GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES


* Golden Nuggets
* Tension in Polarized Europe
* Chinese Barter Isolates USDollar
* Gold Elevated in Banker Importance
* Gold Price Meanders
* USEconomy Flirts with Depression



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

"Indeed, everyone seems to be piling into the dollar. Especially on the short end of the curve, helping drive interest rates ridiculously low. The dollar is as safe as a bomb shelter that is rigged to blow up once everyone is safely inside. You can go check it out if you want to (sure, from the outside it might look like shelter), but you do not want to be in there when it blows up. You must realize that it is both economically and politically undesirable for any currency to appreciate against its peer currencies, due to its use as a safe haven. I do not see gold's trajectory being typical of what you would expect to see in a bull market. And I expect that physical gold will be repriced somewhere around $55,000 per ounce in today's purchasing power. I have to add that purchasing power part because it will likely be concurrent with currency devaluation" ~ FOFOA (friend of friend of another, renowned anonymous contributor, whose point is affirmed by the rise in the Swiss Franc)

"The real question is whether the politically solidified Nash equilibrium will hold, that keeps all the major players in the dollar. It is becoming obvious to even the most dim-witted foreign treasury, central bank, major pension fund, or sovereign wealth fund manager that the dollar is a guaranteed losing bet. After all, it has been admitted openly that the policy is repression. Politics can allow things that cannot go on forever to go on quite long. But as to whether that can become forever, I have my serious doubts." ~ Aaron Krowne (editor of Implode-Explode website)

"Asia is accumulating Gold. Russia is accumulating Gold. [Supposedly] backward nations all over the world are accumulating Gold, on both an individual and a government level. While the [supposedly] developed world has developed an idea of monetary safety which turns all history on its head, the rest of the world is not going along with them. We will leave it to you to decide which are the credulous and which are not." ~ Bill Buckler (editor of the Privateer)

"The whole entire Western banking system is being flushed out. The whole house is being purposely burned to the ground in order to make way for the new. If you are still in paper you are a madman or woman. Pull your money out now while you still have time. To make it as clear as possible, your wealth, your way of life, and your posterity's future is being PURGED, FLUSHED, BURNED OUT. The order of things is about to change officially. Watch the dollar, get out of paper, get into metals. You have been warned, again." ~ Steve Quayle (from his "V" source)

"If you cannot stand the [presidential race] spectacle, just look around at America itself: a wasteland of futile motoring and discount shopping populated by depressed, overfed clowns bedizened with sinister tattoos, pretending to be star warriors. No nation ever seen in human history ever laid such a disappointing egg, only to have it fry on the sidewalk." ~ James Howard Kunstler

## GOLDEN NUGGETS

◄$$$ US-OLYMPIC TEAM OUTFITS ARE MADE IN CHINA. THE BLAZERS, BERETS, AND PANTS ARE RED, WHITE, AND BLUE, BUT THEY ARE NOT EVEN MADE IN THE UNITED STATES. WHAT AN EMBARRASSMENT. $$$

The uproar has already occurred. The nation's leaders are myopic clueless clowns. The US textile industry struggles with tens of thousands hanging onto jobs in marginal businesses. Once again, the political rhetoric about job creation is empty and mostly grandstanding. See the AOL Sporting News article (CLICK HERE). Recall that California high-speed rail projects went to Chinese contractors. The excuse was that the US did not manufacture many components to the railway construction. True enough. The argument does not apply to the Olympic uniforms.

◄$$$ A REMINDER THAT THE FINAL GIANT FINANCIAL SCANDAL WILL BE THE CONSTANT SYSTEMATIC GRABS AND RAIDS OF GOLD FROM ALLOCATED ACCOUNTS, ALL DONE ILLEGALLY. LAWSUITS HAVE BEGUN, BUT PRESS COVERAGE HAS NOT BROKEN INTO THE PUBLIC EYEVIEW YET. $$$

For a quick very high level summary, a question was posted to my excellent gold trader source of reliable information. He has contacts in Germany, Switzerland, London, Hong Kong, Beijing, Toronto, New York, and the Persian Gulf. The question was "When you say over 40,000 tonnes of allocated gold will be asked to be returned that does not exist, only for people to find out it is not there, will this only happen once banks are officially pronounced dead, or is it occurring now?" His answer was quick and brief. "It is already in full swing. There are already multi-billion $$$ lawsuits in the Swiss courts over this issue." The Jackass has mentioned this critically important point many times before. The Western bankers are at least 20 thousand tons short from a longstanding illegal practice of Allocated Gold Account raids, and possibly over 40 thousand tons short. That is precisely what the lawsuits are all about in Switzerland. Accounts under contract are not being redeemed upon demand. It is contract fraud and theft, even if promised redemption in cash. If you own a mint 1962 Chevrolet Powerglide car, hire a garage to hold it and to protect it from the elements, and they sell it, pocketing the cash proceeds, it is a felony crime. Offering you cash at their dictated value matters not at all in the weak attempt to bargain out of the legal box.

A Hat Trick Letter client in June 2010 formally requested his gold from the Zurich Kantonal Bank (ZKB Fund). He demanded a transfer of his metal to a foreign vault location out of Swiss control. The ZKB officials refused his demand, and sent him a check, with which he purchased gold & silver bars, with a premium attached. He was angry, because he was told by the ZKB folks in Switzerland, even during personal visits, that he owned gold bars, and he could see them through the thick security glass. Rubbish, he owned gold certificates and silver certificates. The bars are for show to impress clients during the deception. The Matterhorn Fund client with Von Greyerz has a parallel story. Upon demand from his supposed gold fund to supply Matterhorn with his vaulted gold, he was given delay tactics and nasty deceptions. Finally gold bars were supplied for the client to place in the secure vaults at Matterhorn, a high quality fund with deep integrity. But the gold had dates associated with their forged creation that indicated certain months in 2011 and 2012, not from 2009 when his account was created and funded with gold bars. The corruption is gigantic. Look for hints of an Allocated Gold scandal later this year or early 2013. It will be a huge event.

◄$$$ GHANA IS ON THE VERGE OF DEMANDING GOLD BACK FROM LONDON AND WESTERN EUROPE. SENSE THE DISTRUST, BUT ALSO THE ACCRA GOVT IS UNDER CASH STRAIN. $$$

The Ghana Govt is monitoring banks in the EuroZone where the country vaults some of its reserves including gold. The Ghana leaders intend to move their reserves if the European banks are found to be in danger. They are in danger. Wake up time! Export receipts benefiting Ghana from gold amounted to $2.7 billion in the first five months of this year. Other major exports include cocoa at $1.6 billion and crude oil at $1.2 billion during the same five month period. The Bank of Ghana governor Amissah-Arthur hopes the Euro does not die because the West Africa Monetary Institute (WAMI) is trying to emulate the Euro currency. Bad model, guys! He expects lower demand for commodities generally out of Europe as the recession takes grip.

Ghana's economic prospects will remain linked to the restoration of growth in the advanced and emerging economies, especially the EuroZone and China. The country's foreign reserves fell to $4.3 billion as of early June 2012, from $5.4 billion in December 2011, according to their central bank. Clearly, without the advantage of a brisk bond market, the Accra leaders are tapping their reserves during the downturn to cover funding gaps. See the Bullion Street article (CLICK HERE). My suspicion is that the Ghana leaders are being counseled to retrieve their gold or lose it, just like Venezuela was counseled a year ago.

◄$$$ THE STOCK SHARE PRICE OF SOUTH AMERICAN SILVER PLUMMETED AS BOLIVIA ANNOUNCED IT WILL NATIONALIZE ONE OF WORLD'S LARGEST SILVER DEPOSITS. THE NEWS IS A NIGHTMARE FOR INVESTORS, AS IT CONFIRMS THE MINING STOCK JURISDICTION RISK. FOR THOSE WHO HEEDED JACKASS ADVICE CONSISTENTLY STATED SINCE EARLY 2008, LOSS IS AVOIDED. POOR NATIONS WILL GRAB AT ASSETS IN NEW ROUNDS OF APPROPRIATION AND ASSET SEIZURE. THEY WILL CRY THE HOWL OF SOCIALISM AND NATIONALISM, BUT BE MOTIVATED BY POVERTY. EXPECT REDUCED SILVER OUTPUT, DUE TO HALTED INVESTMENT CAPITAL. THIS IS BULLISH FOR THE SILVER METAL. $$$

Like with oil producing nations in the 1970 decade, the trend has begun in the 2010 decade for gold and silver producing nations to confiscate mine deposits, property, and some facilities. One week ago, the Bolivian Govt announced intentions to confiscate and nationalize the Malku Khota property owned by the silver mining firm South American Silver Corp. The order comes from socialist Bolivian President Evo Morales. The company officials describe the property in focus under imminent seizure as as one of the world's largest undeveloped silver, indium, and gallium deposits in its publications and website. The newspaper El Pais adds that the Malku Khota property is considered one of the largest undeveloped silver deposits, with reserves estimated at 230 million ounces, and at least 2000 tons of indium, gallium, and gold as well. Linked to the project have been violent indigenous protests against the Canadian mining firm.

The total wealth will no longer be the bounty of its mining stock shareholders. Its stock fell almost 30% on a single day, and a total of 60% since the announcement. My Jackass warnings are steady consistent and often stated to avoid mining stocks, the warnings having come since early 2008. They are paper, subject to inflation from share dilution, at risk of foreign confiscation. The mining companies with property and royalty rights across Latin America are at great risk. The mining and extraction companies such as South American Silver are poised to lose a string of properties in a repeated episode of nationalization that occurred in 2011.

The trend is clearly evident in Bolivia, sure to fan out in all Latino directions. President Evo Morales in June took control of tin and zinc mine properties in the Andean nation owned by global commodities giant Glencore. Morales has yet to render a final theft decision in revocation of the Canadian miner's concession. He defended his position, saying "Nationalization is our obligation. I already raised the issue of nationalizing Malku Khota last year. I told local residents to reach an agreement, because when they want we are going to nationalize." The message was given to a domestic gathering of farmers. Exploration work by South American Silver involves a planned $50 million investment expected to span the next three years. The nation of Bolivia will be left to bear that cost in all likelihood, unless a conversion of royalty for profit sharing agreement can be reached. Expect massive production cutbacks. Bolivia is probably the most important nation outside Mexico for diverse metal output.

The entire ordeal with the mine and locals has been violent. Two engineers of the Canadian mining company and a police officer have been held hostage. The locals want the government to break the contract with South American Silver. The Labor Minister Daniel Santalla expects the president to reverse the mining concessions and contracts. The decree will require time, for the government to apply patches of legal types in a banana republic setting. They must legalize the thefts. Morales perceives a mission to nationalize the mines, their national wealth ticket. The backlash will be possible reduction in income to the Bolivian Govt, as the production and investment process suffers critical setbacks. The threat to mining stocks is palpable and real, made acute by the confiscation seen in both Bolivia and Argentina. Their financial plight paves the path for thefts, as they are poor nations. See the Zero Hedge article (CLICK HERE).

◄$$$ GUATEMALA IS SEEKING A 40% STAKE OF ALL MINING COMPANIES BY DECREE. THE CONFISCATION TREND WILL BEGIN IN FOREIGN JURISDICTIONS, BUT END AT THE NORTH AMERICAN DOORSTEPS. THE REFORM IN GUATEMALA IS MUCH MORE CONSTRUCTIVE, WORKING TOWARD FORMALIZING CERTAIN ONGOING NEGOTIATIONS BETWEEN THE MINING INDUSTRY AND GOVERNMENT. THE NATION SUFFERS INTENSE POVERTY. $$$

Guatemala has jumped on the bandwagon that runs through Latin America this year. President Otto Perez Molina is pushing a Constitutional reform that will make possible for the government to acquire up to 40% of the mining and exploration companies operating in the country. The movement is afoot in a powerful way to increase of control over natural resources, a ticket to wealth. The reform in progress addresses 55 articles of the Constitution, with proposals to amend the mining law in place for the last 15 years. In socialist style, the battle cry by Erick Archile (Minister of Energy and Mines) is "to increase the country's revenue and achieve equitable distribution of national income." The most important features include the redistribution of royalties, the creation of a mining council and a mining fund, as well as improved regulation for mine closures. Parts of the reform are not revolutionary. Some of the new legislation is positive, making more formal the existing royalty structure established through negotiation between industry and government.

Currently, gold and silver miners are voluntarily paying royalties of 4%, base metal miners 3%, and miners of industrial minerals 1% to the Guatemalan Govt. No direct indication of higher rates has been made, but any reasonable view would expect so. Concrete amendments could actually pave the way to final permitting of new projects. The nation of Guatemala is the largest Central American economy, but it is fraught with intense poverty that affects over half the population.

