GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Japan Triggers Global QE3
* Golden Potpourri
* Unstable Oil Region
* Europe Still Festers
* Currency Upheaval
* Gold Bull Fights Loose
* Disaster Lights a Gold Fuse


HAT TRICK LETTER
Issue #84
Jim Willie CB, 
“the Golden Jackass”
20 March 2011

"QE will never end. It cannot. The Fed is now 70% of the Treasury market. If they leave, who will buy? With no buyers, how can the US government raise the funds to cover its $1.5 trillion deficit for this year? Where will it get the funds to cover the $1.5 trillion deficit at least for next year? And don't tell me how rates will rise and attract buyers. That is complete bullshxx!! Rates cannot go up. Higher rates only accelerate the death of the Ponzi Scheme that is the US financial system! QE is not ending, ever!!" ~  a colleague

"There is $22 billion of silver available in the world, of which the Exchange Traded Funds already own half, and between you guys and us we probably own the other half. Which means there is nothing left." ~ Eric Sprott

"Robust international demand, financial and political instability across the world, and concerns over remaining reserves all harbor well for the price of silver. Silver is the new Gold." ~ wholesale silver trader in Mumbai

"He who has the silver, makes the rules. It is better to be six years too early than one day too late on this silver rocket." ~ Chris Duane (from Sons Of Liberty Academy)

"The Petro-Dollar is the lace on the corset that supports the Anglo-American frontispiece." ~ the Jackass

"In central banking, as in politics, the ruling elite must keep the people in the dark. The rise of the Internet, and in particular outlets such as YouTube, are making that task far more difficult." ~ Rob Murphy (independent analyst)

"The fiat dollar and its fractional reserve (fraudulent) banking system has done its job well, when you understand the greater agenda. And the very tightly controlled mainstream media is 100% on board with the whole devious process. The US dollar, priced in oil, became necessary for all nations to maintain as a reserve currency. That is if they wanted to buy any oil, as dollars were what the Saudis and the rest of the OPEC members would accept. This created the effect of an ever-growing demand for dollars. If it were just about the oil supply, the US would open up their vast oil resources in the Midwest. It is not really about oil at all. It is about maintaining the global oil trade in the fraudulent US dollar, so that the 20th century game of wealth redistribution and mind manipulation can continue. More and more people are waking up to the realities of what exactly the dollar is and how it has been used to suck the lifeblood from Western citizens and destroy any hopes of progress for developing nations too." ~ Anthony Wile (of The Daily Bell describing the defacto PetroDollar Standard)

EDITOR NOTE: Many investors have been curious when it is wise to sell some or most of Gold & Silver investments, after a considerable impressive run since last July 2010. Here is a simple test to answer the question, administered in the comfort of home or office. Sell nothing until you hear of major US banks being liquidated. Are any like JPMorgan or Citigroup or Bank of America being liquidated? Obviously not. Just ask yourself that question. So the money production will continue at the Printing Pre$$ for new phony USDollars, used to aid the big bankers who drag the system down. New money will continue to cover the outsized USGovt deficits, made worse by the growing recession that festers since no bank liquidations occur. A vicious cycle will feed the Gold Bull, impossible to interrupt unless big banks are permitted to fail. Gold will react upward in price, Silver even more so. It is that simple. The confirmation that time has come to sell positions, when a new global currency regime is in place with full details and implementation. That is years away.

JAPAN TRIGGERS GLOBAL QE3

◄$$$ THE IMPACT OF JAPAN IS COMPREHENSIVE AND PROFOUND ACROSS ALL ASPECTS OF FINANCIAL MARKETS. THE NATION HAS HIT SEVERAL IMPORTANT TRIGGERS SIMULTANEOUSLY. ECONOMIC FALLOUT IS GREATEST INSIDE JAPAN ITSELF. THE IMPACT IS GREATEST WITH THE UNITED STATES AND JAPAN. THE USGOVT MANAGES A MONETARY NUCLEAR REACTOR THAT IS ALSO IN CORE MELTDOWN. $$$

FUNDS FOR FINANCIAL MARKET SUPPORT: Tremendous emergency funds have been appropriated and set aside by the Japanese Govt for financial market rescue & support. The price will be even larger than reconstruction & relief efforts. The debt added is intended to stave off a total national meltdown. The initial pledge of funds was for $86 billion (DETAILS CLICK HERE), to stabilize their financial market, to make regional bank liquidity available, and to fund relief efforts. They reacted to factory shutdowns, a curtailment of distribution channels, and rolling electrical blackouts. The next pledge of funds was for $183 billion (DETAILS CLICK HERE), to further stabilize markets and banks. The support continued until the latest amount is reported to be 55.6 trillion Yen, equal to almost US$700 billion (DETAILS CLICK HERE). Japan has rapidly crossed the bridge from deflation to inflation.

FUNDS FOR TANGIBLE PURPOSES: Tremendous emergency funds have been appropriated and set aside by the Japanese Govt for relief efforts, worker crews, earthquake & tsunami cleanup, body retrieval & searches, and reconstruction. The price tag will be huge, and seems to grow leaps and bounds on a daily basis. The deficit will be large, adding to an already enormous cumulative national debt. Japan must rebuild infrastructure as well as supply delivery systems for basics like food and factory material input, even cash at bank machines.

SALE OF FOREIGN ASSETS: Given the overloaded saturated debt situation in Japan, many assets must be sold in order to raise cash, mostly foreign. Without actual assets used, the size of the crisis and its funding aftermath would produce significant and immediate price inflation. Therefore, they will sell a large hoard of USTreasury Bonds, USAgency Bonds, and possibly US Corporate Bonds. The Japanese insurance companies must also raise cash to pay for claims from the widespread damage, including to businesses. They will sell US$-based bonds also. An unintended consequence is for a pinprick of the USTBond asset bubble, which has been puffed for over two years. Some funds will be made available with USTBond dumps for sure, but in an emergency setting, immediate money creation will be ordered.

REPATRIATION EFFECT: Concurrently, the March 31st deadline approaches for the annual Japan Repatriation of cash held in foreign accounts. The requirement will add to the inflow of money into Japan from overseas. This annual return migration involves funds held in all foreign lands, and will force the sale of EuroBonds, UKGilts, and loose cash in the Persian Gulf. The effect will cause the Yen currency to strengthen relative to all fiat currencies, rendering harm to Japan's export industries. The world annually goes through this required effect, but this year should be more pronounced.

COMMODITY DEMAND EFFECT: The rush to undertake reconstruction will require a wide array of commodities at a time when the commodity market is afire in price increases. From steel to cement to lumber to fuel products to fuel, the major commodities will be in enormous demand, all on a marginal increase basis. The effect on commodity prices will be sizeable and noticeably attributed to Japan. It will be felt primarily after the landscape settles enough for work crews to begin the massive efforts. Already, critical supply shortages have been reported.

FOOD PRICE EFFECT: The shortage of foodstuffs comes from both disrupted original growing locations and disrupted supply chain in delivery systems. Again, a wide variety of foodstuffs will be in enormous demand, all on a marginal increase basis. The effect on commodity prices will be sizeable and noticeably attributed to Japan.

PRICE INFLATION EFFECT: Japan stands at risk of a hyper-inflation episode with more punch than what has begun to unfold in the USEconomy. The emergency funding for both reconstruction and financial market support will unleash price inflation from the inevitable spillover, a financial tsunami of funds. Also, the rising demand and supply shortage with intensify the price inflation. Since the Japanese Debt/GDP ratio is near 200%, they cannot hike interest rates without causing a default on their bonds. The Bank of Japan will monetize the required funds to rebuild their country and later worry about consequences of hyper-inflation. If foreign asset sales are not ordered, and fresh debt monetization occurs, the price inflation will be power packed and doubly significant. When a nation reaches saturation on debt, the new debt is monetized and hits the main street as inflation rapidly. However, it is hard for hyper-inflation to strike a nation with a rising currency. Incredibly strange crosswinds are at work.

EXPORT TRADE EFFECT: The redemption of US$-based bonds will be staggering and sudden, compounded by the sale of other US$ assets. The effect will be a steady relentless significant rise in the Japanese Yen, a decline in the US$/Yen exchange rate, with a powerful effect on the Japanese export industries. A big trade deficit is coming to Japan, a new concept. The system will work to bring the Yen currency down on the tangible side while the financial side actually pushes the Yen up. A big conflict and paradox comes. The lost surplus is a direct result of the rise of Chinese industry, something Japanese firms have invested in, with important technology transfer. The newly arriving trade deficit could easily become a permanent fixture, and its funding will aggravate the high government debt burden.

YEN CARRY TRADE CLIMAX EFFECT: The reversal unwind of the Yen Carry Trade appears to be entering its third and possibly final phase. The unwind has required over ten years to complete. The YCTrade took 15 to 20 years to build into the largest, most powerful, and significant financial engine of phony wealth the world has ever witnessed. The YCTrade unwind is to be assured by the heavy Japanese selling of USTreasurys. Call it a major unintended consequence. The unwind spells major problems for the Japanese export industries, but also for the USTreasury Bond complex. The entire world will continue to abandon the USTreasurys except for a few nations that wish to openly protect their export trade.

EMERGENCY G-7 YEN SELLING PACT: The emergency meeting of G-7 nations was given a general purpose of dealing with Japan, but it was all about the rapid unwind of the Yen Carry Trade without a single mention of the vast perverse engine. The accord resulted in a global consensus that all nations would help to purchase USTBonds sold by Japan, from the unwind of the YCTrade. The G7 Yen weakening accord is a disguised USDollar rescue, since a rising Yen goes with a falling USDollar. Attempts are made to avoid the USFed being isolated as the sole buyer of USTBonds, which is inevitable. The USFed must monetize all the foreign central bank asset purchases of USTBonds ordered abroad, or face higher US interest rates and threatened USGovt debt default. So they print huge amounts of money through the New York Fed window. A USTreasury auction was postponed so as to enable more efficient printing operations. The sales in Brussels, London, and Tokyo will be covered by the USFed. Thus foreign currency exchange rates are rising versus the USDollar still. The Yen Selling Pact by the G-7 emergency is better described as a Global QE3. Monetary expansion cannot be concealed, since out in the open, and blessed with global consent. A risk of a global central bank franchise model destruction could be in intermediary stage. The monetary system is at risk of greater and sudden fractures.

GOLD & SILVER EFFECT: With all the newly created money from Japan in direct inflation, with all the USTBond sales to undermine the USDollar, with all the commodity demand in reconstruction, the overall effect on demand for Gold & Silver will be positive and powerful but a little delayed. One can smell a monster midyear rally in Gold & Silver after some time to gather facts, assess the situation, and detect the positive winds. The entire Japan story is huge bullish for Gold and extremely bearish for all paper currencies certain to be debased further. The G-7 Yen Selling Pact is all about coordinated currency dilution. With Japan, the United States, and and the EuroZone all printing money, global monetary hyper-inflation cannot be avoided. Gold & Silver will react. Attempts to deal with the breakdown will contribute to global systemic price inflation, which has already been initiated. Gold & Silver will react.

CHAOS & KILLING FIELD EFFECT: None of the above points even touches on the nuclear radiation threat to Japan and its downstream global neighbors. My fear is that the long awaited global population reduction programs might be set off by the evil syndicate that has infiltrated far too many governments, led by the USGovt. The natural disaster of the earthquake in Japan in my view was caused by the corona mass emission from the sun, with a powerful impact that altered the earth's rotational axis. The resulting damage to the inferior nuclear generator complex might invite other more intentional events from the vile corners occupied by the syndicate, which brought viral weapons like the SARS and Swine Flu, among other devices like HAARP weapons. The darkest elements of humanity, where bankers roam, in tight control of government forces, including the narcotics barons, wish to reduce the global population by 20% at least. They might undertake some nasty projects, even with false flags, and set off a chain of highly destructive events. It could be disguised within a world war. Those who refuse to believe in genocide plans are some of the nicest but dumbest people alive.

AMERICAN FINANCIAL NUCLEAR REACTOR MELTDOWN: Chris Martenson describes the Great American Financial Nuclear Reactor, which is in the process of going through its own core meltdown. He wrote, "For decades, the world has been running its own nuclear style reaction, only in the currency and debt markets, where exponentially accelerating piles of debt and money have spun about faster and faster in a gigantic, complex, coordinated reaction, the core of which is, and always has been, the United States. At the very center of this ungainly money reactor is the main fuel pile itself, the USTreasury market. With any interruption to smooth flow of money through this pile, it will immediately become unstable. The abrupt slowdown of the world's third largest [Japanese] economy alters the smooth flow of cash around the globe, and even causes reversals of some other longstanding flows. Eventually Japan has to sell some of its vast hoard of US bonds in order to pay for external items needed for its reconstruction. Further, insurance companies, huge holders of US bonds, face stiff liability claims in the wake of the worst natural disaster to hit a heavily industrialized center and will be forced to redeem enormous amounts of Treasury paper. Stressed governments are finding themselves in more of an arguing mood, and agreements are hard to come by. Banks will begin to fail again, global trade to fall off, unrest to continue to build. And then it happens, a currency crisis!"

NOT A REPEAT OF 2008 COMMODITY SELLOFF: Independent analyst Dan Norcini cautioned gold investors not to expect a similar commodity price meltdown like in 2008 after the Wall Street death event. Gold & Silver each sold off sharply during the ensuing months after the collapse of the US banking system, as a liquidity drain was joined by a Wall Street attack of hedge funds. This time is totally opposite. Back in 2008 no Quantitative Easing program was in place, as hyper-inflation engines had not been turned on like now. QE will be global next. The 2008 problems had an unknown element embedded with bank derivatives. Norcini argues that the crisis today is more known, and more centered in Japan, but the Jackass disagrees. The extent of the wrecked export trade of Japan is a big unknown. The extent of the Yen Carry Trade unwind, and its drain from USTreasury Bond sales is a big unknown. The strain on the USFed might actually be more aggravated than they can manage. The extent of the radiation fallout to foreign lands downstream from the trade winds is a big unknown. California must be watched, as well as the NorthWest and Vancouver. Big unknowns remain and lurk with potential lethal impact to both economies and people.

Norcini makes great points about the monetary response being engaged and already at work. He makes great points about the reconstruction demands on commodities of many types. He concluded, "Back in 2008, there was no Fed QE and there was no Japan QE. Once the QE was announced by the Fed near the end of 2008, the hemorrhaging stopped and when the program actually commenced in March the next year, Gold and the rest of the commodity world took off to the upside. The action by the Fed seemed to take the unknown out of the situation in the one sense that many believed that the Fed would not allow the financial system to utterly fail, when many had believed it would. My strong belief is that the panic selling we are seeing in the markets is tied not to the earthquake damage or even the tsunami damage, but at this point to the unknown associated with a nuclear issue. The truth is the Japanese are going to require massive amounts of raw materials to rebuild their battered infrastructure. That is going to put a firm bid under the base metals and other commodity markets a bit further down the road. The implications are more of a short-term bearish thing, long-term bullish for commodities in general, but particularly bullish for Gold because of the implications associated with a QE program by another massive economy."

◄$$$ THE REVERSAL OF THE YEN CARRY TRADE WILL EXERT GREAT IMPACT ON GLOBAL FINANCIAL MARKETS. IT WILL BE IMPOSSIBLE TO STOP. THE EFFORT TO INTERRUPT IT WILL ADD GREAT POWER TO THE QE MONETARY INFLATION ALREADY IN PROGRESS. AT RISK FROM THE FINANCIAL TSUNAMI ARE JAPANESE BANKS AND THE JAPANESE EXPORT TRADE. THE EUROPEANS AND BRITISH WILL BE FOCUSED ON THEIR OWN CURRENCY CROSS RATES WITH THE YEN. THE USFED WILL BECOME MORE ISOLATED IN PREVENTING A USTBOND AND USDOLLAR MELTDOWN. $$$

A financial disaster has begun for Japan. In addition to massive disruption to industry, complete with factory shutdowns, and electricity blackouts, their financial markets are in turmoil. They require tremendous injections of emergency funds. The equally big story to the earthquake & tsunami damage is the currency and export trade damage sure to result. The Japanese Yen reached 129 last week versus the US$, the highest level since World War II. The units are 100 Yen equals $1.29 in US terms. The Nikkei stock index had lost around 20% of value in the span of a mere four days. The implications are obvious and dire. The G-7 finance ministers called an emergency meeting for the purpose of coordinating a Yen sale, to drive it down against other major currencies. The result of their action in just one day was clear, but its lasting effect is not known. They will be compelled to continue the anti-Yen action for weeks and months. They might not be able of preventing the USDollar from falling below some critical support levels. The USFed might have some help in buying USTreasury Bonds, but foreign central banks will have a higher priority to push down the Yen exchange rate versus their own native currencies.

