MONETARY CRISIS REPORT
CLIMAX OF FINANCIAL FRAUD
COMPREHENSIVE GUIDE

* Monetary Shrapnel
* Euro Bail & Fail
* Collapse of Debt-Based System
* Japan as Next Fire Zone
* The Great Global Reset
* Breakdown in Bonds & Banks


HAT TRICK LETTER
Issue #99
Jim Willie CB, 
“the Golden Jackass”
17 June 2012

"The things that will destroy us are: politics without principle, pleasure without conscience, wealth without work, knowledge without character, business without morality, science without humanity, and worship without sacrifice." ~ Mahatma Gandhi (the USGovt fails in 3)

"When the British, Spanish, and Portuguese colonies of 19th century America fought for independence from their respective Mother Countries, a key conflict was that London, Madrid, and Lisbon not only insisted on controlling colonial trade, but also would not allow their colonies to coin their own money. So, yes, a tell-tale sign of a colony is when you cannot issue your own currency to run public finances to serve the Common Good." ~ Adrian Salbuchi

"Let farmers reap their harvests, let bakers bake bread, let forgers make swords, let traders

distribute goods throughout the realm, and let warriors defend our borders, but minting money and creating currency must be the sole monopoly and right of the Governor. Therein lies all power." ~ Po-Chu-I (Chinese sage, 9th century)

"Events in Greece could trigger financial fright in Spain, Italy, and across the EuroZone. The summer of 2012 offers an eerie echo of 2008. If Greece leaves the EuroZone, the contagion is impossible to predict, just as Lehman had unexpected consequences. Fears are mounting that Spain will be crippled by its banking sector and will be the next domino to fall. EuroZone leaders need to be prepared to recapitalize banks. In the EuroZone, the guarantees of some national sovereigns are unlikely to be sufficient and only that of the Euro sovereign will suffice. It is far from clear that EuroZone leaders have steeled themselves for this step. EuroZone leaders need to be ready. There will not be time for meetings of finance ministers to discuss the outlook and debate the politics. In panicked markets, investors flee to safe assets, sparking other flames." ~ Robert Zoellick (outgoing head of World Bank, CLICK HERE)

"The Euro was intended to be the hallmark of EU political integration. It is failing and is the root cause of a great deal of economic harm. The politicians instead of recognizing the folly of their endeavours are determined to put their political project and careers above that of economic common sense and the best interests of their citizens. The Euro will be artificially propped up until the pain does cause an even greater collapse. The EU's hope that something will turn up to rescue the Euro is misplaced and is leading to the wasting of good money after bad. The European Union as a political structure is a drain on European nations that is adding to the decline of its members. The EU has gone fartoo far. It has taken too much power away from democratic national parliaments. Eventually there will be a kickback where people will demand that democracy is returned to the nation state, at which point it will collapse." ~ Robert Oulds (Director of the London-based Bruges Group)

"Specifically, over the past 15 years, the global financial system, encouraged by misguided policy and short-sighted monetary interventions, has lost its function of directing scarce capital toward projects that enhance the world's standard of living. Instead, the financial system has been transformed into a self-serving, grotesque casino that misallocates scarce savings, begs for and encourages speculative bubbles, refuses to restructure bad debt, and demands that the most reckless stewards of capital should be rewarded through bailouts that transfer bad debt from private balance sheets to the public balance sheet." ~ John Hussman

Editor Treat:  Two extremely rare natural events occurred in the last month, both involving the sun. A solar eclipse was visible in the Northern Hemisphere. See the Huffington Post series (CLICK HERE) for a batch of spectacular photos. Also from the same event, an unusual display of shadows is presented by Gadling (CLICK HERE). The other event is much more rare, a transit of the planet Venus in front of the sun. Although Venus appears tiny, it is indeed a planet almost exactly equal in size to the earth. The Venus transit occurs every 100 years in paired events. The next such event will occur in the year 2017. See the Huffington Post series of remarkable photos (CLICK HERE).

## MONETARY SHRAPNEL

◄$$$ HALF A $TRILLION VANISHED FROM CORPORATE BALANCE SHEETS. THE HOKUM ABOUT MOUNTAINS OF CORPORATE CASH ON THE SIDELINES TO PUMP PRIME THE USECONOMY WAS FALSE. JUST ANOTHER LINK IN THE CHAIN OF FALSE PUBLIC ADDRESSES MESSAGES OF MERE PABLUM. $$$

The liquid assets (including cash) held by US non-financial corporations was supposed to lift the USEconomy. It was supposed to be infused as a gigantic healthy boost of capital into the system. It never existed, at least nowhere as claimed in magnitude. Once again, the revision after deception sheds the harsh light of reality. The volume of loose corporate cash fell by half a $trillion compared to end 2011, from $2.23 trillion to $1.74 trillion dollars. My belief is that much of that admitted money is tied up in overpriced bonds of many varieties, including USTreasury Bonds and USAgency Mortgage Bonds, the stuff of commercial paper. Barry Ritholtz wrote, "Did this money actually go missing? From the Fed report, its not clear whether or not this based on a significant accounting revision from recent quarters, meaning it never was really there in the first place. Alternatively, the money actually was spent, and corporate America added an additional half a trillion dollars in economic activity. I suspect its the former." See the Ritholtz article (CLICK HERE)

With a 90% likelihood in practical interpretation of forward views, suspect the more dire outlook. US corporations are not sitting on as much cash as previously reported, just another nail in the recovery coffin or vacant cupboard. The long string of nonsensical false billboards is an embarrassment to the US political & banking machine (hardly separable). Consider the annual Second Half Recovery already discarded this year, the banking system rescue aid packages that solve nothing, the loudspeaker claim that USTreasury Bonds are a safe haven, the supposed traction in USEconomy from the deadly 0% stimulus, the absent Exit Strategy from the monetary hyper-inflation, and lastly the big lie that the USGovt holds any gold in reserves. The nation of lies and fraud approaches its day of reckoning.

◄$$$ BANKERS ARE RESIGNING IN DROVES, MOSTLY FROM MIDDLE LEVEL POSTS. THEY ARE THE AGENTS THAT CARRY OUT PROJECTS. THEY ARE AT THE GREATEST RISK, SINCE TOO AWARE OF PAST DEEDS, YET UNPROTECTED. $$$

A very long list of bankers grows, each having resigned from financial firms. They are mostly from middle level posts, responsible for carrying out projects. They know too much on pathways, devices, contacts, and crimes committed. Yet they are not high enough ranked to be protected as directors or vice presidents. Some have been eliminated. Some are in hiding. An increasing number have turned toward the new sheriff in town in the global cleanup project, offering evidence in exchange for freedom. As of a few weeks ago, the count of banker resignations had reached 611 people. See the American Kabuki article (CLICK HERE). As the movement to audit the US Federal Reserve proceeds in the USCongress, more revelations will come as to multi-$trillion gifts to major global banks (low cost loans never to be repaid). My sincere hope is the money laundering is exposed for most major US banks. The pressure to audit the USFed has resulted in minor glimpses from a crack of light entering their dark chambers. It is a losing battle, since the central bank will do it as pleases, only to be forced to reveal activity long etched in the past.

◄$$$ IN ITS CONSISTENT CORRUPTED CONDITION, THE SECURITIES & EXCHANGE COMMISSION WILL NOT TAKE LEGAL ACTION AGAINST LEHMAN BROTHERS. THE VIOLATIONS ARE OBVIOUS AND LAID OUT IN FULL VIEW. THE GAME CONTINUES OF PROTECTION, BRIBERY, AND INTIMIDATION. $$$

The violations of Sarbanes-Oxley rules were obvious. The Vice Presidents at Lehman Brothers knowingly submitted false balance sheet accounting. The CEO Richard Fuld was warned many times internally, well aware of the fraud. The dying Lehman Brothers firm routinely moved debts to London, only to return them after quarterly statements in a common pattern of pure deception of share holders and bond holders. A substantial record of evidence lays out a criminal skein of events that led to the failure. The evidence is detailed, from many sides within the failed Wall Street firm. It is comprehensive in pointing to fraud, in misleading the investors. It was systematic, a repeated pattern shown. The smoking guns were numerous. The US regulators typically dropped the case, protecting the violators, like they protect JPMorgan in the MFGlobal thefts, like they protect Madoff thefts. Reopening the Lehman Brothers files would surely result in a plethora of embarrassing data, leading to a mushroom of fresh investigations, even possibly indictments and criminal prosecutions. In my view, the Fascist Business Model example of bank fraud and protected financial crime rendered deep economic damage, a dynamic still at work. The protection continues. See the Yahoo Finance article (CLICK HERE).

The author Charles Ferguson in his book entitled "Predator Nation" described crime on Wall Street so engrained, so laced into Congressional committees, so protected by regulators, so evident in financial controls, that politicians are too bribed or too scared to take action. My longstanding belief has been that USCongress is either bribed or threatened into complicity or silence. The deaths of David Kellerman at Freddie Mac, Matt Simmons of Peak Oil fame, and David Breitbart of weblog fame are well known and lead to intimidation. The US financial sector is from a rogue nation.

◄$$$ A FASCINATING BUT VERY REAL CONCEPT HAS BEEN PUT FORTH. A USDOLLAR BACKWARDATION MIGHT SOON SHOW ITSELF. IT WOULD PRECEDE A VIOLENT REMOVAL OF THE USDOLLAR AS GLOBAL RESERVE CURRENCY. CONTRACT COMMITMENTS MIGHT BE SHUNNED IN FAVOR OF HARD CASH. DEMAND FOR THE PHYSICAL IS LIKELY TO RISE TO ACUTE LEVELS, AS THE USDOLLAR IS CLOSE TO LOSING ITS PRIVILEGED GLOBAL RESERVE STATUS. $$$

Keith Weiner is senior advisor at the Gold Standard Institute. He anticipates an important and highly disruptive split between physical USDollars (paper) and electronic USDollars (computer or contract), a very plausible development in his opinion. As people begin to panic and exhibit desperation, they will attempt to cope with the enormity of a collapse. At first, sellers of real goods may accept electronic credit money, but demand a higher price in compensation for the US$ risk. The spread on the electronic USDollar will then widen, with the bid from real goods falling. At the same time, a fast growing demand for the real paper causes the bid on the paper USDollar to rise. Refer to paper currency folded into wallets. Demand should grow on an unlimited basis as the crisis peaks, and the recognition of the US$ losing its prized global supremacy is widely known. People might continue accepting paper USDollars out of longstanding habit. An unstable situation will eventually lead to collapse. Unlike Gold, the paper USDollar has no value other than the promises that back it, thus called fiat currency. Those promises of stability, value, freedom from theft, have been violated. Weiner dubbed the concept with differentials building as USDollar Backwardation. The concept is well understood in the metals world, but has never been extended to the currency world. See the GoldSeek article (CLICK HERE).

## EURO BAIL & FAIL

◄$$$ THE SPANISH I.B.E.X. STOCK INDEX HAS CRASHED. IT HAS LOST ALMOST 50% SINCE THE END OF 2009. IT IS A CASCADE OF EVAPORATING CAPITAL. THE LAX ACCOUNTING PRACTICES IN SPAIN HAVE FINALLY CAUGHT UP. THE ITALIAN M.I.B. STOCK INDEX IS ALSO DOWN ALMOST 50% SINCE THE END OF 2009, ALTHOUGH ITS BRUTAL LOSSES CAME IN SUMMER 2011. THE NATION AVOIDS TAXES OUT OF CUSTOM. THESE BIG ENCHILADAS SIGNAL DEBT DEFAULT, NOT REMEDY FROM BAILOUTS. $$$

The Spanish stock chart has fallen more below the critical support line. A bounce is not too likely, given the accounting sins and escalating estimates for a bank rescue. The Italian stock chart fell hard one year ago. It offers an excellent preview of what Spain should see. The two national stock indexes are due to fall a total of 75% to 80% in the worst disaster those nations have ever suffered. Both economies will accelerate the downside, making corporate profits a rare sight.

◄$$$ THE HUGE SPANISH GOVT REQUEST FOR AID IS A TRAVESTY, FOLLOWED BY CALLS FOR A GREATER FEDERALIST UNION. NOTHING HAS BEEN LEARNED IN EUROPE. THE AID WILL BE GIVEN, BUT AS PART OF AN EXERCISE IN FUTILITY. NOTHING WILL BE FIXED. $$$

Mike Mishedlo offers a fine list of lessons not learned. He coined the term Nannycrat for the politician clowns who steadfastly stick with their wrecking ball of socialism coupled with adherence to the destructive common Euro currency. EU head Barroso claims the EU needs to learn the lessons of the sovereign debt crisis. What demogoguery! Consider the following lessons. See the Global Economic Analysis article (CLICK HERE).