◄$$$ STOCKTON CALIFORNIA IS FINALLY DEAD BROKE. IT MUST DECLARE BANKRUPTCY. IT WILL BE A HUGE EVENT THAT SETS A PRECEDENT FOR SMALLER US-CITIES. SCRANTON PENNSYLVANIA HAS RESORTED TO MINIMUM WAGE FOR CITY WORKERS, WHO ARE OWED BACK PAY OF $1 MILLION. THE MARCH TO THE THIRD WORLD WILL BE UGLY. $$$

Mediation with the city's creditors has failed. Therefore the California city of Stockton California moves closer to bankruptcy. It would be the largest US city failure ever. The city boasts the second highest home foreclosure rate in the nation. Property tax revenue has declined badly. Retirement payouts have drained city coffers on the other side of the ledger. Their creditors cannot come to agreement on extensions. The city manager admits that insolvency is the problem that will not go away, even with grants of time. The city managers conclude that bankruptcy is the only logical choice left. All the cost cutting that can be done has been done. The city is running out of cash. A debt restructure in an orderly or disorderly fashion will come. A declared bankrutpcy event is intended to avoid chaos and to instill order. See the Zero Hedge article (CLICK HERE). The march to the Third World will be ugly.

The city of Scanton PA has had financial troubles for two decades, with lost population (except for a gain of my former mother-in-law, a charming nice lady who appreciated the Jackass unlike her daughter). The budget gap is at $16.8 million and growing. Mayor Chris Doherty is trying to take harsh measures to deal with the matter. An impasse has come with the deficit decisions, between his new taxation proposal and the city council's preference for a borrowing increase. Doherty has reduced everyone's paycheck, including his own, to the state minimum wage of $7.25 per hour, a harsh measure that has captured public attention. In an ironic choice of words, the desperate mayor made reference without possibly realizing it to the printing press option the USGovt relies heavily upon. He wants everyone to be paid. He said, "I am trying to do the best I can with the limited amount of funds that I have. I want the employees to get paid. Our people work hard, such as our police and firemen. I just do not have enough money and I canot print it in the basement." Like the USFed does working with the USDept Treasury. Still, the city owes $1 million to its nearly 400 employees. See the Zero Hedge article (CLICK HERE). The march to the Third World will be ugly.

◄$$$ THE US-BASED STOCK MUTUAL FUNDS CONTINUE A MASSIVE EXODUS. NOTHING HAS CHANGED IN THE GREAT RETREAT. $$$

The investors in the United States have removed a staggering $550 billion since December 11th, putting them in bond funds. In doing so, they have bought the false story of a flight to USTBonds and their safe haven label. They do not comprehend how the safe haven story is phony, engineered by Interest Rate Swaps. For now, the money has not lost any value.

◄$$$ CALIFORNIA STATE PENSION PAYOUTS HAVE INCREASED 73% IN TWO YEARS. THE OUTGOING ACTIONS BY SCHWARTZENEGGAR AND THE INCOMING ACTIONS BY BROWN HAVE DEMONSTRATED TOTAL INABILITY AND  INEPTITUDE TOWARD POSITIVE REFORM. THE RETIREMENT PLANS ARE OBSCENE AND GROWING WORSE. THE STATE OF CALIFORNIA WOULD BENEFIT GREATLY FROM HAVING ITS GOVERNING BODY, ITS MYRIAD AGENCIES, AND ITS LAVISH RETIREMENT PLANS FULLY PLOWED UNDER. $$$

New data has come to shed light on retirement pay scales among California public workers. The number of state workers collecting pensions over $100k has grown exponentially. The pension reform advocate groups have compiled data from CalPERS, CalSTRS, and UC Retirement System. It shows the $100k pension club in California has grown from 16,000 names two years ago to more than 21,000 names today. That aint progress in budget control. The size of pensions has risen as well. In 2010, the pension payouts cost $1.5 billion. But today in 2012, the cost is over $2.6 billion, an increase of 73% in just two years. Credit to the watchdog California Foundation for Fiscal Responsibility. The Jackass recalls vividly the movement in 1980 where the state led the nation in reducing and limiting property taxes. The benefits were felt faraway in Massachusetts (the Jackass pasture at the time), which adopted similar measures. Since that time, California has lost all control of costs in a bureaucracy, half useful, half useless, that has grown as long as a city phone book.

## TENSION IN POLARIZED EUROPE

◄$$$ SPAIN HAS ENTERED THE CONVULSION PHASE WITH RAPIDLY ESCALATING CAPITAL OUTFLOWS. THEY ARE WITNESSING A VERY RAPID HEMORRHAGE. WITH BANK RUNS AND MONEY LEAVING THEIR DOMESTIC ECONOMY. PARALYSIS IS NEXT AFTER THE CAPITAL FLIGHT. THE POLITICAL LEADERS SEEM TO ARRIVE WITH A CHILDREN'S FIRE WAGON INSTEAD OF A TEAM OF TRUCKS TO TREAT THE FIRE. $$$

An extreme alarm signal has sounded. A analyst at Credit Suisse named Yiagos Alexopoulos estimated that Spanish capital outflows are currently running at 50% of GDP on an annual basis. No major industrialized nation has ever seen such an outflow hemorrhage in the modern era. The bank run is accelerating, and involves an exodus at the same time. The years of phony bank accounting have caught up to the nation. Spain is Greece times four, not much more mature an economy in an industrial sense. The supposed bank rescue based in Madrid never seemed to get off the ground. The volume of the package was to be EUR 100 billion, which is a fraction of what is needed. One problem is the Stress Tests used for estimating the capital needs. Like all the rest, they were a farce without any link to reality. The Bankia restatement on accounting turned out to reveal a horror story. Tremendous misrepresentation is the norm for banking accounting in Western Europe, London, and the United States.

Alexopoulos completed his analysis with certain methods. He reduced their national bank assets by 25%, possibly excessive. To be sure, an accurate asset tally would be at least 15% to 20% less, long mentioned as a need in past Hat Trick Letter analysis. He factored in the big five banks, used ratios to the entire banking system, and arrived at a final EUR 990 billion figure as the capital needed to bring the Spanish banking system into compliance with Basel 3 risk weighted capital standards. All of Western Europe is in turmoil. The gradual waterslide in the Euro exchange rate indicates the capital outflow from Europe generally remains fierce. Investors and analysts are awakening to the reality of a Euro exit by at least one nation, in addition to Greece. The nation of Greece is the broken car sitting in the garage. Deposit insurance on accounts is widely seen as grossly ineffective, and thus money leaves. What began in 2011 has gathered momentum in 2012 in a continued trend of capital flight. Bank failures are next. See the Naked Capitalism article (CLICK HERE).

In typical clueless fashion, unable to fully gauge the depth of the problem, or in order to pretend to manage it with benign neglect, the European Union officials have cobbled together EUR 30 billion for a quick bank rescue infusion. That might help for a week, maybe two weeks, but doubtful more. European finance ministers have agreed on the terms of a stopgap bailout for Spain's troubled banks, preparing a meager EUR 3 billion by the end of this month. The group of finance ministers for the 17 countries will return to Brussels on July 20th, but the condition of the bank landscape might change for the worse. The political process cannot conceivable handle the pace of the degradation, what with prime minister signoffs and parliamentary approvals. They maintain absurdities like the 3% budget deficit limit when the system is burning. See the UK Guardian article (CLICK HERE).

◄$$$ FINLAND STANDS AS OBSTACLE AT THE ELECTRONIC CONTROL BOX. IT IS BLOCKING THE PROPOSED EUROPEAN STABILITY MECHANISM (E.S.M.) PURCHASE OF BONDS. THE NORTH REMAINS DEFIANT. $$$

Finland has motioned to block the ESM bond buying on the secondary market. The Finnish Govt said in early July that it will block the ESM from buying bonds in the open market. They are not alone. The Netherlands also indicated opposition to the entire bond buying measure that emerged from the summit, which convened the many finance ministers. A procedural requirement makes the entire plan not so feasible. Once the ESM plan goes into effect, bond purchases on the secondary market will require unanimous approval from the 17 Eurozone countries. That will not happen. Jim Rogers is astute and independent. He acknowledges that the European Union deal solves nothing, more of the same debt upon debt travesty, new debt to replace old debt, fresh debt to turn toxic in a matter of months, to brush aside rotten toxic debt deemed worthless. See the Yahoo Finance article (CLICK HERE).

◄$$$ A REVERSE BANK RUN IS IN PROGRESS IN SWITZERLAND, AS MONEY FROM ACROSS ALL OF EUROPE SEEKS THE SAFE CONFINES OF THE LAND OF  YODELS AND CHEESE. THE SWISS NATIONAL BANK (CENTRAL BANK) WILL EVENTUALLY LOSE THE FIGHT IN HOLDING A FRANC-EURO PEG. IT IS BUILDING UP MASSIVE LOSSES IN A FIGHT AGAINST THE MARKET AND NATURAL FLOWS. NUMEROUS SCATTERED RAIDS ARE OCCURRING IN FRANCE AND GERMANY, EVEN PRIVATE HOMES OF BANK OFFICERS. GREAT INTIMIDATION IS THE ORDER, EVEN AS A SYSTEM-WIDE FINANCIAL TAX ON TRANSACTIONS IS TO BE APPLIED. $$$

The true nature of the capital flow panic on the European continent is not being accurately reported. Tyler Durden regards the Swiss nominal yields to be the only true indicator of liquidity stress. In a recent day, the Swiss 2-year bond hit a record nominal minus 0.37% as a shocker. The record low yields in German Bunds and Swiss bonds explain the lack of confidence in the broader system and the destination of capital flight. The Swiss National Bank continues to suffer outsized losses on its Euro-Franc currency peg in abject stubbornness. The big winners will still be those investors who choose the Swiss banks for cash movement, since the currency peg will eventually break, and the Swiss Franc will zoom higher, to the pleasure of the foreign account holders and to the dismay of the Swiss generally. However, a larger threat looms.

The latest strange event is a targeting of clients of the two largest Swiss banks. The Credit Suisse and UBS banks were raided in two different but related operations in Germany and France. The show of force goes beyond mere investigation for tax evasion. The hidden ulterior motive could likely be a stink bomb tossed, to discourage investors from believing that Switzerland offers a sanctuary. The relative safety of Geneva and Zurich bank vaults has been put in doubt. The raids have a touch of ferocity in flavor reminiscent of an era in Germany during the 1930 decade.

German tax authorities have raided Credit Suisse clients and French officials searched the homes of UBS employees, extending the crackdown on foreigners hiding money in Swiss offshore accounts. The clouded motive is to attack those who dodge taxes. The former Swiss strict banking secrecy rules will be tested again, only to find them riddled with holes from the USGovt penetration during the long UBS battle. The new twist is that European tax officials have broadened their investigation to include clients as well as banks. The offices of UBS in Lyon, Bordeaux, and Strasbourg were raided on suspicion of money laundering and abetting tax evasion. The private homes of several senior UBS employees in Strasbourg were also searched.

Credit Suisse struck a deal with Germany last September, in which the bank paid EUR 150 million to German tax authorities. They attempted to put an end the investigation over allegations the bank and its employees helped German citizens to evade taxes. Germany and France, along with Britain, serve as the largest markets in Europe for Swiss private banks. The German investigation also comes against the backdrop of another deal struck with Switzerland to levy taxes on German funds secured in Swiss bank accounts. That measure is due to come into effect next year, although German lawmakers still must approve it. UBS was forced in 2009 to pay a fine and release the names of 4500 clients to USGovt officials in a settlement of a damaging tax probe. US authorities still have an investigation underway aimed at Swiss banks including Credit Suisse and Julius Baer over tax violations. The Swiss banks are petitioning the US investigations to drop the case in exchange for the payment of fines and the transfer of names of thousands more US bank clients. Such a deal would be modeled after the UBS deal. Europe reverts to the oldest type of capital controls, namely intimidation. The capital remains in flight. The sovereign bond crisis has produced a bank crisis, manifested by bank runs and scared money. The system is about ready to impose a wholesale financial tax for everyone on all transactions. See the Zero Hedge article (CLICK HERE).

◄$$$ ITALY REMAINS STUCK IN BREAKDOWN MODE, DESPITE ANALYSTS BEING INCAPABLE OF RECOGNIZING THE HORRENDOUS CONDITION. MONTI HAS USED A LOUDER VOICE IN EXPRESSING THE PAIN. $$$

Italian prime minister (by syndicate decree) Mario Monti warned about the dire consequences if the latest bond purchase rescue package fails to reach a consensus agreement. Those rescue packages solve nothing. He expects many more speculative attacks on individual countries, with harassment of the weaker countries. Imagine selling out of broken nation bonds as harassment. He urged the finance ministers to stem the debt contagion though the region. Witness the clear signs of desperation. See the Market Watch article (CLICK HERE).