At great risk is the Japanese export trade, the mammoth industrial engine that exports Toyota and Honda cars, Komatsu equipment, Nikon and other cameras, Sony home electronics, and much more. The price paid by foreigners to import such products into their own markets will rise, enough to make a dent. The Japanese trade surplus vanished from the Chinese industrial renaissance, aided by Japan. The Japanese trade deficit is next to appear, a shocker. Ironically, it will cause a RISE in the Yen currency, since funding the trade gap along with funding the government deficit will require the liquidation of a portion of the $800 billion in USTreasury Bonds held. They will liquidate rather than aggravate the nasty price inflation. Whether held in Bank of Japan accounts, or in commercial Japanese bank reserves, no matter. They will be pressured for sale. Enormous pressure is on the USFed in transfer. What comes next is a painful recession to Japan, offset by massive reconstruction projects, and surprising price inflation, with constant upward pressure on the Yen currency that defies logic and perplexes analysts. See the British Broadcast Corp article (CLICK HERE).

One of the most dangerous fresh outcomes from the Yen Carry Trade demise could be the initiation, actually the resumption from 2009, in the Dollar Carry Trade. One ends, another resumes, fueled by 0% rates and a declining currency. The world's financial centers, with all their permitted leveraged speculation, can count on the USDollar to decline and for the 0% rate to remain fixed almost permanently. The Jackass wrote in 2009 about the highly risky global speculation exploiting the easy US$ money, a carry trade in the global reserve currency, the USDollar. If it takes root and advances with a second gear, building momentum, it could be sufficient to kill the USDollar as the reserve currency. Even the oil producing nations will reject payment in declining USDollars that speculators push lower.

Too much attention has been given to the Japanese Yen versus the USDollar. Meanwhile, a massacre is taking place that global central bankers are trying to avert through brute force intervention. The Yen currency has been rising versus the Australian Dollar, the New Zealand Dollar, and the South African Rand also. The most important trend reversal is seen in the Yen rise versus the Euro and British Pound, the rise halted. The implication is loud & clear, that the cheapest recurring source of funding for risk assets the world has ever seen, the Yen Carry Trade, is fast coming to an abrupt end. Those trapped in inaction and lack of awareness will be destroyed and ruined by losses made worse by margin calls and forced selling in negative positions. As Tyler Durden said, "Those who managed to sell early on are lucky. The rest will get such an onslaught of margin calls they may need to access the discount window (if Primary Dealers and the luckier banks). Many will be forced to sell assets to satisfy collateral requirements as ongoing sales of carry pairs push the Yen ever higher, and force ever more liquidity out of the market. And if the Yen carry trade is done, the question is when will the USDollar, which has also been a carry currency for some time, follow suit. Once again, the most troubling observation is that the BOJ has not intervened. Our sinking feeling is that after pumping 50 trillion Yen or so in money markets, the petty cash may be running quite low." At great risk are major financial stock markets from a liquidity drain. See the Zero Hedge article (CLICK HERE).

 

GOLDEN POTPOURRI

◄$$$ NATURAL DISASTERS ARE STACKING UP, A SIMPLE FACT. $$$

Be careful. The world has turned more dangerous. Consider the list of natural disasters in recent weeks and months. Floods in Pakistan, drought in Russia, floods & typhoons in Australia, earthquake in New Zealand, powerful earthquake & tsunami in Japan (with nuclear meltdown threat), a freeze in Arizona & Northern Mexico. Couple these with Arab world uprisings. A little known man-nature event is the depletion of the Ogalalla water basin over Kansas, Nebraska, and Oklahoma that feeds the Plains states breadbasket. Never lose sight of the rising salt level of the California water basis that feeds the San Joaquin Valley. Never lose sight of the 40 years that Brazil has destroyed the rain forest. Effects will be noticeable.

◄$$$ A WIDE ARRAY OF PRICE INCREASES HAS RESULTED FROM THE MONETARY INFLATION LED BY THE USFED. THE BIGGEST RISE HAS OCCURRED WITH FOODSTUFFS AND PRECIOUS METALS. A VICIOUS CYCLE HAS BEEN CREATED, AS MORE CIVIL UNREST OVER FOOD PRICES CAUSES MORE FINANCIAL DISRUPTION AND SAFETY BEING SOUGHT AS MONEY FLEES. RISING FOOD PRICES ARE GLOBAL. IF AND WHEN THE QE PROGRAM TAKES A PAUSE THIS SUMMER, LOOK FOR MORE RELAXED COMMODITY PRICES, LOWER BOND YIELDS, BUT A MUCH SOFTER STOCK MARKET. HOWEVER, THE HIGHER COST STRUCTURE MAKES FOR A MONSTER HEADWIND FOR THE USECONOMY, WHICH WOULD LIKELY FALTER QUICKLY AND NOTICEABLY. THE USFED HAS BEEN ISOLATED AS THE PRIMARY USTBOND BUYER, SOON ITS ONLY BUYER. $$$

Rising food prices have pushed up inflation significantly and noticeably. A recently released report called Food Price Watch by the World Bank confirms that rising agricultural products are sharply pushing up global food prices in lower income nations. The WB global food price index increased by 15% between October 2010 and January 2011, fully 29% above its level a year ago. The global prices of wheat, corn, sugar, and edible oils saw sharp increases. According to the WB estimates, an additional 44 million people fell into poverty. The report made one claim certain to fly in the face of US leaders. Its findings are based on sources from the Global Information & Early Warning and Information System (GIEWS) of the Food & Agricultural Organization. It cited rising agricultural prices (60% on average) are not due to scarcity. Grain production dropped only 2% after three years of bumper crops. They pointed blame to both the USGovt fiscal stimulus programs and the USFed debt monetization programs. They identified non-agricultural and energy resources as experiencing huge price increases too. In mentioning "macro vulnerabilities" they indicate higher food prices are the cause of social unrest and popular uprisings. See the Zero Hedge article (CLICK HERE).

Economist David Rosenberg gave his assessment of what happens if the USFed withdraws its heavy support from the USTreasury Bond market. The midsection of year 2010 gave a very good indication of what to expect. The stock market major indexes fell, but movement to defensive stocks occurred as the crude oil price fell but with several important commodities remaining firm. Corporate bond spreads widened a little, as USTBond yields fell nicely. The US$ DX index firmed a little, giving relief to the cost structure, but Gold rose as safe haven reserve. Rosenberg wrote, "The Fed's real goal is to ignite investor risk appetite. Bernanke et al have not kept it a secret that the real aim of the QEs is to generate a liquidity induced rally in the equity market. If bond yields end up rising, as they have for most of the past six months, but occurs with a rising stock market and greater economic strength, then the Fed is totally cool with that. Again Bernanke has stated that [position] very bluntly, even if the higher mortgage rates that ensue drive another knife into the heart of the housing market. When the Fed stops QE, as we saw last year, risk appetite fades and the economy sputters, a development that will likely be even more acute this time around given the accelerating fiscal restraint at all levels of government that is just around the corner. So who buys the bonds when Ben leaves the building? The same folks who were the buyers last year from April to August. The ones who were switching out of equities, commodities, and other risk-assets." Agreed by the Jackass about the risk being more acute this time, since deterioration in the USEconomy has occurred. The isolation of the USFed as USTBond buyer has been laid bare, more so than Rosenberg admits. A simple rotation from stocks to bonds will be grossly inadequate to cover bond supply. Rosenberg might be very correct in his analysis of last year, but my expectation is for a much quicker and clearer decline across the many sectors of the economy, which are reacting badly to a higher cost structure that Rosenberg does not even address, a big oversight, a surprising gap in his usually solid analysis. See the Zero Hedge article (CLICK HERE).

◄$$$ THE G-20 MEETING IN PARIS BEGAN WITH THE UNITED STATES FAILING TO WIN CONSENSUS IN ACTIONS DIRECTED AGAINST CHINA. THE G-20 DELIVERED MORE HUMILIATION AGAINST THE UNITED STATES FOR ITS RECKLESS QE2 PROGRAM, SEEN CAUSING GLOBAL PRICE INFLATION AND BROAD POVERTY. THE G-20 MINISTERS REACHED AN ACCORD ON A GLOBAL IMBALANCE METRIC. THE CHINESE PREVAILED IN BLOCKING INCLUSION OF A RESERVES QUANTITY. LEADERSHIP AND CONTROL OF THE AGENDA IS CHANGING, WITH INFLUENCE LESS TO ANGLOS AND MORE TO CHINESE. $$$

Out of the gate, China resisted the US-led movement on G-20 imbalance indicators. It was a stick to fight over, with the US losing face again. The world finance minsters from major economies wanted to measure and correct global economic imbalances. The US pushed to include the large currency reserves in the indicator, along with prevailing exchange rates. The Chinese pushed to include the large debt levels and trade deficits, even consumer borrowing and private savings. Little progress was made on action to relieve the imbalances and bring about remedy. Instead, in a pathetic display, progress was hailed as an achievement to agree upon a metric to gauge the ruinous situation without even addressing policy towards it. Initial discord was stubborn, even with all-night negotiating sessions. As the second large world economy, China wishes to aviod usage of any metric as a stick to beat their nation with. It refuses to revalue its currency to help rebalance global growth. Obvious divergent interests were present at the meeting, but they did reach a compromise on a text that seems to be both balanced and demanding in its implementation, even though they agreed on no policy course at all. It is interesting how the G-20 meets every three months, and the G-8 no longer. The US and Western Europe are losing their grip on global finance leadership.

French President Nicolas Sarkozy applauded the fact that China agreed to host a seminar on reforming the international monetary system in Shenzhen in late March. He said, "I want to avoid your debates getting bogged down in interminable discussion about these indicators, which are distracting us from the essentials. Giving priority to national interests would be the death of the G-20." See the Reuters article (CLICK HERE). Any meaningful metric must show reserves and debt, two ends of the same spectrum. On it the US is deeply negative and China is deeply positive. It seems that the US wants a meter used on all other nations but not the US itself. The G-20 ended up much like the South Korean G-20 in November, where China led a gaggle that kicked the US shins hard in disrespect. At the last G-20, the USGovt was insulted on identified coordinated trade protection violations by China, sought by the United States but not approved.

The G-20 finance ministers delivered heavy blows against the US for their QE2 monetary policies. The consensus, excluding the US delegates, was that US monetary policy contributed to global political instability, with debate over degree. Some criticism was also directed at China for being responsible for excessive imbalances. The formal communique cited debts and deficits with poor savings, clearly directed at the United States. It cited an external imbalance composed of global trade and net investment income flows and transfers. Some analysts believe the G-20 was equally upset with the US and China, whose exchange rate policy ranks with the US fiscal and monetary policies as disruptive and chronic causes to excessive imbalances. This much is very clear. The excess imbalances charge on US fiscal and monetary policy will trump the exchange rate abuses of China. The world observed bickering and no work toward solution. The big banks are the problem, and only Iceland liquidated them to start anew. The communique gave a solid hint of their awareness, as it read "We discussed concerns about consequences of potential excessive commodity price volatility and asked our deputies to report back to us on the underlying drivers and consider possible actions." US monetary policies must be included in any report as a contributor. With the next G-20 to take place in April, exactly the time when USFed Chairman Bernanke must provide details on his next policy step, his hands will be tied. Look for him to lie and begin concealing QE to Infinity.

France said the indicators were not binding targets but would lead to the drafting of guidelines for coordinated economic policies to reduce distortions. Germany, also resistent to US efforts to set numerical targets for trade and current account surpluses, repeated that no specific goals would be set for certain indicators. Again, the swing nation Germany as US adversary. The G20 ministers acknowledged that economic recovery was diverging between developed and developing economies, but they differed in their measure of global inflation risks. The communique noted that while growth was subdued in most developed economies, plagued by high unemployment, major emerging markets were roaring ahead with some overheating of price inflation and capital flows. The Euro Central Bank head said inflationary pressures coming from energy and commodities prices must be taken seriously. However, when Trichet of the ECB urged a determined effort to avoid second round effects on wages, he essentially advocated the spread of deep poverty. The United States repeated like an empty gong that price inflation risks were only moderate. China and Brazil complained vigorously that hot money inflows risked destabilizing the economies of emerging countries, as they blamed the USFed without hesitation for its unprecedented monetary printing on display. Consensus was reached in a pithy billboard message of strengthening the international monetary system. See the Reuters article (CLICK HERE).

What is missing in all discussions is Chinese wages, a primary cause for the great imbalances. Globalization is essentially a labor arbitrage to exploit much lower Chinese labor costs. Nobody should expect the Chinese Yuan to be set extremely high in order to compensate for the extremely low wage scale in China. Globalization opened the door to arbitrage on Chinese labor that door cannot close unless China goes dark. The US frustrated pursuits in the Paris G-20 and Korean G-20 point out an end to its prosperity, prestige, and influence. An intriguing process is taking place. The US is vulnerable, losing allies fast within G-20. The G-8 vanished and China is taking control of the reins to the 20-team of horses. The visible aspect to the Global Paradigm Shift in geopolitical power can be seen in the G-20 interaction.

◄$$$ A CONSPIRACY WITH A SILVER LINING. THE NEW YORK TIMES HAS PUBLISHED AN ARTICLE THAT LAYS OUT THE FINANCIAL FRAUD, CITING TWO KEY PLAYERS. IN A NETWORK OF MARKET SCAMS, JPMORGAN APPEARS TO BE GOING LONG COPPER AND SUGAR IN ORDER TO FINANCE ITS COLOSSAL FAILURE IN SILVER AND GOLD. $$$

The New York Times, in a weblog editorial piece, followed the long path of suspicious big US bank activity with respect to the rigged silver market. It identified JPMorgan and HSBC as principal agents in market interference. A long history is traced for the two banks, along with involvement if not support actions by Bear Stearns and Goldman Sachs, and even the heavy profits raked by the banking giants. Mention is given with credibility, to Andrew Maguire for his whistleblower role. The long drawn out saga of CFTC regulator and legal entanglements is laid out in rough sketch. JPMorgan openly boasted in London taverns about their rigged profiteering a year ago, detailed by Maguire. This is the first time the silver market rigging topic has reached any global prestigious newspaper. William Cohan wrote, "It is getting harder and harder to continue to brush off the Andrew Maguire claims as the rantings of a rogue trader with a nutty online following. The Commodities Futures Trading Commission should immediately release the files from its investigation into the supposed manipulation of the silver market so the public can determine whether JPMorganChase and HSBC did anything illegal, with or without the help of the Fed. In addition, the commission should start enforcing the 10% threshold on silver positions it has proposed to comply with Dodd-Frank law. Basically, the other commissioners must join with Bart Chilton to do the job they are required to do: Protecting the sanctity of the markets and preventing the sorts of manipulation we've seen all too often." Nice ideals, no chance of full justice. See the Opinionater article (CLICK HERE). William Cohan was interviewed last week by Fox News. The host interrupted his guest too much, but some good basic points were made. However, Cohan never mentioned the naked short aspect of the silver futures contracts, with no collateral posted (big missed point). Nobody on the panel bothered to mention that Gold & Silver price suppression supports the paper USDollar and the entire paper financial markets of stocks & bonds. Shallow stuff but good public exposure of prima facie criminality. See the Fox Business News video (CLICK HERE).

The silver manipulation story is finally starting to surface in the mainstream media. With all the reports about JPMorgan making huge investments in the copper and sugar markets, one must wonder if they are seeking to make outsized profits in these two markets in order to cover some mammoth losses in the silver market. Methinks clearly yes. JPM seemed to notice an open door to capture significant copper and sugar supplies that were not protected. However, the silver losses should grow exponentially after the price surpasses $36 and $40.

