"Retail investors have always been wrong before. They invest with their eyes on the rearview mirror and their foot on the gas, then wonder why they crash." - Charles Biderman (Trimtabs Investment Research)
"When China wakes up, the world will be sorry" - Napoleon
"We are bearish on the renminbi. On the other hand, we are also bearish on the US dollar, euro, pound, Swiss franc, and Zimbabwean dollar. We hate them all, with appropriate analytical nuances. Show us a monetary asset whose value is not subject to governmental debasement, and we will show you a Krugerrand." - Jim Grant (bond & credit analyst)
"But the fact is that, with the paper gold market, if you look at the short positions that the commercials, that the bullion banks, which are the agents of the US government are running, it is a complete fraud, because they could not possibly deliver on their paper promises if they were called by the people on the other side of the trade. The gold is not there to deliver. They have cleaned out most of the western central banks. So we are real close. I think gold will be $1500 before the end of the year." - John Embry (of Sprott Asset Mgmt)
◄$$$ THE CHINESE HAVE BEGUN TO TIGHTEN THE SCREWS ON THE UNITED STATES AND ITS FINANCIAL STRUCTURE $$$. See the new Hat Trick Letter Special Report entitled " China Tightens the Screws" this month. Foreign revolt against USTreasurys and USAgency Mortgage Bonds continues, with data finally showing up in capital outflows. They show a recent abandonment, as in minus $53.2 billion in April. Recall that USGovt tax revenues went negative in April for the first time ever. This is sufficient to justify the USDollar decline in the last couple months. Before, during, or after laughter was directed at US Treasury Secy Geithner when in Beijing China, he made numerous false promises and empty assurances to their leaders. They have lost respect for US bankers altogether, and have upped the ante. Beijing leaders warn USGovt leaders not to become complacent about continued Chinese support for USTreasurys.
Official Chinese USTBond purchases came nearly to a complete stop in recent months. They are concerned about USGovt deficits and USFed monetization of debt securities with outright purchase of USTreasury Bonds using freshly printed money. A Chinese banker of note suggests the USGovt should issue bonds in Yuan denomination, actually echoed by a Japanese opposition leader in Tokyo who suggested the same idea but in Yen denomination. Another Chinese financial leader recommends broader issuance of Treasury Investment Protection Securities (TIPS) in order to force bond yields up in case price inflation arrives in force. The China syndrome involves diversification by China away from primarily US$ debt and toward hard assets. The movement is in full swing, given a major push by recent announcements. The massive Chinese sovereign wealth funds will be directed toward hedge fund investments, in particular for hard assets. This has of great potential significance, since they will fortify them with USTreasury collateral, thus removing a key device for supporting the USDollar. The USGovt would no longer be in a position to send Wall Street attack dogs to wreck hedge fund commodity positions, a common nasty practice. If they do, then USTBonds will be sold.
◄$$$ POST-ELECTION CHAOS IN IRAN COULD LEAD TO REVOLUTION $$$. The Iranian national elections at first glance were deeply flawed if not corrupted. The leaders declared victory before tens of millions of paper ballots were even counted, in a grand display of stupidity and defiance to the democratic process. Now riots have erupted, and at least 20 people are dead, with 200 badly injured. The opposition leader Mousavi might soon be arrested, or worse, executed into martyrdom. With or without his arrest, the nation is descending into chaos, with a possibility of national strikes. If he is killed, the door is wide open for potential revolution. A shutdown of Iranian oil & gas facilities would directly affect energy prices. What Western leaders and the press networks might not realize is that the ruling mullahs and clergy wish to retain power for an additional hidden reason. THE MULLAH LEADERS ARE STEALING VAST SUMS OF MONEY FROM OIL REVENUES, and have been for years, in the billion$ each year. They have private bank accounts in Europe. To give up power means giving up the avenues and opportunities to continue massive ongoing thefts. Corruption is unfortunately rampant among leaders across the globe.
The Iranian leaders are like a corrupt pack of bitter draconian spinsters who locked control of the entire boarding school, except that Iran is a vibrant nation. Iran lives in a veritable straitjacket of rules. Over 50% of Iran' s population is under 25 years of age. Most women are well educated. They use technology openly and freely. Technology helped bring down the Soviet Union, and it might help to bring down the Islamic hypocrites who control power in Tehran with an iron fist. This time around, the West understands that the Iranian people want more freedom and widely hate the mullahs. Unfortunately, most Iranians dislike Americans for their support of the Shah, and for their support for many years of Saddam Hussein. Gross errors in foreign policy were made for several decades, ever since the Americans deposed the Iranian leader Mossadegh, installed the Shah, opened their crude oil to the West at cheap prices, built a corrupt aristocracy, and sponsored massive criminal activity including vicious security police that killed thousands of Iranian citizens. It has been downhill since the US foreign policy errors way back then. See the Google video of ex-CIA ' Economic Hitman' John Perkins who discusses how the CIA removed Mossadegh from power and tilted Iran to the West (CLICK HERE).
◄$$$ THE SWISS-ITALY JAPANESE SMUGGLING CASE HAS MUSHROOMED ON THE SPECULATION SIDE $$$. See the Denninger archive for diverse information and various theories (CLICK HERE). The USGovt is calling the $134.5 billion in bearer bonds fake, with mafia involvement. Few find this facade credible, with some offering open derision. The USDept Treasury stopped issuing bearer bonds in 1982. The two men at the Italian border are not under arrest or subject to formal charges. Doubt that they are Japanese has arisen, and they used no diplomatic pouches for legal protection. They traveled among swarthy natives on public transportation, stuck out like a colored thumb, easy for being stopped, when a train or rented car would have eluded the border guards. Ergo, they planned it in such a way for seizure, or else guards were tipped off in advance. Numerous inconsistencies have been tracked. See Seeking Alpha (CLICK HERE). William Pesek put out an opinion that reveals how mainstream sources are totally clueless. See the Bloomberg article (CLICK HERE). A wild theory came that the Bank For Intl Settlements needed big money to balance their books at end of quarter, not credible in my view. See the CannonFire article (CLICK HERE).
A disturbing element of the story is how the securities were divided among 249 certificates of $500 million each, along with ten other certificates worth $1 billion each. Except for two Bloomberg articles lacking actual details, an almost complete media blackout has engulfed the networks. The primary USFed dealers are the only private sector sources that have access to such bonds, which is all electronic anyway. The Japanese opposition party has threatened discontinued USTreasury Bond support if elected, while others suggest the USGovt issue debt securities in Yen denomination. See the Bloomberg article (CLICK HERE). The height of conspiracy implications comes from noting that the USTreasury has exactly $134.5 billion remaining in its $700 billion T.A.R.P. funds. So perhaps the USGovt was attempting to help the Wall Street syndicate to hide some stolen funds in Switzerland. Maybe just some kind of repayment of their government was arranged for past favors, or satisfied threats, or payoffs to avoid fraud charges in international courts. They must know the US banking system is heading for the toilet. See the Wall Street Journal article (CLICK HERE). A Chicago floor trader made the following observation, when he said " A shadow banking system has been run by Wall Street for years. Why not a ' shadow public debt' system? Is the Treasury spending additional sums of money beyond what the lemmings are being told by the White House and Congress? Is it CIA cash?" As you can see, speculation is ripe.
Here is what my best sources have shared with me in private exchanges. It is NOT definitive or complete, but the information is reliable. The smuggling of the $134.5 billion in bearer bonds had a source from the Vatican and CIA, as some returned favor or satisfied debt. The Vatican has become the world' s largest holder of gold bullion, and thus wields much hidden power and influence. They wanted to remove the huge block of money from the European Union border, to put it in Switzerland, since they anticipate major bank failures and disruption inside the EU very soon. The backdrop in the last few months is marred by incredibly huge funny money circulating worldwide, of dubious value and origin, as staggering counterfeit is on the rise in the US and Asia. The syndicates are preparing for a collapse of some sort, small or large. The snatch at the Italian border was caused by someone inside the USGovt blowing the whistle, whether planned or mission aborted or an internal factional sabotage is unclear. Perhaps the maneuver was planned in the process to give the huge reward indirectly to the Italian Govt, which will earn 40% on the capture, since undeclared illegal smuggling. It is unclear, but the incident might be related to Leo Wanta money funds, which are very large and very real and soon to come into the open, complete with criminal allegations against Robert Rubin and Hank Paulson. It is probably not related to CIA narcotic traffic laundered funds. The source is certain that it is not intended to prop up the ailing Swiss banks, but rather a syndicate storage deal. It was an isolated project, but well organized. The two men had Japanese passports, were probably not Japanese, and were highly professional veterans. The $500 million and $1 billion denominations clearly indictate transactions made government to government. The news and many details (unsure of accurate depth) will spread all across Europe, in some ugly terms, but nowhere in the US & UK. We are living in a spy novel, complete with deception, intrigue, and hidden violence. This is not a spy novel to read, but a spy novel to live within, as governments jockey for retained control, and the world grinds toward a new system with a different axis of power.
This comes from a well connected source whose friend works deep inside the international banking system, with many years experience, highly reliable. Preferring to remain anonymous, the contact said, " The bonds are legitimate. They are Treasury Bearer Bonds, issued in 1935, known as ' Federal Reserve Note Boxes' (hope I got that right). Some have a face value of $500 million. Wells Fargo was involved at some point, whether with the actual smuggling, is unknown. They were shipped overseas (date unknown), supposedly to assist in propping up the dollar exchange rate. Whether to the Philippines or Hong Kong, is unclear. The government has been trying to get similar bonds, that are in unknown hands, out of circulation. To facilitate this, the Treasury offers a ' 10% finder's fee.' That fee could account for someone blowing the whistle. To whom they ' belong' now, is unknown. They were said to be attempting to smuggle them into Switzerland, for a pre-arranged sale to a Swiss bank."
Lastly, Rob Kirby provides some potential angles on Italy and their role, worth integrating into the story background. The Italian prime minister Berlusconi was in WashingtonDC to meet with Obama last week, for no stated reason. Italy lent significant amounts of gold bullion to the notorious LongTerm Capital Mgmt in the 1990 decade, which failed in 1998. Italy never signed the Washington Accord, limiting gold sales, and has made no official gold sales since then. This could be a complex deal to pay back Italian Govt perhaps from TARP funds. Interference might have been given, and an interruption orchestrated when USFed and WallStreet syndicate planned to send money to Switzerland, designed to pay Italy instead. We might be witnessing a factional battle between the USFed/JPMorgan and Dept Treasury possibly.