1)      The common Euro currency helped to ruin Greece, Spain, Portugal, and Ireland.

2)      The 17 nations will never agree to give up sovereignty to Eurocrats in Brussels.

3)      Even France does not want to give up sovereignty. Instead, France wants more socialism, more monetary accommodation, and more EuroBonds.

4)      Socialism and capitalism do not mix easily or well. France, Spain, and Greece stand against badly needed worker and pension reforms. France is currently taking a giant step back on work-related issues.

5)      France is vigorously opposed to ending crop subsidies, an untenable position in the federalist proposal.

6)      Fiscal unions will not pass. They would not solve the structural problems even if they did pass, as the Maastricht was violated constantly. Too many cultural and philosophic differences obstruct the negotiations.

7)      The European Monetary Union is a failed concept and cannot possibly work.

8)      The urgent task is to dismantle the EuroZone, disband the EU Commission, and remove the Nannycrats before the market further takes matters into its own hands.

◄$$$ SPAIN REQUESTED A $125 BILLION BAILOUT, A CORRECT HAT TRICK LETTER FORECAST FROM 18 MONTHS AGO, AN EASY CALL. THE EFFECT ON THE GOLD PRICE FROM AN OFFICIAL RESCUE DEPENDS ON GOLD BULLION LEASE AVAILABILITY. SO SPAIN IS ANOTHER REPEAT OF GREECE. $$

No rational explanation has come for where the bailout funds will come from. The EFSFund does not have enough money, to be sure. The laughable element in the general plan is that Italy has offered a pledge to help bail out Spain, when Italy is next in line for aid. Both nations are collapsing. The Spanish Govt debt is really 133% of GDP, more than commonly cited. The same error as the LTRO stillborn Draghi baby is to be committed. The next major aid package will subordinate current Spanish Govt debt, and leave old bonds twisting in the wind. The older vintage government bonds will lose value quickly. Italy is surely next for bailout, probably in the next couple months.

Gold price implications are difficult to assess. If the Dollar Swap Facility is expanded, the Gold & Silver prices will drop in proportion to these dead banks having access to leased metal. If the bigger banks cannot find G&S to lease, then maybe a positive response to precious metals prices will come. Past Dollar Swap Facilities have dispensed $3.2 trillion since November, and nothing was fixed. The DSFacility actually enabled much faster shipments of Western gold bullion to the East in a loose forfeiture. Figure at least $3 trillion more will be needed to recapitalize the banking system, maybe much more. Nobody can define where the money will come from. It will obviously be from monetary inflation and debasement, part of the ruinous process. The gold price will respond favorably if and only if the cartel banks have lost access to gold to lease. Recall they have lost at least 5500 metric tons of gold bullion to Eastern locations since late February. They are running out of gold bars to lease.

The formally requested $125 billion requested by Spain for aid is to cover a multitude of sins. Their banks have major losses in Southern Europe sovereign debt, having bought a majority of their own Spanish Govt Bonds, even at high LTRO prices. Their banks have major losses from housing going back to fantasy accounting days in 2007. Spain has been by far the slowest nation in conducting realistic proper accounting since the housing bust. Also, think leverage and think derivatives, atop the delayed reaction to phony accounting for five years. In 2007 and 2008, the Hat Trick Letter reported on Spain's chronic fanciful bank accounting. They maintained real estate portfolios and mortgage assets at lunatic lofty values, like at book value or original asset value. Balance sheet writedowns almost never were done. They were the worst violators of accounting in all of Southern Europe. They are first to fail on debt since the biggest participant in the housing bubble, a Hat Trick Letter forecast going back to 2010. My call was that they would fail before Italy, due to the heavier economic reliance upon housing. Italy has a much more diverse economy, but almost as dead.

The Spanish failure is due to housing loss, sovereign PIGS bond loss, and derivative loss rolled together. The Spanish cleanup will require at least $400 billion. When Southern Europe's bigger nations start to fail, contagion will hit New York City and London. Keep in mind (mentioned more than once in this month's report) that the Wall Street banks put on a gigantic tight credit cable between Southern Europe and their own balance sheets, of shared risk. The last part of 2011 saw the Wall Street banks acting as Dollar Swap agents, before the Dollar Swap Facility kicked into action by the paper hangers at the USFed. The US central bank decided to take responsibility when Wall Street banks became over-extended. When Spanish banks and Italian banks topple, expect a Wall Street failure to occur. My candidate for a bank death is Morgan Stanley. Across the pond, the risk is acute for Deutsche Bank to fail also, maybe even Barclays.

◄$$$ THE SPANISH BANKING SYSTEM RUIN WAS ENABLED BY THE FAILED LONG-TERM REFINANCE OPERATION DESIGNED BY THE RECENTLY INSTALLED EURO CENTRAL BANK HEAD MARIO DRAGHI. NEW DEBT INSTRUMENTS CANNOT BE RELIED UPON TO SUCCESSFULLY REPAIR DAMAGE FROM OTHER DEBT BADLY IMPAIRED, EVEN TURNED TOXIC. EXPECT NEW EURO BOND SENIOR SUBORDINATED IDEAS TO FLOAT, BUT BE SHOT DOWN DUE TO THE FAILED L.T.R.O. INITIATIVE. $$$

The old Von Mises adage comes to mind, that paper currency solutions cannot be applied to repair or replace a impaired paper currency. The same is true of bonds, whether subordinated higher or not. The failed LTRO chapter is about to be repeated, with a new name, but the experts can see its broken pillars from the start. The solution will be pure monetary inflation in a vast banking system recapitalization program valued at least $3 trillion, later more. The bond initiatives will not stick. The central bankers are losing prestige fast. They have exhausted their arsenal, only to find the last round was a dismal shocking disappointment and malfunction.

◄$$$ BANKIA FAILED THREE WEEKS AFTER PASSING THE STRESS TEST, A TESTAMENT TO MOCKERY OF LEADERSHIP AND GRAND DECEPTION. AFTER BAILOUT, BANKIA REPORTED A MORE HONEST ASSESSMENT WITH A MASSIVE LOSS. THE SPANISH BANKING SYSTEM IS IN CHAOS. EXPECT SEVERAL OTHER BANKS TO COME FORWARD WITH MORE HONEST ACCOUNTING VERY QUICKLY. $$$

The Bankia story is alarming but to be expected. Their supposed EUR 41 million profit for full year 2011 was revised to a EUR 3.3 billion loss. A more thorough review of its loan portfolios and capital needs was conducted. The truth emerged only after a state bailout. The bagholder is again taxpayers. That is more than an ooops. That is accounting fraud. Bankia, a major Spanish bank, has suddently moved to insolvent and might face full nationalization to avoid a liquidation. The hint of false books was clearly written on the wall, as Deloitte had refused to sign off on a bank's financial statement. What a travesty! This story will be repeated twenty times in the next 18 to 24 months across Southern Europe. Bigger broader bank runs will occur, in anticipation of hidden insolvency. According to Spain's Expansion, the total Bankia loss could be far worse, like a total of EUR 7 billion. Restatement of years previous to 2011 might soon be demanded, which would greatly expand the losses. See the Zero Hedge article (CLICK HERE).

◄$$$ MUCH GREATER LOSSES FOR SPANISH BANKS ARE TO COME. MUCH GREATER DEFICITS FOR THE SPANISH GOVT ARE TO COME. MUCH MORE HOME PRICE DECLINES ARE TO COME. A BANK SYSTEM BAILOUT MIGHT NOT SUCCEED IN SPAIN. THE POTENTIAL FOR CHAOS IS RIPE. THE EURO WILL CAUSE SOME MAJOR STRAINS ON THE F.O.R.E.X. BEFORE ITS TRADING IS HALTED. $$$

The temperature is rising to take Spain past the virus stage. Their Govt Bond yield is near the dangerous 7% level again. Borrowing costs will lift the official deficits sharply, especially after bailouts like to Bankia and other banks. Spain is dead broke and sinking fast in the sea, once adrift but no longer. Premier Mariano Rajoy is fast losing face, since he denied repeatedly that a formal request for bailout would be made to entities outside Spain. The state's Fund for Orderly Bank Restructuring (FROB) is down to EUR 5.3 billion, which will be drained rapidly since many other candidates are in line.

The Spanish Govt must attract EUR 20 billion more in funds from the debt markets. They are at the breaking point. No backdoor attempts with off-balance sheet mechanisms will succeed, as the spotlight shines too brightly. A report came out that highlights the ruin upon wreckage. Barclays Capital claims the Spanish housing crash is only half way through. Home prices will have to fall at least 20% more to clear the one million overhang of excess homes. The banking losses for the Spanish state are going to be huge, an order of magnitude larger, making up for past accounting games. The Centre for European Policy Studies in Brussels estimates potential write-offs at EUR 270 billion. Expect the Spanish Govt debt to utterly explode. With the jobless rate at 24.4%, the potential exists for civil disorder. For a another review of the scorched Spanish landscape, see the UK Telegraph article by Ambrose Evans-Pritchard (CLICK HERE).

In this terrible environment, expect the Euro currency to halt in trading at the FOREX, all in time. Other significant strains to FOREX have already begun, with the Swiss National Bank fighting away the hot money that seeks refuge from the European bank crisis. They will have great challenges to defend against an unwanted rise in the Swiss Franc. When Spain and Italy both indicate that bank bailouts cannot succeed, the Euro currency will turn toxic. A race will be to shut down Euro trading in the FOREX before damage is done to other nations, Germany included.

◄$$$ GERMAN BANKS WERE DOWNGRADED BY MOODYS. THE PRIZE EVENT WILL BE THE DEBT DOWNGRADE OF THE MOST UNDER-CAPITALIZED GERMAN BANK, IN DEUTSCHE BANK. THE GERMAN LANDSCAPE IS TROUBLED BUT NOT IN RUINS BY ANY MEANS. LATER COMES THE FAILURE OF D-BANK, SURE TO CAUSE A EUROPEAN BANK TSUNAMI. $$$

Moodys downgraded six German bank groups with their subsidiaries, some by three full notches. After having recently put the hammer to the most prominent Austrian banks, in early June it was Germany's turn. Moodys warned, "The ongoing rating review for Deutsche Bank AG and its subsidiaries will be concluded together with the reviews for other global firms with large capital markets operations." The giant German bank is deader than dead, crippled by derivative losses in addition to massive credit portfolio losses. Moodys took action against seven German banks and their subsidiaries, as well as to one German subsidiary of a foreign group. Further to these actions, Moodys has assigned stable outlooks to the ratings of most German banks.

The downgrade decisions were driven by the increased risk of further shocks within the EuroZone debt crisis, in combination with the banks limited capacity to absorb losses within the profit structure. The German banks have significant exposure to Southern European sovereign bond losses. Equity cushions and loan loss provisions are fast vanishing. The potential has raised for new capital to be required, either in stock or bonds. The domestic economy does not aggravate conditions, as loss factors are mostly external. Their jobless rate is much lower. Their household and corporate debt levels are much lower. The German Economy is more resilient. Despite many steps taken by German banks to address asset impairment on balance sheets and to provide liquidity buffers, significant downside risks remain. See the Zero Hedge article (CLICK HERE). Expect Deutsche Bank to be downgraded this summer or autumn, and possibly for its derivative exposure to be revealed, both Interest Rate Swaps and Credit Default Swaps. The former help to control USTBond yields. The latter insures bond against default.

◄$$$ THE EUROPE BREAKUP WILL OCCUR WITHOUT INTERRUPTION. A LIVE STRESS TEST IS IN PROGRESS, THE FORMAL STRESS TESTS HAVING BEEN SHOWN TO BE ANOTHER IN A STRING OF FARCES. MORE STRESS ELEMENTS ARE AT WORK, LIKE COMMERCIAL MORTGAGE BONDS. $$$

A banker source from Central Europe offered a dire assessment. He wrote, "Berlin, due to historic reasons, has been very cordial towards the EU deadbeats and France. Draghi is a puppet fool whom they installed as a caretaker, someone who can later be blamed for the collapse of the Euro and breakup of the EU as we know it. The collapse of Greece and Spain will blow France out of the water. This will constitute a very bad political and economic problem for Germany. The Netherlands already installed a German speaking prime minister and most of those in the second row in Paris either are fluent German speakers or have very trusted relationships with key people in Germany. What is coming will be a stress test of a very special kind and dimension. If it fails, and I know it most likely will, the scheiss will hit the fan big time. Well, you will not need a fan at all, since the coming storm will have enough explosive power to propel matter without the fan across the continent."

