GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Introduction
* Debt Cancer & Insolvency in Europe
* Darwinism Meets Currencies
* IMF Strawman Concoction
* Scourge & Twists of Inflation
* Diversified Gold Stories
* Exchange Traded Frauds (ETF)
* Gold Separates from Commodities


HAT TRICK LETTER
Issue #75
Jim Willie CB, 
“the Golden Jackass”
20 June 2010

"You have a choice between the natural stability of gold and the honesty and intelligence of the members of government. And with all due respect for those gentlemen, I advise you, as long as the capitalist system lasts, vote for gold." -- George Bernard Shaw

"I don't fully understand movements in the gold price." -- Ben Bernanke (USFed Chairman)

"It is hard to decide what is more frightening: that investors are losing confidence in paper money or that the shepherds of the world's major currencies do not get what is going on. Gold's climb of almost 30% in a year reflects fear, not just market concern over inflation or deflation risks. People have lost trust in the global financial system." -- William Pesek


"Adjusted for real inflation (Shadow Govt Stats) the 1980 gold peak in today's prices corresponds to around $7200 today... So gold is likely to make a top in the next few years between $5000 and $10,000. Gold reflects the government deceitful actions in destroying paper money. At certain points gold is a commodity. Right now it is money." -- Egor von Gruyerz

"The financial model of the nation state depends on deficit finance to fund promises, and the market is starting to say it is unsustainable... I love it when the media, which never told you to get into gold in the first place, is now telling you to get out. It is just classic." -- John Hathaway

INTRODUCTION

◄ Due to the incredibly broad deep crisis, on multiple fronts, in fast moving events, a Special Report entitled "Global Crisis, Breakdown & Fracture" was designed for the June Hat Trick Letter that includes mere updates on miscellaneous items of extreme importance. On the economic side, Fannie Mae will be delisted as a major trading stock, with estimated total losses finally tipping past $1 trillion. On the crisis coverage side, a British Petroleum Superfund has been created with $20 billion for initial seed to handle the flood of claims. BP will suffer damage with lost business from its vast trading platform. Liability with Anadarko will inhibit bond sales, whose prospects were already dreadful. Counter-party risk with BP is like with a viper snake, not to be touched beyond a 12 month duration. The true volume of the oil volcano gusher spew is an order of magnitude greater than the official data. A massive methane threat has been identified, but the toxic oil dispersant Corexit fortunately has a brief half-life. Meanwhile, the disintegration of Mexico continues apace, disorder spreading like a virus, a failed state in the making as forecasted. The USGovt enforced offshore oil drilling moratorium in the Gulf of Mexico is utterly stupid. A BP Americas shutdown makes more sense. The Japanese Prime Minister Hatoyama was forced into resignation, after he caved into USMilitary demands to remain in Okinawa.  On the golden side, the US stock market has been Dead Money for 45 years, and losing money in the last decade. But gold has quadrupled in ten years. The Australian Govt tried a stupid ploy to hike their mining tax, changed their mind under pressure, but suffered the damage as large firms postponed major projects.

DEBT CANCER & INSOLVENCY IN EUROPE

◄$$$ AN A.X.A. ANALYST IN FRANCE PAINTS AN OMINOUS PICTURE OF THE EUROPEAN BAILOUT PROSPECT FOR SUCCESS. THE FUTURE HOLDS A FRACTURE OF THE EUROPEAN UNION AND THE END OF THE EURO CURRENCY. GREECE WILL DEFAULT ON DEBT ANYWAY, AS TIME WAS BOUGHT, NOTHING MORE. $$$

The London bank analysts are abuzz over an AXA report that the EuroZone Bank Bailout plan will fail, and the EU itself will not survive. The French financial conglomerate must engage in realism. A Greek default has not been eliminated from the event schedule. Contagion from such a default would be harder to control than fallout from the Lehman collapse, since a long large string of nations are lined up for failure. A gradual but unending run on Greek banks continues. Theodora Zemek wrote, "The markets are very nervous because they can see that there is a fatal flaw in the system and no clear way out. We are in a very major crisis that has even broader implications than the credit crisis two years ago. The politicians have not yet twigged [adapted] to this. It would be the end of the Euro as we know it. The long-term implications are at best a split in the EuroZone, at worst the destruction of the Euro. It is not going to end happily, however you slice it. [Greek default] has huge implications for banks. These bonds did not just disappear. They went somewhere, allegedly into French money markets and insurance companies, or onto French balance sheets." She believes the rescue package bought a maximum of 18 months in time, before deeper structural damage wrecks havoc. She anticipates a probable default in Greek Govt debt that triggers a chain reaction across Southern Europe. Her arguments are sound. The 750 billion Euro EU shield treats the PIGS nation debt trap as a short-term liquidity crisis. The structural defects are grotesque and glaring, untreated and unaddressed, as the Greek federal debt will grow from 120% of GDP to 150% by 2014. Many leaders and analysts alike see no solution imposed, since no devaluation or debt relief is to come in an offset to the austerity measures agreed upon. The IMF had urged debt restructuring but the concept was nixed by Brussels. The facade from Sarkozy and the blitz from Merkel sounded good for a while, but their outward confidence progressively is being seen as mere propaganda, given the lack of reform or restructure. See the Zero Hedge article (CLICK HERE).

◄$$$ THE RUN ON SPANISH BANKS HAS BEGUN IN EARNEST, WITHOUT DOUBT. THE PROCESS IS AT AN EARLY STAGE. IT WILL END IN A FULL BLOWN PANIC. THE EURO CENTRAL BANK WILL BE POWERLESS TO STOP IT. THE SOLUTION WILL INVOLVE DEPARTURE FROM THE EURO CURRENCY. THE DOMINO FALLS THREE WEEKS AFTER THE SPANISH GOVT ORDERED LARGE BANK ASSET WRITEDOWNS, LIKE 30% ALMOST ACROSS THE BOARD ON OLDER VINTAGE PROPERTY LOANS. THE LATEST NEWS IS GRAND CONFUSION OVER A 250 BILLION RESCUE, AGAINST A BACKDROP OF BREWING CONFLICT WITH GERMANY. $$$

A bank run in Spain has gigantic destabilizing ramifications for the entire European Union. Early signs are unmistakable, certain to escalate rapidly. The people have changed their perceptions. In response, Spanish banks are borrowing record amounts from the Euro Central Bank. Spanish banks borrowed 85.6 billion Euros (=US$105.7B) from the EuroCB in May. The amount was double the volume before the collapse of Lehman Brothers in September 2008 and a shocking 16.5% of net EuroZone loans offered by the central bank. The proximal cause to the high level credit flow is the shutdown of the bond markets used typically to fund their financial sector. The liquidity starvation grew into an aggravated condition as a result of loss of access to Commercial Paper, forced to adapt to 18 billion Euros in asset writedowns, a factor with severe adverse impact on Spanish banking sector as it has funneled through the system. The liquidity needs have gone unmet. Nick Matthews is a European economist at Royal Bank of Scotland. He concluded, "If the suspicion that funding markets are being closed down to Spanish banks and corporations is correct, then you can reasonably expect the share of EuroCB liquidity accounted for by the country to have risen further this month." On one end is the steady withdrawal by the public from the banks. On the other end is the absence of bond market funding to fill the giant voided vat. Witness the run on the Spanish banking system, a vivid signal that so far has not been publicized. Bear in mind the stubborn refusal for two years by banking authorities to mark down credit assets linked to property portfolios. Think big air pockets.

The Fitch downgrade of Spanish debt and CDO bonds ruinously laced within the debt structure started the process, easily finding momentum. Fitch threw in the towel, admitting the economic adjustment will be more difficult and prolonged. After the downgrade came, price declines and then margin calls followed. Collisions and momentum are at work like dominos. Just three weeks ago, the Bank of Spain notified its banking sector to set aside much greater loss reserves against assets, "such as real estate, acquired in exchange for bad debts once the holdings have been on their books for more than two years." They staggered the loss provision schedule prudently. It calls for a 10% loss assumption for real estate acquired in foreclosures, 20% for real estate held for more than a year, and 30% for anything held for more than two years. The United States might take some guidance on the accounting strategem from Spain, in dealing with toxic bonds and loans. The central bank intervention in Spain has triggered a sequence of events, perhaps anticipated, probably not. Spanish lenders have foreclosed upon property worth nearly 60 billion Euros, with no apparent bank writedowns. A banking system failure is in progress, with the potential for contagion beyond the PIGS nations. The Spanish banking system will collapse very quickly, unstoppably. The baton of ruin has been passed officially from Greece to Spain. See the Zero Hedge article (CLICK HERE).

For all practical purposes, the EuroCB is supporting the Spanish banking system with life support measures. That alone is frightening enough. But the consequential systemic risk is also acute. Without drainage of extra funds inserted to the EU banking system, called sterilization of the rescue operation, the risk of a sudden burst of price inflation will emerge in Spain. With or without controls, the situation is ripe to destabilize. The loan process will halt. This means that the ECB will have to drain funds from elsewhere in the system to sterilize this rescue operation. The natural forces are enormous for national bankruptcy and abandonment of the Euro currency. Even without a direct decision, the Spanish banks will enter into bankruptcy and restructure. THAT IS WHEN IT WILL GET INTERESTING, for two reasons. The ruined assets will come to the table for full accounting. The pressure to revert to the former Peseta currency will be insurmountable. Spain is at the door to abandon the Euro currency. Unlike Greece, simple bandaids will not work. Spain is much bigger, and its banks are vulnerable to grand shock from two years of improper accounting for property portfolios.

To exemplify how perilous the Spanish bank situation is, confusion over a reported (rumored) 250 billion Euro rescue plan sent shivers through the Spanish Govt bond. Its yield shot up 224 basis points above the German Bund benchmark. Witness a Greek redux. Spain must raise 25 billion Euros of debt refinance in July. The Spanish Govt finance minister Elena Salgado angrily denied the veracity of the report, or rumor. However, three German newspapers have run the story recently, citing German sources. The markets are convinced that some form of contingency planning is underway. Take Elena's denial as confirmation, since the liar rate by politicians under stress is near 90%. The Spanish El Economista journal claimed that officials from the EU, the IMF, and the USTreasury are deliberating a credit line of between 200 and 250 billion, double the Greek aid package. Next will be the refinance of Italian debt, even larger, actually the world's third largest. Apparently, most of the Spanish aid would come from the EU Bailout line of credit, the 750 billion Euro shield. Theodora Zemek from AXA pointed out the implications to credit ratings for funding states Germany and France, which risk going from AAA to AA. See the UK Telegraph article (CLICK HERE).

◄$$$ THE ECONOMISTS OF ITALY ARE PUSHING TO LEAVE THE EUROPEAN UNION ALSO, WISE TO THE DESTRUCTION FROM ANY AUSTERITY PLAN. THEY SEE DEPARTURE FROM THE UNION AS INEVITABLE, AND IMPLY THE EARLIER THE BETTER. $$$

Italy has historically suffered the worst price inflation among leading European nations. They will choose inflation eagerly and enthusiastically, but they require the Lira vehicle. In doing so, restructured sovereign debt will be a vicious pill for the big European banks to swallow, the opposite of the IMF/EU Poison Pill. More big European banks will surely topple. Italy, feisty as always, is on course to reject the austerity programs, and exit the shared Euro currency. Watch their negotiations for debt reduction and foregiveness. A group of 100 Italian economists wrote an open letter warning that the EU austerity policies being imposed on Southern Europe would send the region into a downward spiral. They are wise and ahead of the game. Their statement r ead, "The Politics of Sacrifice in Italy and in Europe run the risk of accentuating the crisis in the end, causing a faster rise in unemployment and company failures, and could at a certain point compel some countries to leave monetary union. We must have an immediate debate on the extremely grave errors in economic policies now being committed. The fundamental point is that the current instability of monetary union is not just the result of accounting fraud and over-spending. In reality, it stems from a profound interweaving of the global economic crisis and imbalances within the EuroZone. Some countries will be pushed out of the EuroZone, others will break away to free themselves from a deflationary spiral." The joint letter criticized harshly the leaders of the European Union and member nations for faulty economic thought process. In Italy is found the first revolt by any intellectual elite cadre. They expect member states might choose to leave EMU, with its shared Euro currency, in order to end job destruction, economic disaster, and social chaos.