◄$$$ A POSSIBLE CONSTITUTIONAL CHALLENGE COMES WHERE A LAS VEGAS BUSINESSMAN PAYS EMPLOYEES IN GOLD COINS, BUT FOR TAX PURPOSES USES THE PHONY USGOVT VALUE OF GOLD $$$. This case could become a national story in a public spotlight, something the corrupt USGovt officials should not wish for. The USGovt has long declared gold coins to be valued at a ridiculous low official level, to keep public interest subdued. The entire banking system depends somewhat on gold not being properly priced. This Robert Kahre is the latest person to attempt to sidestep and outfox the USGovt on this angle. The Las Vegas Review-Journal is resisting a federal subpoena to reveal the names of readers who posted views on their website, since in the USGovt eyes the practice must be prevented from becoming a national movement. The website posters in the majority criticize the prosecutor Damm, calling him a fascist and nazi moron. This is an extremely important story, not only from a free speech point of view, but as a criminal tax trial. It is about using a different medium of exchange besides the corrupted USDollar. The American Civil Liberties Union (ACLU) might soon enter the arena, with their army of expert and experienced lawyers. It is amazing how few legal cases like these are lost by the people. Thus one could conclude that intimidation and cost draining is the motive of the federal prosecutors, not upholding the law. Defendants rarely lose, but they do go broke with costs. See the Las Vegas newspaper article (CLICK HERE). What follows is an excerpt:
" Las Vegas business owner Robert Kahre and others face federal tax fraud charges for paying contractors with gold and silver US coins based on the precious metal value of the coins, but using the much lower face value of the coins for tax purposes. Kahre, his sister, and a former assistant are standing trial for how they handled their own income taxes as well as their roles in Kahre' s unique payroll system. Kahre paid workers at his six trade related businesses in $50 gold or silver dollar coins. Those minted after 1985 are allowed to circulate as money. He also allowed workers to immediately exchange the coins for paper currency, as determined by the coins investment value. Two years ago, Damm prosecuted a similar tax case against nine defendants, including Kahre, on more than 160 counts. The trial ended with no convictions and four acquittals. Five defendants were only partially acquitted, and two of them were dropped from the indictment that generated this trial."
◄$$$ MARTIN ARMSTRONG IS WRONGLY IMPRISONED FOR KNOWING TOO MUCH ABOUT WALL STREET CORRUPTION AND GOLD PRICE FIXING, BUT HE SENDS WORD THAT EXTREME DISRUPTIONS COME TO THE US FINANCIAL MARKETS BY JULY $$$. GATA Chairman Bill Murphy had a conversation in January 2000 with the international financial adviser, Martin Armstrong. He once presided over Princeton Economics Intl, a renowned investment research firm that was noted for its Japanese fixed income clients. The gold cartel involves not only financial fraud and constant regulatory violations, but also alleged murder. What follows is the account by Bill Murphy entitled " Conversations With Marty Armstrong Before He Was Thrown In Jail" unfortunately. See the Greenspun LUSENET article (CLICK HERE).
" My phone conversation with Armstrong touched on many subjects. I mostly just listened, my mouth wide open most of the time, as the conversation centered around such subjects as Armstrong' s receiving death threats from the Japanese, the billionaire' s club that manipulates the metals markets, incriminating Republic Bank tapes, bribes paid in Thailand, the Japanese and Republic Bank, the persecution of his family, including his 81-year-old mother, and the efforts of the US Attorney' s office efforts to deprive him of his First and Fifth Amendment rights. The scariest part of the conversation was about Edmond Safra, the recently murdered Republic Bank founder. Martin knew which phone lines that Safra spoke on directly to the Republic traders. According to Armstrong, ' All the conversations about every manipulation you ever wanted to hear are there.' He said that the problem was that 10 days after he told the feds that he was after sensitive information that would expose the manipulations, Safra died mysteriously in Monaco. This is not kid' s stuff we are talking about here… I told him that we [at GATA] felt that the collusion involved certain New York bullion dealers with the help of the New York Federal Reserve Bank and the US Treasury Dept. We were planning to get together to determine some sort of relationship. He told us that he could provide evidence (tapes and documents) that the metals markets in New York have been manipulated. Naturally, smoking-gun information of that nature is of great interest to us." Then Armstrong was sent to prison on absurd fabricated charges. The lid on incriminating information is still on.
◄$$$ TARP INSIDER TRADING IS PREVALENT, AS SENATORS MAKE POLICY THAT ASSURES PERSONAL PROFIT $$$. Many US Senators held stock in the banks that benefited from bailouts that came from the Troubled Asset Relief Program. The Senate decided to relax accounting rules, thus opening the door to vast misrepresentation and fraud. But the stocks rose, the banks have more apparent equity, and the Senators have more personal profit. A disaster is averted, hallelujah! A job well done, with the perpetrators making handsome gains, kudos! Recent financial disclosure reports revealed how the very senators who oversee the $700 billion Wall Street rescue package held stocks in many of the banks that benefited from huge bailout funds and bridge loans. According to the reports on senator finances in 2008, nearly half of the members of the Senate Banking Committee had holdings in financial institutions that have taken TARP funds. This committee has jurisdiction over the bailout fund and other relief efforts designed to save the nation' s financial system. The engineered rally is so strong from corrupt sources that Bank of America recently was given a strong stock recommendation even after the same analyst estimated $46 billion in NEW future loan losses. See TheHill article (CLICK HERE). Recall that the USCongress Inspector recommends 40 cases for criminal prosecution, related to fraud with TARP funds.
◄$$$ WATCH FOR DENIALS 3X STATED, AS POLITICIAN SUPPORT FOR USDOLLAR SEEMS FORCED FROM VARIOUS CORNERS OF THE WORLD $$$. The Japanese Finance Minister Kaoru Yosano said in early June, " The US Dollar' s position as the world' s reserve currency is not under threat. Our trust in US Treasuries is absolutely unshakable." Then Russian Finance Minister Alexei Kudrin said two days later, " [Russia] does not see any changes in our policy with regards to dollar denominated paper over the next year or more." Then lastly, the German Finance Minister Peer Steinbrueck was reported to " not be concerned" with the Euro' s value against the US Dollar. Echoing from Europe, the IMF Director Dominique Strauss-Kahn " does not see a weak US Dollar." In conclusion, let us invoke the nineteenth century Rule, first stated by German Chancellor Otto von Bismark: " Never believe anything in politics until it has been officially denied three times." Three denials plus two more half denials are presented as above quotes. The conclusion is simple: THE USDOLLAR IS IN DEEP TROUBLE.
◄$$$ LATE IN THE COURTSHIP, THE RIO TINTO OWNERS REFUSED TO MERGE WITH CHINALCO, THE CHINESE ALUMINUM GIANT, LEAVING RIO TINTO TO PURSUE BHP BILLITON, AFTER YET ANOTHER CHINESE BRIDE WAS LEFT AT THE ALTAR $$$. The largest merger deal ever attempted by China failed. Shareholders of Rio Tinto proved too fearful of lost control. Chinese bidders tried to mollify fears, even bent over backwards to satisfy numerous demands. But London-based colonialists ultimately refused the deal. Instead of solving its fiscal woes by working a more intimate partnership with China, the Rio Tinto clan preferred to turn to its cousin and largest rival BHP Billiton. Next Rio Tinto must raise about $20 billion through new stock issuance and break ground on a joint venture with BHP. China will have to settle for now on its 9% stake in Rio Tinto. One more bamboo shoot under the Chinese fingernails in dealing with Western firms, sure to anger them further. Their money is acceptable for credit supply but not for important commodity firm partnership. The distrust is sure to spill into other geopolitical arenas.
◄$$$ CHECK A USEFUL UPDATE ON THE AGRICULTURAL SECTOR, WHICH MIGHT BE ON THE RECEIVING END OF PERVASIVE DISINFORMATION, AS CROP SHORTAGES ARE LIKELY $$$. The USDept Agriculture has released aggregate estimates chock full of dubious information and claims. They expect future increases in crop output, despite the current details telling the exact opposite story, marred by shortages and even spot droughts. Commodity futures prices have come down, again from propaganda. See the Market Skeptics article entitled " USDA Deliberately Misleading Investors To Hide Looming Food Shortage" (CLICK HERE).
◄$$$ VIX VOLATILITY INDEX IS LOW ENOUGH TO DECLARE THAT FEAR HAS BEEN DRIVEN OUT OF THE STOCK MARKET, THUS A STOCK DECLINE IS DUE VERY SOON $$$. An extremely reliable indicator of stock market change in direction is the VIX, which integrates option premium to measure risk perception. In spring and summer 2008, the VIX relaxed until a crisis hit. The VIX is again relaxing, showing very little fear, even to the point of being oversold. It is due to move up (increased fear, lower stock prices), and is stabilizing at a long-term trendline. Trimtabs points out that executive insiders have been major sellers here, with outsized net sales of $1.9 billion in April and $2.2 billion in May. Furthermore, corporations have taken advantage of the false stock rally, selling stocks worth $10 billion in April and $63 billion in May. See the CNBC interview (CLICK HERE).
◄$$$ THE TRUCK INDEX INDICATES THE RECOVERY IS NOT YET HERE $$$. The American Trucking Assn Tonnage Index declined a seasonally adjusted 2.2% in April. That registers a cut of half the 4.5% contraction in March. If retail spending, or construction activity, or new business formation, or capital equipment installation, or industrial processes were indeed on the rise and on the mend, this index would show it. It is too early to declare any recovery as in progress. Beware of seemingly endless nonsensical propaganda. By the way, the unleaded gasoline price rose over the last two weeks by 17 cents on average to $2.66 per gallon, according to Lundgren. More headwinds for the USEconomy.
◄$$$ THE AIRBUS TAILFIN WAS DISCOVERED OFF THE BRAZILIAN COAST, ALONG WITH MANY UNBURNED BODIES $$$. A Brazilian Navy unit retrieved the floating complete vertical tailfin and rudder assembly from the crashed aircraft. It was found floating 30 miles (50 km) from the main debris field. Also, unburned bodies stripped of clothing were found in two separate locations, indicating the aircraft fuselage split into two large pieces. The storied failure history of the vertical fins on the A300 series aircraft will be difficult to conceal, soon likely to be declared as the primary cause for the deadly crash. It is at tribute to political forces and regulatory lapses that these Airbus aircraft are permitted to continue standard flight operations with such a known structural defect. Safety is obviously secondary to lightweight flight. In the George Larson Report, a quote was given by a maintenance veteran who salvages airliner airframes as a profession. His observations confirm Airbus structural deficiencies within the flight test and aero structures communities.