Another big ugly shoe is about to drop, sure to add more stress. The European commercial mortgage bond market is in big trouble. Its bond payouts failed by 79% in 1Q2012, as determined by Moodys. The report came out of Frankfurt, offering details on how the non-payment rate more than doubled from 35% in 2009, reflecting the current weak state of the lending market. The economic recession is rendering damage to landlords of commercial properties from office buildings to parking garages and shopping malls across Europe. A total of EUR 38 billion (=US$47 billion) of commercial real estate loans come due this year and next. The bank strain will be horrendous, as they attempt to de-leverage. Commercial real estate financing will remain constrained, while most loans will not be repaid. See the Business Week article (CLICK HERE).

## COLLAPSE OF DEBT-BASED SYSTEM

◄$$$ CHINA IS RECASTING GOLD BARS INTO SMALLER 1-KG BARS ON A MASSIVE SCALE. A MAJOR EVENT IS BREWING THAT WILL DISRUPT GLOBAL TRADE AND ASSUREDLY BANKING SYSTEMS. IT POINTS TO THE CHINESE PREPARING FOR A NEW SYSTEM OF TRADE SETTLEMENT AND/OR BANKING THAT IS BASED IN GOLD. REGARD THE CHINESE PROJECT AS PRELIMINARY TO A COLLAPSE OF THE DEBT-BASED USDOLLAR SYSTEM. $$$

A source tied to the Delaware Depository has shared some extremely important information, different from my steady longstanding gold source. He has a colleague with London connections. The Chinese are removing thousands of metric tons of gold bars from London, New York, and Switzerland. They are recasting the bars, no longer to bear weights in ounces, but rather kilograms. The larger good delivery bars, often 1000-oz equal to 28.4 kg, are being reduced into 1-kg bars and stored in China. It is not clear whether the recast project is being done entirely in China, as some indication has come that Swiss foundries might be involved, since they have so much experience and capacity. The same source confirmed the figure that the Jackass main gold contact (affectionately named The Voice by me) had stated, that a few thousand tons of gold bullion had departed Western bank locations, transported eastward, all firmly situated in Far Eastern locations, primarily in China. It seems patently clear that the Chinese are preparing for a new system for trade settlement system, to coincide with a new banking reserve system. They might make a sizeable portion of the new 1-kg bars available for retail investors, wealthy individuals. They will discard the toxic USTreasury Bond basis for banking.

When the Jackass brought up the tungsten salted bar issue, he said the new bars will essentially be subjected to a validation process. My best information has indicated that Hong Kong banks are the primary victim of the fake tungsten bars shipped from the USTreasury during the Clinton-Rubin Admin. When the Jackass requested a confirmation of the gold bar recasting story from The Voice, a veteran gold trader of European descent, it came back as full positive in his usual tone. He could not comment further. My inference like in the past is that he is involved as broker agent with the entire project and process. It requires many agents to facilitate the project, since its volume is vast.

◄$$$ THE FAILURE OF THE USGOVT BONDS WILL COME WHEN THE 10-YEAR APPROACHES 1.0% IN YIELD. A RACE IS ON FOR WHETHER THE US-BANKS WILL IMPLODE BEFORE THE 1.0% YIELD IS REACHED. THE BOND RALLY IS THEIR FAILURE, A PARADOX NOT YET PERCEIVED. A POINT OF INFLECTION APPEARS CLOSE OR ACTUALLY HERE, FOR THE EXCESSIVE SLIPPAGE IN BOND MONETIZATION BY THE USFED. THE BENEFIT SUFFERS FROM LACK OF TRACTION, AN EFFECT THE PONZI POINT OF FUTILITY. $$$

The systemic failure symptomatic of the USTreasury Bond rally is not yet recognized. When they suck in stock capital, junk bond capital, corporate bond capital, later the failure pathogenesis to be understood. When private pension plans like 401k, IRA, Keough are all forced into USTBonds, even new marginal funds, it will be understood. When the USEconomic recession is more admitted, recognized, and openly discussed, the rally in the USTBonds will be seen as a very dangerous event, capable of removing the very capital required for a recovery. In no way can the Printing Pre$$ revive the USEconomy. The effect of mass institutional stock sales to convert to USTBonds would cause an uproar among the public, but cause some instability in the stock market. The Jackass is ahead of the crowd, usually a year early. When the 1% yield is approached on the TNX, the Treasury Yield Curve will resemble a flatline, marking imminent death.

A very serious comment is warranted. Ponzi schemes and major asset bubbles require an accelerating amount of funds to sustain the game and bubble, to keep it running, to keep the public involved. Eventually the funds requirement is staggering just to stay even, as slippage starts. Then comes the bust when the supply of funds cannot accelerate further, even from artificial means like the USFed and its bond monetization. Hyper monetary inflation eventually fails, as it strips the gears of the system machinery. My forecast is the USTBonds will require eventually more demand from buying investors including the USFed than the marginal new USGovt supply coming to market, since foreigners will be shedding the toxic paper. DEMAND MUST OVERTAKE NEW SUPPLY. The domestic PIMCO purchase by Bill Gross might be the exception. Finally comes the gigantic bust.

Rob Kirby offered an opinion that coincides. He said, "For what it is worth, anyone who has asked me about QE, whether it be QE2 or the likelihood of QE3, my stock answer for the past couple of years is that I never noticed QE1 stop. Two and a half years ago my expectation was that the US money supply would necessarily be required to grow almost vertically. That view seems exactly right." The flow of funds to support the USTBond complex has been so enormous and so controversial, it must be hidden and constant.

◄$$$ MONEY & DEBT ARE FAILING IN THE SYSTEM FINALLY. PERPETUAL Q.E. HAS ARRIVED. DIMISHING RETURNS ON BOND YIELD SUPPORT DICTATE THAT BOND MONETIZATION MUST ACCELERATE RAPIDLY. THE EFFECTS ARE NIL ON SHORT MATURITY BONDS BUT STILL MINOR ON LONG MATURITIES. THE CONCEPT GOES PARALLEL TO NEGATIVE RETURN ON G.D.P. FROM DEBT. NOT ONLY IS DEBT FAILING, BUT DEBT MONETIZATION IS FAILING. SLIPPAGE HAS BEGUN. IT IS HERE. $$$

Quantitative Easing like the ZIRP are tools to apply sparingly since they are toxic tools. The 0% policy wrecks capital broadly and alters all pricing models. The bond monetization eventually loses it muscle, like now. Its effect is fading. Zero Hedge has produced an extremely important article to reveal a disastrous effect that finally has arrived. Tyler Durden heralds the day, that Perpetual QE has arrived. He understates the warning. QE is failing to show its intended effect, as slippage likely accelerates greatly in the form of deeper and broader bond monetization. Some propaganda by Goldman Sachs is easily dismissed, having here no patience for shaman pronouncements. GSax has been spouting wrong anlaysis that the flow volume of the USFed bond purchases is all that matters, not the stock (bloated balance sheet). In April, the indefagitable insightful Durden offered the insight, saying "Unless the Fed is actively engaging in monetization at every given moment, the impact from easing diminishes progressively, ultimately approaching zero and subsequently becoming negative!" He warns that the USFed is stuck, and cannot stop expanding the money supply to cover bond sales. The USFed intervention in the form of bond monetization can never stop, period.

To claim that whether the size of their balance sheet is $10 billion or $10 trillion is irrelevant, and all that truly matters is the continued USFed purchase schedule, this is nonsense and more heresy what has been spewed for two decades. The result has been systemic ruin of money and ruin of banks (households too) from insolvency, together with toxic obesity of the USFed balance sheet. The financial obesity reflects the US population. The Fed-accepted stock model is wrong. Notice that Bernanke put up a few $trillion in the mortgage bond market and the stock market, but the result has been a frozen lake. The famed flow lies below the ice level, which crystallized layers grow thicker by the month. Goldman Sachs is preparing the stage for the next official QE program. It never ended, all seamlessly secretly applied. The GSax message in a white paper entitled "Flow Effects at the Ultra-Long end of the Curve" is of benefits from flow. It misses the important warning message.

An analysis was done to identify the effect at individual maturities, using a flexible approach to capture the marginal effect of the stock of purchases on yields. See the graphic for the results, which should send shivers to readers. An insignificant effect is seen on short and intermediate maturities, like up to 20 years, but negative and statistically significant estimates at the ultra-long end of the curve with 21-30 years maturity. Flow effect from bond monetization is felt only on the ultra-long end. The results suggest that a $1 billion purchase at the ultra-long end of the curve tends to lower bond yield by 3.3 basis points at that part of the curve. Robustness checks resulted in similar results with a simple split of 1-10 year maturities and 11-30 year maturities in two test groups. Another check was done that removed the 1-3 year maturities since so bound by FedFunds control and guidance language. The results were unchanged.

An asterisk is required for the analysis. Results are somewhat counfounded (mixed, confused) with stock market shifts and European crisis developments. Lastly, do not be fooled by arguments that QE has targeted the long maturities in Operation Twist, scheduled to phase out at end June. The QE program never ended, and it went global. The QE to Infinity has been ON for over a year. It affects all bond maturities and does so month in and month out. The twist story painted a phony billboard, as usual. See the Zero Hedge article (CLICK HERE).

The real story. Operation Twist was designed to help the Asians diversify in risk decisions on their massive portfolios. The Chinese and Japanese wanted to shift their long-dated USTBonds into shorter maturities. Also, a solid argument can be made that Operation Twist was designed to buy ALL of all auctioned 30-year USTreasurys ever issued, from inception. A review of the volume for bond buys and past bonds issued bears this out, as the figures are almost exact. Prior to Oliver Twist chicanery, the invisible hand was buying most of them in a visible manner anyway. The program merely made the task official. Lastly, according to a well-read colleague, the USFed has been buying Mortgage Bond Securities for over a year non-stop. To wit, Tyler Durden delivered a wake-up call to the Ponzi scheme on June 14th. He wrote, "Yesterday we noted the supreme absurdity of having the Fed buy 10-year Bonds two hours before the Treasury sold 10-year bonds, which obviously were priced at terrific terms as there was a $4 billion hole created courtesy of the Fed if only for 2 hours. Today, the lunacy continues. The Fed has just bought $2 billion in 30-year bonds just two hours before the Treasury sells $13 billion in 30-year paper. The Ponzi has become so glaring, that they do not even care to hide it any longer." The USFed actions are Weimar slaps in the face. It reminds me of monetization of the TIPS bonds in 2010 and 2011, the very bonds designed to protect against an accurate measure of price inflation. But apparently not monetary inflation!!

◄$$$ THE RISKS FROM MONEY REDENOMINATION, BANK RUNS, AND DEVALUATIONS IS BECOMING RECOGNIZED, HAVING ENTERED THE MAINSTREAM DISCUSSIONS. THE CONTAGION WILL REACH LONDON AND THE UNITED STATES MOST ASSUREDLY. THE PACE OF THE CONTAGION DISTRIBUTION HAS INCREASED MARKEDLY. PAINFUL LOSSES TO WEALTH ARE IMMIN ENT. SPAIN AND ITALY ARE THE MAJOR TRIGGERS, WHILE GREECE IS THE FUSE. THE ONLY ASSET TO THRIVE WILL BE PRECIOUS METALS. $$$

Bill Holter offers a unique analysis on a regular basis. His viewpoints are astute and on the mark, aware of what is important, not easily deceived. The Jackass has followed his editorials for a few months. He has pointed out two important concepts mentioned on CNBC and the mainstream financial press. They are re-denomination risk and bank runs, even bank holidays. Usually the public address & marketing system (CNBC) refuses to acknowledge such topics since signs of crisis climax. Holter notes "a shift of gears toward the reality that the system is broken, insolvent, and untenable." How true!   

The re-denomination risk as applied to the Greek dilemma is a hot new topic, in the event that Greece exits or is expelled from the EuroZone. The ordinary citizens with deposits in the banking system would have their accounts changed (devalued) into Drachmas, perhaps severely enough to cause massive riots. The lapdog CNBC anchors correctly hold such threat as incentive to cause a run on the banks with massive withdrawals. The almost funny part of the CNBC reporting is that they seem incapable to think past today, and cannot project in basic leaps of logic that the identical Greek bank run threat will hit both Spain and Italy in an easy leap. Actually these two nations, dubbed the Big Enchaladas by the Jackass, have been experiencing bank runs, even some bank holidays. That is tomorrow's obvious news, called crazy today.

