MONETARY CRISIS REPORT
CLIMAX OF FINANCIAL FRAUD
COMPREHENSIVE GUIDE

* Monetary Fragments
* Corrupt Derivatives Seep to Surface
* MFGlobal Stench Lingers
* Greek Default Curtain Rises
* USFed & Fable of Recovery
* Foreign Central Banks & Poor Harvest
* Global Economy in Recession


HAT TRICK LETTER
Issue #96
Jim Willie CB, 
“the Golden Jackass”
18 March 2012

"Despite the well-known benefits of maintaining stable prices, there are calls in both Europe and the United States to abandon this commitment and create higher inflation to devalue outstanding nominal government and private debt. I am deeply skeptical of such a strategy. Inflation is a blunt and inappropriate instrument for assigning winners and losers from profligate fiscal policy or excessive borrowing by private individuals and firms. Proposals to use inflation to fix the debt overhang problem are nothing more than a call for debt monetization to solve a problem that is fundamentally fiscal in nature. Prolonged debates [about curtailing deficits] impede economic growth, in part, due to the uncertainty they impose on consumers and businesses. Until fiscal authorities choose a path, uncertainty encourages firms to defer hiring and investment decisions and complicates the financial planning of individuals and businesses, [but cause serious] damage to the economy in the near term. While some have argued that preventing Greek default would keep the crisis from spreading, that argument has proven false. Financial market participants remain skeptical about whether the political process can come to grips with the problems. So far, this skepticism appears to be wholly justified." ~ Federal Reserve Bank of Philadelphia President Charles Plosser

"At present, with the unemployment rate elevated and the inflation outlook subdued, the committee judges that sustaining a highly accommodative stance for monetary policy is
consistent with promoting both objectives of the Fed for stable prices and maximum employment."
~ Bernanke (misguided professor heading the USFed who revises history)

"Nazi Germany in its final years taught Reich Physics, a preposterous brand of science whose premises defied nature while stressing certain dominance in a bizarre set of adopted natural laws contrary to true physics. One can see its continued vein in modern Economics theory in the United States. It preaches policies about the diverse benefits of inflation, benefits of 0% cost of money, benefits of USDollar stability props, benefits of market intervention, benefits of grandiose bank aid, benefits of Wall Street experience in minister posts, benefits of war output, and more. It is all a grand lie, defiant to nature still and the very science of Economics, defiant to valid gold-based money. The monetary policies are certain to bring about Mother Nature's wrath. The American bankers are the new class imposing dominance, their roots traced to the same Nazi location 80 years ago, whom they gave ample support during World War II. The Neocons show one of their Fascist faces, with a new generation but continued bloodline and behavior. Beware of their same Playbook." ~ the Jackass

"This modernist view of money [that governments determine the ultimate monetary value] ignores that market forces, which a government can influence but in the end cannot control, inevitably determine the value of any asset. With repeated interventions in the market process, governments disregard this basic principle, causing disruptions to the market process that impede economic activity and even worse, can distort money itself." ~ James Turk (in dispute with Warren Buffet

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" ~ Upton Sinclair

"You cannot solve a problem from the same consciousness that created it. You must learn to see the world anew." ~ Albert Einstein

"We really do not know the true market price for USTreasurys."
~ Mike McKee (Bloomberg News)

"I believe with 100% certainty that the Chinese are now clearly on a path to accumulate so much Gold that one day soon they will be able to restore the convertibility of their currency into a precious metal, just as they were able to do a century ago when the country was on the Silver Standard." ~ Porter Stansberry

"China wants the Renminbi to be backed with a huge percentage of Gold, thereby making the Renminbi the world's best and most trusted currency." ~ Richard Russell

MONETARY FRAGMENTS

◄$$$ CHANGE IS COMING TO FRENCH LEADERSHIP. THE DAYS OF SARKOZY ARE FEW AS HIS FATE IS SEALED IN AN EXIT. EXPECT MORE ISOLATION FOR FRANCE, AND ECONOMIC HARDSHIP. THE ALTERNATIVES APPEAR TO BE AUSTERITY OR DECLINE. THE NEW HOLLANDE WILL UNLEASH MORE WILD SPENDING AND SEVERE CONSEQUENCES, LIKE INCLUSION WITH THE P.I.G.S. OF SOUTHERN EUROPE. $$$

France is warming up to Francois Hollande, the likely odds-on favorite to be the next President of France. His job will be difficult and fraught with risk. On the way out is Nicolas Sarkozy after several years. If truth be known, his ties to the USGovt security agency was his ticket to power. The French presidential election will feature the bling and flash of Sarkozy (style and sexy wife) versus the stolid bland of Francoise Hollande as challenger. The nation will slide backward into more costly inefficient socialism. The challenger whom they call Mr Normal has nowhere near the arrogance of the incumbent. Nicolas Sarkozy accuses the Socialist rival Hollande of lying from morning to night, while the president compares himself to a ship's captain in a storm. Think the Italian cruise liner run aground in January. In the next few weeks, a two-stage process will decide the next president of France. The election will define its immediate and long term future, along with its relationship with Europe and its attitude towards Britain and Germany. Voters must choose. They have the ambitious but unpopular Sarkozy (pictured on the left) who promised reform and renovation, but whose five year term in office has seen only degradation. They seem to favor Francois Hollande (pictured on the right) and his leap of faith, whose 30-year career in left wing politics is without ministerial or international experience. He is the opposite to the sitting President, but seen as sincere and serious, even bland. Expect Sarkozy to be shown the door, and watch his courtesan escort abandon him since limelight will turn to a clumsy notoriety. My forecast is that Hollande will turn the spigot wide open in true socialist style, which will force France into the PIGS pen, perhaps as their leader.

 

If the vote goes to Hollande, a major obstacle to the linkage between France and Germany will be put forth. The relationship between France and Europe will be re-examined. Sarkozy just agreed a new stability pact with German Chancellor Angela Merkel which will rein in public spending, but Hollande does not approve of it. He believes the pact threatens France's sovereignty and he will not ratify it. Instead, he intends to renegotiate it. The election will be a referendum on French nationalism and independence. It will also bear on French relations with Britain, which are strained. In fact, the election will serve determine future relations and accords with Europe in general. Expect France to retreat in defiance, hunker down with nationalism, and isolate itself. The consequence will be economic pain. However, what might be cut off is the elite rule in France. Likewise, Angela Merkel has no political base in Germany. The French people feel betrayed by Sarkozy, whom they call the president for the rich. Memories are fixed from the early days of his 2007 election victory, when he dined at a luxury Parisien restaurants. Instead of retreating to a monastery to reflect on his vision for France as he had promised, he went on holiday on the luxury yacht of a billionaire friend. He has presided over a 12-year high in unemployment, unpopular austerity plans, and the loss of their coveted AAA credit rating. The people are ready for change, and a return to what they believe is normal. France will go it alone, then find PIGS as neighbor best friends. See the UK Telegraph article (CLICK HERE).

◄$$$ LLOYDS BANKING GROUP REGISTERED A GBP 3.5 ANNUAL LOSS. THE VENERABLE FIRM HAS TURNED INTO A TOXIC PIT. THE UKGOVT IS NOT SEEING BENEFIT FROM THEIR INVESTMENTS IN THE CITY. EXECUTIVE BONUSES CONTINUE BUT LOWER, A SIGN OF ENTITLEMENT FOR THE ELITE. THE BANK SEES NO NEAR-TERM IMPROVEMENT IN ECONOMIC CONDITIONS. $$$

Lloyds is 41% owned by the UKGovt, a heavy portion like Royal Bank of Scotland, the other toxic pit, secured at the hip after their bailouts. In 2010 Lloyds Banking Group made a pre-tax profit of GBP 281 million and passed out bonuses. For 2011 they posted a whopping GBP 3.5 billion loss. Consequently, the harsh winds resulted in a pullback in the executive bonuses. They reduced their 2011 bonus pool by 30%, to a measly GBP 375 million, the poor upper crust. Presiding over ruin has its privilege at public cost. They are after all the elite. The firm had set aside GBP 3.2 billion to cover payment protection against insurance claims. A snag in their finances comes from a mishandled PPI episode, to manage possible repayment insurance for borrowers. The bank is undergoing a broad restructure program, which includes 15,000 job cuts and the liquidation of 632 branches. Lloyds plans to cut its international activities to 15 nations by year 2014, down from the 30 nations currently. Arrogance or defiance reigns, as the bank claimed that it was in a significantly stronger position than it was 12 months ago. They expect the 2012 financial year would be replete with a raft of challenges, stemming from regulatory issues to the EuroZone economy. Lloyds maintains a sanguine view toward the UKEconomy. They do not expect any improvement in the housing market this year or next. See the BBC article (CLICK HERE).