The engineer said, " I have scrapped just about every type of transport aircraft… Airbus products are the flimsiest and most poorly designed as far as airframe structure is concerned, based upon an almost obsession to utilize composite materials. I have one A310 vertical fin on the premises from a demonstration I just performed. It was pathetic to see the composite structure shatter as it did, something a Boeing product will not do. The vertical fin along with the composite hinges on rudder and elevators is the worst example of structural use of composites I have ever seen. The Airbus line has a history of both multiple rudder losses and a vertical fin rudder separation from the airframe, as was the case in New York with American Airlines. As an old non-radar equipped DC4 pilot who flew through many a thunderstorm in Africa along the equator, I am quite familiar with their ferocity. It is not difficult to understand how such a storm might have stressed an aircraft structure to failure at its weakest point, and especially so in the presence of instrumentation problems…. I was absolutely stunned and flabbergasted when I realized that the majority of internal airframe structural supports on the A310, which appear to be aluminum, are actually rolled composite material with aluminum rod ends. They shattered… [On the A320 elevators and rudder hinges,] not only were the rear spars composite but so were the hinges. While Boeing also uses composite material in its airfoil structures, the actual attached fittings for the elevators, rudder, vertical and horizontal stabilizers are all of machined aluminum."
Watch carefully the orchestration of the inquiry by French officials and Airbus executives. They pursue a cover-up and phony conclusion. Their business is under siege, from faulty aircraft design across its entire structural spectrum. Notice what seems a concerted effort to steer discussion away from structural issues and onto sensors. Air France has begun an initiative to replace all the air data sensors on the Airbus fleet, which creates a distraction and shifts the media focus away from the real problem in the tailfin and rudder assembly. They are trying to pacify the pilot union. This story is not over. NEVER FLY AIRBUS!
USDOLLAR REVOLT GROWS GLOBALLY
◄$$$ PAUL CRAIG ROBERTS PROVIDES AN EXCELLENT SUMMARY ON THE MANY USDOLLAR EXTREME WEAKNESSES AND PROBLEMS $$$. Roberts is a fine analyst. In my view, his political essays are less interesting than his financial essays, which tend to carry great weight from a geopolitical standpoint. Mine is not to favor much of any partisan political slant or the usual tribal political party conflict that distract from the path to a lost republic. Here are some of his major points. The massive USGovt federal deficits must be monetized, something the financial markets are coming to grips with. The effect on the USDollar is clear, not only down, but soon dangerously down. Against the USTreasury issuance to grow by $2 trillion, the foreign trade surpluses are inadequate to cover the debt. In fact, their trade surpluses are considerably smaller. Japan recently suffered a trade deficit, the first in over 30 years. Not only creditor surplus nations they have less to supply US credit needs, but they wish to pursue diversification alternatives away from the USDollar. China does not comprehend how the USGovt debt of $4 trillion in the next two years can be financed at all.
When in China, the USFed resident idiot Richard Fisher was peppered and pestered on the subject of whether the USGovt would cover its debts with printed money. He said, " I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States." Unfortunately, the US bank officials (led by Geithner) were forced to lie, until they returned to home turf. Russia has shifted assets held in reserve, now holding more in Euros than USDollars. The movement to bypass US$-based settlement on international trade is growing, the latest example being the bilateral accord struck between China and Brazil. Roberts expects the USDollar to lose its coveted global reserve currency role. Then comes price inflation, strained by shortages, as life in America becomes evermore stressful.
Roberts brings attention to the idealism, ambition, and ignorance of financial markets by the Obama Admin, and their steadfast insistence to deliver radical solutions to a host of chronic problems in rapid sequence. This reckless path has a backfire element, higher interest rates. Their plans have helped to create a perfect storm, one that will see the entire administration approach come unglued, in his words. The big spending plans have not taken into account any practicality of finance mechanisms, perhaps too mundane! Every sector of the USEconomy is in trouble, including industry that is essentially bankrupt. Next damaging blows come from commercial real estate, along with continued housing pain. Roberts declares the 28-year bull market in USTreasurys as over. It began when Volcker dealt successfully with stagflation in the 1970 decade. See the Robert article entitled " As the Dollar Falls Off the Cliff" (CLICK HERE).
◄$$$ ROUBINI EXPECTS THE USDOLLAR TO LOSE ITS GLOBAL RESERVE STATUS SLOWLY, AS THE USECONOMIC RECOVERY WILL BE VERY SLOW, AND THE US WILL NOT BE ABLE TO BRING DOWN ITS DEFICITS WITH ANY BENEFICIAL DOMESTIC GROWTH $$$. At an Athens Greece conference, Nouriel Roubini laid out the path for the gradual but serious decline in the USDollar. The US will lose its sole global reserve status step by step, he anticipates. The New York University professor has correctly foreseen the bank crisis and economic distress. He said, " We may see complementary reserve currencies. [It is] not going to happen overnight, [but the development] will diminish the role of the dollar over time." Concurrently, the BRIC nations, the emerging powerful economies with a bright future, deep resources (whether human or commodity), have begun to coordinate a break in the ranks of loyalty to the United States. Upstart nations of Brazil, Russia, India, and China have reacted sharply escalating USGovt budget deficits, by calling the USDollar special status into question. They are making plans to diversify their US$-based assets held in reserves. For the USGovt, a change in the role of the dollar would risk higher financing costs at a time when borrowing is going out of control. US prestige is soon to slide away into the night. Thus another backfire to the interest rates driven to zero, good for the US goose in borrowing costs, but bad for the gander in earning a yield from creditor nation loans.
Roubini does not believe the US can count on a strong economic recovery to restore its fiscal balance sheet and whittle down its deficits. Growing out of the problems is not a viable path, except to blind politicians not grounded in reality. Neither can the US depend heavily upon foreign industrial powerhouses to pull the USGovt debt burden. The world economy will remain weak for the next two years, Roubini expects. He predicts a meager 1% growth for the USEconomy in 2010 and stagnation in Japan and Europe. Furthermore, after the corner is turned, he expects very slow growth in the advanced economies. He said, " Recovery will be weak, anemic, subpar." See the Bloomberg article (CLICK HERE).
◄$$$ THE USDOLLAR INDEX IS ON THE VERGE OF A SERIOUS DECLINE, THE ONLY FACTOR HOLDING IT UP IS FOREIGN ECONOMIC AND BANKING WEAKNESS, ALTHOUGH GOLD IS NOT BEHOLDEN TO A WEAK USDOLLAR ANYMORE $$$. One should be clear that the gold story has endured a transition, not fully recognized. As the Competing Currency War has proceeded, the gold price rises against all currencies. The USDollar is defended as foreign currencies suffer their weakened state, and accept official rescues in many forms. The foreign central banks must dig a deeper hole to fortify the dying USDollar itself. Furthermore, nasty attacks against the crude oil edifice by the USGovt have not only weakened Russia and Arab states, but emboldened them to counter-attack against the crippled USDollar fortress on its financially weak flank. See the release of oil by the USGovt Strategic Petroleum Reserve, coupled with attacks by Wall Street against hedge fund commodity positions. Although gold is on the uptrend versus many currencies, the crude oil realm has begun its global counter-attack. The conclusion is that FOR GOLD TO REACH 1500 OR 2000, THE USDOLLAR DOES NOT NEED TO BREAK DOWN. Instead, weaker needier banks, more bloated federal budget deficits, moribund economies, grander stimulus plans, and higher price inflation will ensure the gold breakouts, only given extra power by a US$ breakdown. However, the USDollar will reflect how the USEconomy and US banking system in the worst condition of all major industrial nations. So a US$ breakdown is not a necessary condition for a gold catapult in price, but rather pervasive inflation is. Refer to monetary inflation principally, and price inflation in its wake.
A major Head & Shoulders bearish reversal pattern is extremely evident, with an indicated target of 73. The big telling event was the breakdown below the 81 neckline. It seems unable to rise above it. Bearing down is the upcoming probable MA crossover, marked by the faster 20-week moving average crossing below the more stable 50-week moving average, shown in the green circle. Several more weeks are needed for the MA crossover. Relative strength is poor, heading down. Although the stochastix is turning up, it seems tired. This is a dreadful scary bearish chart. As USGovt and USEconomic fundamentals worsen, added downward impetus will be provided. Any hint of economic growth should be temporary and fleeting.
◄$$$ THE USTREASURY BOND IS VULNERABLE TO DEBT DOWNGRADE, WHICH IS ENTIRELY DESERVED, BUT IF GIVEN, WOULD CAUSE A DAMAGING PANIC IN THE GLOBAL BANKING SYSTEM $$$. The USTreasury Bond is very likely to lose its pristine, but totally undeserved AAA debt rating soon. It has become a Third World debt security, put at great risk from a flood of new debt supply. The credibility of the debt rating agencies was scrutinized last year when an entire class of leveraged mortgage securities and subprime mortgage bonds failed, fell to near zero in value, yet sported hefty AAA ratings. Confirmation that the lost AAA rating might occur sooner than later came from Standard & Poors last week. The S&P made a formal statement, " The AAA USTreasury rating will not be lowered anytime soon." That denial is proof enough for me that it will occur. The lost AAA rating will occur only after its behavior loudly warrants less. It means S&P is closely examining the rating, and knows what they must do. There is no need for a denial if the USTreasury Bond were not deserving of a debt downgrade. The rating agencies are under great political pressure, since they operate within the United States. The abject total shame, insult, and ignominy would be enormous, and make global news as a central story for a month. A prolonged selloff would ensue, causing higher USTreasury yields across the spectrum, pulling down the USDollar, disturbing financial markets tied closely to USTBonds, and forcing many banks into sudden bankruptcy. For these reasons, the USGovt will coerce S&P to back off, in the national interest. We will see if S&P downgrades all sovereign debt except the United States, when the US debt condition is worst of all.
Noted author Robert Prechter expects the United States to lose its top AAA credit rating by the end of 2010. A growing chorus has formed of financial market experts which expects the shameful downgrade, as the USGovt issues trillion$ in debt for bailouts, nationalizations, and stimulus packages. This entire storyline began when in May, Standard & Poors lowered its outlook on British Gilt debt securities, a certain threat to the UKGilt' s equally undeserved AAA rating. The credit market logically and correctly deduced that USGovt debt securities share a similar risk. Both nations have embarked on desperate spending programs that liken them to Third World outfits. Despite monumental efforts by the USGovt and US Federal Reserve to rescue (if not salvage) financial companies and securities markets, Prechter expects credit markets to seize once more, and for the USEconomy to enter into a depression. He regards the US banking sector as still in severe trouble, no matter the Stress Tests conducted for capital adequacy and recent raised capital. He believes those who have declared victory over a pending disaster will be disappointed. See the Reuters article (CLICK HERE).