The bank holiday threat should cause shivers to the citizen spines. The official explanation is that a transition requires time and careful processing, thus a bank shutdown. True enough, but the part of the story typically left out is the ugly painful devaluation. A holiday dictates that everything financial is frozen and no changes can be made in asset positions. All accounts, assets, certificates, and positions are held frozen until the changes are made. The past precedent is stark and on record. In Argentina, USDollar deposits were changed into Pesos which were devalued 75% upon the reopening of the banks. Withdrawal limits of $300 per week were imposed after the reopening, a painful stricture. My sister-in-law is from Buenos Aires, and attests to the above. She lost 90% of her life savings held in the banks and migrated to the United States. What most people will not anticipate is the many nuisance obstacles for those attempting to remove even the last 25% of their savings. She was forced to wait in line for hours at one bank one day, another bank another day. She eventually gave up hope, refused to stand in queues any longer, in a game of runaround imposed by the banks to steal that other 15% or permit it to waste away in a fiat paper sewer. My warning to her has been for eight years, that she left her beleaguered nation to come to the United States, where the same events will be repeated. She did not believe me in 2004, but is beginning to comprehend the truth of those past warnings. Latinos have a very strange constant positive view toward the US, impressed by large buildings and big corporate billboard signs and a powerful military and a stream of news networks. Such trappings impress the Jackass not one iota. Latinos tend not to comprehend the debt situation within the United States, and foreign obligations.

Holder warns that the European bank & bond deterioration has entered a Quickening phase. Events are speeding up, are spreading widely, and will ultimately hit the United States most assuredly in a grand contagion. Holter wrote, "We have been told at every turn since 2007 that each and every problem was contained and that a ring fence would stop any contagion. Using your very own eyes, this has been, is and will be forever, total bullshxx of the first degree (as in intent to deceive). Every calming announcement, whether by US, Euro, British, or whatever officials, have ALL been false and none turned out to be true. The road map from here as I see it is not a pretty picture and the previous slow pace of advancement will move into high gear." Expect a rapid acceleration of events to occur, and shorter times between important breakdown incidents.

In the last two weeks, Spain has shown itself to be another dead man walking. They comprise about 12% of the EuroZone. Formerly, they had been labeled as a PIGS nation, but curiously as one of the saviors to count on for aid of the weaker Greece, by the troubled Spanish banks. Spain will not be able fund any bailouts. They need one, a gigantic one. Next apparently will be Italy, and then France in a shocker. In my view, the greatest deception regarding the Southern Europe crisis has been the portrayal of France as strong. In fact, France is a PIG dressed in Teutonic clothing. In no way is France as strong as Germany, yet its banks have extended loans across all of Southern Europe for years as part of regular business followed by a string of bailouts. The French leaders pose as partners to Germany without the savings, the trade surplus, the industrial might, or the power. The French are the great pretenders. When any large PIGS nation officially enters the extreme distress zone and suffers the symptoms of failure, like Spain is right here right now, the big French banks will suffer similar distress. If and when the Greek debt default occurs, the big French banks will topple like tall pine trees in high winds. They are hollow weak trees ready to fall. The big moment might have already passed, where the German bankers say NO MORE AID. They have done so, but that fact is not properly reported in the mainstream press. Angela Merkel of Germany is a stranded voice from a remote island, of no meaning or consequence, just like Sarkozy was of France before voted out. Ignore all Merkel says.

Holter expects Japan and the United Kingdom (Britain) to dump USTreasury Bonds. Both nations are part of the US Train of Debt, and both are in worse shape fiscally than all of Europe. Together with China, itself under strain, these nations are large holders of USTreasury securities and will become high volume sellers. The Japanese have been sellers en masse for a full year, hardly even noticed except by the Jackass (with forecast given in advance). He expects these nations can and will sell large blocks of USTBonds for liquidity purposes. His timetable is for "the wildfire to burn through Europe over the summer and ignite (my guess is the UK) by late summer or early fall. Think back to 2007-2008 and 2009. Britain was usually a two-week frontrunner to the same maladies admitted to by the US. What is happening in Europe will not stay in Europe. It will reach the shores of the UK and US, which is where the disease was born and hatched in the first place. Coming home to roost so to speak." The London banks are also large PIGS creditors. In the last half of 2011, the big Wall Street banks built themselves as much larger PIGS creditors also, from massive extended swap loans. The contagion pathways are well established.

The financial risks are acute and not bounded by national borders. The contagion risk will jump from one nation to another will ease, enabled by bank exposure. What happens to Greece and Spain, then Italy, will eventually reach almost every Western nation, every internal bank, business, and household. The risks from re-denomination, bank runs, bank holidays, and devaluations will affect everybody, everywhere in any and all fiat denominated accounts in the entire Western world. No ring fences exist, just like no protection from contagion exists. US citizens will suffer a devaluation of personal assets bound by the USDollar, the so-called paper assets. They include mutual funds, bank CD's, stock accounts, corporate bonds, and pension checks.

Holter shares my forecast, stated as conclusion on the fate of Gold & Silver. In a fairly properly price free market, the Gold & Silver price should be multiples higher already. But the precious metals market is interfered with and rigged to the extreme. Holter concludes, "After the firestorm passes and fiats are devalued to make the excess debts repayable, Gold and Silver will be re-monetized to levels where the free market will accept. They must be revalued to levels to entice them to come out of hiding and re-enter the market place. I have said this many many times before, once this process is all said and done, you will count your net worth in ounces, not Dollars, Euros, Yen, Pounds, or anything else." He is not explicit, but he forecasts Gold & Silver prices to be multiples higher. The enticing levels will be much higher. The new monetary systems, bank systems, and trade systems will require Gold & Silver to be priced multiples higher, as the toxic paper upon which the entire monetary system is built is downgraded in value. In summary, governments are running out of choices. This theme is expertly developed in a fine well developed carefully crafted article. See the Economic Noise article (CLICK HERE).

◄$$$ THE SOUTHERN EUROPEAN SOVEREIGN BONDS DID NOT TAKE THE L.T.R.O. SOLUTION AT ALL. THE LONG-TERM REFINANCE OPERATION WAS A STILLBORN DRAGHI BABY THAT WRECKED THEIR BANKS FURTHER. THE SPANISH BOND IS AT ALERT PANIC LEVELS, WHILE THE ITALIAN IS FAST APPROACHING THE PANIC LEVEL. A STRING OF BANK FAILURES IS NEXT. $$$

Nothing can repair these two nations except exit from the Euro currency, liquidation of their big broken banks, devaluation of the Peseta and Lira reverted currencies, and a vast bank recapitalization. Don't expect an exit anytime soon. Don't expect a liquidation ever. The banking system recapitalization is the big event on the horizon that will require several $trillion, since it will include France and Belgium and Portugal and Ireland. Forget Greece, which has been ruined. The West faces a Mulligan do-over of the entire system. The effect will be grandiose currency debasement and powerful upward pressure on the Gold & Silver prices to double their current levels.

◄$$$ THE FINANCIAL SECTOR IS BRACING THIS SUMMER FOR A LEHMAN-TYPE MELTDOWN. IT COULD BE MANY TIMES LARGER, AND WELL BROADCASTED, BUT STILL UNAVOIDABLE. NO SOLUTIONS HAVE BEEN APPLIED OR ATTEMPTED IN FOUR YEARS, NONE. THE OBJECTIVE HAS BEEN TO PRESERVE THE POWER STRUCTURE, A SUCCESS STORY, SINCE STILL IN PLACE. THE WARNINGS BY ZOELLICK AT THE WORLD BANK ON HIS WAY OUT HAVE REVERBERATED. $$$

The red alert signals have been given, and are flashing at major financial institutions. On June 1st, market rumors streamed in heavy volume out of a hedge fund luncheon. The rumors stated that Pimco, JPMorgan, and other financial companies were cancelling summer vacations for employees. They were bracing for a shock wave. They are preparing for a major Lehman-type financial crash. It is projected to occur in the coming few months. It cannot be avoided since no remedy or solution has even been attempted, and insolvent conditions have turned more illiquid. The primary motive of almost every official action in response to the crisis has been to preserve power, to aid those responsible for the ruin, to toss money into a black hole pit, to refuse liquidation of the big US banks, and to justify their actions as saving the American way of life, when they are only preserving the power structure and protecting the criminal banker elite. These rumors came on a day when the markets nearly came to capitulation, after the Dow Jones Industrial stock index fell 274 points, and gold jumped up $80 as traders across the board fled stocks and moved into safer investments.

The avenues for rumors were messages and word of mouth. On the Twitter channels, it was heard that PIMCO employees were asked to cancel vacations so as to have all hands on deck for a Lehman-type tail event. Also, a similar directive was given to JPMorgan Chase employees. Credit for sharing the alert is given to Todd Schoenberger, from the Blackbay Group, and to Todd Harrison of Minyanville. The threat for a potential repeat of the 2008 credit crisis is acute, and might have originated in the outgoing statement from World Bank President Robert Zoellick, more like a warning. He issued warnings of a potential re-run of the great panic of 2008 in his words. His comments came on June 2nd. He claimed the crisis-torn Europe was heading for the danger zone. Zoellick will retire from his World Bank post at the end of the month after five years in service at the Western USDollar armory of financial weapons. He concluded that it is far from clear that EuroZone leaders have steeled themselves for the looming catastrophe amid fears of a Greek exit from the single currency and meltdown in Spain. See the Examiner article (CLICK HERE).

◄$$$ ITALY IS NEXT ON THE BIG BAILOUT TRAIL, SAYS AUSTRIAN FINANCE MINISTER. SHE ANGERED THE UNELECTED HIRED ENVOY ITALIAN MONTI IMMEDIATELY. THE ENORMOUS SPANISH BAILOUT WILL BE INADEQUATE, DEEMED SO JUST WHEN THE ITALIAN BAILOUT IS MADE OBVIOUS. THE DEBT RATIOS AND CERTAIN FUNDAMENTALS LOOK BETTER IN ITALY, BUT THEIR DEBT VOLUME NEEDS ARE OVERWHELMING AND CANNOT BE MET. WORSE, MONTI IS MAKING THE SAME ERRORS COMMITTED IN GREECE. HE PUSHES TO RAISE TAXES, A LEVER TO SEND THE ECONOMY INTO A DOWNWARD SPIRAL. $$$

The stakes in the European debt crisis are rising fast. The Austrian finance minister Maria Fekter openly stated Italy may need a financial rescue because of its high borrowing costs. Her comments drew a furious rebuke from the Italian Prime Minister, who was never elected. Italy is the EuroZone's third largest economy. Reality bites, as Europe is far from ending its credit crisis turmoil. Monti should pay heed to the confirmation of Fekter's comments, as Dutch Finance Minister Jan Kees de Jager called the EuroZone still far from stable. Note that Germany, Netherlands, and Austria form the core of healthy nations. Fekter said, "Italy has to work its way out of its economic dilemma of very high deficits and debt. But of course it may be that, given the high rates Italy pays to refinance on markets, they too will need support." She softened her remarks afterwards, admitting no indication Italy planned to apply for aid, surely with wry grin knowing it comes. The Austrian minister has a track record of being vocal and disruptive, but constructive. In May, she stated the obvious, that Greece would be forced out of the European Union. She infuriated Euro titan Jean-Claude Juncker in March by tipping off the public on an expanded EuroZone financial firewall. Best for last, she angered USTreasury Secretary TinyTim Geithner in Poland last summer, telling him bluntly that WashingtonDC should look after its own worse fiscal mess first before dispensing advice on European matters. She is a fireball to be admired within a gaggle of bootlicking empty suits.

A hasty deal by finance ministers to lend Spain up to EUR 100 billion (=US$125 bn) to recapitalize its banks was seen by many as gigantic, unmanageable, and inadequate. A purveyor of truth, Fekter called the fund already stretched and insufficient,. The size brings attention to the depleted EFSFund for bailouts. Almost laughingly, Italy has pledged funds in the Spanish bailout. Maybe Italy can borrow the funds to aid Spain! So the two drowning Enchiladas will support each other. More like they will grapple each others arms when sinking. The report card will as usual be the Italian Govt Bond, which still rises. The aid deal for Spanish banks failed to ease doubts and could not quell the bond fires, fuelling wider contagion fears. The market reaction points clearly that the Euro Central Bank and the finance ministers have failed to break the so-called vicious circle between rising government debt, economic recession, and teetering banks. Wider bigger bailouts are to come all through year 2012. Nothing has been resolved since no big bank liquidations have occurred, no currency devaluation can occur within the common Euro region, and more debt instruments (higher subordination fixes nothing) cannot relieve the impact of toxic debt securities. The override in senior bond securities is a backfire, not a new solution. Gary Jenkins of Swordfish Research stated, "If you are a bondholder and they just push you down the line, why would you invest in Spanish government bonds? What they should be doing is trying to encourage people to invest in Spain, not discourage them."