DARWINISM MEETS CURRENCIES

◄$$$ GERMANY AND FRANCE ARE EXAMINING A TWO-TIER EURO CURRENCY STRUCTURE. THE INTERMEDIATE STAGE OF THE NEW NORTHERN EURO CURRENCY IS IN PROGRESS. THE MOTIVE IS PROTECTION FROM THE SOUTHERN INSOLVENT P.I.G.S. NATIONS. A GROUP SOUTHERN SOLUTION PROTECT BANKS EXPOSED TO SOVEREIGN DEBT, RATHER THAN A SINGLE NATION BEING EXPELLED. $$$

Germany and France Finance Ministers are attempting to design a Two-Tier Euro currency system to separate stronger Northern European countries,  protecting them from being dragged down by the weaker insolvent Southern states. Word has leaked to the UK Daily Telegraph of the dramatic option. Senior politicians do not believe they can withstand another crisis like the recent events in Greece. They are preparing for Spain and Italy next, even bigger shocks. The creation of a Super-Euro zone would initially include Germany, France, the Netherlands, Austria, Denmark, and Finland. The broken parts in Portugal, Italy, Greece, and Spain, even Ireland, would be relegated to the Mediterranean under-class. In minister offices among the 16-member EuroZone, it is being called Plan B. An unnamed official spoke freely, saying "The philosophy is the stronger countries might need to move away from countries they cannot afford to bail out. As a way of containing the damage, they may have to do something dramatic, though obviously in the short term implementation is difficult. It is an act of desperation. They are not talking about ideal solutions but the lesser of evils. Helping Greece could be done relatively cheaply, but Spain they cannot afford to let fail or bail out. And putting more pressure on the people of France and Germany to save other countries is politically unfeasible... [Sarkozy] would prefer to keep the Euro in place but if Spain, Italy, and Greece are dragging him down, he accepts he may have to cut them loose. They are trying to contain the contagious effect, but they do not have a solution yet. [Failure by markets to resolve the situation] will trigger a response by Germany and France." The official stressed how France has lent $750 billion and Germany $500 billion to Spain respectively. Lead nations are frustrated by being attached by a ball & chain to the wrecked PIGS nations. Politicians have suffered lost support in elections, are deeply concerned about lost power, and seek alternative solutions of radical type, since their finances are being ruined slowly.

Witness the precursor to the New Northern Euro. The wealthier Northern European nations seek to protect themselves, while simultaneously setting up the necessary structure that would enable reform and restructure to the indebted Southern Europeans. Germany would lead a group of countries out of the existing Euro into a new single currency. The old Euro would become the Latin Euro or Southern Euro. It would decline sharply against the newly hatched German-centric Euro. The devaluation would render great economic stimulus to the Southern nations. Important difficult decisions would have to be made regarding debt writedowns, forgiveness, and restructure. A perceived driving motive in the plan is to provide Southern nations some security from remaining within a group, so individual distressed nations like Spain or Italy would be spared the stress of being forced to contend with their situations alone. Think group thrashing instead of single trashing. A two group monetary setup would assist the exposed banks also. The consequences for any expelled nation would be catastrophic to bankers holding the sovereign debt. The only assurance in this chaotic crisis is change coming to the EuroZone, radical change. In time, each Southern Europe nation could opt to go it alone, to revert to the old native currency, to devalue it more, and inflate with abandon with spectacular deficits incurred. See the UK Telegraph article (CLICK HERE).

◄$$$ SOME UNCERTAINTY EXISTS OVER WHETHER FRANCE WILL BE INCLUDED OR EXCLUDED FROM GOLD-BACKED NEW NORTHERN EURO CURRENCY. THE STORY HAS EMERGED FROM GERMANY, BUT IT IS NOT ENTIRELY CORRECT. MY GERMAN SOURCE INVOLVED DIRECTLY SETS IT STRAIGHT. $$$

The Frankfurter Allgemeine provided a glimpse of the gold-backed New Northern Euro, the proposed new hard currency backed in part by at least gold. The newspaper cites a list of nations associated with the important consortium of nations: Germany, Austria, Benelux, Finland, the Czech Republic, and Poland, but not France. The article entitled "The Alternative" claims that deflation policies, such as the severe elements of the IMF-type austerity programs endorsed, might push Greece to the brink of civil war. It concludes that Europe would be in a much better position if it abandoned efforts to keep the two incompatible halves of the Union together. The southern half is insolvent, but the northern half is relatively strong. See the Business Insider article (CLICK HERE).

My German source of information on this important development has been very valuable. Not only does he possess contacts with great experience inside the Euro Central Bank, close to key political undertakings related to monetary matters, but he actually attended meetings in April that forged the foundation for the New Northern Euro currency. Details were given in the May Gold & Currency Report. Crucial problems between the Germans and French have contributed toward a small rift. The EuroCB and IMF leadership is too tilted toward France, geared to offer lopsided aid to French banks. Some resentment might be stewing in Berlin. He informs me that the New Northern Euro possibly will not include France, but certainly "the Poles are not part of the equation." Furthermore, if France were to be included in the new gold-backed currency, their weak economy without trade surplus of size, and their banks, riddled with PIGS sovereign bond losses and sizeable property losses, could not tolerate the rising exchange rate certain from the new currency. As the new currency rose in value, the exports from participating nations would rise in price, inhibiting that export trade. The German banker source made an additional comment after a visit to the Persian Gulf. He said, "Oman and the United Arab Emirates are struggling to un-peg from the US$ in an important detachment. However, they will soon succeed in making the disconnection." Fast forward, and think ahead. A basic requirement for the Persian Gulf oil export to be priced and sold in any currency other than the USDollar would be for the individual nations to detach from the longstanding commitment the USDollar for their banking and commerce. That fact that Oman and the UAE are moving in that direction should tell us that OPEC oil might someday not trade in US$ terms, possibly instead in New Northern Euro terms. A consistency requirement appears to be in the process of being met.

A Hat Trick Letter subscriber in Denmark offered a note of great importance, for which the Jackass is grateful. He confirms the New Northern Euro is coming into reality, as a result of conversation with his banker. A man with initials TKN wrote, "It is amazing to see how things play out like a script! I recently talked to the German chief economist of Barclays Thorsten Polleit. When confronted with the Nordic Euro currency idea, he nodded silently, with a strange look of having a secret cover blown away. He did not comment on it even though we were having a quite informal talk. The warmest of greetings from the heart of Copenhagen." Word is spreading, impossible to contain, since too important.

◄$$$ THE KREMLIN STRIVES TO ELEVATE THE RUSSIAN RUBLE TO A RESERVE CURRENCY. THEY WANT AN END TO USDOLLAR DOMINATION. A COMPLEX STRONG FINANCIAL CENTER IN MOSCOW REQUIRES MANY CHALLENGES TO BE MET, AND DIVERSE FINANCIAL ASSETS TO BE FREELY TRADED, WITH RESPECT FOR CONTRACT AND LAW. MOSCOW IS WORKING TOWARD A ROLE IN THE NEW NORTHERN EURO. $$$

Russian President Dmitry Medvedev has a multi-faceted goal: to make the Ruble one of the world's reserve currencies, and to establish Moscow as a global financial hub. The vast nation clearly is in possession of natural resources to support a global currency. The tougher question is whether they could defend from corrupt dens of paper vipers in Wall Street and London. A gold component to a new Ruble currency would render the Anglo fraud kings toothless and without gonads. Their dream could be realized, but in my view only if linked to gold. The world might require up to six reserve currencies, Medvedev believes. The Kremlin wishes to reduce the USDollar dominance. Russia sold USTreasurys for a fifth consecutive month in April. In fact, all BRIC nations (Brazil, Russia, India, China) were net sellers of US$-based assets in April. Russia is considering the addition of Australian and Canadian Dollars to its international reserves, as the central bank diversifies the world's third largest FOREX reserves away from the USDollar, according to central bank Chairman Alexei Ulyukayev in a June 16th interview.

With ambition showing at the St Petersburg International Economic Forum, Medvedev said, "[A new center] is something that is obviously needed. Developing a financial center in Moscow will considerably help to strengthen the Ruble's position as one of the reserve currencies. [We are] very carefully monitoring what is happening in the EuroZone. If the world depended completely on the dollar, the situation would have been more difficult. We really live at a unique time. We should use it to build a modern, prosperous, and strong Russia, a Russia that will be a co-founder of the new world economic order." The challenge to establish an international financial center is great. A reserve currency requires the openness to trade it on the FOREX, and strong capital markets for currency, bonds, and stocks, along with investment banking and respect for contract law. These are the challenges. My sources tell of Russia working closely with the designers and foundation for the New Northern Euro, in commodity supply guarantees. With such profound bond fraud in New York and London, laced with magnificent securities fraud, the door is open in foreign lands. See the Bloomberg article (CLICK HERE).

◄$$$ GREECE WAS URGED TO LEAVE THE EURO CURRENCY. GRADUALLY A MOVE COMES TOWARD A RESTRUCTURING OF GREEK DEBT, AS PART OF A DEFAULT PROCEDURE. THE FLIP SIDE IS A STIMULUS FOR THE GREEK ECONOMY. $$$

The Greek Govt has been advised by prestigious economists to depart the Euro currency and default on its 300 billion Euro debt in an effort to save its economy. The Centre for Economics & Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap, unable to achieve sufficient growth necessary to outrun their debt. They must find a path that permits devaluation of their own currency and leads to a strong boost of exports. The CEBR concludes the only workable path is if Greece returns to its own Drachma currency. The powerful bank centers that guide Euro Central Bank policy and European Union politics choose a differnet path, since such a Greek departure from the Euro would prove disastrous for German and French banks. Doug McWilliams is chief executive of the CEBR. He said "Leaving the Euro would mean the new currency will fall by a minimum of 15%. But as the national debt is valued in Euros, this would raise the debt from its current level of 120% of GDP to 140% overnight. So part of the package of leaving the Euro must be to convert the debt into the new domestic currency unilaterally... The only question is the timing. The other issue is the extent of contagion. Spain would probably be forced to follow suit, and probably Portugal and Italy, though the Italian debt position is less serious." McWilliams called the move virtually inevitable (in his words) but he minimizes the devaluation potential. Any conversion of debt to the Drachma would obviously be accompanied by debt restructure and reduction, as part of a default. Think lower currency AND lower debt, which is the whole idea! See the Financial Times article (CLICK HERE).

Greece must pursue economic expansion, but cannot while wearing the Euro straitjacket. The only workable path is for Greece to return to its own currency, the Drachma. To date, the EU Bailout is a poorly disguised rescue for German and French banks, even London banks. The dirty secret across Europe is that the major nations all own a huge raft of PIGS debt, and each nation within the PIGS pen all own a huge raft of the same debt. Any departure by Greece from the Euro would create a grand shock for banks across all of Europe, cause great disruption, and subvert the banker plan for their latest welfare program in continuation of public governmental adoption. It all ends in ruin. The advantages are as numerous as they are deep, all significant. ALL PIGS NATIONS WILL FOLLOW THE SAME PATH OF CURRENCY REVERSION AND DEBT WRITEDOWN. The purpose of returning to their old currencies is to devaluate, then force a debt reduction. The advantages are powerful and shared across Portugal, Italy, Greece, and Spain. The proposed solutions and remedies are all cockeyed, lunatic, destructive, and disastrous, such as the IMF/EU sponsored Poison Pill presented as an austerity plan. The PIGS nations will choose inflation instead, but to do so they must revert to the Escudo, Lira, Drachma, and Peseta currencies. This is a grand test of CENTRALIZATION, since currency reversion represents the opposite in power shift.

Defaulted Restructured Debt: A return to the Drachma currency would enable a restructure of the Greek Govt debt. Look for at least a 30% debt reduction, but simultaneous with a currency devaluation. This delivers a double slam to the external bankers. The Athens leaders can win a very large portion of debt forgiveness, or else threaten default. European banks will choose a writedown rather than a total wipeout loss. Carrying full debt on their books would be futile, and lead to unending constipation.