◄$$$ EU BANKS ARE IN MISERABLE SHAPE, BUT BENEFICIARY OF MUCH LESS AID THAN AMERICAN BANKS $$$. European Govts have approved $5.3 trillion of aid for ailing banks, less than half what the USGovt has. Put that in perspective; it is more than the annual German GDP at $3.3 trillion. The United Kingdom pledged €781.2 billion (=US$1.1 trillion) to restore confidence in its lenders, more than any of the 27 European Union members. In Denmark, where one in ten banks were rescued, they committed €593.9 billion. The USGovt deficits have made the news, but the EuroZone budget deficit has reached a three year peak. The EU Commission is its executive arm. It intends to create the first new agencies with broad powers across the EU system. The tally on bank loss damage has come to $460 billion of losses and writedowns across the continent. Official rescue actions continue, as do government pledges. In all, EU governments approved about €311.4 billion for bank capital injections, €2.92 trillion for bank guarantees, €33 billion for redemptions of impaired assets, and €505.6 billion for bank system funding, to make a total of €3.77 trillion. Over 80% of bank loans in Central and Eastern Europe come from six Western European EU countries. All together, 18 member states have made bank liability guarantees, 15 have approved bank recapitalization steps, and 11 have provided bank liquidity support. The following lists European Govt commitments in total from all relevant aid sources: United Kingdom €781.2 billion, Denmark €593.9 billion, Germany €554.2B, Ireland €384.5B, France €350.1B, Belgium €264.5B, Netherlands €246.1B, Austria €165B, Sweden €142B, Spain €130B.
The EU Commission has called for greater bank disclosure of impaired assets, needed to restore bank system confidence. New EU guidelines may require banks in receipt of aid to proceed with restructuring plans. Still, Europe is beset by what is called ' elevated risk premiums in many parts' of the still challenged financial markets. All this bank relief largesse will have a certain negative impact on the Euro currency integrity and positive effect on the gold price in Euro terms, eventually. In contrast the USGovt and the US Federal Reserve are in line for US$12.8 trillion in spending, formal loans, and future commitments. See the Bloomberg article (CLICK HERE).
The real disaster zone is the United Kingdom. Their plight was fully forecasted, with deficits, trade gap declines, housing bust, and banking system ruin. The UK debt is expected to rise from just over 50% of annual GDP today to well beyond 100% of GDP in a couple years. Some have called for the US and UK to issue index linked debt, whose principal value is designed to remain fair and constant. Such extreme measures would protect the creditor against the temptation for the debtor to try to inflate debts away. THESE ARE TACTICS USED AGAINST THIRD WORLD NATIONS AND THEIR DEBT MANAGEMENT. Debate has come over formal mechanisms to enable England to inflate significantly, and thus avert bank failure from insolvency and declining liquidity. The mechanism in question could be used as an option but would require their Treasury to invoke its reserve powers, granted in the Bank of England Act 1998. This step would permit the Treasury to seize the power to set interest rates and conduct monetary policy generally from the Monetary Policy Committee of the Bank of England. If that mechanism is used, market perceptions of UK inflationary would be suddenly felt, as in a sharp decline in the British Pound Sterling currency. The more likely course of action is calling in the US Cavalry, to print USDollars and purchase UKGilts, a US-UK monetization. HOW ELSE CAN ONE EXPLAIN WHY THE BRITISH POUND HAS RISEN FROM UNDER 150 TO OVER 160 AFTER S&P DOWNGRADE THREAT? We are witnessing possibly a new wrinkle in the competing currency war, when the United States shares its ammunition, cannon balls, and artillery. If the USDept Treasury printed money and bought UKGilts (which nobody hypothesizes), then the market reaction would have precisely what we have seen in the last two months. Confusion would have masked the US activity, just like over a wartime battlefield. But then again, this is the Competing Currency War, and the UK is an ally of the US.
I.M.F. THREAT TO THE USDOLLAR
◄$$$ MEDVEDEV SLAMS THE USDOLLAR AS HE BLAMES THE UNITED STATES FOR THE GLOBAL BANK CRISIS, AND WORKS CONSTRUCTIVELY TOWARD THE I.M.F. SUPRA-NATIONAL CURRENCY, ALONG WITH TRADE IN RUBLES FOR RUSSIAN ENERGY $$$. Russian President Dmitri Medvedev told the St Petersburg Economic Forum recently that an unstable US financial policy had made the USDollar an undesirable denomination for usage in central banks reserves management. Corporate leaders met in an attempt to coordinate a response to the downturn. Russia has joined with China, as well as other nations, to pound the table in a call for a supra-national currency that replaces the USDollar. The concept of the IMF Special Drawing Rights is growing in acceptance as a basis. Medvedev colorfully called reliance upon the USDollar so extensively, in a climate of US weakness and instability, could mean building a post-crisis financial system on legs of clay, in his words. He advocated wider usage of regional currencies, like the Ruble. Removing some control of the world' s financial architecture from the United States is a theme often raised by Russian leaders. Independent economists generally dismiss Moscow' s ambition of broader Ruble currency usage, since the Russian financial system is not mature or stable or global in reach. They do not take into account how Moscow might install a crude oil or natural gas or gold component to their Ruble currency though. That would change the entire equation. Linkage to commodities is a revolutionary concept. Moscow is ready for profound change. The big question is whether such a step would increase global Ruble liquidity.
Russian authorities are learning that their negative comments on the USDollar and USTreasurys have the power to pull down the US$ exchange rates with other currencies. THAT IS REAL POWER, based upon concerns that central banks would dump the currency. An entrenched adversarial relationship is developing between the United States and Russia. The Kremlin leaders are fighting warriors who rarely pass an opportunity to accuse the United States of causing the global financial crisis. President Medvedev said, " The artificial and monopolar support of a monopoly on key segments of the world economy became the fundamental cause of the crisis." As Russian officials have stated in the recent past, Medvedev assessed blame for the global banking crisis on what he characterized as " one center of consumption, which is financed by deficit, and correspondingly, an accumulation of debt, one reserve currency that is powerful as never before, and one predominating system of evaluating risks and assets." In other words, the United States, complete with its over-consumption, excessive debt, its Wall Street agents, and subservient debt rating agencies, is at the center of responsibility. Any economist or bank analyst worth the weight in salt would agree.
Russian leaders use the St Petersburg Economic Forum as an annual opportunity to put forth their economic policy and to court foreign investors for vast energy and mineral projects, as well as for port facility projects (like with liquefied natural gas). The recent recovery in both the oil price and Russian stock market has revived investor interest in the country. Scores of chief executives and more than 200 portfolio investors attended the gathering in early June. The backdrop for the meetings is a growing consensus for a super-sovereign reserve currency to at least operate alongside the USDollar, and in time to replace it. Global banking stability is sought after, and the new concept is gaining favor. Russian President Medvedev in early June renewed his call for consideration of a supra-national currency to challenge the USDollar. Chinese Central Bank Governor Zhou Xiaochuan said in March that the Intl Monetary Fund should create a super-sovereign reserve currency. Much weight comes with such calls, but the structures are difficult to construct. While Medvedev and Zhou Xiaochuan questioned the global status of the USDollar for settling international debts, Kudrin might be currying favor with the USGovt, playing politics, as he defends the US$ legitimacy. In Italy after meeting officials from the G-8 nations, Kudrin said " It is too early to speak of an alternative."
If Russia is to win a role as a leader among the world' s major economies, then Kremlin leaders must act constructively and thus exhibit leadership qualities. Medvedev tried to do so, when he said that all governments had worked cooperatively during the crisis. He praised the ability of governments to ' work in concert' in preventing downward trends. He correctly put on the table how policy makers are torn in conflict between preserving the old failed system and installing a new one. He questioned the wisdom of any approach that would conserve the current global regulatory regime. He promotes an overhaul that reduces the likelihood of future crises, but which could inhibit the staged recovery. He probably believes any recovery would be temporary and would fail soon afterward, since the structure is faulty. Medvedev repeated his theme, that Russia pursues substantive change, and will no longer support the continued dominant role for the USDollar. The irony, evidence of the coerced position that foreign governments find themselves, is that the Russian central bank holds half of its reserves in US$ assets. Moscow has taken steps to lead countries into holding Rubles as a reserve. They do so by encouraging trade in Russian oil and natural gas to be denominated in Rubles. Seeing inadequate Ruble volume, inadequate trading vehicles like Russian debt securities, and immature Russian markets, the many trading partners prefer to date to remain with US$-denominated contracts. See the New York Times article (CLICK HERE).
◄$$$ RUSSIA & CHINA & BRAZIL EACH WILL WORK WITH THE I.M.F. BUT THE HIDDEN MOTIVE IS LIKELY TO BE GRABBING THEIR GOLD FROM THE BACK DOOR $$$. Russian central bank head Alexei Ulyukayev confirmed that the Kremlin intends to follow through with plans to purchase $10 billion of IMF bonds using funds from its foreign reserves. Specifically, funds from USTreasurys will be moved to the IMF bonds, reiterating comments made in May by Finance Minister Alexei Kudrin. At last count, about 30% of Russian FX reserves were held in USTreasurys. Their entire reserves stood at $401.1 billion on May 29th. The IMF securities enable contributors to the fund to earn an interest yield, pegged to the IMF' s basket of currencies, known as Special Drawing Rights. The IMF bonds are a new vehicle, intended to encourage fund raising for global aid during a fierce global recession. China has pledged to purchase up to $50 billion of the bonds, according to IMF Director Strauss-Kahn, confirmed by the State Administration of Foreign Exchange in China. The backdrop of cooperation with IMF is painted by a global consensus, textured by anxiety about inflation eroding the value of the USDollar. Angst is growing, even as hope is rising, as a new dawn might come without the USDollar commanding its historical role as the international currency.
In addition, Brazil' s Finance Minister Guido Mantega said his nation will purchase $10 billion of IMF bonds. China will buy $50 billion in the IMF bonds, and India may announce similar funding. The IMF calculates the value of SDRs daily, with 44% weighted towards the USDollar, 34% to the Euro, and the remainder split between the Yen and the Pound, according to its website. Brazil' s central bank will decide which assets to sell toward purchase of the IMF securities. Brazil' s reserves totaled $204.6 billion as of June 8th. Mantega said, " This is an investment that Brazil is doing with part of its reserves, and making available financing so that the IMF may help emerging countries, especially developing countries which face today a shortage of capital because of the global financial crisis." Joydeep Mukherji is a sovereign risk analyst at Standard & Poors in New York. He said, " [Plans by the largest emerging economies to buy IMF debt is not] a dramatic reallocation of resources. It is a signal that instead of needing help, it is providing funding. It is a sign of political support for the IMF. It is a statement to the world and their own people, a signal that the world has changed." These nations, Brazil, Russia, India and China, increased their collective foreign reserves by more than $60 billion in the month of May, a tidy sum useful to limit currency gains against any rising dead USDollar. They accumulated USDollars at the fastest pace since before the credit markets froze last September.