◄$$$ A GLOBAL BANK MAELSTROM HAS QUIETLY OCCURRED. SOUTH KOREAN BANKS ARE FACING A NATIONWIDE BANK RUN. MASSIVE WITHDRAWALS ARE SPREADING LIKE A VIRUS. ITALIAN BANKS ARE SUPPOSEDLY GOING TO MARK TO MARKET THEIR BANK ASSETS IN GOLD, AND THUS RELIEVE THEIR INSOLVENCY. THE ONLY PROBLEM IS THAT THEY OWN ALMOST ZERO GOLD. THE BAHRAIN BANKING SECTOR IS AN ORDER OF MAGNITUDE LARGER THAN ANY OTHER PERSIAN GULF NATION. ANY COLLAPSE COULD CAUSE STRONG RIPPLES AND POSSIBLY A GLOBAL BANK RUN. $$$

Quietly a South Korean bank run has spread like wildfire. It began in February but has settled down somewhat in the last couple weeks. The eighth bank shut down after Domin Bank voluntarily decided to suspend its operations because of massive withdrawals. The savings bank saw its capital ratio fall below the 5% level. The JoongAng news agency reported, "The decision took both depositors and financial regulators by surprise, since it was the first time that a local bank shut its doors on its own." Locals realized that their banking system is built on a house of cards. The nation's ethical standard almost openly states it is legally and morally wrong for a bank to admit it is insolvent; they simply shut down. What a noble unique concept that America banks should adopt. Instead, the big US banks declare fraudulent accounting as the national norm, and permit Zombie banks not only to continue operations, but to rule the USGovt from their syndicate perch and to preside over protected fraud. The US has yet to export bank accounting fraud to Korea. One must wonder the effect if Chinese banks could suffer a proportional bank run, with half a billion depositors seeking to withdraw cash. See the Zero Hedge article (CLICK HERE).

In an about face, after interrupting all movements for banks to Mark to Market toward an indication of true asset value, Italian banks have been aggressively urging a policy reversal. They want to implement Mark to Market finally in order to take advantage of surging prices in Gold. The hypocrisy is stark. The Financial Times reported, "Italian banks, which by a quirk of law as shareholders in the country's central bank, are lobbying to have their stakes in the Bank of Italy marked-to-market on the back of surging gold prices in an attempt to ease regulatory pressure on them to raise capital in advance of this summer's stress tests." More Stress Tests are coming to mask insolvency, a painted front. A renewed debate is springing up from the grassroots as to whether the USFed should also permit Mark to Market accounting on its alleged 8133 tonnes of Gold, currently held on the books at $42.22. Such a bold move would raise the US gold bullion asset value by $350 billion. Not to worry, never to happen! Do not expect any material change to Italian bank accounting either. The current Bank of Italy governor Mario Draghi is a Goldman Sachs alumnus. So a simple telephone call will bring him in check. See the Zero Hedge article (CLICK HERE). Bear in mind that Italian banks are not in possession of much of ANY gold. Check the facts behind the LongTerm Capital Mgmt incident. The only big loser in that 1998 incident was the Bank of Italy. In an orchestrated outcome, its Gold was sacrificed in the process of saving the world, given at the fiat altar.

Bahrain has been in the news, with street violence, Saudi overseer reaction, and the potential for more disruptions. Not told enough is the clash of Moslem religious sects, the Shiites among the Bahrain residents and the Sunnis from the Saudi government and apparatus. Not mentioned ever in news stories is the Bahrain banking sector, which is enormous. The Bahraini banks stand an order of magnitude larger than any other Persian Gulf nation. Unhappy natives tend to pull money out of banks, to migrate, and to seek safer ground. Notice the relative size of the bank assets and the outlier. A very unstable situation is developing in the tiny nation, where chaos could easily spread. The banking world is watching Bahrain for contagion, as fallout could be serious, even reaching Western banks in an new source of problems. Just when people thought Dubai was contained in the region.

Bahrain is an unusual nation, consisting of numerous islands. Until 1783, Bahrain was a Persian province, when the Al Khalifi royal family began its rule, protected by the British. Its wealth from oil sources is drying up, replaced by a construction sector and sponsorship as a military base for the United States. Its Shiite majority has consistently been unruly and activist. Political repression is continuous, as all political opposition parties are banned. The rulers, tied to Saudi strongholds, cleverly set up a parliament with an upper house and lower house having equal powers. Therefore, all actions and movements are nullified. See a good brief background on Bahrain from About.Com on Middle East Issues (CLICK HERE).

Bahrain is the point of eruption within the Persian Gulf. It has tremendous Iranian influence. A source from the Gulf region has informed me that the Saudis will lose control in Bahrain to Iran, certain to cause significant new problems. Think banking. Several Gulf states have offered aid to the Saudis in quelling the uprising, but those gestures will backfire. He said, "Saudi Arabia has 24 month maximum to remain intact, in its current condition. People in this region are clueless what is going to hit them. The UAE made a gigantic strategic and operational mistake to send 500 security forces to Bahrain the other day. Bahrain belongs to Iran, and they will take it back, breaking the backbone of the US naval base there."

UNSTABLE OIL REGION

◄$$$ LIBYAN OIL PRODUCTION GRADUALLY IS GOING OFFLINE, AS CIVIL WAR HAS BEEN LIT. SO FAR ALMOST HALF OF ITS OUTPUT HAS SHUT DOWN AS VIOLENCE SPREADS AND THE THREAT OF GOVERNMENT SABOTAGE INCREASES. CONTROL OVER THE EASTERN OILFIELDS AND REFINERIES RAGES. IN EACH CONTROL SHIFT, MORE DESTRUCTION TO THE PETRO PLANTS TAKES PLACE. BEWARE OF LIBYA SERVING AS A WEDGE TO DIVIDE THE ANGLO AXIS, WITH GERMANY ACTING AS THE WEDGE. $$$

Half of Libyan oil production is down. In the early weeks of conflict, 800 thousand barrels of the national output of 1.6 million barrels per day were taken offline. The current figure is only 600 thousand barrels per day in production, less than half. The biggest importer of Libyan oil is its longstanding commercial partner Italy, which imports 425k barrels of oil per day. The war strewn nation of Libya accounts for only 2% of global oil exports, but its biggest customers have felt the impact immediately. Hence, 1% of world oil output has been removed from the equation. As the violence escalates, chaos could easily spread, resulting in oil closure to reach 100% before long in the North African nation ruled for 40 years by a lunatic tyrant. Recall price is determined at the margin, and the Saudis are probably lying about their excess capacity. Furthermore, excess OPEC capacity cannot be easily substituted, contrary to the popular beliefes. Libyan crude is far higher in quality, some of the world's best grade. Other disruptions to crude oil output have come from neighboring Algeria. The Japanese firm Nomura has put forth a forecast that the combined Libya & Algeria oil outage will result in the doubling of crude prices, like to the $150 mark. The current $110 price is not far off. Beware of any potential to Saudi growing chaos, which so far has been contained. The Hat Trick Letter will not go into depth or analyze political issues, banned political parties, social welfare, demonstration causes, quelled protests, pilfered hoarded national wealth, and so on except for perhaps sequested accounts overseas that affect banks. The Saudis have their own methods of quelling protests like the Day of Rage last week, by setting up detours and roadblocks. The protest fizzled, a dud. If the Saudi crude oil output is interrupted, then much more than a higher crude oil price is at stake. The implications could carry into the PetroDollar defacto standard itself, the norm of transactions for purchase conducted in USDollars. The global reserve currency status of the USDollar is enforced by the PetroDollar Standard. See the Zero Hedge article (CLICK HERE).

◄$$$ GERMANY DEFIED THE UNITED STATES IN THE UNITED NATIONS VOTE AGAINST LIBYA. REGARD THE ACTION AS DEFIANT AND A SIGN OF FURTHER OPPOSITION AGAINST THE ANGLO POWER CENTER. $$$

A geopolitical note with no followup. At the United Nations, a vote was approved to establish and enforce a No-Fly Zone over Libya. The ban essentially creates an environment to attack aircraft set to make bomb delivery and strafing missions. The ban also proves a cloak for any coordinated aerial attacks on the Qaddafi regime, to unseat him and the brutal dictatorial rule. However, a key item on the UN Security Council vote should be noted. Germany, Russia, and China abstained in the vote, not a YES, not a NO vote. Germany was not seen at the side of France or the United States, who normally can take Germany's vote for granted in a strong front. Observe German defiance. That front is no longer strong, and possibly no longer a front at all. If the US, France, and Britain attack Libya, do not be surprised to see widespread retaliation in response in WashingtonDC (or New York), Paris, and London. The uprisings in the Arab world are spreading, the most recent being to Syria. My interpretation goes beyond Arabs and Anglos, but to the new geopolitical force that has yet to show its muscle and utilize its strength. The Eastern Alliance has focused its efforts behind the curtains to create the new Nordic Euro currency, backed by Gold and possibly Crude Oil. It is a solid alliance currently past planning and in development, implementation, and coordination. The alliance is led in the background by Germany, and relies upon heavy Russian resource supply and heavy Chinese funding guarantees. My belief is that the Chinese Yuan will fold somehow within the new Nordic Euro, or give recognition to it, or manage reliable swap facilities with it. So Germany has showed defiance against the US & Britain, as well as France, breaking from the pack. It could be that Germany decided to use the Libyan card as its opening gambit in breaking ranks with the Anglo Axis. More to come.

◄$$$ THE ELEPHANT OILFIELD GHAWAR IN SAUDI ARABIA PRODUCES CRUDE OIL WITH A 95% WATER CUT. THE IMPLICATION IS THAT THE OIL GIANT IS NO LONGER PRODUCING AT THE LEVEL THEY CLAIM. GHAWAR IS NEAR ITS TERMINAL END. THE PEAK OIL SHORTAGES ARE VERY REAL IN MY VIEW. $$$

When an oil field is old, after a couple decades of oil production, it lacks pressure down below to push up oil from the deposit location at lower levels. In order to maintain pressure, both water and at times natural gas are pumped into the drill site holes. As the years pass, the proportion of water from output above ground rises to indicate the retirement end of the oilfield. It is called the Water Cut. In the 1980 decade the water cut from the giant Saudi Ghawar oil field was 30% to 40%, still viable for crude oil output. The dirty secret from Saudi Arabia is that Ghawar has a water cut of around 95%!! Some energy analysts believe that Saudi output is not as much as the world believes, not as much as they claim credit for. The royals talk about excess spare capacity, serving the US & UK interests dutifully, when their major oilfields, not just Ghawar, are nearly exhausted. The Saudis are a big bluff on supply. The peak oil argument is more acutely true than some aggressive analysts even know. The vast reserves like in Bakken in the United States are viable only at $150 to $200 oil prices. See the Oil Drum article (CLICK HERE) and the CWSX essay (CLICK HERE).

◄$$$ GASOLINE PRICES HAVE RISEN WORLDWIDE. EUROPEAN CONSUMERS WILL FEEL COST PRESSURES, AND DO MUCH LESS DISCRETIONARY SPENDING, A FACTOR THAT THE USGOVT AND USBANK LEADERS SEEM OBLIVIOUS OR INDIFFERENT TO. THE SQUEEZE HAS BEGUN. THE EURO CENTRAL BANK TEMPTATION TO RAISE INTEREST RATES WOULD ONLY COMPOUND THE PROBLEM. CENTRAL BANKERS ARE MORONS AND HORRENDOUS ECONOMISTS. THEY PREFER THE SPREAD OF POVERTY. $$$

Gasoline prices set records across Europe in the first week of March, matching 2008 levels. The conflict in Libya has a direct affect on the crude oil price, a continuation of the supply threat that began with the Egyptian uprisings and partial interruption of the Suez Canal. Consumers and businesses must adapt to higher energy costs across the spectrum. Already, data shows that British households are cutting back on travel, movie theater visits, and grocery food shopping. In the UK, gasoline (petrol) prices surged to 1.307 Pounds per liter ($8.06 per gallon) in the first week of March, according to research from the British Automobile Assn. Prices set records in the Netherlands and Italy in coincident fashion. In Italy, gasoline prices reached 1.544 Euros a liter and diesel climbed to 1.438 Euros per liter ($8.17 per gallon), according to Quotidiano Energia. Gasoline prices in the Netherlands reached a record 1.697 Euros per liter, according to consumer advocate United Consumers. The average price for high grade gasoline in Germany was 1.55 Euros per liter. The record high June 2008 levels are back, almost equal.

The average US gasoline price is working its way up toward the $4/gallon mark. The insanity of central bank policy is vivid to observe. The impact on consumer prices might motivate the European Central Bank to recklessly raise interest rates in April in order to discourage higher wages and head off the threat of an inflationary spiral. Translation, the central bank and the banker elite do not wish for the citizens to be capable of covering the higher costs, and prefer the widespread poverty instead. Banker welfare has continued unabated in bond redemptions and bank bailouts. But higher wages are considered a curse to the upper class, enabling better wealth distribution to the unwashed masses. An interest rate hike would raise the cost of home loans, car loans, and business loans, resulting in higher costs passed on further, a vicious cycle. Central bankers are economic fools and harvesters of vassal poverty. Their main handicraft is economic deterioration, a consistent outcome of their policy. See the Bloomberg article (CLICK HERE).

EUROPE STILL FESTERS

◄$$$ THE MERKEL POLITICAL DEFEAT SIGNALS GRAND CHANGES INSIDE GERMANY. THE ESTABLISHED LEADING PARTY IS OUT OF TOUCH WITH THE PEOPLE, REPRESENTING THE OLD GUARD (EVEN TIED TO LONDON & WALL STREET). GERMANY IS PREPARING FOR THE JETTISON OF SOUTHERN EUROPE AND LAUNCH ON A NEW PATH. THE GERMAN PEOPLE WANT AN END TO THE FOREIGN BANK BAILOUTS, AND A VIABLE NEW DIRECTION. $$$

The Hat Trick Letter does not dabble much into politics. But when Angela Merkel lost an important election in overwhelming terms, it carried repercussions of a massive collapse for the Old Guard in Germany. Too many are the links from Merkel and Deutsche Bank, the main agent as support player to the Anglo banker syndicate. The people rejected the path of never-ending European bailouts. For over ten years, Germans have subsidized inefficiency, lower work ethics, corruption, and reckless asset bubbles in the Southern European nations. The German people were heard loud and clear: No More Bailouts, and No More PIGS Welfare. This marks the end of Merkel's political career in my view. Her Christian Democrat party has lost control of Hamburg, the nation's richest state. Cross the table to the financial side. The Euro Central Bank will be called up much more to pick up the same PIGS sovereign bonds, like from Portugal pressingly, since Germany has lost its appetite to devote hard earned savings to wasteful welfare program. Implications are vast. The periperal sovereign debt from Southern Europe will not be on the German menu much longer, if at all. What has happened in Germany is a veritable revolution against the existing status quo. The attempt to cover up European bailouts with endless credit lines has ended. Thus, expect Chinese discounted purchases to enter the picture with greater volume, even greater recognition. See the Zero Hedge article (CLICK HERE). The response from a German banker contact to my query was simple, "Merkel and her gang are out of touch, and will be swept aside. Germans will no longer subsidize their reckless and irresponsible neighbors to the south. After ten years, it is enough, at a cost of at least $3 trillion in German savings. More accurately, Germany cannot afford to provide such welfare to the South any longer."

◄$$$ THE EURO CENTRAL BANK HAS SEEN EXPLODING CREDIT. THEY BLAME IT ON IRELAND, A GROSS DECEPTION. THE EUROPEAN BANKS CONTINUE TO SUFFER AN IMPLOSION. THE HEAVY LENDING WILL CONTINUE AND CONTIBUTE TO EUROPEAN INFLATION. $$$

The Euro Central Bank a few weeks ago saw record overnight borrowings. Some deception comes with the story, as blame is placed on the black hole of Ireland. The official story is that the culprits for the surge in borrowing on the Marginal Lending Facility have been identified, and Ireland is again to blame. The flawed explanation given was that insolvent Irish banks were taking great advantage of the credit lines, and paid an extra 75 basis points in interest for the single day quick notice for access. Many were skeptical of the explanation, since banks across Europe are in deep trouble. One a given day, total borrowing on the lending facility fell by a ripe 2 billion Euros, without any news of collateral unwind to free up asset sales by either Anglo Irish Bank and the Irish Nationwide Building Society. This is a telltale sign of a false story. If Ireland was responsible, then collateral unwind would occur. False blame is easy and will continue. Borrowings on the Marginal Lending Facility will persist for a long time. See the Zero Hedge article (CLICK HERE).