Economic Stimulus: A return to the Drachma currency would enable a strong stimulus to the Greek Economy. Nothing is free, however. Currency devaluation is a double-edged sword. The benefit to be realized with cheaper exports (wine, figs, tourism) would be offset by higher energy costs and other import costs (cars, cell phones, machine equipment). The historical effective tool is for a currency devaluation, one that leads to valid stimulus but with a steady dose of price inflation. Greece, like other European nations, is no stranger to socialist solutions to spread the pain. Inflation fits their mindset, not austerity.

Poison Pill Revenge: A return to the Drachma currency would enable a national rejection of the IMF/EU poison pill solution. The austerity measures have no precedent of effectiveness. They are ruinous, lead to greater federal deficits, worse unemployment, and more social disorder, yet the Banker Elite continue to push such non-solutions. Rejection of the austerity programs would incite a national rally of pride and celebration. Bloated government payrolls would remain a year later, at a heavy cost. The Drachma would suffer a continued devaluation later on, especially after more stimulus down the road.

Autonomy & Control: A return to the Drachma currency would enable a national movement for the Greek people to take control of their fate. Their population feels like victim vassals of dictums and forced solutions, complete with massive job layoffs and budget cuts. They detect duplicity, since other nations in Europe are in violation of guidelines. Nevermind that something like 11% or 12% of all Greek jobs are located within the government sector, and how tax evasion is rampant. The psychological benefit to a reversion to the Drachma is to spit in the faces of bankers and to take the reins of national control.

◄$$$ THE SWISS CENTRAL BANK HAS ENDED A DISASTROUS PROGRAM TO HALT THE RISING SWISS FRANC CURRENCY. TRADERS WHO ABANDON THE EURO ARE NOT SEEKING THE FRANC AS MUCH AS THE SWISS ARE NOT EQUALLY EXITING THEIR CURRENCY. $$$

The Swiss National Bank lost $8 billion in a fruitless effort to prevent a Swiss Franc currency from rising. Given the program's failure, the central bank program was terminated. The Euro/SFranc cross closed at a generational low. The official program to hold back the tide in a FOREX intervention had been a mainstay for six months. They surrendered to Mr Market, and must permit the Swiss Franc to float higher. On a proportional level, it ranks as the biggest loss in FX history, equivalent to a $200 billion USFed loss. It came to almost half their total GDP, equal to 30k SwFrancs for every citizen. Philipp Hildebrand, who assumed the head of the SNB on the 1st of January 2010, could not uphold the inherited policy to defend the strong SwFranc. Hildebrand publicly defended his actions on many occasions, leaning on the threat of deflation in Switzerland as justification. But deflation was not the motive. Rather, the program was to prevent their stock market from becoming expensive, their exports (clocks, pharmaceuticals, agriculturals, machinery) from becoming expensive, even their European client bank accounts from losing value. Dishonest to the last, Hildebrand declared victory in the fight against deflation. He actually said, "The deflationary risk in Switzerland has largely disappeared." Try not to laugh. See the Zero Hedge article (CLICK HERE).

◄$$$ PHONY STORIES OF HUGE MONEY FLOW FROM EUROS INTO THE SWISS BANKS ARE FALSE PROPAGANDA. THE BIG MONEY IS MOVING TO ASIA, IN PARTICULAR SINGAPORE AND HONG KONG. THESE TWO LOCATIONS ARE THE STRONGEST AND SAFEST IN ASIA. $$$

The press in Europe is subject to the same pressures from the Elite to distort the news. Beware that globalists and supra-nationals, along with USFed owners often reside in European and Swiss castles, defended by Dobermans. After hearing of the supposed huge money flow from European sources into the Swiss banks, frightened by the Euro currency instability, the Jackass checked some sources. The story is entirely false, the subject of yet more profound propaganda. A reliable well connected so urce set the record straight. A tremendous amount of Euros, USDollars, Pound Sterling, and Swiss Francs have already left Switzerland for Asia, and a tremendous amount of additional money under the same denomination is committed to moving still to Asia. The exodus is in progress, whose pattern is established, and which will continue for the foreseeable future. Furthermore, a whopping $1 trillion in Indian cash is departing Swiss banks. For the last decade, the shift of power from industrial factories, banks, and savings has turned East. Trillions in various currencies are moving to Asia, in particular to Singapore and Hong Kong, where the leaders are fiercely independent, where defiance against the Anglo Axis is firm, where the bank management is orders of magnitude more honest, and where the prospects for valid economic growth remain fixed and stable. The big money heralds the safest jurisdictions as being Singapore and Hong Kong, which offer stability based on a stronger economy and banking system. An opposite motive is at work. Vast money is leaving Swiss banks, departing for the simple reason that Swiss bank officials and Swiss Govt leaders are caving in to USGovt demands for cooperation and disclosure on tax haven accounts. A war is going on, and the Swiss have decided to side with the losing Anglo Axis.

◄$$$ CHINESE EXPORTERS REFUSE EURO PAYMENTS, WISE TO THE WAYS OF FAST FADING WESTERN CURRENCY VALUE. THEY MIGHT BE FORCED TO SETTLE FOR DIFFERENT WORTHLESS FIAT MONEY, JUST NOT EUROS. THE CHINESE CANNOT INVEST IN COMMODITY CONTRACTS FAST ENOUGH. THEY ARE TRAPPED WITH A SURFEIT OF PAPER. $$$

Despite denials, a growing number of Chinese exporters have begun to refuse Euro payment. Regard the action by actual producers as a contradiction to anything their SAFE fund managers claim as policy. The State Administration of Foreign Exchange (SAFE) is a Chinese sovereign wealth fund controlled by the Chinese Govt. Two weeks ago, they denied an exodus from the Euro currency, and its attendant bonds. Of course they would deny the departure. They need to follow the Goldman Sachs tactics, and express long-term support for the Euro, and place a 1.35 target by December. Any confirmation would cause a global rout, sure to render greater damage to the SAFE portfolio than already suffered. Just one year ago, Chinese exporters had urged payment in Euros for delivered products, worried of the integrity of the USDollar. The Chinese are trapped with a mountain of paper confetti certain to crater in value, and they know it! Here in the present, the same exporters are worried about the integrity of the Euro currency, as the European currency is badly wounded. Such is the dilemma of global exporters, and financial wealth managers too. No currency has integrity, value, or inspires confidence. Faith in the monetary system is fast vanishing. If the Chinese do not know where to store surplus, no nation does. Gold can only serve a minor role in stored surplus. For an element of comedy, check comments made by the French disguise artist sitting as President. Sarkozy claims he only sees good news in parity between the USDollar and the Euro, which means the Euro valued at 1.00 US$. He is not a student of finance, as his background covers many corners, including service in the Central Intelligence Agency. Ditto for the current US President. The people need representation, not agents, certainly not clowns. See the Zero Hedge article (CLICK HERE).

◄$$$ THE RESOURCE CURRENCIES ARE BEGINNING TO HIKE INTEREST RATES. THEY CAN DO SO MORE SAFELY, SINCE THEIR ECONOMIES OWN TANGIBLE COLLATERAL TO DEBT, UNLIKE THE UNITED STATES AND UNITED KINGDOM. CANADA HIKED INTEREST RATES BUT STILL NEAR 0% LEVEL. THE RESERVE BANK OF AUSTRALIA KEPT THEIR OFFICIAL INTEREST RATE AT 4.5%, THEIR FIRST REST SINCE FEBRUARY. $$$

Among the G-7 nations within the Western fold, Canada has become the first to hike its official interest rate. Canada is a nation rich in natural resource and mineral wealth, which serves as indirect collateral to the currency it promotes. On June 1st, the Bank of Canada raised its key interest rate from a record low, making it the first G-7 nation to do so since the global recession struck. It said further moves will be weighed carefully against future growth. The target rate on overnight loans between commercial banks rose to 0.5% from 0.25%, to make the first rate hike under the guidance of Goldman Sachs preppy Mark Carney since July 2007. The bank cited continued uncertainty, an uneven global recovery, contagion risk from Europe, and acceptable Canadian growth that should be construed as cautionary. The Canadian GDP grew at a 6.1% annualized pace in 1Q2010. The BOC statement read, "The global economic recovery is proceeding but is increasingly uneven across countries, with strong momentum in emerging market economies, some consolidation of the recovery in the United States, Japan, and other industrialized economies, and the possibility of renewed weakness in Europe."

Brazil, Malaysia, and Peru have already hiked their official interest rates this year. They are resource nations also. Australia made several official rate hikes in recent months. The island continent Down Under is yet another resource nation. My forecast made for two years has been that the US & UK will not hike interest rates, even after the entire world of central banks sequentially orders rate hikes. The Anglos are stuck in mud, unable to hike rates, living in quicksand fashioned with a flood of toxic paper. The USFed will talk about hiking rates, but cannot order hikes. From mid-2009 to early 2010, the USFed raised its voices to herald an Exit Strategy and an end to near 0% rates, but it was all talk in USTreasury Bond managed global opinion. Since the extreme actions toward the European Bank Bailout and the Dollar Swap Facility installation in May, all talk has ceased, and the USFed can be called liars, incompetent hacks, mere servants to the Ruling Elite and their syndicate.

On the same June 1st date, the Reserve Bank of Australia left its benchmark interest rate unchanged at 4.5% after six previous increases since October. The central bank gave clear signal of a desire for steady borrowing costs in coming months while it assesses the impact of the most aggressive rate increases across the world. The RBA statement read, "This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2% inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery." They apparently talk a lot with Canada, enough to share elements of official statements. RBA Governor Glenn Stevens mentioned that domestic inflation appears likely to be in the upper half of the target zone over the next year. He also noted concerns about sovereign creditworthiness in several European countries, as contagion spreads, a condition that must be kept under review. The Indian central bank boosted its reverse repurchase rate for the second time in five weeks on April 20th. Some risk comes from tightening actions from monetary policy, as the global economy continues to sputter, retreat, and pass gigantic toxic hairballs of US bond origin. See the Bloomberg article (CLICK HERE).

◄$$$ THE AUSTRALIAN HOUSING BUBBLE IS VULNERABLE, READY FOR A POWERFUL DECLINE, REGARDLESS OF THEIR COMMODITY STRENGTH. PREPARE FOR A REVERSAL OF MONETARY POLICY, AN OFFICIAL RATE CUT BY AUSTRALIA IN RESPONSE TO THEIR HOUSING BUBBLE, ENOUGH TO WEAKEN THEIR CURRENCY. $$$

IMF STRAWMAN CONCOCTION

◄$$$ RICKARDS SPOUTS WISDOM... RICKARDS POINTS OUT THE HEIGHTENED STRESS BY G-20 MEMBERS, AS RECOGNITION GROWS GLOBAL OF FAILED FIAT CURRENCIES IN GENERAL AND FAILED USDOLLAR IN PARTICULAR. HE MAKES REFERENCE TO THE NEW NORTHERN EURO (NOT BY NAME). THE I.M.F. PROPOSAL FOR A 'STRAW MAN' REPLACEMENT TO THE USDOLLAR IS DOOMED TO FAILURE, SINCE THE UNDERLYING ASSETS OF SPECIAL DRAWING RIGHTS (S.D.R.) ARE WORSE THAN THE USDOLLAR. A PAPER CURRENCY NEVER CAN REPLACE A PAPER CURRENCY. THE EASTERN AXIS COALESCES. $$$

Jim Rickards of Omnis has become the global spokesman for the failed global monetary system. He is well qualified, having exited unscathed from the heart of the LTCM beast over ten years ago. He explains the extreme precipice risks on the path to a new global reserve currency. Rickards senses a shift in sentiment within the broader group of G-20 finance ministers, urged by the perception that the USDollar might be approaching an exhaustion limit in his words. Behind the shift is a profound reaction (fear, respect, dread, destiny, validity), as they observe the progress made by Germany, Russia, and China toward a commodity backed currency reinforced by not only gold but also crude oil. An Eastern Axis is forming. Rickards reasons that the Anglo-led Monetary Brigade must pre-empt a Paradigm Shift away from worthless currency backed by nothing, the fiat system, centered upon the USDollar. The Anglo Bankers appear to pursue another vehicle for principal usage, one still under the control of the developed world. Translation: by Anglo Bankers. Rickards sees the Intl Monetary Fund currency, the Special Drawing Rights (SDR) as the goal for broader global usage as replacement to the USDollar.