Credit ratings agency Fitch said the bank rescue may calm the Spanish bond rating, which it cut last week by three notches to BBB. Italy looks better than Spain, except for the volume of its debt finance needs. Even though the Italian Govt deficit and unemployment are lower than Spain's and its banks are not exposed to a real estate crisis, the Italian system is heading for the rocks. This point was made numerous times in 2010 and 2011 by the Hat Trick Letter. It was not ratios that mattered, but rather debt volume. Right on correct! Notice how the US-based debt rating agencies are an ongoing cannon firing on European banks from Wall Street hillsides. They ignore the United States indebted landscape. Lastly, calls by the European Commission for a new banking union are stupid and vacant. They have learned nothing. It brought to a union, then the European banking system could sink in better unison from its insolvency and toxic bond solutions amidst worsening economic recession and more idiotic calls for budget austerity. These guys have nothing on the table, in their pockets, or in their heads. See the Reuters article (CLICK HERE).

The danger zone is Italy, where Monti is making the usual errors that toxic paper merchants make, and economic meddlers make. He has lost much public and bureaucratic support as light is shone on his dullard destructive austerity program. Nothing was learned from Greece, unless they wish to bring ruin and fires to Italy also. A main plank of the Monti reform package is labor market reform. It has been watered down and is not fully approved yet, sure to fall flat on its face. In a true bout of stupidity, Monti suggested raising taxes instead of cutting spending. In doing so he condemns the economy to a downward spiral. As Monti loses more and more support, expect nasty policy reversals. Monti will be deposed, causing sheer panic in Italy from a nasty vacuum. The effect will be played out in the Italian Govt Bond market. See the Acting Man article (CLICK HERE).

◄$$$ THE GREEK DEBT DEFAULT WILL BE A LEHMAN BROTHERS FLASH EVENT, BUT 10 TIMES BIGGER. DENIALS OF THE INEVITABLE DEFAULT ARE LAUGHABLE. DELAYS AND EXTENSIONS CANNOT PREVENT THE EVENT FROM OCCURRING. A DEFAULT IS BEST FOR THE GREEK NATION, AND WORST FOR THE CREDITOR BANKS ACROSS BORDERS. THE EXTREME RISK GRADUALLY RECOGNIZED IS OF CONTAGION, THAT GREECE WOULD TOPPLE THE WEAK SOUTHERN EUROPEAN NATIONS. COMPANIES MUST BE CAUTIOUS NOT TO ENTER INTO CONTRACTS, THEREBY AGGRAVATING THE RECESSION, AND RAISING GOVERNMENT DEFICITS. $$$

A smooth transition with a Greek Govt debt default would cause a 20% to 25% devaluation in assets in Greece, from bank accounts to home values to business worth. That level is what the new Drachma would require upon conversion from Euros. A disorderly transition could result in a 50% devaluation. Expect disorder. Thus the motive for capital flight, bank runs, and smuggling cash across borders. Yet the officials are not pursuing solutions in the best interest of the citizens, which removes order and makes rough the avenues from the table. The extreme risk ultimately keeps coming back to Spain and Italy. If every peripheral nation of Southern Europe were in better financial and economic condition, the impact of a Greek exit would be much lower. Dominos are ready to fall. The impact on the Euro Central Bank, the European Financial Stability Facility, and the Intl Monetary Fund would be bad if the other larger PIGS nations were strong. They are not, and France is an unrecognized PIG nation, smelling like a PIG. The absorption of Greek losses would be tolerable if paying for losses in Portugal and Ireland could be stalled. Spain and Italy face great and formidable potential consequences, thus the Jackass name for two years of the Great Enchaladas.

A confidence factor is important. Continuing to do business with Spain and Italy presents a risk, one bound in standard contracts. Companies must be careful not to be dragged down by the failing nations. Imagine how many European companies lost money from Greek business contracts, horrified to watch the economy sink and the streets burn. That caution actually worsens the economic recession, giving it greater intensity, and increasing the official government deficits. Participants become frozen in inaction from fear and risk.

The upcoming unavoidable Greek exit will be an order of magnitude worse than the Lehman Brothers killjob. It was rather well controlled, since under the Wall Street wing. Having the USGovt under Wall Street control levers also kept the damage contained, or better described as hidden. See Fannie Mae and AIG. However, with each passing month in delay of viable actual legitimate stable solutions, the ultimate cost later will grow to be much higher. The cost to the United States from the refusal to liquidate a few big US banks will be paid by the citizens in lost wealth, continued lost  home equity, lost pensions, followed by forced entry into the Third World. The same is true of Europe, which faces its Lehman moment. The Western European nations will likely experience a similar boot into the Third World. These nations cannot devalue their currency in a constructive manner. Therefore their entire nations will be demoted into the Third World, just like Greece. The Greek showcase is scaring the European nations witless, white as sheets. See the Zero Hedge article (CLICK HERE).

## JAPAN AS NEXT FIRE ZONE

◄$$$ THE JAPANESE YEN SIGNALS BIG TROUBLES IN QE-LAND. THE STRONG USDOLLAR PLAN IS OFF TRACK AGAIN. THE BANK OF JAPAN CANNOT MAKE THEIR PROGRAM STICK, TO KEEP THE YEN CURRENCY DOWN. CAPITAL FLOWS ARE RUNNING IN THE OPPOSITE DIRECTION, DUE TO RECONSTRUCTION AFTER THE NATURAL DISASTERS AND FEAR OF EUROPEAN DISTRESS. REPEATED Q.E. PROGRAMS HAVE NOT SUCCEEDED FOR MORE THAN WEEKS. THE JAPANESE ARE UNABLE TO ATTRACT CAPITAL FOR THEIR GOVERNMENT BONDS, SINCE STUCK AT ZERO PERCENT. $$$


The Bank of Japan is stuck in a bad dream. It is like they are trying to keep a big inflated ball underwater. They cannot relax, since natural forces lift the ball with power. For a full year, the Jackass has pointed to enormous funding requirements to handle the massive task of reconstruction after the earthquake and tsunami. Here one year later and the factor remains at work with a new kicker in escape from European assets. The secondary reserve Euro currency usage is in full reverse. The trouble with Quantitative Easing is that it is a temporary fix, fighting against the flow. If the natural forces are great, the program is useless, a waste of money, and a flight of fancy on supposed omnipotence of central banks. They persist in promoting the myth. The Japanese Yen has been the object of QE since 1990. Notice that Japan never has exited the 0% corner, even after 22 years. The United States will not either. Since Japan has had advantages of a trade surplus and strong industrial core (not forfeited like in the US), the Land of the Rising Sun has kept afloat. However, since the renaissance of China, and the offshore ventures by Japanese firms to exploit cheaper Chinese labor as well as less environmental restrictions, Japan has reversed course. Not all the blame belongs at the doorstep of Mother Nature with earthquakes. The globalization initiative has rendered Japan as vulnerable. Its QE and ZIRP have kept it suspended within the target zone. Always troubles come when the Yen rises (USDollar falls) in QE-Land, since it means lost control to the free market.

Japan invented the Quantitative Easing aberration of bond monetization and the Zero Interest Rate Policy that distorts all financial markets. Simply stated, the QE aint working in Japan anymore due to the shoe tossed into the Zaitek machinery from Chinese hands. The Bank of Japan is a critical part of the Global QE team, the quiet player in Asia that can always be counted upon. Many financial experts believe the BOJ is a US lackey upon agreement of World War II terms. Some go so far as to claim that the Japanese Yakuzi (crime syndicate) has been hired by US shadowy chambers to keep the Japanese politicians in line. My belief is firmly in agreement on the former, with suspicion of veracity on the latter. The Japanese Yen reached 130 last August 2011 in a strong run to satisfy my April forecast when at 118. Then the Yen fell out of bed on the last QE from Bank of Japan in February 2012, as designed, falling on cue, aided by the hundreds of large FOREX players who know enough to stand aside, to join, then to move to the other side of the table when the movement was exhausted. Once more, the decline in the Yen has reversed from 120 up to 128 in the couple months, having recently relaxed a little back toward the 126 level at the Moving Average support levels. My gut indicator has always regarded the JapYen as the indicator for QE suffering from the weak water of fiat currency printed too often. The JYen is safe haven in Asia, where distrust of US and EU and UK is growing. Any big new problems with the USTreasury Bonds, and the JYen could rise much above the 130 level and cause severe economic problems to Japan.

After enduring the growing impact of both globalization (Chinese industrial expansion) and the Global Financial Crisis (rampant Western bank insolvency), the effect of bond monetization under the motive of pushing down a currency has lost its mojo power in Tokyo. Two separate motives are at work with QE. In the United States, the QE lever is pulled in order to compensate for absent bond demand, to keep interest rates down, and to avoid a global bank meltdown. In Japan it is pulled to support the export trade, by keep down the JapYen. The newest wrinkle might be that the QE power is weakening in general as the USTBond king JPMorgan suffers losses and prestige as it loses control of the USTreasury Bond structure. The Interest Rate Swap support machinery is breaking down, soon to fracture in full view.


The Japanese bank officials are stuck in an impossible position. QE does not work when massive capital flows are running the other way, or it works too briefly to cause a beneficial effect. The vast Reconstruction projects require mountains of funds, not typically from channels extending from the Bank of Japan and its printing operations. No longer does Japan have gigantic trade surpluses with which to intervene in the important bond and currency markets. Its arsenal is being depleted. No more abundant capital flows are coming into Japan. They go to China instead. If the BOJ officials have any brains, they are joining the savvy financial sector titans in the sale of USTreasurys at lofty undeserved high valuations. Japan cannot attract capital for its sovereign debt, since it is locked in a corner. Too much grotesque malinvestment has taken place with support of the 0% edifice. Troubles come when a nation sporting a 0% yield begins to show big deficits. If normalcy is restored to the JapGovtBond yield, their financial sector would crumble while their pensions would enter poverty. Such are the wicked brutal unforgiving consequences of the ZIRP corner. The United States faces the same forces, but with twice the power.

The Japanese reconstruction to repair damage from the earthquake and tsunami will continue for another 12 to 24 months. The Fukushima reconstruction will not happen at all, since it continues to melt down. Contamination is all over the Western United States, and parts of the Midwest. A flood continues to sell USTBonds in Tokyo, as forecasted in April 2011. It never fully went away. It only took a break in February. In fact, bond sellers are grateful for the QE, which gives them higher US$ exchange rates. The central banks try to hold back the tide of markets, never with success, always repeated. Their arrogance will be their ruin. The ultimate cost to both the US and Japan will be the destruction of their sovereign bonds, due to the imposed enforced defended official 0% rate. The phony rate affects financial markets, prevents proper reward for savings, and punishes pensioners. The high principal value for government bonds is a conjob. They pay nothing to the enormous pool of savings collected for pension purposes, and suppress economies. They are a failure in Japan for 20 years. They are a failure in the US for one year (or more).

◄$$$ THE NEXT FIRE ZONE IS JAPAN, ACCORDING TO SAGE ANALYST GREG WELDON. HE POINTS TO JAPAN AMIDST THE GRAND CONSTANT DISTRACTION FROM EUROPE. WITH THE STRONG USDOLLAR HARDLY HOLDING THE FORT AGAINST THE NATURAL FORCES, THE YEN IS RISING. WATCH THE JGBOND YIELD IN JAPAN FOR SYMPTOMS LIKE SPAIN AND ITALY, ON TOP OF A GROTESQUE 19:1 RATIO ON JAPANESE MARGINAL DEBT. A PERVERSE EFFECT IS FELT AS THE USTBONDS RALLY, LEADING TO MORE US$-BASED BOND SALES IN TOKYO. $$$

Greg Weldon believes that while European fires burn hotter, the next problem area nobody is looking at is Japan. Recall that just three months ago, Weldon pointed to Spain as extreme potential fire zone. He was spot on correct. Weldon sees three different crises: sovereign debt, political, and macro-economic. He points out that Japan has become a wild card with eight consecutive months of trade deficits, and $2.6 trillion of Japanese Govt Bonds that must be rolled over within the next six months. The JapYen currency is rising fast, sure to harm their expert trade. Yet it might attract more funds for the JGBonds, provided the bond yield is permitted to rise. This is a double edged sword, since rising bond yields would cause significant damage to the banking sector loaded with bond reserves, coupled with nasty blows doled to pensions. The BOJ monetization program is not working. Irony is thick. Usually a nation with huge stored savings will enjoy a burst of economic growth and prosperity in the rebuilding process after disasters, provided they are not too great. The bond sales to finance the reconstruction after the earthquake & tsunami is fierce. The nation is suffering another Kobe event in a 1995 redux against a European storm.

