GLOBAL MONEY WAR REPORT
DEBASED CURRENCY COMPETITION
SOVEREIGN BOND BREAKDOWN
CENTRAL BANK DISCREDIT

* Intro Monetary Fragments
* USTreasury Bonds in Turmoil
* Contagion Looms at the Brink
* Chinese Yuan Grows in Stature
* Potential Trigger Event
* Insolvent Banks & Bail-Ins
* Global Economy Faces Abyss


HAT TRICK LETTER
Issue #112
Jim Willie CB, 
“the Golden Jackass”
21 July 2013

QUOTES ON MONEY

"With unprecedented outflows from the bond complex coupled with notable global central bank selling, the bubble in US fixed income would appear in serious jeopardy. And while analysts and money managers will continue talk of a fair value range for Treasury securities, for the time being flow of funds analysis trumps valuation. Will foreign central banks continue reducing their enormous holdings of USTreasury and Agency securities? How much leverage has accumulated throughout US fixed income, especially in corporates, mortgage backed securities, and municipal debt? How long until some hedge funds are in trouble? Redemptions coming? Derivative problems? Will investors continue their retreat from US fixed income mutual funds and ETFs?" ~ Doug Noland (of Prudent Bear)

"The expansion of QE3, at the beginning of calendar year 2013, encompassed new purchasing of USTreasury securities. To date (June 12th), the Federal Reserve effectively has monetized 78.4% of net new USTreasury debt since January 2, 2013. With the USTreasury playing accounting games that should hold the gross federal debt at its debt ceiling through Labor Day, the Fed's monetization should top 100% of net issuance, year-to-date, within the next two months." ~ John Williams (Shadow Govt Statistics)

"Nothing is normal: not the economy, not the financial system, not the financial markets, and not the political system. The financial system still remains in the throes and aftershocks of the 2008 panic. A number of underlying problems of that time, tied to the risks of a near-systemic collapse and the related extreme economic downturn, were pushed into the future. [They are] not resolved by the extraordinary liquidity and systemic intervention actions taken by the Federal Reserve and federal government. Further panic is possible, and severe US dollar debasement and inflation remain inevitable." ~ John Williams (Shadow Govt Statistics)

"We no longer have a free market. The world's financial asset prices have become a plaything of central banks and the sovereign wealth funds of a few emerging powers. Julian Callow from Barclays says the [gaggle of central banks] are buying $1.8 trillion worth of AAA or safe haven bonds each year from an available pool of $2 trillion. Nothing like this has been seen before in modern times, if ever. The Fed, the EuroCB, the Bank of England, the Bank of Japan, et al own $10 trillion in bonds. China, the petro-powers, et al own another $10 trillion. Between them they have locked up $20 trillion, equal to roughly 25% of global GDP. They are the market. That is why Fed taper talk has become so neuralgic and why we all watch Chinese regulators for every clue on policy. A paper co-written by Frederic Mishkin (Bernanke's close friend and a former board member) is warning that it is becoming ever harder for the Fed to extricate itself safely from QE, and the door may shut altogether from 2014." ~ Deepcaster

"If Bernanke really shakes the tree, half the world may fall out." ~ Ambrose Evans-Pritchard

"Central banks should not wait long to go back to normal monetary policies. Otherwise the patient will have become an addict." ~ David Dodge (former Canadian central bank governor)

"I speak at pension conferences quite frequently and they are all feeling desperate. They say, 'WE CANNOT MEET OUR LIABILITIES.' Therefore right now, the major pension fund groups are making applications to (in this country) the Pension Benefit Guaranty Corp, about trying to find ways to stretch out the application of the rules, because the typical corporate pension plan assumes 7% compounded returns. But that is extremely difficult to achieve." ~ Don Coxe

"Technical Analysis is a billboard guidance system that warns the Banksters to conduct the next market intervention with naked shorts, government funds, and big bank collusion. With corruption of markets finally in the open, full impunity continues to be guaranteed by the USGovt to achieve the Reich Finance objectives which intend to obscure the Weimar traces, but do not succeed. To be sure, some chart work has meaning, but the core of the science has been deeply perverted by authorities who target the resistance and support lines, as well as the trendline barriers." ~ the Jackass

"Putin of Russia just dressed down the G-8 Finance ministers in unmistakably clear harsh tones. The Anglo-American-French alliance and axis suffers from totally distorted perceptions. Their leaders are naive in promoting their agendas. The United States is currently falling in ultra-slow motion onto its own sword. People are totally oblivious to what that means to our way of life and the future world we shall have to deal with. Why all this was and is allowed to happen escapes a rational thinking and educated human being." ~ The Voice

"The fascist governments stir fear and spread insecurity. But the prevailing attitudes across the States are more steeped in apathy and delusion. Most people do not care about the concept of money. They operate under the notion that the United States and the King Dollar are the center of the universe, the rest of the world subservient in devotion and fealty. The era is gone where the world's nations will send the US their hard earned savings. A new paradigm is soon to emerge. It will leave the United States out in the cold, an uninvited guest declared necessary for past criminal behavior established over decades." ~ Jackass

 

## INTRO MONETARY FRAGMENTS

◄$$$ PUTIN DRESSED DOWN THE ANGLO-AMERICAN PUPPETEERS FOR THE DISASTER AND WRECKAGE AND SUFFERING THEY HAVE CAUSED. PUTIN WAS HARSH, AND QUITE SPECIFIC ON THE DESTRUCTIVE INFLUENCE OF WESTERN POLITICOS. THE GLOBAL CHESS MATCH CONTINUES OVER SYRIA, SITE OF A NATURAL GAS PIPELINE AND A NAVAL PORT. THE CHESS PIECES HAVE FALLEN IN EGYPT. THE CRITICAL DEFIANCE INDICATES A SHIFT IN THE GEOPOLITICAL BALANCE, AS CHANGE IS IN PROGRESS. $$$

Russian President Vladimir Putin did not hold back in criticism of G-8 nations for their heightened failures in the Middle East, North Africa, and elsewhere. The setting was a G-8 Meeting held in Lough Erne, Northern Ireland on June 17th and 18th. Attending nations were Britain, Canada, France, Germany, Italy, Japan, the USA, and Russia. The iron-spine Putin slammed Western leaders for their meddling in Syria in particular, with references to Egypt and to Turkey. He was harshly critical for the numerous puppet leaders installed, whose rule led to eruptions and instability. The chess master Putin called the Western leaders liars to their own people, to further their geopolitical interests. He warned them of an end to the era of their direct monopoly of control without obstacles. One might say another new sheriff is in town, to join the White Dragons who enforce a new set of laws on the gold market. Putin said the following.

"You want President Bashshar al-Asad to step down? Look at the leaders you have made in the Middle East in the course of what you have dubbed the Arab Spring. Now the peoples of the region are rejecting those leaders. The revolution against Muhammad Mursi in Egypt continues. Anybody who knows the character of Egyptian society is aware of the fact that it is a deeply rooted secular society of varied cultures and civilizations with a history of advanced political activity. It will never accept attempts to impose things upon it by force. As to Receb Tayyib Erdogan [in Turkey], the street is moving against him and his star is beginning to wane. In Tunisia the Muslim Brotherhood Salafi rule that you formed there is no longer stable and the fate of Tunisia will not be very far from the army seizing power, because Europe will never accept chaos on its borders and Tunisia is an entry way to Europe." As footnote, Putin made his comments before a previous important event occurred, when the Chairman of the Joint Chiefs of Staff of Tunisia resigned to declare his candidacy for president of the republic.

Putin continued. "You have spread anarchy in Libya after Muammar al-Qaddhafi. Nobody can put together an authority capable of working to rebuild the state there. Yemen after the departure of Ali Abdallah Salih lacks stability in government and there is no peace in the streets. Military and security unrest continues to prevail in all the regions of the country. As to the Persian Gulf, the whole area from Bahrain to the rest of the states there is sitting atop a volcano."

The notes from diplomatic reports indicate that the leaders gathered at the summit were shocked when German Chancellor Angela Merkel supported all points made by Putin in his address. She declared her rejection of any solution in Syria other than a peaceful one. She warned about the deep risks of any military solution, mentioning a plunge of the whole region into the unknown, in her words. Merkel openly wondered if aid to the Syrian Opposition would result in weapons diverted into the wrong hands, who might use them in attacks against cities in the European Union. She even added a distaste for adding to European Union debt from any ongoing military adventure. Merkel concluded, "Germany is no longer able to serve as a financial and economic rescue line for those countries in order to help cover up their mistakes." See the Phi Beta Iota article (CLICK HERE) and the Paul Craig Roberts website article (CLICK HERE). The stakes have been raised. The players are all with chips on the table. The risks are huge. Expect the US & Allies to back off, especially after further exposure of the US contribution of chemical weapons into the fray, a point never cited in the Western press. Beside Putin, Merkel is defiant. The new team is emerging slowly.

◄$$$ HEDGE FUNDS ARE DOWN AND OUT. THE SANCTIONED HEDGE FUND, NAMELY THE USTREASURY BOND, IS ALSO IN BIG TROUBLE. THE UNITED STATES IS SEEING AN OUTFLOW OF LONG-TERM INVESTMENT DOLLARS FROM ITS FINANCIAL MARKETS. $$$

The big banks are going after their high net worth clients and ultra-HNW accounts as well as hedge funds who are their clients. As in exploiting them, trying to force liquidations, turning a profit on an embattled client after inflicting their wounds. Most retail clients are long gone, either depleted and discouraged or wounded and admonished. The sharks remain active, but the shark tank only has bloodied sharks left in it. They will soon devour each other. The poor performance of hedge funds is made clear by the Zero Hedge article (CLICK HERE). The poor performance of the big Paulson Fund has been a regular story, pulled down by idiot devotion to the corrupt GLD fund. See the Zero Hedge article (CLICK HERE). The USFed is the chief attack dog agent against the fund. Best to follow the Pied Piper at the USFed and go with USTreasurys, the sanctioned approved hedge fund, the best, the largest, the Weimar Fund. Except they are suffering important losses, not exactly huge percentage losses though. See the Zero Hedge article (CLICK HERE).

The May Treasury Investment Capital data (delayed by two months) showed a small rise in inflow following the staggering $38.3 billion outflow in April. Expect the June outflow to be historically record setting. The May bond story showed a discharge of USAgency Bonds and corporate stocks, which together saw outflows for a total of $19 billion. To make more clear and readable the outflow phenomenon, consider the trailing 12-month moving average of long-term US$-based flow. With all the distorted US-based data and charts, the basic outflow of foreign investment serves as an excellent indicator of the dreadful USEconomic future prospective health. It does not look good, as serious problems loom ahead. The trend is down, but most recent months are very negative. It means the USEconomy is more fully dependent upon the USFed inflation engines. See the Zero Hedge article (CLICK HERE).

◄$$$ RETAIL STOCK MONKEYS ARE IGNORED AS THE MARKET IS MORIBUND. THE C.N.B.C. BABBLING CARNIVAL BARKERS ARE FINALLY BEING CAST ASIDE. TO REGAIN A VIEWING AUDIENCE, THE MAJOR FINANCIAL NETWORKS MUST HONESTLY REPORT ON GOLD, AND ON THE PRIMARY DEPENDENCE ON THE USFED CENTRAL BANK SPIGOT OF EASY FREE TOXIC MONEY. $$$

One Jackass forecast made in 2005 was that the fields will be properly tilled for the rise of Gold only when CNBC goes off the air, its propaganda rendered a memory. To be honest, it was made in jest, intended as a joke, but with some sincere conviction. Apparently, it is slowly coming true, at least the part about CNBC being ignored by its viewing audience. In particular Jim Cramer and Larry Kudlow have suffered a collapse in viewers, as they must be wising up. The former is a clown with his carnival acts to promote stocks, rarely correct, hardly amusing even. The latter is a formerly bright guy, but in recent years he has been dragged down by conversion into a Keynesian harlot, a monetary moron, and a man with little traceable integrity. The fact that CNBC's financial network is suffering such low ratings could be an indication of a grand shift in certain markets. My eyes are on the COMEX, which faces pressures to shut down and turn into a Cash & Carry gold supermarket. Retail investing is almost done. The NYSE is the province of algorithm trades by Wall Street robots. Long live retail gold investments. See the Zero Hedge article (CLICK HERE). CNBC has earned the nickname of CNBS.

◄$$$ SOME COMMENTS ABOUT PAUL CRAIG ROBERTS AND HIS EXPECTATION THAT THE USGOVT WILL PERPETUATE ITS POWER WITH BRIBERY AND COERCION. HE EXPECTS THE USDOLLAR WILL PREVAIL AS THE GLOBAL RESERVE, AND THE TRANS PACIFIC PARTNERSHIP WILL PREVAIL AS THE TRADE ZONE FOR THE EAST. THE JACKASS DISAGREES ON BOTH COUNTS. $$$

Paul Craig Roberts has recently written that he anticipates the USDollar system with its USTreasury Bond vehicle to prevail and to continue. He cites extreme coercion through payoffs of officials and other meted privileges. The connected Roberts does not expect any USDollar alternative to be installed on a global or regional level. On a recent radio interview show, Roberts commented to Greg Hunter on USA Watchdog that the felt that the Trans Pacific Partnership trade agreement promoted by the USGovt will ensnare many countries into supporting the USDollar as the reserve currency. He forecasts that thereby, the US hegemony will be prolonged possibly for years to come. He does not anticipate the US currency to be rejected in any coordinated manner, by the Eastern nations or any other group of nations.

The Jackass disagrees rather forcefully. Although Roberts is a brave man, an official with some insider experience in the Reagan Admin, an outspoken critic of American abuse of power, a harsh critic in warning of a growing US police state, if not a dictatorhip, he is lacking in some information sources. The Jackass loves PCRoberts and regards him as very brave man. Unfortunately, he does not comprehend the strength of the Eastern Alliance or its inevitable path. They might compromise a bit here and there along the way, but probably to avoid attacks of microbe viruses, or HAARP attacks to deny rainfall, or the usual US-UK violent attacks blamed falsely on terrorists. Be sure to know that the East will dominate. The flow of gold indicates a shift of power. The US & UK and West Europe have completely lost their grip on the financial system, from bonds to currencies to banking systems. Their situation is no longer recoverable. Even Roberts will be a little surprised when the events unfold on the Gold Trade Standard renaissance. The Jackass prefers never to be cocky, but my sources are better than his. It is very doubtful that Roberts has an informed source who is gold broker to Russia, China, Turkey, and Arabs or acting as their consultant on matters of trade.

One should never trust what comes from inside the Dome of Perception. Roberts is smart and dutiful and brave, but he operates inside this dome. He does not have much of any Eastern sources of information, evident from his own public writings. Roberts never mentions the gold trade movement, the BRICS Development Fund or its real purpose, the accumulation of Russian & Chinese gold, the new NatGas Coop forming under the Gazprom aegis, the cornering of strategic metals by China, the Shanghai gold arbitrage, the slimy deeds in war motivated by gold lust, and much more. He seems unaware of an entire financial army in opposition to the US-UK bankers and their puppet governments, with 1000 men and women in the East fighting to put the USDollar Regime to rest, to fade into the sunset. To be sure, the USDollar demise will occur, but not without tremendous cost, huge suffering, enormous loss of wealth (life savings), and probably more costly wars. Do not confuse my disagreement with disrespect. Roberts does a great job in spreading the word about US lost leadership and its domestic course to fascism. But he does not seem to be aware of Eastern developments to produce a viable non-USD alternative. He must observe the G-20 Meetings, but not their impact. He is too entrenched in US events.

As EuroRaj commented in a private message on the topic, "Roberts is a nice man but a bit of a delusional patriot, hoping that the system corrects itself. We are way past correction. This system needs replacement." Another smart colleague from California said, "I can only surmise that the former KGB head, a good chess player, Putin goes this far because he is now moving forward, pushing rhetorical escalation, because he has or clearly sees game changing events (towards energy and gold) in place, and gives fair warning in neatly veiled threats." Agreed here, as Western leaders are no longer shown respect on the geopolitical stage. The September G-20 Meeting in Moscow should be loaded, not with words, but instead actions on the active platforms and practical dynamics of gold trade settlement. The rhetoric indicates a great change of wind to reflect activity. Watch Roberts change his tune as the tumultuous year draws to an end.

◄$$$ CHINA IS ABOUT TO EXECUTE A DE-LEVERAGE ON A MASSIVE SCALE. THEY PLAN TO REDUCE DEBT BY ONE TRILLION YUAN. THE IMPACT AND AFTER EFFECTS WILL BE PROFOUND. CHINA MUST CONTEND WITH A DANGEROUS RELENTLESS PROPERTY BUBBLE, AND ASSOCIATED BAD LOANS WHEN IT GOES BUST. BEFORE CHINA CAN TAKE ITS PLACE ON THE WORLD STAGE AS BANKING LEADER (BONDS, CURRENCY), IT MUST CLEAN ITS DEBT SITUATION. THE IMPACT WILL BE MASSIVE AND DISRUPTIVE. $$$

Ever since the 1990 decade, China has employed a monetary policy with a tight link to the USDollar. Since 2005, the link has been loosened. In keeping the linkage, China has exposed itself to high risk in the banking system, in the debt structure, and its the economic fallout from any disconnection brought about in change. As a result of their largest housing bubble in history, Chinese monetary authorities have decided to embark on a plan to reduce leverage, to trim down its debt by an incredible CNY 1 trillion, roughly US$160 billion. The first few rounds will likely reduce credit growth this year in China by 750 billion Yuan (=US$122 bn), an amount equivalent to the size of the entire Vietnam economy. The Chinese must contend with a reduced money market. The official policy that has slammed the Shanghai Composite on their stock market cannot seem to overcome the powerful exogenous factor, the USFed monetary spigot on full blast. Tyler Durden expects the Chinese Economy to be stunned by news before long of GDP growth all the way down to a mere 3.0% annual pace. He summarized, "The country is about to undergo an unprecedented deleveraging that could amount to over CNY 1 trillion in order to force reallocation of capital in a more efficient basis. That is right. A massive deleveraging coming dead ahead in China just in time to shock the market still reeling from the threat of the Fed's tapering."