My description 18 months ago was of a Dollar Death Dance as the US$ benefited from widespread bond destruction, and credit derivative contracts were paid in US$ terms. Since that time, the escalating European sovereign debt breakdown has again provided US$ benefit, in what is better recognized as the Competing Currency War. At risk is the credibility of capital markets, as FOREX volume hits records. Rickards concludes the Oligarchs (those pesky Anglo Bankers) might desperately seek a 'Liquidity Pump' as merely a different colored USDollar machine in order to retain power. The problems are two-fold for the Oligarchs. First, paper currency can never replace paper currency, as only metal currency can. Second, any transition would take too long, since the structural systems would have to be constructed, complete with contracts and facilities. No FX contract exists to convert an SDR to a major currency, and no SDR Bond exists with 10-year maturity. That is precisely what the New Northern Euro enjoys here & now, that very same progress but with a commodity backing to its currency. The impact of the German, Russian, Chinese initiative is finally being felt, with fear and trepidation. It will render the Anglo Banker monetary ship a busted leaking listing derelict vessel.

Rickards in the interview said, "The alternative is to find another engine, another liquidity pump, if you will. That is clearly what the G-20 leadership would like to do, and their chosen candidate is the SDR, and their chosen vehicle is the IMF. So basically the IMF putting out SDRs, will over time displace the Fed printing dollars as the engine of world trade, world liquidity and world growth. So, that cannot happen overnight, that is a momentous shift. It is going to require a lot of consensus building among the G-20 members. So what they do is they put these papers out, get the dialogue going, and get it on the agenda, talk about it, get people kind of used to it. The average citizen has no idea." Hear the Rickards interview on King World News (CLICK HERE). My view is the G-20 has no interest whatsoever in any broader SDR usage, which they see as the same toxic bundled fiat papyrus perhaps with different ink on the label. The battleground for the global monetary future has been set. It is Anglo Fiat versus Eastern Hard Currency, old versus new. The key to remember is that a new paper currency can never replace a failed paper currency as the global reserve, since the paper varieties die together and a new paper currency is simply a relabeled failed version of the same.

Consider additional critical notions. Simple logic is explained by Rickards. The guy is sharp and deep. He explains that money is debt, the same debt produced by the USFed, and this same USFed has a hopelessly impaired balance sheet (if not wrecked). If the IMF vehicle of the SDR is accepted and becomes the reserve currency, then the financial foundation for the new standard vehicle would be built atop an even more impaired balance sheet backing the current USDollar reserve fiat. That will not succeed, period! The IMF rescue facilities, funded by the Dollar Swap Facility, have been tapped to support European sovereign bonds. So these toxic assets dispersed across the European continent would be pressed into action, to form the backbone of the current sovereign stability, an unworkable requirement. These assets have no integrity or strength to serve as IMF debt foundation, the new fiat debt-denominated currency proffered. Zero Hedge concludes that the G-20 ministers will require much time before realizing how dangerous a trapped corner they are in. The lockup of excess reserves in the banking system prevents price inflation, but it also prevents a recovery. No exit from the stalemate is available except one tarnished by the scourge of hyper-inflation. As time passes, what ZH calls the China-Germany-Russia axis will be complete. The new Eastern Axis coalesces, forged of gold & oil over the fires of crisis. See the Zero Hedge article (CLICK HERE).

◄$$$ THE INTL MONETARY FUND REVEALS IT NEEDS $320 BILLION IN NEW FUNDS TO REMAIN THE PRINCIPAL BAILOUT ARTIST, THE FUNDING AGENT OF LAST RESORT. DESPERATION HAS ENTERED THE ROOM LIKE A THICK CLOUD DRENCHED IN ACID. $$$

If the Intl Montary Fund is to serve as new global foundation, then it cannot float on papyrus rafts. It requires a castle on high ground, or at least strong ballast at sea. It has neither. Worse, it lacks the old-fashioned funds to provide last resort bailouts, even in fiat paper money. The head of the IMF policy steering committee, Youssef Boutros-Ghali announced the fund requires $320 billion in order to be properly resourced, in his words. So they are broke too! The irrepressible and valiant Tyler Durden describes the event as letting the genie out of the bottle. Boutros-Ghali admitted that the IMF is essentially insolvent in its current form. It cannot operate as the backstop for a European bailout, admitting it is not properly resourced. He revealed a goal for the IMF to double the amount of SDRs in their possession. By the way, the IMF officially lists their asset base as containing 3005 tonnes of gold. What a joke! They have neither gold nor money, owning mere pledges of gold, after serving as mere conduit from broken channels for the beneficial support for Greece.

SCOURGE & TWISTS OF INFLATION

◄$$$ THE STOCK MARKET RECOVERY SINCE EARLY 2009 IS STRONGLY CORRELATED, AND MOST LIKELY ALMOST ENTIRELY DUE TO THE POWERFUL MONETIZATION AND QUANTITATIVE EASING. COLD TURKEY ON STIMULUS AND QUANTITATIVE EASING SOUND GOOD BUT ARE CONTROL TACTICS. NO EXIT STRATEGY FROM 0% MONETARY POLICY EXITS. THE DIRTY SECRET IS THE POWERZ DO NOT HAVE AN END GAME. $$$

Economic progress and corporate profitability take on secondary meaning on greater stock market valuation. The obscene control by the Working Group for Financial Markets (aka Plunge Protection Team) have become well-known. Their methods have repeatedly been monitored for late day recoveries that make no sense. The propaganda of Green Shoots and other absurd notions are patently false, an insult to the Thinking Person. The most significant factor in supporting the stock market is monetary inflation, made accessible to the Wall Street wizards and their many control devices. Like with the 1999-2000 tech/telecom meltup in stocks, the sign of the systemic failure is in the rise of the stocks, not the decline, seen in aberrant outsized monetary growth directed at assets. This is also true of the USTreasurys, whose principal value rise with falling bond yields. Notice the extremely tight correlation of the S&P500 stock index recovery with over $1.5 trillion in Quantitative Easing. When the stock index slides downward hard, expect more talk of Quantitative Ease and abandoned risk, as the Printing Pre$$ will be geared into overdrive again.

Cold Turkey on monetary inflation devices and programs sound good, but it is not an option unless collapse is desired. The term refers to sudden withdrawal of an addictive source, complete with shock. Within a few months, a second round of Quantitative Easing will be announced, embraced, and implemented by the clowns who desperately run the USGovt and its finance ministry. They talk of an Exit Strategy for crowd control, nothing more, since not an option. The billboard that reads 0% is stuck in place. Already, the start of US stimulus is set for a second round, in the form of state budget relief in order to salvage city and state services. The nation cannot have garbage on the streets, fires ablaze, and no police force. The Dollar Swap Facility in September 2008 just had a second round implemented, for the benefit of European banks. Regard it as QE revisited. The profound and powerful monetary inflation will continue, despite deceitful comments. Govt and banking leaders began the process by injecting huge doses of stimulus and phony money to cover bank losses. A year and a half later, even more when mortgage bond rescues began, the financial system has grown highly addicted to the programs and flow of funds. The United States, Europe, and Japan are addicted to stimulus and easy money, meaning deeply dependent. As governments and central banks prescribe cold turkey, watch the signals for yet more injections. The impact of withdrawn stimulus and ready flow of tainted money is severe and amplified. See the Money & Markets article (CLICK HERE).

◄$$$ KARL DENNINGER IS AMONG A NOTABLE CROWD THAT HATES GOLD, FAILS TO RECOGNIZE THE INFLATION, AND DISTORTS THE MONETARY PICTURE WITH REALLY BAD ANALYSIS. HE IS A BLOCKHEAD IDIOT WHO ENJOYS OCCASIONAL EPISODES OF MENTAL CLARITY, WHEN NOT DISCUSSING GOLD. $$$

One must truly wonder if Karl Denninger is a paid shill, perhaps on retainer from Dennis Gartman. He produces analysis of value, as long as the gold topic is not mentioned. When he touches on gold, he turns incredibly stupid. He has made more derogatory comments about gold, in a display of great ignorance, unaware of its performance. Even Gordon Gekko of Zero Hedge entered the fray to heap insults at Poor Karl.

See Gordon Gekko's slam of Denninger, a comprehensive essay that covers a multitude of aspects of the gold story, from his admonition to remain within the financial system of paper instruments, to his advice to buy LEAP calls on the major US stock indexes, to his claim that Gold has not served well as a hedge against inflation, to his lack of understanding of acceptable legal tender, to his lack of comprehension of the gold supply being taken out of circulation but never destroyed. Gekko reveals the extraordinary ignorance, stupidity, and illogical mind that occupies Denninger's cranial cavity. Ignorance must be paid for or else acquired naturally. Denninger claims that gold has not kept pace with inflation. He must not notice that gold has risen from $265 low back in 2001 to over $1200 today amidst the most prolific extravaganza of monetary profligacy known to mankind. While the USFed has increased the US$ money supply by almost $2 trillion in the last two to three years, the gold price has risen from the $800-900 range to the $1150-1250 range. Karl failed to notice. In fairness to readers, not Karl, he does provide occasional excellent information and analysis, but never when related to gold. Often, and ironically, Karl provides great motive and justification to invest in gold, the ultimate intellectual insult.

Karl Denninger actually wrote, "My recommendation thus is to buy insurance against a hyper-inflationary event using instruments that do not try to evade the formal financial structure, are levered, and are defined risk... Gold has never performed well on a contemporary basis versus inflation." Precious metals will not serve as a safe haven, he urges. This is a really stupid man plying his trade within the web journals frequented by gold advocates and others devoted to sound money. At times, he brings to light excellent information and solid points, to his credit. See the Zero Hedge article (CLICK HERE) and the answer by Gekko to Karl's vapid nasty but deficient rebuttal (CLICK HERE).

◄$$$ LONG-TERM USTREASURYS IN A BREAKOUT, THE NEMESIS TO GOLD. THE BOND MARKET HAS GIVEN UP ON ANY EXIT STRATEGY FROM THE 0% CORNER WHERE THE USFED IS STUCK. CURIOUSLY, NO FEAR OF INFLATION IS EMBEDDED IN THE PREVAILING YIELD. WITHOUT MUCH DOUBT, THE DOLLAR SWAP FACILITY DESIGNED TO AID EUROPEAN BANKS INDIRECTLY RESCUED USTREASURYS, AND TO KNOCK GOLD DOWN. THAT MIGHT HAVE BEEN THE REAL INTENTION AND MOTIVE, AS A DIFFERENT PUBLIC BILLBOARD MESSAGE WAS GIVEN. $$$

The lunacy of flocking into USTreasurys is mindboggling. No currency secured by debt (all of them) is safe. The USGovt deficits and accumulated debt are monstrous and growing out of control. Despite this stark fact, money flows into USTBonds, or at least vast stock flows shift to bonds. Three important points must be made about the USTreasury rally. First, it is a strong signal that JPMorgan and the credit derivative managers have a firm grip on the situation, or so it seems. Enormous hidden fires are surely burning hot, with associated losses covered by the Printing Pre$$ and USGovt consent. Second, it is a strong signal that the USEconomy is not in anything remotely resembling a recovery. Elements of the standard credit cycle remain, much to the peril of bond investors who should bear witness to the European sovereign debt situation as an alarm. Third, it is a signal that further grand Quantitative Easing programs will be enacted in sequence. No fear of price inflation appears engrained within either the investment community or the policy makers, a serious error. So the stage is set for more monetary inflation, more impaired bond redemptions, and more saturation of the system with tainted money. Analysts call it monetary debasement, with risk to the USDollar. If the USTBond does not give ground, the USDollar will. The Powerz cannot control both.