The reconstruction in the aftermath is the trigger. But the Japanese economy is being gradually weakened by a rising Yen currency. The nation was laid vulnerable by chronic 0% ZIRP, which left it in suspended animation until the shock wave finally hit. Now symbolically a million tons of waste from Japanese harbor wreckage has hit Hawaii and will soon hit the California coast. It is symbolic of the financial wreckage in progress, unstoppable, from messing with Mother Nature in the bond world. See the Financial Sense interview (CLICK HERE).

The Japanese Govt runs debt at a 19:1 ratio to its own revenues, which is both outrageous and unsustainable. Wave after wave of Quantitative Easing, economic stimulus, and project finance have left the Japanese Govt debt a mountain impossible to remove. Growth to pay down debt is the great modern myth. The debt ratio for the United States is 3:1 to income and rising, and for Italy it is a 2.5:1 ratio. The only other nation that comes close to the Japanese debt abuse is Saudi Arabia. See the Zero Hedge article (CLICK HERE).

Bond analyst and forensic dissection specialist Rob Kirby pitched in, saying "I have been told by people far above my pay grade in institutional markets since 1988 that Japan was going to blow up. In my opinion, however, it is a fool's bet to attempt to time the implosion." Colleague Aaron Krown of Implode Explode website also pitched in, saying "Japan will blow up. I have been waiting for a couple years now. Everyone just sort of forgot about it because they muddled on for so long in the liquidity trap. But now that the USDollar is going away as a compensatory mechanism, and they are heading into deficits of all sorts. Japan is overdue for an implosion. The key change is that the USEconomy is going away as a life preserver device. Maybe they will totally restructure and somehow shrug off the deficits they are now entering for the first time since the bubble burst. I do not see how they will avoid sharply higher interest rates and/or a drop in the Yen currency."

The global revolt against the USDollar has severely affected Japan at a time when China has been handed a significant slice of the export trade, even some Japanese consumer product manufacturing. To keep the Yen down used to be easy when the Strong Dollar Policy was in effect, and ably defended. No more. To be sure, the US life preserver is going away. China must replace the United States as that destination market for Japan, and as a counter-weight for Japan. However, as pain for past sins, the Yen currency will rise and rise and rise, since the Chinese Yuan is not yet convertible. Worse still, the rising USTBond principal value will make that perverse phenomenon easy, since Tokyo firms will avidly sell the USTBond as it rises in value, succumbing to temptation and necessity. The USDollar will continue levitating, and thus enable foreign creditors an attractive back door to exit. The implosion risk for Japan is a major selloff in its JGBonds. If their domestic government bonds sell off like the USTBonds, pop goes the game. The risks are acute for JPMorgan in the US, for Deutsche Bank in Germany, and for the Bank of Japan in Tokyo. The adjoining risk during a Yen decline is for a possible JGBond yield rise. The end chapter in the fiat game is a march to 0% in bonds, which creates an asset black hole. In Tokyo they have effectively covered the Black Hole for 22 years, with surplus USTBond paper earned from exports. Times are changing and shock has entered the equation.

◄$$$ ARGENTINA IS THE GREECE OF SOUTH AMERICA. IT IS IMPLODING WITH RABID PRICE INFLATION. THE NATION HAS SEEN ONE THIRD OF ITS USDOLLAR ASSETS VANISH FROM THE BANKING SYSTEM. CITIZENS ARE TRYING TO AVOID RABID PRICE INFLATION, AND HAVE RESORTED TO PRIVATE HOARDING. THE PRESIDENT HAS ORDERED CAPITAL CONTROLS TO PREVENT THE BANK RUN IN US$ TERMS. IT IS THE LATIN FIRE ZONE. $$$

Argentines are reacting to foreign exchange restrictions, withdrawing about $100 million in USDollar units every day. The nation's banks have seen one third of their U.SDollar deposits withdrawn since November as savers chase greenbacks in response to stiffening foreign exchange restrictions. Capital controls work to prevent those USDollars from leaving the country. Natives expect clamps to come down on access to the US currency as high inflation and lack of faith in government policy erode the local Peso. The total USDollar deposits of Argentine banks fell by 11.2% in the preceding three weeks to $11.5 billion, according to central bank data. President Cristina Fernandez won a second term on promises of deepening the state's role in the economy. Her plan vows to deepen the model of the interventionist policies associated with her predecessor, Nestor Kirchner, her late husband.

The great obstacles to purchase USDollars at the official (artificial) rate is motivating some people to pay a hefty premium in the black market. Capital controls have made the swap out of domestic Pesos difficult. Adverse effects have been felt throughout the important South American economy. Fears grow of a government sanctioned project to de-Dollarize their economy. Officials deny, of course. The Fernandez Admin wishes to halt the common practice of paying for home purchases with stacks of USDollar bills. She wantsArgentines to end their love affair with the greenback and to start saving in Pesos despite inflation measured by private economists at about 25% per year, a tremendous erosion of wealth. President Fernandez set an example by vowing to swap her only US$-denominated savings account for a fixed term deposit in Pesos. Watch as she breaks her vow. The nation has been ravaged by a series of bank system holidays and deep devaluations, leaving memories all too fresh. The citizens are hoarding USDollars out of distrust and firm memory. See the Reuters article (CLICK HERE). The lesson is the same each event. Fiat money and fractional banking are the disease for which there is no cure.

Adrian Salbuchi pitched in a comment. He wrote, "All very true. Argentina's Kirchner government are now caught in their own trap. In June 2005 former president (and her late husband) Nestor Kirchner implemented a Sovereign Debt Mega-Swap engineered by his finance minister Roberto Lavagna (founding member of the local think tank CARI which is the local branch of the Council on Foreign Relations) which could only get Argentina into very deep water. The sad part is that those of us trying to warn about this have a very tiny voice, whilst the bankers have a huge voice. It seems money is always on their side, even when it is in the hands of people on our side."

SteveK is a Hat Trick Letter subscriber from the Western US. He wrote, "I spoke with my son today who lives in Bariloche Argentina. The whole country is seriously deteriorating. Increasing crime from the lower classes. Rampant corruption at the top. Kristina is a power monger, a socialist nut wrecking the country at all levels. My son wants to move to Uruguay but is stuck. He cannot sell a beautiful apartment on top floor overlooking a lake, due to the freeze. I suggest he wait for the generals to take over."

My conclusion is basic, not complicated. The solution requires a lot more than having a sound monetary system for Argentina, with no more fractional banking. They need to boot their destructive socialist mindset that took them down the road to perdition, which ends with a banking system failure every 20 years. Many analysts address the effect of a dysfunctional cycle of misery. My view is to cite its cause in an important decision several decades ago to forego prosperity, and to embrace socialism, the system of shared produced misery. Mine is not a vote against the people. It is against the illusory benefits of socialism, which wrecks successful economies and engines of wealth creation, rendering great harm to people's wealth and income. The nation of Argentina used to be a bastion of wealth 100 years ago, before it adopted the acidic socialist wardrobe.

## THE GREAT GLOBAL RESET

◄$$$ DEBT IS NOT WEALTH. THE ILLUSION EASILY INFECTS. THE MAJOR INDUSTRIALIZED NATIONS ARE THE PRIMARY ABUSERS OF DEBT. IT SUSTAINS THEIR STANDARD OF LIVING, BUT ALSO ENABLES A DEGRADED WORK ETHIC. THE GLOBAL MONETARY SYSTEM IS BUILT UPON DEBT. THE FINANCIAL MARKETS TREAT DEBT AS AN ASSET. THE PERVERSION IS PART & PARCEL TO THE ENDLESS GLOBAL FINANCIAL CRISIS. THE BANKS ENABLED THE PROCESS, WHICH HAS NOT YET HIT CLIMAX. THE HOME FORECLOSURE CHAPTER WILL BE FOLLOWED BY SOVEREIGN DEBT RUIN IN A SERIES OF FALLING DOMINOS. THE TRUE CLIMAX WILL BE THE FALL OF THE HOUSE OF MORGAN, JPMORGAN CHASE. $$$

The advanced nations carry between three and ten times as much total debt as they have economic activity, as measured by Gross Domestic Product. The worst offender is the United Kingdom, whose debt is about 9.5 times its annual economic activity. With a string of bank welfare programs and endless vapid economic stimulus (little more than reshuffling taxes and extending doles), the UK piles more debt upon debt without a remote hint of remedy and solution. The United States is piling up debt at an extremely rapid rate, as is Europe. Notice the Japanese debt at over six times GDP after two decades of Quantitative Easing and endless stimulus. The cost of 0% policy is heavy but hidden.

The pervasive systemic problem is founded in the misconception that debt is wealth. Debt can be used as collateral. Debt is securitized into bonds that are avidly traded on exchanges. With such transfer of debt to securities, the cancer is spread from the banking industry under its regulatory oversight. To support debt valuations, and to prevent massive writedowns during the global financial crisis in its fourth year, the central banks of the world have been willing to swap out bad debt for good money. The counter-party risks have been overlooked and shoved under the carpet.

The missing piece is conversion of debt-based promissory assets into real world tangible assets. That process would reveal the low value of the entire asset base of the West, and much of Asia. From the debtor standpoint, the concepts are easy. Rather than work and save before making purchases, the debtor takes loans, forfeits equity in homes, and buys two items recklessly instead of one prudently. The banks permit the process, the great enablers if not predators. The fruit of the frenzied orgy of debt is a wave of endless home foreclosures and the end of the American Dream. The United States is reaching a climax of debt from its mismanagement. The JPMorgan episode will bring down the house of cards, with the Interest Rate Swap machinery caving in. See the Aziz Economics article (CLICK HERE). Recall the 1980 decade where access to credit was perversely considered wealth. It ended in ruin and tears and bad health. The United States is on the verge of being plowed under, just like Greece, just like Spain. The dominos are lined up to fall, including Italy and England.

◄$$$ THE GLOBAL RECESSION IS COMING FROM A VERY POOR RECOVERY THAT NEVER GOT OFF THE GROUND. THE DEBT LEVELS ARE MUCH HIGHER THAN THE START OF THE LAST RECESSION. WORSE, THE DEBT SERVES AS COLLATERAL FOR A MOUNTAIN OF DANGEROUS DERIVATIVES WHICH HAVE BEGUN TO CAVE IN. THE YEARS 2012 AND 2013 WILL USHER IN THE END OF THE CURRENT FINANCIAL SYSTEM, IN A GRAND RESET. A GRAND RESET IS COMING THAT SWEEPS AWAY THE FRACTIONAL BANKING SYSTEM. THE FINANCIAL MARKETS WILL SOON ENTER A STATE OF PARALYSIS, WITH THE BOND MARKET DEAD (EXCEPT FOR USTBONDS LAST). ALL THAT WILL SURVIVE WILL BE GOLD AND PERHAPS SOME FORM OF THE USDOLLAR. $$$

The Global Macro Investor provided a fine high level summary in May 2012 at a Shanghai conference. Their message is loud clear and stark in warning. They wrote, "The world has no engine of growth with most of the G20 countries approaching stall speed at the same time. The Western World is about to enter its second recession in an ongoing depression. For the first time since the 1930s, we are entering a recession before Industrial Production, Durable Goods Orders, Employment, Employment, and Private Sector GDP have made back their previous highs. We do not know exactly what is to come. We can all join the very few dots from where we are now, to the collapse of the first major bank. The problem is not Government debt per se. The real problem is the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives. That equates to 1200% of Global GDP and it rests on very weak foundations. From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude. That is the end of the fractional reserve banking system and of fiat money. It is the big RESET. From a timing perspective, 2012 and 2013 will usher in the end. You have to understand that a global banking collapse and massive defaults would bring about the biggest economic shock the world has ever seen." See the Scribd article (CLICK HERE) for a gallery of worthwhile charts.

Raoul Pal is the founder of Global Macro Investor, and previously co-managed the GLG Global Macro Fund in London, one of the largest hedge fund groups in the world. Raoul came to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities & Equity Derivatives in Europe. Raoul Pal in his latest presentation assembled a most disturbing and scary forecast of the future, not to be dismissed. He provides a succinct summary of the sovereign debt and derivative quandary. He offers a general forecast of frightening nature, that seems plausible and consistent with the Jackass view. Raoul Pal forecasts the following:

  • Bonds will be stuck at 1% in the US, Germany, UK, and Japan
  • The whole bond market will be dead
  • Short selling on bonds will be banned
  • Short selling stocks will be banned
  • CDS bond insurance will be banned
  • Short futures contracts will be banned
  • Put options will be banned
  • All that remains will be the Dollar and Gold.