The Chinese residential property market has almost doubled in price since 2008, in five short years. That is leaps & bounds greater than even the chronic US housing market bubble ever was. Carson Block of Muddy Waters Research has laid out in detail several accounting scandals in Chinese companies, earning some notoriety if not enmity. He believes China faced problems in its banking system more severe than those which triggered the global crash in 2008. He said, "We believe that the domestic Chinese banking system is a mess, with an enormous amount of bad loans, or loans waiting to go bad. The problems of China's lenders are greater than those of Western banks on the eve of the financial crisis." By eve, he meant in 2008. Some important challenges must be addressed if the Chinese wish to take their place at the pinnacle of the world's banking system, to sell their sovereign debt as part of reserve banking systems, to distribute their currency as convertible specie across the world. Apparently, events could soon go very wrong, very quickly. See the Zero Hedge article (CLICK HERE).

◄$$$ ON THE SCORE OF IRAN SANCTIONS, FOREIGN BANKS KICK SAND IN UNCLE SAM'S FACE. THE JAPANESE ROUTINELY PASS ON FUNDS TO IRANIAN BANKS, WITH THE TACIT BLESSING OF THE MINISTRY OF FINANCE. THE USGOVT MUST BE SEEN AS A PAPER TIGER. $$$

More highly indicative evidence of the weakened US position in the world in recent years is visible. However, it routinely is swept under the rug in the mainstream Western press. The workarounds to the Iran sanctions seemed to first expose the lost dominance by US bankers. Another instance occurred very recently when a Japanese bank was found to have flouted the US-led financial embargo on Iran. The bank, a subsidiary of Mitsubishi UFJ Financial Group, allegedly routed over 28 thousand payments worth on the order of $100 billion, on behalf of Iran and other blacklisted countries. In an earlier era, such a story would have led the network news bulletins and topped the front pages. Retaliation would have been swift. They would have featured the defiance, and pointed out retributions against the Japanese bank. Instead it passed almost unnoticed.

The implications are important. Given that the Japanese banking industry is highly regulated, and how all large transactions must clear the Ministry of Finance (MIFI), the steady business of fund flows with Iran mean only one thing. The Japanese Govt approved the defiance and ignored the USGovt sanctions and directives. The MIFI is by far the most formidable agency of Japanese financial power. Basically it is inconceivable that the ministry did not know what was going on. See the Iran Focus article (CLICK HERE).

A source with a rich deep resume of global consultancy across Europe and Asia had some choice delicate comments on the topic. He has much experience in past geopolitical chess games centered on the Soviet Union and Eastern Bloc. He commented on the ongoing chess match that the United States is losing so badly. He wrote, "What many people do not know is that Halliburton has its global headquarters in Dubai and they are doing brisk business in Iran. The US hypocrisy is blatant, in your face. Like Prince (ex-Citi CEO), the former top honcho and owner of Blackwater who lives in Abu Dhabi. They are training and managing a mercenary force 1200 men strong that is located in a mega desert camp. The US is nothing but an opportunistic corporation, and not a country at all. It is all about to fall apart. The US acts much like a nouveau rich bully on the block who was and is clamoring for recognition and acceptance. Its lack of history and culture has been compensated by abject  materialism. It is a country that can be accused of being built on genocide, deceit, and fraud. It simply does not qualify to be a leader. Gates, Zuckerberg, Jobs, Page, and all the other CIA sponsored clowns will eventually be forgotten. There are no Howard Hughes or Henry Ford guys any longer, the real innovators. In the famed Arlington Cemetery are the many white crosses. One must wonder what all these soldiers died for. The US strongly resembles a nation of low stature where presidents or contenders are assassinated or controlled, as in Manchurian Candidates.

The Russians call the American leaders Mutants. After the Bill of Rights was flushed down the toilet with the Patriot Act, all went to hell rapidly for the nation. We are all in deep shiitte since America was our beacon of hope for a free world. What a colossal disappointment. We are at the dawn of the biggest battle to maintain our way of life, and we have no leader to ensure victory. We are royally screwed. The Boyz in Washington and London are finished, but their removal will come at great cost." Wow!! For an exposure of FaceBook and the non-existent privacy, even the risks facing the USMilitary personnel from social network usage in battle-strewn nations overseas, see the Business Insider article (CLICK HERE). The Jackass continues to refuse all invitations to FaceBook. In fact, on several occasions, after checking with the source of invitations, it was determined that the invitation came from FaceBook HQ, and not from the supposed friend. The friend denied ever sending an invitation. The social network is a overgrown spy network.

◄$$$ NEW YORK AND LONDON BANKERS HAVE A PUNISHMENT IN STORE FOR THE ASIANS. IT IS PUNITIVE FOR THEIR PLANS TO ABANDON THE USDOLLAR. IT WILL BACKFIRE, AND SEND THE UNITED STATES INTO THE DE-INDUSTRIALIZED THIRD WORLD. THE ASIANS WILL INEVITABLY LEAD IN BANKING AND COMMERCE, AN EXTENSION OF INDUSTRIAL MIGHT AIDED AND ABETTED BY THE WEST IN SEEKING TO EXPLOIT CHEAP LABOR. ANOTHER BACKFIRE, SINCE INDUSTRY LEADS TO WEALTH IN SAVINGS, REFLECTED IN NEWFOUND POWER. $$$

Much unusual speculation swirls about how the Gold price will crash to US$825 per ounce soon. The leadership crew for the United States is deeply motivated to teach a severe lesson to Asian central banks, led by Russia, China, India, Singapore, South Korea, and Japan, even Saudi Arabia. The USGovt wishes to inflict retribution on the foremost Asian nations for abandoning the USDollar in key respects, and for challenging the supremacy of Anglo-American currency management. The American Express bank and Deutsche Bank are indicating Gold will eventually settle at $1050 per ounce. The Obama Admin and his CIA contollers have apparently ordered a secret mission to reduce the asset value of Asians dramatically to the extent of $2 trillion, in order to penalize Asians for questioning supremacy of US$ currency. The Obama/CIA team wish to put Europe on the defensive, to keep them in serious trouble, so as to ensure Germans do not become as threat to US-UK supremacy. The US strategy appears to damage the entire world so as to retain power, a macrocosm of its internal policy. The USFed has worked to damage the USEconomy so as to create domestic USTBond demand and to reduce final commodity demand.

What is certain to continue is the chronic demand, if not requirement, that the United States will print paper in the form of USGovt debt securities, and ask for supply of goods in return. Europe also prints paper with Euro labels, from which to buy goods and services. Any nation that refuses will be labeled a rogue terrorist nation, such as Iraq and Iran. Notice that no country in Europe is pledging Gold for loan with the IMF. The USGovt wishes to weaken and to crush Iran, Russia, Turkey, and China, the nations promoting gold trade settlement in lieu of the USDollar. Iran has amassed gold since it was not allowed to deal in USD or Euro for settling its trade, largely dominated by energy sales. By pushing the Gold price lower and lower, the USGovt seems inebriated by stupidity. They are moving the Gold bullion wealth to the East, as the nations of the West sink in a sea of toxic debt paper. Eventually the Gold price will not be set by the Western corrupt temples of commerce, since the gold exchanges will possess little or no gold. The United States is on a destructive course, a perfect prescription for Third World adoption and entry in a faded American dream.

◄$$$ INDIA IS ON THE VERGE OF INSTALLING CAPITAL CONTROLS. THEIR IMPORTS ARE OUT OF CONTROL, DOMINATED BY GOLD PRODUCTS. THE INDIAN RUPEE CURRENCY HAS BEEN AT RISK FOR MONTHS, SUFFERING SHARP DEVALUATION. $$$

On July 17th, Goldman Sachs announced the possibility of capital controls implemented in India. Such views have been circulating for months, reinforced last year when Cyprus implemented capital controls, and beforehand Spain. The Indian Govt is considering new strictures, where Indian citizens might not be allowed to take money out of India, known better as capital controls. A trusted colleague to a great source believes some controls will come in place within a few months. What follows are his thoughts, edited for readability. Certain funds could be blocked for a period of time. Interest rates will continue to rise. It is believed that when capital controls are put in place, interest rates on deposits will actually come down. Last week, India hiked interest rates to reduce liquidity in the markets by 2%. A test project was launched, where Indian crude oil was put on the market. Then US$-based bonds are to be floated to test the markets. Within a few weeks or months, the Indian Govt is rumored to issue a sovereign bond in US$ denomination for the first time in its history, targeted to foreigner investors. The rate hike caused bonds in India to decline by over 3%. The INR (Indian Rupee) 10-year bond yields are still over 8%. With elections around the corner, tensions are on the rise. Big spending by the Indian Govt is going toward food subsidies, but much wasteful giveaways are harming the currency. Gold sales are being blocked. Duties on imported cars are being hikes. The Indian Economy is suffering.

The Reserve Bank of India announced a number of measures to tighten Rupee liquidity in order to shore up its weakness. The moves to restrict borrowing from the repo window and to sell government bonds demonstrate the central bank's discomfort with the recent Rupee depreciation. They are rapidly using FX reserves in defense. Notice a shift in monetary stance from pause to tightening. The longer end of the yield curve can move up due to the sale of government bonds, while the short end will be negatively impacted by the volume restrictions on the repo window. The result should be to increase the yield differentials as incrementally positive for the INR and for the external balance of payments. However, other measures, including capital and import controls are on the table to stabilize the Rupee currency. The Rupee faces pressures for further devaluation down to 60 per USDollar.

◄$$$ THE UNITED STATES GOVERNMENT IS BEING GUTTED BY THE PENTAGON AND WALL STREET BANKERS, TO THE TUNE OF JUST $12.4 TRILLION IN THE MOST RECENT AUDITS. THE PILFERAGE IS PART OF THE COUP D'ETAT AND TAKEOVER BY THE FASCISTS. THE FIGURE CITED DOES NOT COUNT OVER $2 TRILLION COUNTERFEITED BY JPMORGUEN IN DUPLICATE USTREASURY BONDS. THUS ONE MOTIVE FOR 911. $$$

According to the USGovt's own records, over $12.4 trillion has gone missing. The Masters in Accounting group serves as a watchdog. The total missing is over 70% of the  nation's $17 trillion in national debt. For the millions of Americans who struggle to survive and raise families, the missing funds are an outrage. But the dull public is quite oblivious. According to a 1999 Defense audit, $2.3 trillion of balances, transactions, and adjustments are inadequately documented. Not without a good faith effort to conceal the thefts in appropriations, the USMilitary money managers made almost $7 trillion in adjustments to their financial ledgers in an attempt to make things add up. Despite all, the Pentagon could not show receipts for $2.3 trillion in changes. Secy Defense Donald Rumsfeld made a public statement dated 10 September 2001, "According to some estimates, we cannot track $2.3 trillion in transactions. We cannot share information from floor to floor in this building, because it is stored on dozens of technological systems that are inaccessible or incompatible." My source indicates that the small ally nation on the Southern Mediterranean was responsible for weapons system thefts on a grand scale, all accounted for on the books as scrap metal castoffs. The next day was the infamous 911 attack, which was centered at the Pentagon's USArmy Accounting Office where scores of ranking accountants were killed. Think Semtex.

During the early days of the Iraq War, numerous cargo flights were conducted from USMilitary bases to Iraq installations, each carrying pallettes of shrink wrapped $100 bills. The stolen money amounted to $2.3 billion per flight. A total of 21 flights were completed, absconding with $6.6 billion in cash. It is their right, since the USCongress receives payoffs to look the other way as the USMilitary goes about nation building, with a moonlight business of vertically integrated narcotics industry centered in Afghanistan with distribution points at NATO bases across Europe, the doorway in Turkey. Law does not apply to security agencies, churches, and big banks. My sources indicate some storage of (possibly these) containers tucked away in Greek ports containing US$100 bills in large quantities.

From 2008 to 2009, the USFed had placed $9 trillion onto their off-balance sheet. During a congressional hearing, the Federal Reserve Inspector General could not account for the money. On a regular basis, the USFed issues loans (never to be repaid) to its favorite banker buddies. It is their right, since the USCongress granted them dictatorial powers in 1913 during a sparsely attended Christmas session. It is their right, since the USCongress receives payoffs which permit the bankers to write legislation, and to receive TARP Funds and endless banker welfare. Add up the stolen funds to arrive at $12.4 trillion stolen. The figure does not include the counterfeited USTreasury Bonds sold as duplicates by JPMorgan, totaling over $2.2 trillion. The records for those transactions were stored in Building #7 at the World Trade Center, which fell to the ground without any aircraft crashing into it. Think Semtex. See the Before Its News article (CLICK HERE). It is important to comprehend the source of the nearly $17 trillion in USGovt deficits, before the eve of debt default. War, theft, and fraud account for over half the national debt.

## USTREASURY BONDS IN TURMOIL

◄$$$  BERNANKE BENT ALL THE WAY, AVOIDING THE USE OF TAPER IN HIS SPEECH LAST WEEK, IN A GRAND GESTURE TO END THE PANIC. HE FLINCHED ON THE JULY 10TH F.O.M.C. SPEECH. THE FULL MONETARY THROTTLE WILL REMAIN THE NORM, AS SUSPECTED. NO CHANGE, THE LIVE STRESS TEST ENDED. MUCH TALK BY THE USFED CHAIRMAN TO JUSTIFY CONTINUED HYPER MONETARY INFLATION, SINCE THE ENTIRE SYSTEM HAS GROWN TOTALLY DEPENDENT UPON IT. BERNANKE CLINGS TO DELUSIONS OF RECOVERY AND BRIGHT SPOTS LIKE A PSYCHOTIC IN A BREAK FROM REALITY. $$$

So USFed Chairman Benjamin Shalom Bernanke has made it clear. Highly accommodative monetary policy will be needed for the foreseeable future, in his words. No surprise to Jackass Wannabees. On July 10th, during an eagerly anticipated speech at the National Bureau of Economic Research, Bernanke said the USEconomy continues to require the easy money road. Footnote, the Jackass graduate school department head Kadane at Carnegie Mellon Univ was a consultant at the NBER. The chairman Bernanke admitted that when looking at the USFed's dual mandate on employment and inflation, more work needed to be done. Such cavalier choice of words in a deadly dependence game. He said the 7.6% unemployment rate probably overstates the health of the labor market, but on the good side, price inflation remains below their 2% target. His actual words were that "[Fiscal policy remains] quite restrictive. Highly accommodative monetary policy for the foreseeable future is what's needed. If financial conditions were to tighten to the extent that they jeopardized the achievement of our inflation and employment objectives, then we would have to push back against that. There are some risks now that we have to pay attention to, but I think it is also the case that there are some positive factors that, with some luck, will generate somewhat faster growth and continued improvement in labor market conditions. The recent crisis has underscored the need both to strengthen our monetary policy and financial stability frameworks and to better integrate the two. The idea that this long period of calm lulled investors, financial firms, and financial regulators into paying insufficient attention to building risks must have some truth in it." So he relies upon luck to counter the capital destruction, and admits the widespread dependence. Little does the quack professor with a discredited doctoral thesis realize that he is part of the problem, and Greenspan was a chief architect of the crisis.

Bernanke is delusional, relying on luck and not science or historical precedent. No hyper monetary inflation episode has ever ended well. All end in extensive destruction. Quick comment in rebuttal. The USEconomy suffers from the zero bound in rates (ZIRP) and from the bond purchases (QE) that constitute hyper monetary inflation. The entire US financial system has become totally dependent upon the accommodation, like a heroin addict, while the nation suffers from the equivalent debilitation. Bernanke commented that policymakers are somewhat optimistic about the condition of the USEconomy, and that housing is a positive, and even household balance sheets have improved. None is remotely true, but the bankers must put something on display as positive on stage. He turned nostalgic about the 100-year history of the august institution, in an effort to deflect the broad criticism for the central bank's highly destructive policy, which is stuck like an intravenous syringe doling out heroin. He actually admitted that the prolonged period of low inflation and steady growth between 1984 and 2007, dubbed the Great Moderation, contributed to excess risk-taking that led to the subsequent crisis. Obviously, along with the advent of the derivative foundation poppycock experiment led by Greenspan, which he often praised as sophisticated off-loading of risk.

Bernanke appeared to be making an exiting assessment for his failures. He said "Rather, the right conclusion is that even in, or perhaps especially in, stable and prosperous times, monetary policy makers and financial regulators should regard safeguarding financial stability to be of equal importance as (indeed, a necessary prerequisite for) maintaining macroeconomic stability." He stressed how financial stability should be a top priority always, like a third mandate beside employment and inflation. The central bank learned nothing from the Roaring Twenties (1920 Decade) that contributed to the Great Depression. What the nation witnesses now, what the country suffers today, is the Greater Depression. Systemic collapse is assured, in progress, and unstoppable for the basic reason that the solution requires liquidation of the power centers, the big banks, never to happen. Bernanke blinked, he flinched. He gave the nation and the world a Live Stress Test, discussed fully in the June reports. The world resoundingly rejected any removal of full hyper monetary inflation, aka monetary accommodation and stimulus. It does accommodate anything except financial heroin, and it is the opposite of stimulus since the current policy causes a rise in the entire cost structure. See the CNBC article (CLICK HERE).

◄$$$ CURRENCIES WENT BERSERK WHILE BERNANKE KILLS KING DOLLAR. HE BACKTRACKED TOTALLY. THE SYSTEM CANNOT HANDLE 2.75% IN THE USTREASURY 10-YEAR YIELD. WITH TAPERING GONE, FULL BORE ACCOMMODATION WILL RESUME AS THE NORM, FULLY FORECASTED HERE. THE USFED HAS NO MORE CREDIBILITY, ALL GONE. $$$

USFed Chairman Bernanke could not have been more dovish, catering to inflation. The central bank is nowhere near achieving the labor target. The price inflation appears to be contained at 1% but the Shadow Govt Statistic calculation has been over 7% to 8% for a few years running. Expect the USGovt fiscal policy to continue to render harm to the USEconomy, since it is basic austerity, the standard poison pill. The implication is that sequestered budgets will continue to have a deflationary impact. The Bernanke speech read like an admission of failure, an apology for rattling the collective financial markets. To be sure, he was following a script from the BIS higher power, like a good dutiful soldier. Note that Bernanke will not attend the Jackson Hole conference in August. The smart money will view the recent FOMC speech as a Jackson Hole equivalent. Only the intelligent in the crowd knew that QE would never come to an end. The Hat Trick Letter has outlined numerous factors to force its endless continuation, from economic wreckage, to derivative implosion, to housing market ruin (again), to big bank carry trade reversal, and more. The Live Stress Test was an historical remarkable failure, as the QE to Infinity will prove to be.