One keeps hearing about how Italy is not Spain, not as big a mess of disorder, insolvency, and imminent breakdown. The Jackass continues to disagree vigrously and emphatically. Arguments in defense of Italy center on the debt level not so big, the economy nowhere near the same type of housing bubble suffered as in Spain, with much more wealth in the private sector secured (could be taxed). It is amazing that two years ago, the argument in defense of Italy used to be that its cumulative debt to GDP ratio was much lower in aggregate, and its annual deficit to GDP ratio was much lower. Both factors in defense were dismissed by the Jackass, with the basic view that the Italian debt volume was too huge to roll over in refinance, in the midst of a toxic debt climate. Nothing in my view has changed that, and that view seems to have been correct all along. So Italy will continue to surprise with wreckage, while Monti screams for a massive rescue of Italy.

The German perspective on Italy bears repeating. My recollection is clear, that a banker contact from Central Europe mentioned in February that what tipped the table for Germany was Italy, that the rescue requirements for Italy were far too great for Germany to engage in anything remotely like a Greek-type rescue. Germany made some distance from the entire rescue table that was essential for its own survival, and a rift grew. That rift is very apparent, if not obvious. The message was clear, that Germany (due to Italy) would no longer follow through on rescue commitments made by the clownish politicians that tended to make deals without authority from the true financial captains and field marshalls. My analysis has been calling Spain and Italy the Big Enchiladas for two years. Both are going down, but on different parallel paths.

◄$$$ AN IRON CURTAIN IS FORMING INSIDE THE E.U. BANK SECTOR. ENTITIES OUTSIDE THE EURO BANK PASTURE WISH TO FENCE THE TOXIC PAPER INSIDE AND PREVENT ITS ESCAPE. AN INVISIBLE FINANCIAL WALL IS SLOWLY BEING ERECTED INSIDE THE EUROZONE. NO BANK UNION IS REMOTELY POSSIBLE IN THE CURRENT TENSE CLIMATE. $$$

The fragmentation and disintegration of the European economic and monetary union is picking up speed, much faster than policy makers can treat it. Measures are being imposed and applied too slowly. Deposit flight from Spanish banks has been gaining pace. The loans of EUR 100 billion to Spanish banks will be too little, too late. The nation of Spain will surely require a full sovereign bailout, which could break the entire system. Many banks are reorganizing along national lines, revealing a clear deep divide along North versus South lines. The currency bloc is fracturing. After the banks realign, a currency solution can be made more possible. Most importantly, an invisible financial wall is gradually being erected inside the EuroZone. It will remind many of the Iron Curtain that once divided Eastern and Western Europe. The new wall will divide the North and South. Already the sovereign bond market has sorted out the lending cost differentials. The Spanish or Italian banks and companies (regardless of well run and solvent) are forced to pay far more for credit, compared to their German or Dutch peers (regardless of poorly managed and teetering). No chance of a recovery in Southern Europe is possible under the present circumstances. The wealth gap between North and South will grow. With extremely high unemployment and poverty levels in southern countries, a political backlash seems overdue. To be clear, no banking union can possibly be assembled in the current climate. The consensus among the politicians and the press networks is forming toward that reality. See the New York Times article (CLICK HERE).

## CHINESE BARTER ISOLATES USDOLLAR

◄$$$ CHINA IS MAKING VERY EARLY PLANS FOR YUAN CONVERTIBILITY AS IT SETS UP A TRIAL ZONE IN SHENZHEN. FINANCIAL AND CURRENCY REFORMS ARE IN PROGRESS. ALTHOUGH FAR FROM A FULL OPEN CAPITAL ACCOUNT, PROGRESS IS BEING MADE TOWARD THAT END. EVENTUALLY THE CHINESE YUAN WILL BE IN DIRECT COMPETITION WITH THE USDOLLAR IN GLOBAL RESERVE ROLE. RECALL THAT TRADE DICTATES FUNDS FLOW AND BANK RESERVES MANAGEMENT, FROM WHICH FOLLOWS GLOBAL RESERVE CURRENCY RECOGNITION. $$$

Full convertibility of the Chinese Yuan currency is a primay pre-requisite to a more global role. China announced plans to create a special zone to experiment with its convertibility, the latest step toward opening its capital markets. The zone will be set up in Shenzhen, the site of economic reforms 30 years ago. Banks in Hong Kong will be allowed to lend money to companies based in that zone. Beijing leaders recently have come to regard more open capital markets as necessary to invigorate its own economic growth, having turned stagnant. They strive for a more global role for the currency, partly for expedience, partly for prestige. The nation has strived for respect since 2005, and feels insult at every G-7 Meeting where it is given guest status. From 1999 to 2005, the Yuan exchange rate was pegged to the USDollar until 2005 in a very tight narrow range. Since that time, it has been allowed to float against a basket of currencies each day. Over the past seven year, the Yuan has risen nearly 30% against the USDollar. But barkers at the USGovt continue to complain.

Beijing financial managers have made notable reforms. Wei Yao of Societe Generale in Hong Kong assessed, "This is a logical next step of the ongoing capital account opening and Yuan internationalization. A lot of developments this year show that China is indeed sincerely committed to reforms and opening up." They are loosening their grip. In April, China widened the range in which the Yuan can fluctuate against the USDollar to 1% up or down versus a daily price set by the central bank. The previous limit was 0.5% only. It also raised by almost 3-fold the amount that international fund managers can invest in China to $80 billion. If the Shenzhen experiment is successful, then it is possible that the Yuan will be fully convertible for investment as well as business.

China strives for use of the Yuan as an alternative to the USDollar as a global reserve currency, which would encourage more Chinese trade and enable easier funding of Chinese Govt debt. Correspondingly, a Yuan alternative would make more difficult incremental USGovt debt, and thereby increase the US dependence upon hyper monetary inflation, as in bond monetization, the most egregious central bank violation. Liu Dongmin is a senior researcher at the Chinese Academy of Social Sciences who helped to draft the plans for the special zone. He gave emphasis to the effect that China would not rush to fully open up in full capital reforms. The upcoming experiment is far from the full opening of a Chinese capital account. See the BBC article (CLICK HERE).

◄$$$ AUSTRALIA AND CHINA STRIKE ANOTHER NAIL INTO THE USDOLLAR COFFIN. THE FIRST ENGLISH SPEAKING NATION HAS MADE AN AGREEMENT TO DIRECTLY CONVERT ITS CURRENCY TO CHINESE YUAN. THE VAST COMMODITY TRADE, PORT FACILITY INVESTMENT, AND OTHER BUSINESS RELATIONS WITH AUSTRALIA HAVE MADE EXPEDIENT THE CONVERSION ACCORD. AUSSIE BUSINESSES AND CHINESE BUSINESSES WILL CUT COSTS FROM THE BYPASS OF USDOLLAR AND JAP-YEN. $$$

China celebrated July Fourth (the US Independence Day) by delivering a rocket up the USDollar's rear flank. China moved on that day to grant Australia the first G-20 nation with the ability to directly convert its currency into Chinese Yuan. The broad trade between the two nations will bypass the USDollar completely. The writing on the wall is clear, that the USDollar's reserve currency status will soon be a hollow distinction. Australian Treasurer Wayne Swan was tagged as the emissary to push the progressive reform at a currency forum in Hong Kong. He also met with Chinese leaders in Beijing. Analysts expect the direct convertibility of the Aussie Dollar currency into Yuan will make trade with China more efficient and will lower transaction costs. Vast mining operations are directed toward Chinese customers, using ports in Australia owned and managed by the Chinese. A step in conversion to USDollar or Japanese Yen is the current path. Andrew Salter is ANZ Bank currency strategist. He said, "You do not have to do that interim step. You can convert directly from Renminbi into Australian Dollars and therefore avoid one layer of transaction costs associated with the deal. So primarily [the accord is] a means to remove that extra layer of cost, an efficiency advantage." Expect no effect on the Yuan exchange rate, since China's capital account remains closed. See the ABC Net article (CLICK HERE). Prepare for Australia to become a Chinese colony of sorts, much like Western Canada.

◄$$$ CHILE HAS TAKEN A SEAT AT THE CHINESE YUAN SWAP FACILITY TABLE. THE LIST IS GROWING TO INCLUDE JAPAN, RUSSIA, IRAN, INDIA, BRAZIL, AND NOW CHILE. THESE ARE BARTER DEALS THAT BYPASS THE USDOLLAR. BEFORE LONG, ALMOST ALL EASTERN NATIONS PLUS LATIN AMERICA WILL BE JOINED WITH CHINESE BARTER DEALS THAT INCLUDE MANY KEY RESOURCES IN THE COMMODITY MARKET. THE USDOLLAR WILL BE ISOLATED FOR USAGE WITH CANADA, MEXICO, WESTERN EUROPE, AND THE PERSIAN GULF. $$$

China and Chile agreed in late June to upgrade their bilateral ties to a strategic partnership. They will strive to double trade in three years. Chinese Premier Wen Jiabao and Chilean President Sebastian Pinera announced the establishment of a strategic partnership between the two nations. Various features to the agreement were hammered out toward investment projects. The bilateral free trade agreement is designed to target the Chilean infrastructure construction along with future transportation networks in broader Latin America. The currency swaps will create a barter table on which to conduct trade, with expanded settlement in China's Yuan currency.

The BRICS nations that include Brazil, Russia, India, China, and South Africa are stretching their barter table to include neighboring nations in a spread of fertile ground. Trade outside the USDollar has reached far more than critical mass. Before too many more months, publicity will come that more trade is done in bilateral swap facility frameworks than in traditional trade settled in USDollars. That will be a tipping point for the embattled USDollar that increasing resembles the PIIGS nations. The trade is for key resources and commodity supplies, but to date the core OPEC oil trade remains in US$ terms. The world, led by the East, has objected to the Western corruption and insolvency. A strong signal will come when China dips its fingers in the European bond market again for a rescue discount purchase to prevent a breakdown, but requires all transactions to be conducted and settled in Chinese Yuan. See the Xinhua Net article in English (CLICK HERE).

◄$$$ ANOTHER IMPORTANT CHINA SWAP FACILITY IS SIGNED, A RENEWAL WITH BRAZIL. THESE TWO LARGE NATIONS ORIGINALLY SIGNED A SWAP DEAL IN 2008, JUST RENEWED. BRAZIL IS MORE THAN TWICE THE SIZE OF ANY LATIN AMERICAN NATION, ONLY RECENTLY AWAKENING. $$$

The USDollar epitaph is being etched within global trade circles. The trap is closing, as trade exclusive of the USDollar grows like a network, a veritable latticework that spans the globe. The USDollar is gradually being dethroned as the world's reserve currency, the push coming from a growing list of nations that hardly qualify as Lilliputians. Consider the recent headlines just in the last few months:

  • "World's Second (China) and Third Largest (Japan) Economies to Bypass Dollar, Engage in Direct Currency Trade"
  • "China, Russia Drop Dollar in Bilateral Trade"
  • "China and Iran to Bypass Dollar, Plan Oil Barter System"
  • "India and Japan sign new $15 billion Currency Swap Agreement"
  • "Iran & Russia Replace Dollar with Rial & Ruble in Trade"
  • "India Joins Asian Dollar Exclusion Zone, Will Transact with Iran in Rupees."
  • "China and Chile to Establish Strategic Partnership, Launch Currency Swap and Settle in Renminbi"

No longer is the so-called Dollar Exclusion Zone confined to Asia. By signing a renewal deal on currency swap, Brazil has promoted the renminbi (people's money) as a reserve currency by becoming the biggest economy onboard with the barter swap table. Brazil and China announced the BRL 60 billion (=US$29B) local currency swap after a bilateral meeting between Chinese Premier Wen Jiabao and Brazil's President Dilma Rousseff. The deal was struck on the sidelines of the RIO+20 environmental summit in Rio de Janeiro. The Brazilian Real will trade freely with the Chinese Yuan to facilitate all trade between the two nations. One by one every country in the world is starting to think about and plan for the post-dollar world. China has launched an aggressive campaign of Currency Swap Diplomacy steeped in trade. The Asian giant has signed about 20 such agreements over the past four years with countries ranging from Argentina to Australia, even the United Arab Emirates. While these deals have been largely symbolic, they pave the way in the long march of the internationalization of the Chinese currency.