◄$$$ GOLDMAN SACHS HAS BEEN DEALT A BLOW TO ITS IMAGE IN A BLATANT NAKED SHORTING CASE. THE DETAILS OF THE OVERSTOCK.COM INCIDENT WILL BE AIRED IN PUBLIC FOR ALL TO SEE. THE COURT RULED THAT EVIDENCE WILL NOT REMAIN SEALED. A TRIAL WILL EXPOSE CORRUPT WALL STREET PRACTICES. $$$

The court final ruling on disclosure is significant because the evidence submitted to the court lays out in detail the means by which Goldman Sachs and Merrill Lynch committed numerous securities violations. They used naked short selling of the stock, in collusion with others, to manipulate downward the Overstock.com share price. The court declined to seal the evidence, a refusal in defiance of the syndicate. The court denied mostly all of the defendant motions to seal the evidentiary record on the summary judgment hearing. Patrick Byrne is chairman and CEO of Overstock.com. He said, "We are thrilled. I could not imagine that a post-2008 public would be denied access to this evidence, which displays in living color the flaws in our capital markets and in the regulatory structure that governs them. Now the public will have a window through which to view this evidence and judge for itself the fraudulent and systemically risky behavior at issue in this case." Jonathan Johnson is president of Overstock.com. He said, "On the one hand, defendants have gone overboard to keep this evidence locked away from public view, while on the other they maintained that the conduct is perfectly legal. We believe it is not legal, and that the public has an independent right to make that determination, based on the evidence." Four major media groups intervened in the case to join Overstock in opposing the motion by Goldman and Merrill to seal the evidence. They were The Economist, New York Times, Rolling Stone Magazine, and Bloomberg News. Many expect the court decision will be upheld on appeal. But in today's corrupt age, watch for a higher appellate court to toss the entire decision out on an early Saturday morning several weeks later. At issue in the case was an earlier ruling by the court that was overturned. That court had granted a summary judgment motion in favor of the defendants, ruling that the conduct at issue in the case did not take place in California, therefore not subject to California law. A full trial is scheduled which should attract many reporters and cameras.

Details are scummy but vintage Wall Street. A large percentage of the stock trades that were part of the manipulative scheme were effected on the Pacific Coast Stock Exchange, located in San Francisco. The Merrill Lynch Professional Clearing Corporation in San Francisco also played a significant role in the fraud. In addition, Goldman Sachs routinely purchased a type of conversion trades that were part of the manipulative scheme. Such disguised activity was cleared by the Merrill Lynch clearing office in San Francisco, but were made to close on the Pacific Coast Stock Exchange. Counsel also laid out for the court the evidence to support the stock manipulation claim, evidence that the court refused to seal. The case is not decided, but the ground rules are coming into view. Byrne summarized, saying "Ultimately, despite defendants sanding the gears with the summary judgment, we will win this case. It will be a hard fight, but we will prevail, first on appeal and then at trial. Almost as important to us as a trial victory is the fact that now the public will know about Goldman and Merrill's conduct." See the Yahoo Finance article (CLICK HERE).

◄$$$ THEGOLDMAN SACHS POISON VAMPIRE CULTURE IS COMING TO LIVING ROOMS ACROSS THE WESTERN WORLD. MATT TAIBBI NODS TO GREG SMITH, WHO CRITICIZED HIS EX-FIRM ON THE WAY OUT THE DOOR. A TOXIC DESTRUCTIVE CULTURE IS DESCRIBED IN A STORY GONE VIRAL ON THE WEB. $$$

A Goldman Sachs employee has delivered a scathing criticism of his old firm for exploiting clients. The image of a crime syndicate comes to mind, except that Greg Smith did not reveal illegal activity. That might come next. A Lithuanian-born native of South Africa, Smith called the GSax culture toxic and destructive in a New York Times opinion piece. One must wonder why the NYTimes published the article, given the strong ties to Wall Street and frequent genuflexion before the banker gods. Smith is identified as an executive director and head of their US equity derivatives business in Europe. He departs the firm after 12 years. Another charge laid is his direct blame of CEO Lloyd Blankfein and President Gary Cohn for losing hold over the firm's culture. Smith blamed the firm's management for promoting employees who persuaded customers to buy products that were loser investments, dumping them from the GSax portfolio which they caused damage.

The Stanford graduate Smith wrote, "I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It is purely about how we can make the most possible money off of them. It makes me ill how callously people talk about ripping their clients off. Over the last 12 months, I have seen five different managing directors refer to their own clients as muppets, sometimes over internal e-mail. Culture was always a vital part of Goldman Sachs's success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. It was not just about making money. This alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm. Smith describes a vile predator from the inside.

More remarkable is how the press networks are running with the story, albeit with some wry grins and laughter in undermine. The attack adds to criticism from politicians and protesters who blame the company for triggering the financial crisis and profiting at client expense. The august firm is widely accused of engineering the TARP Fund bailout to disguise a 100% redemption for its badly impaired AIG holdings (believed worth 40% to 60% of face value). The criminal organization has endured Congressional hearings probing its role in the financial crisis. It paid $550 million in 2010 to settle a lawsuit related to misleading investors in a Collateralized Debt Obligation (leveraged mortgage bond scam). A recent Harris Interactive study was conducted by the market research firm, in which is found Goldman Sachs to score among the lowest on corporate reputations. Matt Taibbi is squarely on the mark calling the firm the great vampire squid with tentacles spread anywhere that blood resides.

Some query on the Jackass part revealed that numerous big bank organizations are under active and vigorous investigation. The forensic work is being done by a crack international team of police, attorneys, and judges. Mos of their work to date has been in Europe, but that is changing fast. They have made headway on Deutsche Bank in obtaining incriminating data. The source informed me that Goldman Sachs is a key firm under investigation, in Europe for its illegal currency swap activity with Greece and other nations. The pressure is on. Many more people will likely depart the fraud-ridden corrupt financial firms engaged in $trillion thefts with impunity. We have entered the blowback phase.

In an echo event, a whistle blower has stepped forward anonymously to cast accusation at JPMorgan Chase. His focus is on illicit activity in the Gold market. He urges the CFTC to take action. But this story involves very little information. If in the next few weeks, no further direct information and evidence is produced, regard it as a distraction ruse. He opened the door, and next we must see if he walks through it carrying boxes. See the CFTC article (CLICK HERE).

◄$$$ GEITHNER SUPPOSEDLY WAS ARRESTED AND RELEASED OVER COLLUSION REGARDING THE A.I.G. CASE. A WAVE OF BANKER RESIGNATIONS IS IN FULL SWING, MOSTLY IN EUROPE. A HIDDEN MOMENTUM COULD SIGNAL AN IMPORTANT REVELATION OR EVENT. THE GROTESQUE INSOLVENCY OF BIG BANKS SHOULD LIMIT BANKER CAREERS AND PENSIONS. LENDING OPERATIONS HAVE CUT BACK SEVERELY, AND GAMBLING ON CENTRAL BANK GIFTS AND MANAGING MONEY LAUNDERING OPERATIONS SEEM A POOR CAREER PATH. $$$

Rats are jumping from the ship, or else feces is departing the rodent structures. A fellow with Harvard credentials combines with the now notorious hero Judge Napolitano to inform that Treasury Secretary and former New York Fed head Timothy Geither was recently arrested over his tawdry role in the AIG case. But his release came quickly, maybe in a simple showcase event. Geithner allegedly ordered AIG to withhold documents during the entire bailout and investigation period. To be sure, he is linked to much bigger crimes, from $trillion thefts to mortgage bond fraud to money laundering. A much bigger dragnet is at work. Arrest warrants for US bankers are sitting on desks all across Western Europe. The result is not arrests but rather limited travel by the cadre of American bank crimin als. Switzerland like with the Davos Global Economic Summit is a safe haven exception, where warrants are understood never to be enforced. Recall Poland was an exception for a pan-Europe meeting that Geithner attended, but his appearance was more like a hit & run flash. It was almost like Tiny Tim did not want to remain in a fixed European location for too many hours.

Carl Herman has made a private mission of following the bankers (aka The 1%) and documenting their profound crimes. He wrote, "Anyone with intellectual integrity and moral courage can affirm that the Federal Reserve system is guilty of financial fraud at its core. The EMPEROR HAS NO CLOTHES reason is they lie in omission and commission with a fiduciary responsibility. They create debt for what we use as money, charge the 99% increasing aggregate interest, and then tell us this is responsible leadership for the public good. I teach college level Economics. The facts of a debt-based monetary system, unpayable increasing aggregate debt, and increasing per-capita interest costs is conservative textbook information. If you want to understand, I will walk you through here. There is more to the charge of financial fraud at the top of US economic and financial policy, of course. I recommend the documentation of Matt Taibbi and David DeGraw to dive into details of the crimes, and Ellen Brown and American Monetary Institute to explore solutions. Until we have justice with the 1%"s crimes centering in war and money, we will continue to document the facts and demand their arrests. These crimes kill millions, harm billions, and loot trillions of our dollars every year." See the Activist article (CLICK HERE) and the Amerian Kabuki article (CLICK HERE).