Following the FOMC speech, with its crystal clear Bernanke promise to print endlessly ad infinitum, the after-hours collapse in the USDollar against every major currency in the world was tremendous. The Japanese Yen rose over 200 basis points from the day's highs in a surge. The British Pound pushed higher by 275 bpts from the pre-close. The Euro screamed higher by 220 bpts from the US close, as it went above the 132 mark. Notice the turmoil, confusion, and consternation just three hours before the important speech. BERNANKE FLICHED, LOSING TREMENDOUS CREDIBILITY. See the Zero Hedge article (CLICK HERE).

◄$$$ THE USDEPT TREASURY WEBSITE HAD BEEN DOWN FOR 10 HOURS ON JUNE 30TH. SPECULATION IS RIPE. PERHAPS OVERWHELMED ON FOREIGN USTBOND SALES. PERHAPS ANGRY DESPERATE PENSION FUND MANAGERS SEEKING INFORMATION. POSSIBLY SOME NEW INSTABILITIES CAUSED BY RECENT INTEREST RATE SWAP CONTRACT MOVEMENT. THE LOST VALUE IN USTBONDS IN 2Q2013 WAS THE WORST IN HISTORY. $$$

The intrepid and irrepressible Tyler Durden displayed his usual alert ways on June 30th. The USDept Treasury website was down for unscheduled maintenance. Ten hours later, the site was down apparently for other reasons. Suspect overload or darkness to conceal a derivative threat. When it returned, it was for premium members. To be sure, USGovt-run pension funds seek more information on where their investments are heading. Also, pension funds across the land are frustrated as they cannot meet their payout requirements. Maybe the USDept Treasury will claim that sequestered budget cuts smacked them broadside. Perhaps they had been hacked by domestic anti-inflation vigilantes. No explanations are expected. Let it be known that the 2Q2013 will record the largest USTreasury principal value loss in US history. In fact, the unrealized gains for entire bank industry bond portfolios just turned negative. The two month rate of loss creation in exempt AFS portfolios soared to the highest in series history, when marked to market. This is almost unprecedented, at least very indicative of deep distress. The USFed weekly H.8 report shows the damage to AFS (available for sale) bond portfolios. The consequence is much less bank lending, and much worse USEconomic recession, to contradict what morons expect is a recovery. See the Zero Hedge article (CLICK HERE).

◄$$$ CENTRAL BANKS RECENTLY SOLD A RECORD SUM OF USGOVT DEBT. THE JIG IS UP, THE BUBBLE IDENTIFIED. THE DISASTROUS GAMBIT BY BERNANKE TO DISCUSS TAPERING THE MONETIZED BOND PURCHASES RESULTED IN A GLOBAL PANIC. THE LOSSES ON USTBOND PORTFOLIOS IS ENORMOUS. THE INTEGRITY OF THE USTBOND HAS DIMINISHED. THE MOMENTUM OF UNWOUND ASSET BUBBLES IS HIGHLY DESTRUCTIVE WITH VIRTUALLY UNSTOPPABLE MOMENTUM. $$$

Central banks around the world sold a record amount of USTreasury debt securities in the last week of June. The many bond funds suffered the largest investor withdrawals in history. Financial markets recoiled and shuddered at the prospect of the US Federal Reserve ending its Quantitative Easing program. The effect is much the same as removing the heroin supply from a narcotics addict. Holdings of USTreasurys in official accounts held at the USFed on behalf of official foreign institutions dropped a record $32.4 billion to $2.93 trillion, eclipsing the prior mark of $24 billion in August 2007. The amount might not seem like much, at a mere 1.1% of the entire asset holdings. However, the volume was indeed huge, and the lost trust worse in impact. It was the third consecutive week of bond outflows in the past four weeks. Private investors are also dumping fixed income securities outside the sovereign bond arena. Bond funds tracked by EPFR Global (data provider) saw total redemptions of $23.3 billion in the week to June 26th. US-based funds were the worst hit, with withdrawals totaling $10.6 billion. The Japanese investors, big holders of USTreasury debt, dumped a net $12 billion of foreign bonds last week, their biggest sale in 14 months. The more vulnerable emerging market debt funds also saw heavy redemptions of $5.6 billion, at record setting levels. Damage hit stocks as well. Over the past five weeks, emerging market debt and equity fund outflows have totalled $35 billion, of which $22.5 billion has fled stock market funds.

Important and influential bond managers are quitting, tossing in the towel. The process began on May 22nd, when Chairman Bernanke first indicated an intention to reduce the USFed asset purchases toward the end of 2013. Yields on long-term USTreasurys have risen sharply ever since. The low was 1.62% for the TNX in early May. The high was reached in early July at 2.7% on the same TNX. Many are the twists and turns, not all of domestic US origin. The developing nations might be selling USTBonds in order to finance currency interventions, part of the Competing Currency War to reduce their own exchange rates. They wish to curtail the imported inflation from a rising domestic currency. Many emerging market nations have currencies that have been under heavy pressure. The selloff feeds upon itself. The lower value of bond funds encourage selling by investors, which forces further reductions in bond fund valuations. An endless cycle ensues, hardly virtuous, fully toxic. The illiquid summer months approach. A series of capitulation events might ensue this year.

Then comes the hidden damage from hidden mechanisms. Like the stress placed on the Interest Rate Swap derivatives. They react badly to any movement up or down. Like the sales by Wall Street banks, which are structured with carry trades that employ leverage. Their forced sales will be leveraged sales, just like on the way up, forcing a nasty overshoot called convexity on Wall Street. Bubbles have catastrophic effects, when they unwind, when they go bust. The USTreasury Bond has become the largest asset bubble in human history. See the Financial Times article (CLICK HERE).

◄$$$ PETER SCHIFF COMMENTED ON THE USFED TAPERING THE TAPER TALK. ALTHOUGH A TRUE GOLD WARRIOR (AND GOOD GUY), SCHIFF IS NOT AN EFFECTIVE ANALYST OR DEBATER, VERY FRUSTRATING TO WATCH IN THE HEAT OF BATTLE. HE OFFERS SHALLOW OBVIOUS ARGUMENTS BUT FORCEFULLY AND DUTIFULLY. TO HIS CREDIT, HE OFFERS SOME INSIGHT ON THE SIMILAR GOLD PRICE EFFECTS FROM THE 1970 DECADE. $$$

A broad shallow perspective is given, the usual from Schiff. He might be a perfect windbag to join the US Senate from the state of Connecticut. He touches on several important areas for USFed impact, like the $85 billion per month in USFed support props which cannot be removed. He cites a selloff of the gold market, without mention of naked shorting that brought the price down. He correctly cites the positive stock and housing market signals as false. He anticipates increased USFed bond purchases, despite all the rhetoric, in synch with the Jackass. When Bernanke promises of withdrawn accommodation support if the economy improves, that is not a claim that it has improved. Schiff totally misses the factor of capital destruction, like most drone economists lacking insight. He focuses mainly on the rabid growth of USGovt debt and equally staggering production of phony money by the USFed to cover federal deficits, even toxic Wall Street bonds. He focuses on the USGovt not owning Gold, and the illegitimacy of the USDollar. To give credit where due, Schiff provides a useful walk down memory lane to expose parallels in the gold market rise and correction, before likely resumption in the bull run, again. See the Euro Pacific essay on Taper Talk (CLICK HERE) and on the gold cycle (CLICK HERE).

Schiff wrote, "They [USFed] are convinced that the kindling of QE will inevitably ignite a fire in the larger economy. But the big lumber is still too dampened by debt, government spending, regulation, and high asset prices to catch fire. All we have gotten is smoke instead. A few mirrors supplied by the Fed merely completed the illusion. The larger problem of course is that even though the stimulus is the only wheels, the Fed must remove them anyways as we are cycling toward the edge of a cliff." While true that training wheels are gigantic systemic props indeed, the bigger problem is the internal wreckage from the rising cost structure and impeded profit potential across the USEconomy, along with reduced income for savings and pension funds on the carry trade. Good points made, not enough depth, but one of our guys. Honestly, the Jackass believes Schiff appears on CNBC so much, precisely because he argues the case for Gold so poorly and weakly, missing so many important convincing factors. When he appears on CNBC or other venues, the Jackass cringes because he argues with emotion, but always falls short of making additional readily available relevant points to really give a forceful argument. He never makes slamming convincing arguments, never. Too numerous are the instances over the past several years of my deep frustration in watching him.

Again Schiff wrote on an historical perspective, "The parallel between the 1970s and the current period are even more striking when you look closely at the numbers. For example, from 1971 to 1974 gold prices rose by 458% from $35 to $195.25, which was then followed by a two-year correction of nearly 50%. This reduced total gains to just under 200%. The current bull market that began back in 2000 took a bit longer to evolve, but the percentage gains are very similar. (We should allow for a more compressed time frame in the 1970s because of the sudden untethering of gold after decades of restraint.) From its 1999 low to its 2011 peak, gold rose by about 650% from $253 to $1895 per ounce, followed by a two year correction of approximately 37%, down to around $1190 per ounce. The pullback has reduced the total rally to about 370%. The mainstream is saying now, as they did then, that the pullback has invalidated fears that rising US budget deficits, overly accommodative monetary policy, and a weakening economy will combine to bring down the dollar and ignite inflation. But 1976 was not the end of the game. In all likelihood, 2013 will not be either." Agreed totally. The recent gold ambushes were designed to hide the gold exchange defaults and to conceal the ravaging effects of three full years of hyper monetary inflation.

◄$$$ MARKET MOVING INTEREST RATES UP IS THE KILLER OF THE PONZI. EXPECT MAJOR ACCIDENTS TO BE REVEALED VERY SOON IN THE INTEREST RATE DERIVATIVES. A NIGHTMARE SCENARIO IS UNFOLDING. THE LIVE STRESS TEST MIGHT HAVE BEEN AN ORCHESTRATED CHARADE TO PROVE THAT THE LONG-TERM BOND YIELDS ARE PART OF A FAIR MARKET. ALSO, THE WORLD WILL NEXT BEG FOR FURTHER MONETARY INFLATION, CALLED QUANTITATIVE EASING, AS IN Q.E. TO INFINITY. THE USFED HAS EARNED AND MERITED SOME POLITICAL COVER. BUT NEXT COME THE UNINTENDED CONSEQUENCES, OF ECONOMIC DETERIORATION AND DERIVATIVE ACCIDENTS. $$$

Rising interest rates tear down the house, wreck the paper fortresses, and expose the charade by central bankers, who have been playing with fire way too long. The Weimar signature has been evident for over three full years at ultra low interest rates. They have been reversing upward, although they must rise another 4% in the long-term bond yields to achieve anything resembling normal. The balance of incompatible goals such as low interest rates, stable currencies, and accelerating growth has been elusive, not remotely attainable. The laws of economics are bending, but against the banker syndicate. Rising interest rates undermine everything, bonds, stocks, and the economy, but their most dangerous damage is hidden with derivatives. The safe haven is being ripped apart by the sudden suction of a tornado, cut loose by lifting the Weimar devices. In the end, the hyper monetary inflation will remain firmly in place.

The beneficiaries are few. Pension funds will rejoice at the higher yield income, but cringe at the lost principal from stupid purchases in the last two years when TNX bond yields were under 2.0% for months on end. The real estate market will be torpedoed, already with mortal wounds showing. Witness the nightmare scenario that keeps central bankers and institutional investors up at night because no solution exists. Look to the Japanese experience with highly aggressive monetary ease, which saw only QE to Infinity and nothing solved. The American Delusion continues, replete with self-deception that the US outcome would be different. The Jackass warned for nine years that the US lacks many Japanese advantages, like an industrial base and trade surplus for starters. See the Safe Haven article by John Rubino (CLICK HERE).

Expect an Interest Rate Swap accident within the next couple months. Perhaps the London Whale episode in June 2012 taught the bank syndicate how to react, but their challenge transcends all human feats to rescue paper skyscrapers from movement in cyclone storms. The accident will occur, but it will be falsely reported as a FOREX swap loss or blamed on Southern European sovereign bonds. Like the London Whale massive loss, it will be from the Int Rate Swap. The big movement in the USTBond long maturities will cause the accident or accidents. They might be planned to bring down some big banks in vengeance that one cannot easily understand yet.

Rob Kirby is more harsh and direct. The Jackass agrees with his points completely except for harsh views toward ZH Durden, who is utterly outstanding but not perfect. The following are his thoughts, with my edits for readability. Blame it all on reduced consumer spending, more misdirection. Rubino (like Tyler Durden of Zero Hedge) has not a clue about what Interest Rate Swaps are, who the major players are, or what they are about. The principal players are the central banks and the USDept Treasury major slush fund, the infamous Exchange Stabilization Fund. Drawing conclusions on the basis of Rubino's commentary about long-term interest rates is foolish. The USFed never announces what they are going to do. They just DO IT. Like now, they are busily applying the brakes on the upward movement in rates. Here is where Kirby makes a bold forecast. The next big rodeo show for the government bond market is going to be engineering an excuse for 10-year bond rates to fall back under the 2% level. A recent flurry of bad economic news came out, an epic trifecta of sluggish growth when data for durable orders, housing, and confidence all slammed expectations on the downside. The GDP was set up to be the bad cop. The 1Q2013 GDP revision had been painted at 2.4% in a slight downgrade, but was finally released as 1.77% in final form. The USGovt announced a weak consumer, and let it be known that since the first revision, Personal Consumption Expenditures tumbled to just 1.83% of GDP.

Kirby concluded, "The Fed and USTreasury have much to gain by fooling the world into thinking there is legitimate price discovery in the USGovt bond complex. The Fed would be tickled if the world thought they were actually losing control of the long end of the curve. This plants the notion that they do not already control it through derivatives. They clearly do control the whole curve through OTC swaps, such as the Interest Rate Swap and the Forward Rate Agreements. If correct in my thinking, it follows that they will now allow (force) long rates down significantly and leave them there for an even longer than expected duration. The world wanted to know the Fed had an exit plan. The Fed more or less convinced everyone they could would exit.  The whole thing was a ruse. The Fed wants the world to believe they do not control the long end of the curve, like there is some semblance of a real market. This is essential going forward, for maintaining any sort of faith in USGovt bonds. The rise in rates, I believe, will be seen to have been a very temporary but convincing [orchestrated] event." Kirby therefore accuses the entire Live Stress Test as being an orchestrated event to fool the world into believing that the long end is not under control. It is under the hidden control of IRSwaps and FRAs. The unintended consequence, something Kirby described in detail last year, is the damage done to the derivative complex from the movement in long-term bond yields. With planning, maybe they controlled it. Time will tell. The part the banker powers cannot control is the rising cost structure and associated capital destruction, as eroded profitability will continue to cut deep wounds in the economy.

◄$$$ THE USTBOND COMPLEX IS UNWINDING WITH WEIRD TWISTS FROM SURGE IN FAILURES TO DELIVER. OSTENSIBLY FROM SHORTING USTBONDS, BUT PERHAPS MORE FRAUD IS SEEPING TO THE SURFACE IN DUPLICATE BONDS SOLD IN CORRUPT MANNER. THE FAILURES TO DELIVER MIGHT BE EVIDENCE INSTEAD OF SLIGHT IMBALANCES IN THE COMPLICATED GAME PLAYED BY THE EXCHANGE STABILIZATION FUND, MIXED WITH I.R.S. TAX GAMING. KIRBY CALLS THE TAX GAMING THE BRAKES TO RISING RATES. IF THE USTBOND IS TO HAVE A DEATH EXPERIENCE, IT WILL BE FROM BEING IGNORED, NOT FROM IMPLOSION. TOO MANY ARE ITS DEVICES. $$$

The confusion abounded over the Bernanke high alert comments about Tapering the QE bond monetization. As the USTreasury Bond yields have risen in the last month, so have the Failures to Deliver bonds in an upward surge. This critical indicator of both collateral shortages and technical carry trade unwinds is a rarely discussed indicator of how deeply broken the market is, courtesy of the overwhelming ownership by the USFed. Tyler Durden of Zero Hedge reasons that speculators are shorting USTBonds, but exhausting supply. My theory shared by Durden, the big Wall Street banks are reversing their leveraged USTBond carry trade, seeking buyers of their dumped bonds, finding little supply in real form apart from the futures arena and derivative complex. The bond market weakness might actually be feeding upon itself. Durden believes the USFed was motivated to Taper the QE accommodation because of collateral shortages due to their rehypothecation, and a somewhat smaller supply of securitized bonds from smaller USGovt deficits. See the Zero Hedge articles (CLICK HERE and HERE). The Jackass believes the above points have some merit, but do not explain all the dynamics in a very complex system.

Again permit Rob Kirby, premier bond expert with personal derivative experience, to enter the room. He angered Wall Street bankers too much in the 1990 decade, to the point that they shut down some Toronto outpost offices. The following are Kirby's thoughts, with my edits for readability. Durden does not understand what he is talking about. The rise in Failures to Deliver in government securities arises when there are not enough bonds to meet settlement demand, period. Durden would have us believe this is all due to shortages in supply because people want to short bonds and cannot borrow them. The rising Failures to Deliver phenomena have for the past decade been the signature of the IRS mechanism being ramped. At work is the USDept Treasury acting through the NYFed as broker to the big US banks, using the powerful Exchange Stabilization Fund (ESF). The signature move allows them to put the brakes on the rise in bond yields on the long end of the interest rate curve. If the past is any indication, the USFed will continue applying the brakes until the market realizes that long rates will not be going materially higher. Durden does not understand this concept, confirmed in personal conversations with him in the past.

Durden regards incorrectly the IRS factor to be a zero sum game, the notion that in every IRS transaction there is a buyer for every seller of USGovt securities. In a vanilla swap where both sides of the trade are bond spread players, he would be correct. The problem with his line of thinking is that the ESFund is not a bond spread player. When the ESFund receives fixed bonds, they do so naked, not supplying the spread playing banking counter-party with the bonds to hedge their trade. This forces the banking counter-party into the bond market to buy unthinkable huge volumes of USGovt bonds. The Failures to Deliver result since the derivatives overwhelm the natural market volume. The USTreasury enjoys this because the apparent supply shortage reinforces the notion that more demand for USTBonds exists than supply. The notion is patently false, total fundamental nonsense, and blatant propaganda. Settlement demand is conjured out of thin air, via the IRS tax door.