◄$$$ THE CHINESE YUAN IS FAST BECOMING A GLOBAL TRADE CURRENCY. RECALL THAT TRADE DICTATES FUNDS FLOW AND BANK RESERVES MANAGEMENT, FROM WHICH FOLLOWS GLOBAL RESERVE CURRENCY RECOGNITION. $$$

The overarching motive to strive toward a new trade and banking reserve system, even new currency system, is to avoid stepping in the sclerotic Western monetary system replete with extensive insolvency, commonplace fraud, and hidden derivative manipulation of related markets. The West has crippled itself, having fallen off the stage and struggles to find wheelchairs. The East wants to continue to produce, to trade, to supply, and to save without fear of catching a case of multiple financial sclerosis themselves.

The march to global respectable status for the Chinese Yuan has been gradual, led by trade rather than boastful domination and bank bully tactics. It bears repeating, that a global reserve currency comes as a natural consequence to broad-based trade, in order to supply the banking system with the funds to make payments possible. The Western banking system will soon fill its vast reserves shelves with Chinese Yuan, but not exclusively, in order to manage trade. The United States has for two decades relied unduly upon trade in bonds and S&P500 stocks, whether USTreasury or USAgency or Corporate, in order to lock the flow in USDollars that accompanies the oil trade in US$ terms dictated by the OPEC oil cartel. The bond bubble with USTBonds, and bond fraud with mortgage bonds, and rat traps built with derivatives behind corporate bonds has encouraged the global trade participants to seek another blood line.

The JPMorgan and Goldman Sachs and Barclays toxic paper flow can no longer keep the global body economic functioning. It seeks a Chinese solution. The Western bankers have doled out liquidity water torture for two decades with painful outcomes. See the Zero Hedge article (CLICK HERE). As footnote, the adoption of a non-US$ vehicle to facilitate and settle global trade removes from the US & London hands the devices they lust to continue using in the counterfeit of bonds, and in the ripe derivative rivers of toxic paper. Some analysts call the USDollar reserve status an abused credit card. The Jackass prefers to call it the counterfeit basement.

◄$$$ A VERY SERIOUS MISCONCEPTION RIGHT NOW IS THAT THE USDOLLAR HAS RETAINED THE GLOBAL RESERVE CURRENCY STANDING. ON THE OTHER SIDE OF THE WORLD, THE EURO WILL REMAIN IN A BADLY DEBILITATED CONDITION, UNTIL IT GOES AWAY. THE CHINESE YUAN WILL PROVIDE A STABLE PLATFORM FOR WHEN THE EURO CAUSES TREMENDOUS DISRUPTION. THEY AWAIT THE GREAT DEBT DEFAULT STRING, STARTING WITH GREECE AND EXTENDING TO SPAIN, POSSIBLY ITALY ALSO. $$$

Multiple bilateral swap agreements render the Chinese Yuan a defacto alternate trade currency standard which undercuts the USDollar reserve currency status. Since trade drives reserves management, it is fast approaching Game Over for the USDollar as that special privileged global currency. Wait until the Saudis announce a Chinese Swap accord, or simply announce non-US$ payments are AOK acceptable. That will signal the funeral parlor bells. The Chinese & Saudis already have significant new energy projects on Saudi soil, like a vast refinery complex under construction on the Red Sea. That project will surely be funded in dumped USTBonds by the Chinese managers. Crude oil is the centerpiece in global trade. Therefore the USDollar demise final declaration rests on the oil payment decisions. See the Iran sanction reaction for more insurrection. The USDollar is a crippled global reserve currency awaiting Death Row. When the Euro vanishes, the USDollar will receive a bizarre lift much like a cortisone injection in the heart of a dead man. He will jump and mumble with some hand movement, but it will be dead nonetheless. The collapse follows.

To claim the Euro will be around for a long time aint saying much. It will transform with some serious shakeouts, like when Germany says NEIN more loudly to aid for Southern Europe. Then the Euro will begin to clearly resemble a stringy piece of fecal matter hanging from wayward patches of hair on the PIIGS derriere, being walked along by a French master is a clown suit.

◄$$$ THE USGOVT BLINKED AND BACKED OFF ON FULL S.W.I.F.T. BANK CODE USAGE AS A WEAPON. THE RIFLE WAS COCKED THEN UNCOCKED. THE NATION IS REVEALED AS A TIGER PAPER, WOUNDED BY THE TREMENDOUS BACKFIRE OF IRAN SANCTIONS. THE GREAT FUMBLE RESULTED IN AN HISTORICAL RALLY CRY AGAINST THE USDOLLAR HEARD GLOBALLY. $$$

In Jackass view, the Iran sanctions of 2012 will go down in history as the biggest USGovt blunder next to granting Most Favored Nation status to China in 1999. What the MFN grant did for gutting the USEconomy, the sanctions did for coalesced reaction against the USDollar in counter-offensive reaction. In late June, the USGovt blinked and lost face. Bill Holter summarized the travesty of leadership where the United States leaders shot themselves in the chest, not the feet.

"The United States blinked yesterday by granting China (and others) a 6-month extension of sanctions being levied for trading with Iran. Sanctions were scheduled to begin yesterday where anyone trading for oil with Iran was supposed to be locked out of the SWIFT payment transfer system. I wrote maybe two months ago that locking the world out of the SWIFT system was akin to playing Russian roulette with all six chambers loaded. China has been quite busy over recent months making deals with their major trading partners, to make trade settlement in Yuan or in their trading partner's currency to ensure that a SWIFT cutoff would not stop trade. This really is big news, because what started out as a threat by the US has turned out to be an exposure of the Dollar's Achilles Heel. Surely China's trade would have been disrupted to some extent, but the decline in demand for Dollars would (and will in the future) have torpedoed the Dollar unlike any event seen before. This blink shows that our fearless leaders finally have figured out the errors of their logic.

So we did not pull the trigger. So all is well, right? No, the damage is done and our bluff was called. This rabbit is not going back into the hat no matter how hard we try. The SWIFT system has already been skirted by multiple side deals where countries plan to settle in their own currencies. This is the same thing as when a banking system actually goes down. Trade and business slows but deals are still made and settled in barter. The logic was [unclear on how] excluding anyone from the SWIFT system was such a big stick. But it surely is not, and now it can no longer used for any leverage. While China was touring the globe and doing deals (buying up resources), they were making these alternative settlement deals. It just so happened [that China] purchased the London Metals Exchange which, by the way, will be moved to Hong Kong."

A consultant in European and Asian business with vast experience pitched in with a comment on the Iran blunder. He wrote, "All the empty sanctions the US/West imposes on Iran and whatever countries trade with Iran are ineffective and only promote a shadow business layer that is invisible but extremely effective and powerful." The USGovt encouraged the development of big US$ alternative pathways. Huge strategic error!

To pile onto what Holter said so emotionally, the United States has lost face, lost prestige, and lost leadership. It is seen as a bully with a toxic load in its backpack. It is left isolated in ther corner with one costly hand in its military pants and the other playing interminably with financial machinery that wrecked the nation. The US is a victim of the Fascist Business Model embraced since September 2001, with deep blows from aggression and fraud. It has been humiliated on the global stage. It can never lead the world in anything except toxic paper mache tournaments. If truth be known, the Rasputin on the southern shores of the Mediterranean Sea looking northwest to Italy, that little nation has sent the United States from its nearly total puppeteering on foreign policy into the quicksand of shame. The Council on Foreign Relations should be indicted for sedition, reckless endangerment, and extortion. They were architects for the Iran sanctions. The group is to foreign policy, what Goldman Sachs and JPMorgan are to the banking sector, pure contamination, toxin, and betrayal to the US population. They would not react well to exposure of their dealings, pressures, and policies.

◄$$$ THE G-20 NATIONS PROPOSE A GIANT GLOBAL RESERVE POOL TO FACILITATE TRADE AND TO PROVIDE MARKET LIQUIDITY. MOVE OVER WORLD BANK AND INTERNATIONAL MONETARY FUND, NO LONGER RELEVANT, NO LONGER NEEDED, NO MORE ANGLO HEGEMONY DESIRED. $$$

An incredibly big development barely made the news. It was truly enormous in importance. The Chinese Central Bank announced willingness to share usage of its $3 trillion reserves to create a gigantic reserve pool. It wishes for other nations to join in a proposed shared fund based on reserves. In late June at the G-20 Meeting in Los Cabos Mexico, the BRIC nations again flexed their muscles and showed defiance for the existing financial system based upon USTreasury Bonds held as reserves. Chinese leaders put forth a proposal to share their vast reserves, in an effort to create a more perfect union of global traders. Chinese President Hu Jintao requested the finance ministers and central bank chiefs from the four BRIC nations to implement these ideas. They must forge a unified financial system with banking maturity and systemic stability, in particular a framework that avoids the Euro and USDollar volatility. That is being kind. They wish to rid themselves of the Anglo hegemony, the incessant brutal methods of the IMF and World Bank, and the full toxic fallout. They wish to stand clear of USMilitary maneuvers when talk of diversification of reserves away from the USTBond is discussed openly. They wish to avoid the wide prevalent toxic paper rivers that overflow and spread filth and poison across the world landscape of growing fields. They wish to put asunder the American Empire that has turned into a Fascist Axis.

The potential pooling of Central Bank reserves, mostly held in US$ form, could provide a vast circulatory system to enable effective trade and its settlement. The problem would be that it is mostly bubbly USTBonds backed by the US-operated Printing Pre$$ under private control. If conversion of the toxic USTBonds were done in a massive liquidation, the world would go dark temporarily. That is the dilemma. If no conversion is done, the system would basically be controlled still by the same banking criminals that have contaminated the entire global financial system while demanding worship status instead of being shown jailhouse garb. The proximal motive for establishing a reserves pool for trade purposes would be to prevent any credit crisis stemming from the advanced economies, the locus of deep insolvency and unbridled hyper monetary inflation still. The current global financial bodies providing this described function for loaned reserves are the Intl Monetary Fund and the World Bank, long believed to be havens for CIA agents posing as bankers, and Goldman Sachs lieutenants in service to the Anglo bank cartel. They are fast becoming as obsolete and they are exposed for their corrupt roots and tentacles. See the Forbes article (CLICK HERE).

## GOLD ELEVATED IN BANKER IMPORTANCE

◄$$$ US-BASED NET GOLD EXPORTS INCREASED SUBSTANTIALLY IN THE FIRST QUARTER 2012. THE EXODUS OF AMERICAN GOLD BULLION HAS RAMPED UP SIGNIFICANTLY, CONFIRMING THE STORIES ABOUT VAST RAIDS BY EASTERN ENTITIES OF THE BANK CARTEL FOR ITS GOLD INVENTORY. THE EXPORTS ACTUALLY HELP REDUCE THE US-TRADE GAP, BUT IN A HORRIBLE WAY. THE HIDDEN STORY IS THE CLOSURE OF A GAGGLE OF RUBIN ERA GOLD LEASE SALES BY WALL STREET BANKS OF EUROPEAN GOLD. THIS IS NOT YOUR FATHER'S TYPE OF TRADE ACTIVITY. $$$

As preface, examine the gold shipments in export for details. Last year, the United States was a net importer of gold during the first quarter. Things changed radically. In the first three months of 2012, the US became a huge net exporter of gold during the same time period. The data comes from the latest USGS Gold Mineral Industry Surveys. Three particular types of exports tend to dominate in the gold bullion trade, used to tally and construct the graph.  In 1Q2012, the nation imported 75.1 metric tons of gold. For the full year 2011, fully 507 metric tons were imported. A year ago, the 1Q2011 gold imports totaled 172 tons. Therefore the imports fell by 56% quarter over quarter. But the emphatic point is that the US became a net importer. A year ago, the first quarter showed a net import of 38 tons gold. This year, the first quarter shows a net export of 102.9 tons gold. Amazing, gold is leaving the United States at a brisk pace. Imports are dropping from lack of investment demand, as the citizenry realizes its galloping poverty. The exports are growing for more sinister reasons. The trade gap is actually reduced by such sales, a sign of wealth foundation exodus. Imagine a student who sells almost all his blood for the cash, leaving his wallet thick with money. Sadly, the fellow would be near death from depletion. The same with the US as a viable nation.

The gold export tracking reveals the top three countries receiving US gold were Hong Kong, the United Kingdom, and Switzerland. Of the total 178 metric tonnes of gold exported from the US during 1Q2012, these three nations acquired 161.7 metric tonnes or 91% of the total amount.  Rumors rage that the majority of this gold is being shipped to these countries, then sent East to accommodate very large Asian buyers. This data verifies (or is at least highly consistent) with the stories of massive drains occurring to US and London based cartel banks. My firm belief is that the true figures are much greater, done in off-market trades confirmed by my gold trader source. Information from a USGovt agency is naturally incomplete and subject to convenient omissions. Further examination of coin data confirms the very small proportion that coin shipments comprise for the aggregate data. The effect is bullion bars, not small coins in volume.