The USTreasury 10-year yield is back to May 2009 levels, showing no fear of price inflation, demanding no compensatory reward for higher risk. A reversal has occurred in the last few months. The bond market has no conviction that an Exit Strategy will be followed, a correct Hat Trick Letter forecast for a solid year. The USFed and USDept Treasury have no options, painted squarely in a corner, as any move results in a kill. Long-term USTBond yeilds rose to 4% on the expectation that the US Federal Reserve would increase the official US interest rates. The need screams for both an exit from extreme stimulative monetary policy and from the absent reward to savers. Entire pension funds, annuity funds, and simple CD savers have been betrayed for two years, paid paltry payments in interest. In the last couple months, the long-term USTBond yields came flying down off the 4.0% psychology mark, in reaction to the European sovereign debt crisis. The exodus has been directed into USTreasurys by virtue of the Dollar Swap Facility, re-installed by the USFed. A hidden motive was at work clearly. Once more, the propaganda story of a Flight to Safety was trumpeted, an impossible story to swallow given the $1.5 trillion USGovt deficits to be funded. They have been largely funded by the Printing Pre$$, the inflation machinery locked in US control. Follow the money.

The USTreasury Bond competes as safe haven with gold during crises and sudden asset price stormy declines. Another important role has come as an important funding conduit for the credit cycle directing money flows back into the financial system. It used to be the essence of powerful monetary inflation converted to bond principal gains when the USEconomy improved and righted itself. That process of the cycle has been interrupted. In the months of February, March, and April, confidence in the USTreasury market was damaged and had to be restored. Notice the IEF bond index fund of long-term 7-10 year USTreasurys, lifted at a critical juncture. It was at the point of decision, breakdown or rally. So a Western World financial rescue decision was made. But who was rescued? My Jackass contention is that the USTreasurys were rescued, along with European big banks, with the wink understanding that the funds from redeemed EU member nation debt would be recycled into USTreasurys. The Dollar Swap Facility was used to bail out big banks with a heavy inventory of Greek and other PIGS nation sovereign debt. The banks turned around with their impaired bonds redeemed at handsome prices, and placed a great deal of the final funds in USTreasurys. That might have been an actual requirement for participation in the Swap Facility in the first place. So the Bond Vigilantes appeared at the barn door, but were scattered by a flurry of machinery and strong ill winds of monetary barnyard flatullence. A bond rally ensued, aided and abetted by the Dollar Swap Facility. The USFed had motive to aid European banks on its face, but aid USTreasurys in deed, which stood in a danger zone. One must wonder if regular USTBond indirect rescues will be required. Methinks yes!

◄$$$ THE USDOLLAR SWAP FACILITY WAS USED TO SHORT GOLD & SILVER BY CENTRAL BANK PROXIES. A SMALL PORTION OF THE FUNDS DEVOTED TO USTREASURY SUPPORT WERE DIVERTED (PROBABLY BY PLAN) TO SHORT THE GOLD & SILVER MARKET. MONETARY INFLATION THUS AIDS AND ABETS THE SUPPRESSION OF PRECIOUS METALS PRICES, THE NEMESIS OF FIAT MONEY. $$$

Analysts are missing a big big point. To be sure, the EU Bank Bailout program had a primary pump in the USFed Dollar Swap Facility. Big banks and central banks used funds from the redemption of impaired EU member nation sovereign bonds in order to short gold & silver. Nobody mentioned it. Nobody noticed it. It is glaring. The gold community does not have much deep analytic brainpower sadly, in my view. The bailout plan was a bullish signal for gold with huge debasement of money, yet gold corrected in price. The USFed managed to spread gold risk across the globe, with hits to come on the next rise past $1300. They know about the JPMorgan naked shorting and frequent gold pounces, but they overlook the new staggering huge credit line to conduct their criminal exercises. The funds were indirectly supplied by the USFed.

Gold investors need not fear, since the major governments of the world, who operate custodial roles for the major currencies, essentially dig a bigger hole. Each episode of reckless monetary expansion, welfare ridden bank rescue, and futile economic stimulus, all badly designed and poorly executed, actually raises the potential gold price another $1000 in the long run scheme. Wait until yearend when the nonexistent fruit of the initiatives is obvious, when nothing is fixed, no toxic assets are disgorged, when the big banks are still broken, all after blowing a cool $1 trillion. What they have accomplished is a higher gold target, along with greater federal deficits. While no remedy has come, no reforms have come, no liquidation has come, the system deteriorates further, thus generating much greater losses seen in capital destruction, reduced tax receipts, lower income, and thus steady gargantuan federal deficits.

◄$$$ FORECAST OF A STRONG DEFLATION EPISODE WILL SOON COME TO AN ABRUPT END, FOLLOWED BY 20% TO 30% PRICE INFLATION. THE TWO CONCEPTS ARE DEEPLY INTERWOVEN. RESPONSE TO DEFLATION IN PUBLIC POLICY (FISCAL & MONETARY) OPENS THE DOOR FOR PRICE INFLATION. THE UNDERCURRENT IS CONSTANT POWERFUL MONETARY INFLATION, EXPANDING THE MONEY SUPPLY. MISSING IS THE TIPPING POINT. $$$

Some financial analysts actually 'Get it' on the inflation debate. Albert Edwards of Societe Generale in France put it well in his title "Europe Is On The Edge Of A Deflationary Precipice That Will, Paradoxically, Usher In 20-30% Inflation" that hits a nerve of truth. This topic has been and will continue to be one of the most frustrating for me as an analyst to observe and listen to, let alone explain. Few analysts bother to define the terms they abuse so liberally. Deflation (falling prices, as they mean it) of diverse assets will continue during the multi-faceted crisis. Inflation (money growth) in many forms will continue, as a result of the human response, managed within public policy. The price inflation effect is clear to the awakened, but not on the federal docket. Responsive policy pertains to USGovt fiscal decisions like economic stimulus programs, extended jobless benefits, state aid, nationalizations of crippled corporations, subsidies for Fannie Mae & AIG, and outsized banker welfare funds. The policy also pertains to USFed monetary decisions like official purchase of impaired mortgage bonds, creation of vast liquidity facilities (that mimic the entire banking system), establishment of Dollar Swap Facilities (to enable foreign monetization plans), and enforcement of 0% easy money credit lines. This topic is as confusing as it is emotionally charged. Many subscribers ask for more analysis and discussion. The Hat Trick Letter reports cover the topic amply.

The key to grasp is that the debt based system, both the economy and financial markets, are imploding from failure of the fiat monetary system that uses phony money as legal tender. The evidence is falling home prices, wrecked mortgage bonds, failed banks, insolvent homeowners, insolvent banks, and much more. That is the deflation side, evident, obvious, indisputable, except for its ultimate effect. The reponse is for more federal programs of diverse type, and more monetary expansion channels into diverse program types. As long as the political and banking leaders sit in office, despite their corruption and ineptitude, they will spend more federal money and print more USDollars, in a grand human response. They will first and foremost defend their banker masters, directors, and brethren, since the US leaders are subjects to the syndicate, vassals in robes.

Albert Edwards has a firm grip on the powerful paradoxical dynamics. He believes the rampant regional deflation, once finally acknowledged by central bankers, will drive fear deep in their hearts. Edwards anticipates the bankers will feel they are running out for time. Their only natural response to preserve the system will be delivered in desperation. They will follow the Japan model, but probably loaded with more amplication and speed of delivery. He said, "The US and EuroZone now stand on the edge of a deflationary precipice. Amid all the recent Euro-related turbulence, the markets have not focused enough attention on the rapidly vanishing core CPI inflation rates in the US and EuroZone. With both moving below 1%, we are now only one cyclical mishap from joining Japan in outright deflation. Given our view that this cyclical recovery will end surprisingly early, slipping into the deflationary mire will trigger further more extreme rounds of Central Bank monetization, inevitably driving us towards our ultimate destination, a 1970s style 20-30% inflation will surely return... We are now only one cyclical failure away from Japanese-style outright deflation in the United States and the EuroZone at a time when de-leveraging still has years to run (falling prices bring the risk of a classic debt deflation trap). Impending cyclical failure and a deflation scare will trigger new lows in equities as the valuation bear market finally plays itself out with the S&P falling below 500. We therefore maintain our longstanding target of sub-2% US 10-year bond yields. That is the point when QE will really begin to get serious." The last sentences are key. The recession will bring about asset price destruction, enough to warrant the most powerful monetary inflation initiatives yet. Watch the 10-year USTreasury yield for timing clues.

Edwards expects a powerful upward move in the price of gold. He believes the Obama Admin is slowly realizing they are losing the economic battle. Political leaders will focus on preserving political credibility. He anticipates worsening trade tensions with China, whose leaders will deliver a powerful shock in retaliation, like a Chinese Yuan devaluation. The Middle Kingdom wishes to stimulate their own economy bubble wreckage zone. The devaluation will incite great anger by amateurs in USGovt leadership posts and the inept compromised USCongress. He reminds how the Japanese Govt attempted to remove stimulus and monetary accommodation in a premature manner, which ultimately resulted in greater deficits and a weaker economy. Edwards forecasts a renewed economic recession, and price declines that prompt a vicious competing currency war phase. See the Zero Hedge article (CLICK HERE). What we are observing are telltale signals of the progression of the United States into the Third World but without awareness.

$$$ A CHINESE BOND AUCTION FAILURE ADDED TO EUROPEAN CHALLENGES. IN TIME THE ONLY SUPPOSED SUCCESS AMONG SOVEREIGN DEBT WILL BE WITH USTREASURY AUCTIONS, BUT DUE DIRECTLY TO MONETIZATION HIDDEN. CHINA MUST ADAPT TO THE EFFECTS OF INFLATION. $$$

The Chinese Govt suffered their third Bill Auction failure in 2010. On June 11th, a failed Bill Auction occurred when they failed to cover the total offering amount of 15 billion Yuan in 3-month Bills. Unlike the United States, China is not compelled to refinance $150 billion in debt every week or so. The prevailing opinion for the failure in Beijing was the inability of the government to compensate investors for higher risk, as higher yields were desired. The 1.91% yield seemed puny. The untold story, at least not often enough, is that China (by virtue of its quasi-peg to the USDollar) has adopted the US monetary policy, thus operates in its captive province. Therefore the nation must come to grips with the incredible effects of a decade of inflation absorbed from the United States and Europe, masquerading as wealth, soaked by virtue of trade surpluses. Investors in the Chinese debt were not citizens, but rather banks. The near 0% cost of money does not work well with investors who must provide the savings without adequate compensation.

Liu Junyu is a fixed income analyst at China Merchants Bank in Shenzhen, the nation's fifth largest lender. He said, "The yields on shorter dated debt are too low to attract investors as inflation quickens. Also, there is a shortage of cash in the financial system." Liquidity is gradually becoming a problem in China. Evidence is the 7-day Repo, whose rate is moving up. Imagine, a cash crunch in China!! See the Zero Hedge article (CLICK HERE).

DIVERSIFIED GOLD STORIES

◄$$$ DIVERSIFICATION AND RISK MANAGEMENT HAS LED TO GREATER USAGE OF GOLD AS SAFE HAVEN. MAINSTREAM FINANCIAL HEDGING IS ON THE STEEP RISE. ASIAN NATIONS ARE PROVIDING MORE GOLD DEMAND, WHILE CENTRAL BANKS ARE SELLING LESS GOLD. $$$

The turmoil in European sovereign debt has shaken financial firms worldwide. Predicated upon shifts from Euro and USDollar usage as reserves, gold demand is on the rise. Emerging economies are outpacing industrialized economies in basic growth, a new trend that favors gold investment demand from trade surpluses. Bruce Ikemizu is the head of commodity trading and managing director at Standard Bank in Tokyo. He expects the gold price to hit $1300/oz as troubled currencies lose their appeal, and gold is seen as more effective as a safe haven. The Japanese commodity expert notes no immediate replacement for the major currencies, thus demand for gold will rise. Many sharp folks like George Soros regard the European debt crisis as unresolved, entering a second phase to be marred by deeper recession caused by austerity programs. The reckless poison pill dictums will be revealed, all in time. Ikemizu provides a solid Asian perspective on attitudes in China, Russia, and India. He said, "The United States will never regain its dominance in the world economy. Gold is drawing attention. It is risky for [Asian nations] to depend heavily on USTreasuries, given the possibility of a further decrease in the dollar. Gold may be their option as it is nobody's liability." Gold is independent of debt, a crucial factor. He cited central bank official gold sale trends lastly. Official sector gold sales by central banks declined by 82% to 41 tonnes in 2009 from 232 tonnes in 2008, according to GFMS. Ikemizu expects central banks to become net buyers of bullion in 2010. A gold explosion would occur in our midst. See the Bloomberg article (CLICK HERE).