Kirby states categorically and emphatically that Failures to Deliver are not from bond shorting. The Supply & Demand imbalance is being run by the ESFund through the IRS complex. The USGovt finance ministry is trying to make the rest of world believe that there is some kind of legitimate scarcity of USTreasury Bonds. In the second half of 2011, they engineered a global flight to safety in USTBonds with the Interest Rate Swap device heavily leaned on. Morgan Stanley applied $8 trillion in such swaps. Kirby compared the trick being done to making beachgoers believe there is a scarcity of sand. Experience shows that over the years, remarkably the Failures to Deliver in USGovt have happened more or less equally when rates are falling as when they are rising. Kirby believes the big US banks will not blow up any more than the USTreasury complex will blow up. He warns that betting against JPMorgan, Citigroup, Goldman Sachs, Bank of America, and Morgan Stanley is like betting that the USTreasury and the USGovt will publicly fail. The long range forecast by the Jackass is precisely that, a USGovt debt default, but it will take a long time to occur, with a great many twists (Operation Twist with QE theme) and turns (like Tapering threats with retreats). A big special thanks to Kirby for his patience in teaching from his own experience in derivative trades.

At one time, Failures to Deliver used to be associated with the duplicate bonds sold by counterfeiters on Wall Street. This factor is clearly recalled even though a phenomenon that occurred about three years ago. While the Wall Street banks must reverse their USTBond carry trades, they must exit out of leveraged losses in a dangerous volatile situation. Kirby provides an excellent description of a big factor that is probably dominant, not totally clear though to the Jackass, always a student. Indeed, if some big players want to short USTBonds, there might not be enough bonds to do so. If some USTBonds were shorted illegally (phantom bonds), then they cannot be covered to close out the shorts unless the certificates are located in paper form. If duplicate serial numbers were used to sell bonds in the past, then attempts to sell them might result in failures, since the duplicates are desired not to be exposed. My suspicion is that Failures to Deliver are due to some shorting, but mostly to what Kirby describes in the engineered ESFund activity using the IRS tax door. To be sure, deep Wall Street corruption is behind every single moving object within the USTreasury Bond complex. Conclude the USDollar will die from being ignored, never to implode, always to inflate.

◄$$$ THE USFED CRASHES MARKETS TO DEFEND AGAINST USDOLLAR COLLAPSE. CENTRAL BANKS ARE TOLD TO ABANDON ANY GLOBAL ECONOMIC RECOVERY. USFED BEING CHALLENGED OPENLY ON MONETARY POLICIES. $$$

The word is finally reaching the public. The gold market was sent into a tailspin in order to protect the USDollar system. The gold price was sent plummeting in order to conceal a gold market default. Central banks the world over are now being influenced to lift interest rates, to permit higher prevailing bond yields. The effect will be to torpedo any hope of global economic recovery, if any existed. The foreign press has begun to recognize the vile nature of the USFed and major central bankers. Its side of being a dictatorship is being seen as palpably real. It remains to be seen whether the major central banks can bring rates back down with the USFed leading. The hideous irony is that higher rates will kill the global economy from greater cost of money, but ultra-low rates will kill global economy from higher tangible costs. No escape is offered. Therefore deploy the Gold lifeboats with Silver oars. The Federal Reserve Act of 1913 established a gigantic trust which has become an economic dictator, a veritable invisible government by the money power, in the words of Rep Charles Lindbergh, the father of the famous aviator. His son may have crossed the Atlantic Ocean, but the USFed creates oceans of toxic liquidity. See the Before Its News articles (CLICK HERE and HERE). Also see the Economic Times article (CLICK HERE).

## CONTAGION LOOMS AT THE BRINK

◄$$$ BIGGEST ASSET BUBBLE IN HISTORY IS BREAKING, THE USTREASURY BOND BUBBLE. THE DUMPING OF USTBONDS HAS BEGUN. DAMAGE WAS SEEN FROM THE SOVEREIGN BOND ARENA TO MORTGAGE BONDS, EVEN TO JUNK BONDS. THE EFFECT WILL BE DIFFICULT TO REVERSE, AS IN RESUMPTION OF HYPER INFLATION. THE MONSTER HAS BEEN RECOGNIZED FOR WHAT IT IS, AN ASSET BUBBLE. ITS FATE MIGHT BE SEALED. $$$

Th biggest bond bubble in history is turning into carnage, so claims Wolf Richter of the Testosterone Pit. Around the world is being acknowledged the bust of the largest asset bubble ever blown in history, the USTreasury Bonds. It was done with full intention, in order to attract funds, in order to make easier the financing of the runaway USGovt deficits, in order to buy time. The Powerz of the dark syndicate might be out of time. They permitted a Live Stress Test, and it failed. The USFed Chairman Bernanke talked of tapering off the financial heroin, to deny the financial market addicts, but then backed off in very clear manner like the drug dealing pharmacist he is. He is NOT an adept economist. What comes is not an ordersly reversion to normal rates, not at all. Such a controlled glide path to normal is nowhere possible. Instead will be a desperate attempt to perpetuate powerful inflation, and to justify it. The global financial instability is plainly visible everywhere.

The July 2012 low for the TNX (10-year USTreasury yield) went below 1.4%, the established bottom. The extreme a year ago was reached to assist JPMorguen escape some damage from Interest Rate Swap derivative, the lies as gigantic as the losses, fully documented in the Hat Trick Letter. The big US bank claimed the London Whale losses were over the leveraged Southern Europe bond losses, but the previous 90 days only showed positive bond movement. The real cause for the outsized losses, estimated at $100 billion (not the admitted $9 billion), was interest rate derivatives. This June, the Live Stress Test did not go well. Or perhaps it did go well, and the Western financial world did not actually collapse, only showed tremendous strain. From the 2.3% yield reached in mid-June, the TNX went to 2.7% in early July. Then finally came the Bernanke capitulation speech, as he surrendered to hyper inflation, and thus calmed the markets. They can relax and expect another few $trillion in toxic bond relief to arrive as USFed trucks that ride endless into the night, the destination OBLIVION.

Investors wonder aloud what would happen if ten-year Treasury yields were to return to more normal levels of 4% or even 5%, dragging other long-term interest rates with them. Easy, as the effect would be carnage and systemic collapse, precisely as the Jackass has warned. The USFed is trapped into inflating forever, to enforce QE to Infinity, as the Jackass has forecasted, delineated, and made clear for four years. The USFed is working to justify the endless inflation on the financial political front. Any return to normal rates would wreck the favored son big Wall Street banks, forcing them to dump USTBonds held in carry trade. The convexity would send the TNX way high in an overshoot. Any return to normal rates would cause a banking derivative nuclear event, and cause the vanishing of the entire artificial banking system foundation. Any return to normal rates would kill both the US housing market and the USEconomy, the former already dead and operating as a bank zombie picked over by private equity firms in exploit, the latter a walking dead economy that must contend with a rising water (cost) level.

Wholesale dumping of Treasuries by frustrated foreigners has already begun, as they realize they are caught in the bubble. Private foreigners dumped $30.8 billion in USTreasurys in April, an all-time record. Official holders dumped in unceremonious fashion $23.7 billion in long-term USTreasury debt, the highest since November 2008. They also dumped $30.1 billion in short-term USTreasury debt. The jig is up. Bond fund redemptions reflected the fear and mild panic. In the week ended June 12th, investors pulled $14.5 billion out of USTreasury bond funds, the second highest ever. The previous record outflow was set at $12.5 billion, one week before. Only the October 2008 massacre was greater in magnitude. Chaos has descended upon financial markets. In lockstep, average 30-year fixed rate mortgage rates jumped from 3.59% in early May to 4.15% in mid-June, continuing under 4.5% in mid-July. The mortgage refinancing bubble is imploding, no longer the ready vat from which banks have creamed off $billions in fees. The mortgage REFI index had plunged almost a robust 40% since early May at its worst.

Curiously, housing prices have risen as private equity carpetbagger (elite snakes) have entered the fray. With amply supplied funds, their investors have snatched single family homes. Not only has the USFed with its Live Stress Test caused deep damage to Wall Street banks on their bond portfolios, but they have caused wide losses to private equity funds. The next splash of cold water on the fund is the realization that the large tracts of bank REO properties suffer from physical sabotage and hostile tenants. The carpetbaggers will have their challenges. Even junk bonds are ripe for a big hit, as many had boasted the absurd low risk billboard of sub-5% bond yields. They must face high default risk soon. Their investors are pure morons. The party actually stopped on May 9th for junk bonds. The deep damage for the more sterling bonds will be told soon, the USTBonds, the USAgency Mortgage Bonds, and the select private lable Mortgage Bonds. Emerging market bonds were slaughtered as well, in particular the foreign debt securities denominated in USDollars and Euros.

Richter concluded, "These inflated prices are now colliding with rising mortgage rates, with the possibility that hot money might dump empty homes while it still can. This would make for one heck of an ugly dynamic. The absurd magnitude of the bubble was so glaring that even Fed officials who caused it began to get concerned, in part because financial institutions were loading up on junk. All because of a single word [TAPER]. To its immense credit, the Fed, with its money printing and bond buying binge that is continuing at $85 billion a month, has accomplished a unique feat. It has shifted the focus of financial markets away from awkward economic and business fundamentals to what the Fed will do next. It worked like a charm for years. But now, what the Fed will do next has been boiled down to a single innocuous sounding word: TAPER. The mere possibility that the Fed might taper its binge has pricked the most insane credit bubble mankind has ever seen. A disorderly implosion could take down some big banks." If a heroin dealer tapers, the addict goes into shock laced with convulsions, same effect.

Even the Bank of England director of financial stability Andrew Haldane considered the release of Anglo-American bond gas to pose the biggest risk to global financial stability, in his words. The USFed must determine how to exit from its reckless experiment without killing its own favored banks, the Too Big to Fail banks. After massive crooked bailouts, death at the hands of their own twisted mafia don would be embarrassing but loaded with irony. See the Zero Hedge article (CLICK HERE). Investors have been served notice. The asset bubble monster has been sighted. The Hat Trick Letter followers have known it to be an asset bubble, the biggest in history, all along.

◄$$$ EGYPT FELL FROM FOOD PRICE INFLATION, COURTESY OF THE USFED AND ITS GLOBAL EFFECT FROM QUANTITATIVE EASING. IT WAS NOT FROM POLITICAL CAUSE, OR FROM FOREIGN INTERFERENCE. IT WAS FROM ECONOMIC CAUSE, WHICH IN TURN HAD A ROOT CAUSE IN US-EXPORTED HYPER INFLATION. IF NOT DIRECTLY IMPORTED IN CAIRO, THE TREND WAS CLEAR OF MASSIVE MONETARY EXPANSION TO MATCH THE UNITED STATES, IN THE COMPETING CURRENCY WAR. $$$

Dan Rubock of Hidden Secrets of Money speaks plain sense. Few do nowadays when it comes to geopolitical events. Take Egypt. Its leadership helm was toppled by a bloodless military coup, but not from political insurrection, not from undue foreign interventions, not from anything reported in the Western press. Egypt fell from price inflation, as a result of three years of USFed hyper monetary inflation exported globally. The Arab economies have a distinction of spending over 70%, up to 85% of their income on food. The Arab Spring has a root basis in the USFed accommodation, the American monetary policy. Rubock said, "It is no secret that the situation in Egypt is deteriorating by the day, but for some bizarre reason the ultimate cause of the recent chaos remains generally unknown. Ask any friend or colleague what they think initiated the Egyptian revolution and most will come up with something like 'THE PEOPLE WERE UNHAPPY WITH THE GOVERNMENT, SO THEY RIOTED', or words to that effect. But that is only part of the story. Nobody seems to be talking about why the people were unhappy in the first place. The truth is, it was crippling levels of inflation that sparked the rioting, looting, and mayhem that Egypt is still experiencing."

The breakout of civil unrest in Tahrir Square first occurred back in 2010, amply reported even by CNBC. They correctly identified fast rising food prices as ultimately breaking the back of the Murbarek regime, as staples like meat, sugar, and vegetables had climbed out of the reach of the ordinary Egyptians. Rubock was doing investigative work for his production before the 2010 uprisings. It was easy to detect a heavy sense of desperation, he claimed. A quick review at statistics for their currency supply made easy to see the ravaging effects of devaluation. He noted a chain reaction. As the people suffered a loss of purchasing power, Egypt became more dangerous. As Egypt became more dangerous, tourism all but dried up. As tourism revenue dried up, the situation in Egypt turned unstable. Finally their military stepped in. To be sure, the people objected to volunteer programs to join the Syrian war in recent weeks, urged by the USGovt spooks. A scary feedback loop was interrupted.

At the time of the first revolution, Richard Daughty (aka Mugambo Guru) warned "No society breaks up because they do not have any money. They break up because they cannot afford to buy food. That is how societies fall apart, because of this inflation thing." The French Revolution proved the food price link to be critical. Ask King Louis XVI and Marie Antoinette, or ask their heads after they rolled into a basket. See the YouTube video (CLICK HERE), and also the Gold Silver article (CLICK HERE) and generally the Hidden Secrets of Money website (CLICK HERE). As footnote, bear in mind that the Egyptian currency is called the Pound, which makes clear the Anglo connection.

An expert on the Middle East, Islamic lands, Turkey, and India is my source EuroRaj. His experience is impressive, as is his knowledge. Better is his ability to describe the dynamics from that part of the world. He pitched in with the following thoughts, with my edits. If Egypt takes protection implicitly from Russia and even a large loan from China, that would be the clearest indication of a major shift in geopolitical balance. Also Erdogan in Turkey stands on very shaky ground, the site of widespread street violence. Erdogan is another operating piece of the Moslem Brotherhood. The entire Western alliance against Assad in Syria is in chaos. The tables have been suddenly turned. Egypt will someday be recognized as a major turning point where the West and its Anglo controllers lose their grip. Ditto for Syria, which has more exposures to come, including the US-UK devoted preference for chemical weapons, just like the Nazis. Because the Anglo-American leaders are Nazis.  Hint: NeoCon means NeoNazi, a fact the dimwitted American citizens cannot come to grips with.

◄$$$ ACCELERATED BAIL-IN PLANS ARE CALLED FOR BY THE EURO CENTRAL BANK. THEY SEEM ANXIOUS TO CONFISCATE PRIVATE FUNDS, TO START THE PROCESS OF BANK FAILURES. AN AIR OF DESPERATION PERMEATES THE GLOBE, PERHAPS A RISING MOTIVE TO COVER UP PAST SINS, BUT MORE LIKELY TO MANAGE THE COLLAPSE. THE BANKERS ARE LOSING CONTROL, AND SEEM TO WISH FOR MORE AGGRESSIVE ACTION. $$$

The Euro Central Bank has actually urged the European Parliament to accelerate the bail-in plans. The big banks must be critically ill, even teetering. Joerg Asmussen, an EuroCB policymaker, sent formal word to Brussels and the EU Commission that advised an acceleration of plans to force investors and wealthy depositors to share the costs of future bank failures. He also suggested a more precise definition of rules for these bail-in confiscations. The EuroCB is no longer willing to devote even newly created (hyper-inflation) funds in order to save the continent's big banks. The EU actually did come to agreement on a bail-in plan to target shareholders, bondholders, and rich depositors, eager to avoid a repeat of the extreme public sector bank aid. In the recent past, member states spent the equivalent of one-third of the EuroZone economic output on saving its bank sector through formal aid. Asmussen cited the current timetable of January 2019 as far too late for implementation. Concerned about the timely cleanup of a major bank, he said, "It means that we have a time gap where the harmonized resolution framework has entered into force. But one of the key resolution tools is not available to the resolution authorities. The European Parliament proposes bail-in to enter into force in 2016. That is an improvement, but I think January 2015 would be better. Markets will in any case anticipate bail-in earlier." See the UK Reuters article (CLICK HERE). Some bail-in live exercises will surely occur before 2015.

The Jackass believes that a Bail-in procedure might be intended to cover up the bank fraud and deep corruption. They appear to want to put themselves ahead of the process that is fast going out of control. They might wish to be in front of security agency database revelations. After a Bail-in event, the controversy will not be about bank behavior on their tainted balance sheets, on bond fraud, on derivative fraud. It will be about the actions to confiscate private accounts, which they call unsecured. They call their unregulated derivatives secured. In other words, private savings is expendable, to be sacrifices on their satanic altars.

◄$$$ DEBKA FILES REPORT VIOLENT RIOTS IN EASTERN SAUDI ARABIA.  THE HOUSE OF SAUD IS UNDER SEIGE. IT WILL FALL. THE POLICY OF EXPELLING FOREIGN INSURGENTS WILL DESTABILIZE THE NEIGHBORING YEMEN. THE ERUPTIONS IN SAUDI THREATEN TO ALTER THE BALANCE IN CONTROL OF THE DJIBOUTI DOORWAY PERCH OF AFRICA. $$$

Disturbances have sweept across the Saudi oil producing region to the east. The Riyadh officials have taken the usual steps that fascist regimes do, the oft-used news blackout. But the DEBKAfile reports widespread riots and clashes have been underway across the oil rich Eastern Provinces of Saudi Arabia. The conflict is between Shiite demonstrators and national security forces, leaving unknown numbers of casualties, including many dead. My sources indicate that what comes next might quickly be protests in Yemen and perhaps other countries if Saudi continues its practice to deport expats. The action results in spreading the firestorm like a wind. See the Al Jazeera article (CLICK HERE). Note that Yemen stands at the critical passageway to Africa in the Gulf of Aden, by Djibouti. The war between the United States and China, a hot military war (field deaths by soldiers in battle) that has been in progress for at least two years, focuses on the Djibouti control of the passageway.

◄$$$ THE USGOVT LEADERS AND BANK LEADERS ARE SUDDENLY AT GREAT RISK, DUE TO HACKED SECURITY AGENCY DATA BASES. A LAUNDRY LIST OF POTENTIAL DISCLOSURES BY SNOWDEN'S CAMP IS VERY REAL. THE ISSUE OF PATRIOT VERSUS TRAITOR PERTAINS TO DEFENSE OF THE FASCIST DICTATORSHIP IN POWER. $$$

An entire laundry list of potential disclosures is on the verge. The US and UK vast database has suddenly been put at risk of exposure. The Snowden team (surely he is the front man for a vast organization) has reportedly installed at least 50 back doors to the giant database, according to my source. It contains communications at the USDept State, USDept Treasury, USGovt Embassies, the USMilitary, surely the big US banks, major Pentagon contractors, as well as the obvious USGovt security and legal offices like the now infamous FBI. As footnote the FBI is rumored to be the chief organizer, planner, and execution manager for domestic events such as the Boston Marathon (an orchestrated fake incident) and Sandy Hook (a detailed child abduction).

