCCUR WHICH WILL CAUSE THE USDOLLAR TO LOSE ITS STANDING. HE POINTS TO PRICE INFLATION AND A GOLD MARKET FAILURE TO DELIVER. THE RESULT WILL BE AN EXTREME MONETARY EVENT THAT USHERS IN GREAT CONFUSION. $$$

"It is impossible to predict the exact pin that will pop the [USDollar confidence] bubble in a world full of pins, but I have an idea that it will be one of two things. I think the two most likely proximate triggers to a catastrophic loss of confidence are a major failure in the London gold market, or the US government's response to an unexpected budget crisis due to consumer price inflation. Most people who expect a catastrophic loss of confidence in the dollar seem to think it will begin in the financial markets, like a stock market crash or a Treasury auction failure or something like that. But I think it is more likely to come from where, as I like to say, the rubber meets the road. And here I am talking about what connects the monetary world to the physical world: prices. I think these worlds are connected in two ways. The first is the general price level of goods and services and the second is the price of gold. If one of these two connections is broken by a failure to deliver the real world items at the financial system prices, then we suddenly have a real problem with the monetary side. So I think it will be a relatively quick and catastrophic event, but maybe not as dramatic as a major stock market crash. It will be confusing to most of the pundits as to what it really means, so it will take a little while for reality to sink in."

◄$$$ GIVEN THAT THE BREAKDOWN IS IN A STRONG MIDDLE GEAR, NUMEROUS MESSAGES HAVE COME FROM MY BEST SOURCE OF INFORMATION. HE HAS STRONG TIES TO THE GOLD MARKET AND THE EUROPEAN BANKING WORLD. HIS OPINIONS ARE MANY AND VERY ENLIGHTENING. NOT ONE OF HIS INSIGHTS ON MAJOR EVENTS HAS BEEN FOUND TO BE ERRANT IN FOUR YEARS. IN 2010 HE EXPECTED THE BREAKDOWN TO COME AND TO GATHER GREAT SPEED, BUT NOT FOR A COUPLE YEARS. THAT IS NOW. HE MENTIONED THAT IN MAY, A GREAT WRENCH HAD BEEN TOSSED INTO THE JPMORGAN MACHINERY THAT WOULD LEAD TO A COLLAPSE OF THE USTBOND AND ITS DERIVATIVE BUTTRESS. THE EVENTS CONTINUE. HERE ARE SOME KEY ITEMS TO HIS MESSAGES, ORGANIZED BY THEME, HIS THOUGHTS, HIS WORDS, MINOR EDITS PLACED TO FLOW WELL. $$$

A Paradigm Shift is in progress that defies perception in established ways. The bankers who wrecked the system by opposing the free markets falsely thought they would always be in control. Wrong! The bank rescues to date are like a big bucket to scoop water out of the Titanic flooded lower chambers, a futile exercise. The events to date have ripped out the entire bottom hull from the financial market, keeping the analog. The only lifeboats have labels that indicate hard assets, the self-re-pricing assets such as precious metal, valuable commodities, agro/forestry/fishery and essential commercial real estate, all located in non over-regulated and confiscatory jurisdictions in the West. The Hong Kong territory is one of the safest  places to store your assets. A total collapse is urgently needed, to remove from power the few who rig the system for their advantage. The implosion is already happening but not yet seen by the general public. An event driven scenario is in progress, but it is anyone's guess what will trigger the final outcome. The infighting at the round table at the very top already draws blood. Precious metal and agricultural assets are key to survival.

Hardly any investment grade Gold remains available in larger quantities. Good quantities are left at Scotiabank in Toronto, which is a sitting duck that can be drained only during the final act. Persian Gold is being reprocessed in very large quantities in Turkey, given new markings, then sold to major buyers in Asia and the Middle East. The Swiss depositories are mostly cleaned out except for segregated vaults where governments are holding substantial quantities. However, no one trusts the Swiss banks any longer and those depositories will soon be cleaned out. In just 20 to 25 years, the Swiss have lost their historical and coveted integrity. Depending on the situation of the seller, premiums are being paid but some closings are done at spot prices. The physical metal will survive and rule royally, whereas all paper will decay and blow away. We are indeed entering a golden age.

The Euro currency is dead and so is the USDollar. The Euro is running on fumes, while the USDollar enjoys a erection in the morgue. We are at the end of an era, just like when the Iron Curtain fell with an event of smaller scale. The European deal making is absurd theater, where all that ever comes from Brussels summits is well fed and well liquored participants coming out of luxury dining rooms. We shall see precious metal prices in today's US$ terms go through the roof not before long. Silver will rise to $500 per oz and Gold to $10,000 per oz. These could be conservative projections. The means to control the precious metals prices is gradually disappearing with their forfeited metal. A critical point will be soon reached where the cartel can no longer control the price. The stage they stand on will not tilt, but rather collapse from a lost foundation used to manipulate prices. On the other hand, crude oil could be on its way to $50 per barrel. The big oil producers are already sweating blood and shitting bricks. As mentioned previously, Germany, Holland, Finland, and Austria are the nations calling the shots in a well choreographed sequence whose outcome was agreed upon in April 2010. The events are happening as planned.