China has been in direct conflict with the Intl Monetary Fund for over ten years. The principal objection raised by Beijing is over harsh and largely unsuccessful prescriptions for nations seeking aid. The IMF solution measures typically result in painful economic decline, ruined industries, hollow banks, impoverished population, and a decade of reduced prosperity. Their recommendations usually create Western wealth and emerging nation poverty and dependence, after conforming to Western requirements on fiscal transparency, banking deregulation, and denationalization, all considered vital in that structural reform. The IMF has recently angered Beijing, when it urged Western governments, creditors, and mining firms to pressure the government of the Democratic Republic of the Congo to renegotiate a $9 billion project involving copper and cobalt rights and infrastructure development. It is one of China' s biggest overseas resources deals. The Chinese ambassador to the DRC angrily characterized the IMF' s involvement and actions as blackmail.
China is toying with its hated IMF overlord. The leaders in Beijing have a trump card, mentioned before in the Hat Trick Letter. A new regional grouping is being fashioned to provide financial support to Asian economies. In May, the Association of Southeast Asian Nations (ASEAN) plus China, Japan and South Korea struck an important accord in Bali Indonesia to establish a $120 billion regional reserve fund. The deal is led by China and Japan, the two largest contributors to the fund. They each ponied up equal sums, totaling 32% of the needs to create the fund. The regional reserve fund potentially represents the first regional institution in Asia that is fortified with actual financial power and the means to enforce discipline among members.
At the G-20 summit in London this April, China pledged to support a broad effort to boost the IMF resources by $500 billion. However, China is clearly proceeding in a cautious if not ambivalent manner. They distrust the fading exploitative institutional weapon housed in the IMF. Some believe it is a relic, soon to be found in the dustbin behind the American Empire. Now the Chinese approach seems somewhat self-serving. Beijing might welcome the institution as giving them an escape route for unloading USDollars, while gaining two potential advantages. They might force important structural reforms in the IMF itself. A principal donor can make demands that stick. China is aligning itself for extraordinary IMF gold sale transactions, alongside Russia. The IMF has huge gold bullion pledges from major nations. China & Russia might be putting themselves into position for massive gold purchases, essentially converting their USTreasurys into gold bullion. The IMF wins with a source of large scale funding. The Chinese win by obtaining gold bullion through official channels, without disruption to the gold market. Beijing and Kremlin leaders can claim to be good global citizens on all fronts. This is how global leadership is won, or rather wrested via creditor brute force. What works for China will also work for Russia, and the Kremlin is closely watching developments. See the Asia Times article (CLICK HERE), and the Bloomberg article (CLICK HERE).
◄$$$ THE I.M.F. BOND HAS MANY PRACTICAL HURDLES TO JUMP BEFORE INSTITUTED AS A NEW GLOBAL RESERVE CURRENCY, SOMETHING THE UNITED STATES WILL VIGOROUSLY BLOCK AT EVERY TURN, YET SOME ALTERNATIVE IS INEVITABLE FROM A PRACTICAL SIDE $$$. For the IMF to lead the way in blazing a path to a new currency, a differentiated money instrument would have to be created apart from the IMF bond. Also, to fortify the entire system, a skeletal independent central bank must be established with a formal chartered function. The United States and Britain must provide tacit support for the initiative, probably only after threat of global revolt. The USDollar is becoming widely understood to be maintained not by the market but the USMilitary, something seen more often in print, to my surprise. American leadership recognizes the removal of the USDollar from its exalted post as a death knell certain to have enormous economic consequences. Therefore, they instruct Persian Gulf states not to trade oil in any other currency but the USDollar. The currency insurrection faces a great uphill struggle, but one pushed by need since the global financial system is not functioning, period! Look for a dual global reserve currency soon. My belief remains, that the IMF basket might operate as a super-sovereign reserve currency in parallel to the USDollar only until a viable gold-backed currency is established on the world stage. It is a Straw Man concept that could have temporary legs.
Brazilian Finance Minister Mantega said, " For us, there is no interest in weakening the dollar, because when the dollar weakens the real [currency] gets stronger, and when the real gets stronger the exchange rate trips our exports up a bit. What we really want is that other currencies are also behind international transactions." This is the Competing Currency War at work in vicious style. These countries will struggle to push aside the USDollar as long as they keep buying USGovt debt securities in order to hold down their own exchange rates and maintain trade surpluses. Various ideas and potential vehicles are being floated. The monetary elite never offers a single solution. Their motives are often to confuse and undermine support for anything that weakens their perch of power. Thus, the situation eventually generates a Chinese solution (the Yuan), a Russian solution (the Ruble), and an Arab solution (the Dinar). Regional solutions might actually provide a working functional alternative, and could be the goal. In fact, the regional solution can succeed only if the IMF supra-national currency basket is accepted, since its composition is made from the regional currencies. See the Bloomberg article (CLICK HERE).
In some cases, strange bedfellows will be noticed in the battle to unseat the USDollar from its catbird seat, its dominant position, one that is causing untold wreckage in almost every important national economy. The Japanese and Chinese are cooperating like never before. In 2009, China displaced the United States as Japan' s #1 trade partner. Mutually beneficial opportunities override past conflict, but this must be watched closely for fractures. As BobO in Kansas said in a personal exchange, " Economic crisis has a tendency to turn yesterday' s strongly held opinions into today' s unaffordable luxuries. Economic ties and opportunities trump just about every other card in the deck. My guess is that the US will find many of its long time allies less reliable, as we are no longer ' top bidder' for their loyalty."
GOLD BANKERS ENTER THE KILL ZONE
◄$$$ US GOLD IS BEING EXPORTED TO FOREIGN NATIONS, HIDDEN AS ' GOLD COMPOUNDS' ON THE OFFICIAL BOOKS, PROBABLY THE REPATRIATION OF LEASED GOLD, WHICH ACCOUNTS FOR A LARGE SLICE OF THE REDUCED US TRADE GAP $$$. Rob Kirby remains the foremost financial forensic analyst in my view. See his insightful yet disturbing article entitled " US Gold, Going or Completely Gone?" (CLICK HERE) from late May. He points out how 2920 metric tonnes were exported from US confines in 2008, after 2150 metric tonnes were exported in 2007. Yet the value of the ' Gold Compounds' is surely exaggerated. If indeed the gold is from recoverable industrial sources (like gold paint), then the yield is surely much smaller, surely less than the hefty values assigned to the export. Something smells rotten and corrupt, the usual fare for US financial records. Kirby wrote, " This figure of 2920 metric tonnes is equal to 36% of all alleged sovereign US gold stocks or more than 14 times annual US gold mine production… I noted that this was counter-intuitive and made no fundamental economic sense." Kirby pressed a USGS employee to explain why the gold compounds were assigned such high value, and he confirmed the value was given as if gold bullion itself. Kirby wrote of a conversation, " Let me guess that the US Census Bureau is assigning an astronomically high value to these goods. Such a high value would be COMPLETELY INCONSISTENT with what the US Census Bureau claims these items are, namely industrial goods. The values being reported would be more in line with these goods being gold bullion or equivalents." The USGS worker responded, " That would be CORRECT."
Kirby concludes that the USGovt has been, and continues to export gold bullion to other nations secretly, and with false accounting. The United States Govt disguises physical repatriation of foreign gold bullion which used to be held on deposit with the New York Federal Reserve. The Germans have demanded return of their gold held in custodial accounts. This appears to be proof, but not proof positive. It is cloaked in a hidden accounting cloud. The end result is between $120 and $130 billion in exports to foreign economies is registered in the trade data for the last two years, explaining the big reduction in the trade gap. How very devious!
◄$$$ THE COMEX HAS BEEN TARGETED FOR DISCREDIT, DAMAGE, AND POSSIBLE RUIN, AS THE PROCESS HAS BEGUN QUIETLY, THE CHOSEN WEAPON BEING OFFICIAL AUDITORS $$$. Several gold bullion bankers are lined up for a kill. They have inadequate gold in their vaults to cove their deposits. They have colluded and conspired with the major banks in the gold cartel, and have permitted their gold bullion in deposit accounts to be removed. In many cases, the banks have leased the gold bullion, resulting in a paper certificate left at the scene of the crime. In other cases, they have turned a blind eye when the gold bullion was fraudulently taken, a close cousin to simply stolen. The banks identified by my excellent source at most risk of imminent ruin are ScotiaBank (and their Moccata Group), Bank of New York, Union Bank of Switzerland, and Credit Suisse. This list is not complete. Add at least HSBC to the list. Expect that the medium sized bullion banks will be attacked and ruined first, since not well enough connected to the power center on Wall Street and the USDept Treasury. A domino effect seems part of the grand plan. The basic problem is that gold is missing, and in large volumes!!
The task has been contracted out to several institutions, agencies, and powerful individuals which collectively are furious at the Wall Street and London financial syndicates for their corrupt control of financial markets generally, and suppression of the gold & silver markets specifically. The contractors are as powerful as they are wealthy and influential. From what is told in communications, the ' HITMEN' are very well financed with billion$ accounts and deep credit lines, very well connected with power centers (like central banks and sovereign wealth funds). They are very motivated to end the incredibly pervasive and perverse corruption, and are very motivated to undermine the important pillars to financial hegemony led by the US and UK. Given the nature of the initial chosen weapon, the bullion bank auditors, my conjecture is that the Bank For Intl Settlements, the lead global central bank, is giving the all important orders to conduct formal audits with a bite.
In my late May article entitled " Hitmen Contracts to Bust COMEX" (CLICK HERE), a story was told with some attempt to describe the background for the Hitmen Who Cometh. The article generated quite a powerful response. Big changes come, global changes, in particular to the financial structures. The birth pangs might involve the pain of a COMEX bust. The Jackass wrote, " All Paradigm Shifts result in extreme disruption. That is the essence of Paradigm Shifts. The entire table changes, like its shape, its seats, its location, even who sits at the table, and in particular who sits at the head of the table. Big disruptions are to come from the COMEX pit of corruption, the central nexus for controlling illicitly the price structure for gold, the USDollar, and the USTreasury Bonds. The COMEX in all likelihood is the weakest link in the US-UK chain of corrupted financial markets. For many months my view has been that gold fights the political battles, while silver gathers more than its share of rewards and spoils. Gold has a long history of experience fighting grand battles. It can be placed in dungeons, but not for more than a couple decades. The rot in financial systems without golden foundations forces gold to the surface!"
Some confirmation has come from the indefatigable Jim Sinclair, whose website blog is a rich source of information, analysis, and encouragement (CLICK HERE). He implies that the list of targeted bullion banks is one level above the second tier cited above. The major gold cartel banks in charge of corrupt price fixing in gold & silver price structures are JPMorgan, Goldman Sachs, Citigroup, Bank of America, Barclays, and HSBC. On June 10th, Sinclair wrote, " I have heard rumors for some time, but today it was confirmed to me, that the Canadian mint' s present problems are not unique and that other depositories (vaults) have had an army of auditors descend on them in the last two weeks. Some of these depositories have names so famous that it would scare the hell out of you. The repercussions would be drastic if they turn out to be troubled." Sounds like gold cartel banks.