◄$$$ SAUDI ARABIA, RUSSIA, AND PHILIPPINES WERE BUYERS OF GOLD IN THE RECENT QUARTER. THE EUROPEAN MEMBER CENTRAL BANKS SOLD ONLY A DROP IN THE BUCKET. $$$

The World Gold Council has released its latest report of official gold holdings, reflecting activity over the latest quarter. The key buyers were Russia, adding 27.6 tonnes, Venezuela at +3.1 tonnes, and Philippines at +10.3 tonnes, while the IMF sold 38.5 tonnes. Russia might be making preparations for its expanded role with the New Northern Euro. The most bizarre ledger item was the surge in Saudi Arabia holdings. Its official holdings shot up by more than double from 143 to 323 tonnes. The Saudi Arabian Monetary Authority, perhaps taking guidance from Wall Street or London on twisted verbage, announed "Gold data have been modified from First Quarter 2008, as a result of the adjustment of the SAMA's gold accounts." So they reclassified 180 tonnes of gold, which was what before, copper? Or perhaps, and more just maybe, they owned gold certificates after leases to the Wall Street & London Boyz, recently returned as gold bullion? Maybe before they refused to call gold certificates gold bullion, out of honesty. If the Saudis did purchase the gold, it would be equivalent of a $7.5 billion purchase in the open market. The member European central banks sold a mere 1.8 tonnes of gold over the past quarter, outside of minted gold coins. Their total sales have been a trifle since the third central bank gold agreement began in September of last year. In the next phase, they will be buyers of the same gold they sold at half the price like fools, the US-UK lackeys that they are. See the Zero Hedge article (CLICK HERE). 

◄$$$ THE CHINESE SET UP A SEARS/KMART GOLD BUYING COOPERATIVE PROJECT. THE AMERICANS ARE DISGORGING THEIR GOLD WHILE THE CHINESE ARE ACCUMULATING. AGAIN, THE POWER SHIFTS EASTWARD. THE UNITED STATES IS NOWHERE NEAR A CULTIVATED GOLD BUBBLE, PURE PROPAGANDA. GUIDELINES CAN BE OFFERED TO JUDGE A BUBBLE. $$$

More evidence comes to confirm that Americans want no part of wealth preservation or continued power. A Chinese company called Combine Intl and its operating arm called Pro Gold have begun to set up a gold & silver buying operation at Sears/Kmart. The Chinese are indeed diversifying out of the USDollar, hedging and investing away from increasingly risky USDollar exposure. The Chinese have turned to innovative clever methods such as this cooperative venture. Perhaps Americans are still transfixed with the consumer mentality, perhaps unfortunately strapped to meet expenses in a survival mode. Americans are dumping the one asset of high value they own to the Chinese in exchange for USDollars, considered confetti at best and toilet paper at worst. The Chinese have run their household savings up to $670 billion, of which a little over 2.0% has come in the form of private gold buying. The trend hardly exhibits characteristics of a glut, obviously not a bubble except to US propaganda outlets devoted to Wall Street. In fact, the Chinese citzen conversion is from US fountains of inflation, earned as income inside their nation, and then turned into gold. This is actually a proper sequence, inflation providing a thrust in gold demand. See the Truth in Gold article (CLICK HERE).

My best advice on judging a Gold Bubble in the United States follows. We are nowhere near such an event. The Powerz are growing desperate, as their paper system is crumbling on all sides. True safe haven can be found in gold. You will know a bubble is at work when certain people speak of gold, who hail from the lower echelons of our society. Sell gold when 10 identiable fecken idgits tell you about gold. Pardon the slang, but its translation: fecken idgit = freakin idiot (in Irish) best spoken with an Irish accent. Examples are numerous: a gas station attendant, a slower staff secretary, a sports club janitor, the guys who collect your garbage, a waiter at fast food restaurant, a guy who parks your car at the country club, a liquor salesman, an old high school buddy who was near the bottom of the class. A further confirmation signal: the public lined up around a street corner to buy gold coins. A final confirmation signal: national financial network news presenting people who advocate gold from the middle class American fabric.

Precisely the opposite is still in occurrence right now in America. People are attending shows to sell their gold, not to buy it, and to sell it to smart exploitative organizers. People are having parties to sell gold to vipers like in intimate clubs, where the money is intended for spending sprees, or to meet household expenses. My view is the trends in the US for disgorging its gold are additional signs of the march to the Third World on an opposite path from that of a gold bubble. A hemmorhage is afoot in the United States. The defiant Tyler Durden of Zero Hedge has an answer to bubble queries. He said with sass, "As to questions about whether gold is in a bubble, we cannot claim to know the answer at this point. Please ask us again when gold trades at $5000." Take a minute and recall the numerous stories every single week back in 2002 through 2005 on CNBC about regular people boasting of their massive gains in the housing market, buying to flip properties after minor repairs, leveraging one property's equity gains to purchase another, even clubs to help ordinary people capitalize on the so-called housing boom (misnomer). The gold boom is young, and it is a reaction to a monetary cancer of global currencies and banking systems, which is in a middle stage of fracture and rupture the metastasis. Common folks cannot identify it, invited guests skirt around it, while experts speak of it mainly in private.

◄$$$ BANKERS ARE PREPARING TO CONSTRUCT NEW GOLD VAULT FACILITIES, AS THEY NOTICE THE PROFITABILITY TREND. FEES ARE PROPORTIONAL TO THE RISING GOLD PRICE. THEY SENSE RISING DEMAND AND A BUSINESS POTENTIAL. $$$

The gradual commitment of gold bankers to construct gold bank vault facilities is not a contrary negative indicator, but rather a confirming positive indicator. Inadequate global vault facilities exist, as rising interest has led to a shortage of long-term storage space.. Plenty of facilities exist to store bonds of all stripes, but not gold & silver bullion. Some of the biggest banks and security companies have begun to build vaults to store gold bars and coins worth tens of billion$, set to exploit surging demand and uptrending prices. The sovereign debt crisis has struck hard, putting fear in hearts, as the global monetary system slowly disintegrates. Gold buyers are the ones who recognize the degradation process. Bankers report that vaulting is highly profitable, as rising bullion prices translate into higher storage fees, usually calculated as a percentage of the gold price. Unfortunately, the majority of the demand arrives through the fraud-ridden Exchange Traded Funds managed by the Wall Street and London fraud kings. Recently, the largest among them, the SPDR Gold Trust, announced its holdings of a record 42 million ounces of gold worth $51.5 billion at current prices. Someone at the firm should prove such huge bullion holdings, since without a doubt, the fund is a fraud with minimal metal. The bullion bank industry is split. While some banks claim they had space, others admit their vaults were nearly full. Several concede they were building or planning new vaults. JPMorgan recently opened a new gold vault in Singapore, and Swiss-based Via Mat Intl just opened a silver warehouse in West London. BayernLB in Germany admits their vault was full, and plans an expansion. Even Barclays Capital is actively looking at the precious metal vaulting business. Various design types are in usage, even warehouses above ground, surrounded by high security. Other older deep underground facilities still exist. The gold market is undergoing a shift in sentiment and activity, like a blossom.

◄$$$ THE USMINT HAD A HUGE MONTH OF MAY IN GOLD COIN SALES. SHORTAGES HAVE GONE GLOBAL FOR GOLD COINS. RECORDS ARE BEING SET FOR SALES, AS THE PUBLIC IS CATCHING ON. $$$

The USMint sold a mountain of gold coins in May, more than any month since January 1999. The May tally of USMint sales totaled 190 thousand 1-oz American Eagles, an incredible sum, worth $228 million. Unlike past years, the national mint only sells 1-oz gold coins in the 2010 vintage year. The single monthly record is January 1999, when 208.5 thousand 1-oz coins were sold. The American public is awakening. Thankfully, the USMint still has supply. They must be taking the gold from the SPDR exchange traded fund, right out of GLD shareholder cages. Sorry, just a joke, but one never really knows. The coin suppliers in Greece can no longer respond to urgent demand, which is so great, that the price necessary to clear 1-oz gold coins has risen to $1700. Sounds like a free market. Without any doubt, the relentless deepening crisis in the EuroZone over sovereign debt has raised fears of not only a harsh economic effect, but also wanton destruction of savings from a currency breakdown on the continent. Gold has not replaced USTreasurys as the ultimate safe haven harbor, but great progress has come in public awareness and practice. The USTBonds and Gold share the haven status on a mounting basis. See the Zero Hedge article (CLICK HERE).

◄$$$ BRITONS SCRAMBLE TO BUY GOLD COINS AHEAD OF A HEAVY TAX INCREASE SOON TO COME ONTO THE BOOKS. BUYERS MUST BE AWARE OF THE SYSTEM FAILURE IN PROGRESS. $$$

British investors are running ragged in a scramble to purchase gold coins. They seek to exploit a tax loophole to avoid paying more capital gains tax. Mark O'Byrne is a gold analyst and vendor for Gold Core, a London-based dealer in gold coins and small bars. He reports sales of sovereign gold coins and Britannias by the thousands. In late May he said, "This week we sold more than in any other one week period. The vast majority of the buying is related to capital gains tax." The UKGovt plans to raise the CGTax for items such as second homes and stock shares to rates consistent with those taxes applied to income. The consensus believes the tax hike for gold items will go from the current 18% rate to the 40% to 50% rate. The tax increase has been scheduled to go into effect next April 2011. However, some analysts wonder if the hike might be introduced early on June 22nd in the same stroke as the UKGovt's planned emergency budget. Runaway UKGovt deficits and an economic disintegration on the heels of a housing bust have led to broad growing civilian gold demand. They notice a broken banking system and a threatened Pound Sterling currency, and have turned defensive. See the Financial Times article (CLICK HERE).

◄$$$ GERMAN CITIZENS ARE PANICKING TO PURCHASE GOLD, EVEN CROSSING THE SWISS BORDER. THEY ARE REACTING TO THE EUROPEAN BANK BAILOUT AND THE HARSH EURO CURRENCY DECLINE. $$$

German citizens are crossing the border to Switzerland for the purpose to buy gold, according to the Zurich Blick newspaper. Their own banks and vendors have grossly inadequate supply to meet fast rising demand. Leading online German dealer ProAurum.de reported 140 of the 163 gold products it lists for sale were not available three weeks ago, a situation which has been somewhat remedied since then. Thorsten Proettel is a metals analyst from Landesbank Baden Württemberg. He said, "It is worse than in the days after the Lehman Crash." In late 2008, retail gold investors were unable to secure a sufficient supply of coins and small bars to buy, despite lower spot prices. Again, the investor community sees absent supply amidst a coerced low gold price. The gold market is experiencing internal forces that should ordinarily result in a gold price $100 to $200 higher, perhaps $500 higher. The perceived higher value coincides with a mad rush to purchase.

◄$$$ A SILVER SHORTAGE IN JAPAN IS REPORTED, PART OF A GLOBAL TREND. SHORTAGES FOR SILVER ARE MORE ACUTE THAN FOR GOLD. $$$

A Hat Trick Letter subscriber sends a key message from Osaka Japan. A man with initials HP wrote, "I have been living in Japan for over 20 years and buying silver for five years. Always delivery comes within a week (usually 3-4 days). I order through a wholesaler and get the shipments directly from Sumitomo. My order last week was scheduled for the 17th (10 days waiting). Today I ordered 20 kilograms in 1-kg ingots and the secretary who usuallY takes my orders said it might take a while, like UNTIL THE MIDDLE OF AUGUST. So it seems the shortage is on its way, and prices will move." So North America, Europe, and Japan report shortages.