Much more to this story. Several months ago, the related story was mineralized gold shipments in high volume, such as dorey bars (90% purity). The jist of that story was how the shipments were reducing the US trade gap in a large bulging item. In 2004 through 2008 the deceptive related story was big IMF-sponsored gold sales for European central banks. Both stories were packed with partial facts and intended deception. The mineralized gold shipments and the IMF sales in all likelihood were big repayments to close out massive gargantuan shorts by the Rubin Gang during the Clinton Admin. They sold off almost all of Fort Knox in the arranged gold carry trade. Then they leased European gold from unsuspected central banks, either nitwit or easily duped, doubtfully fully compliant in awareness of the great game underway. For instance, in 2006 a big French sale of gold was actually a repayment of a Wall Street short. The evidence was compelling, since no gold seemed to be in transit from large shipments. The IMF conducted many gold sales without delivery.

The Indian Govt purchase from the IMF last year also tipped the manner of deceit. They bought gold, but it never left the Bank of England, and probably had been leased and sold long ago. India appears to have purchased gold certificates. Good luck in having them sent from London to Delhi, as Indian leaders learned. So the 2011 shipments and the past IMF sales were closeouts of massive shorts. But the first quarter exports appear to be different here in 2012. They appear to be extremely important drainage of gold inventory from the bank cartel. The Eastern entities are on a major buying spree in a shift of global power. The Commitment of Traders reports indicate a big decline in commercial short positions. The game has turned against them in a big way. Last year the COMEX operators were importing to keep supplying outflows as best they could. This year the suppliers are under much greater pressure to meet foreign demand. Other countries who entrusted their gold to the US bankers want it back. Unfortunately, the Wall Street scheisters sold it without permission. Food for the next big banker scandal. See the Silver Doctors article (CLICK HERE).

◄$$$ ONLY A VERY MINOR AMOUNT OF DOMESTIC GOLD MINING ACTIVITY CAN EXPLAIN THE GIANT RISE IN GOLD EXPORTS. THE NEVADA REGION IS BOOMING WITH MINE EXPANSION AND JOB GROWTH, ALONG WITH THE NORTHERN CENTRAL REGION. $$$

A savvy Chicago investor with strong background near the COMEX pitched in with a suspicion. He believes gold metal output is coming from the US miners as an undisclosed tax. He points to the miner profits in the big companies and how they do not make sense at all. Some satisfaction of forward sale in delivery could be part of the equation. It could be that a small part of the exported gold is coming from US-based mine output. Check out the new trend, as the mining sector is ramping up in strong fashion. The mining industry leads all sectors for job growth in the USEconomy. It is growing at 16% since 2007, according to the BLS stat rats (home of many dull blades) in the USGovt. This percentage change is far better than any competing sector, with the worst contrast being the construction industry. The jobless rate in the mining sector is 4.8% but in the construction sector it is 12.8%, almost triple. The manufacturing sector has also seen big damage. See the Daily Markets article by Frank Holmes (CLICK HERE). The incremental US-based mine output does not seem to adequately explain the rise in US gold exports. Some forward sales might be taking place. But actual big truckloads of gold bullion are leaving the banking system.

The state of Nevada has had its share of turmoil and devastation. But its gold boom is helping to provide high paid jobs, not without arduous work and long commutes. Many workers have settled in Elko and have taken lucrative jobs nearby at the Barrrick Gold mine projects. They are vast. Some have migrated from shutdown mines in Montana. Nevada still maintains a dreadful 12% jobless rate. However, the mines are bright and bustling. The Nevada Mining Assn estimates the industry will add an additional 1200 jobs to the state this year. In the northeast corner of Nevada, the gold mines are booming, and prospectors are pouring in from places like Montana, California, and Tennessee. The state of Nevada is often compared to entire nations for listed gold production. After China, Australia, and South Africa, Nevada is the fourth largest gold producer in the world. State-wide, the mining industry employs more than 12 thousand people, with an average individual salary of about $80 thousand. See the CBS News article (CLICK HERE). Thanks to RobH in Washington state for the stories.

◄$$$ BANKS ARE RAIDING ALLOCATED GOLD ACCOUNTS. TO DATE, SUCH CHARGES HAVE BEEN HYPOTHESIZED, OFTEN REGARDED AS WILD SPECULATION. AS TIME PASSES, THE EVIDENCE MOUNTS TO VERIFY MY CLAIM. THIS WILL BE THE CLIMAX BANKER FRAUD CRIME TO BE EXPOSED IN THE CURRENT DECADE. EVERY MONTH OR TWO, ANOTHER LOG IS PUT ON THE FIRE THAT BUILDS THE CASE. $$$

As preface, gold analyst and historian Jim Rickards, the GATA contributing analyst Adrian Douglas, and several others have argued that the big bullion dealers and Exchange Traded Funds do not possess anywhere near as much as physical bullion as they claim. Should a substantial portion of investors in these vehicles demand physical delivery at the same time, it could cause a panic in the gold market which would cause a huge run up in gold prices. That is what the future will bring with the Great Allocated Gold Account scandal, maybe with roots at end 2012 but blossoming more in year 2013.

In 2007, Morgan Stanley paid out $4.4 million to settle a class action lawsuit by its clients after they were charged for storage of precious metals purchased and stored on their behalf. The criminal Wall Street firm admitted the metal was neither bought or stored, in more paper certificate shuffling. Similarly, a 2011 class action lawsuit filed in federal court in New York accused UBS Financial Services of misleading silver investors and charging them storage fees. The metal allegedly was never actually purchased, segregated, or stored for the investors. Several months ago, Morgan Stanley returned to the same congame with more finesse. The firm launched a similar scam, offering Allocated metals, but altering their definition so that the holdings are not really allocated. The are called allocated accounts but the plan does not conform with anything that resembles allocated.

In an earlier Hat Trick Letter report, the story of a Matterhorn Asset Mgmt client was told. Its manager Egon von Greyerz related the story, where a client had requested his gold bars be moved to the more honest safe Matterhorn fund filled with integrity. After delays, the bars finally arrived. But a great discrepancy was glaring, as many bars bore a date stamp far too recent to coincide with the length of time for the account being moved. The bars were very recently created. The message is clear, that Allocated accounts are being tampered with at best, and pilfered at worst. Never confuse the fact that accounts are redeemed in cash as equivalent in remedy. Without the broad corruption in Allocated account management, the gold price would be at least $3000 per ounce.

John Embry of Sprott Asset Mgmt commented on the Matterhorn client case. He said, "When the customer finally got his gold, it was 2011 minted bars. This made no sense because he had been holding the allocated gold for years. That is just another example that even the Allocated gold in the banking system has probably been loaned out. Many of these customers will wake up one day and realize they entrusted their gold to the wrong people."

Rob Kirby has noted, "We are hearing anecdotal accounts that beneficial owners of Allocated gold bullion in London and other European centers have showing up at bullion banks. They are demanding their physical metal be a) viewed and assayed, and then b) withdrawn from the vaults of banks." This is an investor revolt. See the Zero Hedge article (CLICK HERE) and the Before Its News article (CLICK HERE) for a good review of the corruption in gold accounts that will erupt into a new scandal.

◄$$$ CHINA HAS IMPORTED MORE GOLD FROM HONG KONG IN FIVE MONTHS THAN ALL OF THE COMBINED CURRENT GOLD HOLDINGS OF THE UNITED KINGDOM. IN FACT, THE OFFICIAL U.K. GOLD RESERVES ARE AN EMBARASSMENT IN THEIR PALTY QUANTITY. THE NATION CLAIMING TO BE THE WORLD FINANCIAL CENTER HAS A PATHETIC PUNY PILE OF GOLD. SEVERAL NATIONS HOLD MORE GOLD IN RESERVES THAN THE BRITISH. PREPARE FOR A POWER SHIFT EASTWARD, WHERE THE GOLD SITS. $$$

An utterly amazing fact can be told. In the first five months of 2012, China has imported more gold than the entire official gold holdings of the United Kingdom. Compare the cumulative recent Chinese imports of 315 tons versus the meager 310.3 tons held by the UK in official reserves. Never overlook that a decade ago, Great Britain shamefully sold 400 tons of gold under the corrupt Gordon Brown leaderhip at $275 per ounce between 1999 and 2002. He did so to save Deutsche Bank in a secret deal. D-Bank is to Europe in shady slush games what JPMorgan is to the United States. The central bankers did not want a repeat of the Long-Term Capital Mgmt fiasco, a crisis averted, a new crisis created. The list of nations and gold reserves is interesting to review. It includes ranked #10 Netherlands at 612.5 tons, #14 Portugal at 382.5 tons, #15 Venezuela 365.8 tons, and #16 Saudi Arabia at 322.9 tons. Behind them at #17 is the United Kingdom, supposedly more sophisticated, more astute, more wealthy, keeper of the great London financial center. Not so, more blockheaded and more corrupt. See the Zero Hedge article (CLICK HERE).

◄$$$ THE RUSSIANS BOUGHT MORE GOLD IN THE OFFICIALLY REPORTED CIRCLES. THE CLAIMED ACCOUNT IS LIKE A CAT PLAYING WITH THE WESTERN MOUSE IN THE PARLOR CORNER. MY SOURCE INFORMS THAT THE TRUE RUSSIAN GOLD HOARD IS 10X TO 20X AS GREAT, AND RIVALS THE VATICAN DEPOSITORY IN A VAST TUNNEL VAULT SYSTEM BENEATH THE KREMLIN. IN ECHO FORM, THE BANK OF KOREA INTENDS TO ADD TO ITS GOLD RESERVES, IN ORDER TO PROTECT FROM GLOBAL CHAOS. THE ASIAN NATION HAS ONLY AROUND 1% OF RESERVES HELD IN GOLD. $$$

Russia went on record as buying 500,000 ounces for its official gold reserves in a single month, or that is what it admits in a global game of information deception. The Bank Rossii announced that it had increased gold holdings in its international reserves by 0.5 million troy ounces to 29.3 million troy ounces in May from the end of April. The value of Russian gold and FOREX reserves is $512.2 billion in the week ending June 15th, a small increase  from the $498.6 billion at year end 2011. Other official reserve assets include monetary gold, special drawing rights, reserve position at the IMF, and foreign exchange. In late May, the deputy chairman of the Russian central bank Sergey Shvetsov claimed that the Bank of Russia plans to sustain its gold purchases on the domestic market in order to diversify their foreign exchange reserves. He said, "Last year we bought about 100 tons. This year it will be less but still a considerable figure." Wink wink, he probably bought many times more.

More recently, the former Russian finance minister Alexei Kudrin said that a full-blown economic and financial crisis in the EuroZone is inevitable and will develop within a year. He does not expect Greece to fulfill its obligations towards lenders. At a conference, Kudrin said "A serious financial and economic crisis will hit Europe within a year with Spain being its next victim, and then possibly Italy. The time for avoiding it has already past." He is a savvy experienced banker. The rumors are clear, confirmed by my gold trader source. Russia is planning to give the Ruble currency some form of gold backing in order to defend against devaluations and protect Russia from an international monetary crisis. The timing is uncertain. The event is written in stone. The reaction is inevitable.

The Bank of Korea formally announced plans to increase its current gold holdings this year in order to diversify its foreign exchange portfolio. They mentioned a desire to reduce exposure to the USDollar. Their gold holdings are absurdly small relative to the total size of the nation's FOREX, which stood at a record level of $310.87 billion at end May. After two purchases last year, official gold reserves reached 54.4 metric tons, equal to about 1% of the total reserves, a paltry sum compared to other industrialized nations. According to the latest BOK data at end 2011, its US$-denominated assets accounted for 60.5% of total forex reserves, while other currencies such as the Euro, Yen and Pound made up the remaining 39.5% in assets. The BOK will not be selling their Euro assets, but instead will be diversifying into assets denominated in Yuan, such as Chinese debt and equities. For sure they could sell the overvalued USTBonds at bubbly prices, and buy a truckload of gold bars at artificially depressed prices. The BOK is not currently investing in the BRICS nations except for China. They are closely examining long-term opportunities in other Asian and Latin American countries, such as Indonesia, Malaysia, Thailand, India, Brazil, and Mexico. See the Silver Doctor article (CLICK HERE).