◄$$$ SPAIN'S PROPERTY PRICES ARE GROSSLY DOWNPLAYED FOR A GENTLE DECLINE. PRICE DECLINES IN REALITY WILL BE TRIPLE WHAT ARE ESTIMATED OFFICIALLY. THE SPANISH BANKS HAVE NOT EVEN BEGUN TO DEAL WITH THE WRITEDOWN LOSSES. UNEMPLOYMENT GOES HAND IN HAND WITH THE PROPERTY WOES, SURELY TO WORSEN ON ALL FRONTS. THE NATION OF SPAIN IS THE GREAT RISK IN THE EUROPEAN LIVING ROOM. ROUGHLY HALF OF THE SPANISH PROPERTY LOANS HAVE  BEEN DECLARED AS TOXIC. $$$

Nevermind the Middle East, as Spain remains the gravely wounded man in the European room! Connections between the two regions are considerable, both family linneage and bank commitments. The short distances have a parallel with corporate investments that are not minimal. Libya holds large stakes in several large Italian companies like the UniCredit bank and defense company Finmeccanica. The nation of Italy, already struggling within the financial chaos, stands at risk from the North African turmoil. Other points of risk are the large trading hub between Morocco and France, as well as the Turkish gateway to Eastern Europe. Apart from the Middle East & North African meltdown and anger at their tyrant leaders, who have largely hoarded national wealth as their own personal pie, in the bigger picture for Europe lies Spain. It is the big threat for Europe. The sun-drenched nation is the site of unending home foreclosures, just like Florida, California, Arizona, and Las Vegas are for the United States. Home prices in Spain continue their downward path. But worse, given the resistance to liquidate bulging home supply, given the unwillingness by the big banks to deal with the problem, given heavy cultural factors, nothing has been resolved. Home prices will fall much farther. Bank losses will rack up much higher. It might be a cultural pride issue, but delays are the norm. Consider the following highly deceptive property price graph from Spanish Property Insight. It represents a gross departure from reality. One year under a 10% price decline, and another year under 5%?? Hardly, not in this world! Home prices are destined in Spain to decline by 30%, in order to correct for five consecutive years over 10% in annual gains.

The press hails the declines as dramatic, but they are small and unrealistic, once the withheld home supply is factored in. The big banks are not selling the homes on their books. People are holding out for a ridiculous price for sale, and not selling. Properties sit on the market like a festering weeping sore. Here in Costa Rica, conditions and cultural influence might be similar. It is not unusual to see a home sit on the market for two full years without any offers, priced 30% above the market. My view is that an extension of the Hispanic culture is at work. Spain is unique among the larger European nations, in that it has an enormous number of homes unsold sitting in limbo, associated with gigantic debt loads for banks tied to the property market. Mark Stucklin of Spanish Property Insights shed light on some official housing numbers. They are loaded with a dreamy version of reality, not too connected to the real world, admittedly. He said, "As a result, prices have now fallen 13.1% peak to present, and by as much as 20% in popular tourist destinations like Alicante province (Costa Blanca), home to a large stock of holiday homes. The problem with the Government's data is it tends to understate price falls, which have been more like 30% or more (peak to present) in coastal regions like the Costa Blanca and the Costa del Sol." So dispute and contradiction came from inside the same agency that produced the falsified graph. Expect a deeply damaging nasty significant second leg down in Spanish property prices, which will address the disparity but only when the bloated inventory is actually processed, and progress is made toward clearing the market. Consider the twin plague in the jobless condition. The latest unemployment figures are devastating, as the February number of unemployed citizens in Spain stood at 4.3 million, more than 20% of the working class and over 40% among the young! More severe pain comes to Spain for home prices, bank losses, unemployment, and petitions for official European Union aid. The Spanish banking sector is already insolvent, therefore bank failures and liquidations should be expected.

◄$$$ PORTUGAL IS READY TO BLOW UP AGAIN, AS NOTHING WAS FIXED. THE PIGS NATIONS WILL ERUPT PERIODICALLY, SINCE SMOTHERING A DEBT PROBLEM WITH A FLOOD OF NEW DEBT SHOWS STUPIDITY IN THE FACE OF FUTILITY. SOVEREIGN DEBT IN SOUTHERN EUROPE WILL REACH ANOTHER CLIMAX POINT THIS YEAR. PORTUGAL IS A REMINDER. $$$

The Southern Europe debt cauldron might turn from simmer to boil very soon, with Portugal serving as the reminder. After a bland agreement that basically blessed all past moves as sufficient in Brussels two weeks ago, the sovereign debt crisis continues to unfold in Europe. Their midcourse accord employed the same useless peer pressure model, as Mike Shedlock appropriatedly described. EU leaders agreed offered debt plagued Greece a cut in its interest rate, and provided more flexibility for the stability fund. Since it refused to adopt a corporate tax change, Ireland will receive bailout funds but at no reduction from the 6% interest rate. Germany and France intend to tighten discipline in the EuroZone, a daunting task much like herding cats that each speak a different language. The temporary Financial Stability Fund will be extended in its term, and permitted to lend its full 440 billion Euros. The permanent fund that will replace it in 2013 will grow to 500 billion Euros. They extend what does not succeed. Last week Moodys cut Portugal's sovereign debt rating by two notches to A3. Given the clear impact of high borrowing costs and the impossible challenge of meeting tough fiscal targets, the agency promised of possible future downgrades. The yield on Portuguese Govt 10-year bonds was at 7.67% recently, as its spread over benchmark German Bunds rose slightly to 456 basis points. The risk premiums are rising once again, a crisis warning. Such is normal when nothing is remedied. The true solution requires widespread bank liquidations, just like in the United States. Instead, the stability fund will be used to offer grandiose redemptive aid to the bankers while the system remains broken.

The Portuguese Govt blamed higher rates paid at a debt auction on the political refusal to ratify its latest austerity plans. The standoff could force the nation of 11.4 million people to seek a bailout. Budget goals will not be met, since spending cuts associated with an austerity plan have been sidelined. Besides, such poison pills will assure much greater budget deficits, a fact that simply cannot be learned by the governments under elite control. Finance Minister Fernando Teixeira dos Santos told their budget committee, "Failure to approve the new measures in the budget plan would push the country to external help. Current market conditions are unsustainable in the medium and long-term." A snowball effect from higher borrowing costs is underway, leading to higher debt levels, in a vicious cycle gradually turning the situation worse. The natives have turned restless, stepping up public protests against the austerity measures. They feature higher taxes, lower social benefits, and worse economic recession. Portugal will require a bailout regardless of the political squabbles or the budget approval, since it cannot fund its debt effectively. Bear in mind that bailouts are to the debt holders which are dominated by foreign entities led German, French, and British banks. The easy conclusion is that delays are pushed, one after the other. Solutions are too painful to the elite. Structural problem in Europe are immense. See the Global Economic Analysis articles (CLICK HERE and HERE).

◄$$$ THE IRISH GOVT HAS DECIDED TO CONTINUE TAKING THE POISON PILLS. PRESSURE FROM THE LONDON BANKERS HAS BEEN INTENSE. THEY RARELY EVER LOSE, AS THEY DID IN ICELAND. THE IRISH GOVT IS A LOST GROUP OF SOULS UNDER LONDON INFLUENCE AND CONTROL. THE NATION IS A DISASTER, SURE TO GROW WORSE WITH MORE BUDGET CUTS, MORE JOB CUTS, AND MORE POVERTY, BUT HANDSOME BANKER REDEMPTIONS. $$$

If only Ireland were smaller, like Iceland, they could defend themselves from the intense banker pressure. But they are medium sized and must yield to banker pressures, since the bankers refuse to accept big losses. The new Irish Govt has decided to remain with the disastrous EU/IMF plan, best described as a poison pill that bails out the big foreign banks from their Irish exposure. Clearly, the new Irish leaders caved in to the banksters, as fiscal austerity has been grinding the populace down, cutting spending, eliminating jobs, and canceling projects. One must suspect heavy bribes paid to Irish leaders. Meanwhile, expect the Irish budget deficit to grow worse and rise further. The protests and riots will come and go, but the devotion to the elite will remain a constant. The big London bank exposure, along with a few other key European nations, is too great. The plan to sell sovereign assets will most assuredly be at discount prices to the banksters, as they replenish their accounts. Profiteering during crisis is a bankster speciality, a practice evident for at least 300 years. See the Reuters article (CLICK HERE).

◄$$$ PRESSURES MOUNT FOR GREECE TO REVERT TO THE OLD DRACHMA CURRENCY. FINALLY SOME MASSIVE WRITEOFFS ARE LIKELY FOR THE GREEK GOVT DEBT. THE UNPOPULAR AND DESTRUCTIVE AUSTERITY MEASURES DEMANDED ARE SUFFICIENT FOR GREEK LEADERS TO ABANDON THE EURO, FINALLY A CONCEPT PUT IN THE OPEN. AFTERWARDS WILL COME A HUGE CURRENCY DEVALUATION. PORTUGAL AND SPAIN ARE NEXT ON THE FIRING LINE THAT COULD ENABLE A REVERSION TO OLD CURRENCIES. $$$

Greece cannot exit the news, despite all the vacant fixes, since they were basic bandaids and chewing gum to plug holes, nothing more. The Greek Govt swallowed an IMF poison pill. Little wonder its deficits are rising rapidly despite radical austerity measures imposed. A group of leading European economists has warned that creditors might have to write off more than 30% of their loans to Greece, even recent loans. The EEAG recommended drastic steps for Greece, as further long-term aid seems less likely in the current political climate. Leading banks are giving up hope that Greece will be able to pay back all its debts. The radical steps are for Greece to return to its national Drachma currency, or to launch even tougher austerity measures that will deepen the cuts in wages and salaries. Few realize that the IMF solution was suicide, as the Jackass described before the deficits worsened as forecasted. Thomas Mirow is head of the European Bank for Reconstruction & Development. He expects a grand Greek debt debt restructuring, complete with writedowns and partial debt forgiveness. He said, "It is doubtful that Greece will be able to bear a debt ratio of more than 150% over the long term. The markets have been pricing in a debt restructuring for some time. The ratio should be lowered to 100%, so that the country can overcome its problems." Creditors are on the hook to write off as losses over 30% of their loans. Fine, but the austerity measures are the problem also, since spending continues on banker welfare, government fraud, and systemic inefficiency. Spending was merely reduced, with restructure, which is badly needed as part of the surgery.

CURRENCY UPHEAVAL

◄$$$ THE USDOLLAR LONG-TERM CHART IS THREATENING A BREAKDOWN. IT IS JUST A MATTER OF TIME. AMONG THE FIAT CURRENCIES, THE MOST DESTROYED IN FUNDAMENTALS, DEFICITS, WAR COSTS, AND FRAUD IS CLEARLY THE USDOLLAR. IT IS DEAD AND GOING THROUGH FIBRILLATIONS EN ROUTE TO THE MORGUE. THE JAPAN INCIDENT IN MY VIEW IS SIMPLY THE CADAVER RISING TO TAKE A LOOK AT THE EARTHQUAKE AND NUCLEAR PLANT DISASTER. $$$

Every once in a great while, the 30-year chart is offered by the Jackass. The historical USDollar chart shows the great danger, since the world banking system rests on its unit of exchange. The DX index lows from 1991, 1992, 1995, and 2005 have all been breached, a major warning signal. A full breach means two things. First, major nation banking systems will risk going insolvent. Second, price inflation will arrive at the same time globally. Jesse at Cafe Americain points out the pennant flag pattern formed in the last three years. It must resolve up or down. My contention is that the pennant has already been broken on the lower barrier, a bear signal. The constant nature and heavy burden of the extreme volume of USFed debt monetization should send the DX index heading fast toward the 2008 critical low toward the 71-72 level. The bottom levels should be reached in year 2011. The Japanese disaster should only accelerate the downward move. They will sell USTreasury Bonds to raise cash, a process in full swing and never to be curtailed by any coordinated central bank initiative.

Many technical analysts are pre-occupied with monitoring the critical support levels. Those levels are 72, 75, and 76.5 from recent lows. Instead, focus on the lower barrier of the crucial pennant. Notice that the bounce in recovery off the October and November low of 76.5 could not manage a rise about the 20-week or the 50-week moving average. Those MA series serve as current overhead resistance. The DX chart is caught in powerful downward momentum. My forecast for a breach of 76 a couple weeks ago has already occurred, as a weekly close at 75.7 has been logged. The next battle of paramount importance at 74, the next critical support. The pennant trendline has been broken on the downside, an important development. Traders in the currencies, a multi-$trillion market, will take the minor technical breakdown and push the already weak USDollar lower. Many argue the Euro is in deep trouble, with its union in the midst of dismantlement. That might be true, but in the Reverse Beauty Pageant, the USDollar is by far the ugliest of the coined damsels. Its deficits are on par with the PIGS of Southern Europe in percentage terms. Besides, the US is the site of QE, the greatest monetary inflation scourge in modern history, a grand cancer center with full global metastasis. The recent accord to coordinate a move in the Yen currency lower will actually work to put a global face on the Quantitative Easing programs, and thus send the USDollar low also, an unintended consequence.

The USDollar has begun to reach critical low levels upon expectations of the next round of monetary inflation. The QE3 launch is being regarded as a certainty, thoroughly denied, but certain to occur, even inevitable given the enormous deficits to cover and debt rollover to fund. The USEconomy is mired in a recession that has begun to react adversely to the higher cost structure. Worse, the endless Quantitative Easing will drill holes all through the USDollar floor and the monetary system. Witness a monetary acid drip at work, whereby every new round of debt monetization is larger in volume and more damaging in its effect than the previous intravenous drip. Every hint of additional QE absorbed in the financial markets will result in waves of USDollar selling, and USFed isolation as the sole USTreasury Bond buyer. Coordinated USTBond buying by major central banks will merely disguise the USFed actions, like a parent feeding all plates at the dinner table turning into several participating parents handing out plates. The global pressures will have a marked influence on forcing the USFed to go underground and make secret its QE continuation. They do not wish to force the entire world against the Anglo bankers that caused most of the fraud, protect the criminals, redeem their toxic bonds, inflate the global cost structure, and continue the process when recognized. The Japanese conflagration might actually rescue the USFed, by permitting it to make secret its QE continuation. By making the USTreasury Bond buying a global central bank project, aiding in the coordinated sponsored Japanese Yen decline, the QE Program is made a global policy and not so much an American perversion. They can inflate to infinity together, and prevent individual currencies from blowing up. In their midst, Gold will rise relentlessly, and Silver even more. Even crude oil will rise, the unwanted child.

◄$$$ THE USGOVT IS SECRETLY ATTEMPTING TO FLOAT AN IDEA TO RETIRE THE USDOLLAR, PAY OFF CREDITORS WITH TOILET PAPER, RETIRE THE ENTIRE DEBT, DEVALUE OLD ASSETS, START ANEW, AND ISSUE A NEW USDOLLAR. THIS NEW USDOLLAR CONCEPT SEEMS GROTESQUELY FLAWED SINCE IT LETS THE UNITED STATES OFF THE HOOK AS DEFAULTED DEBTOR, AND IT ASSUMES NO CONSEQUENCE FROM THE USTREASURY BOND LIQUIDATION. THE USGOVT AND USECONOMY WOULD DESTROY THE URGENTLY NEEDED CREDIT TO MAINTAIN ITS ONGOING MASSIVE DEFICITS. $$$

In early February, over 150 US State Dept emissaries were called home to WashingtonDC for secret meetings. The news came and went quickly on internet journals. Many thought meetings were convened to discuss the growing Arab world upheaval. Instead, my sources report that the USGovt wanted to canvass opinions and coordinate feedback, if not to simply float a trial balloon on an historically unprecedented idea. The USGovt is trying to end the USDollar, to retire it, and to replace it in a fresh start after forcing a stern devaluation on all US$-based assets in conversion. The Boyz are printing $100 billion per month. So why not print $5 to $6 trillion and pay off all creditors with fresh colored toilet paper? The plan would call for all foreign creditors to be paid off, and all US-based depositors converted, both parties suffering devaluations. They would all be betrayed under the conceived plan, handed a hefty 30% instant devaluation that would accompany the birth to the new Republic Dollar by name, backed 80% by gold and 20% by silver. My guess is that Gold & Silver would be revalued at $7000 and $250, or $5000 and $175, something like that.