My best security system source rarely provides information, but when it comes, it is juicy. His past information has been reliable, confirmed in cross methods with another source. He has deep security contacts in four nations. He informed me that his security agency connections warn of numerous highly embarrassing stories coming out as a nasty high volume stream in the next several months that will put the USGovt and UKGovt on the extreme defensive in a manner never seen before in modern history. He wrote, "The entire UK and US electronic surveillance infrastructure is wide open for the others to now actually download and read in real-time the entire data flow. It is called gyroscopic mirroring. It is impossible to plug the channels, since there are millions of back doors in the system that the programmers put there to get into the system for regular maintenance. Info Tech guys like Snowden have pretty much unrestricted system access, as they leave no traces wherever and whenever they go inside these systems. There will be brutal information batches to be disclosed that will put the US and UK under horrific pressure. To be sure, their credibility will be very badly damaged. You can control machines but you cannot control people or human behaviour. So the risk is high for some big false flag incident being staged to divert attention." Expect UK and US political policy to be hampered perhaps to the point of crippling the nati ons.

That the USGovt pretends to be a nation of liberty and freedom is a gigantic egregious affront, outrage, indignation, and insult to intelligence. Instead the United States has emerged as the central axis for Fascism, a loudspeaker for Propaganda, a core for Bank Fraud, a base for export of Terrorism, the monopoly for Global Narcotics, and the spawning ground for Predatory War. President Raphael Correa of Ecuador boldly put it well in direct rebuttal, as nation after nation is confronting the United States. Imagine the USGovt being reprimanded by a Banana Republic! Prepare for the United States to be isolated, then slide into the De-Industrialized Third World.

The biggest exposures for embarrassment and controversy could center upon the revelation of the inside job on 911 attacks by US bankers, US security agencies, US defense contractors, and a small MidEast ally nation on the Southern Mediterranean, or the revelation of the primary Afghan War motive to capture the heroin industry, as monopoly. These two represent treason and crime syndicate operations. Numerous other exposures could occur, like integrated financial market corruption (USDollar, USTBond, Gold, S&P500), like USFed $trillion funding to big banks in sweet deal loans, like narco money laundering with the big US banks, like deeply perverted sexual activity of US bankrs and political leaders (e.g. Mexican sex farm, the favorite of Ted Kennedy and Dick Cheney), like ritual and robot demonic practices of US leaders & Hollywood types, like major projects under Langley roof such as the Oklahoma City attack on federal building (where Fannie Mae $1.5 trillion thefts had evidence), like projects under FBI roof such as the Sandy Hook abductions and the Aurora Colorado massacre, like Wall Street executive & USGovt leader offshore slush fund accounts (see the Vatican), like vote fraud rigging in the United States national elections (using Diebold machines), like coverups of events like Goldman Sachs unix box (peek at order flow) and TWA Flight 800 in New York (the USArmy accidental Stinger missile), like USEmbassy abuses in military operations and insurrection activity, like destabilization projects in Middle East & North Africa, even Central America, like Mexican drug cartel cooperative projects (see Fast & Furious with Mr Holder), like HAARP hurricane and earthquake projects as weaponized events, like chemtrail toxic lacing as genocide events, like various virus attacks disguised as vaccination projects, like Monsanto genetic modification in preparation of virus project releases, like defensive measures against Chinese stated threats toward USD/USTBonds, like cut deals with Extra-Terrestrials, and dozens of others. Sorry if some other key disgusting projects were left out, since the Jackass did his best to be brief.

◄$$$ NOTES FROM THE VOICE ON ATMOSPHERE FOR A NEW SYSTEM. THE SYSTEM BASED UPON USDOLLAR USAGE IN TRADE SETTLEMENT WILL NOT LAST, CANNOT LAST, AND IS BROKEN. IT WILL FAIL ON ITS OWN DEVICES FROM INSOLVENCY, AVOIDED USAGE, AND CONCERTED EFFORTS TO BYPASS. EVOLUTION IS IN PROGRESS WITH GREAT EFFORTS. $$$

The Voice commented on the background sentiment for the USDollar alternative. Numerous nations have been actively working on the alternative system for over three years. He has provided Hat Trick Letter readers a regular sequence of updates over this period. He has provided emphasis to key USGovt directives that have accelerated the development of the alternative He wrote, "The many Bail-in plans declare the end of depositors putting trust into any and all banks. We shall see alternative platforms springing up all over the world, to be used by people for conducting their business transactions and doing their banking. The technology is there. People with honest and transparent concepts and systems do not need crooked regulators to screw the public out of their wealth. Barter exchange and settlement platforms using ample local money are only two alternatives. These stupid and crooked politicians need to be hugged and kissed for finally having provided the foundation reason for others to launch alternative systems for settling trade in private transactions. Last night I attended a very strange meeting on the same subject of trade settlement systems, concerning several Middle East and Africa locations. Today I received from one of my most trusted partners who works deep inside the system another message along the same lines about Europe, on transaction settlement. You could not make this up in your wildest dreams. The wheels are already off the wagon and all is on skids heading for the cliff. The current system based upon the major fiat currencies, bond foundations, and banking systems loaded with USTreasurys is unsustainable and will all come apart by default. Totalitarian regimes always come apart and so will the US version. However, there will be horrific collateral damage."

◄$$$ THE WHITE DRAGONS OF ASIA HAVE COLLECTED A FEW $TRILLION IN LEGACY USTREASURY BONDS. THEIR PURPOSE IS UNKNOWN, BUT LEVERAGE SEEMS OBVIOUS TO BRING ABOUT A DIFFERENT GLOBAL SYSTEM FOR BANKING AND TRADE. $$$

The White Dragons do not crave publicity, only justice. They have no love for the camps responsible for genocide who roam freely in the United States and England, often revered as retired leaders. The White Dragons are in possession of several $trillion in USTreasury Bonds, but not the modern variety. They own USGovt bonds that might have more gold-backing involved. In fact, much of the Chinese held bonds were given by the USGovt in exchange for Chinese gold. Plenty of precedent apparently, including the year 1999 batch tied to the Most Favored Nation granted by the US to China. The next step is leverage applied (often called blackmail) and used against the USGovt on threatened USTBond sales, or basic redemption at the USFed window. Bring the spotlights and press coverage for that event. The White Dragons might use their leveraged pressure to pave the way to execute on implementation of a non-USD solution with USTBond held hostage. The game of intrigue is at high pitch behind the scenes. The methods of confirmation are extremely difficult. My only White Dragon source only reminds of diverse but hidden banker arrests, an expanded Caribbean undersea prison, and the wrecking of all but two Rothschild banks.

 

Ben Fulford wrote in the last week of June, "Last week, representatives of Asian groups asked the White Dragon Society to help them cash trillions of dollars worth of historical bonds issued by the Federal Reserve Board. The WDS agreed on the condition the funds be partly used to finance a massive campaign to end poverty, war, and environmental destruction. For example, here is a picture of one of a set of 60 boxes each containing $125 billion worth of bonds. If the Federal Reserve Board and the BIS refuse to cash these historical bonds, then the relentless campaign against them [the leaders] will continue. The bonds pictured above and below are part of a batch of bonds given to a Chinese Nationalist army general by a US general back in the 1930s. We have confirmed with a master list at the Federal Reserve Board that they are genuine. The Feds have been trying to buy up bonds like this for a tiny fraction of their cost and then dump them in the garbage. However, the owners of this batch are insisting on full payment and they have the means of enforcing their demands." On the left is a formal bond box, and on the right is a formal $million bill. The USGovt and its mafia don USFed are in a tremendous bind. They not only have $trillions in recent year vintage USTBonds to manage from redemption, but $trillions of very old legacy USTBonds from several decades ago. Great leverage will be applied to bring about the USDollar trade alternative. See the Deus Nexus article by Fulford (CLICK HERE). Say what you wish about Fulford, but his information overlaps all too often with the Jackass sources. My eyes do roll a bit when reading the varied descriptions of rival camps and even detailed Alien references. Memories of Star Trek are too fresh.

◄$$$ LINDSEY WILLIAMS ON GOLDSEEK EXPLAINED HOW THE PLAN CALLS FOR BLOWING UP THE INTEREST RATE DERIVATIVE MARKET AND BOND REPOS. HE REFERRED TO A NEW SYSTEM READY TO BE INSTALLED, WITH GOLD AT $3000/OZ AND SILVER AT LEAST $75/OZ. $$$

Lindsey Williams served as pastor to the giant oil companies in remote locations. He has been blessed with valuable information, much of which has proved valid, but not all. His clients continue to supply him information, sometimes wondered to be disinformation. Lately the data has seemed quite valid. Recent input from his insider source is that the entire plan centers upon interest rates and planned bond market destruction. The castle dweller bankers (probably Bank For Intl Settlements) wish to raise interest rates to the point that doing so blows up the bank derivatives and repo rate instruments. When they are ready, the time determined right, the bank czars will collapse the derivatives market, so he claims. Bernanke's comments that roiled markets in June revealed an intentional test, ordered by the BIS. Its motive was to track how everything reacts, especially the interbank rates which skyrocketed as expected. The Jackass called it a Live Stress Test. They received  their confirmation. Expect little or no warning for the controlled implosion event. They will take down the financial system like an old rickety Las Vegas hotel scheduled for demolition. All paper wealth is at great risk. Only Gold & Silver assets are safe, including tangibles like farm land and art works. Williams was told one year ago that nothing would happen for 18 months, leaving about six months or more to go. Take a ringside seat for the titanic struggle that comes, if Rob Kirby is correct about the managed USTBond market using the IRS door and Interest Rate Swap levers from the powerful Exchange Stabilization Fund.

Other details along the way were mentioned by Williams. The new US Healthcare law has a hidden agenda in disrupting the USEconomy. My belief is that inserted human RFID chips will be ordered. A warning would be given by Williams before the take-down of the system, so that GoldSeek listeners could be forewarned. He anticipates a fresh new world financial system to be launched. It is ready in the wings, backed by a precious metals foundation. He was told the inherent Gold price within the new system would be $3000 per ounce, and for Silver $75 to $100 per ounce. He claims the April and June Gold and Silver market ambushes were designed to reduce the prices. They wish to drain out all physical assets they can from the markets in advance, at the cheapest prices possible. He is unaware whether the Gold & Silver prices will be knocked down further. Two emails recently received by Lindsey Williams from his insiders are posted on his website (CLICK HERE). Also, see the YouTube video (CLICK HERE). Some wonder why the architects would use outlets to forewarn people. The answer is simple. Satanists insist on forewarning their victims, and prefer to give them choices before the sacrifices. It is part of their rituals and beliefs in highly perverse fashion.

◄$$$ DISASTER STORIES ARE BECOMING COMMON IN THE ALTERNATIVE PRESS. NEVER HAVE THEY BEEN SO PREVALENT. A CATASTROPHE UNFOLDS. A MAJOR CLIMAX TO THE STORM IS NEAR, THE ONLY TRUE PROTECTION BEING GOLD & SILVER. $$$

The United States appears to be heading for a complete and total disaster, as the greatest Ponzi Scheme in modern history unravels. It centers upon the USDollar and its sidekick the USTreasury Bond. See the Zero Hedge article (CLICK HERE). A grand tsunami is coming to the American shores. Most people are not prepared, still grounded in false hope, still clinging to baseless assumptions, in full denial of what has been warned in many alternative circles. Many Americans will be wiped out, if not already by the housing bust, then by a bank confiscation ploy. It is hard to know where to place one's trust, but best in Gold & Silver kept outside the United States borders. See the Economic Collapse article (CLICK HERE) for 17 signs. The publicity focused on the fradulent corporate foundation of the USFed as central bank contractor is turning white hot. The USFed is a pure fraud, the headquarters of the banker crime syndicate, the primary money laundering firm, the dispenser of $trillion gifts. See the Zero Hedge article (CLICK HERE). A grand shock is coming, a wave to alter humanity and its places of business and residences. Events will change the financial system and install a bizarre new system called many things. The world has never seen anything like this in its entire history. See the interview of Robert Fitzwilson, founder of The Portola Group, in a King World interview (CLICK HERE). Not 2% of Americans are ready, and most own Gold & Silver as ballast for the storm.

## CHINESE YUAN GROWS IN STATURE

◄$$$ THE EURO CENTRAL BANK IS PURSUING AN AGREEMENT WITH THE PEOPLES BANK OF CHINA THAT WOULD ALLOW IT TO EXCHANGE EUROS WITH LIMIT LINE OF 800 BILLION YUAN (US$130 BILLION). EUROPE IS SCRAMBLING TO OBTAIN A SIGNIFICANT TABLE FULL OF CHINESE YUAN IN THE SWAP FACILITY. THE COMPETITION IS GAINING MOMENTUM IN EUROPE FOR THE YUAN CURRENCY TRADE, THE LEADER IS STILL LONDON (FOR NOW). IN THE PROCESS, THE USDOLLAR WILL BE PUSHED ASIDE, AND THE UNITED STATES MORE ISOLATED. $$$

Frankfurt is vying to become an offshore Chinese Yuan trading center of Europe. The German financial capital is host for numerous local financial institutions who are pushing for a potential currency swap agreement between the Euro Central Bank and the Peoples Bank of China. The Frankfurt Main Finance, a financial association that represents major German banks, anticipates the official signing of an accord with the EuroCB valued at CNY 800 billion (=US$130 bn) in a formal currency swap with Beijing. If approved, it will surpass the CNY 200 billion agreement signed by the Bank of England and the PBOC a few months ago, four-fold larger. The benefits will be reduced trading risk and lower hedging costs, which should further boost trade between Europe and China, in particular Germany. The Frankfurt Main president Lutz Raettig commented that stronger Sino-German economic relations and closer ties between the financial sector and industries are not found in other financial centers in Europe. Frankfurt, home to the Euro Central Bank, is in competition with rivals such as London, Paris, and Zurich to win Yuan business.

Germany has a competitive edge, since the industrial powerhouse already has excellent relations with China, already a significant exporter to Chinese businesses.  Corporate chieftains from Volkswagen (vehicles) and Messer Group (industrial gases) and GEO Group (technology) are meeting with officials in support of the initiative. Stefan Strater at the Frankfurt branch of Industrial & Commercial Bank of China noted that China needs to further liberalize its financial market, in order to convince international investors of the value of its currency. The EuroCB currency swap will significantly ramp up Yuan business for banks in Germany. Yuan payments in Germany trade increased by 71% between April and May, the biggest increase in the top 20 countries, according to SWIFT bank data. Germany is ranked #8 in the world in terms of the Yuan payment volume. Excluding Hong Kong, London currently is the largest offshore Yuan market in Europe with total deposits exceeding CNY 100 billion, while Paris has deposits of CNY 10 billion. See the China Daily article (CLICK HERE) and the Bloomberg article (CLICK HERE).

◄$$$ BUNDESBANK OFFERS GUIDANCE ON THE CHINESE YUAN BECOMING THE NEXT GLOBAL RESERVE CURRENCY. TRADE IN CHINESE CURRENCY SETTLEMENT IS SET TO ACCOUNT FOR 20% TO 30% OF THE GLOBAL PIE. THE GROWING CONVERTIBILITY OF THE YUAN PAVES THE WAY FOR ITS WIDER USAGE. EXPECT MORE PROGRESS ON A CONVERTIBLE YUAN. $$$

Joachim Nagel of the Bundesbank (German central bank) anticipates the Chinese currency is well on its way to becoming one of the future global reserve currencies, in his words. To be sure, the USDollar is still the most commonly used currency for settling trade with China. However, from zero in 2010, the Yuan is currently used to settle over 12% of trading global transactions, a figure likley to increase much higher. The Yuan's pathway is paved by its increasing convertibility. The significance of the renminbi has increased greatly over the last few years. The name renminbi is often used, which means people's money in Chinese language. Given the growth in its usage, the Yuan has already achieved the status of a trading currency. See the Zero Hedge article (CLICK HERE). From the 15th Century, the mantle of global reserve currencies has been passed from Portugal to Spain to Netherlands to France to Britain to the United States. It will next go to China. The currency leadership follows industrial strength in the modern era.

According to a poll conducted by Standard Chartered Bank and the Bank of China, almost 14% of China's current trade is settled in Yuan currency, up from only 3% in 2010. The sample was taken from 3000 foreign and domestic clients. Cross-border Yuan settlement at the Bank of China amounted to CNY 1.6 trillion during the first half of 2013. In all, 77% of the banks Chinese domestic clients and 61% of foreign clients plan to utilize the Yuan in cross-border trade or to grow upon current levels of settlement. More than 50% of the respondents of a recent poll said the volume of cross border Yuan trade would account for 20% to 30% of all cross border trade in the next five years. The study was published by Bank of China, released on July 12th. Yi Gang, deputy governor of the Peoples Bank of China, stressed that China would continue to promote exchange rate reform and to make further progress in the capital account convertibility. See the BRICS Post article (CLICK HERE).

◄$$$ SWITZERLAND HAS JOINED THE RACE TO BE TRADING HUB FOR CHINESE YUAN. THE ISOLATION OF THE UNITED STATES IS THE BACK DRAFT EFFECT. NOTHING CONCRETE HAS BEEN AGREED UPON WITH THE SWISS, BUT TALKS CONTINUE TOWARD HAVING A SWAP FACILITY IN PLACE SOON. $$$

Switzerland is bidding to become an offshore Yuan trading center in Europe, competing with Frankfurt and London. The competition heats up to secure a slice of trade in the Chinese currency. Economy Minister Johann Schneider-Ammann met officials in China, concerning the prospect of installing a Yuan trading hub in Central Europe. While no official talks have taken place, the minister said he hopes the idea will become more seriously discussed in the coming weeks or months. Leaders of China, the world's second largest economy, are actively promoting greater use of the Yuan in international trade and finance. They wish to lessen the nation's dependence on the USDollar, by working toward making the Yuan currency convertible for investment purposes. Zurich competes with London, Paris, and Frankfurt among the financial trading centers in Europe.

Not left out, Canada is working in the same direction, within the American shadow. Toronto wishes to establish the the first North American trading hub. Growing trade with China is the driving force for Toronto and Canada to construct a viable Yuan hub. London remains the primary center, with its gigantic $4 trillion in daily FOREX trading. With its swap accord, London became the first among European central banks to establish such a facility with the Asian nation. The important point is not which is biggest, but that the Yuan trading centers are springing up like massive trees to overshadow European trade outside the USDollar. The United States will be isolated, as it clings desperately to a dying currency turned toxic. See the Bloomberg article (CLICK HERE).