◄$$$ INDIA MAY BAN BANKS FROM SELLING GOLD, IN AN EFFORT TO MOLLIFY THE WEAKENED RUPEE CURRENCY. SUCH ACTION WILL PROMOTE THE BLACK MARKET. BANKS WISH TO PROMOTE INVESTMENT IN THE ECONOMY INSTEAD. A BATTLE FOR CAPITAL IN INDIA COMES. $$$

The Reserve Bank of India (RBI) is prepared to stem gold sales from banks to customers. Banks had been selling imported gold to defend from excess US$ flows. The central bank has also openly discouraged the practice of banks promoting gold coin sales. Do not expect the banks to comply, as bank staff has a bonus plan for incentives on gold coin sales. You aint gonna see that in US or UK banks! Rising bullion imports have been weakening the Rupee currency each month, lifting the Current Account deficit. The response is likely to be a big jump in black market activity to acquire the gold, and force a rise in the black market price. The constant will be a decline in the Rupee exchange rate, since India does not produce much of any gold. Confidence in the Rupee is not preserved in such bans. Since last August, the Rupee value has fallen by over 30%, blamed on the European crisis. Rising food prices are a new concern. Since 2011, gold and silver imports have climbed by about 44.4%, the data thru end March.

India has imported a total of 969 tons of gold so far this year in 2012. Gold coin sales at the central bank have increased by 33% over last year. The Central bankers harbor a fast growing concern as major account deficits have built. Investors are flocking to safety, fully aware that USTBonds are a fool's game. The major bank entities of India account for 70% of gold coin sales in the country. Some bank profits result, as a typical 3% of margin comes from sales of gold coins. The RBI plans to phase out gold sales of any kind, deemed not in their core business. A new consensus is forming, for banks to convert savings into investment so as to promote economic activity. They want to convert stored gold to domestic plowshares. See the Business Standard article (CLICK HERE).

Deputy governor Anand Sinha of the Reserve Bank of India announced that the bank is considering financial instruments that mimic the returns on gold. He said, "Gold imports have been a substantial part of the current account deficit. Therefore, it is being looked at what best can be done. Import is one aspect, the other aspect is that the Gold that already exists in the country can be brought out to satisfy the demand by devising financial instruments which can mimic the returns on Gold.'' The officially stated directive is to put the idle gold to productive use, but gold analysts of the Austrian streak suspect that games are to be played. My guess is if enough citizen gold is redeemed for suspect paper, the RBI can somehow finagle the books to compensate for the gold bullion purchased from the Intl Monetary Fund. That gold sits in the London where it is held hostage to fraud, put surreptitiously in the form of paper certficates. So India's central bank might have learned devious tricks.

India imported $45 billion worth of gold in 2011-2012, an increase of 3% year on year although physical imports fell 17% to 854 tons from 1034 tons, due to high global prices which were aggravated by the weak Indian Rupee. Their currency problems have made the gold price rise in their terms. During the March quarter, gold imports are estimated to have fallen 68% to a mere 90 tons, compared with 283 tonnes in the corresponding quarter a year ago. Bigtime problems in India are reflected in lower gold demand. Their Current Account deficit, equal to the difference between total imports and transfers and total exports, including all financials, widened to the highest ever level to $21.7 billion in the 15-month period of January 2011 to March 2012. That is 4.5% of GDP. See the MineWeb article (CLICK HERE).

◄$$$ THE BANK OF ENGLAND IS DEEPLY INVOLVED IN A GOLD SHELL GAME, JUST LIKE THE US-FEDERAL RESERVE. FOLLOW THE OFFICIAL DOCUMENTS THAT ARE INTENDED TO EXPLAIN THE MANAGEMENT POLICY FOR GOLD, AND TRY NOT TO GO DIZZY. THEY HAVE GOLD BUT THEY DO NOT. THEY LEASE GOLD BUT THEY DO NOT, AS WRITTEN CLEARLY. $$$

In order to form a more perfect union of central banks with the bullion banks, laced with hidden shell games, examine some official documents. Key to comprehension is realizing that the Bank of England plays havoc with the gold and currency markets in parallel manner as the US Federal Reserve plays havoc. The Londoners use the Exchange Equalisation Account and the LBMA, much like Wall Street uses the Exchange Stabilization Fund and the COMEX. Gold metal moves freely from one shell to the other. They are obviously modeled after each other. In a November 1999 communication with the Bank of England, Peter Hambro inquired whether the Bank of England swaps or repurchases gold. The venerable dark castle responded, "The Bank of England acts purely as a custodian of the Gold reserves, and we also look after some for other Central Banks. Therefore the Gold is not ours to swap or repurchase. I suggest you address your enquiry to the London Bullion Market Association (LBMA)."

The Bank of England has posted on its own website a rich supply of documents to explain their gold swap activity. It is a shell game. The BOE acts, administers, and deals the assets of the Exchange Equalization Account (EEA). The BOE cites United Kingdom assets of various types, that include Gold, foreign currencies, IMF Special Drawing Rights funds (basket of major currencies), and the UK account at the IMF. They manage Her Majesty's Treasury (HMT) and the Exchange Equalization Account. The BOE acts as official HMT agent in the day-to-day management of the EEA.

However, here is where the games comes. The Bank of England through the EEA invests in, or makes usage of other instruments, including:

  1. Bonds and commercial paper issued by other national governments, supra-national organizations and selected official sector agencies
  2. Foreign currency spot, forward, and swap transactions
  3. Interest rate and currency swaps
  4. Bond and interest rate futures
  5. Forward rate agreements
  6. Gold deposits
  7. Special Drawing Rights (IMF fruit basket unit)
  8. Certificates of deposit and bank and corporate commercial paper.

The Bank of England stipulates clearly its policy on gold swap contracts, as a footnote to item vii above on Gold deposits. It writes, "Under a gold location swap, Gold stored in a particular physical location is swapped with a market counter-party for a specified period with Gold stored in another physical location. Under a Gold quality swap, Gold of a particular quality (fineness) is swapped with a market counter-party for a specified period with Gold of a different fineness. In each case a fee is built into the transaction." In other words, its gold deposits are swapped oftentimes as a regular course of management. One can be certain that swaps are not intended to facilitate location or fineness in 99.9% of the swap cases. Their policy is pure doubletalk and deception! See the official BOE documents (CLICK HERE).

In like manner, the Federal Reserve Bank of New York is named in official United Nations documents as the official fiscal agent for the USDept Treasury in matters relating to gold swaps with the Bank of England, made official in 1981. Recall that is two years into the Volcker reign as Fed Chairman. Yet Volcker steadily denied any role in gold swaps by the USFed. This status of fiscal agent for the United Kingdom is listed as the Bank of England clearly in a UN Treaty (CLICK HERE). The central bankers are deceptive, crooked, and great abusers of truth. The gold swap practice is central to their operations with the vast slush funds, in the control of the gold price, to manage their toxic paper currency game. Credit to Rob Kirby for laying out the deceptions with official documents.

## GOLD PRICE MEANDERS

◄$$$ CORRELATION BETWEEN GOLD PRICE AND USGOVT DEBT HAD BEEN RISING WITH ALARM FROM THE QUANTITATIVE EASING PROGRAMS. GOLD SERVED AS A RELIABLE LINK INDICATOR. BUT WITH THE GIANT DOLLAR SWAP FACILITY AND OPERATION TWIST HAS COME INTENSE GOLD PRICE SUPPRESSION, WHENEVER CENTRAL BANK ACTION IS TAKEN. $$$

When the USFed or Euro Central Bank have taken bold steps that show both desperation and a broken financial system, the hidden actions have been intense since late 2011 and into year 2012 to keep Gold down. Illicit and illegal methods matter not at all when defending the Empire. The massive Dollar Swap Facility dispensed over $3 trillion over European bank soil. The entire QE dispensed more than $2.5 trillion over US bank soil. The Operation Twist embarked on a new approach that involved more secretive monetary expansion, matched by much higher volume cartel short positions for Gold futures contracts. High correlation like what is shown between the Gold Price and outstanding debt at the USTreasury are rare indeed outside the scientific laboratory. Over 70% to 75% is very rare. Such is the power evident in hyper monetary inflation and the elicited response. Nature dictates a tight link. The bank cartel has taken extraordinary measures to hold down the Gold price during its Weimar fire drills that scream of systemic failure. Thanks to NathanS in Indiana for his contribution.

◄$$$ HUGE CHANGE IN COMMITMENT OF TRADERS FOR GOLD & SILVER APPEARED IN THE LAST WEEK OF JUNE. THE COMMERCIALS COVERED A SIZEABLE BATCH OF THEIR SHORT GOLD & SILVER POSITIONS. THE PEAK SILVER SHORT POSITION FROM APRIL 2011 HAS BEEN ALMOST ENTIRELY REDUCED. FROM A MARKET STANDPOINT, A BOTTOM IS IN FOR PRECIOUS METALS PRICES. BUT THE ZINGER WILD CARD FACTOR IS THE POWERFUL EASTERN COALITION. $$$

The Turd Ferguson roundup on June 29th was extremely positive. His expectation for a bullish Commitment of Traders report was exceeded. He called the COT report terrific. For Gold, as the price fell $49 in a big down move for the week, the Gold cartel net short position was reduced by 19,531 contracts to just 144,170 and a net short stood at a 1.93:1 ratio. To gain perspective, as recently as end February, the Gold Cartel net short stood at a 2.69:1 ratio. For Silver, the COT was simply fantastic in his words. For the week, the Silver Cartel decreased their net short position by 4943 contracts. They are now net short a mere 12,011 contracts. Better yet, the net short ratio has fallen hard for Silver to a 1.25:1 ratio. Again for perspective, in the first week of April, the Silver Cartel was net short 56,414 contracts and held a net short 2.69:1 ratio. At end February, they were net short 44,593 in silver with a 2.32:1 ratio. The cartel banks seem not to anticipate lower precious metals prices.

Some historical reference is relevant. During the month of April 2011, the final surge in the Silver price was almost entirely caused by cartel short covering in a veritable panic. The Silver price had been rising $1/oz every day. They have been trapped for a long time. So over the last 14 months, the cartel has engineered time to buy back and close out the massive shorts in an orderly manner. It is not clear they can claim profits. The cartel net short Silver position has been trimmed by an amazing 85% over that timespan. As a final point, since early April 2011 the Silver Cartel has increased its long positions from 33,413 contracts to 48,591 contracts, while at the same time taking the proportion of long positions within Open Interest from 23.36% back then to 38.51% now. Almost all the improvements have come in the last couple months. See the TFMetals Report (CLICK HERE).

Ferguson concluded in his own style, "Here is your extremely important takeaway: though a stop-gunning plunge through $25 is still possible, we are very close to the bottom in Silver. From there, we will all experience a move higher that will be breathtaking." In market parlance, they say the Boyz gunned for the stops when they push the price down in order to force stop loss orders that are visible in large numbers. More sales result and the price takes another leg down in a cascade process.

◄$$$ ALL HELL IS GOING TO BREAK LOOSE ON THE UPSIDE IN GOLD. THE GOLD MARKET IS CATCHING WIND OF THE FACT THAT THE C.O.M.E.X. IS NEARLY BONE DRY OF GOLD. WHEN THEY LEARN THAT OVER 20 THOUSAND TONS OF ALLOCATED GOLD ACCOUNTS HAVE BEEN RAIDED WITH ILLEGAL LEASES, LEAVING BEHIND A GOLD CERTIFICATE, THE GOLD PRICE WILL TURN INTO A MOONSHOT. LEEB EXPECTS THE GOLD PRICE TO SCREAM PAST $8000 PER OUNCE. $$$

King World News interviewed money manager Stephen Leeb. He anticipates a scandal of a different kind, as in COMEX dry inventory. He expects a huge scandal because, "The banks do not have the Gold the customers are paying them to have on deposit. All hell is going to break loose on the upside." He broadened the threatened scandal with reference to raided Allocated gold accounts. Like with that client often referenced from the Matterhorn Fund led by Von Greyerz gaining traction in publicity. Leeb mentioned "where an individual depositing Gold in 2009, when they asked to get their gold back there were long delays. The Gold bars they got back were certainly not the Gold they deposited because they came back dated 2011." Leeb cited a growing distrust of the government and the financial system. Fraud is ripe.