◄$$$ THE SILVER PRICE IS AN ORDER OF MAGNITUDE BELOW PAST PEAKS, WHEN PROPERLY ADJUSTED FOR PRICE INFLATION. CARE MUST BE TAKEN NOT TO TREAT THE SILVER PRICE WITH TAINTED INFLATION ADJUSTMENT. $$$

Consider the generational chart for silver, adjusted for price inflation. Apply the more accurate Consumer Price Index maintained by the Shadow Govt Statistics folks. The official USGovt measure of price inflation is a farce, kept low to manage public perception, but also to lower cost of living adjustments for pensions related to Social Security, USGovt, and USMilitary. No evidence of a bubble exists. A silver price move merely to $50/oz, the next line of resistance, seems a slum dunk. Nothing can stop such a move in the currency environment marred by mammoth monetary inflation. Future climax events are assured. Tectonic shifts have occurred, with more coming.


◄$$$ VON GRUYERZ MADE A $7000 GOLD CALL THAT COMES WITH BLAME LAID ON RECKLESS GOVERNMENTS AND CENTRAL BANKERS. HE GIVES STERN WARNINGS OF PRICE INFLATION AND SOCIAL DISORDER. $$$

Egor von Gruyerz is a respected gold analyst from GoldSwitzerland. His website posted a report recently. He set the record straight on bubbles and gold price targets. He refers to inflation adjustment according to more accurate CPI measures, like what the Shadow Govt Statistics folks publish. He gives stern warnings that make perfect sense. The news coverage certainly shows the early evidence of what he describes. He clearly implies that funds are abandoning toxic bonds of all type, including sovereign bonds, in search of real money forms, where gold is found. Tremendous debasement of major currencies and their associated bonds in support have conspired to destroy paper money. A revolution in money is in progress. Von Gruyerz expects the USDollar to collapse, as well as many other currencies. See the CNBC article (CLICK HERE).

Von Gruyerz wrote, "Adjusted for real inflation, the 1980 gold peak in today's prices corresponds to around $7200 today. So gold could easily go up 6 times from the current price of $1220 and still be within normal parameters. Gold is at this point not a bubble. It is not overbought. There will be nowhere near sufficient gold to satisfy demand at current prices. We had been expecting gold to start its acceleration in March 2010. This is exactly what is happening. We expect the move to be relentless during most of this year with very few major corrections, but with high volatility. Moves of $100 in one day could easily happen. So gold is likely to make a top in the next few years between $5000 and $10,000. Gold reflects the government deceitful actions in destroying paper money. At certain points gold is a commodity. Right now it is money. You can only measure the value of currencies now against gold because gold has an absolute value. Clueless governments still do not understand that their ruinous actions have created a credit infested and bankrupt world. They will continue to prescribe the same remedy that caused the problem in the first place, namely more credit and more printed money. The consequences are clear: Inflation, hyper-inflation, economic and human misery, as well as social unrest." The man does not mince words.

◄$$$ G.A.T.A. IS GIVEN CREDENCE ON C.N.B.C. EUROPE. DOUBTS WERE LAID AS TO THE VALIDITY OF USGOVT CLAIMS TO BE IN POSSESSION OF 8000 TONNES OF GOLD IN RESERVES. WORD IS SPREADING, LIKE A BAD ODOR. $$$

The platform was CNBC, but the venue was Europe. On the CNBC Europe's Squawk Box show, interview guest Ben Davies was featured. He is CEO of Hinde Capital in London and co-manager of its gold fund. With surprising candor, reeking of treasonous disloyalty within the financial sector, where corruption is rampant, he expressed his opinion. Prefaced by a comment that "central banks and governments are very good at obscuring facts," Davies went on to cast doubt that the USGovt indeed has the 8000 tonnes of gold it claims. This is precisely what GATA has filed lawsuits to discover, to no avail. Davies mocked the USGovt, as he calculated that a $36,000 gold price would offset the US national debt entirely. However, any road that leads to such a gold price would involve either massive market breakdowns in USTreasurys and the USDollar, complete with credit derivative nuclear explosions, or massive monetary inflation in response to crisis and absent liquidity, complete with economic destruction and jobless roaming the cities in marauding gangs. See the CNBC video with Davies (CLICK HERE), where the GATA reference is made 6 minutes into the clip.

◄$$$ IN LATE MAY, GOLD CALL OPTIONS WERE ALMOST TOTALLY DESTROYED IN A MAJOR PRICE ACTION ASSAULT. JUST ANOTHER IN A LONG STRING OF HEAVY HANDED ILLEGAL BEAR RAIDS AHEAD OF OPTION EXPIRY, A KNOWN MODUS OPERANDI BY CRIMINAL ELEMENTS. $$$

Check out the schedule of June futures contract gold option calls, for their distributed strike price. The Commodity Futures Trading Commission remains fast asleep on the job, heads stuck in coffee cups, with puppeteer hands deeply rivoted up their rectums from Wall Street desks. Notice the spike in the number of option contracts at the $1200 price. Between 500 and 2000 options had other strike prices, but the $1200 strike had 18,000 contracts. So the objective for the criminal gold cartel was to pull the gold price below the $1200 mark, a task easily done with the aid of naked shorting and a blind CFTC eye. With each option expiration, they run the identical criminal games. Naked shorting is against the law, but the United States financial arena is not subject to laws, not for a long time. Speaking of GATA, my colleague Bill Murphy tells of an upcoming article by Financial Times of London, an exposure of the JPMorgan gold & silver market price rigging and illicit manipulation. It is due to be published any week now. He was interviewed for the article.

◄$$$ BEN BERNANKE ADMITS HE IS PUZZLED BY GOLD. AS CHIEF INFLATION ENGINEER, HIS IGNORANCE OF GOLD AND BLINDNESS TO INFLATION WARNING SIGNALS IS GLARING. HIS IGNORANCE OF HOW CHRONIC INFLATION DESTROYS CAPITAL IS TRAGIC. THE VICTIMS ARE THE ECONOMIC PARTICIPANTS WHO LIVE UNDER HIS DOMAIN. $$$

For several years, my disrespect for the post of USFed Chairman has been consistent. The post is better described as Secretary of Inflation for the USGovt and warlord wielding undue power from a sacred financial helm over the USEconomy. The post has gone from primary high priest and inflation engineer with Alan Greenspan to designated manager of slush funds for Wall Street benefit with Ben Bernanke. So the USFed Chairman Ben Bernanke says he is a bit puzzled by surging gold prices. Heck, Bernanke is puzzled by economics!! The 30% rally in the gold price from a year ago puzzles him, even though the USFed balance sheet has risen by over $1 trillion. Bernanke seems to have no comprehension of money and the role of gold. He has an excellent grasp of inflation machinery, which qualified him for the job. One should properly interpret the gold price rise as a loud signal from markets that big inflation pressures are building in the United States, and worse, that the global monetary system is crumbling beneath our feet. Bernanke is oblivious to the breakdown signaled. Gold is seen by many investors as a hedge against inflation risk. Its role is much greater. Gold is a hedge against fractured monetary and banking systems and systemic breakdown.

Like the fool he is, Bernanke notes that the inflation signal is not confirmed by any rise in USTreasury Bond yields. How incredibly feeble! How ignorant! How shallow! The very inflation machinery Bernanke manages has been chronically abused to the extreme for funding USTreasurys at auctions in illicit hidden monetization exercises, and for funding Interest Rate Swap contracts whose losses are ablaze in the JPMorgan and Fannie Mae basements. Gentle Ben has ruined all the important warning signals, within the paper realm. Bernanke notes that the inflation expectations as measured in Treasury Inflation Protected Securities (TIPS) markets remain low. Two months ago, the same hacks at the USFed announced direct purchase of TIPS in order to keep such expectations low. How overt! How reckless! How stupid! Bernanke shocked the investment community with his ignorant words, when he said "I do not fully understand movements in the gold price." Yes, exactly! He did not understand the subprime mortgage problem either, nor the global bond contagion either, nor the sequence leading to the insolvent US banking system either, nor the USEconomic recession almost two years ago either. His job is to be blind to the effects downstream to the inflation machinery output, those he manages. He is paid to inflate and to build channels to send the inflation output to Wall Street masters. He was hired because of his blindness to inflation damage and willingness to destroy the USDollar. His words punctuate the tragedy. He is one of the worst economists within the American pond. He is totally ignorant to the powerful effect of monetary inflation in the utter destruction of capital. Its chronic abuse in the United States led to a climax event in export of the industrial base to China, to the destruction of home equity, and to the destruction of bank equity. The American nation is grossly misled by Bernanke, as it grows angry. That anger has been shifted to British Petroleum, as it and other disasters might be arranged as distractions.

◄$$$ CHINA TAPS FOREIGN RESERVES FOR COMMODITY SUPPLY LINE. THE S.A.F.E. SOVEREIGN WEALTH FUND WILL BE TAPPED FOR GLOBAL COOPERATIVE PROJECTS, ENSURING A STRONGER PIPELINE SUPPLY OF COMMODITIES TO CHINA. AS THE SUPPLY CHAIN DEVELOPS FOR CHINA, THE STRANGLE OF WESTERN SOURCES CONTINUES. A NOOSE IS FORMING AROUND THE AMERICAN NECK. $$$

China has found a more useful and practical role for its FOREX reserves, to date virtually locked up in the State Administration of Foreign Exchange (SAFE) fund. It will be tapped for loans overseas through commercial banks. Reform is to come in steps, but SAFE will be granted authority to handle $billion loans for inter-governmental cooperation projects through commercial banks. That means loans with nations from Canada to Brazil to Nigeria. Major deals tied to oil supply swaps signed in recent months marked a baptism for the new policy. The changed policy is designed to help China diversify its foreign currency assets and provide a channel for portions of the $2.4 trillion in reserves held by the central bank, expanding its traditional role of solely managing FX reserves. China will become a major lender and dealmaker. After receiving new directives from the State Council, the first step taken by the SAFE fund was to forge an agreement with China Development Bank (CDB) for to manage so-called Entrusted Loans. The contract gave CDBank authority to act as SAFE's agent for foreign investment loans, primarily to Chinese enterprises that seek overseas opportunity to secure commodity supply. Also and importantly, the CDB arrangement enables risk assessment, loan evaulation, and profit sharing through bank partnership. One source said, "The entrustment agreement between SAFE and CDB allows SAFE to directly take on new projects. SAFE will act as the organizer and primary arranger of syndicated loans." Some competitor banks like the Bank of China are displeased with the CDB partnership, pointing to risk management, controls, and profit as problematic. China has embarked on a path, for at least three years, in securing global commodity supply. With deals in Canada, Venezuela, and Brazil, they have actually worked to create a chokehold in the American Hemisphere.

The Chinese Govt through its State Council formally requested at the end of 2009 for the SAFE fund to take the lead in projects, including a Chinese deal for Russian oil, and even to study additional innovations for policy lending. They have been evaluating various loan programs to assist Chinese enterprises in expansion abroad. Since 2009, China has signed loan-for-oil agreements valued over $60 billion in recent months with Russia, Venezuela, Kazakhstan, Turkmenistan, and other nations. Collectively, the deals have secured for China the rights to import nearly 75 million tonnes of crude oil annually. Under the China-Russia bilateral agreement signed February 17th, China will provide Russia $25 billion in long-term loans in exchange for 15 million tonnes of crude oil annually between 2011 and 2030. See the MarketWatch article (CLICK HERE).

EXCHANGE TRADED FRAUDS (ETF)

◄$$$ G.L.D. FUND INCREASED ITS PHYSICAL GOLD HOLDINGS, OR SO WE ARE TOLD. CONTROVERSY DOGS THIS CORRUPT FUND, RIGHTFULLY SO. SIGNS POINT TO INTENSE ACCOUNTING FRAUD. $$$

The story goes that total gold tonnage making up the GLD recently hit an all time high on Net Asset Value (NAV) at 1289.8 tonnes, from additional purchases. Even with a rising gold price, GLD added to gold purchases by 1.9 tonnes up to June 17th, the latest tick. The ETF increased its gold holdings NAV from 1306.1 to 1308 tonnes. The all time record high holdings of the precious metal represent a 7.5% increase in the tonnage of gold held from the beginning of the month, when the tick was 1217 tonnes. The public is led to believe that during a period of time when the gold price has been flat, the GLD fund for some reason saw fit to sharply increase its holdings. Supposedly, administration by Street Tracks for this Exchange Traded Fund is supposed to match investor input with gold metal purchase. Doubtfully, GLD investors added significantly during gold price consolidation. So when the gold price shows no movement outside a narrow range, suspicion is aroused upon large purchase orders, with sizeable delivery supposedly taken. My view is false stories and phony accounting, growing worse, more fraudulent, and more distorted with each passing month. So much for the valuation side. Next come the market effects.