◄$$$ CANADA TO USE YUAN CURRENCY IN CHINESE TRADE. IT WILL PUSH TOWARD A FORMAL YUAN SWAP FACILITY IN FUTURE MONTHS. TORONTO WILL CREATE THE FIRST SITE IN NORTH AMERICA. $$$

As preface, Canada has a large Chinese population. There were 1.5 million people of Chinese ancestry living in Canada as of 2011, equal to 4% of the population. The city of Toronto is home to 40% of the nation's Chinese population. Toronto has begun a formal review to become Yuan Currency trading hub. Some of the largest Canadian banks, insurance companies, and pension funds met with government representatives and the Bank of Canada on June 21st to discuss establishing a Chinese Yuan trading hub, according to the Toronto Financial Services Alliance. The industry group set up the meeting held in Toronto. Representatives from Chinese banks also attended the meeting, to date not named. The leaders are watching carefully the developments in London, Singapore, and Hong Kong. The EuroCentral Bank is near a completed deal for such a hub. The Bank of England signed a similar agreement in June, joining other nations like Australia, Turkey, Brazil, and South Korea. The global initiative is on full throttle, as China pushes for greater usage of its currency outside the mainland. To install a trading hub, a nation's central bank must have an agreement with the Chinese central bank to swap its currency for Yuan, through an established list of major participating banks. In future years, the political influence of China will grow inside Canada. The trade deficit for Canada with China reached C$31.4 billion (=US$30 bn) last year, according to Statistics Canada. See the Bloomberg article (CLICK HERE).

The initiative is early in development. Maura Drew-Lytle from the Canadian Bankers Assn represents the country's banking industry. She said their members are assessing the proposition, but no other information is offered. A spokesmen for Canada's five biggest banks (Royal Bank of Canada, Toronto Dominion Bank, Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank of Commerce) declined to comment. In addition, HSBC, Industrial & Commercial Bank of China, and the Bank of China attended the meeting, reported by the Shanghai Daily. Trade goes parallel with acquisitions, which have been prevalent. Last year the Canadian Govt approved the CNOOC purchase of Calgary-based energy producer Nexen Ltd for C$15.1 billion. National leaders stated that further acquisitions would be approved of businesses in Canada's oil sands by government backed companies only under exceptional circumstances. See the Reuters article (CLICK HERE).

◄$$$ SHANGHAI AND BEIJING HAVE BEGUN TRADING THE YUAN AGAINST AUSTRALIAN DOLLARS AND CANADIAN DOLLARS. ITS DOMESTIC FOREIGN EXCHANGE MARKET IS GAINING TRACTION. THE DOMESTIC CHINESE FOREIGN EXCHANGE IS GROWING IN STATURE. $$$

China's domestic foreign exchange market announced in late June that it would imminently launch trading of the Yuan against the Australian Dollar and Canadian Dollar. The latest dollars add to Beijing efforts to promote the use of its currency. The confirmed report pertains to the China Foreign Exchange Trade System (CFETS), whose mission is to reduce dependence upon the USDollar. Trade will be simplified in an assortment of items from energy to manufactured goods. Analysts claim that China needed to add direct Yuan trading against the AusDollar because of increasing deals between China and Australia, primarily in the mining sector. A trader at a European bank in Shanghai said, "CFETS said last November when it launched Yuan/Ruble trading that it would gradually list all major world currencies against the Yuan. Both Australia and Canada are among China's main trade partners. So the move is not a surprise." Next in line for CFETS inclusion in currency trading are expected to be the Singapore Dollar and the Korean Won. The current list of currencies traded formally includes the USDollar, Euro, British Pound, Japanese Yen, Hong Kong Dollar, Malaysian Ringgit, and Russian Ruble.

The Chinese Yuan has attracted increasing global attention as the Chinese economy recently surpassed Japan to become the second largest in the world. The Yuan is not yet fully convertible under the capital account but important progress has been made in this direction. Formal efforts to raise its status have been high priority projects. The Chinese Govt has converted Hong Kong into a center for offshore Yuan, thus creating bigger Yuan pools outside mainland China. See the Business Financial Post article (CLICK HERE) and the Shanghai Daily article (CLICK HERE). Witness the new standard American Nightmare, as the USDollar is gradually displaced. The American public, including some smart Jackass friends, seem oblivious and in full denial. The first step is for the Chinese Yuan Swap to wean nations off the USDollar in trade settlement. Later more Chinese Govt Bond trade and investment will occur, when the Yuan is more convertible. They are working on the Capital Account. Later still, the Gold-backed Yuan will be the kill switch device. It will be coordinated with the Eurasian Trade Zone development and energy pipeline buildout.

## POTENTIAL TRIGGER EVENT

◄$$$ DOMINO OF CONTAGION ON THE VERGE OF OCCURRING. THE PRIMARY RISK LOCATION IS DEUTSCHE BANK. THE ASSOCIATED RISK LOCATIONS ARE BARCLAYS IN LONDON, AND CITIGROUP IN NEW YORK. THE CONTAGION EFFECT WILL BE TOTAL, REACHING ALL PLAGUED MAJOR FINANCIAL MARKETS. MANY ARE THE POSSIBLE TRIGGERS, BUT THE GIANT GERMAN BANK IS DISTRACTED WITH LEGAL PROSECUTION, UNABLE TO DEVOTE FULL RESOURCES TOWARD DEFENSE OF THE EMBATTLED SYSTEM FROM ITS CENTRAL EUROPE PILLBOX. $$$

While many analysts and informed observers expected the LIBOR bank scandal to bring down Barclays, it did not happen. The big Anglo banks are protected by the USFed and Bank of England, with unlimited funds. They are also protected from prosecution, not due to Too Big to Fail, but rather Too Big to Jail since they are sanctuaries built in criminal organizations. The LIBOR market has continued its price fixing, with defiance and inability of detractors to stop it. The many lawsuits over improper charges in the adjustable rate mortgage arena, for instance, seem to be suppressed and go nowhere. If the cases proceed, the awards or settlements will be a tiny fraction of the damage. The game continues apace. However, a new threat seems powerful from the Central European flank, away from the sacred ground of London and New York. If the Jackass were in charge of setting the Vegas line on the next big Western bank to collapse in failure, it would be probably Deutsche Bank with favored odds. The immediate domino dead set to fail from profound contagion next would be Barclays and Citigroup, assured of failures also.

The air of a Deutsche Bank failure is filled with a different stench. To be sure, the LIBOR price fixing affects many different cost of funds. But the D-Bank case involves a raft of rancid ruined vehicles and markets. It involves concealed collateral in USTBonds, falsified bank derivatives with FOREX, corrupted devices used in accounting for Southern Europe debt, and much more. The deceptions used in Brazilian Bond accounting to conceal Italian debt risk is the latest straw. The D-Bank case involves the Interpol Serious Fraud Division. The case resulted in the dismissal of CEO Josef Ackerman a year ago. Imagine the hubbub if JPMorgan CEO Dimon were dismissed due to bond corruption in accounting fraud. Numerous D-Bank officials have flipped, offering testimony and documents to Interpol. A big fire is being built under the D-Bank roof. Few seem to notice the billowing smoke. My source has German connections, and he calls the big bank as walking down the corridor toward its execution in a death sentence.

Pressures are enormous for a failure in Deutsche Bank, or Barclays, or Citigroup, every single night in accounting and reserves compliance. Factor in the Basel III rules that gradually go into effect, forcing more collateral held in reserves. The effect of any big bank failure to occur next will be ten times more extensive and all-embracing in damage than Lehman failure. Yet another factor underscores the heightened risk. D-Bank cannot prevent the breakdown due to their own legal defense in diversion. They have too many resources devoted to legal defense and cooperation with prosecutors. Bank officials who might have offered steady support at the many desks have flipped, working with Interpol to build cases against the London and New York gangster banksters. One can only wonder if a murder case is coming. Recently, D-Bank came under BaFin investigation (the Federal Financial Supervisory Authority in Germany), a no nonsense organization very much unlike the SEC mole puppets in the United States.

A great contagion event could soon occur, of unknown origin. Some critical fingers point to Deutsche Bank as trigger. The giant German bank is tied with every major Western bank and every major financial market. They were complicit in the Gold lease game, in the Mortgage Bond game, in the USTreasury Bond game, in the FOREX game, and in all markets contorted beyond description away from equilibrium based pricing. The avenues that work toward breakdown will be from derivatives and counter-party risk on OTC contracts. Since 2008, the defense at desks has been more difficult. The risk is manifested by the group tethering phenomenon among the big banks.

To be sure, the Basel III strictures were designed to announce with megaphones that the free money party might be over, the Kool-Aid to be taken away. Beware of the obvious, especially when removal of USFed bond monetization support would result in a global collapse. The continued harmful inflation will soon be judged more the lesser of two evils. However, as the USFed orchestrates the relaxation of long-term rates, they will acquire political permission (green light) to proceed with another chapter of hyper monetary inflation. A very complex orchestrated script is being played in order to win approval for more destructive inflation, even as the damage to integrity in financial markets and economies is obvious. One must be on the lookout for targeted bank failures by the London and New York bankers, like hired financial slaughter killings intended to bury the criminal evidence. But they might not be able to contain the fallout damage. See the Zero Hedge article (CLICK HERE).

◄$$$ A NEW FRONT HAS OPENED AGAINST DEUTSCHE BANK WITH REVELATION OF SOVEREIGN BOND RACKET. DEUTSCHE BANK HID DERIVATIVES WORTH 400 BILLION EUROS. QUESTIONS HAVE ARISEN ON POTENTIAL CONNECTION WITH BULLION BANK LEASE PROGRAMS. A STRING OF IMPROPERLY ACCOUNTED LOANS IS BEING REVEALED THAT INCLUDES GREECE. APART FROM FRAUD, THE PLAIN TRUTH IS THAT DEUTSCHE BANK IS GROTESQUELY UNDER-CAPITALIZED, FAR LESS THAN THE PREVIOUSLY UNDERSTOOD LACK OF CAPITALIZATION. $$$

A grand web of deceit, reckless lending, and accounting fraud is evident in the Deutsche Bank trail. Offsetting tactics were used to conceal the levels of debt and the risk exposure to the big German bank as a regular practice of deceit. It is unraveling and going out of control, the bank a veritable ticking time bomb for embattled executives in rotation. The bank is being accused of hiding risk to their investors in a string of large transactions in extended credit to foreign nations. Since year 2008, when the grand Western banking system bust occurred, almost $400 billion were lent by Deutsche Bank, much of the volume veiled from their own bank investors (owners) and concealed by their complicitous auditors. In doing so, the bank jeopardized the financial system. The destination for the bank loans included countries from Brazil to Italy, but none of the transactions appear in the balance sheet. However, the claims of the bank continue to exist. This is the new revelation from internal documents of Deutsche Bank. One reference is of EUR 2.5 billion, which displays the approach used in deceitful accounting methods. Involved are the Italian Banca Monte Paschi (EUR 2 billion loan), and Banco do Brasil. A similar credit involves Dexia, the Franco-Belgian bank, before it accepted government bailouts. A pattern is laid out bare. Since 2002, the German bank is among the top three underwriters of international bonds, as per data compiled by Bloomberg.

The new accounting malfeasance scandal could bring down Deutsche Bank. A banker source from Central Europe commented, under benefit of numerous German contacts. He said, "It basically states, in great detail, that DB has a EUR400 billion risk on its plate, which they camouflaged with a lot of trickery in order to keep it off their balance sheet. This liability will most likely blow up in their faces and will be the ultimate kill shot for the giant German banks. The article and its analysis is a grand revelation that makes the top executives sweat blood and worse."

The opaqueness and complexity of $295.5 billion in such transactions is under review, suddenly revealed. In none of the credits, the German bank has its own name on the balance sheet. D-Bank instead attempted to offset corresponding payment obligations in turn. This is basic accounting fraud. The total amount that the bank published in April, under the new IFRS reporting standards, corresponds to 19% of the assets of the Bank issued at EUR 2.03 trillion. The bank claims the netted amounts of credit are irrelevant for key balance sheet figures, which is lunatic and false. The easy conclusion is that capital requirements are veiled and averted from all parties from investors to regulators. The Berlin-based KPMG firm has served as auditors of D-Bank since 1990. The two co-CEOs of Deutsche Bank, Anshu Jain and Juergen Fitschen, have been telling investors that the bank is adequately capitalized in relation to the balance sheet to protect against potential losses. Furthermore, D-Bank benefited from transactions in connection with the loans, from the sale of Credit Default Swaps on government bonds. Hence, profiteering on insurance from concealed loans compounds the fraud. Documents indicate usage of assets in offset, rather than declared collateral. A failed attempt to use comparable accounting methods took place with Banco Popolare in Italy back in 2009, another bank supported by the state. Furthermore, the same accounting shows up with Greek loans. They involve long-term repurchase agreements with National Bank of Greece and Hellenic Postbank of Greece, as well as Al Khaliji from Qatar. The same offsetting fraud is present in a pattern. The type of loans are called structured repo transactions.

The rapidly growing portfolio volume normally would have forced D-Bank to raise more money from investors. Thomas Selling is Professor Emeritus of Accounting at the Thunderbird School of Global Mgmt in Glendale Arizona. He said, "Investors rely on the statements in the financial statements in order to get a neutral picture of the risk of the bank, and this image has been distorted. This makes the balance sheet look less risky than it really is." Deutsche Bank is ranked last among the largest globally active banks on the leverage ratio, a debt ratio calculated from the proportion of available capital to total assets. This according to a December 31st report from data collected by the FDIC in the United States. Kian Abouhossein at JPMorgan Chase in London, estimated in a report to clients on July 4th that the German bank could face a capital shortage in the amount of EUR 12.3 billion, based upon Basel III rules. The amount might be sufficient to bring down the bank, or to force a merger. See the Bloomberg article (CLICK HERE) and the translated German article (CLICK HERE).

◄$$$ A FAILURE BY DEUTSCHE BANK WOULD RESULT IN A SYSTEMIC FAILURE, SINCE THE BIG GERMAN BANK IS LASHED WITH EVERY OTHER BIG WESTERN BANK AND EVERY SOVEREIGN BOND. MORE LIKELY PERHAPS IS A MERGER OF DEUTSCHE BANK WITH ANOTHER GIANT BANK. $$$

The Voice pitched in with a comment. He wrote, "When I wrote a white paper in 1985 predicting the collapse of the entire Soviet East Bloc, including the Soviet Union (CCCP) some time during the 1993-1995 timeframe, people went ballistic and thought I had gone mad. Things came apart in 1989. Too Big to Fail? Just watch what is going to unfold not before long. It will be very very ugly. The bank is being attacked from several sides. The recent accounting disclosures reveal a pattern used for many years. It is unraveling. Their CEO was forced out. Many top executives are cooperating with Interpol. Many secrets are going to come out. What is happening with DB goes higher than judges and politicians. Hear this, up to 60 thousand metric tons of Allocated Gold certificates having been sold to their clients. No need to analyze anything else. It is going to blow up."

Back to the Jackass here. Be on the lookout for Deutsche Bank to suffer a death experience, or a near death cardiac episode from gross insolvency, or a grand restructure event with significant liquidations, or a minor restructure to mask a larger hidden one. It should happen soon, since the DB resources are not fully geared to operations, but rather legal defense. The events do not go according to real live pressures in recent years. When D-Bank goes down, the impact will be ten times worse than Lehman's death (kill job, execution). The contagion will hit the derivative complex hard, starting with FOREX currency swaps, then Interest Rate Swaps. The Voice in private emails has mentioned repeatedly the D-Bank link in the FOREX angle of derivatives. The Jackass never believes the too big to fail concept, never. Usually it means a very long dragged out sequence. After 2013 turned, all is possible since the QE to Infinity weakened all internal structures both to financial integrity (wrong asset pricing) and business integrity (raised cost system). The biggest will fail, and create some gigantic black holes, causing systemic collateral damage via grand contagion. The key events were the LIBOR scandal, the MFGlobal theft, London Whale, the April gold market smash, all under the growing dark shadow of Basel III rules being imposed.

All is falling apart with great speed, now visible. The big change is that the fractures are more visible in 2013. When Deutsche Bank falls, or groans with an episode, it will smack various derivatives, the vaporous girders which support the entire Western banking system. Here is the key. If any of the top dozen or more huge international banks goes down, it sets off a daisy chain of explosions in the vast $1.6 quadrillion derivative market, most of which is unregulated and off the exchanges (over the counter) in a mutual destruction sequence. Without doubt, most of the major banks are interwoven with rotten risky leveraged derivatives. The big Western banks have been living as a group on borrowed time. Therefore, expect the USFed will be obliged to expand its balance sheet to obscene levels. It will be interesting to watch, especially since the USFed has possibly turned over a sizeable core of its balance sheet to the USDept Treasury.

Rob Kirby pitched in once more, a busy bee with the Jackass discussions. Here are some of his thoughts with my edits for readability. Don't bet the farm on Deutsche Bank will fail anytime soon. Their derivatives book is too big to ever allow them to fail, much like Morgan Stanley. When you stop and consider that virtually all of their $25+ trillion in derivatives are OTC swaps with central banks, one begins to appreciate that they are indeed a critical center, along with all Wall Street banks, together lashed with Barclays and HSBC. They have a prime directive, to maintain Zero Interest Rate Policy nested within the USTreasury Bond complex on behalf of the USFed. If Deutsche Bank indeed fails, it will be beyond very ugly. Because if they fail, so does the entire Western bank team. Include on the list from a contagion that would not quit, are also big banks across France and Germany. At risk of implosion would be the entire EU and all Western nations. They should fail, just as Morgan Stanley should have failed years ago. But it will not be allowed to happen. The only option is to merge Deutsche Bank with another bank deemed too big to fail, thus creating a bigger monster. To be sure, that task might be a dangerous operation to perform. Kirby is not saying DB cannot fail. He stresses that the implications of Deutsche Bank failing are much much bigger than one bank failing. Betting that Deutsche Bank will fail is a much bigger bet that all Western banks collapse in a simultaneous string of closely related and closely timed events. A bank as large as D-Bank intertwined with the financial system and governments cannot fail by itself.