Also, the Securities Exchange Commission maintains a database named EDGAR, open to the public. Corporations must report by law executive resignations on 8-K forms. Some research with searches on a specific range of dates and including the keyword boolean searches reveals aplenty. A baseline comparison exposes a big uptick in resignations. In all, 320 resignations have occurred recently from world banks, investment houses, and money funds. One must wonder if Dominique Strauss-Kahn of the IMF is included. Not all these resignations have any meaty meaning behind them, because bankers routinely wait for their yearly bonuses to leave office. The European implosion has taken a large toll, as has the breakdown in North America. A hat tip to Gabriel and Sophie for dogged research. Goldman Sachs is the leader of the pack, the firm under siege, seen in the individual bank tally. See the NewsUS article (CLICK HERE) and the Above Top Secret article (CLICK HERE).

◄$$$ RUSSIA WILL PLAY A HIGHLY IMPORTANT PIVOTAL ROLE IN THE NEXT CHAPTER, AS THE FORCES OF FREEDOM AND FORCES FOR FAIR MARKETS RISE. RUSSIA IS A VAST LAND WITH GREAT RESOURCES, NATURAL AND HUMAN. THE WORLD HAS BEEN TURNED UPSIDE DOWN. THE WEST IS FULL OF DESTRUCTIVE FASCISM, WHILE THE EAST IS FULL OF UNIQUE BRANDS OF CAPITALISM. THINK ECONOMIC, NOT POLITICAL. $$$

Edgar Cayce is known for many scientific facts, like the wobble in the earth's rotation and its relation to geological instability. He also made some amazing references to Russia for its special place in the cosmic plan. He foresaw a vital role as the West entered its twilight economically. In 1944 he wrote, "In Russia there comes the hope of the world, not as that sometimes termed of the communistic, or Bolshevik. No, but freedom freedom! That each man will live for his fellow man! The principle has been born. It will take years for it to be crystallized, but out of Russia comes again the hope of the world." The words of the Sleeping Prophet Cayce have proved true. Many Hat Trick Letter subscribers have resisted my notion that Russia holds hope for the West, with free markets, with commodity supply, with gold vault services, with safe haven. It will come, all of it. Some bumps in the road have been seen with resource and mineral deposit confiscation, and contract violations. Consider them adjustments to the chessboard, hard to justify, but based in resets if not paybacks from the Yeltsin years.

For confirmation, consider the opinion of an excellent contact with global consulting experience that includes Russia during the turbulent 1990 decade when Yeltin had brief rule. He had direct experience, not in the US-Anglo attempt to control the Russian leadership through the oil company cable lines, but in the cleanup afterwards. He is also fluent in Russian and two other languages. He wrote, "Russia and China will counter any attack by the American-led cabal. With Putin back in the Kremlin, their cabal is back at a disadvantage, since the man is thinking strategically and not tactically. Russians play chess and are always five moves ahead of everyone else. One day in the not to distant future, we shall be thankful to have Russia for what it is. First they will break the back of the NWO Boyz, and secondly they will balance the scale when it comes to China. To do that they will need Germany, as they have needed them many times before during the course of history. Today's Russia is not the Soviet Union (CCCP). Today's Russia is the old Russia with 21st century tools, expertise, extremely well educated people, and resources that are beyond people's wildest imagination. Over the last weekend, Putin and Demedew had Berlusconi as guest for sking in Sochi. Russia will take over Libya's assets in Italy, that include refineries, gas stations, bank holdings, ports, and more. Once Italy goes towards default, it will have already been rescued by Russia. Hence Russia counter-balances China's Europe expansion. China de-facto owns Greece today but the dimwitted Greeks holler and scream at Germany for destroying them. The real German decision makers do not care at all about the sideshows. For them the Euro exists, and the alliance with Russia, China, and the Middle East is a done deal. Then there is Africa, where the United States will have many wars triggered to fight the Chinese and all their other adversaries, a lost cause for sure. Yes, Russia plays a vital role in what is going to happen the DAY AFTER and right now." Notice reference to the Eastern Alliance with Germany at its core counsel role, and secretive leadership role that is never in the news.

CORRUPT DERIVATIVES SEEP TO SURFACE

◄$$$ A CONGAME IS UNDERWAY, AS THE I.S.D.A. WILL USE AN AUCTION IN PAYOUTS FOR GREEK DEFAULT INSURANCE, IN A GRAND EVENT THAT WILL SHROUD HIDDEN CENTRAL BANK BAILOUTS IN SIMULTANEOUS MANNER. AROUSED SUSPICION POINTS TO SOME DEVIOUS HANDLING IN THE GREEK DERIVATIVES THAT TOTAL UP TO $37 TRILLION. $$$

The bigger story on the micro scene is the congame managed by the Intl Swaps & Derivatives Association (ISDA), whose released report was intended to confuse. The press is using the word default, but the ISDA is using the word auction. The amount of CDSwaps outstanding is orders of magnitude more than the $3.5 billion being quoted. That low figure is the likely premium posted by the insurance contracts. The BIS confirms the total outstanding CDSwaps is approximately $37 trillion. Sinclair believes that at least 50% or more of the existing $37 trillion on the books is directly related to Greece. The $3.5 billion figure could be a miniscule subset finding its way to the US Comptroller of the Currency, obscuring the notional value. It is inconceivable that German and Swiss institutions underwrote virtually all CDS transactions, leaving only a tiny fraction by US banks. Expect significant USFed swaps to go to the Euro Central Bank, where the funds will be redirected to their subsidiaries and to the foreign banks. The implications of any managed default event would be a second rescue of approximately eight international banks. Central planners would attempt to camouflage the event, as they make good the big banks, covering their exposure in typical hidden style. It could serve as a preliminary step to a more grandiose bank recapitalization initiative. Astute observers can track central bank currency swaps from the USFed. It is the lender of last resort.

The beginning has come for revealing the false facade of offsetting derivative exposure. When Bank A and Bank B are counter-parties to each other in large scale destruction, both are almost certainly going to face ruin. The payout liability for a debt default is so great that Bank A could not pay it on the Credit Default Swap insurance contract. So Bank B would be left exposed to a loss without hope of payout on the insured loss, while Bank A is dead. Both lose. One holds a huge bond loss, the other a huge insurance cost. The financial press and bank leaders promote the story that the two sides cancel and offset each other. It is like seeing two buildings side by side, one burned to the ground, the other smashed by a wrecking ball. We are told that the smashed building will prop up the burned building. Both are ruined in the real world.

A rejoinder editorial comment. Notice the key word is auction to resolve the Greek bailout and its complex intertwined after-effects. Sinclair tipped us off with the hint of the auction being the key. The auction will help to put a spotlight on the true value on the Greek Govt Bonds, since the swap from the insurance contract involves the bond owners to hand over (swap) their bonds in return for full original principal value in payout. The auction will put value on a bond kill zone. However, much more to this story. The total Greek debt exposure that must be rolled over this month is $129 billion worth of bonds, ranked of various maturities like 1-year, 5-year, 10-year. The big big big problem is that the Credit Default Swaps are unregulated, corrupted, written in obscure language, and overseen by friends of the banks who suffer exposure. The problem simply stated is that the underwriter banks sold multiples more CDSwap contracts than Greek Govt Bonds in existence. It is like 30 to 50 people bought fire insurance on a house worth $250k. The average policy was for $200k, since the plot of land is not part of the protection policy. The house burns down. All the people (who do not own the house) want their $200k. The underlying asset is dwarfed by the CDSwap contract payout risk held by the underwriter banks. The CDS market involved is grotesquely over-leveraged versus the asset base. For a decade or more, it has been a vast money machine for Wall Street with no hope of paying out insurance awards. What an incredible mess, an unresolvable mess, extending from the fact that the derivative market is shady, secretive, and totally corrupt.