One must be aware that the USDollar might morph into two types, a foreign held version and a domestic version. My sources inform that the foreign US$ might be honored, while the domestic US$ might be severely devalued. Raoul Pal concludes, "We have around six months left of trading in Western markets to protect ourselves or make enough money to offset future losses. Spend your time looking at the risks of custody, safekeeping, counter-party, etc. Assume that no one and nothing is safe. After that, we put on our tin helmets and hide until the new system emerges. From a timing perspective, I think 2012 and 2013 will usher in the end." See the Zero Hedge article (CLICK HERE).

◄$$$ PAUL CRAIG ROBERTS IS BETTING ON COLLAPSE. A USDOLLAR BUBBLE IS FORMING, SURE TO BREAK, TAKING DOWN THE USTREASURY BOND WHEN THAT BUBBLE BURSTS. THE DE-REGULATION MOVEMENT PAVED BY WALL STREET DONATIONS WOULD CAUSE A GREATER FINANCIAL CRISIS DOWN THE ROAD. THE USDOLLAR IS ENTERING A BUBBLE PHASE, SURE TO BREAK AND TAKE DOWN THE USTREASURY BOND. THE GLOBAL REVOLT AGAINST THE USDOLLAR IS CENTERED UPON TRADE SETTLEMENT. THE US-BANKERS ARE RESPONSIBLE FOR THE GLOBAL COLLAPSE. EXPECT MORE TERRORISM EVENTS, ORIGINATED FROM THE RED WHITE & BLUE CORNER. $$$

The views of Roberts are usually profound. He mentions financial de-regulation as being a cause for crisis and breakdown. Yet the Wall Street powers are preparing to strip away the Dodd-Frank Financial Regulatory Bill at first opportunity. The weakened power of the USDollar stick prevents the USGovt from punishing rogue nations, from isolating nations that refuse to toe the line in obedience. He anticipates the European crisis causing a flood of global funds into the USDollar. After to European exodus, when the USDollar bubble bursts, tremendous wealth will be wiped out. No safety will be offered USTreasury Bond investors. The USDollar will go away, interest rates will rise, and bond losses will mount sky high. The great reset will be identified by historically unprecedented loss of wealth, and shift of wealth eastward. The losses have been staggering to date, like with bank equity loss and home equity loss. But the future losses will be further staggering, as sovereign debt becomes badly impaired and defaults in a string from weaker progressively to stronger. The USDollar devaluation will be an event for the ages.


On the European crisis, Roberts wrote "Prior to the sovereign debt crisis in Europe, the dollar was also faced with a run-up in the value of the Euro as foreign central banks and OPEC members shifted their reserves into Euros from Dollars. The Euro was on its way to becoming an alternative reserve currency. However, Goldman Sachs, whose former employees dominate the USTreasury and financial regulatory agencies and also the European Central Bank and governments of Italy and, indirectly, Greece, helped the Greek government to disguise its true deficit, thus deceiving the private European banks who were purchasing the bonds of the Greek government. Once the European sovereign debt crisis was launched, Washington had an interest in keeping the crisis going, as it sends holders of Euros fleeing into safe Dollars, thus boosting the exchange value of the Dollar, despite the enormous rise in Washington's own debt and the doubling of the US money supply." Expect the Wall Street crowd to sabotage Europe in order to ensure the uninterrupted flow of funds toward the US shores, into USTBonds. The deed will cause a wreck from its own success, but initialy put the blame on Europe. The Wall Street crowd strives always to divert blame. All financial sector criminal convictions involve non-New Yorkers or non-white men.

Simon Johnson is a former IMF economist and current MIT professor. He points out that Wall Street greedy motives and faulty risk models will be heaped upon the system once more, with grand destruction to continue in wave after wave. Damage to the USGovt budget deficit is becoming permanent. Roberts, in deference to the concerns raised by Johnson, wrote "Financial deregulation raises the returns from speculative schemes above the returns from productive activity. The highly leveraged debt and derivatives that gave us the financial crisis have nothing to do with financing businesses. The banks are not only risking their customers' deposits on gambling bets but also jeopardizing the country's financial stability and economic future."

Roberts gave a chilling conclusion. The major players in global trade are forming a new bank that would protect them from harmful consequences of events in the United States and Europe. The BRICS nations (Brazil, Russia, India, China, South Africa) intend to settle trade with no further reliance upon the USDollar. They thereby deliver a powerful message in lack of confidence in US handling of financial matters. The bloated oversized US banks routinely hand over their multi-$trillion losses to the USGovt to be added to the unpayable deficit. US taxpayers have had zero real income growth in 20 years. Meantime, "The banksters take home fortunes in annual bonuses for their success in socializing the free market bank losses and privatizing profits to the point of not even paying income taxes. In the United States, free market economists unleashed avarice and permitted it to run amok. Will the disastrous consequences discredit capitalism to the extent that the Soviet collapse discredited socialism? Will Western civilization itself survive the financial tsunami that deregulated Wall Street has produced? Ironic, isn't it, that the United States, the home of the indispensable people, stands before us as the likely candidate whose government will be responsible for the collapse of the West."

Roberts has frequently been cited in Hat Trick Letter reports for his sage commentary. He foresees the collapse that is coming. He acknowledges the responsibility of the US bankers for the ruin. He is betting on collapse. See the Before Its News article (CLICK HERE). The contrast is stark and ugly. China has spent years exporting workers to build the next platforms in economic dominance. They pursue influence via trade, which unfortunately is not so mutually beneficial, since Western industry has often been swept aside. The United States specializes in exported bond fraud, slams like sanctions, and exported military excursions, complete with swarms of drones that kill civilians. The US pursues influence via pressure, as the Full Spectrum Dominance mantra persists, in keeping with the rooted Nazi traditions. The contrast is stifling, disturbing, and entrenched.

The topic of controlled terrorism and shifted blame will not be addressed, since beyond the scope of this report. The USGovt enjoys fingering blame on state supported terrorism. The most recent high profile event was the bombing in Oslo Norway last year. My sources inform that the US and British security agencies were at work, in retaliation against Norway for refusing to invest the $1.6 trillion sovereign wealth fund in depleted London banks. The fund is seeded by lucrative North Sea oil operations. Big money is usually the motive in a common theme, not religious fanaticism. The usual MO was used, of a weird violent young man working alone, a truly tired theme like a thread through time. Such a common threaded theme can be cited for Timothy McVeigh (Oklahoma City records for Fannie Mae), John Hinkley (Papa Bush control after Reagan shot), Lee Harvey Oswald (newly created Silver Certificates, restrictions on the USFed by Kennedy), and even John Wilkes Booth (refusal by Lincoln to accept London loans for the Civil War) in a previous century. Enough!

## BREAKDOWN IN BONDS & BANKS

◄$$$ ITALY HAS SHUT DOWN A MIDSIZED BANK NETWORK INVESTMENTS (BNI). THE PROCESS HAS BEGUN. IT WILL SPREAD LIKE WILDFIRE IN A HOT DRY TEXAS SUMMER, ACROSS ALL OF SOUTHERN EUROPE. IT HAS ALREADY HIT FRANCE TOO. BANQUE POSTAL HAS LIMITED WITHDRAWALS. BUT WORSE, ONLINE BANK WIRE TRANSACTIONS HAVE COME TO A HALT IN FRANCE. $$$

BNI depositors were told on June 10th that they were unable to make withdrawals, payments of utility bills, mortgages, or taxes. The bank is busted but did not give any warning to its own clients. Instead it has cut off its deposits from accessing their money. The Bank of Italy (cental bank) authorized the suspension of payments by Bank Network Investments without communicating anything to the depositors. They are mere pawns in the process, whose interests are secondary to supplying banks. The Bank of Italy extended receivership of the bank, then gave the green light for compulsory clean-up exercises. BNI is thus left twisting in the wind, unable to perform any type of operation, even basic ones for daily survival. Past has ample precedent of callous action by the central bank. Decisions without taking into account the heavy impact are not new to Bank of Italy, particularly on savers in possession of a single bank account on which salary or pensions deposits accrue. In addition to BNI, depositors of Banca MB are also affected. Formal petitions have been submitted to request definition of how customers, especially fixed income families and pensioners, can perform normal daily operations and have some access to their funds. See the Investment Watch article (CLICK HERE).

Max Keiser reports that a mid-sized French bank is in deep trouble. It has blocked depositor withdrawals and halted bank wire transactions. Banque Postal is in in very bad position. Tellers are enforcing limited withdrawals at the windows to 180 Euros. Other BP branches have denied any cash transactions on Friday. Some people are offering stories that computer technical problems across France are obstructing bank wire transactions online at numerous banks. Something big and dangerous is going on in France with Banque Postale, one of the most important banks of the country. Personal stories cite a panic of their friends, from London to Paris. Savings accounts have been emptied at a dramatic rate. By next week a bank panic should spread like wildfire. Only a short while ago, the ATM machines were changed to offer withdrawal choices of 10 to 50 Euros. Formerly the choice was 20 to 500 Euros. The bank runs have had a big effect. Last month, the Hat Trick Letter reported vast withdrawals by the French wealthy, the money put away in Sweden and other Scandinavian locations.

◄$$$ OVER SEVERAL CONVERSATIONS AND EMAILS WITH ROB KIRBY, NOTES WERE TAKEN. HIS BOND TRADING DESK ENABLES AN EXCELLENT PERSPECTIVE ON THE DERIVATIVES INVOLVED WITH THE MASSIVE AND GROWING JPMORGAN LOSSES. HE SHEDS LIGHT ON THE UNCONTROLLABLE COMPLEXITY, AS MULTIPLE GAMING OCCURS SIMULTANEOUSLY, WITH SUDDEN CHANGES AND COMPETING OBJECTIVES, TOO MANY PLAYERS. $$$

Breakfast with Rob Kirby over Interest Rate Swaps. In no way does the Jackass claim to comprehend all about the complex world of interest rate derivatives and how they support the USTreasury Bonds. My understanding is more than basic, far from expert. But some light can be shed for the layman to follow. They are a contract spread trade of long-term bond swaps versus short-term bond swaps that enables artificial demand to be produced. Here are some nuggets of his wisdom. They are 90% Rob's words, made to flow in explanation with helpful phrases, added words, and appended items on my part for clarity purposes. His concepts, my paragraph formations.

In the 1980s and early 1990s, the biggest player in the world in interest rate derivatives was Citibank in Toronto, acting as the firm's clearing house worldwide. They were my client. Every morning, the book runners on the trading desk had sensitivity reports published. They covered the bank's hedge position, reflecting overnight changes in interest rates along the curve. Included were mandates on adjustments to the hedge position to keep the bank's aggregate position delta neutral. In finance, delta neutral describes a portfolio of related financial securities, in which the portfolio value remains unchanged due to small changes in the value of the underlying security. Such a portfolio typically contains options and their corresponding underlying securities such that positive and negative delta components offset, resulting in the portfolio's value being relatively insensitive to changes in the value of the underlying security. The goal is to remain neutral. With large books, severe volatility creates stress that dramatically alters the value of hedge positions. Adjustments mandated by sensitivity reports are thus made extremely difficult, especially if caught wrong footed in a one-way market or in an illiquid market. Back in the day, such events customarily happened to Citi-Tor from time to time.

My Jackass view can be expressed in math parlance. JPM dances too close to singular points in the mathematical equations. Like with the function "1/(X-4)" when X is close to the value 4. The derivative of the function in a calculus sense, the slope function, turns very tilted. The small changes in the base result in gigantic changes in the function value. In finance terms, the market price for certain assets approaches dangerous values, whereby the resulting effect on the asset position or derivative contract goes haywire out of control. My firm belief is that the ultra-low 1.6% TNX (10-year USTreasury) is near such a singular point, but the offical near 0% FedFunds rate is at a singular point. The singularity raises the risk to unmanageable levels in the delta neutral game. Also, the human reaction time surely is too slow to render full neutral the end result to the asset strategy. It is kind of like chasing one's tail.

Rob Kirby continued. If only JPMorgan were alone doing this type of high risk derivative risk game, it might be manageable. But the reality is that there are at least five large US financial institutions engaged in this insane game. And worse, it is very likely that at least another five foreign institutions are doing the same thing simultaneously. This is a scary fact. Think Barclays. Think Deutsche Bank. It is like having 10 plate spinners all in a room, each one spinning 20 plates on the end of poles in a marathon. Then they place bets on which one will see their plates drop first, and break in a grand mess. The end result that comes is not pleasant, and addresses the Ponzi theory. The USTreasury Bond market is a hoax. It is the biggest hoax ever perpetrated on mankind, period. Once again, JPM is both sides of an Interest Rate Swap netted market, but in no way is neutral. JPMORGAN CHASE IS THE MARKET. The real concern is not $250 trillion in IRSwaps. It is when the daisy chain is broken and a bank is pulled out of circulation, or when JPM can no longer control its own book.