In past reports, the role of the Germans has been cited. They are the spearhead in my opinion for challenge to the corrupt US-UK gold system. They have demanded their gold assets to be returned from US custodial accounts. They have counseled the Arabs in Dubai to demand their gold assets to be returned from London custodial accounts. Like the Germans, the Swiss want their 1000 tons of gold bullion returned from the United States, held in custodian accounts. Perhaps some vengeance here from the Swiss, whose private banking was assaulted by the bankrupt US bankers. Here is an email message from AshleyD in British Columbia, who saw a British Broadcast Corp news story a while back on a Caribbean cruise. He wrote, " This story was a snippet on the BBC/TV world news in late February. I saw it while on a cruise ship which carried BBC news on the television in the cabins. Not a word have I seen in print since that time. I brought it to Bill Murphy' s attention [at GATA] and he mentioned it briefly in his Midas column at the time. Also I emailed the BBC [in England] encouraging them to dig deeper into their story, but got no response. Sounds like the same custodial deal as the Germans are demanding from the USA. My guess is that it is a stand-off between the USA wanting more names of Americans with Swiss bank accounts, versus the Swiss wanting back their 1000 tons of bullion, which was no doubt part of a ' swap' deal."
HSBC has apparently entered the auditor meat grinder. They are one of the six biggest gold cartel members, perhaps politically the weakest of the majors, and possibly selected to be ripped to shreds first. In a timely fashion, a subscriber FredD in England sent an email that said, " I am hearing unsettling rumors regarding HSBC precious metals in London being audited with mismatched results, as yet unconfirmed. I own silver in custody with HSBC New York and have contacted them to organize withdrawal and delivery elsewhere. I received an auto-reply from the guy I am usually talking to in HSBC. It stated that he will be away from the office from June 15th to Aug 31st… Unusual to say the least. There may be some legitimate reasons for someone to be away that long. However, it is of concern that he happens to the head of physical Precious Metal storage, during a time of stress." Maybe he has been reassigned to another continent, or made the handy scapegoat, or dismissed on permanent leave so as to delay the audit process.
My inquiry was sent to my best and most reliable source in gold banking. The response was quick and crisp, highly encouraging to those who seek justice in the gold arena. It went, " The plug has already been pulled. The gold banker manipulations do not really matter at all. By the end of the day, they get crushed by the market forces. As I have told you. They are being taken down one by one. Your subscriber' s observations at HSBC are correct."
Bullion bank auditors have begun to descend upon medium banks, as well as some larger banks. Their management of gold bullion has been criminal and will gradually be exposed. The auditors have already found evidence that a great deal of gold is missing from several key banks. The news will slowly emerge. This all begs the question: WHO CALLS THE SHOTS, MAKES THE ORDERS, BRINGS IN AUDITORS ??? My best guess is the Bank For Intl Settlements in Basel Switzerland !! The BIS gave the orders last September for the Americans do force some liquidation of Wall Street firms, as well as important financial firms like Fannie Mae (mortgage giant, burdened by loss & fraud) and American Intl Group (insurance giant, burdened by credit derivatives). After the initial phase, the USGovt halted the liquidation process, claiming global systemic risk. Instead, a global US$ Swap Facility was put into place for major foreign central banks to tap. That was the US banker response to the marching orders. In the year that followed, no remedy, no systemic reform, no prosecutions, no reversal of criminal US$-Gold structures have taken place. So in my opinion, the BIS has ordered gold bank audits with teeth that cannot be sidestepped. From what is told to me by an extremely experience, connected, reliable source, the order has been given to put the US-UK bankers out of the control position, using the US$-Gold weapon. That is my best viewpoint.
◄$$$ REFLECT ON THE SEQUENCE LEADING TO ATTACKS ON THE US-UK GOLD FORTRESS, WHICH WILL PRODUCE OPPOSITE PRICE ACTION COMPARED TO LAST AUTUMN 2008, SOON FAVORABLE TO GOLD $$$. The USGovt creditors are tired of being bullied, losing money in the USDollar trap, while the US-UK suck their savings and dilute the US$ currency into oblivion with a flood of potentially bad paper. The creditors realize that they are funding the USMilitary, which is being used against their interests. The creditors seek the US$ alternatives in commodities like gold, silver, crude oil, base metals, and foodstuffs. Last autumn, when the US$ was threatened, the US-UK wizards crashed the commodities, attacked the hedge funds, smothered gold & silver and their miners. They took down the Russian economy and the Persian Gulf income stream with sharply lower crude oil price, all to buffet the USDollar and reduce the USEconomy cost structure. The USGovt released vast amounts of oil from the Strategic Petro Reserve to bring down oil price. They kicked the creditors in the teeth, and inflicted great damage. They prevented creditor gold assets from being properly priced, which would have offset some bank losses. The creditors have had a year to prepare, to remove one by one the pillars of US$ support, to dismantle the important levers used. Whatever price action occurred last autumn, prepare for the price action to be in the opposite direction next time. US$ defenses have been removed. The counter-attack of the US$-Gold structure is more organized and deliberate, and it has already begun.
During the next heavy distress period, the next crisis phase, it is going to be different. This time gold & silver & crude oil will rise in price, as the USDollar declines sharply. The beleaguered buck might rebound somewhat as foreign financial structures grow weaker. The COMEX will be busted, and discredited, and the fraud will be exposed by official auditors. The creditors will demand return of their gold that does not exist, sold under lease long ago by the USDept Treasury criminals. This time the creditors will operate off an organized effective plan, and they are motivated to end the US-UK financial syndicate stranglehold that defrauded the entire globe and is hiding money in Caribbean and Israeli and Swiss banks. Some of the Wall Street and USDept Treasury officials (past and present) might be the future object of threatened criminal violence, like murder or kidnapping. Talk swirls of secret trials, private tribunals, and hidden prisons for usage, most likely in Europe. Some gigantic Ponzi schemes will probably be revealed, starting with the Madoff Fund, and extending to much larger schemes run for over 15 years by the USDept Treasury and the Bank of England. During this ruinous chaotic disruptive environment, the US Federal Reserve will very likely resign its contract with the USCongress in order to avoid heavy scrutiny into crime syndicate enterprise, complete with legal challenges and tests by the US Supreme Court. The USTreasury Bonds will very likely default. Never leave out the growing lawlessness and widespread violence and public demonstration that will fill the urban streets, as Americans will increasingly become very angry and frustrated with a leadership that has betrayed the people, and bankers in particular. Beware of virus attacks in response. Thanks to EricD of Texas for his appropriate summary after some exchanges, to which a couple added points were inserted.
◄$$$ THE CANADIAN MINT IS INVESTIGATING $20 MILLION IN MISSING GOLD, BUT THIS INCIDENT IS NOT ISOLATED, AS NUMEROUS GOLD BANKS HAVE FAR LESS GOLD THAN THEY PURPORT, AFTER YEARS OF SCANDALOUS LEASING FOR SALE TO THE GOLD CARTEL, WITH GOVERNMENT APPROVAL $$$. The common link to most improperly leased and sold gold is the USGovt participation, urging, and leadership. The Royal Canadian Mint is busy reassuring customers that their deposits are fully accounted for and in secure vaults, even though an investigation continues to locate up to $20 million in misplaced precious metal deposits. A criminal probe has been called for the Royal Canadian Mounted Police, after a four month external audit was unsuccessful in any reconciliation. In other words, the cover-up has to date been fully effective. Most Canadians are already furious that with US assistance, almost the entire Canadian gold treasure was sold off during the 1990 decade, leaving their currency dependent upon natural resource and economic collateral. The Mint Chairman James Love offers a pathetic distraction story that a new upgraded computer tracking system is to blame. The Mint also offers a possible explanation of residual gold slag not recovered as expected, estimated at 90 tonnes. Official explanations strain to find something credible, to distract attention away from the significant pattern of leasing and sale, without proper authority, approval, or legal standing. See the Ottawa Citizen article (CLICK HERE).
GOLD & SILVER CONSOLIDATE BEFORE BREAKOUT
◄$$$ GOLD PRICE IS IN EXTENDED CONSOLIDATION BEFORE VERY POWERFUL BREAKOUT, AS ALL CURRENCY FUNDAMENTALS (NOT JUST US$) ARE MISERABLE, DURING A PROFOUND CURRENCY DEBASEMENT $$$. The gold price has clearly shown its reversal pattern and desire to surpass the $1000 mark. The stochastix are oversold at extreme. All moving average on the daily chart are pointing upward. Notice the 50-day moving average offers strong support. Generally, the longer the delay in a formal breakout to new highs, the more powerful that breakout will be. While novice investors bemoan the delay, the professionals load up on little retreats and patiently wait for a grand payday. It seems the gold price is waiting for an event. My conjecture is that the announcement and admission of quarterly $1 trillion monetizations is exactly that event. It is coming, from utter desperate need, even though the Chinese will be visibly angry at the decision. In fact, the Chinese will probably punish the USGovt by assuring a strong glide in the gold price well past $1000 toward $1300, maybe higher, later this year.
Consumer gold demand shows a 615% surge for Europe in 1Q2009 over the same period in 2008! The latest World Gold Council report said global demand for gold rose 38% annually to 1016 tonnes, a 36% rise in market value. Mark Kirk (Rep-Illinois) just returned from China. He reports that Chinese officials have substantial and rising concerns over the USDollar and their reserves, and are extremely unnerved by the Quantitative Easing in full progress. He said, " They funded a second Strategic Petroleum Reserve, and they plan to buy $80 billion worth of gold." That is equivalent to two Fort Knoxes, and both investments make sense only if significant US$ inflation is expected. His perceptions stand in total contradiction to Geithner' s perceptions and reassurances
India has turned from gold jewelry domestic vendor to exporter of scrap gold and gold coins to several locations in the Middle East, especially Dubai. In 2008, India imported around 400 tonnes of gold, but so far imported only around 47 tonnes of gold this year. India has so far exported 30 tonnes of gold coins and scrap gold Dubai in 2009. Gold refiners in Dubai and elsewhere in the Middle East are buying scrap in large quantity. Furthermore, the flow of gold has changed radically for Dubai and Switzerland. Both centers used to be major exporters of bullion to India, but are now receiving considerable quantities of scrap from Indian origin. In fact, the contract trade partnership between India and Dubai is increasingly being written in gold. Gold trade through Dubai rose 53% to $29 billion in 2008 versus $19 billion in 2008, due in part to prevalent Indian-owned gold shops. The leader in that trade with the Emirates city was India.