◄$$$ HUGE DERIVATIVE PAYOUTS ARE LIKELY TO BE COVERED IN THE GREEK DEFAULT. BUT THE SOURCE OF FUNDS WILL BE THE HYPER INFLATION PIPELINE IN THE PAPER CURRENCY PRINTING PRESS. WATCH FOR THE PROJECT TO BE CONTAINED WITHIN THE FINANCE SECTOR, AND NOT LEAK OUT INTO THE MAIN STREETS OF VARIOUS WESTERN ECONOMIES. $$$

Common misconceptions continue to spread, even by very astute community members. Jim Sinclair believes the Greek credit default event and declared resolution will result in enormous price inflation. That remains to be seen. The plan executed in the last few years has been to contain the hyper inflation within the financial sector in general, and the bond & derivative markets in particular. Offsetting bond loss is not inflationary to the economy where people work in offices and plants small and large, only to the financial sector. So far containing the inflation within the Black Hole of the finance sector has prevented the required leakage to produce systemic price inflation. An inflationary hell comes, but in the ruin of currencies from lost legitimacy even as used widely. The derivative Black Hole will see the inflation engine output pissed down a bottomless pit, not the economies, certainly not wages. Sinclair expects the full notional value of derivatives in bank restoration to result in massive inflation, from direct infusion of $trillions, leaking into the Main Streets. That remains to be seen.

The Jackass has been in steadfast disagreement for a year or longer about the imminent extreme price inflation episode. The principal effect will come in rising costs, not in wages, which serves as the main byline message. The result is economic collapse assured by the Chinese industrial expansion in the Globalization movement which has stripped off legitimate income from the Western economies, and thus limited Western wages. Debt replaced it. The magnificent monetary inflation covers runaway government debt, covers ruined mortgage bonds, and covers derivatives implosion. But that inflation does not and probably will not reach the Main Streets of each Western nation. Find the price inflation in Greece and Italy and Spain. It does not exist since incomes are almost totally squashed, against a backdrop of rising prices that few can pay. Thus businesses liquidate, rather than receive higher required prices.

Sinclair concluded two end results, a fast rising Gold price (with a cautionary note) and a powerful price inflation outbreak. The Jackass agrees on the first result, not the second. He wrote, "This type of event would be the meat by which Alf Fields would be proven right on his $4500 projection for Gold. But strictly for traders, this does not apply to investors. For the intelligent traders, they will flatten out their positions. If my father were still living, I could hear him telling me, GO FLAT! My father Bert Seligman and his business partner Jesse Livermore would flatten out their positions because of the ambiguity that exists here. Again, this is for the traders, which is not to be confused with investors which hold positions in Gold. The bottom line is if these CDSwaps are made to pay, we are looking at an inflationary hell. This is also key, whether or not this is a default, this is a revelation of the outrageous weakness in all fiat currencies." To be honest, the Jackass is not entirely clear about the cautionary note, but it sounds like he warns of extreme volatility that makes for dangerous times. Some smart colleagues tell me that Sinclair advises not playing games with futures or leveraged positions, even to sell out of most stocks (except mining stocks). Going flat means not to have risky bets that would be harmed by the volatility or leverage. The winners will be those who avoid the casino tables, hunker down with physical gold & Silver, and wait for much higher prices. See the King World News interview (CLICK HERE).

Permit a lecture on the distinction of inflationary hell. It will come as financial sector hyper-inflation, not to reach Main Street. This is not an event with leakage over the street levy system vigorously defended by the elite bankers. They have sopped up staggering welfare funds. The slosh of money does not result in bank loans to businesses, nor to capital investment through business expansion, nor job hiring, and certainly not lifted wages. It is hyper monetary inflation of the worst kind held within the Black Hole of the financial sector that is rapidly imploding. The Black Hole will see several $trillion vanish in offset to destroyed bond paper on a vast scale. The marquee asset bubble is the USTreasury Bond, which actually causes economic slowdown for numerous reasons. It offers too little to savers. It limits pension income. It draws money from the stock market. It attracts money from the typical credit engine institutions. It removes money that seeks safe haven, whether or not safe or a haven. Also, the AIG and Fannie Mae vast bottomless pits draw funds in vast offsets. The USTBonds, AIG, and Fannie constitute historically unprecedented Weimar Pits, holes for the monetary firehose going nowhere. Where is the leakage?? Nowhere!! In fact, housing prices continue down from the lack of industry and 0% killshot to capital. The big banks are insolvent dead, not lending like credit engines should. We surely do have USFed-led monetary hyper inflation. We have asset deflation in housing and in many stock sectors. But we have asset bubble inflation in USTBonds and crude oil and most commodities, which suppresses the economy and raises costs generally. That is not a systemic price inflation formula.

No systemic strong price inflation effect can happen unless wages go up in a strong manner. The great obstruction, the economic global hairball, is China and Globalization, which have prevented the key wage ingredient from happening. Instead, what we will see is some pervasive stubborn nagging price inflation but powerful cost inflation without potential of rapidly rising wages. The horrendous witch's cauldron formula will lead to systemic failure in the West. This concept has been a nasty paradoxical thorn for a lot of people. It has been given much thought in private quiet moments. Worse, the failure is planned and orchestrated in my opinion from a Twenty Year Plan. The China card in Globalization is being used to usher in Global Fascism from the collapse. See Papademos in Greece and Monti in Italy, the unelected technocrat leaders installed by the Syndicate. The only exception possible to engineer systemic price inflation would be vast gigantic welfare programs or price subsidies put in place on a constant fixed basis (not temporary). They could be from further deficit programs ordered in desperation by the indebted nations like the US, England, France, and PIGS of Southern Europe. They could be from tapped FOREX reserves from the producing nations of the East plus the BRICs. As the global economy continues to deteriorate, the entire world of nations will be forced to take action on the defensive.

◄$$$ THE DERIVATIVE MESS IS THE CHANNEL FOR RAMPANT FASCISM AND NATIONALIZED BANKS, OR ELSE MASSIVE PRICE INFLATION FROM AN ARTIFICIALLY RECAPITALIZED BANK SYSTEM. THE CHOICES ARE LIMITED, AS PHONY ACCOUNTING PERSISTS INSTEAD OF MUTUALLY LINKED FAILURES ALONG WITH LOST CONFIDENCE IN THE SYSTEM. THE OFFSET LOSSES AND NETTING BENEFITS ARE THE NEW MYTH. $$$

The difference between the notional and real value of derivatives has been of great interest in recent months, as the entire shadowy corrupted field of finance is thrust into the news. The real value comes to bear on the financial system only in the event of a default. Uncollateralized financial instruments, like derivatives, are credits or potential money. Only when a failure event triggers them do they become real, with a significant effect hitting the balance sheet of the payer and lifting the income statement to the beneficiary. At that time, they become money. The financial world has seen the extraordinary growth of derivatives in notional value, to almost unbelievable proportions approaching $1 quadrillion (one billion billion dollars). The entire scummy business has served the Wall Street and London bankers well, providing huge income streams without the burden of payouts. The payouts have been consistently blocked by the regulatory body in governance, whose makeup reads like banker executive staffs.

The hyper-inflation managed by the major central banks has an abscess filled with a leveraged form of money in the derivatives. It explains the policy error blatantly evident for the past several years. The policy error is not in the setting of interest rates alone, but in the USFed's failure to regulate the banking system and manage its risks. The Greenspan Fed started the process, and was an abysmal failure. No improvement has been forthcoming at the Bernanke Fed. The explosion of new derivative contracts creates a risk of either enormous fortunes restored or hidden cancelations of unpayable debts. Watch for more bank nationalizations in order to cover up the corruption within derivatives themselves. The constant in the picture is the unsustainable leverage and the mispricing of risk. The individual contract risk quickly becomes a cascade of risk in a financial system where risk has gone amok. In all too many cases, a single bank might have a hundred or more $trillions of notional value in derivatives on their books, against much less than one $trillion in assets. The situation is permitted since netting is the norm, and multiples in contracts to the underlying assets are permitted. The raft of derivative arrangements never offset their own risk, much like a hedge. As the amounts of derivative netting grows larger and more intertwining, the secondary effects of counter-party risk become tightly compressed and distorted. Since the Lehman Brothers meltdown, the entire derivative arena has gained attention, while its exposure to risk and accounting flaws have come to the fore for better autopsy examination. The analogy is not frivolous, since in late 2008 the US banking system died. That explains their absent lending and supposedly tighter lending rules. Blame is given to unqualified borrowers. But the lending capital is not available.