For in a period of less than one month, GLD presumably acquired 80 tonnes of gold to support its intrinsic value, but the physical purchase made no effect on the price movement. Rubbish!! Also notable is that on the day of June 3rd, the public was told that GLD increased its gold holdings by 21.3 tonnes, despite a decline in both gold fix and the GLD share price. More rubbish!! As Zero Hedge alertly informs, weekly global gold mine production is roughly 30 tonnes. So logic dictates that the GLD fund custodial JPMorgan acquired two-thirds of all gold produced on the planet in the last week, on a single day, without a peep from mining firms. Rubbish!! Bear in mind the prevailing propaganda debate on the mythical Gold Bubble. The opposite is the case. USTreasurys are the grand bubble, and Gold remains in the early stages of a mammoth long-term bull run. The chart shows the gold bullion holdings (in red) against the gold price. Notice in the early months of 2009, a big rise in bullion holdings, not matched by any gold price rise. Notice in the last months of 2009 a big rise in the gold price, not matched by bullion holdings. Evidence is there to see, once again, to confirm the corruption of this GLD fund. It uses physical gold to short the gold market, conspiring with its custodial manager, JPMorgan. See the Zero Hedge article (CLICK HERE).

◄$$$ THE MANAGEMENT AND CUSTODIANS FOR THE G.L.D. FUND ARE IN A HEATED INTERNAL BATTLE, GROWING WORSE BY THE MONTH. DEEP DIVISIONS AND CONFLICTS MIGHT ERUPT AT ANY TIME. $$$

Word came from a veteran gold banker, who held his ear to the wall concerning the Street Tracks SPDR gold fund, which trades under GLD corrupted shares. Internal conflict and dissension are raging inside the GLD fund team. Here is what he reported. He said, "I am told that the GLD people are not acting in lockstep internally, as it might appear to the outside observer. There are allegedly enormous frictions within GLD management due to broken commitments, fraud amongst the members, and massive threats being made against each other. If this is true, which I have no reason not to be, it is safe to assume that the GLD people are going to bring their house of cards down all by themselves. There are also rumors, unsubstantiated, that there is a group of ex-bullion dealers who have virtually unlimited funds to draw from, who might be the ultimate game changer in the way precious metals are going to be traded in the future. These guys are allegedly old school professionals who do not suffer bankster idiots lightly. They are known to make life for certain market participants and big commercial banks living hell. They recently were very close to shutting major Swiss banks down that defied their legitimate desire to reallocate very substantial amounts of precious metal. When the bank tried to stall them, they just ran over the banks and shoved them into the corner. They had it their way by the end of the day, and were given their delivery. Not even the pleas from their bank CEO's had any effect on this group of powerful players. No one seems to know where these guys operate, but they are allegedly out there. We shall see if there is truth to these rumors or not. If these guys really exist, the big boys are technically toast." Be assured that none of the GLD internal conflicts and friction will ever make the news, until the fund is dissolved amidst lawsuits and deep controversy. The GLD fund might be part of a confiscation project conducted by the USGovt, hidden for a while longer, then made public, couched in a national security emergency initiative.

Permit me to speculate, to offer a scenario, gilded in conjecture, on the operations of the GLD corrupted fund. Nothing can be proved, the result of numerous conversations and memos with well informed people deep in the fray. The foundational practice is that GLD leases its gold bullion to the Wall Street and London banksters, which sell it immediately in the open market. This practice acts to suppress the gold price. More, much more, occurs behind the scenes. GLD must pay a premium to locate gold, maybe from hidden supplies like at the Vatican. GLD also might have a lock on the majority of Barrick Gold output for instance. GLD receives occasional gold delivery from COMEX and LBMA, from normal channels like any fund claiming to own gold, but it earns favors in the reverse direction. GLD then puts the gold bullion on their books. These corrupt exchanges routinely refuse to deliver on legitimate claims, offering cash bonuses (technical default). The metals exchanges actually receive some gold bullion from GLD illegally in emergencies, part of a cozy relationship that after all, involves JPMorgan as custodian. Yet the gold bullion remains on the GLD books. Perhaps some of future Barrick production is part of the GLD stated account of holdings. GLD earns some extra money from the leasing and maybe bribes taken, to offset the premiums paid to share holders. Then they lease the gold to the JPM, GSax, and Barclays crews. Such maneuvers aid helps both the GLD balance sheet and the falling gold price.

◄$$$ MORE REALITY FOR THE G.L.D. EXCHANGE TRADED FUND. THREAT OF GOING 'NO BID' IS VERY REAL, AS MORE NEGATIVE FOCUS HAS BEEN DIRECTED TO THE CORRUPT FUND. THE SPOTLIGHT BREEDS BAD ATTENTION. $$$

Permit the Truth in Gold journal to lay out the threat to GLD investors, the corrupt Exchange Traded Fund managed by State Street but whose gold custodian is JPMorgan. They wrote, "For the record, until GLD can prove that its custodian and the subcustodians possess every single bar of gold listed on the GLD website, that these bars are not just paper swap transactions with US and European central banks, the GLD shareholders are highly exposed to an Enron/Refco/Bear Stearns type of price collapse. The instant a big holder of GLD tries to exchange its shares for a couple hundered tonnes of the GLD gold bullion, and GLD blinks with hesitation on the delivery, the price of spot gold will shoot to the moon, and the price of GLD will have an air pocket plummet. A long-time investment advisor colleague of mine remarked that he had put his clients in GLD today.  I replied, 'I hope you are not holding GLD when it is exposed.' He replied that he needed the relative liquidity of GLD for the size he was buying. I replied that the second GLD is exposed, GLD will go No Bid, and the only thing liquid will be the brown substance in your boxer shorts. Not only that, your phone will start ringing off the hook from lawyers who are filing Breach of Fiduciary Duty lawsuits."

This topic will not go away until it erupts like a volcano. It is just a matter of time. Exposure is gradually chipping away at its corrupt facade. The liquidity sought by the investment advisor is an illusion, since its basis is fraud. Actually the GLD liquidity offered is exactly the same as any Ponzi Scheme. A trap is laid, much like the subprime mortgage bonds that traded so freely before they stopped trading altogether. It seems the fund managers never learn. If a price collapse comes, it will be matched by a run on the GLD gold bullion inventory. At that time, my forecast is for the GLD to take on a price discount of 30% to 40% to the gold price.

◄$$$ SILVER COIN SALES ARE GATHERING TOWARD A SKYROCKET EVENT. THE ULTRA-LOW $10 PRICE IN 2008 MIGHT HAVE SPARKED A BULL RALLY IN SILVER, OFTEN CONSIDERED A CHEAPER PRECIOUS METAL HEDGE. $$$

In response to the Wall Street crash, best described as a death event without a funeral, the silver price hit a $10/oz price bottom in November 2008. Demand began to spike for silver coin sales, as a fire was lit. Investment demand has transfromed into great pressure on the USMint, which sold over nine million silver eagles in 1Q2010. That volume is greater than any previous quarter in its history. The Royal Canadian Mint set its own record, producing 9.7 million silver maple leafs in 2009. Observe the doubling and tripling in USMint coin sales since 2007. See the Zero Hedge article, which provides a good guide on storage alternatives, warning on volatility, and some historical perspective (CLICK HERE). Thanks to the Casey Gang for a fine graph.

GOLD SEPARATES FROM COMMODITIES

◄$$$ METALS PRICES GENERALLY ARE DROPPING BUT THE GOLD PRICE IS RISING, A SEPARATION. A CONTRADICTION ON LIQUIDITY THREATENS THE SYSTEM, AS ECONOMIES GRIND BUT MONEY SEEKS THE SAFETY OF GOLD. A GRAND MOVEMENT HAS BEGUN IN EARNEST OUT OF PAPER MONEY AND INTO GOLD, THE OTHER RESERVE CURRENCY. SILVER IS OUTPERFORMING COPPER AND THE INDUSTRIAL METALS. $$$

The mainstream has caught onto the concept of Gold serving as a legtimate refuge during the historically powerful monetary crisis. The latest chapter of the monetary crisis is mainfested in sovereign bond breakdowns and the Euro instability episode. Its first chapter was manifested in the collapse of the Wall Street and London financial bastions, along with their national banking sectors. Gold should rise on demand for a currency alternative, according to a survey. Gold will continue to advance on speculation investors will buy the precious metal as an alternative to currencies. Fourteen (=70%) of 20 traders, investors, and analysts surveyed by Bloomberg favored gold. James Turk, founder of GoldMoney, received some positive mainstream press exposure. The article described his business as an online gold purchase & storage service that has passed $1 billion of customer assets. Turk is quoted to have said, "Anyone throughout Europe who understands how the Euro is being debased is seeking the safety of gold. The demand for physical metal from Europe is particularly strong." See the Bloomberg article (CLICK HERE).

Silver has a storied history as the most widely used monetary metal. It once financed a Greek War. It will garner a strong share of the wealth seeking safety. Its prestige and popularity assure a return to monetary status. Not Poor Man's Gold, rather it is Gold's Little Brother. When copper broke its technical uptrend, along with many industrial metals, silver did not follow to the downside. Silver has been outperforming copper since April, holding its own, preparing for a price breakout, taking its cue from gold instead (the monetary thrust). Silver will gradually assume more of a monetary role while still to some extent dragging the industrial metal ball & chain.

◄$$$ THE CRUDE OIL PRICE HAS SEEN A LIFT SINCE THE GULF OF MEXICO OIL VOLCANO DISASTER. WITHOUT THE MEXICAN AND BRITISH PETROLEUM OUTPUT PROBLEMS, THE CRUDE OIL PRICE WOULD CONTINUE DOWN. HOWEVER, THE CURRENT IMPETUS WILL LIKELY PUSH CRUDE OIL TO THE $100 LEVEL. $$$

◄$$$ THE GOLD PRICE IS IN A QUIET SLOW MOTION BREAKOUT. GOLD IS RECOGNIZED FINALLY AS A SAFE HAVEN AND A GLOBAL CURRENCY RESERVE. THE SOVEREIGN DEBT CRISIS IS IN AN EARLY STAGE. DISTRUST OF CURRENCY AND GOVT BOND HAS GONE MAINSTREAM. TREMENDOUS MOMENTUM AND FORCE IN GOLD HAS GATHERED, MUCH LIKE ITS OWN VOLCANO. THE UPTREND IS CRYSTAL CLEAR. A HUGE PRICE ADVANCE IS IMMINENT, AS THE $1200 PRICE HANDLE WILL GIVE WAY. $$$

◄$$$ SILVER IS IN THE PROCESS OF BREAKING LOOSE OF ITS INDUSTRIAL ROLE, AND EMBRACING ITS MONETARY ROLE. A GREAT SIGNAL CAME WHEN SILVER ROSE WHILE COPPER FELL. THE SILVER UPTREND AND REVERSAL MOMENTUM WILL SEND SILVER INTO A POWERFUL BREAKOUT. BE SURE TO KNOW THAT WHEN SILVER IS RELEASED, A $23 PRICE IS A CINCH, THEN $30 AND HIGHER. SILVER HAS BUILT A COILED SPRING. $$$

◄$$$ THE H.U.I. PRECIOUS METAL MINING STOCK INDEX IS ON THE VERGE OF A LONG-AWAITED PRICE BREAKOUT. IT IS HESITANT, PERHAPS DUE TO DEFLATION THREATS TO ASSETS. THE TARGET IS 575 UPON BREAKOUT, A CERTAIN EVENT. LARGE MINERS WILL CAPTURE MOST DEMAND AT FIRST, THEN SMALLER MINERS LATER WILL BENEFIT, A RESULT OF RISK PERCEPTION AND CAPITAL FUNDING NEEDS. $$$

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