◄$$$ THE SILVER PRICE IS ALSO CONSOLIDATING, WAITING FOR GOLD, AS ITS FUNDAMENTALS IMPROVE, DUE IN PART TO HUGE DECLINES IN MEXICAN MINE OUTPUT $$$. The silver price follows the gold turns. The 14.5 February high might still offer some support, if the last week can be labeled slippage. It needs more stability here. The relative strength is very clear and powerful. The big event here is the bullish crossover eagerly awaited in the 20-week moving average above the 50-week moving average, shown in the green circle. It happened! Technicians and professional traders pay special attention to such events. Additional support should be felt with the pair of rising moving averages. Soon, a move above the 16 level will continue toward the 19-21 range to challenge recent highs. Bear in mind that a quadruple witch option expiration event occurred on last week. The last quad witch occurred in mid-March, when a downdraft also was seen. A strong recovery usually builds in the following weeks. This July should be no different.
The World Silver Survey forecasts silver mine production to fall slightly in 2009. It was estimated that net supply from above ground silver stocks fell 14% to 4,718 tonnes (=151.7 million oz) in 2008, primarily due to lower net government sales and a modest drop in scrap supply. In India, the cheaper silver saw a return to investor favor in lieu of gold. Indian silver imports increased 103% to an all-time record of 5048 tonnes (=162.3 million oz) of silver. See the Commodity Online article (CLICK HERE). Photovoltaic usage is on the rise for silver. The solar industry has pushed alternative technologies for energy to the point that photovoltaic usage is the fastest growing application for silver in the past five years. NanoMarket research estimates that the volume of silver photovoltaic usage will go above 24 million troy ounces in 2016.
Mexico is a total mess, economically, politically, with its petroleum business, and with its mining business. The March silver output fell 54.7% in the last twelve months to 99,214 kilograms, and gold output fell 63.6% to 1635 kilograms, according to their National Statistics Agency. They blamed the shortfall on ' labor circumstances' broadly. Also, copper production fell 27.6% in the year to 20,371 metric tonnes. Industrias Penoles, the world' s largest producer of silver, declared force majeure at its Met-Mex refinery in northern Mexico in March as a result of the strike, which ended on April 14th. As the premier silver producing nation, or at least a high profile producer, Mexico will aggravate physical silver shortages from its shortfall, especially in US markets and for the USGovt Mint. See the Bloomberg article (CLICK HERE).
◄$$$ EMBRY EXPECTS GOLD TO HIT $1500 DUE TO COLOSSAL FUNDING OF USGOVT DEFICITS, STATED IN A GOLD REPORT INTERVIEW $$$. A conversation took place with John Embry of Sprott Asset Mgmt. What follows are his comments, put in a form easily read in concise way, still capturing exactly his points. See the complete interview on The Gold Report (CLICK HERE). He cited the USGovt deficits, the bankrupt condition of the United States generally, and growing awareness globally, then awareness within the US itself, as price inflation ramps up, and unemployment ramps up, and purchase power declines. The reaction to all these developments will be gold demand, heavy gold demand, across the globe as they escape the falling USDollar, and in the US as they contend with a failed system marred by an inflationary recession. He believes the USDollar will fall versus hard assets like commodities, while most currencies maintain the value relative to each other. John Embry said the following:
" Basically, there is a major problem with the dollar. I believe it is absolutely fated to fall dramatically against everything, but more against real assets than against other currencies. When I look at the other currencies, they do not look very good either, particularly the Euro and the Japanese yen. They are trying to create the impression that paper currency is still good… But we are getting close to the end of [knocking down the gold price]. There is no question what is going to push it [over the 1000 mark], the realization that the United States is broke… The US budget deficit is going to be 13% of GDP. That is unheard of for the world' s reserve currency. There is no way you get out of that easily… The people with the money, the people in the Far East and the Middle East, they will just want out of currency and as quickly as possible… They have already started [buying gold]… With the paper gold market, if you look at the short positions run by the commercial banks, by the bullion banks, which are the agents of the USGovt, it is a complete fraud. They could not possibly deliver on their paper promises if they were called by the people on the other side of the trade. The gold is not there to deliver. They have cleaned out most of the western central banks. So we are real close. I think gold will be $1500 before the end of the year.
What will inform the American people is the inflationary impact that will really start chewing into their standard of living, if the dollar falls the way I believe it is going to. That has not happened yet… [Worse job loss] will change if the dollar falls to the extent that I expect, which will be fairly precipitous. [Price inflation will not occur before the end of this year], not in a dramatic way. It will be in the early stages. This obviously presupposes that the dollar will fall in that environment. But yes, as the dollar falls, you will start to see more inflationary implications in my opinion. There will still be a lot of people out of work and it will start affecting those who are working. I think that will have a rather negative impact on the overall USEconomy as well."
Philip Manduca, investment manager at ECU Group, is not a very prominent fellow. His opinion is colorful and on the mark. He uses the confetti image for the USDollar paper output. He expects price inflation is likely to crop up again next year or in 2011, despite reassurance from central banks. They are wrong the great majority of the time, one should realize. He called gold the safest asset to buy in such times as these. He points the finger at monetary authorities, which have printed so much money that price rises in the future are inevitable. He calls gold the pure asset. He said, " You have a lot of ' confetti paper' fears out there. As a consequence, you have just got to be bullish on gold even at these levels. It is going to go to $2000 next year. In the currencies and the companies, you have political and corporate risk. Go buy the pure asset." See the article (CLICK HERE).
The insurance sector has begun to invest in gold, as a hedge against further asset declines, and possibly a systemic hedge as well. For the first time in 152 years, Bloomberg reported, Northwestern Mutual has accumulated about $400 million in gold. Their CEO Edward Zore anticipates the price could double or even rise five-fold if the USEconomy continues to weaken. He said, " Gold just seems to make sense. It is a store of value. In the Depression, gold did very, very well. The downside risk is limited, but the upside is large. We have stocks in our portfolio that lost 95 percent. [Gold] is not going down to $90."
◄$$$ GOLD INVESTMENTS ARE ON THE FAST RISE, AS THE PUBLIC IS AWAKENING, A DOUBLE IN PRIVATE HOLDINGS IN THE PAST YEAR, BUT MUCH IS STUCK IN POPULAR DEADEND EXCHANGE TRADED FUNDS $$$. Demand for physical gold and paper gold by small investors is on the rise, a brisk rise from a year ago. Gold Money enables investors to buy gold bars then stored in vaults on their behalf. The vaulted gold owned by GoldMoney clients has risen from $352 million one year ago, to nearly double at $694 million by the end of May. The official data confirms the trend, which suggests investment demand for gold has increased substantially over the last 12 months. Fears of gold shortages are pervasive worldwide. According to the World Gold Council, retail investors around the world bought 131 tonnes of gold in the first three months of 2009, an increase of 33%. Investors are motivated by holding the ultimate hedge against inflation, by insuring themselves against bank system ruin, by protecting themselves from global currency debasement, all while the central bank franchise system is turned on its ear in visible but misunderstood failure. Gold is the constant, as paper currencies fluctuate according to increased supply from money printing, changing interest rates, government finances, the USDollar status of global reserve currency, economic performance, advent of widespread price inflation, adoption of currency linkage to gold, installation of grand barter systems, and other lesser factors. See the UK Telegraph article (CLICK HERE).
Analyst Daniel Wills at ETF Securities said, " Inflation is starting to loom large. Historically, high inflation is associated with high returns for gold. It is a key safe haven, a safe store for wealth when paper money decreases in value." The client demand at his firm has doubled from $770 million a year ago to $1.5 billion. Theirs are other Exchange Traded Funds though. Generally, such funds in all likelihood do not possess the gold they claim to hold, or are forced to hold paper certificates unwittingly.
◄$$$ BEWARE OF G.L.D. AND S.L.V. FOR NEAR TOTAL FRAUD, JUST GET OUT $$$. To begin with, neither GLD nor SLV has ever permitted a formal independent audit, and each is under suspicion for not increasing their bullion holdings when the outstanding share open interest rose. Charges of naked shorting and vault fee fraud are pervasive. Yet another aspect of the biggest Exchange Traded Fund for gold, the SPDR Gold Shares (symbol: GLD) has aroused suspicion, concerning its security and insurance. The highly fraudulent GLD ETFund pays a mere 10 basis points annually for insurance. Seeking Alpha sees no credible or legitimate way for insurance protection at such low cost. Furthermore, he brings up an excellent point. If the ETFund gold is stored at a bank, then the failed bank takes down the stored gold, lost in the process. The entire purpose of investing in gold as a hedge against bank failure is missing! Also, insurance for the gold is duplicated, since the bank internally insures its own deposits on a very general sense. The ETFunds are not being realistically insured against the failure of their host financial institution. So the GLD has more red flags. GET OUT OF ALL E.T.F. GOLD INVESTMENTS. My firm belief is that when the crisis strikes the banks from the gold angle, the GLD and SLV Exchange Traded Funds will be swamped by controversy, charges of fraud, and likely criminal prosecution. The unsuspecting investors in GLD and SLV will in all likelihood be cashed out in redemptions worth much less than the physical gold & silver prices, since the paper prices would be much lower, and worse, totally discredited upon complete separation.
Seeking Alpha wrote, " I have been told there is no way this insurance company would charge a meager 10 basis points annually for an ' All Risk' policy. That is equivalent to insuring a car worth $10,000 and its driver for ten dollars a year. No insurance company could ever make enough money to cover the risk of loss on that policy except maybe AIG. Even some of the largest custodians for valuable assets pay a minimum of 15 to 25 basis points just for an ' All Risk' insurance policy. Personally, I question any program that stores their metal at a financial institution. In many cases, the financial institution is internally insuring much of the gold it stores. The problem with that is, if the institution runs into financial trouble, the owner of the metal has no protection against the loss or damage to the items being stored. And isn't the idea of owning gold and silver a hedge against a failure in the financial system?" See the Seeking Alpha article (CLICK HERE).
◄$$$ HUI STOCK INDEX IS HESITANT TO CHALLENGE RECENT HIGHS, SINCE IT WAITS FOR GOLD, BUT AN IMPORTANT BULLISH MOVING AVERAGE CROSSOVER OFFERS IS IN PROGRESS $$$. The GoldBug index of precious metal mining stocks shows strength in the cyclicals, and demonstrates extreme support at 330. The moving average and recent turns offer that support. Technicians would like to see a firm rise in the 20-week MA above the 50-week MA in order to build bold confidence. Gone are the days when the HUI would lead the gold price. This is now a coincident indicator to gold. A very good pair of indicators for the revival of the Canadian Junior miners is the recovering Canadian Dollar (went over 92 cents before retreat), and the Energold stock price (doubled from 40 cents C$ to over C$2.0 just since November). Energold is a mine service firm that leases drill rigs in the American Hemisphere. From word passed in several circles, mine projects are back into the swing of things, funded, active, finally.