Leeb went on to describe the dynamics of a much higher gold price. "But the real scandal here is the banks do not have the Gold the customers are paying them to have on deposit. The more countries like China and India accumulate, the more likely all hell is going to break loose on the upside. It is that simple. Eventually there will be panic because the Gold is not there at the banks. I see massive turmoil. It is one thing if people want a lot of dollars out of the banks, you just print the dollars. But how are they going to print the Gold? I just see massive turmoil when people finally realize the banks do not have their Gold. You will see governments frantically trying to substitute fiat money for Gold because this is going to feed on itself. Keep in mind this is something that has happened all over the world. The banks take in customers Gold and charge them fees for storing the Gold as Allocated, but then they turn right around and lease it out to the market to aid in price suppression. This is the kind of thing that will end in catastrophe. At some point the government may try to impose some type of controls, but before you get that you could end up with $8,000 or $10,000 Gold. I think this whole situation will end in total chaos. They will be trying to satisfy customers wanting their physical Gold by the printing presses and that is not going to work. It is not a pretty situation."

Leeb foresees a stable Gold price as it continues to establish a floor. Strong physical buying is in the market. Too much pessimism is seen in the form of rafts of low-ball bids in the current price range. He sees gold as a good buy here, as investors should prepare for a massive move to the upside. Leeb mocked Warren Buffet, for his foolish inane comments about dislike for gold even though it is up almost seven times from the bottom and the best performing asset of the last decade. He accused Buffet of protecting the establishment, nothing more. See the King World News interview (CLICK HERE).

◄$$$ SILVER METAL IS MOVING FROM SCOTIA TO THE S.L.V. EXCHANGE TRADED FUND. SOME ALERT FORENSIC WORK REVEALS THAT VOLUME OUT FROM SCOTIA ALMOST EQUALS VOLUME INTO THE CORRUPT SILVER FUND MANAGED BY JPMORGAN. THE TALLY COVERED A TWO-DAY PERIOD. $$$


This is not rocket science, but it is excellent detective work. Scotia vaults appear to be clearly used to meet delivery requests for the deeply corrupted SLV ETFund. On consecutive days, big Silver withdrawals have been registered from the Scotia vaulted account at the COMEX. Thanks to contributor named Saddle, data was gathered to the effect that back-to-back daily removals almost exactly equal and coincided with an extremely large additional Silver deposit reported into the SLV fund. As Harvey Organ has long alleged, the cartel appears to frantically move around what little physical Silver they have remaining so as to meet delivery requests at the SLV. Saddle points out that the SLV fund is permitted to increase its inventory through paper contracts, physical, and futures. But in a recent bulge, the physical seems dominant in changes. Look at the SLV inventory for 10 July 2012 to see an increase from 311,271,605.5 ounces up to 312,823,227.9 ounces. That marks a net increase of 1,551,622.4 ounces to SLV in two days. That number is suspiciously close to Scotia removals. The bullion bank reported reductions on July 11th from 651,306 ounces withdrawn, and on July 10th from 996,615 ounces withdrawn. The total is 1,646,921 ounces removed from the vaults in two days. This is extremely close, only 6.1% apart but from a series with enormous daily variability of 20% to 40% at times. While not exact, the data coincides enough to make the case of collusion. Veterans see it as a smoking gun. See the Silver Doctors article (CLICK HERE).

◄$$$ SPROTT ANNOUNCED UP TO A C$230 MILLION ADD-ON TO THEIR PHYSICAL SILVER FUND (SYMBOL: PSLV). THE PURCHASE WILL ADD GREAT PRESSURE TO THE PHYSICAL MARKET, WHERE SHORTAGES ARE REPORTED TO BE COMMONPLACE. $$$

The irony is thick, or the corruption rather. Amidst widespread Silver shortages, from coin dealers to the metals exchanges, the COMEX price is stuck on the floor. The naked shorting is ugly and deep. To take advantage of the artificially low price, the Sprott Silver Trust will snag at least C$200 million worth of Silver. They will cause some havoc for the bank cartel, since the metal is nowhere readily available. The purchase will drain from the barren system between 7.143 moz and 7.407 moz silver if the price paid is between $27 and $28 per ounce. That assumes the full C$200 million is devoted to purchases. Expect a premium to be paid, reflecting the widespread shortages. Unlike the SLV fund which trades at a negative premium to spot silver, the Sprott Silver Trust trades at a positive premium since they actually purchase the metal, and they honor requests for redemption upon demand. The SLV fund is replete with official shorting of shares by its own management in order to suppress metals prices. The SLV fund serves as a bullion central bank of corrupted spine.

The last time Sprott succeeded in sourcing a large block of silver bullion for his Trust, big challenges had to be overcome. He warns that many months might be required to locate the bullion bars. Curiously, in the last offering, the bars that were received into his Trust were minted well after his offering had closed, a point Sprott himself made on King World News past interviews. He does what is necessary to source the metal. Let there be no doubt he will be able to procure the silver in due course. Sprott among others is helping to put the squeeze on the Boyz. Their silver inventories are uniformly near bone dry, while the price is kept low. The Sprott purchase will possibly light a fire under the Silver price.

Sprott will once again drain almost all available physical supply from the market to complete the placement, and likely force a bottom in the Silver price. The Sprott Physical Silver Trust (NYSE: PSLV & TSX: PHS.U), a trust created to invest and hold substantially all of its assets in physical silver bullion, announced on July 12th that it has priced its follow-on offering of 18.1 million transferable redeemable units of the Trust. The price will be at US$11.05 per unit offered. As part of the offering, the Trust has granted the underwriters a green shoe over-allotment option to purchase up to 2.715 million additional units. The gross offering proceeds will be US$200 million, but up to US$230 million if the underwriters exercise the over-allotment option. The offering will be made simultaneously in the United States and Canada with underwriters led by Morgan Stanley and RBC Capital Markets in the United States and by RBC Capital Markets and Morgan Stanley in Canada. See the Silver Doctors article (CLICK HERE).

The source of silver metal for the Sprott silver purchase is not exactly known. Eric Sprott and John Embry have excellent relationships with numerous Canadian mining firms. In order to secure the metal in purchase, they will likely be forced to pay a slight premium over the artificially low COMEX price. The paper price discovery mechanisms are totally skewed to the downside in horribly corrupt fashion. The mining firms are not content with the lowball official price, and would be willing sellers to the Sprott Fund, just like in the past. They would ask for a premium on price in fairness. Some expect the Sprott source to pursue the big SLV warehouse run by JPMorgan, called the bullion central bank. With enough 50k share baskets, Sprott could conceivably demand the silver metal from the SLV exchange traded fund. Small investors are not permitted, but since the Sprott Fund is a viable legitimate financial institution in good standing, it might be able to gather baskets of SLV shares, submit a redemption in delivery, and see the metal roll off the ramp into the Sprott inventory held at the Canadian Mint. Rumors about the source coming from Chinese refiners are in all likelihood just silly hopes. The Chinese do not ever choose to play any role in such strategic games. The Chinese do not like long noses, preferring instead to permit the West to implode on its own devices without any finger of blame in assistance.

## USECONOMY FLIRTS WITH DEPRESSION

◄$$$ THE BAD ODOR FROM THE JOBS REPORT FOR JUNE WAS HARD TO HIDE. ALMOST NO SUSPICION WAS RAISED AGAINST THE FUDGE FACTOR IN THE BIRTH-DEATH MODEL. SIGNS ABOUND FOR ACCELERATED ECONOMIC SLOWDOWN. THE LABOR MARKET IS A WRECKING ZONE. $$$

As preface, note the litany of slowdown indicators. The Philly Fed went down very hard to minus 16.6 in June versus minus 5.8 in May. The Purchase Managers Index (PMI) went down to 52.9 in June versus 54.0 in May. The Institute for Supply Mgmt in Manufacturing went into negative terrritory (below 50), down to 49.7 in June versus 53.5 in May. The ISM Services went down to 52.1 in June versus 53.7 in May. The USEconomy is overweighted in services, which is faltering.


The USEconomy requires around 140 thousand jobs to stay neutral, as population growth is absorbed. This important point was often stated back in 2004 and 2005 and 2006. But it is not made any longer, since the goal is to achieve 100k to 200k jobs, come hell or high water, even massive fudge factor infusions. The Non-Farm Jobs report is widely regarded to be a farce display, with a powerful fudge factor that can bring about almost any final figure desired. The June +80k final net estimate of job growth benefited greatly from the Birth-Death Model addition of 124k mythical jobs. The Birth-Death Model is a travesty. Let this statistical analyst assure that an auto-regressive integrated moving average model of 11th order is nonsense in the Time Series arena of modeling artistry. The BDModel is designed to track small business job growth, since the NFPayroll survey does not. Instead the BDModel is used as a fudge factor with no bearing whatsoever on the reality of small business climate. The Natl Federal of Independent Businesses has its own measures, and in the last three years they have been uniformly negative. Yet the BDModel continues to add jobs to the official estimate.

     MONTH

 ORIGINAL

   REVISED

  BDMODEL

       NET

March

+153k

+133k

+90k

     +43k

April

+115k

+68k

+206k

minus 138k

May

+69k

+77k

+204k

minus 127k

june

+80k

 

+124k

minus 44k

The table displays the trend in revision downward, and removes the fallacious fabricated fiction that is the Birth-Death Model fudge factor. The USGovt Bureau of Labor Statistics could not tolerate posting a negative job growth number in consecutive months, to reflect the true condition of the reeling USEconomy. So the fudge factor enters the equation. Blatant deception, kind of like constantly updating the seasonal factor adjustments in monthly statistics, another common gimmick.

A quick footnote on the jobless claims submitted. They are steady at 386 thousand from June 23rd, another 387k from June 15th, and a similar 389k from June 8th. Also, the June 23rd tally cited continuing claims of 3.3 million, still a large slice of the depressed labor market.

◄$$$ JUNE US-RETAIL SALES WERE ATROCIOUS. RETAILERS POSTED THE WORST JUNE SALES IN THREE YEARS. NO ECONOMY SHOULD BE DRIVEN BY CONSUMPTION, A GRAND ABERRATION OF THE USECONOMY AND ITS HELM SITTING IN THE CABOOSE LOOKING BACKWARDS. THE RETAIL SECTOR PLIGHT IS A LAGGING INDICATOR OF RUIN. ITS HEAVY EMPHASIS AND EVEN CELEBRATION IN THE LAST DECADE ASSURED THE RUIN. THE NATION SHOULD HAVE BEEN INVESTING IN BUSINESS. CAPITAL INVESTMENT SHOULD LEAD, BUT NEVER DOES IN THE USECONOMY. INSTEAD IT ENJOYED AN ORGY FOLLOWED BY INSOLVENCY AND WRECKAGE. $$$

Still the pundits and mavens talk of poor consumer confidence and sentiment, when the true condition is vast insolvency and dried up sources of capital to tap. The lousy job security has resulted in uncertain income, while the drained home equity has resulted in an vacated household ATMachine. The outcome is of decimation and devastation, such words no longer held up as exaggerations. Shoppers exercised notable caution and delivered US-based retailers with the worst monthly sales in three years. The 'comp sales' are calculated as sales growth at stores open at least a year, able to provide a comparison, which strips out the impact of new and closed stores. The calculation does not factor in price changes from inflation. The June comps rose 0.1%, far below the consensus, and the smallest pace since sales declined in August 2009. Therefore, real adjusted retail sales probably went negative. No longer can rubbish stories be promulgated about weather or such nonsense, insults to the cerebrum. Over two thirds of 20 retailers that reported their results missed estimates, according to Thomson Reuters. The anticipated Back to School season will be the clincher, demonstrating without mercy the wretched USEconomic condition.

Shortfalls were seen from discounters Costco Wholesale and Target to department store operator Macys, even to Buckle with teen appeal. Middle tier Kohls saw sales fall a hefty 4.2%, worse than the average. On a decent trajectory in recent months, Macys reported a 1.2% gain but worse than expected. The New York City tourist trade is off, an obvious consequence of financial storms in Western Europe and Great Britain. Luxury jewelry retailer Tiffany, affected by absent Europeans, reported a drop in sales. On the discount side, Costco sales rose 3%, decent but below expected. Target sales rose 2.1%, also below its forecast. Some typical banter was heard about the July Fourth holiday falling on a Wednesday. My view is that an excuse would come if the holiday fell on any of seven weekdays. The executives at discounters actually mentioned lower gasoline prices as a reason for lower sales. How truly bizarre, since more money would lie in pockets and purses. See the Market Watch article (CLICK HERE)

◄$$$ THE BEST & BRIGHTEST ECONOMIC AND FINANCIAL ANALYSTS CONSISTENTLY OVERLOOK A GLARING INADEQUACY IN THE USECONOMY. THE MISSING CYLINDER IS THE ABSENT INDUSTRIAL BASE IN CRITICAL MASS, WHICH WOULD PROVIDE TRACTION FROM LEGITIMATE INCOME. IT IS GONE, DISPATCHED TO ASIA OVER THREE DECADES OF TIME, WITH A CLIMAX IN THE LAST DECADE TO CHINA. $$$

The skimpy industrial base for the USEconomy will result in systemic failure for the nation. Almost nobody discusses it. No political leader mentions a high priority of returning, or attracting, factories to the US again. Instead, they focus on taxes, consumer handouts, and dumb programs, if not gay marriage. It is like the USEconomy is a hollowed house on the dole. Redistribution of wealth matters little toward a recovery. Dumb programs are a grand extra burden that precludes recovery. Gay marriage is an absurdity within the political arena. The US cannot detect the missing cylinder, industry with factories, workers with real income. They talk in empty tones about creating jobs, without focus on resuscitating the industrial base. Not one economist or economics professor in 20 is worth an income equivalent to food stamps. Doug Noland wrote the following in Prudent Bear. He is an astute excellent analyst, but he too hardly ever mentions the factories as renewed source of income. Noland and other analysts miss the urgently needed focus on returning the factories and re-industrializing the USEconomy. The nation has zero traction to match the 0% official monetary rate, in a policy of futility, stupidity, and grand neglect.