A Chicago-based contact named George added some information. His thoughts follow with my edits. The derivative volume has not shrunk in recent years, its total book surely hard to quantify. The US money center banks have been accumulating massive amounts of securities for the last five years, virtually all hidden at the end of the quarter. They evade the balance sheet exposure at quarter end both off-balance sheet transactions (like swaps) and by more derivatives, a common practice widely known. The market accommodates them well, with swaps that are valid only for the last few days of the quarter. They are specifically designed to offset those positions for reporting purposes. If some big banks go down, it will be like simultaneous black swans swirling around neatly arranged ponds falling into cascades of black holes. All these interest rate, currency, equity swaps, default swaps, and other forms of off-exchange derivatives are absolutely rife with counter-party risk. They are thoroughly woven through the one or two dozen largest banks. If a bank as big as D-Bank goes down, then all the counter-party risk of every derivative they hold or wrote spills onto a variety of other money center banks. The damage is not measurable.

George went on to explain the change of winds in the gold market. Gold has been probably fractionalized 10:1 or more for years. The introduction of metal Exchange Traded Funds (GLD, SLV) with banksters serving as vault keepers greatly expanded the game. It made for the recycling of ETF paper witnessed as in shorted shares. The game changed radically when China & Russia stopped exporting gold, and in fact became net importers. Then came vast demand from India. It is almost game over when nations started to demand their gold back from the United States. Finally the flows went into reverse, enough to build pressure to overwhelm the Ponzi. We are fast approaching game over, since the corrupt devices are all interwoven.

◄$$$ A CRACK IN THE BANK DERIVATIVE FACADE IS IN PROGRESS. THE EUROPEAN AUTHORITIES HAVE FILED LAWSUIT AGAINST 13 BIG BANKS OVER COLLUSION. $$$

The collusion charged is over Credit Default Swaps designed to prevent the exchanges from correctly pricing everything from soup to nuts. Bank reform is not dead. A new front has opened up, in continuation of the ongoing saga and war waged against Gary Gensler of the CFTC. He lost his job when fired by Obama, and the behest of his Wall Street handlers for attempting to pressure the big banks into properly accounting for derivatives. Events in the recent past have seen the USDept Treasury and the Financial Services Authority in the UK pushed to enact legislation for a renewed split of Glass-Steagall type, only to be obstructed. The result was ring fences, not a wall. A renegade European regulatory entity has launched a major attack on a big derivatives profits engine, credit default swaps. The renegade is the European Commission itself, which has filed charges against 13 banks for allegedly conspiring to block exchanges from challenging their business model. The document detailing the charges runs to almost 400 pages, as it alleges collusion to ensure the bond insurance contracts remained an over-the-counter (OTC) product, thus preserving the banks lucrative role as middlemen.

Investigators in Brussels claim the banks from 2006 to 2009 protected their indispensable position in the $25 trillion global market through control of a trade body and information provider, which did the vetting, thus building obstacles for entry. The less costly exchanges such as Deutsche Borse and CME Group (US) were blocked out as competitors. Clients were forced into the more costly OTC market. The EU competition chief Joaquín Almunia claimed that keeping CDSwap trades in the opaque OTC market weakened the financial system, and increasing counter-party risks, all clearly exposed after the collapse of Lehman Brothers.

The Wall Street Journal reported that Markit and ISDA, providers of data and licensing in the market, were the tools used by big European banks to block competition in the CDS trading. The banks allegedly instructed Markit and ISDA to sell licenses for their data and index benchmarks only for Over-The-Counter trading. Other efforts took place like routing trades to clearing houses deemed unlikely to develop exchange traded CDSwap contracts that could take business away from the banks. Clearing houses are entities that absorb losses if one of the parties to a derivative contract defaults. See the Naked Capitalism article (CLICK HERE).

## INSOLVENT BANKS & BAIL-INS

◄$$$ MARGIN CALLS COMING ON TOO-BIG-TO-FAIL US-BANKS. THE USFED SEEMS MOTIVATED TO PULL THE PLUG ON THE BIG DEAD US-BANKS, BUT THEY MIGHT BE TIMID AND HESITANT. ON ONE EXTREME IS THE MOTIVE TO INSTALL A FASCIST BANKER STATE. ON THE OTHER EXTREME IS TO PUT THE BANKING SYSTEM ON FIRM FOOTING. IF THE GLOBAL FASCISTS ARE NOT READY, THEY WILL SIMPLY CONTINUE THE HYPER MONETARY INFLATION UNTIL THE FINANCIAL STRUCTURE COLLAPSES FROM FAULTY INTEGRITY, DESPITE THEIR BEST EFFORTS (AS USUAL). MANY BANK REFORMS ARE IN THE PLANS FOR PENDING IMPLEMENTATION. SHOCKS TO THE SYSTEM ARE GOING TO HAPPEN IN COMMON HAPPENSTANCES. $$$

Permit some rambling thoughts, since confusion abounds. What follows is speculation, but somewhat informed. Clearly the banking syndicate with headquarters for over a century in Basel Switzerland, and operational servile outpost at the USFed in New York City, wish to install a global banker dictatorship, a totalitarian state where bankers rule with an iron fist. They appear to lust for the power to obstruct, steal, kill, molest, and torture. That much is crystal clear. The Basel III Rules seem like pulling the plug on the global financial system and the global economy, in order to further their plan. In the ruins would be martial law, emergency tribunals, great loss of private wealth, even prison camps. My suspicion is that not only indoctrination in the camps would be routine, but organ harvesting for black market sale. No laws, no rights, no self-defense will be afforded in any federal camps, not where nazis run them. Historical precedent is too ripe with examples. As footnote, Joseph Mengele was never killed, the chemist and human anatomy experimenter in tolerance levels. He was hired by the CIA after World War II. His work continued and blossomed in the human multiple personality trauma-based robot programs, with a satanic theme, and thousands of people enrolled and trapped.

The Basel III Rules are about enforcing proper collateral and bank reserves to make for a better stronger banking system. The rules are sure to put some boundaries on the runaway derivatives, now totally unregulated, which threaten to strangle the system and to vanish private wealth. Leverage ratio rules sound good until they are enforced. The rules might actually elevate Gold to a bank reserve asset, in which case it will receive a boost in value so as to aid the bank solvency. It all sounds like a lofty worthwhile set of goals, except the big Western banks are short a few $trillion. It cannot come from thin air, or the Weimar press deployed by the USFed with the EuroCB and Bank of England and Bank of Japan following in suit. The implicit indirect cost of pouring out free money is to raise the cost structure, a phenomenon not 5% of economists comprehend, due to stupidity, alliance to the syndicate, and bad education.

The banker syndicate is not ready to take control, since they cannot marshall the important forces of the world. They cannot put into place the proper collateral and reserve levels, which leaves the system to collapse. Notice how quickly the global financial structure threatened to fracture when the USFed simply talked about withdrawal of monetary easing. It is like calling for a coup d'etat but the key men are not in place, lacking support at the key locations. The Basel-based bank syndicate might be powerful, but they do not have global support outside their camp, and outside the Western political leadership rooms. So the Too Big to Fail banks will continue to be propped, continue to commit grand larceny, continue to bribe government officials, and continue to rig the financial markets. They will not go to jail for crimes. However, they cannot prevail since all the important critical systems are broken, are listing badly, and are collapsing. It seems this is occurring simultaneously.

Some key event items are worthy of note that reinforce the notion of syndicate cogs being removed. Geithner is gone from his USDept Treasury post, replaced by a Citigroup errand boy Jacob Lew. Ackerman is gone from his Deutsche Bank CEO post, where cables and stays were managed. Bob Diamond of Barclays is gone, where the LIBOR price rigging was centered. Jon Corzine of MF-Global is gone, the firm dissolved. The Hong Kong Mercantile Exchange was shut down, where the Rothschild tools had hoped to manage the gold cable from the East. King Abdullah is clinically dead in Saudi Arabia, leaving the throne open and chaos at the door, making certain the demise and sunset of the all-important Petro-Dollar defacto standard. Hillary Clinton is gone from her USDept State post, where tyranny had reigned from embassies. Nicholas Sarkozy is gone from his French President post, replaced by a nitwit socialist who is hell-bent to wreck what is left of the lovely French countryside. The Iran sanctions led by the US-UK Fascist tagteam are being ignored and worked around, with a British High Court ruling against the government in favor of the Iranian Bank Mellat, damage awards to follow.

Edward Snowden is running loose, camping out in Moscow, to be sure a front man figurehead, whose colleagues have left open at least 50 back doors from which to raid real-time the US-UK security database. The continued presence of Snowden in Moscow would eliminate any arrival of Obama for the September G-20 Meeting of finance ministers. My view on the boycott of the meeting is being confirmed slowly. The Associated Press reports that Obama ponders canceling Moscow talks with Putin, obviously. Friction exists over both the Snowden case and the Syrian conflict. After the harsh criticism in Northen Ireland given in direct effront terms by Putin for the US foreign policy in the Mideast and North Africa, no wonder. Putin regards Obama as a rank amateur of destructive tendencies. See the AP article (CLICK HERE).

Look for a constant threat of a system-wide margin call on the US banks. Some light is shed by Daniel Tarullo at the Peterson Institute for Intl Economics, a prestigious think tank in Washington DC, not always in tune with the White House team. His work is on improving the framework of bank structures in order to strengthen them. Yet he does not begin with liquidation of the biggest insolvent zombie banks. Let the Jackass not digress. Consider the consensus of bank reforms to be applied sooner or later. 1) Capital standards require proper common equity capital ratios. This new standard requires substantial increases in both the quality and quantity of the capital to absorb losses, taking account finally of off-balance-sheet items. 2) Greater prudential regulations and supervisory requirements will be applied to the larger financial firms of systemic importance. More strict enforcement is desired. This is basically the Dodd-Frank Act put into practice, since it has not been enforced to date. The USFed will impose capital surcharges on the eight large US banking organizations identified in the Basel Committee agreement for additional capital requirements on banking organizations of global systemic importance. The size of surcharges will vary depending on the relative systemic importance of the bank. A critical Liquidity Coverage Ratio (LCR) will apply only to large institutions. It will hard to convert zombies into people.

An orderly liquidation authority will be put into force, under which the Federal Deposit Insurance Corporation can impose losses on shareholders and creditors of a failed systemic institution, and replace its management. Refer to Bail-in plans and private account confiscation. The talk is of avoiding bank runs, but the practical effect is to administer internal bank losses, a sort of reverse bank run of vanished wealth from leakage. 3) Reforms are aimed at strengthening financial markets generally, without regard to the main banks as players. The key focus is the central clearing house for derivative markets, for making them safer. Margin requirements would be enforce on such derivatives. In addition, eight financial market utilities engaged in important payment, clearing, and settlement activities have been designated by the Financial Stability Oversight Council as systemically important. They will be subject to enhanced supervision. Look for a JPMorguen wonk to manage the derivative oversight, of course.

Too much focus has been given to the USFed Tapering its QE bond monetization. Not enough attention is given on the USFed threat of a systemwide margin call on the big banks. The banks operate on extreme leveraged applied to borrowed money and electronic free money. Any directive by the USFed to reduce the banking system's ability to use leverage will technically equate to a margin call. The banks do not have the collateral. They are shedding the real valued asset in Gold. They are making more toxic the paper assets for building blocks. Something must give, or else the entire stage collapses.

◄$$$ USFED STRESS INDEX HAS SHOT UP MARKEDLY IN RECENT WEEKS. THE SIGNAL IS CLEAR. AN EVENT IS NEAR. SINCE 2008, NOTHING HAS BEEN FIXED, NOTHING ATTEMPTED. $$$

The last three times spikes in the Stress Index have been seen were during the US financial crisis of in late 2008, during the acceleration of the Greek crisis in May 2010, and in August 2011 when the USGovt credit rating was downgraded by Standard & Poors. Consider this a serious red light warning signal. Big events are approaching. The chart below shows from June 2012 to  June 2013, just the last twelve months.

◄$$$ BIG BANK ILLIQUIDITY HAS STRUCK THE MAJOR CENTRAL BANKS. NOT JUST PRIVATE SECTOR BANKS, BUT THE PARENT CENTRAL BANKS. THE PROXIMAL CAUSE IS THE USFED TALK ABOUT TAPERING THEIR AGING ACCOMMODATIVE MONETARY POLICY. DAMAGE RUNS DEEP. ALL SOVEREIGN BONDS ARE DOLING OUT MAJOR LOSSES. THE HIDDEN LOSSES ARE WITH INTEREST RATE DERIVATIVES. AN IMPORTANT DISCOVERY OF DERIVATIVE LOSS IS IMMINENT, TO HIT MARKETS BROADSIDE. $$$

The banks in 2Q2013 are nursing staggering losses on their fixed income portfolios as bond yields have gone up. The risk is acute, since the banks cannot hedge rising yields. No counter-party will sell them that hedge, unless from an off-world source. The only device for maintaining low bond yields is continued bond monetization, as in QE to Infinity, the ongoing Jackass forecast. The pressure is huge to continue QE, the political cover having been won by the steep losses everywhere. The global economy, the global financial markets, the global banking system, and the global asset base are all fully dependent upon the USFed. It cannot taper support, or else face global collapse on all fronts.

The primary victim in the last two months with the USFed talk of reducing easy monetary policy is the USFed itself. Its highly leveraged balance sheet, if marked to market, is at least $1 trillion in the red. It has a 60:1 leveraged ratio. Furthermore, the USFed balance sheet is made to look better by virtue of the hefty Excess Reserves held by the big US banks, within the USFed balance sheet. To overcome these trading losses, a potential gain lies in commodities and precious metals. They know it, but cannot admit it. Nobody wants to discuss the deep insolvency of the USFed, the Euro Central Bank, and the Bank of England. Add the Bank of Japan also for that matter. Furthermore, the EuroCB suffers a triple whammy. They are hit by the increase in German Bund yields, the increase in PIIGS sovereign bond spreads, and the decline in Gold price. The pervasive losses are well understood by the Bank For Intl Settlements, China, and Russia. They realize the powerful insolvency dynamic is unsustainable, even in the short run. The banking facts of life (broken, insolvent, desperate) will usher in some tremendous changes in the geopolitical balance of power.

Some astute bond analysts anticipate an accounting change soon to be imposed, a parallel to the FASB charade permitted in April 2009. The central bank balance sheets are on the verge of changing the way USTreasury Bonds are accounted for. They have been the most liquid of all financial instruments. The USTreasury market will move from marking to market to either mark to maturity (a sign of no liquidity in the market) or mark to model at discretion of management, otherwise called mark to myth (a sign of USTreasury default). The ugliest of truths is that the interest rate derivative market has suffered some profound devastating attacks from which it cannot recover. The Jackass forecasted massive losses approaching $trillions in the last several months, from fluctuating long-term bond yields. Recent moves of 70 basis points are sufficient to bring down the flying buttresses that support the USTBond tower. The buttresses are the Interest Rate Swap derivatives, which are rarely cited.

◄$$$ FIVE BRITISH BANKS MUST RAISE AN EXTRA $21 BILLION IN CAPITAL. PRESSURE IS APPLIED BY THE BANK OF ENGLAND. AS LOSSES INCREASE, THE CAPITAL REQUIREMENTS WILL INCREASE. THE BRITISH BANKING SYSTEM IS UNDER HEAVY SCRUTINY, AS IT FIGHTS INSOLVENCY. $$$

The Bank of England, as the British central bank, is attempting to bring solvent order to the nation's banking system. Capital on the big bank balance sheets has been determined to be inadequate. The five bank lenders, including Barclays, Lloyds, and Royal Bank of Scotland, have already submitted plans to raise half the total ultimately required. Lloyds must plan to raise an extra GBP 7 billion, while RBS and Barclays need GBP 3.2 billion and GBP 1.7 billion respectively in additional capital. The strength of the British banking system is under scrutiny as the UKGovt considers selling its stake in Lloyds. It is 39% owned by the state. The current plan floated is to split up the gangly RBS. The central bank, whose Prudential Regulation Authority unit took over as the UK banking supervisor (from the Financial Services Authority) this year, outlined potential losses. The results are staggering, up to GBP 52 billion. The rule applied is direct. Lenders must hold capital resources equivalent to at least 7% of their risk weighted assets, after losses are accounted for. See the Bloomberg article (CLICK HERE). The effect will be to reduce the value of the British banks, lower stock valuations, and perhaps pull down the British Pound currency's exchange rate. The new capital must come from somewhere, and not from vapor. The shine is fast leaving the British banking elite system, as it transitions into De-Industrialized Third World.

◄$$$ THE BAIL-IN THREAT HAS BECOME SYSTEMIC FOR CONFISCATION OF PRIVATE WEALTH. PRIVATE ACCOUNTS ARE ACTUALLY TREATED AS LOANS BY INVESTORS, LIABILITIES TO THE FINANCIAL FIRMS. THE SENIOR SUBORDINATION GOES TO BANK DERIVATIVES. IT IS A PRESCRIPTION FOR WIPING OUT NATIONAL WEALTH ALTOGETHER. $$$

A growing concern for veteran investors since the endless crisis began in 2008 has been the security and longevity of the various types of retirement accounts and systems. The integrity of private accounts generally is a concern. Decisions rendered by courts regarding the absonding of customer money have fanned the fears of private investors. The MF-Global case is the most visible for undermining confidence in private accounts, in that case those in futures brokerage firms. The risk to bank deposits has already been firmly established. Since the December 2011 case with MF-Global, few if any institutions are taking action to protect from confiscation of accounts. Trust in the system is not warranted or deserved. Protection is nowhere. More outsized losses are coming. The nation is in adolescent denial.

The origin of the vanished trust is the law itself. The 1995 Bankruptcy Reform law changed everything. The structure of all types of private accounts changed, in very subtle terms. A recent federal Appellate Court case in the United States gave its approval in the Sentinel case, months after a similar court gave approval in the MF-Global case. The message was clear, giving the green light to the theft of customer funds. It matters not whether they be segregated in a brokerage account (but held in street name) or held as deposits in a traditional banking arrangement. The go away.

Andy Sutton stresses how the origin of the risk to wealth is the quiet and subtle change in status from depositors to unsecured creditors which took place back in 2010. When investors place money in private accounts at banks or brokerage accounts or futures accounts, they are essentially treated as loans to the firms, and placed far down the list in subordination in the event of a financial firm failure. Ironically, derivatives held by the firms are treated as assets and placed at the top in subordination, the most senior, above private accounts. So when derivatives go bust, the private accounts vanish. It is a horrendous prescription to force a vanishing act in an entire nation's wealth. This feature is the basis of the Bail-In laws for handling financial firm failures. The United States appears slightly different by offering the killed account holders some stock in the worthless dead firm.