In 2002 Warren Buffett famously referred to derivatives as financial weapons of mass destruction. That was one of the few times the Oracle of Omaha actually spoke the truth. His more recent rubbish emitted vocally pertain to big bank strength, stock market valuation, and the imprudence of investing in Gold. A grand distortion in the real economy still goes largely unmeasured since 2008, by design. The bank leaders prefer phony accounting to a loss of confidence in the system. Buffet is a principal player in the charade. The entire Too Big To Fail mantra is a grand charade. It is soft blackmail in Jesse's keen view, blackmail of mutually assured destruction borrowed from the cold war. In fact, the old Soviet Cold War has morphed into a Financial Cold War. The large insolvent banks are kept standing as zombies in order to cover up the depths of the fraud, insolvency, and mispriced risk in the financial system. The same large dead bank structures have seized enormous power over the political process. The global financial system is like a nuclear bomb. At its center are at most ten banks whose financial posture is over-leveraged and interdependent not only amongst themselves but also with their national economies. They have already failed. They are too big to fail comfortably and in a stable manner. The challenge will be to manage their failures when they become too obvious, like dead vehicles lying in the road.

Jesse summarizes very effectively the bad math of derivative offsets and mythical netting. He wrote, "Rather than execute a disastrously complicated web of transactions, swap dealers and ordinary banks use clearing houses to do exactly what we just did above, but on a gigantic scale. Obviously, this is done by an algorithm, and not by hand. Banks and swap dealers prefer to strip down the number of transactions so that they only part with their cash when absolutely necessary. There are all kinds of things that can go wrong while your money spins around the globe, and banks and swap dealers would prefer, quite reasonably, to minimize those risks. Presumably by assuming them away, as in the case of Black-Scholes Model. Except the assumptions made in netting as compared to the risk handwave in Black-Scholes seem like planet killer class ordnance [bombs] compared to conventional bunker busters. It is an Engine of Misunderstanding. As you can see from the transactions above, the total amount of outstanding debts is completely meaningless. That complex web of relationships between A, B, and C, reduced to 1 transaction worth $1. Yet, the media would have certainly reported a cataclysmic 2 + 3 + 4 + 5 + 2 + 6 = $22 in total debts. But borrowing from Sinclair's description, if a major counter-party in this daisy chain fails, the notional netting can become cataclysmic, and enormous losses can be realized, especially if there are linkages to the commercial credit and banking systems. And this is where Mark-to-Myth and bailouts come in." See the Cafe Americain article (CLICK HERE).

◄$$$ THE I.S.D.A. MAKEUP ON THE BOARD IS AN EASY PRIMITIVE GIVEAWAY, JUST AS BAD AS THE SECURITIES & EXCHANGE COMMISSION, JUST AS BAD AS THE COMMODITY FUTURES TRADING COMMISSION. THE BANKERS REGULATE THEMSELVES AND PERMIT GROSS CRIMINAL ACTIVITY. EXPECT ALL OUTCOMES TO SUSTAIN THE CURRENT SYSTEM WITH A CLEAR BIAS, OR AT LEAST ATTEMPT TO SUSTAIN IT. $$$

Consider the Intl Swaps & Derivatives Association (ISDA) and their entire structural makeup. Their titles will not be cited, since all high ranking and influential. Only their company affiliation will be listd. The Board of Directors consists of Stephen O'Connor of Morgan Stanley, Michele Faissola of Deutsche Bank, and Diane Genova of JPMorgan Chase. The Directors are Guillaume Amblard of BNP Paribas, Brian Archer of Citigroup, Martin Chavez of Goldman Sachs, Bill De Leon of PIMCO, Thibaut de Roux of HSBC Bank, Nitin Gulabani of Standard Chartered Bank, Harry Harrison of Barclays Capital, Alan Haywood of British Petroleum, Peter Healey of Union Bank of Switzerland, Jonathan Hunter of RBC Capital Markets, Jeroen Krens of RBS Global Markets, TJ Lim of Unicredit, Eric Litvack of Societe Generale, Ted MacDonald of the DE Shaw Group, Yutaka Nakajima of Nomura, Gerhard Seebacher of Bank of America Merrill Lynch, Yasuhiro Shibata of Mizuho, Eraj Shirvani of Credit Suisse, Stuart Spodek of BlackRock, and Emmanuel Vercoustre of AXA. With such a cast of insiders, do not expect anything fair and equitable to come from derivative payout decisions and rulings. All outcomes will favor the banking system in a manner to sustain that system. Even their biased efforts might not be sufficient to save the system.

◄$$$ THE DERIVATIVES CLEARING FUNCTION IS FALLING THROUGH THE FLOOR. THE EMBATTLED C.M.E. HAS WITHDRAWN FROM ITS EUROPEAN DERIVATIVE RESPONSIBILITIES. THE GREEK DEFAULT IS CAUSING A TREMENDOUS CRUMBLING ACT ON THE FOUNDATION OF THE UNREGULATED AND HIGHLY CORRUPT NICHE INDUSTRY. GREECE HAS FORCED THE SYSTEM TO REVEAL ITS FAULTY NATURE AND CORRODED INNER CABLES. $$$

Again, not in the news, since the preferred story is that the Greek default is finally behind us. Not true! The CFTC regulatory body released this announcement stating that it has vacated the CME Clearing Europe Limited registration as a derivatives clearing organization. They actually reported that the action was taken at the request of CME, citing Section 7 of the Commodity Exchange Act. Bix Weir summarized by writing, "There is a raging wildfire behind the scenes, as the entire $50 trillion Credit Default Swap market is imploding due to the Greek default. The losses will come fast and furious once the auction is held on March 19th. The ISDA's 2009 Big-Bang Protocol will be put to the test next week."

MFGLOBAL STENCH LINGERS

◄$$$ THE MF-GLOBAL FAILURE AND FRAUD HAS CREATED A TAX CRUNCH FOR MIDWEST FARMERS, AFTER A LIQUIDITY CRUNCH WHEN IT ERUPTED IN DECEMBER. THE LACK OF RESOLUTION AND THE INCESSANT DELAYS HAVE PUT THE VICTIMS IN AN AWKWARD POSITION IN DECLARATION OF PROFITS AND LOSSES. EXPECT FARM OUTPUT TO BE AFFECTED, AS THE ENTIRE RISK HEDGE BUSINESS IS TAINTED. $$$

This story was told a couple months ago. The farmers and their business are put at risk by the criminal theft perpetrated by MFGlobal and by the tax liability that lingers without certain closure. The farmers cannot properly account for their losses. They must declare the lost and forego attempts at recovery in the process of paying taxes. Many do know know exactly the results of last year from legitimate hedging of risk, since a crime scene is permitted to persist. The delay assists the thief in JPMorgan, while harming the victims a second time. The authorities wish for the MFG scene to linger, the trail turned cold, and for victim motivation to fade away. In the process, farm enterprises are at risk from lack of funds, heavy losses, and uncertain tax filings. Those affected include not only farmers, but ranches and honest ancillary investors.

In many cases the criminal organizations that ransacked through their accounts and stole their funds have not yet distributed tax forms that detail their profits and losses, perhaps embarrassed at detailing their own robbery. Such documents could be construed as evidence in court. The collapse of MFGlobal, whose fallout hit farmers more than others, has produced a series of financial frustrations for former customers not yet fully reimbursed for hundreds of $millions that were frozen in their accounts, many still frozen. The reimbursed funds are an order of magnitude lower than the financial press reports. The process of recovering funds from the overseeing Trustee is painfully slow, while the tax deadline approaches. The delayed tax forms often add insult to injury since the lack of data means some people may have to pay taxes on profits they did not really make while being unable to write off money they may never see again. The theft has been followed by malignant neglect.

The Commodity Customer Coalition is a victim advocate group led by a dedicated Koutoulis, pushing the government for more guidance from his lead attorney post. It estimated that not even one MFGlobal customer has filed a 2011 tax return in the aftermath of confusion, due to delays in the Trustee sending out 1099 tax forms on income. The coalition requested Treasury Secy Geithner for guidance from the IRS on how former MFGlobal customers ought to account for assets still frozen in the bankruptcy. The group has not yet received a response, a sign of bereft leadership by the diminutive crime lieutenant. Former clients, so the press informs, have been returned about 72% of their missing money so far. Yet my contact in Chicago, one of the victims, has not received anything, nor any of his cohorts. They cannot declare the remainder as a loss yet because there is still the possibility it will be returned, tax experts state. Any victim who declares a loss might put himself in a weak position at a later date for recovery. See the Reuters article (CLICK HERE).