"Stubborn refusal to admit policy mistakes along with increasing desperation ensure things will only get worse. Over time, it all regresses into a perilous confidence game. Government intervention and monetary stimulus inflate confidence for awhile, although such actions only weaken the underpinnings of the credit structure. In reflecting upon the 1920 excesses that set the stage for collapse and depression, Keynes referred to the Whirlwind of Speculation. I expect there will be a point when the markets begin to narrow the gulf between the speculative markets perception of policy efficacy and the outright limits of governmental control and market intervention. When the development of a country becomes the byproduct of the activities of a casino, the job is likely to be ill-done. Our economic problems run far deeper than what can be healed by more reckless bubble-blowing by the Federal Reserve. At the center of global economic turmoil is a mountain of bad debt that was extended on easy terms by weakly regulated lenders with a government safety net. Global leaders have done all they can to protect the lenders at the expense of the public, to make good on the bond contracts of mismanaged financial institutions by breaking the social contracts with their own citizens. The limit of this unprincipled madness is being reached."

◄$$$ DAVID ROSENBERG DESCRIBES MODERN DAY DEPRESSION IN THE UNITED STATES. HE GIVES SPECIAL EMPHASIS TO THE FOOD STAMPS, THE HIGH CHRONIC JOBLESS RATE, AND THE MILLIONS LIVING IN NEGATIVE EQUITY HOMES. HE STRESSES THE MISSING RESPONSE TO GOVT DEFICIT SPENDING AND USFED BOND PURCHASES. HE OVERLOOKS A KEY REQUISITE FOR USECONOMIC RECOVERY, THE RETURN OF FACTORIES FROM CHINA. HE ALSO DOES NOT NOTICE THAT Z.I.R.P. AND 0% DESTROYS CAPITAL AND ASSURES STRONG MOMENTUM TOWARD SYSTEMIC FAILURE. $$$

It is difficult for the sitting incumbent president to harp on a USEconomic recovery theme anymore. The nonsensical gongs are anniying to the ears. The USFed has cut its growth forecast for the second half of 2012 and for 2013. They cannot come to grips with the reality of a verifiable recession entering its fifth consecutive year, and becoming worse. So they stick to their propaganda of a slow recovery in pure Orwellian style. The ECRI cycle indicator is pointing to a recession. They operate with the best statistics, but they are loaded with some official garbage inputs like personal income and durables that include defense hardware. David Rosenberg of Gluskin Sheff used to be a favorite economist of mine, until he climbed aboard the propaganda machine in 2009, talking about a recovery based in fiction. He and other creditable economists are coerced to accept the mumbo jumbo as a basis for marketing. to preservre a paycheck. Rosenberg however has over half his spectrum laced with great insight. He does not mince words. He wrote, "We are living in a modern day depression." His words make lies of the basis of a recovery, when those words exit the other side of his mouth.

The dramatic statement by the respected economist who returned to Canada is based on several factors. He gives a great deal of emphasis to the record number of 46 million Americans living on Food Stamps, equal to one in seven citizens in 2011. He prefers to mention that bread lines among the poor are not visible, since electronic debit cards are widely dispensed by the USGovt. Actually, they are a profitable business for JPMorgan. The lines of poor folks are mixed in the public bustle at supermarkets across the land, the desperate citizenry meshed in with the ordinary struggling citizenry. The aid for food is part of a vast network of public assistance. Rosenberg stated, "Government transfers to the personal sector now make up nearly one-fifth of total household income. Even Lyndon Johnson, architect of the Great Society, would blush at that."

The many sides of the modern day depression can be seen. Wealth has been consistently destroyed, perhaps never present in the first place from the series of asset bubbles, culminating in the housing bubble. The recent USFed report on the massive 40% drop in median household wealth from 2007 to 2010 is a main plank of the lost American Dream. The home equity vanishing act was a big piece of the loss. The housing bust is nowhere complete, not with a full channel of delinquencies, defaults, and foreclosures, often detailed in gory form in the Hat Trick Letter. The national housing market remains depressed, with nearly 30% of mortgage holders with no equity or under water, suffering from negative equity, owing more on their home loan than the value of the property. The biggest victim class is the Baby Boomers, who lack a retirement plan except for stocks, which are eroding as well. The Boomer homes are balls & chains.

Rosenberg dismisses outright any labor market improvement in recent years, just like he dismisses the housing market stability. How true! He cites the actual unemployment rate at 14.8%, the U6 official figure that includes the discouraged. He points out the fact that 5 million jobs have not been built back from the 2007 peak. Rosey gives emphasis where due. The USEconomic growth is pathetic in his words, given the gargantuan support the USGovt and USFed have provided for over three years. Liquidity in deep broad channels cannot overcome insolvency. The annual $1.3 to $1.5 trillion deficits have not kickstarted any recovery whatsoever, nor has the secretive ongoing multi-$trillion bond monetization. Such efforts are futile, only redeeming toxic bonds for the dead banks and their toxic balance sheets. Thus no effect on the real economy. He declares that the anomaly is not a phenomenon only seen in the United States.

My criticism is steady and consistent. Like many economists, Rosey gives zero mention to a root cause, that China has been handed or has taken a gigantic swath of factory jobs. This is the gigantic blind spot of US economists. The rise of China has coincided with the decline of the West, in a Zero Sum Game. By putting a floor under the USEconomy, the policymakers are actually prolonging the agony. Rosenberg estimates that judging from past debt deleveraging cycles, this modern day depression is only halfway done. See the Yahoo Finance article (CLICK HERE). Rosey does not notice that the stuck 0% monetary policy assures capital destruction and systemic ruin. He simply notices no benefits, but not why.

◄$$$ THE USGOVT PAYROLL DATA IS A TRAVESTY AND TESTAMENT TO BLOCKHEADED MANAGEMENT. WHILE THE USECONOMY HAS STRUGGLED WITH FINDING A RECOVERY BASE, THE FEDERAL SECTOR HAS SEEN FIT TO EXPAND ITS HIGH-PAID JOBS. IT IS NOT CLEAR THEY CONTRIBUTE A SINGLE IOTA TO THE USECONOMY. THE DATA IS STAGGERING. $$$


The USGovt long ago went insane, corrupt, and inefficient. Yet recent data from just the Obama Admin is utterly insane and indefensible. A total of 21.3 million USGovt employees are currently on the payrolls, a whopping 16.0% of the US population. The positions are more like club membership, syndicate posts, civil service lackeys, basic effective clerks, and actual doles. In my humble opinion, the Rebooblican Fascists steal from the top, while the Dummocrat Socialists steal from the bottom. Ruin is the only guarantee. The details are incredible, likely to cause jaws to drop. Since 2008, twice as many more people draw a salary over $100k on the USGovt payroll dole. The average 2008 salary for people on USGovt payroll used to be $61,051. In less than four full years, that average salary has risen to $123,049, over double. Consider the USDept Defense. At the end of year 2008, fully 1868 people drew a salary over $150k. The figure is now 10,100 people, almost a six-fold increase. Their contributions are destructive. Consider the USDept Transportation. At end 2008, only one person drew a salary over $170k in salary. Now a ripe 1690 people earn over that figure. Their contributions are illusory. My argument steadily made is reinforced by the state and federal data. The USGovt debt is headed for default before 2020. My analysis did not use the word EARN, only drew salary. Another clever euphemism commonly used in my past was SHOW UP AT WORK, rather than actually do work.

The Jackass is apolitical and has little use even for Libertarians and Independents. They mean well, but do not realize the entire federal leadership apparatus needs to be abandoned and dissolved, the nation split into five or six territories for tribunal management in a vast receivership process of debt default and reconstruction. The two renegade groups seem to work within the system to their disadvantage, much like biting gnats that are absorbed into the skin and muted. Nothing can be salvaged, the system wrecked over 20 years ago, probably around the time of the Reagan Admin with all the $trillions wasted on Star Wars, the Cold War, and the onset of grandiose research, complete with underground cities. See Denver and Virginia. Reagan probably knew nothing about such onset developments. The intelligence and security agencies took total control of the nation in that turning point decade. In my opinion, these agencies have caused more devastation to the United States than the central bank and Wall Street firms. Over half the USGovt debt is from war, with uncounted $trillions spent in secret ventures. Much are financed by narco funds, but some from counterfeit funds, others by theft of funds like at Fannie Mae.

◄$$$ USECONOMY GASOLINE SALES VOLUME HAS FALLEN BY 28% IN THE LAST YEAR ALONE. VOLUME SALES ARE DOWN BY 50% SINCE THE PEAK IN YEAR 2006. MY FIRMLY STATED POINT HAS BEEN THAT Q.E. CAUSES INTENSE CORROSION IN THE USECONOMY FROM CAPITAL DESTRUCTION. WITNESS THE EFFECT, HARDLY STIMULATIVE. $$$

Economists point the blame to other simultaneous factors like Europe, which acts as the confounding effect. However, Europe endured the same type of debt monetization by the Euro Central Bank. This is not a story of newfound efficiency from carpools, a likely very small factor that might explain 5% of the decline in fuel consumption. Another bandied explanation is home offices, a likely larger factor that might explain 10% of the decline. The sudden gap down in late 2011 was probably from the ended QE, the life support intravenous drip that was removed.

◄$$$ JOB OPENINGS IN UNITED STATES DECREASED BY MOST IN ALMOST FOUR YEARS. THE LABOR MARKET IS NOT SIMPLY COOLING, RATHER GOING COMATOSE. A GRAND DEGRADATION IS OCCURRING IN THE USECONOMY, WHICH IS BEING NOTICED BY A GROWING CROWD OF OBSERVERS. $$$

Job openings in the U.SEconomy decreased in April by the most in almost four years, the latest sign of significant slowdown. The number of open positions declined from the 3.74 million level from 3.42 million in March. That is a whopping 325,000 drop, the biggest since September 2008. The USDept Labor did not bother to put a good spin on the disastrous news item. Hiring slowed from the prior month and job cuts climbed. The number of jobs in available posts is down by an average 4.46 million in the two years 2006 and 2007 before the recession began. Some call it a labor market in a struggle. My assessment is a labor market in collapse, just like housing, just like banking, just like construction. The only thriving industry is weapons manufacturing and defense services. Well, bankruptcy counseling is doing a brisk business too. War is good for a few, but kills the core. Many analysts are noticing the broad degradation that has been steadily forecasted by the Jackass without hesitation. The number of job openings in April was the lowest since November. It will hit record lows in this cycle.

◄$$$ THE SCOURGE OF NEGATIVE HOME EQUITY IS ABATING BUT ONLY SLIGHTLY, NOT ENOUGH TO RELIEVE THE INSOLVENT NATION. NEARLY 30% OF HOUSEHOLDS ARE IN OR NEAR NEGATIVE EQUITY AT END MARCH. $$$

CoreLogic released new data showing that 11.4 million (=23.7%) of all residential properties bound by a mortgage were in negative equity at the end of 1Q2012. This is down from 12.1 million properties (=25.2%) in the previous quarter. An additional 2.3 million borrowers had less than 5% equity in their homes, referred to as near-negative equity, in the first quarter. See their excellent but disturbing map, collated by county. Together, negative equity and near-negative equity mortgages accounted for 28.5% of all residential properties with a mortgage nationwide in the first quarter, but that figure is down from 30.1% in 4Q2011. On a national level, negative equity decreased sequentially from $742 billion to $691 billion collectively above home loan volume in the first quarter. Based upon anecdotal stories, economic slowdown, and consumer confidence reports, expect by Q3 the negative equity will rise again. See the CoreLogic article (CLICK HERE).

## 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.