Two points must be made. The motive appears to be for destroying national wealth and imposing debt serfdom, if not debt slavery. The masters would be the bankers, the elite leader nazi master class. The second point is that an aggregate form of justice would be served, since the monetary system has a debt foundation. So when the debt structures defaults for the nation, the wealth base vanishes with it as part of the restructure process and debt writedown. Recall all wealth is debt in disguise. Since mid-April, Japan, Great Britain, and the European Union have officially adopted the bail-in doctrine, an alarming development given minor publicity. The grand change and risk to private wealth is nearly uncovered by the lapdog intrepid media. Sutton suspects the next target for confiscated wealth will be the retirement accounts, as in 401k, IRA, and Keough. See the Market Oracle by Andy Sutton (CLICK HERE) and the Sutton Assoc website article (CLICK HERE).

◄$$$ THE USDEPT TREASURY THREATENS TO END THE TOO BIG TO FAIL LENIENCY ON THE INSOLVENT GIANT ZOMBIE US-BANKS. THE TALK IS TOUGH, EVEN FROM SENATOR ECHOES. THE INTENTION IS TO ENFORCE THE DODD-FRANK FINANCIAL REGULATORY BILL. BUT THE ACTION IS SLOW. NO RESTRUCTURE HAS OCCURRED. NONE IS PLANNED. WITH STRONG SECOND QUARTER PROFITS ANNOUNCED, THE BIG US-BANKS HAVE FEW ALLIES AND FACE SCRUTINY. $$$

The big US zombie banks have warned that tougher regulation would undermine their entire operations. Their strong profits in 2Q2013 make them liars at a time when regulators and finance officials (USCongress oversight) strive to make them more safe and more sound from a capital level perspective. In early July, the nation's six largest banks reported a collective $23 billion in profits for the second quarter. They face scrutiny, and might end up victims of their own successful bounty from the protected USTBond leveraged carry trade. They are casinos, not lending factories. A strict new reserves rule recently proposed could force banks to build up more capital, the financial buffer they maintain to absorb losses. Given the profits flowing, even if some are accounting fiction items like Credit Value Adjustments, the banks now appear to have fewer allies in WashingtonDC than at any time since the financial crisis. They should be subject to the same laws as Vegas gambling casinos.

It could be fake tough talk with a wink to his friends, but US Treasury Secy Jacob Lew (from Citigroup) issued an ultimatum to Wall Street, calling for the swift adoption of rules introduced through the Dodd-Frank financial overhaul law, which Congress passed in 2010. Lew cited the threat that big banks can pose to the USEconomy in general. He said, "If we get to the end of this year, and cannot, with an honest straight face, say that we have ended Too Big to Fail, we are going to have to look at other options because the policy of Dodd-Frank and the policy of the administration is to end Too Big to Fail." He did not mention anything about Too Big to Jail as policy to enforce bond fraud, client misrepresentation, contract fraud, and counterfeit laws. Some like Senator David Vitter of Louisiana called the statement by Lew the strongest declaration  yet to demand higher capital levels. They never mention the ugly word INSOLVENT, surely not ZOMBIE. See the New York Times article (CLICK HERE). The Jackass will believe the TBTFail permit is over for the big banks when one of them in NYCity faces a restructure event with even a small portion of their portfolio being liquidated.

◄$$$ NUMEROUS MARQUEE NAME WESTERN FINANCIAL FIRMS ARE BEING EXPOSED. THEY ARE UNDERGOING A STORM DEFENSE. THEY ARE IN TURMOIL. THE LIST IS LONG. CONSIDER SOME SNAPSHOTS. $$$

Bank of America games on home foreclosure are being revealed. Take Simone Gordon of New Jersey, who left Bank of America in 2012. She said, "Employees were rewarded by meeting a quota of placing a specific number of accounts into foreclosure, including accounts in which the borrower fulfilled a HAMP trial period. For example, a collector who placed ten or more accounts into foreclosure in a given month received a $500 bonus. We were regularly drilled that it was our job to maximize fees for the bank by fostering and extending delay of the HAMP modification process by any means we could. This included by lying to customers." Other rewards mentioned for placing accounts into foreclosure included gift cards to Target or Bed Bath & Beyond. See the Bloomberg article (CLICK HERE).

New York University professors Acharya, Richardson, Van Nieuwerburgh, and White provide a neat exposure of the Fannie Mae leverage abuses. While most banks were enforced with a 4% capital requirement for holding mortgage loans, Fannie Mae was given easier terms. The Federal National Mortgage Assn had enforced a 1.6% capital requirement if they held Govt Sponsored mortgage backed securities. The professors published a book entitled "Guaranteed to Fail, Fannie Mae, Freddie Mac and the Debacle of Mortgage Finance" which should be a hit. See the Stern NYU website V-Lab (CLICK HERE).

Citibank is caught in China in the middle of a cash crunch. Numerous clients are complaining about the big bank not making money transfers. The source of the problem is the ICBC and Bank of China, each strapped for cash. As a result, neither Citibank nor Bank of China bank debit cards based in renminbi work outside China. They do not dispense cash. ATMs at many banks will not work in China. See the Forbes article (CLICK HERE). The trip wires are lying on the floor all over the world. Chase Bank has announced plans to eliminate some foreign accounts, in particular those with under $20 million in gross annual sales. The fallout will affect agricultural produce trade to the United States from Mexico.

Anglo-Irish Bank gamed the system in its original 2008 bailout, picking a number ex anus (like Hank Paulson did for the TARP Fund bailout simultaneously). The Irish people were shocked to learn that the bailout to save Anglo-Irish was engineered by its executive staff in order to game as much money as possible from the central bank. The Irish Independent has secret recordings from the period in 2008, after senior senior management lured the State into giving it billions of Euros. The bank officials admitted openly that the EUR 7 billion number was picked out of the arse, in their words. They exploited the advantage of the state aid, knowing that once the flow began, it would not be possible to stop. The locals on the Old Sod claim there will be an Irish Spring as the conspiracy theory of the banking bailout becomes conspiracy facts. See the Zero Hedge article (CLICK HERE).

◄$$$ WESTERN BANKS ARE LEAVING INDIA, NOT BECAUSE OF PROBLEMS IN THE COUNTRY, BUT RATHER BECAUSE OF CAPITAL REQUIREMENTS BACK HOME IN LONDON AND THE UNITED STATES. MANY ARE THE WESTERN BANKS, MOSTLY BRITISH, PULLING OUT OF INDIA, OR AT LEAST CUTTING BACK MARKEDLY. $$$

The shockwave went across the entire European continent. UBS must close its operations in India due to forced raising of capital requirements back home in Switzerland. Expect more Swiss and other European banks to withdraw worldwide in the coming days. UBS will exit India except for securities trading and investment banking. UBS has decided to surrender its banking license in India, which includes exiting its fixed income business, FOREX operations, and credit services. All are capital intensive. UBS India has just one branch in the country, in Mumbai. The move comes at a time when the Reserve Bank of India (central bank) is pushing foreign banks to reorganise themselves as wholly-owned subsidies for better regulation.

The story of bank subsidiary shutdowns reads much like the resignations of banker executives in the United Arab Emirates, cited last month. In May 2013, Morgan Stanley sold its India operations to Standard Chartered. They surrendered their license within one year of securing it. As of April 2013, Royal Bank of Scotland had been trying to sell its Indian retail bank for the last two years, but no buyer, no taker. RBS includes former ABN AMRO branches as well. The RBS subsidiary CEOs have been assigned to restructure and sell the retail bank, only to continue a few operations. In February 2013, Barclays sold its corporate loan book to Kotak. In December 2012, RBS was forced to significantly reduce Indian operations, closing 23 out of 31 branches by May. In September 2012, Barclays shut down three branches in India out of nine they had. In June 2011, Societe Generale's Private bank closed in India altogether. In Sepember 2008, Lehman was sold to Nomura. In the recent past, Morgan Stanley and Goldman had also surrendered their banking licenses in the country.

In the annual monetary policy statement in May, the Reserve Bank of India had proposed a new banking structure involving a differentiated licensing regime for domestic and foreign banks, instead of granting of universal banking license. For instance, the RBI had allowed American Express to open an office to manage credit card and travel card businesses without a required banking license.

◄$$$ NEW BOND RATINGS USED BY RUSSIA AND CHINA ARE BEING ACCEPTED IN EUROPE. A RIVAL TO THE BIG THREE RATINGS FIRMS IS BEING CREATED. PROGRESS MOVES AFOOT. $$$

The new credit agency, the Universal Credit Rating Group, has been set up as rival to the existing agencies Moodys, Standard & Poor and Fitch. The reason is simple, that the Big Three are Wall Street harlots and tools, which do a horrendous job, now a consensus view. The new agency was featured in a recent Hat Trick Letter, but progress has been made to make it operational, funded, and with a home. It will be based in Hong Kong. Critics claim the need for an independent group of credit ratings, since the Big Three bear some resopnsibility for the 2008 crisis. Dagon, RusRating and Egan-Jones Ratings (from the USA) will have equal shares in the venture, with an initial investment of $9 million. The new agency is intended to provide some balance to the industry. This agency is already accepted in the EuroZone. Analysts believe the move is in the right direction, but Universal will need time to win credibility. At least the Big Three have none. After the global turmoil broke out in 2008, Moodys, S&P, and Fitch were criticized for absurdly high rubber stamp debt ratings for complex mortgage backed investments. Hundreds of $billions were lost by investors who were left unaware of the high risk. Not only are the ratings by the global agencies used as guidelines for investors, but they can result in certain bonds forbidden from ownership due to not attaining investment grade. Lawsuits are stacking up against the Big Three agencies.

Universal hopes to operate under a dual rating system, which means other agencies would issue their own ratings. Look for some perplexing contrasts in the future, certain to lay bare the American corruption. "[Investors will] see there is a difference of view and then the investors can make their own mind up," says Universal CEO Richard Hainsworth, who is also president of RusRating. The entire development can only help in shedding proper light on debt securities. More discipline will result. Vengeance is front and center obvious. Only one day before the deal was formally announced, Moodys downgraded the Hong Kong banking sector outlook to negative, referring to negative interest rates and the chances of a Hong Kong property bubble going bad. Again Hong Kong features as a pivot point, a factor to be seen in numerous areas, like the gold exchange, like the Yuan trading hub, like the Chinese Govt Bond trade. See the RT News article (CLICK HERE).

## GLOBAL ECONOMY FACES ABYSS

◄$$$ THE WHEELS ARE COMING OFF ALL OF SOUTHERN EUROPE'S WAGONS. THE COLLAPSE IS BROAD BASED. GERMAN EXPORTS FELL AT STEEPEST RATE SINCE DECEMBER 2009. $$$

The strategy to deal with the debt crisis is in a constant state of collapse. Debt ratios across Southern Europe are still on the rise. Austerity is gone with the ill wind. Bank insolvency worsens. Greece will miss its budget targets by a wide margin. The crisis in Italy is again flaring up, its debt trajectory beyond the point of no return. Standard & Poors just downgraded the country to near junk BBB. Italy is embroiled in the latest derivative loss fiasco through another Draghi scandal. Italy is reaching the end of its rope as its swaps to conceal true debt levels blow up in Super Mario's face. The Financial Times reported that "Italy risks potential losses of billions of Euros on derivatives contracts it restructured at the height of the EuroZone crisis." The defiant Italians are in a race with Spain and Portugal to revert to their old pre-Euro currencies. Spain's leaders are all over the map in corruption revelations, as slush funds are in the spotlight, up to Rajoy. Portugal is chasing its tail in a downward spiral, a nation whose total debt of 370% of GDP. Unemployment is at depression levels, home prices are plunging, and voters are restless in both nations. Europe is a political minefield. The key is no loan package has ever brought about a single Euro in writedowns. No solution, just quicksand. See the UK Telegraph article (CLICK HERE) and the EuroNews article (CLICK HERE) and the Voxxi article (CLICK HERE).

German exports had their biggest fall since late 2009 in May, but its imports rose more than expected. The powerhouse struggles to sell its output abroad although domestic demand is strong. Seasonally adjusted exports fell 2.4%, as the EuroZone slides into the abyss (where 40% of shipments are directed), and even Chinese demand was notably weaker. Domestic strength was robust, as imports increased by 1.7% to bolster the GDP. Retail sales remain strong, as the labor market holds firm. The German Economy continues to outperform other nations within the EuroZone. The French trade deficit grew sharply in May. See the UK Reuters article (CLICK HERE).

◄$$$ US-BASED INDUSTRIAL PRODUCTION IS AT A STANDSTILL. THE ECONOMY FOLLOWS THE TREND IN FALLING INDUSTRIAL CAPACITY UTILIZATION. THE SHARE OF THE GLOBAL ECONOMY FOR THE NATION IS VANISHING. $$$

US Industrial production was unchanged in May, just like in April. Capacity utilization measures how fully the nation's mines, factories, and utilities are deploying their resources. It fell to 77.6%, well below the average of 80.2% experienced from 1972-2012. The 80% mark is the magic level. The USEconomy is still in a powerful recession for five full years. Its share of the global economy is falling tragically, down from 31.8% in 2001 to 21.5% at end 2010. The nation has seen its better days.

◄$$$ DETROIT BANKRUPTCY COULD BEGIN A WAVE OF OTHER CITIES DECLARING BANKRUPTCY. THEN COMES THE ATTRACTION OF BUSINESS FROM AILING CITIES NEARBY, SURE TO WEAKEN THE OTHER CITIES. $$$

Bankruptcy is a competitive devaluation phenomenon among cities. It will lead to two unfortunate outcomes. First, other cities and municipalities in equaly horrendous condition will follow Detroit's lead. Like Chicago, St Louis, Philadelpha, which will take the same steps. Second, once Detroit has recovered even a little after bankruptcy, it will attract businesses and jobs from neighboring cities. In time, the small magnet effect will begin to stress the finances of entire states such as Ohio, Indiana, Illinois, and Wisconsin. This is assured, since Detroit city will offer very low tax rates or none at all, and will offer commercial property on easy terms. The same effect is seen in nations, like the Chinese devaluation in 1991, which was followed by the Asian Meltdown in 1995. Few make the connection. Within a year of a Turkish devaluation, the Greek crisis hit in 2010, again with few making the connection. The Municipal Bond market is in line for a cardiac attack soon. The public outcry will be for the USFed to extend QE to include the muni bonds paper, especially GO bonds. The USFed is the buyer of the most worthless toxic bonds in the nation, the garbage collector, the toxic paper vat overseer. The echoes of the Detroit story resounded in Chicago, where 2113 teachers and staff are to receive pink slips. See the Cyniconics article (C LICK HERE) and the Chicago Public Media WBEZ article (CLICK HERE).

◄$$$ ANOTHER FARCE OF A USGOVT NON-FARM JOBS REPORT. THE PART-TIME JOBS SKYROCKETED IN A NASTY TREND. THE JUNE I.S.M. SERVICE INDEX CRASHED, LED BY NEW ORDERS ON DOWNSIDE. RESTAURANT SPENDING IS DOWN IN A SUDDEN PLUNGE. NO RECOVERY HERE. THE STUDENT LOAN SCAM WITH BLEAK FUTURE PAYBACK POTENTIAL COMPLETES THE LABOR MARKET VIEW. $$$

The USGovt economic data continues to be a total farce. The June part-time jobs rose by 322,000, with full-time jobs down 240,000. The bottom line story is a bad ongoing joke. In contast, the ISM Service index fell to its lowest level since 2009. New orders fell hard, down to 2008 levels. A contradiction to the rosy distorted national labor picture comes from the restaurant (food services) sector, which fell by 1.2% in June alone, the largest decline since February 2008. The empty restaurant seats have a record number of part-time waiters catering to the non-existent clients. Expect speedy service. Restaurants and bars account for only 11% of total retail sales. But spending at those locations is largely discretionary, thus signaling the waning American confidence in the USEconomy. Meals out can be skipped more easily than trips to the gasoline pump or grocery store. See the Zero Hedge articles (CLICK HERE and HERE).

The Congressional Budget Office report concluded the federal student loan program is another scam. The nation's entire financial system is racked by fraud. The decade should see an estimated $95 billion in losses, a far cry from the supposed $184 billion in profits over the next decade. The 1990 law enabled a deliberate under-counting of the cost of defaults. Interest rates on student loans are suddenly on the rise, adding to burdens when jobs to service the debts are a slim hope. The potential for the society's young will not be realized. See the Money News report (CLICK HERE).

◄$$$ FAREWELL TO THE HOUSING RECOVERY, AS JUNE HOUSING STARTS MISSED THE MOST SINCE JANUARY 2007. PERMITS HAD THE BIGGEST MISS IN HISTORY. BUT THE HIDDEN CANCER LIES IN THE PRIVATE EQUITY DEALS TO ACQUIRE HOMES RANSACKED BY VANDALISM, OCCUPIED BY HOSTILE TENANTS. $$$

The June housing data was truly miserable. The full brunt of the USFed Taper shock has not been felt yet, but early indications are wretched. The Hat Trick Letter story last month on the private equity carpetbaggers taking advantage of the bank-owned properties in large tranch purchases deserves an update. Special thanks to DonZ from Miama-Dade, a subscriber. He was a self incorporated foreclosure realtor, who paints a nightmarish picture for the sector. He wrote, "Enter 2007-2008, when we retired almost unscathed. Here are the facts. Low and middle income housing gets destroyed daily by the tenants who do not pay and rip out the plumbing when they leave. The municipalities levy fines that multiply monthly on violations that pile up, while ownership is absent. They must be paid. Every property that is foreclosed winds up that way. Repairs are unending while taxes pile up. Undisclosed liens are endless and title insurance does not help when the county puts you on a 10-month wait to fight the lien or settle. Houses cannot be sold while liens appear on somebody's computer but not in the county record. It is a game in Dade County. Rents never cover purchase cost or repairs while vandalism is rampant.

Those fund managers think they are so smart until they realize that all they have is junk [property] and junkies [for tenants]. I know that real estate market inside and out. Just wait until they try to find qualified buyers! [Then add on top] the cost of hurricane insurance. Just like the banks went to the cleaners, so will the hedge funds. They will resort to being housing wholesalers to undocumented immigrants, who make up the buy side market, especially for unrepaired property. The sellers wind up with inflated values for resale and will have zero chance of seeing their original investment again. Miami is a legendary housing market for being a bottomless pit. South Florida housing in mostly not luxury living. Rental collection is the strong-arm business. Wall Street and Hedge Fund managers have no capability for this." Wow! The losses to predatory New York hedge funds will come as a shock. But at least they can sick the USGovt mafia on the scoffers. The same story might be almost as bad in other urban centers, although not in suburbia.

## THANKS

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