The old US$-based USTreasury Bond debt would be paid off with Printing Pre$$ toxic effluent output. The new US Republic Dollar would be backed by precious metals finally, in a return to the Gold Standard. The entire concept does not receive solid confirmation, but rather numerous repetitions from the same secondary source, and reports on support mechanisms working feverishly to enable its enactment. The story does receive an echo from Bob Chapman. The plan is very unclear about the status of old US$-based stock and bond and property assets, but my belief is they would be devaluated in hidden manner, to minimize public objection and to enable acceptance. It is also unclear the status of old US$-based debt obligations like home loans and car loans and business loans, but my belief is they would be converted in like kind. Recall that the world rejected the Amero concept for a omnibus North American currency before, largely because the United States could not dictate terms of contracts across the world, like between Chile and Europe on copper or between China and Brazil on sugar cane or between Canada and China on industrial metals.

My thinking has many parts, best summarized with a caption heading NO WAY IN HELL but summarized in three reasons.

1)      The USGovt does not own enough Gold & Silver to back a new currency, even at higher precious metal prices.

2)      The USGovt is the debtor nation, and debtors never dictate the terms of liquidation and restructure. The creditors do.

3)      The USGovt has huge deficits, and the USEconomy has huge deficits, each not to be funded since creditor nations would halt all new credit to the US after they are handed forced devaluations on the instant payoff and devaluation.

The USGovt and USBankers cannot possibly dictate the terms of a new USDollar since they are bankrupt, since they are guilty of multi-$trillion bond fraud, and since the USGovt and USEconomy are both deeply insolvent with ongoing massive deficits. The defaulting debtor does not dictate terms to the creditors, even if the debtor is dominated by global banker elite. The wild card in such a deal would be nuclear weapons and an eager CIA to deliver terrorist attacks surreptitiously to any creditor nation seeming uncooperative. Instead, somehow, unsure how, the global elite bankers eat some crow, mixed with toxic bread & butter, and are demoted on the global stage of power, secret pacts with China notwithstanding.

With a new US Republic Dollar, the deficits would cripple the United States immediately. The USGovt deficit would force the United States to find and hand over many tons of Gold & Silver every quarter and year, without fail or exception or forgiveness, since no more scheister paper repayment in settlement.  The US lacks the base monetary metal from which to continue the outsized and worsening deficits. The USEconomic deficit would force the US into insolvency immediately. The result would be that right away, the US would forfeit massive amounts of Gold & Silver that it does not own to settle trade gaps. Perhaps massive hidden Syndicate Gold supply would come to the table, taken as counter-party from Wall Street shorts that destroyed those shell corporate entities. My position has been stated before, that a new hard currency behind the US financial system would result in rapid insolvency and ruin, since the old systemic insolvency would instantly cripple any new launched monetary initiative. Thus the US never proposes one like the new Republic Dollar. Other foreign nations that would use the new Republic Dollar would generate large surpluses, and therefore make possible grand demands for US forfeited Gold & Silver. A new gold-backed US$ currency would force an immediate Black Hole inside the US system. The new system would promote in fast return exactly the same grotesque imbalances in a grand degradation. The United States could not expect to be given renewed credit after betraying the world's major creditors with the USTreasury Bond devaluations and liquidations, not in this real world.

Lastly, the new Nordic Euro currency would have to be subjugated under the new Republic Dollar. Such a development could only happen under some very scummy power sharing agreement with Russia and China and Germany. Then again, they might make a decision under nuclear threat. Any new Chinese Yuan currency with a hard asset backing would also have to be subordinated under the new Republic Dollar also. Those agreeing to subjugation under continued Anglo banker rule must accept $trillions in losses from USTreasury Bonds, USAgency Mortgage Bonds, even US Corporate Bonds during the devaluation process. The surplus nations, those blessed by huge surpluses, huge reserve savings, robust industry, and absent debts are planning the new Nordic Euro currency, a gold-backed currency. My belief is that as the Nordic Euro comes closer to its anticipated June 2011 launch, enormously important negotiations, hidden battles, important posturing, and desperate ploys will be put forth. The new Republic Dollar seems fanciful and totally impractical, surely such a desperate ploy to be shot down, unless a nuclear threat is delivered.

My best banker source, with solid international experience over 30 years, dismissed the idea as a wet dream by Anglo criminals to gain forgiveness, or rather to dictate forgiveness. This sage generous veteran claims the next phase will unfold very differently, with the foreign group called the Eastern Alliance pulling the rug from under the criminal Americans and British bankers, who operate a syndicate and display an evil streak. They are plainly nazis with nice wrappers. Neocon meant fascist nazi, for those naive in the crowd. The coming arrival of the gold-backed New Nordic Euro is causing a rush to duplicate it. The United States and Great Britain will either maintain a control position within a huge global slavery fascist brutal regime (featuring genocide), or else the US will descend into the Third World with a dead currency which must bid for the good useful currency in order to secure supplies. My belief is that the US$ in current form will be rejected within 18 months, globally, for crude oil and global trade settlement. My belief is that the USEconomy will suffer profound price inflation in the coming two years. My belief is that a new Republic Dollar would fall on its face before launch, but after presentation. A payoff of USTreasury Bonds with soon retired toxic paper with promise of deep devaluation would have immediate consequences of grave proportion, like the US being totally isolated from global commerce. The other name for that place is the Third World, marred by huge price inflation and credit cut off.

◄$$$ UNFOLDING EVENTS REGARDING THE USDOLLAR AND USTREASURY BOND DISPOSITION WILL NOT OCCUR ACCORDING TO ANY USGOVT AND USBANKER PLAN, OR PREFERRED DIRECTION. ANGLO BANKERS ARE NO LONGER IN CONTROL. NO NEW USDOLLAR CAN BE BORN FROM THE CRIMINAL SYNDICATE CRUCIBLE THAT HAS EXPLOITED AND BETRAYED THE AMERICAN CITIZENRY AND GLOBAL INVESTORS. BEHOLD WHAT COMES, A NEW EQUITABLE BARTER SYSTEM THAT REQUIRES ACCOUNTABILITY. $$$

In continuation of the new Republic Dollar theme, and the urgently needed transition to some currency vehicle in a viable fashion, my solid reliable banker source sent this note. He wrote, "It is not going to happen the way any US bankers would choose or direct. It is is unfortunate and regrettable that the USA has begun and is about to commit financial and political suicide. Today's USA power establishment is incompetent, delusional, and outright evil. It is less the criminal foreign policy and all the wars the US prosecutes. It is the treason the US power elites commit in regards to exploiting and betraying its own citizens. They can try whatever they like. They are done, finished. The engrained problem is too big for anyone or any group or any institution to fix. It is not about the price of Gold or Silver. Price is irrelevant. It is about purchasing power of Gold & Silver that has not really changed over the last 60 to 80 years. Take a look at Libya, a similar scenario that you will see unfolding on a larger scale. By comparison, the USA has its own Gadhaffis. We shall have a commodity based money regime and a non-monetary trade system called barter. Back to basics. It is as simple as that. That is what comes in the future. An entire new system has been in the works for almost two years, much planning, much development, an equitable system that has no place for freeloader or deadbeat nations. It will be a very accountable system, a fair system. Nations that do not participate will not have a supply chain. It is that simple."

◄$$$ EL-ERIAN SEES A POSSIBLE LOSS OF RESERVE CURRENCY STATUS FOR THE USDOLLAR. SUCH A DEVELOPMENT WOULD BE A DISASTER FOR THE UNITED STATES, AND FORCE IT IMMEDIATELY INTO THE THIRD WORLD. THE USDOLLAR REIGN IS NEAR AN END. $$$

El-Erian does not believe people can be assumed the USDollar will retain its reserve currency status. He speaks somewhat late, validating many other analyst observations including the Jackass in recent weeks that the USDollar is no longer the broadly accepted safe haven currency. In fact, gold seems to have at times supplanted the USDollar in that exalted role. In a Bloomberg interview, PIMCO executive Mohamel El-Erian said, "The USDollar could lose its reserve currency status. It is a warning shot to America that we cannot simply assume flight to quality, flight to safety. People are starting to worry about the fiscal situation in the United States. They are starting to worry about the level of debt. They are starting to worry about what they hear about states and municipalities. So, I would take this as a warning shot that we cannot assume that we will maintain the standing of the reserve currency as we have in the past. We have to appreciate that in the West, what is happening in Egypt and North Africa results in stagflation in the short term. So higher inflation and lower growth result because of higher oil prices that take away purchasing power and transfer wealth somewhere else. Because of higher geopolitical risk, which tends to diminish animal spirits and therefore impact investment. And let's not forget that the Middle East is a market, particularly for European exports. So from an economic perspective, it is important for the West to understand that these are stagflationary winds that have been added to the global economy." See the Zero Hedge article (CLICK HERE). El-Erian makes a lot of sense, except that his Stagflation term missed the mark, since stagnation implies no recession. The USEconomy is mired in recession, soon to worsen badly. Despite the closing days on the USDollar's reign, the US will soon be compelled to share that role. Too much debt, too big an imbalance, too much exported inflation, too much fraud under the US watch, too many problems generally. Univ California Berkeley professor Barry Eichengreen believes the US will lose its privileges, as a great impact will be heaped upon international markets and companies that are involved in global commerce. His book entitled "Exorbitant Privilege" provided great detail of the abuse in international monetary terms. See the Wall Street Journal article (CLICK HERE).

Consider what a global reserve currency is. It is a foreign currency held by central banks and other major financial institutions as a means to pay off international debt obligations, or to influence their domestic exchange rate. Often global trade settlement is conducted in USDollars, such as for crude oil, a contract entered willingly by parties. In many cases, transactions to purchase Gold & Silver are completed in currencies other than the USDollar. The reserve currency must be the most fungible and exchangeable of all. The United States stands at or near the top of nearly every country's list of trading partners. But the US runs a trade deficit with most of them, as they accumulate USDollars in heavy volume, a longstanding problem, since their US$-based assets are falling in value. Many nations cannot store surplus funds in crude oil, since they are major oil exporters (e.g. Saudi Arabia, Russia, Norway). Although China might want the prestige of a reserve currency, their balance sheet would dictate a sudden rise in the Yuan currency. They wish to maintain job creation and boost exports. They have challenges to manage Chinese businesses that understand how to work around rules and regulations regarding currency inflows. Although the USDollar, the British Pound, the Japanese Yen, the Euro, and the Chinese Yuan cannot all be weak at the same time, THEY CAN ALL FALL VERSUS GOLD & SILVER, AND THE BASKET OF COMMODITIES. A monstrous challenge comes to the world in developing, promoting, and implementing a new global reserve currency. It is a daunting task that might require a catastrophe to implement. But beware of the same characters implementing a new currency regime, the same power merchants, fraud kings, and criminal actors. Unfortunately, my premise for three years has been that the first nation, or group of nations, that install a different currency system for their banks and commerce will be the survivors. The rest will be subjected to dangerous instability, economic deterioration, bank system insolvency, and price inflation. They will risk entering the Third World.

◄$$$ JAMES TURK HAS WARNED OF A POTENTIAL USDOLLAR COLLAPSE. THE FORMERLY PRESTIGIOUS GLOBAL RESERVE CURRENCY RESTS ON THE PRECIPICE OF FAILURE AND REJECTION. EVEN GLOBAL DISRUPTIONS AND CREEPING CHAOS CANNOT BRING A LIFT TO THE USDOLLAR, ONCE A SAFE HAVEN. THE VENERABLE ART CASHIN ADMITTED THE USDOLLAR IS IN DEEP TROUBLE. $$$

James Turk, founder of GoldMoney, gave a rather frightening warning about the USDollar, which has been on a downtrend for a few months. Its decline has been the impetus behind the global rise in commodity prices, led by food, but also by energy. He notes that the former safe haven harbor has been losing that exalted function, amidst the civil strife and European disorder, failing the test of crisis. The US$ DX index has support levels at 76, 74, and 71. He said, "The dollar right now is hanging on the precipice. If we break below 77 on the dollar index, look out below. I do not think people really appreciate how scary the dollar chart is here, or how ominous the implications really are. There is no predicting how far the dollar could plunge if confidence breaks. You have civil war breaking out in North Africa and you have rebellions happening in the Middle-East. In this kind of geopolitical situation, in the past the US dollar would always rally, but this time it cannot even bounce. The other side of this coin is that if the dollar falls off the edge of a cliff, precious metals are going to skyrocket. The short squeeze is continuing to develop. The shorts are trapped and whether the trap springs this week or in a month or two, I do not know, but we are getting very close. Gold is incredibly resilient and looks coiled for an explosive move higher. We started our initial probe of the all-time high this week closing in on $1430 before backing off. Look for another probe of that $1430 level very soon. It will not be long before we take out that all-time high, particularly if the dollar falls off the edge of a cliff." The US$ DX support at 77 has been broken convincingly on the downside, as the next critical support awaits test. See the King World News interview (CLICK HERE).

Also in a King World News interview, Art Cashin warned about the USDollar being on the verge of serious trouble. Any continued extreme weakness on the part of the USDollar, or a breakdown, would increase bids in both the Gold & Silver markets. See the King World News interview (CLICK HERE). Little did they each realize that a Japanese earthquake and consequent nuclear radiation threat has given lift to the USDollar, but it is fleeting support.

◄$$$ RELATIONS BETWEEN THE USGOVT AND CHINA HAVE BEEN STRAINED. A STRING OF EVENTS HAS BEEN CHRONICLED THAT SHOWS USTREASURY HOLDINGS USED AS A BARGAINING CHIP, A LEVERAGE DEVICE, AND A STICK TURNED AGAINST THE DEEPLY INDEBTED NATION (USA). CHINA IS DUMPING THE USDOLLAR IN EXTREME VOLUME. CHINA IS WORKING TOWARD ESTABLISHMENT OF THE CHINESE YUAN AS AN ALTERNATIVE GLOBAL CURRENCY RESERVE. THE INDUSTRIAL POWERHOUSE IS BEGINNING TO CHANGE THE RULES. $$$

To put it simply, China is flexing its muscles using USTreasurys on the world stage. More confidential diplomatic cables from the US embassies in Beijing and Hong Kong have exposed the US vulnerability to Chinese influence, its largest creditor. More fallout from WikiLeaks. Since the financial crisis hit, ignited by the Wall Street collapse better viewed as the Bear Stearns and Lehman Brothers kill jobs, the Chinese suffered huge losses from their investments in bank stocks. Other losses came from the supposedly safe Primary Reserve Fund, a major money market fund. The escalated Chinese pressure prompted a parade of visits from the USDept Treasury and US State Dept designed to sooth nerves, and to be sure, to lie deeply. See the Yahoo article (CLICK HERE).

The Chinese are avidly working on a bypass of the USDollar in trade. The result should be fewer USTreasury Bonds stored in paper vats. China hopes to allow all exporters and importers to settle their international trades in the Yuan currency by the end of year 2011, according to their central bank. They wish to increase the standing of their currency's international role. The nation is responding to overseas demand for the Yuan to be used as a reserve currency, enabling it to flow back into China more easily. The Beijing leaders are not happy with the status quo. Observe a new powerhouse China suddenly more vocal about its intention to convert the Yuan to reserve status, and in the process make the USDollar even more insignificant. An internationalization of its currency is in progress, all a great threat to the USDollar and its currency market share. The list of nations doing bilateral trade conducted in Yuan is growing, from Russia to Brazil to Malaysia, with more to come. They are relaxing rules for foreign financial institutions to access the Yuan, which has seen increasing popularity. Anxiety over the toxic USDollar makes for a large reception room. China is already the leading trade partner with Australia and Japan, along with most of its smaller neighbors.