My line of query was directed at the Evil Camp to unleash a new chapter nightmare, not to permit white light, fresh breeze, and cleanup to come so neatly. My suspicion is that the Boyz will attempt to destroy much of the world, rather than turn over control and face criminal prosecution, or endure vanishing acts by the new captains. My expectation is that the bankers will turn on each other, the survival of a few stronger or more connected or more involved could likely depend upon eating and devouring some weaker rivals and then putting blame on them in the aftermath.

He responded. These banksters are very naļve, easily being pushed onto their own sword. They have been busy shoveling themselves as excrement. The strategy of divide and conquer always succeeds. The real powerful people are going to play Cowboys & Indians with the United States next, where the entire US will act as the Indian victims this time. It will not be funny at all, this global counter-attack to bring an end to financial tyranny. Some executives from the powerful banks are running for the exit to cut deals before all comes crashing down. The lid on corruption has blown off, finally visible. The system has already cratered big time, having been broken over two years ago. The news came that ex-CEO Bob Diamond from Barclays would forgo up to $31 million in deferred bonuses. He predicted the blocked bonus four days before it became news. He believes Diamond bought some time and probably will not go to prison in Europe. But as a US citizen and passport holder, he will likely be prosecuted by the US authorities. He might see jail time,  unless he dies from an accident in order to protect his family. Plenty of precedent there.

The shock waves only now are reaching the surface, after much effort to contain the damage. The old system is broken beyond repair but the new system has not been launched yet. The old system must first be wrecked to the ground in totality, in order to assure no migration of old Boyz from the old system to the new system. They must be isolated and dealt with. The sequence of events appears to be a slow motion implosion, but the process is actually unfolding with lightning speed. Most people cannot comprehend what is happening, as they tend to come to the wrong conclusions from patterned thinking that no longer is relevant. The Jackass belief is that deeply rooted wrong-footed assumptions interfere with the mental processing of events, like beliefs that my government is basically good, our leaders have our interests in mind and strive to keep us safe, the military protects our nation, and respect for private assets is a constant. Wrong, wrong, wrong!

The damage done to the customers in the entire banking community from this market rigging scheme goes in to the $trillions. Little Metzler Bank of Germany is putting a telephone pole up Deutsche Bank's rectum in the LIBOR fraud, decorated with razor wire. Expect to see the big banks taken down now one after the other. The D-Bank CEO Ackerman has already been dismissed. American banker CEOs are next. The blowback from this scam is so big that the damages could be incalculable. In fact, the resolution could force a global war, which cannot be ruled out any longer. When one pillar at a time is removed from big buildings, an event drive scenario is triggered. The buildings are all connected by vast cable systems.

A religious element is laced within the European crisis. The Northerners (Germans, Dutch, and Finns) have strong resolve, marching in lockstep. These Northerners are all Protestants whereas the Club Med legion are all Catholics. The EU leaders are Catholics, some associated with secret societies and pedophile rituals. Many century old and deep rooted resentments and animosities underneath that are boiling with big bubbles to the surface during the ongoing crisis. If sufficiently frustrated, a internal war in Europe could occur, since the players are bellicose people. The Northerners are freedom loving, strong willed people and fierce warriors. Recall the Battle of Varus in northern Germany where a few legions of the Roman Army were annihilated (SEE LINK).

The key to the next chapter is a growing alliance between Russia and Germany. All pipelines coming from Russia end in Germany. The largest roll-on & roll-off rail facility is in the port of Finofort in Germany on the Baltic Sea. The North Stream pipeline is going from Russia, across the bottom of the Baltic Sea, all the way to Germany, where it terminates at Lublin. The rail network from China passes through Russia and on to Germany. An entire network of rail systems is being fixed for heavy duty rail transport. Test runs have been successfully concluded. Chinese and Russian companies have been buying up the majority of former East German airfields, where heavy lift cargo planes come in every day to deliver good to large scale industrial facilities, destined for making finish products and distribution in the EU. An important point is that German obtains from Russia its raw materials including metals and energy. It is not the Middle East, and therefore the strategic thinking is not skewed. The open trade is brisk. The German foreign policy is not written by a small nation on the Southern Mediterranean.

In order that nobody believe this intriguing man to be perfect, he has had only one error in his view of unfolding events. A great many events have occurred, with clear forewarning by him and his expansive team, events unfolding much as he expected. Events where decisions were made have been shared, which shine a light on the path of events to come. In the summer of 2009, he expected an imminent powerful upward move in the price of Gold & Silver during the yearend holiday season. Instead, it occurred one year later, exactly in magnitude as described but with a time lag. A very forgivable faux pas by a brilliant, connected, and generous man. We lock horns on certain matters, but they are minor and pertain more to style. He has my greatest respect and gratitude. His shared views have helped hundreds of Hat Trick Letter readers to comprehend the unfolding events with less confusion harbored. He has helped many to enjoy financial reward. The future reward will be an order of magnitude larger.

## THANKS

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