◄$$$ CHECK OUT BLISTERING COMMENTS ABOUT THE JPMORGAN ROLE IN THE MF-GLOBAL FIASCO. CREDIT TO C.N.B.C. FOR THE EXPOSURE AND INTERVIEW, BUT THE FINANCIAL NETWORK IS PART OF THE SYNDICATE PROPAGANDA AND COVERUP ENTERPRISE. THE CASE IS SO CHOCK FULL OF DIRECT EVIDENCE OF THEFT, THAT IT HAS BECOME A COMIC TRAGEDY REDUX OF THE MADOFF THEFT. ALL THE EVIDENCE POINTS TO JPMORGAN. $$$

Chris Whalen is a superb financial and bank analyst, at Target Capital Partners. He believes that JPMorgan and CEO Dimon are being protected by USGovt agencies and the financial media. He criticizes the official story being told as incorrect and deceptive, whereby the public is told of confusion at MFGlobal in their bank office on the days of the account thefts. In fact, client accounts are segregated and are never to be touched, hardly the basis of confusion, but rather outright raids and thefts. He points a finger of guilt at the SEC for continuing a charade whereby the MFGlobal failure is being treated as a financial firm liquidation, when in fact it is a brokerage dealer breakdown. In the latter brokerage bust, the client accounts are sacred and restored fully. But not in this case, since the big bank, namely JPMorgan, has no interested in justice or due process. The SEC and JPM preferred to deny the Trustee the empowerment to claw back funds taken by JPMorgan. He went on to describe the effects of the horrendous 2005 bankruptcy reform law, which he claims the banker lobby unduly influenced. It does not permit a Receiver to be in the picture, which would be given broad powers to pursue funds held by accused third parties. Instead, the Trustee is left helpless, without the power to claw back funds unless fraud is clearly proven. Proof cannot easily be made. The big bank JPMorgan prefers theft with impunity and USGovt regulatory agency protection.

Whalen openly told CNBC and Carl Quintania that customers were raped publicly, and legitimate broker clients will not return to the COMEX futures arena from lost trust. He warns that the risk hedge niche industry might be vanishing. Chicago pit veteran Rick Santelli added a stern accusation at the FBI agent Freeh, who has promised emails from MFG and JPM. Santelli believes they are full of damning evidence, yet held back by Freeh, who has absolutely no role in this investigation except to cover up the crime. He wonders why the press cameras have not filmed a perp walk of JPMorgan executives much like WorldCom. Clearly the law does not apply to Wall Street firms on theft and fraud. On October 26th, MFG sent via bank wire $165 million from client accounts in a transfer to JPMorgan. They later attempted to reverse the transfer, since direct theft. Some call the event a preliminary smoking gun that was overlooked by the lapdog regulators. Late r came a massive crime. See the CNBC video (CLICK HERE). Expect more MFGlobal crime scenes to occur.

◄$$$ THE SHAM OF AN MF-GLOBAL INVESTIGATION HAS DIED DOWN IN VERY PREDICTABLE FASHION. THE FRONT WAS MADE. THE EFFORT FIZZLED AWAY, MUCH LIKE MADOFF. THE PUBLIC ATTENTION SPAN IS SHORT. THE ARM OF JUSTICE IS SLOWLY REMOVED, AS THE PUBLIC FOCUS HAS MOVED OFF CENTER TO THE ACADEMY AWARDS AND PRESIDENTIAL ELECTION. AS FOR THE MF-GLOBAL CRIME DRAMA, WE HAVE SEEN THIS MOVIE BEFORE. $$$

After a quick start, replete with an army of marshalled forces, the MFGlobal criminal probe has slowed to a dribble. USGovt investigators of bankrupt MFGlobal Holdings still have not determined after four months of intense comprehensive indefatigable heroic probes, whether sufficient evidence warrants pursuit of a criminal case. Federal prosecutors in Chicago diligently had a grand jury issue a stream of subpoenas. Nothing came of it all. They could not find the pilfered funds either, even though everybody in Europe knows the funds reside in London accounts of JPMorgan. Investigators from the Commodity Futures Trading Commission, Federal Bureau of Investigation, and other frenzied agencies have been analyzing events using midnight oil in tireless fashion. An estimated $1.6 billion in client funds went missing, better described as stolen. Focus has been given to mountains of documents related to thousands of transactions worth hundreds of $millions. Credit should be given to the noble effort toward justice. On the one side is the veteran Fitzgerald in Chicago and US Attorney Bharara in New York. On the other side is JPMorgan, the free lance mafia don Louis Freeh from the FBI, and the phone calls made in secret to urge a halt any prosecution progress in the interest of national security. The Syndicate interest is the national interest, we should know.

The CME is the world's largest futures exchange. It received subpoenas in November from the Chicago federal grand jury investigating the MFGlobal collapse, as well as from the more friendly CFTC, according to a February 28th regulatory filing. The FBI, a primary player in financial crime coverup, opened up a formal inquiry in early November. The same FBI has sat on the damaging email evidence, probably losing it with delete buttons. The CME received a subpoena from the CFTC and a document request from the Securities Investor Protection Corp, the trustee mishandling MFGlobal's liquidation. The CFTC, the FBI, and Freeh each have been unavailable or unwilling to respond to press requests for further information, serving as the center for the criminal defense. A stonewall has been fashioned. The biggest farce in the criminal comedy comes from James Giddens, Trustee for the MFGlobal fortress. He has used confiscation of account receipts, foot dragging, and misdirection effectively to bring an end to the entire case. Witness American justice within a partition of the Fascist Business Model. Expect the criminal cases and lawsuits to fade into the sunset amidst intense rear guard pressures. See the Bloomberg article (CLICK HERE).

◄$$$ THE WALL STREET JOURNAL IN JAPAN HAS BROKEN A STORY OF ANOTHER MFGLOBAL EVENT BUT WITH TWICE THE VOLUME AT $2.3 BILLION IN HYPOTHECATED ACCOUNTS. MISSING FUNDS AT AIJ: WATCHDOGGING JAPAN. THE LAND OF THE RISING SUN HAS ITS OWN BIGGER MF-GLOBAL EVENT WHERE A MOUNTAIN OF CLIENT FUNDS WENT MISSING. $$$

The watchdog job requires overtime in this day and age of high crime sponsored by governments and protected by its armada of agencies. The Wall Street Journal in Japan broke a story that has received zero press coverage in the United States. The site of the crime scene is AIJ Tokyo Asset Mgmt, where $billions in customer funds are missing in what appears to be a copycat event to mimic MFGlobal. An estimated $2.3 billion has gone missing from a small obscure firm based in Tokyo. The nation has a meager spotty regulatory watchdog body, admittedly. In their country, such crimes when they come public result in ritual suicides. At issue is pension fund assets managed by AIJ Investment Advisors. Details are sketchy, as the volume lost is uncertain, the client base is unknown, and the certainty of malfeasance is unclear. They are sure of one thing, that if stolen, the likelihood of catching the thieves or recovering the money is remote. The regulatory filings are minimal, kept to a submitted business report to regulators once per year. Happenstance inspections are an embarrassment, only resulting in 5% of the firms being ever audited. According to the Nikkei daily in Japan, AIJ might have misled clients for years, claiming they had cumulative returns as high as 240%. The bleak picture continues for Japanese financial regulators, who are working busily on the Olympus Corp fraud case. The camera maker admitted to hiding more than $1.5 billion in losses for 13 years. The apparent AIJ theft has the same earmarks of MFGlobal and Madoff, in huge unforeseen counter-party risk and thefts of client accounts. See the Cafe Americain article (CLICK HERE). Expect to see a wave of MFGlobal type cases spring up in the next several months.

GREEK DEFAULT CURTAIN RISES

◄$$$ THE GREEK DEFAULT IS SET TO TRIGGER $3 BILLION IN CREDIT DEFAULT SWAPS, THE ACTUAL TRUE VALUE IN DISPUTE. GREAT MYSTERY AND INTRIGUE IS LIKELY TO ACCOMPANY THE VAST FRAUD FACADES. THE FORMAL DECISION WAS UNANIMOUS TO DECLARE A GREEK DEFAULT THAT TRIGGERS THE CREDIT DEFAULT SWAPS. $$$

The New York-based Intl Swaps & Derivatives Assn is set to start the grand event. The ISDA has stated that the latest Greece bailout deal triggers $3 billion in Credit Default Swaps. Be sure that this is mostly US bank exposure, but possibly calculations are in premium value before leverage in order to conceal the actual exposure. A gross $68.9 billion of contracts were outstanding as of March 2nd before accounting for offsetting trades, the infamous netting ruse. A daisy chain of losses if counter-parties fail to meet their commitments could occur, unless hidden gargantuan funds are used to fill the related Black Holes, like they were with the urgently necessary nationalizations of Fannie Mae, Freddie Mac, and AIG. The proof of hidden slush funds to cover the process was the nationalizations, hardly required if the system were functioning in an orderly and proper manner. The actual notional value could be in the $60 billion vicinity. The underlying bonds are swapped to the under-writer of CDSwap contracts. The auction to recover value on the toxic bonds typically is held about a month after credit events are triggered. It seems March 9th was a hidden default date.