Stephen Roach wrote in Project Syndicate, "In early March, the China's National Peoples Congress will approve its 12th Five Year Plan. This Plan is likely to go down in history as one of China's boldest strategic initiatives. In essence, it will change the character of China's economic model, moving from the export and investment led structure of the past 30 years toward a pattern of growth that is driven increasingly by Chinese consumers. This shift will have profound implications for China, the rest of Asia, and the broader global economy." China is no longer capable of absorbing its massive labor surplus in the converted form of foreign reserves. They no longer wish to store reserves in toxic US$-based assets, period. A reserve currency would be critical in achieving the goal of China's conversion to an inwardly focused society with a growing middle class and rising domestic consumption, from soup to nuts to computers to televisions to cars and cellphones. The transition will not come without shocks to the system. To begin with, it will have less surplus reserves from which to fund foreign deficits like of the USGovt. It will strategically pursue sovereign debt like from Southern European nations, since doing so serves a greater purpose, toward expansion, prestige, influence, if not colonization. Great strain will come to its relationship with the United States, but much blame might be attributed to the secret betrayal by the USGovt to sell the Gold & Silver leased from China in 2003. The USGovt sold it all, angering the Chinese to the hilt, motivating their retaliation. Such deeds tend to ruin diplomatic relations and any symbiosis in monetary and fiscal policies. See the Zero Hedge article (CLICK HERE).

The PBOC announcements confirm what the Jackass has been saying for six months. The Yuan currency is moving toward a global reserve status, if for no other purpose than to fill a void and detour from holding toxic US$-based assets in reserves. The first foundational step is its usage in international trade settlement. They choose to bypass the damaged wounded (if not derelict) USDollar from here onward as much as possible. A replacement or boycott of the US$ in global trade, especially in crude oil, paves the way for US passage into the Third World. The process is simple, since the US would be forced to bid up the required currency for purchases in the global market, and thus bid down the USDollar. Doing so would push the US$ exchange rate to where it belongs, with other destroyed Banana Republic currencies. The unleashed powerful price inflation would become a national banner, its badge of dishonor.

Mortgage Implode website manager and colleague Aaron Krown pitched in with a comment. He said, "China is actually well underway on its path to explicitly driving the stake into the heart of the dollar once and for all. It is clear now they really are going down a well-defined path here, that shows it is only a matter of time until we arrive at wholesale regime change for the dollar-dominated international trade system. It makes little sense that everyone (especially the Chinese) should by default hold dollars, when China and not the US is the company store the world goes to for most of its goods. Basically, the US has until now had the geopolitical influence to demand its own worthless IOUs be accepted by that store. But now the vendor realizes that if he decides not to accept them, the customer will not have anywhere else to go. So it is the vendor China, the one providing the real stuff, that can demand the terms." In short, whoever possesses the industry makes the rules.

◄$$$ THE BRITISH POUND HAS BEEN HIGHLY CORRELATED WITH THE JAPANESE YEN CURRENCY FOR A LONG TIME. THAT LINK HAS RECENTLY BEEN BROKEN. IT COULD SIGNAL A BRITISH RATE HIKE OR SOMETHING WORSE, LIKE A PRICE INFLATION FEVER AND BOND ROUT. IT COULD INDICATE TROUBLE EXTENDING FROM ABSENT JAPANESE TRADE SURPLUS. THEN CAME THE JAPAN EARTHQUAKE AND NUCLEAR ACCIDENT THREAT. $$$

An important inversion has occurred in the usually stable British Pound vs Japanese Yen currency correlation. After a very consistent tight relationship, an R-squared regression correlation of 80% for six to eight months, a dramatic breakdown occurred. Damage has been done to currency traders, who wonder what happened, what hit them. Speculation has been ripe. Possibly the Bank of England will hike interest rates to deal with high inflation and large deficits, even to forcibly reduce leverage by liquidating bank assets. Too much attention has been directed by the London community to explain the lost correlation in British terms. As we are told, the sun never sets on the British Empire. Their bankers are perhaps the most arrogant and self-absorbed lot in the world. Perhaps the vanishing act of Japanese trade surplus has caught up with the heavily indebted government balance sheet. With all the attention given to debt to economy ratios, Japan ranks worse than even the PIGS nations of Southern Europe. Heavy investment in Chinese industry to take advantage of lower labor costs has resulted in large segments of consumer goods being made in China for Japanese users. Hence the trade surplus as a fixture of Japanese success over three decades has gone away, likely never to return as long as China continues to operate factories. The chart below is not of currency exchange rates, but rather speculative futures contract positions. The dotted lines represent fitted polynomials that best explain the movement of the two series. See the Zero Hedge article (CLICK HERE). Something was brewing, BEFORE the powerful earthquake and the sudden nuclear threat of radiation fallout. Japan is suddenly in tatters, with industry shutdown, supply chain disruption, heavy commitments to fund rebuilding and stabilize financial markets, and a general sense of growing panic and a public that doubts the messages given by its leaders.

◄$$$ THE CANADIAN DOLLAR IS STRONG, BUT ITS STRENGTH RENDERS DAMAGE TO ITS OWN ECONOMY. THE COMMODITY BULL MARKET HAS A NASTY SIDE EFFECT TO CANADA, A GREAT SUPPLIER AND GLOBAL SUPERMARKET OF MINERALS & RESOURCES. ANYTHING ABOVE PARITY IS VERY HARMFUL FOR TRADE, WHICH IT DEPENDS UPON. AFTER THE CORRECTION, IT REMAINS ABOVE PARITY. $$$

The Canadian Dollar is likely to remain above 100 parity, as support and trend appear strong. Canada might be an early victim of the higher commodity prices in strong upward trend. The fast rise in income on the export side for a wide variety of items has a backfire. Unless their central bank soaks up the surplus funds and invests in toxic US$-based bonds, the Canadian Dollar will rise. It has done exactly that, as USTBonds might be widely avoided. So the risk to export trade in non-commodities, like cars, machine tools, and an assortment of finished products. Their export prices will rise from the foreign buyer perspective, resulting in lower sales. Many nations have a suddenly higher valued currency directing exports to the United States market. So the export factor might be relatively even and multi-lateral from the US perspective. My belief is that the USEconomy will sharply reduce imports as the consumer is pinched hard, reducing imports from all nations. The exception is imported crude oil, the lifeblood. Despite the recent correction, the Can$ remains above parity at 100. The currency pressure remains a damaging factor to Canada. Watch its economy morph into a commodity delivery economy, as its industry slowly erodes.

A highly reputable international consultant offered some major points about Canada. He resides in Toronto, and has many global clients. He said, "Canada & the US are the two largest trading partners with approx $1.8 billion per day. Canadian export industry lost its edge when the exchange rate for its dollar climbed over 0.87 a couple years ago. The Canadian secondary industry is defacto toast. Canada provides approx 67% of all energy to the US. With the US imploding, its neighbor Canada will be pulled down with it eventually. China and Russia will divide Canada up amongst themselves, once the dust settles. Canada having lost to Portugal on the UN Security Council vote and having been evicted from their military base in Dubai provides a glimpse of what kind of clown show the idiots in Ottawa are running. Canada has lost its credibility as a dependable Middle Power that the elite forces turn to for difficult assignments." Ouch! A dire view!

◄$$$ THE CHINESE MIRACLE HAS TURNED INTO A EXPORT DEFICIT AS THEIR IMPORTS RISE SHARPLY. ONE MUST CONCLUDE THAT A GLOBAL ECONOMIC SLOWDOWN HAS BEGUN IN EARNEST. ALSO, NEVER COUNT OUT THE POSSIBILITY THAT CHINA IS LYING ABOUT ITS DATA, A POLICY RESPONSE SINCE THE USGOVT LIES ABOUT ALMOST EVERYTHING. THE BEIJING LEADERS MIGHT WELCOME A PRICE INFLATION EVENT INSIDE THE UNITED STATES, TO WEAKEN THE CORRUPT LEADERSHIP AND BREAK SOME FINANCIAL CABLES IN REINFORCEMENT. $$$

The February trade results brought a deficit in a flash for China, its largest in seven years. In a single stroke, announcement of not a $4.9 billion trade surplus turned instead into a substantial $7.3 billion trade deficit. The Beijing leaders (bankers included) silenced much of the ongoing tiresome cricitism of a deeply undervalued Chinese Yuan currency. A regular sturdy surplus has disappeared suddenly. Little explanation has come. The result was due to a substantial contraction in exports, accompanied by a smaller decline in imports during the month. Export growth decelerated to 2.4% year on year in February, down from 37.7% year on year in January. On the other side, import growth calmed down to 19.4% year on year in February, down from 51.0% year on year in January. Clear evidence stands out that the consumer nations of the world are importing less from China. Conclude a global slowdown has begun. Despite slowing, imports to China continue as robust. Any stockpiling of Gold & Silver, even industrial metals and crude oil, could be taking place in the form of switched demand by Chinese consumers wary of price inflation. They are well aware of the dangerous nascent trend in rising commodity prices from the USFed QE inflation policy. See the Zero Hedge article (CLICK HERE). China might have cleverly turned the entire focus of attention on the USGovt and USFed. One might make two possible conclusions. A) The US and European export markets are suffering from a much worse economic recession. The cost structure rise has finally hit, rendering great harm to squeezed businesses and pinched consumers, as the Jackass forecasted. B) The Chinese leaders are lying about the data, resorting to similar tactics by the USGovt in data deception. They are drained and jaded by criticism from US leaders, who have inflicted $trillion bond fraud on the world, protected those responsible, ordered hyper-inflation with a sparky QE name, caused unspeakable wreckage in global price inflation, and continue to blame China for currency manipulation. My belief is that both A & B explain well, equally well, both true. China has felt the impact of Western recession and has shut up its critics using massaged data.

The National Inflation Institute made some solid valid comments. They believe China's trade deficit is temporary and that China will quickly return to having a trade surplus. The damaging effects of the USFed ordered monetary inflation in QE2 has combined with China's own destructive monetary policies to enable a massive rise in China's raw material costs this year. NIA believes that in the upcoming months, Chinese manufacturers will raise the prices of their export products headed to the US market in response. The USEconomy, heavily dependent upon low cost Chinese production, will soon see significant price inflation in almost all consumer goods. The NIA forecasts that by the end of 2011, the US Consumer Price Index will be at least 4.9% on a year over year basis (nominal index versus one year ago), with the annual price inflation rising above 10%. The NIA made some further analytic points that directly address how price mechanisms can replace the currency exchange rate when interfered with. They wrote, "The truth is, if China allowed the Yuan to strengthen, the Chinese would have enjoyed a much higher standard of living. Sure, prices would rise in dollars and Americans would import less, but the Chinese would have the ability to consume more of their own products. Now, as a result of China expanding its own money supply in order to keep the Yuan pegged to the US dollar, Americans will be forced to pay a much higher price for Chinese goods anyway. The same higher prices Americans were going to pay as a result of exchange rate appreciation, Americans will now pay as a result of inflation. For the Chinese, the exchange rate appreciation route would have been a much better route to take than the inflation route, because now the Chinese will also be forced to pay higher prices."

Great point by the NIA on the pricing mechanism response in reaction to obstructed currencies. However, if China resorted to higher domestic Yuan exchange rates, their export industries would have suffered an instant profit margin decline. Either way, the impact would be felt inside China. The bigger point is that they might want the West, in particular the United States, to suffer from price inflation simultaneously from a rising cost structure enforced by the commodity prices, driven by a USDollar in decline. China might believe, correctly in my view, that price inflation could wreck the US power structure lodged within the USTreasury Bond, and unlock the Gold monster that acts as linchpin to the USDollar. China might have forced shared pain effectively with the United States, rather than absorb a higher Yuan valuation unilaterally. Never overlook the intelligence and devious thought process of Chinese strategy. While the US bank leaders are dishonest and greedy, the Chinese leaders are crafty and patient.

GOLD BULL FIGHTS LOOSE

◄$$$ H.S.B.C. IS LOCKED IN A POWER STRUGGLE WITH LONDON BANKERS OVER GOLD ACCUMULATION. THEY ARE CUSTODIAN TO THE G.L.D EXCHANGE TRADED FUND. THE GOLD FUND IS THE STICK BEING FOUGHT OVER BET WEEN CHINA AND LONDON IN A POWER STRUGGLE. THE LATEST TWIST HAS H.S.B.C. PLANNING TO MOVE THEIR HEADQUARTERS TO HONG KONG, AND TO LEAVE LONDON. A WAR OCCURS BEHIND THE SCENES. $$$

Regard the HSBC heralded move of their headquarters to Hong Kong as a signal of extreme warfare between China and the Anglos. A major disruption is near climax. HSBC will most likely be moving their HQ to Hong Kong. Recall the name stands for The HongKong & Shanghai Banking Corp. Too much bank regulation and high taxes are given as the main reasons for relocation. Britain's biggest bank has been headquartered in the London for 19 years. In response to disappointing annual performance results, executives have given preview, complete with sugarcoated arguments, for migrating the formal out of London. Many major investors support the potential move. Never lose sight of the fact that HSBC operates as custodial to the controversial GLD exchange traded fund of gold bullion investments that trade as a popular listed stock. However, evidence mounts on the abuse of the metal held in inventory, used in my view to satisfy COMEX short positions illicitly. The press release on the HQ migration mentions nothing about the GLD fund, when an independent source confirms that it might have everything to do with the marital breakup with its Anglo mistress host. See the UK Telegraph article (CLICK HERE). Chinese leaders, including the Peoples Bank of China, might be forcing HSBC to abandon London. My strong suspicion is that China could be using HSBC to grab some significant GLD Fund gold bullion over the last few months. London might be in direct conflict and China might be winning the power struggle. When a gold banker was asked if this theory is accurate, his reply was quick and terse. He wrote, "Correct. It is HSBC and Standard Chartered Bank HK doing the gold grab on behalf of the Chinese." This is very big news. My last wonder is whether the buyers are the Chinese Govt or wealth Chinese individuals. The financial war is escalating, but in hidden ways that can be inferred by the alert observer. China has become much more aggressive in pursuing gold bullion from multiple sources, including Southern European nations by way of the discounted sovereign debt. Rumors were strong last month, reported in the Hat Trick Letter, that China was using GLD shares to acquire gold bullion in a slick quick backdoor maneuver. A minimum 100 thousand share redemption rule seems easy for China to overcome for qualification.

◄$$$ CHINA CONTINUES TO PURCHASE A TREMENDOUS AMOUNT OF GOLD AT THE RETAIL CONSUMER LEVEL. CHINESE GOLD DEMAND IS VORACIOUS, USED WIDELY AS INFLATION PROTECTION. SOME WONDER ALOUD IF CHINA IS PREPARING ITS YUAN CURRENCY WITH GOLD BACKING, A MANIFESTATION OF THE GOLD STANDARD. ASIDE FROM THE STANDARD LABEL, STRONG GOLD RESERVES BOLSTER RECOGNITION OF A CURRENCY AS A GLOBAL RESERVE FROM ITS FUNCTION. $$$

Massive gold demand continues in China. Latest reports measure consumer gold demand as very strong out of the 2011 gate. Buying momentum continues. Little noticed in even the financial press networks is this fast pace of purchase, with all the Middle East, North Africa, and Japan news. According to Peter Hickson, the global commodities strategist for UBS, the Chinese gold demand reached at least 200 tonnes in the first two months this year. The demand is accelerating on a massive scale! Chinese gold imports in the first 10 months of 2010 totaled 209 tonnes, itself a 500% increase over the previous year. So the 500% annual growth rate continues into the first two months of 2011. Even jewelry demand in China has risen by 70% year on year. If the current monthly sales pace (not the acceleration) is extrapolated over a full year in a constant pace, the Chinese consumer could be in line to buy close on 50% of global gold mine output. Recall China has a large population and expanding middle class. Demand is motivated domestically and globally. The rate of Chinese price inflation has climbed to 4.9% with food price rising 15.1% and fruit up 34.8% since January of 2010. Many citizens have started to devour gold as wealth protection. An important impetus behind China's rising prices stems from the $585 billion economic stimulus package last year, a truly huge sum for its national economic size. The Chinese Govt has made taken some big steps to prevent domestic inflation from spiraling out of control, like raising interest rates several times, making tougher price fixing rules, tightening lending requirements, and raising the minimum down payment for home purchases. These measures have accomplished little, as fears of faster inflation circulate throughout the Chinese economy.