If the Jackass might interject on the imagery, it is more like the plate spinners tangle into each other's space and their legs become tangled too, with eyeball attention at times distracted to the other circus performers. The overpaid JPMorgan geniuses cannot conceivably react to and manage the sudden errors over at Morgan Stanley or Citigroup. They arrogantly maintain a pecking order of power, prestige, and intellect. So accidents happen, and sabotage can occur. Due to the derivative complexity, when the accidents do occur, they cannot centrally manage the fix. It spirals out of control. My excellent European banker contact believes the USTBond/IRSwap structure will implode, a trigger having been pulled, and no amount of controls can stop the destructive process.

◄$$$ THE EXCHANGE STABILIZATION FUND IS THE PROBABLE SITE FOR INTEREST RATE SWAP ACTIVITY THAT CONTROLS THE USTBONDS. THE VITAL FUND IS THE TRIUMVIRATE FUND TO CONTROL BONDS, CURRENCIES, AND GOLD. $$$

Rob Kirby is a GATA consultant. He brought emphasis to the extremely devious ways and powerful hidden cables within the USGovt Bond market. He calls their bond yield movement entirely a function of Interest Rate Derivatives probably purchased and sold by the USDept Treasury through their secretive Exchange Stabilization Fund. It is the most important fund at work, ten times more vital than the Working Group for Financial Markets (aka Plunge Protection Team). The ESFund works to control the USTBond market and the USDollar in the FOREX, both individually much larger than the stock market. The ESF also works to intervene in the Gold market. If one of the three sides fails, all sides will fail. See the Gold Seek article by Kirby (CLICK HERE).

◄$$$ JPMORGAN MISPRICED ASSETS IN CREDIT DERIVATIVES, WITH DEUTSCHE BANK IMPLICATED. THE GIANT BANK MAKES A REGULAR PRACTICE OF BEING INCONSISTENT ON ASSET PRICING BETWEEN ITS OWN INVESTMENT BANK AND THE CHIEF INVESTMENT OFFICE. LOOK FOR EVIDENCE TO ACCRUE ON HOW IKSIL AND OTHERS BULLIED THE DERIVATIVE MARKET AND THE ACTUAL MARKIT PRICES. $$$

JPMorgan mispriced assets within two important chambers of the financial firm, the investment banking side and the cash management side. They are guilty of mismarking $100s of billions in Credit Default Swaps. Standard asset pricing methods dictate that short positions are marked at the offer and long positions are marked at the bid. To be sure, marking at either side of an illiquid market can result in $10s or $100s of millions of unrealistic profits booked in advance. Nicely done when yearend bonuses are nudged. Bloomberg reported that JPM's CIO unit "was valuing some of its trades at  prices that differed from those of its investment bank. The discrepancy between prices used by the Chief Investment Office and JPMorgan's credit swaps dealer, the biggest in the United States, may have obscured by $100s of millions the magnitude of the loss before it was disclosed May 10th." The source was anonymous within the JPM caverns. Brad Hintz works at Sanford Bernstein, and was the former chief financial officer of Lehman Brothers. He said "I have never run into anything like that. That is why you have a centralized accounting group that is comparing marks [between different parts of the bank] to make sure you do not have any outliers." The Zero Hedge veteran has noticed that for Bruno Iksil, the spread on the TRSed position of $100 billion in notional value carries an illusory $500 million profit on the big/ask spread alone. Perhaps Iksil was actively overriding the real price marks, or forcing bid and ask prices to move. Yet more fallout might come. Questions arise on the validity of CDSwap marks reported by MarkIt, the same MarkIt partially owned by Goldman Sachs in a conflict of interest. Imagine as a contestant owning a stake in the judges. Oops, that is already the case with debt rating agencies, the SEC, and the CFTC.

Abuse by JPMorgan CIO desks in mark-to-market practices of Level 1 securities would result in losses materially greater, potentially up to $100s of millions in the remarking process itself. Any further uncertainty about accrued JPM losses, obscured and covered up by $10s of billions in asset sales from its portfolio, will merely add to the toxic spiral of losses in a gathering storm that has slammed its stock share price. The continued widening of spreads in the illiquid IG9-10 positions leads to more JPM losses, a blowout in progress. Recall that JPMorgan claimed not need the cash, just like they did not need the cash when they stole the MFGlobal accounts. Like with the UBS proprietary trader caught mismarking his CDS book, certain litigation follows, from serious accusation of illegalilty. Ramon Braga and Denis Minayev are embroiled in a legal case over alterations to price marks of CDSwap contracts.

So far the JPMorgan losses and dubious internal practices, lacking any and all internal controls, are being reviewed by overmatched investors and sleepwalking regulators. Next could come legal prosecution and share holder lawsuits. The prosecutors should investigate the regularity of false price marks, the involvement of Iksil to make the price move, the market effects from false portrayals, and the potential influence of MarkIt prices overridden by JPMorgan itself. To be sure, internal risk and compliance controls are non-existent. In no way can JPM big whigs, even whales, explain how improper price marks affecting $billions in profit & loss snuck past the middle and back offices. If malfeasance is found, it will be swept under the rug, like with the Lehman Brothers and MFGlobal crime scenes. See the Zero Hedge article (CLICK HERE).

◄$$$ THE LONDON WHALE WENT NAKED ON DELTA HEDGING OF USTBONDS, LONG AND WRONG. HE GOT GREEDY WITH FAVORABLE WINDS. THEN WINDS SHIFTED. LOSSES WILL ESCALATE OVER TIME. $$$

The lapdog press and subservient analyst community prefer to stick with the $2 billion figure on the JPMorgan loss, when the admissions, evidence, and analysis continue to point to at least $8 billion in losses from unhedged enormous derivative positions. Crafty veteran Tyler Durden summarized the risk taken and absent hedging in late May. The sequence can be seen at least for the temptation, backfire, and loss by the layman. See the Zero Hedge article (CLICK HERE).

·         A large (~$120bn) tail-risk tranche credit hedge was placed.

·         The hedging of that hedge became very onerous but surprisingly profitable as markets rallied day after day with no give-back.

·         This led to a greedy trader lifting some of the original tranche (and the HY short side) and leaving himself much more naked long to the market into LTRO2, which marked the top. Losses escalated through April (~$2.5bn).

·         Dimon went public with some details, and admissions of lost control.

·         In late May, the rest of the tranche was dumped at a large cost (perhaps ~$5.5bn).

·         A potential ~$8bn loss and a heavy IG9 long credit position hedged (with major basis risk, the difference in dynamics between the legs of the trade and the hedge) by various other liquid positions including shorts in HYG, JNK, IG18, and HY18 (stocks and financials too).

◄$$$ JPMORGAN IS COMPOUNDING ITS ERRORS WITH BAD DECISIONS, OR WITH ACTIONS FORCED UPON THEM FROM MASSIVE MARGIN CALLS. THE GIANT BANK SOLD A HUGE BLOCK OF SECURITIES TO OFFSET OVERSIZED DERIVATIVES LOSSES. $$$

Even the lackey CNBC called the sale a stupid decision, but they often make statements with one foot in ignorance. JPMorgan sold $25 billion in profitable bonds and securities to offset trading losses from its IG9 derivatives crisis. The decision was made merely in an effort to prop up earnings for their Q2 report. The more likely story is that JPMorgan was liquidating capital to meet massive margin calls over its escalating Interest Rate Swap losses, which could approach $100 billion in magnitude. CNBC misses the meat of the story again. Bankers make seemingly dumb moves only when they must. If JPM sold $25 billion in profitable positions, it is because it was forced to do so. The moves will trigger tax obligations and eliminate future earnings, another effect down the road. See the CNBC article (CLICK HERE).

◄$$$ JPMORGAN PEERS TOOK OPPOSITE POSITIONS IN RECENT MONTHS, WITH GOLDMAN SACHS STRONG IN CONTRASTING STRATEGY. IT WILL BE IMPOSSIBLE FOR ALL WALL STREET BANKS TO REMAIN CONSISTENT WITH NO ROGUE POSITIONS OUT OF LINE. ACCIDENTS WILL COME. THE GUARDS IN THE SHACK HAVE BEEN PAID TO SLEEP. A TANGLED MESS AWAITS. $$$

Wall Street banks, in particular JPMorgan, find themselves forced to double down, amplifying positions that vastly increase risk in a worsening credit environment. They must defend the financial market interventions over the last two decades. In stark contrast to JPMorgan, the USFed data depicts other major US banks maintained large short positions in investment grade credit. They expected a continuation of the turbulent market environment that persisted throughout the second half of 2011. The evidence shows JPMorgan to be a notable outlier among its peers, most of whom decided to load up on investment grade credit protection in preparation for a deterioration in credit markets. JPM largely went naked to the market square, equipped only with a robe of arrogance. Goldman Sachs took almost the polar opposite position to JPM with a net short of $80 billion in investment grade Credit Default Swap contracts at the end of 1Q2012. Other major dealers were similarly positioned, such as Citigroup with a net short $69 billion position and Morgan Stanley net short $63 billion. Bank of America ran a relatively flat investment grade CDS book, with a net short $3 billion position. The figures highlight how JPMorgan failed to respond at an earlier stage given the large concentrations of risk it was accumulating. The figures also point to JPMorgan being alone with some outsized losses. As usual, the guard dogs (regulators) who were paid to sleepwalk, did indeed sleepwalk, never to detect abnormal trading patterns. See the Reuters article (CLICK HERE).

◄$$$ THE TRIGGER THAT WILL BRING DOWN THE USTBOND TOWER OF BABEL HAS BEEN PULLED. THE RALLY IN USTBONDS BRINGS UNSTABLE BOND YIELD MOVEMENT, WHICH CAUSES HEAVY DERIVATIVE LOSSES. THE LOSSES HIT IF A BIG MOVE UP OR DOWN IN VOLATILITY. $$$

Hats off to Rob Kirby for correctly concluding the Interest Rate Swaps were at the center of the mega mushrooming JPM losses. Kirby reminds that volatility is toxic to derivatives, when either up or down. The nature of the losses, absent controls, and the destructive sequence is coming to light slowly. The internal mechanisms at work are very complicated. Many analysts naively believe the USFed can monetize whatever ails, but not so when the biggest credit market in the world (USTBonds) is involved. They can use the 0% money to paper over the hurricane damage for a while. In the May Hat Trick Letter report, several times it was repeated that the central problem is 0% rate with annual $1.5 trillion deficits and absent creditors bidding on the USTreasury Bonds, urgently requiring the USFed to monetize almost 70% of the new USGovt debt in 2011. The situation is untenable, unsustainable, and bound to fail. It is like a narrow tower that grows higher and higher each year, subjected to the powerful winds in the global financial storm. The winds can be in the right direction or wrong direction, still to render tower damage. The USTBond Tower of Babel will surely fall. My suspicion is that a certain Eastern power center intentionally disturbed the 10-year USTreasurys in March by sudden sales, kind of like slamming a hedge hammer into the tower's base.

To this day, the press and financial community seems to totall miss the important disturbance that sent the TNX from 1.8% to 2.4% suddenly in the USTreasury complex. They follow up with more errors, by calling the move from 1.8% to below 1.5% in in mid-May all wonderful. My forecast of a rapid move to help JPMorgan in the 10-year USTreasury happened. The TNX went quickly to under 1.5%, settling down between 1.6% and 1.7% in the last couple weeks. If not careful, the USTBond rally coming (from Euro triggers) will be too successful. Problems will arise next with junk bonds, maybe soon the corporate & mortgage bond complexes. As the US maestros attempt to control the tower with exogenous jolts, they will cause corresponding reaction jolts within the US from fat cables lying hidden. The Wall Street mad engineers will attempt to push European banks over the edge, in order to usher funds into the USTreasurys and to deflect blame. It is going to be the most dangerous and exciting event in modern financial history, that climaxes with the death of the USDollar, wreckage of the USTBond, and a USGovt debt default. The main tough questions are timing of events. But as usual, the sequence will be from an event schedule.

An excellent European banker source offered more comments on the saga. He wrote, "The final losses for JPMorgan Chase will be in the hundreds of $billions. An event driven chain reaction has been triggered from deep inside the system. This has already gone viral. They will have to trigger a mega-crisis, most likely in Europe and Greece, as a diversionary tactic and to have something to blame things on. Once Greece implodes, so will the big French banks. It is all so obvious and predictable, at least for the people in the know."

## THANKS

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