Confusion is the constant. The viability of CDS contracts as a hedge for the $257 billion of Greek Govt debt has been regularly questioned. The recent restructuring during the bailout effectively subordinated private investors to the European Central Bank, an extremely risky maneuver that angered a great many leaders. It was a rules change to maintain elite control and solvency in pecking order. Banks, hedge funds, and institutional investors were directly affected. Investors with 95.7% of privately held Greek Govt Bonds will participate in the swap after the collective action clauses (CAC) are triggered. Such clauses force the hand of holdouts who object to the process, typically hedge funds that seek fair play. The ISDA has been feverishly defending the widely swirling belief that Credit Swap Default contracts are not effective hedges, since they have not been triggered by past bailouts and forced bond writedowns. The ISDA has been working with members to put together a preliminary list of bonds that can be used in the auction, having hinted at expanding the range of obligations that are either currently outstanding or may be outstanding once some of these exchanges occur.

CDSwaps on Western European government debt securities can pay out on a credit event triggered by failure to pay, restructuring writedown of debt, or a moratorium on debt service payments. A restructuring event can be caused by a reduction in principal or interest, postponement or deferral of payments, or a change in the subordinate ranking or currency of obligations, according to ISDA rules. Curiously, the ISDA ignored their own rules until this month. Any of these changes must result from deterioration in creditworthiness, applied to multiple investors and be binding on all holders. The determinations committee which decides whether a credit event has occurred consists of representatives from 15 dealers and investors. On March 9th, the ISDA rendered a formal decision in unanimous manner on a credit default event, relating to The Hellenic Republic formally. An assumed loss ratio of about 80% is expected to prevail. They issued a public statement. The EMEA DC has resolved to hold an auction with respect to the settlement of standard Credit Default Swaps for which The Hellenic Republic is the reference entity. To maximize the range of obligations that market participants may deliver in settlement of insurance contracts, the EMEA DC has agreed to run an expedited auction process to take place on 19 March 2012. See the Bloomberg article (CLICK HERE) and the Zero Hedge article (CLICK HERE).

◄$$$ BRING YOUR PROGRAM GUIDE TO FOLLOW THE GREEK EVENTS. $$$

Tyler Durden of Zero Hedge provides an excellent summary of where the crisis stands in Greece and affected nations. Program guides must inform that CAC means Collective Action Clause, and LTRO means Long-Term Refinancing Operation. To begin with, Greece has defaulted. Here is a capsule summary, that might be slightly outdated, but not much, since we have entered the eye of the hurricane. The waiting game has come, waiting for Monday March 19th when the curtain rises to display the totally corrupt stage performance that will go to great lengths to save the big banks and preserve the power structure. See the Zero Hedge article (CLICK HERE).

1)      Greece was able to write off EUR 100 billion worth of debt in exchange for a EUR 130 billion rescue package of new debt. The Greek Govt will receive EUR 25 billion of that sum, in order to assure continued operations. The public is told that Greece is in a better position than before, albeit with more debt and less sovereignty, since they still share a common currency.

2)      As a result of the bond writedowns, Greece has widespread decimated pension plans, far lower in payouts than under original contracts. The cruel offset to mitigate the damage comes from current wages being cut also.

3)      CDS buyers will struggle, but should win some insurance payouts, provided their counter-party is solvent. Worse, the counter-party cannot be heavily exposed to an insolvent party or a financial firm permitted to fail since not in the syndicate. In other words, risk is hidden and confusion reigns.

4)      Nations with AAA-rated debt will be left in the cold, when they attempt to issue new debt. Usage widely of the CAC clauses on Greek Govt Bonds revealed how contracts can be unilaterally abrogated. Ugly gray storm clouds hover over new debt issuance. Peripheral nations in the EU will suffer most, since their bonds will continue to be subordinated to the EuroCB. If at any point the ECB chooses to exercise its divine right of seniority, the bond investors will face heavy losses at the stroke of a pen without recourse.  Bond investors do not cotton to such rules.

5)      One hundred EUR billion worth of paper wealth evaporated, a major blow to the European banking system. It had been short of capital, busily responding to Basel rules on reserve levels and leverage. Renewed strains will come to the battered inter-bank market. Look for perpetual LTRO carry trade activity at the overwhelmed Draghi window at the Euro Central Bank.

6)      Europe deceives itself that the system has an effective firewall for at least three years. A repeat performance is due for Portugal, which will suffer a similar default indignity by Q3 of this year. The liquidity provided by the LTRO will for a time keep market rates lower in Spain and Italy. On one side is maintaining sovereign bond obligations, service of existing debt, and issuance of new debt. On the other side is the slow collapse of the banks in the two countries. Do not expect organic economic growth to lift all boats and prevent banks from running aground.

7)      Be on the watch for a massive hidden bank recapitalization, conducted simultaneously, funded by USFed Dollar Swap Facilities. The opportunity is ripe. The need is desperate. The cloak is in place. The credit line has been written.

◄$$$ SOME CONFUSION HAS COME OVER THE GREEK DEFAULT IN PRELIMINARY STAGES. A FALSE PREMISE HAS BEEN EXPOSED, WHEREBY VARIATION MARGIN WAS NOT MAINTAINED AND TRANSFERRED THROUGH THE PROCESS AS IT SHOULD HAVE BEEN. THE BASIS FOR SOME CONFUSION IS THE HOPE THAT GOVERNMENT BACKSTOPS WOULD SAVE THE DAY, AND MORE SENIOR BONDS WOULD ARRIVE ON WHITE HORSES. JUST ONE RUINED LINK IN THE DAISY CHAIN OF PHONY NETTING EXPOSES HOW BOTH SIDES ARE DEAD. THE FALLOUT FROM THE MAYHEM IS ASSUREDLY GOING TO BE SUDDEN CAPITAL FLIGHT OUT OF THE OTHER P.I.G.S. NATIONS IN A FLASH EVENT. $$$

Reports circulate that a snag has occurred, surely to be swept under the rug. The big banks apparently have not regularly been squaring off their margins on the Credit Default Swaps. They act much like an option, but the margin must be maintained much like a futures contract, marked to market. Bloomberg reported that KA Finanz, an Austrian Bad Bank supported by the Austrian Govt, faces as much as a EUR 1 billion funding need to cover its margin exposures to Greek CDSwaps. The bank noted that "activation of the CDS with an assumed loss ratio of about 80% would mean an additional provisioning charge of EUR 423.6 million." A big oops! The bandied impression has been that very little net cash would change hands on the basis of the $3.2 billion net aggregate market exposure, a lie. However, that belief was based on the now known false premise that variation margin was maintained and transferred throughout the process. Recent IMF filings attest to this shortcoming. The dealer to dealer variation margin has been conveniently less rigorous since perhaps all collateral was netted up across all exposures.

The higher order backstops by the individual governments and even the Euro Central Bank surely motivated the sloppy maintenance. One might easily conclude that the big banks have been marking all sovereign debt CDS insurance at par, and not paying off cash to other dealers. The counter-party chain is fragile. Only a single ruined counter-party entity within the chain is required to quickly convert net into gross. In other words, only one failure within the chain can ruin the corrupt practice of netting, enough to expose the entire chain as flawed and defective, both party and counter-party ruined. That is my perception, all sides are dead. The bank leaders have a herculean balancing act to undertake, as they must ensure that not a single entity fails. See the Zero Hedge article (CLICK HERE).

Marc Ostwald from Monument Securities put it well when he said, "The rule of law has been treated with contempt. This will lead to litigation for the next ten years. It has become a massive impediment for long-term investors, and people will now be very wary about Portugal." A political risk premium is soon to be introduced into bond investments within Europe, since legal whim has shown itself in clear terms. A rising risk is soon to be realized as the EuroZone crisis rumbles and stumbles. The fiscal contraction in Italy and Spain plays havoc with debt dynamics, as banks continue to scramble, while reforms come much too late to lift confidence in the system. The formal handling (corrupt process) of Greece has guaranteed that global funds will rush for Club Med exits at the first sign of trouble. The impact will go beyond the Italy and Spain, and whack the already downtrodden bruised nation of Portugal. The abused bondholders will seek their revenge with long memories. See the UK Telegraph article (CLICK HERE).