The Chinese gold demand is truly voracious. Their leaders encourage the trend, probably regarding Gold as a device to unseat the US-UK power center in banking. An ICBC bank executive described Chinese gold demand as voracious, referring to the citizen interest. The Industrial & Commercial Bank of China has in only two months opened gold savings accounts for more than one million individuals, to account for more than 12 tons of gold stored on their behalf. Zhou Ming is deputy head of the ICBC precious metals department. He cited their giant bank sold nearly 250,000 ounces of physical gold in January, equal to half of all the bullion ICBC sold all last year. Zhou also cited heavy demand for silver. ICBC sold almost 13 tons of physical silver in January alone, compared to 33 tons in the all 2010. If the pace continues, it would mean a 370% annual rise. Beijing Caibai, the city's largest jewelry store, reported that sales of gold bars and jewelry have totaled an incredible 4 billion Yuan (=US$600 million) in two full 2011 months, a 70% rise year on year. Then add the PBOC central bank acquisitions, made less public as part of state secrets. The US state secret is that the USGovt owns NO gold, having sold all of Fort Knox (or permitted its theft by the Clinton-Rubin team). The USGovt lies and claims it owns 8113.5 tons of gold in reserve. The fine print indicates otherwise, like the Deep Storage gold, meaning unmined ore in mountains.

Momentum has been reinforced by concerns over both government instability and natural disasters whose dire effects on the global economy are revised on a daily basis. Motive to purchase gold had been reinforced in the past year by shaky sovereign bonds that support the global monetary system (currencies). So systemic reasons to invest in Gold are mounting. Bear in mind that the Chinese central bank, together with their two major sovereign wealth funds, are purchasing at least five times more gold bullion than they admit publicly. This word comes from a gold trader who is personally involved with such Chinese purchases and shipments. They are salting away gold in a big way.

Given a $2.85 trillion reserves account managed by the Chinese Govt, and a disclosed diversification plan, and a $1.6 trillion US exposure, expect the Middle Kingdom to expand its official gold purchases and accumulation rapidly. China has been working hard to position the Yuan currency (also called Renminbi, which means people's money) as the alternative global reserve currency. Officially, China is the sixth largest holder of gold reserves in the world, with stated reserves of 1054.1 tons, a palty amount less than half held by central banks of France or Italy. China has ambitions. The Chinese Govt revealed a significant feature of commerce, as they will permit all exporters and importers to settle their international trades in the Yuan this year. They call it part of plans to grow the currency's international role. In fact, their official statement went further, saying "It would respond to overseas demand for the Yuan to be used as a reserve currency." First comes usage in foreign reserves accounts. Later they can cross the bridge possibly for usage as a formal gold-backed currency, a monumental step. Bear in mind that a currency with heavy strong gold presence in its national reserves is elevated in prestige and viability for recogntion widely as a reserve currency. A currency widely used to settle global trade also elevates it toward recogntion widely as a reserve currency. Function precedes label.

◄$$$ THE MEXICAN MINING FIRM PENOLES SOLD ALL ITS INVENTORY BELOW THE SPOT SILVER PRICE. CARLOS SLIM HAS HIS FINGERPRINTS IN THE TANGLED STORY. JPMORGAN APPEARS TO HAVE DECLARED WAR AGAINST MEXICAN MINING FIRMS, EVEN CARLOS SLIM. $$$

Word came from a contact of Rob Kirby. During a recent trip to Puerto Vallarta in Mexico, the person learned something intriguing. The contact has a Mexican friend who is allegedly very close to Industrias Penoles, the big mining firm. Apparently, the word is that in early February, HSBC advised Penoles to sell out all their silver held in inventory, which prompted Penoles to call every one of their industrial dealers offering a substantial discount below spot, for any quantity required! This is the same firm Penoles that plans to sell one of their prized assets Fresnillo to Carlos Slim, the Mexican multi-billionaire. Hedge activity might not have been at work, not the reason for the action. Simply, a bunch of physical silver was dumped into a black hole, which surely brought smiles to the US & UK silver price suppression gang. Pressure might have come directly from Carlos Slim, just speculation. He has become one of the richest people in the world by buying assets on the cheap. The recent action in silver could have been manipulated to benefit Slim. After the Fresnillo purchase is complete, be on the lookout for strange developments like labor or security problems. Consider the involvement of Slim as a strong indicator that the silver price will work its way past $50, even toward $100 per ounce. Carlos Slim is a silver mine investor.

Jesse of the Cafe Americain provided information on another story that came out of Mexico with Carlos Slim involved. At work might be some pitched battle between Wall Street's JPMorgan and another Mexican mining firm with significant Slim ownership. The JPMorgan folks forced the firm south of the border to produce a huge supply of silver in closing out a short position, a forward sale hedge that had gone bad in a big way. A short position sold under $20 per ounce in silver resulted in heavy losses. Jesse wrote, "Hedge funds were passing around the story early this week that the spike in silver last week was because JPM forced Minera Frisco to close a silver hedge they had taken in the teens for a $1.5 billion loss.  The rumor reached me via a name blogger with ties to the Too Big To Fail banks. Minera Frisco is owned in large part by Carlos Slim. They are preparing a $1.2 billion stock offering to facilitate the acquisition of another mining property. I did not believe it. But it did play into my thoughts about a setup to take down silver after the option expiration which I did write about and warned explicitly. These are some very desperate, dirty SOBs in my opinion." See the Crossroads Cafe article (CLICK HERE). It seems like JPMorgan declared war on the Mexican miners and Carlos Slim. Let's watch to see the counter-attack. Slim personally could lift the silver price with steady outsized demand from his loose pocket money. Revenge is a very big part of Latino culture, especially in Mexico.

◄$$$ THE USMINT HAS CONTINUED THE SUSPENSION OF SILVER EAGLE PRODUCTION. RATHER THAN PUSH DEMAND IN A SHORTAGE SITUATION, THEY FOLLOW ORDERS AND MAKE A SUSPENSION. THE USMINT OFFICIALS INVITED COMMENTS ABOUT SLUGS USED FOR COINS. PERHAPS BRASS OR ZINC OR IRON WOULD SERVE WELL, OR EVEN A HARDWOOD. $$$

Production of USMint American Eagle silver uncirculated coins continues to be temporarily suspended because of unprecedented demand for coins. Until recently, all available silver bullion blanks were being allocated to the American Eagle Silver Bullion Coin Program, as the United States Mint is required by Public Law 99-61 to produce these coins in quantities sufficient to meet public demand. So the USGovt is actually in violation of the law in refusing to bid up the silver price in the open market, clearly taking instructions from the Wall Street masters. They want no further aggravation from their own fold. See the Silver Gold Silver weblog article (CLICK HERE).

Try not to laugh or vomit on the next story. The USMint announced a request for public comment on the usage of alternative metallic coinage materials for the production of all circulating coins. We are talking about slugs and tokens worth a fraction of coin face value, when cheap coated coins have been the norm for over 30 years. They cited relevant factors that did not include value. As topics of relevance, they mentioned physical, chemical, metallurgical and technical characteristics, then metallic material, fabrication, minting, and distribution costs, then metallic material availability and sources of raw metals, then durability, sorting, handling, packaging, and vending machines, then appearance, then risks to the environment and public safety, then resistance to counterfeiting, then commercial and public acceptance. Some solid research went into the question formulation. NOT!! The USMint seeks public comment only on the factors to be considered in the research and evaluation of potential new metallic coinage materials. The recently enacted Coin Modernization, Oversight & Continuity Act of 2010 gave the USMint research and development authority to conduct studies for alternative metallic coinage materials. See the Zero Hedge article (CLICK HERE).

◄$$$ INDIA MIGHT BE LEADING THE WORLD IN MONETIZATION OF SILVER. THEIR BYPASS OF THE USDOLLAR WITH CHINESE TRADE HAS BEEN FOLLOWED BY LIMITED DISTRIBUTION OF SILVER COINS FOR CIRCULATION. THIS DEVELOPMENT IS CONSISTENT WITH IRANIAN CRUDE OIL PAYMENTS AND CHINESE TRADE PAYMENTS OUTSIDE THE USDOLLAR SPHERE. CONSIDER THAT INDIA HAS OFTEN BEEN CITED AS A SECRET GIGANTIC SILVER SOURCE TO THE WESTERN BANKERS, THUS AVERTING DEFAULTS THAT SHOULD HAVE OCCURRED IN THE PAST DURING SEVERAL YEARS OF MASSIVE DEFICITS. $$$

Thanks to Vineet from India from the Turd Ferguson website (don't blame me for the name, since mine is a Jackass). Vineet wrote, "Contrary to the expectations of most, it is not Mexico or China, but India that has taken the first step towards re-monetisation of silver. I noted that these coins are not Special Edition or Collecters Items, but intended for general circulation. I would hazard another guess that the Indian Govt will bring out silver coins in other maybe greater denominations, to replace the paper money notes of INR 100, 500, 1000 etc [INR=Indian Rupees]. It seems that India has been aggresively stockpiling silver and now has the reserves to gradually introduce monetary metals as medium of exchange. Stockpiles had dwindled between 2002 and 2005. This is probably the first step. In time, India may phase out a large part of paper money, in approximately the same period as some other countries like China, Russia, or Mexico also start re-monetising silver. There was other news that the Bank of India is now facilitating trade between China & India in Yuan instead of USDollars. The BOI is one of the largest public sector banks in India, and other banks will follow its example. Consider that India is now paying for Iranian crude oil in a combination of Gold & INR. In 2006, India picked up half of the IMF gold sale (200 tons), the inference being that India was accumulating gold reserves before and has being doing so until today. My point is that the largest Asian economies (also the main growth engines) are gradually but surely detaching themselves from the USDollar and towards re-introduction of monetary metals in their internal economies. These seem to be subtle indications that the Gold Standard is inevitable in the not-so-distant future." See the TF Metals Report article (CLICK HERE). A side bar comment. It has been rumored for well over a decade that the Indian Govt and certain wealth centers have been in possession of large scale silver supplies, and have been cutting deals with Wall Street and London in various supply deals. The source above has been mentioned so as to explain why the acute ongoing aggravated shortage has not yet resulted in an outright default in the silver market. A very big Indian silver supply is often blamed or used to explain. Notice Vineet mentioned that Indian silver supply declined between 2002 and 2005 without explanation of why or how.

DISASTER LIGHTS A GOLD FUSE

◄$$$ LOUISE YAMADA SHARED ANALYSIS THAT THE GOLD PRICE IS HEADING FOR $2000, WITH SILVER COMING ALONG FOR A STRONG RIDE AS A CHEAPER ALTERNATIVE. DEUTSCHE BANK ALSO BELIEVES GOLD IS GOING TO $2000. $$$

Louise Yamada has made a solid reputation for herself over the years. Yamada is from LY Advisors, and former head of Technical Research at Smith Barney. She said, "Gold looks fine as it is moving to a new high. Gold is probably on its way to $1500 and then $2000. Silver is outperforming right now, but they take turns, as that is normal. Gold remains in a structural bull market that was initiated in 2002. Silver has 60% industrial usage, but because there are still the monetary concerns out there, Silver represents a less expensive alternative to owning Gold. I think that Silver has lifted out of a 30-year base and the whole concept of the longer the consolidation, the greater potential upside. Silver is clearly in a structural bull market. Its Point & Figure calculations off this base are $40, $45, $60, $75 and $80 over months to years. These are short and intermediate and longer-term targets over a period of years." Yamada mentioned an important technical phenomenon of great relevance. The Silver market has been in deficit for a long time, and under heavy control for a long time. Since August 2010, the Silver price has been breaking loose from its bondage and supression. So expect a very powerful continued Silver rally to set extremely high new record levels, as an attempt is made to seek price equilibrium that balances Supply & Demand. The supply is in dire shortage, while the demand is in extremely rapid growth. Lastly, a confirmation came from an unlikely source. Deutsche Bank analyst Daniel Brebner wrote recently that Gold is heading for $2000 an ounce in the next 12 months, and Silver could average $50 an ounce next year.

◄$$$ JOHN HATHAWAY FORECASTS $50 TO $60 SILVER, AS THE USDOLLAR IS IN GREAT DANGER. HE BELIEVES A GLOBAL CONSENSUS IS FORMING THAT THE USDOLLAR IS BEYOND REDEMPTION AND CAN NEVER RETURN TO VIABILITY OR RESPECTABILITY. THE DAMAGE DONE BY THE USFED DEBT MONETIZATION (KNOWN AS QUANTITATIVE EASING) HAS BEEN DEVASTATING. $$$

John Hathaway from the Tocqueville Gold Fund is a venerable veteran, gentlemen like Sprott, Embry, and Turk. His emphasis in comments was directed at silver, which has led in the precious metals breakout, a role reversal. Hathaway said, "Well, silver is on fire obviously. Usually when Silver does well, you have a set of inflationary expectations. If we have a continuation of QE2 past June 30th, I would not be surprised to see silver in the $50 to $60 an ounce territory. I think [a USDollar move down to take out the 71-72 area] would be a real sign that people had given up on the dollar. The market would basically be telling you that the verdict is in and the dollar is in effect beyond redemption in terms of any sort of respectability. I think you would see a huge move into Gold at that stage." An aggressive forecast indeed!

◄$$$ JOHN EMBRY EXPECTS A $1650 GOLD PRICE, AND FOR THE SHORT PLAYERS TO BE CRUSHED EVENTUALLY. THE PRECIOUS METALS MARKET HAS CHANGED RADICALLY IN THE LAST YEAR. STRONGER AND FASTER PRICE RECOVERIES OCCUR AFTER AMBUSHES. HE CLAIMS PHYSICAL DEMAND IS OVERWHELMING AVAILABLE SUPPLY, AND PRICE WILL BE DETERMINED IN THE PHYSICAL MARKET, NO LONGER IN FROM THE CORRUPT PAPER PRICE DISCOVERY MECHANISM. HIS PARTNER ERIC SPROTT EXPECTS TO SEE $100 SILVER IN THE FUTURE. HE POINTS OUT THAT MONEY FLOW INTO SILVER MATCHES THAT INTO GOLD ON A VALUE VOLUME BASIS. THEREFORE THE GOLD/SILVER RATIO WILL FALL EVEN MORE TOWARD HISTORICAL LEVELS. $$$

As the silver price was pushing past $34 and gold setting new highs past $1430, King World News interviewed John Embry of the Sprott Asset Mgmt, which has $8 billion under management. A remarkable phenomenon has been conspicuous in the last several weeks, if not few months. The precious metals prices have rebounded with gusto and vigor after cartel pounces, using their favorite naked short devices. Recoveries used to require weeks, but now require days, and sometimes only hours. Discounted price is regularly jumped on by eager physical buyers, grateful for the discount, in a grand backfire which never was seen in past years. Without hesitation, Embry provided his own bold forecast on price movement in the near future. He said, "This is a complete change in the market. In the old days when the bullion banks took the gold and silver prices to the woodshed, it took days if not weeks or months to repair the damage. Today to have it turn around on a dime and go rocketing up, silver to 30 year highs and gold challenging its all-time high again, this is new action indicative of the changed condition of the market. The physical market is slowly starting to take precedence over the paper market. Historically the paper market dominates most of the time. In this instance they have been so abusive in the paper market, and kept the prices at such attractive levels that they have induced so much physical buying, that the physical buying is overwhelming the available supply. That is where the price is going to be set, in the physical market. When that happens these guys on the short side of the paper market are going to have a religious experience. There is far more demand for silver than there is available supply and the inventory levels around the world have been depleted to very dangerously low levels. Silver stands out because it is so much more inexpensive and so it is easy for the little guy to buy. It is the realization that the value of the money being denominated in is being destroyed. Ergo the prices of gold and silver have to go up. If you do not grasp that concept, you are going to miss this market. [On the gold price] we should be able to achieve $1650 on this trip." See the King World News interview (CLICK HERE).