COMMODITY RECOVERY IN FULL SWING
◄$$$ COMMODITY DOWNTREND OVER, WORD COMING FROM BARCLAYS $$$. Many fine analysts come even from within the bowels of the gold cartel. Phil Roberts at Barclays Capital believes that commodity prices have set the stage for extended gains after breaking through a key chart level. The CRB commodity index surpassed the 200-day moving average on June 1st, signaling an end to the prolonged downtrend from last year. The index ended at 252.8 on the week. The index is comprised of 19 commodities ranging from gasoline to grains to cotton, with the largest weight being crude oil. Roberts said, " The downtrend is over. It could come down to 245 as a correction and still be going higher."
A quick examination shows recovery in the crude oil price, the copper price, and natural gas price, and the oil services stock index. The grand bear market last autumn began with enormous liquidations by hedge fund firms, in reaction to profound asset losses in financial firms. The downtrend was worsened by unprecedented attacks waged by Wall Street against hedge funds. The USGovt entered the game with huge sales of crude oil from the Strategic Petroleum Reserve, disguised with sleazy accounting. The bear market appears to have ended. The general shape of the recovery is similar for all four important prices, with natural gas the laggard. A strong factor in these recoveries is the weakening USDollar. The next stage of price advances could ride the wave of Chinese infusions into hedge funds, pushed further by investment knowledge of this grand phenomenon. By the way, Russia owns most of world' s untapped natural gas, so claims US energy researchers. See the Mosnews article (CLICK HERE).
◄$$$ THE BRIC-YARD REVOLUTION CONTINUES IN YEKATERINBURG TO SAY NIET TO WESTERN BANKERS, THEIR CONTROL DEVICES, THEIR DEBT PAPER PRESSES, AND THEIR WAR MACHINES $$$. The BRIC nations are Brazil, Russia, India, China. Sometimes they go by the name BRICA with Arabs added. They have growing power from an economic standpoint. The BRIC nations are responsible for 15% of the $60.7 trillion global economy GDP. The BRIC nations own 40% of global reserves. They own a growing portion of the global manufacturing base. When Arabs are included in BRICA, they own 45% of the global crude oil supply. These nations desire a more diversified international banking system, one that serves their developmental needs and protects them from debt risk. However, a quid pro quo is required. In order to join the community of bankers in control, they must conform to certain rules as dictated frequently by the Western bankers in firm control, despite their virtual ruin. Conformity to demands would place them at risk in different ways, fully understood by the BRIC nations from painful experience. See the Global Research article by Michael Hudson entitled " De-Dollarization: Dismantling America' s Financial Military Empire" (CLICK HERE).
The rules come in three flavors. 1) The BRIC nations must float their currencies, thus subjecting them not only to the FOREX trading, but the leveraged control devices employed by the US-UK corrupt financial market engineers. 2) They must permit bank system regulatory oversight and disclosure, thus exposing their intimate banking details, favored financial institutions, designed pension and other benefit systems, and crony relationships. 2) They must permit financial system disclosure, thus exposing their seamy internal arrangements, their greater participation in commodity stockpiles and gold & silver accumulation, as well as details on complex bilateral projects. 3) They must protect property rights and copyright ownership, thus put an end to vast piracy of copyright violations for software, music, books, and patents. The Chinese are by far the biggest violators of copyright law, as the Chinese Army has been in charge of vast piracy operations for years. The Chinese Army has firm control of pirated Microsoft software. So a conflict comes. The United States would do well to conform to the above four requirements. The US violates currency float systems by means of constant interventions and bond counterfeit. The US violates bank oversight by corrupting regulators, corrupting debt rating agencies, and permitting accounting fraud on a grand scale. The US does a very good job of protecting proprietary and copyright property, defended vigorously by the courts. The BRIC nations will not place their currencies at risk of leveraged criminal financial processes, nor permit Westerns to peer into their growing financial networks, nor cease a very profitable piracy of copyrighted material. As long as the United States and United Kingdom require enormous sums of money in credit supply, the creditor can and will on an increasing basis demand and dictate the terms of that credit supply, BY SHEER FORCE, once they learn how to use it. THEY ARE LEARNING HOW TO USE IT.
The Shanghai Coop Organization (SCO) met in Russia last week, in Yakaterinburg, the largest city east of the Ural Mountains, formerly known as Sverdlovsk. Time will tell if this is where the US-centered international financial order was run aground. In attendance were Chinese President Hu Jintao, Russian President Dmitry Medvedev, and other top officials from the six-nation SCOrg. The alliance is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrgyzstan, and Uzbekistan, with official observer status given to Iran, India, Pakistan, and Mongolia. Dignitaries from Brazil also joined for trade discussions. The United States asked for permission to attend, and was refused. The American diplomats were assured that dismantling the US financial and military empire is not their aim, which is a reliable confirmation of exactly that as an objective. Medvedev aide Sergei Prikhodko revealed in Moscow that the leaders probably planned not to discuss alternative reserve currencies, further confirmation. They will do so in private meetings, just like in London at the G-20 Meeting. The SCO directives have been mutual aid, shared industrial projects, cultural sharing, and security protection. One should regard SCO as a clear counterweight to NATO.
Some details few Americans are aware of… Almost half of USGovt discretionary spending is for military operations, that includes operating more than 750 foreign military bases and increasingly expensive operations in the oil producing and pipeline nations. Few speak directly about US Imperialism. However, former Chinese central bank advisor Yu advised that the United States should ' increase savings first and foremost' by cutting back its military budget. He said, " US tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures, and the cost of fighting two wars." This is the essence of imperial over-stretch!
The US dismisses all efforts to replace the global USDollar standard or to undermine the US financial system or to limit the USMilitary. The US leaders rely upon historical divisions for SCO to remain less than a threat, like Russia at odds with China, like China distrusting India, like Former Soviet Republics bearing grudges against Moscow. However, the London G-20 Meeting served notice to the US-UK tagteam of their empire' s sunset. The emerging nations demand an increasingly multi-polar world. They refuse to exchange their natural resources for US debt securities. They refuse any longer to fund the US war machine that encircles Eurasia and aggravates the Russian Bear. The SCO nations bristle at the continued practice permitting the US to print money in unlimited fashion, to purchase foreign assets, to fund its war machine, and spend to excess in consumption, then expect foreign nations to recycle directly back into USTreasury to perpetuate the process. They wish to interrupt the great USTreasury Bond recycle, and plan to use their commodity resources to do so. But they need the financial mechanisms and structures to conduct commerce, since they currently lack alternatives without continued Western domination. Elaborate barter systems and trading platforms are coming.
The SCO and BRIC nations intend to trade increasingly in their own currencies, thus eliminated third party finance freeloaders. China has made progress in this regard, with Argentina, Brazil, and Malaysia to conduct their trade in yuan currency. These nations perceive the United States more and more as a lawless nation, confirmed by the Wall Street fraud, the Madoff scheme, the Iraqi occupation, and the Afghan narcotics trafficking. They see the United States as putting forth a set of laws for other nations on a host of matters, but which it ignores and does not honor. They see the US as the world' s largest debtor nation, which has avoided the pain of structural adjustments typically imposed upon other nations. They see the USGovt as demanding foreign subsidies after undermining its own financial house by a failed banking system, numerous nationalizations of failed firms, laced with pervasive fraud and corruption. They see the USGovt as blocking other nations when they attempt to purchase important US assets, without legal grounds. They see their own investments in icon US firms as having delivered huge losses. They see the Intl Monetary Fund, World Bank, and World Trade Organization as clear Washington surrogates in a financial system backed by the full brunt of American power. They see the US as an indebted nation that cannot possibly repay the $4000 billion it owes foreign entities. THEY SEE THE UNITED STATES AS IMPOSING A HIDDEN TAX ON FOREIGNERS WITHOUT GIVING THEM A VOICE ON BUDGET SPENDING.
Hudson concludes nicely, when he writes " Even without capital controls, the nations meeting at Yekaterinburg are taking steps to avoid being the unwilling recipients of yet more dollars. Seeing that US global hegemony cannot continue without spending power that they themselves supply, governments are attempting to hasten what Chalmers Johnson has called ' the sorrows of empire' in his book by that name, the bankruptcy of the US financial military world order. If China, Russia, and their non-aligned allies have their way, the United States will no longer live off the savings of others (in the form of its own recycled dollars) nor have the money for unlimited military expenditures and adventures." The United States will be forced to monetize much of its spending, including military, which is hardly defensive. Thus, the USDollar is at risk.
◄$$$ THE CHINESE ECONOMY MUST WORK THROUGH SOME DISTRESS, WHOSE PERFORMANCE IS SURELY A MIX DURING THEIR TRANSITION $$$. The Chinese service industry saw earnings fall in 1Q2009 by 3.3%, as consumption has slowed. Their government pump priming is prevalent, deep, and broad, not thrown into an elitist Black Hole like in the United States. Their challenge is to create more of a domestic centered economy as exports reduce. Many bright analysts anticipate that Chinese growth will eventually become the global economy engine, supplanting the United States, to my agreement. Chinese exports in May fell by a record 26.4% versus last year, following a 22.6% decline in April. That marks the seventh consecutive month of export decline for China, which has forced adjustments. See the CNN article (CLICK HERE). The friend of one subscriber just returned from a 7-day business trip to Beijing. He was impressed with their internet banking and smooth procedure to open a bank account. He noticed gold vendor shops doing a brisk business. He said, " Building cranes are everywhere. Traffic is jammed along with shoppers at the three malls I went to. If there is a global recession, there is no obvious sign of it here. Possibly the closure of toy factories that fed the sheeple in the West will give this sleeping giant more time to build upon their strengths while exposing the weakness in the West."
◄$$$ THE BALTIC DRY INDEX IS CLOSELY CORRELATED WITH CRUDE OIL AND GOLD $$$. The Baltic Dry Index versus crude oil shows a very high correlation (left graph). Versus the CRB commodity index (right graph), a similar and less tight correlation is evident, since crude oil is the dominant weighted component in the CRB index. Curiously, the Baltic Dry Index shows some directional relationship and slight correlation with the gold price also, even though it is not typically transported by ships. This connection is most likely due to the widespread brutal force used to take down commodity prices in the autumn. The USGovt and USDept Treasury had a mission and agenda. They wanted to support the USDollar when the US banking system was in the midst of a deadly threat, enough to possibly push the insolvent banks into systemic failure. The same hedge funds and big investors own both commodities and gold in common, in what is often called the Dollar Bear Trade. We are seeing the recovery in shipping, connected to the commodity revival in demand.
Thanks to the following for charts StockCharts, Financial Times, Wall Street Journal, Northern Trust, Business Week, CIBC Bank, Merrill Lynch, Shadow Govt Statistics.