His partner Eric Sprott had similar comments about the advantage of Silver, which he claims is relatively scarce in terms of value, which bodes well for further gains. Silver inventory in COMEX warehouses is near the lowest since April 2006, when the metal traded at $5 per ounce. In an interview with The Gold Report, Eric Sprott offered many excellent useful details. The money flow is equal into Gold & Silver for many different marts and funds. Supply is much larger for Gold. It stands to reason from basic market theory that the ratio of Gold to Silver will continue to fall and work its way back toward former traditional levels. The current G/S Ratio has come down from absurd highs to 40:1 currently. It will be 30:1 within twelve months time. Eric Sprott said, "Based on fundamental evidence, technical evidence, and other things going on in the markets, I thought silver would be explosive this year. It has probably fallen a little short of my targets, but I think it is going higher. Silver does not have to hit $50 for everyone who is involved with it to make outsized returns, but I thought it could reach $50 within the first half of this year. All the data supports the thesis that Silver is undervalued. Lots of things may happen in the short term that have no bearing on the long term. Silver now trades at a price ratio of about 40:1 to gold. In other words, it takes 40 ounces of silver price to equal one ounce of gold. The historical ratio is more like 16:1. My view is that we will go back to 16:1 within two to five years. To put that in perspective, a $1600 gold price would imply $100 for silver. I happen to believe that Gold will go much higher than $1600. Therefore, given time and letting this ratio play out, I think we will certainly see a three digit price for silver. The $50 price is a step on the way. It may come faster or it may take a little longer. When it happens, silver will outperform gold 3:1. That is a shockingly large difference and good reason to get a little more involved in silver. Now that we are in the second year of another decade, Silver will be the investment of this decade. Gold essentially blew everything away in the last decade. There was no contest whatsoever versus any currency or stock market. We will all look back 10 years from now and say Silver was the investment of this decade, because it might triple the performance of Gold. Also, gold will continue to outperform all other currencies and stock markets. So silver is really an area where people should focus very heavily.

There are two parts to the silver Story. One is industrial demand and one is investment demand. Industrial demand has been quite strong, but the thing that has been very unusual in the last year or two has been the marked increase in investment demand. There are many ways of viewing investment demand, and it is obvious we are going to experience some serious growth here. Judging from the data points that we look at, when we look at our sales of gold and silver bullion [at Sprott Asset Mgmt], we are actually selling about five times more dollars of silver than we are dollars of gold. That means we are selling 200 times more silver bullion than gold bullion. The USMint is selling as many dollars of silver coins as dollars of gold coins. GoldMoney.com, an online precious metals bank, also has sales of silver and gold that are about equal. I want to emphasize that we are dealing with the flow of money here. The price difference is 40:1 ratio. But with that kind of money flowing into this commodity versus that commodity, you also have to look at the availability of one versus the other. In this case, believe it or not, that is 1:87. There is $1 of silver available in the world for every $87 worth of gold. The number of coins is explosively larger than the dollar figure. Something has to give when you have the same amount of money going into two products that are priced 40:1."

◄$$$ SILVER RECOVERED ITS ENTIRE AMBUSH PRICE DECLINE IN A MATTER OF TWO DAYS IN LATE FEBRUARY, RESILIENT AND STRONG. THE USDOLLAR CRIMINAL DEFENSE FEATURES NAKED SHORTING AS ITS MAIN PILLAR. SILVER HAS BEEN USING THE QUICK RECOVERIES TO GAIN QUICK MOMENTUM IN BREAKING OUT TO NEW HIGHS WITH GUSTO, GIVING A DISCOUNT TO PHYSICAL BUYERS. THE BIG USBANKS DUMPED 29.4 MILLION OUNCES OF PAPER SILVER ON THE MARKET, AND THE SILVER PRICE CONTINUED UPWARD. $$$

Behold the resilient power of Silver. Take one recent example. A late February ambush came and went with a slingshot reaction, giving positive lift to the Silver price. The typical naked short tactics are consistently backfiring on the cartel, which has grudgingly granted price discounts to the big physical metal buyers. The sudden drop from 33.5 to below 32.0 on February 24th saw a sudden impressive recovery that is typical of this surging robust market. The cartel ambush was built around a crude oil futures contract margin increase, which effectively ran interference, but only for a brief time. Over the course of a mere 24 hour period, the Silver price shot up in an impressive 4% rise, even as collateral rates rose to pinch energy speculators. The syndicate attempts to suppress major commodities cannot succeed and has not succeeded. Little attention was given the $25 billion in USTreasury cash management bills and almost $100 billion in new notes auctioned, a sizeable drain of cash to the financial markets generally. Silver paid no heed and rose to recover. In the next ten trading days, it reached the $36 mark. In the tight liquidity regime, a growing army of investors have shown preference for major commodities as an investment class, something which had not happened previously. See the Zero Hedge article (CLICK HERE).

The buzz a while back during the consolidation of January, was the silver short contracts were shed in a big way by the big US banks. They reduced their Open Interest exposure. Then came the rest of the story, a reversal to their norm. They increased their silver short position by 5880 contracts or 29.4 million ounces in just one month, splitting the suicidal duties among four or five banks, while the price of silver rose 25%. Their interventions were wrecked again. What a disaster!! See the official CFTC new item (CLICK HERE). The gold cartel is in trouble. By the end of March, most of the new contracts must be covered or rolled over. Think cannon fodder in a war zone. The CFTC has provided the renewed exposure with a sham explanation. They called it new silver mining firm hedges, forward selling by silver mine output producers, taking a conservative approach and making commitments to sell at those nice generous levels. Very doubtful, since most no longer hedge, and wait for the best price.

◄$$$ THE PREMIUM LOADED INTO THE SPROTT SILVER FUND INDICATES A HIGHER TRUE PRICE OF SILVER, CONFIRMED BY THE COMEX CASH BRIBE PAID TO CONTRACT HOLDERS COERCED INTO ACCEPTING CASH SETTLEMENT. SILVER MIGHT ALREADY BE WORTH CLOSE TO $50 PER OZ. CONTRAST THE CASH SETTLEMENT PAID BY JPMORGAN TO THE APPARENT SPEED AND EASE BY WHICH THEY AS CUSTODIANS CAN LOCATE AND OBTAIN 5.65 MILLION OUNCES. WITNESS A GREAT FRAUD AND SERIES OF LIES IN THE DATA. $$$

The prestigious new Sprott silver fund (symbol PSLV) recently hit the 20% mark in its premium to net asset value, a new record. It reflects a big metal shortage. One might surmise that Sprott had to pay up to obtain the silver, bought on the market. The margin always determines the price. As the Sprott Fund $300 million silver purchase around the December 2010 timeframe took place, the Silver price rose from $24 to $30. See the Zero Hedge article (CLICK HERE). The Jackass interpretation is different from most analysts. The infamous corrupted SLV fund managed by JPMorgan contains a negative premium, because it owns very little silver bullion, surely less than advertised, as part of a criminal fraud operation. The Sprott Fund has a positive premium because it does own silver. The SLV premium will fall farther negative, then come lawsuits, as it is revealed the fund is empty, vaults raided, paper certificates left behind, just like Fort Knox. The Sprott Fund premium indicates the true silver price, worth in the mid-$40s right here, right now. The other legitimate indicator in confirmation of the actual Silver price is the 25% vig paid by COMEX on cash settlement. Notice the vig and Sprott premium are almost equal, not a coincidence, as the true price is seen on such trajectories. By the way, an aside. A colleague with numerous contacts with mining firm executives shared some information. He confirmed from his personal relationships that several mining firms are indeed bypassing the COMEX. They seek a higher and more fair price for their gold & silver mine output. Sprott used them for direct sourcing for his fund. The COMEX is being isolated as a metals market that cheats on price!! My forecast is that in the next two years, probably less, the COMEX will not sell silver at all, and not offer silver futures contracts. At that time, even the purchase of physical silver will be extremely difficult. The silver price will be over $100 at that time.

Let us be practical and make comparisons of SLV iShares versus the universe. The JPMorgan custodians appear to obtain physical silver very easily, when the Canadian Mint, the USMint, and the Sprott Fund had extreme difficulty, and continue to have difficulty. Eric Sprott has been very vocal about the long duration to source his fund with physical silver bullion, even saying colorfully none was just lying around. As owner of silver mines, even he required two months to source six million ounces. The SLV fund has a finger of suspicion cast its way all the time. Perhaps the big discrepancy is explained as the iShares acquisition process means filling a cabinet with paper certificates from the nearby crime desks. Most amazing about the SLV fund is the speed in which it can allocate silver bars overnight. In a 48 hour period two weeks ago, the busy SLV folks added 5.65 million ounces. They simply found the huge hoard overnight amidst a great global shortage, at a time when JPMorgan the bank has a staggering 3.3 million ounce short position, when nobody else can seem to locate silver. But the SLV fund found the silver, shipped it, sorted it, audited it, and then lied about it in just 48 hours. The Jackass is looking forward to the day when the fraud-ridden SLV fund is exposed and defends itself in court. At that time, its slippery prospectus will be shocking, shown to legally permit leasing to the gold cartel.

◄$$$ HARVEY ORGAN REPORTE THE COMEX ACTIVITY ON MARCH 6TH. THE DETAILS INDICATE STRONGLY OF PRESSURES TO FULFILL ORDERS IN CASH. JPMORGAN HAS BEGUN TO OFFER AN 80% BRIBE TO SETTLE SILVER FUTURES CONTRACTS IN CASH. THEIR USUSAL AMOUNG IS 25% TO 30% CASH PAYOFF. A LINE IN THE SAND AT $36 SILVER MIGHT BE DEFENDED WITH VISIBLE DESPERATION. $$$

Be sure to know that silver futures contract holders who settle in cash with a generous bonus must sign a non-disclosure agreement, which means they must shut up. So the practice must be inferred from evidence. We must act as detectives at a crime scene. The COMEX provided data. For the second straight day, they could not fulfill any of their obligations to settle any long silver contract holders awaiting their metal paid in full. However, there was a drop in Open Interest (OI) from 2040 down to 1876 contracts, a drop of 164 contracts. Organ wrote, "When you have silver longs who pluck over $150,000 per contract into their brokerage accounts waiting for settlement, and then have some of these longs disappear, you can rightly assume that the only explanation is cash settlements.  Just look above and see [the opposite effect in] gold. The Open Interest rose even though gold had deliveries. Silver had no deliveries and OI fell. Ladies and Gentlemen: cash settlements is the order of the day at the COMEX."

Blogger Louis Cypher (a takeoff on Lucifer) offered some details on the cash payouts for silver contract settlement. Heavy handed tactics were used, typical of criminal syndicates. He wrote, "[The program's] success has spawned even more questions about the price of paper Silver going forward. It was reported by Shadow Govt Statistics that he heard that Blythe Masters [of JPMorgan] was offering a 30% to 50% premium and that at least 4500 hundred contracts will stand for delivery. I am here to give you a more accurate update, and a first hand account of what happened on Friday Feb 25th. Our group was detemined to stand for delivery going into Monday because we were not going to take a 30% premium on a price of $33.50. It was reported that Blythe offered 50% premium. That was not even close in our case. We got over 80% premium. That is right. Over $50 per contract on the condition that our group sell all our contracts. Our counter-party even threatened us with the ghost of Herstatt. They openly admitted that they could not deliver even 20 million ounces to us, but that if we stood for delivery, they would be sure to make delivery to everyone else before they defaulted on us, which would make us unsecured creditors. They told us directly that they could not allow even 5000 contracts to stand for delivery because they could not deliver a mere 20 million ounces. And indeed we did not refuse, as this was our intention all along." He went on to make an important point about a line in the sand drawn by JPMorgan at the $36 silver price. Paying up on the cash settlement bribe reveals their growing desperation. Great numbers of Silver contracts are demanding delivery, assuring a higher vig than 25% to be paid in coming weeks and months. Very few COMEX silver contracts remain standing for delivery. Organ concluded that COMEX could default if as few as 4000 contracts stubbornly demanded delivery. Given that the USMint stopped production of Silver Eagles, the shortage in physical silver is much worse than described.

◄$$$ PUT SOME DETAILS ON THE JPMORGAN DEPTH OF COMMITMENT TO PROFOUND FINANCIAL LOSS. SILVER MIGHT BE THE LINCHPIN TO THE SYNDICATE BREAKDOWN. $$$

Analyst Eric Fry gave a rough cut on the potential JPMorgan loss from its silver exposure. He paints a picture of an Achilles Heel of vulnerability. For JPMorgan, it is Silver. He HRumors are consistent from diverse sources that JPM has a total short position is 3.3 billion ounces of silver. Put that figure into perspective. It is one third of all the world's known silver deposits, two times the world's approximate stockpiles of silver bullion, four times the annual global silver mining output, and 30 times the claimed inventory of silver at the COMEX. The argument requires another starting point, an assumption of a $16 average JPM silver short price, which many analysts believe is conservative. It could be lower, with even greater losses. The scenarios are loaded with red ink. At a $36 silver price, JPM would be on the hook for $66 billion dollars in paper losses on their silver short position!! At a $75 price, the JPM loss would be $195 billion. At $100, the JPM loss would be $277 billion. The current marketcap for the big bank is $182 billion. Fry makes the conclusion, "Physical is trumping the paper market. In fact, the more I think about it, Silver could be what collapses that quadrillion dollar derivatives house of cards." See the Daily Reckoning article (CLICK HERE).

◄$$$ THE GOLD SUPPLY SHORTAGE BOTTLENECK HAS MET FIERCE GLOBAL DEMAND. COMPARISONS TO THE 1980 GOLD RUSH INDICATE THE CURRENT GOLD RUSH IS AN ORDER OF MAGNITUDE MILDER. IT IS MOVING INTO A MIDDLE GEAR, NOWHERE NEAR THE LATE STAGES. THE PUBLIC HAS NOT ENTERED EVEN THIS EARLY PHASE OF PARTICIPATION. $$$

The bottleneck argument best describes the situation, as end product with coins is in short supply. Silver must be bid up much higher in price in order to satisfy the intense demand. Too much time is spent in offering details on the supply shortage, which is real. The equally important factor is elevated and persistent powerful demand. The bottleneck is most evident in the public government mints that provide service to the public. They are not equipped to meet fast growing demand. The system is approaching a tipping point. Enter the new wrinkle, a burgeoning price inflation within many major economies, especially on the cost side. The public will respond with wealth protection in the form of Gold & Silver purchases. See the Zero Hedge article (CLICK HERE). Consider some details on demand and current status of investment, which point to a considerably longer period of time for the bull to reach a higher speed.

1)      According to the Intl Strategy & Investment Group, gold ownership currently represents 0.6% of total financial assets. If it rose to just 1.2%, ownership would require an additional 917 million ounces, or 16% of aggregate gold worldwide. That is still less than half its 1980 level. Almost one billion ounces is equal to about 10 years of current global output.

2)      Investment demand represented 53% of all gold demand in 1979. Today it represents just 32%, almost half as much. Coin demand represented 37% of all demand in 1979. Today it is under 14% of all demand, almost one third as much.

3)      Gold and gold mining stocks represented 26% of all global assets in 1981, a time of high recognized price inflation, and 20% of global assets in 1932 (high deflation). Today, gold and gold mining shares represent about 1% of global assets, a drop in the bucket.

4)      The marketcap of the entire gold industry is about the size of Microsoft, less than Exxon Mobil, and 10 times smaller than the banking industry. The entire marketcap of the silver industry is smaller than Starbucks, the coffee retailer, but bigger than Chiquita Banana.

5)      Silver mine production is not sufficient to meet current industrial and investment demand. The demand for silver is satisfied and met by means of scrap coming to market. Miners do not produce enough on their own. Soon the scrap will be tapped out, just like the official stockpiles.

◄$$$ GOLD AND SILVER PRICES FROM THE PAST 1980 PEAK ARE THE TOPIC OF FREQUENT DEBATE. THE INFLATION ADJUSTED PEAK PRICE IS ASTOUNDING, IF ONE USES AN ACCURATE PRICE INFLATION INDEX. $$$

Using the highly accurate Consumer Price Inflation series from the Shadow Govt Statistics in calculations, one finds the current Gold & Silver prices to be very low, very mild, very tame, compared to the 1980 peak. For perspective on deceptions, put side by side the adjusted peak prices using the doctored phony low Bureau of Labor Statistics series for the CPIndex. The $850 gold price in January 1980 would today be $2406 (BLS) and $8047 (SGS) after inflation adjustments. That is right. The more accurate price inflation effect from the Shadow Govt folks is 3.5 times higher than the propaganda spewed by the USGovt. In a similar fashion, the $50 silver price in January 1980 would today be $142 (BLS) and $473 (SGS). Consider these numbers to be conservative. So the silver price must rise 13-fold to even approach the 1980 high. Time to relax on claims of reaching a peak. This is very early in the game.

Thanks to the following for charts StockCharts,  Zero Hedge,  UK Independent,  Wall Street Journal,  Calculated Risk,  Business Week,  Merrill Lynch,  Shadow Govt Statistics.