◄$$$ ACCELERATING CAPITAL FLIGHT OUT OF ITALY AND SPAIN IS IN FULL SWING, BUT THE EURO CENTRAL BANK IS HIDING THE HOT MONEY EXIT. THE DEPOSITS ARE MOVING OUT. THE LONG-TERM FINANCING OPERATIONS ARE RAMPING UP FAST. A HIGH RISK BOND CARRY TRADE HAS EMERGED. $$$

Hot money is moving out of Italy and Spain, and fast. The bluntly ignorant or highly deceptive financial press networks are asleep, as they report the sovereign bond market has stabilized. They only look at the bond yields, like poor students or willing dupes. At first blush, it appears the Euro Central Bank is concealing the movement of funds. The now infamous Long-Term Refinancing Operations are essentially a EuroCB sponsored expanded window to accept toxic sovereign bonds in return for other equally tainted but newer paper products bearing more senior signatures. While LTRO operations have slowed the need for immediate asset sales and larger de-leveraging in European banks, the two most significantly fallout trends center upon deposit flight and credit cutbacks. The latter remains a concern for the BIS, which notes in their recent report that lending curtailment by European banks sought to reduce risk-weighted assets to meet Basel III capital rules. Banks seem transfixed on de-leveraging in anticipation of the end of EuroCB facilities down the road. That translates into heavy asset sales. Increasing attention has come to the avalanche of deposit outflows from Greece, but also Italy and Spain in accelerating fashion. In fact, the largest takers of LTRO loans are Italy and Spain, a surefire signal of where the next disaster will be located. The recipients are banks headquartered in Germany, Finland, and Luxembourg, according to the data that the ECB. Their efforts are half hearted to make available. Recall the inter-bank market is essentially dead defunct, having lost its function long ago. Therefore the only way to fund bank liabilities will be the EuroCB window for toxic paper.

As deposits fall (shown above in falling blue line) within the large Spanish and Italian banks, the need to reduce assets can only accelerate problems, especially as they replace liabilities with their own sovereign bonds in the all too convenient carry trade. Notice the rise for deposits in Finland, Germany, and Luxembourg (shown above in rising brown line) held at the EuroCB. They have skyrocketed in the last few months. In the process, the banks are subject to an increasingly concentrated systemic risk. When the economic duress and related bank stress arrive in Italy and Spain, a certainty to realists, the steepness of their bond curves will accelerate, the telltale marquee pain signal. The short end will be anchored by the LTRO-induced carry trades. The long end will be left to the ravages of market forces. Eventually, the uncontrollable situation with much bigger volume pressures than Greece ever dealt with will snap the front end, resulting in margin calls and vast collateral damage for the Euro CB and the big European banks, probably London banks also.

The cardiac arrest evidence lies in the fast rising LTRO for Italy and Spain (shown in rising blue line). For over a year, false stories were told of Italy being more sound financially, with better ratios. The Jackass discarded such rubbish arguments. Nowadays, Italy is joined with Spain in the data to display the mutual communal ruin. Notice the usage of LTRO for Belgium and France is on the rise (shown in rising green line), not yet attracting much attention. Their deposit flow has not become a problem, not yet a crisis. France in one year will be firmly located in the PIGS pen, with the other crippled Southern European nations. The relocation will be forced after the removal of Sarkozy from office and the advent of wild socialist spending to anger the European Troika. See the Zero Hedge article (CLICK HERE).

◄$$$ PRIVATE GREEK DEBT REPRESENTS ANOTHER BIG SHOE TO DROP IN THE MACHINERY, YET MORE DEBT GUARANTEED BY THE GOVERNMENT. THIS PLAYER AT THE TABLE HAS BEEN IGNORED FROM FORMAL PROCEEDINGS. THE BONDS IN QUESTION ARE LINKED TO NUMEROUS ITEMS, BOTH TANGIBLE AND INTANGIBLE. $$$

Tyler Durden calls it the 800-pound Greek Gorilla entering the room gracefully. Other Greek debt remains outstanding and must be accounted for as the country defaults. Detailed are disconcerting. The Other sovereign obligations of the Greek Govt submitted to the ISDA include Bank bonds, Hellenic Railway bonds, Urban Transportation bonds, all guaranteed by Greece. Still other bonds are tied to Inflation, Floating Rate Notes, Asset Backed securities, and an assortment of structured products with a Greek sovereign guarantee. Recall that the investment banks made money off the assortment at the buffet table, using their financial engineering and inventiveness, even creative flair. No shortage on variety there in the wide range of casino products in securitized form, dealt in all kinds of currencies. The complications are mind numbing. Curiously, the trigger on such listed bond defaults for these off balance sheet securitizations are governed by English Law, not Greek Law. The fallout to the banking system is uncertain, if and when the holders of these securitizations line up at the judicial bench. Durden points out that the Allen & Overy firm receives $1500 per hour to indemnify ISDA with a plethora of exculpation clauses, knowing full well what is coming. My view all along has been that the derivative event will expose the corruption of the Western financial system from sixteen different sides. That is the biggest reason the default event has been avoided to date like the plague. Prepare for the curtain to be raise. See the Zero Hedge articles (CLICK HERE and HERE).

USFED & FABLE OF RECOVERY

◄$$$ THE USECONOMIC RECOVERY IS A FABLE, AS THE USGOVT DEFICIT RECORDED THE LARGEST IN HISTORY FOR FEBRUARY IN THE REAL WORLD. DATA ON THE DEFICIT IS WORSE THAN COMPARABLE PERIOD IN 2011. REVENUES ARE DOWN ALSO FROM 2011. A SLOW MOTION IMPLOSION IS OCCURRING, REPORTED IN ORWELLIAN STYLE. $$$

The USGovt has recorded more miserable aggregate data on economic performance that makes big liars of most politicians, bank leaders, investment barkers, and market barkers. Tax revenues are far below year 2011 when the recovery supposedly was still on track. What a grand lie! The USEconomic recession is on course, powerful, unstoppable, and will continue as long as the 0% interest rate is a fixture. The budget deficit for February rang in at $231.7 billion. That is around one quarter of a $trillion in a single month, the largest single monthly deficit in history. In the first five months of the new fiscal year that began in October, the USGovt (aka USS Titanic) has racked up $580 billion in deficits. Curiously, an even larger sum of $727 billion in new debt was issued, 25% more than needed to fund the deficits. Perhaps the endless war or Fannie Mae costs or AIG black hole expenses account for the additional sum. Be sure to note that February is traditionally the worst month for deficits as the USDept Treasury pays out the usual surge in tax refunds. The other damning pointed finger is the tax revenues. The total US tax revenues net of tax refunds were actually lower in the fiscal 2012 year to date period (five months) than compared to 2011. Revenue input was $625.5 billion, down by about $2 billion. The data cast aside any claim of recovery or expansion. The main items growing are USGovt debt and household ruin. The annualized napkin calculation brings the anticipated deficit to $1.5 trillion. The chart is a mirror image of payroll tax deductions against income, another reality test that fails to confirm a recovery. See the Zero Hedge article (CLICK HERE).

What is worse is the hidden off-balance sheet pile of certain future toxic debt gathering at the foot of the USFed locker. The Fannie Mae adopted serial destroyer leads in the toxic spill. Most of the $2.665 trillion in debt will be plowed under in the toxic vat. The smallest two items in agriculture and small business could prove viable. The rest probably not.

◄$$$ SOMETHING BIZARRE AND SUSPICIOUS IS HAPPENING IN THE LONG-TERM USTREASURY BOND MARKET. THE USFED, THE USGOVT, AND WALL STREET ARE PROMOTING A NASCENT RECOVERY STORY. THE BOND MARKET IS CALLING ITS BLUFF. THE USFED MIGHT BE TESTING THE WATER FOR A WITHDRAWAL FROM THE HEAVY BOND PURCHASES BEHIND Q.E. IN A HIGH RISKY MANEUVER. THE HUGE FEBRUARY MONTH AND HEAVY DEMANDS FROM EUROPE COMBINE TO MAKE A HORRIBLE CAULDRON. $$$

The 2012 is an election year, complete with the insanity and distortions and promises of free lunches, an absurd carnival atmosphere during a systemic failure. The political nonsense serves as motive for painting a thoroughly fabricated fable of a USEconomic recovery, one to aid the incumbent President to win. It has no basis. To the contrary, the statistics are uniformly worse in the valid data world that the Jackass prefers to focus on. No end in sight for food prices to come down, especially after the MFGlobal ruin for farmers, unable to risk hedge anymore. Expect agricultural supply to be harmed. No evidence of price inflation abating, with gasoline in the US jumping up to $3.82 per gallon on average for unleaded regular. The Shadow Govt Statistics folks honestly measure the CPI at 10.5% in February. The ECRI recession call contradicts any and all dumkopf pronouncements of recovery. The housing market continues down, with foreclosures to accelerate, and bankers liquidating REO homes more readily. My suspicion is that either something has gone badly wrong with the Quantitative Easing bond purchase initiative, or else the end of Operation Twist deception has come. For sure, less QE purchases of USTBonds is obvious. The USFed might be testing the bond market to see how much turmoil a rising TNX 10-year yield would cause.

The buyer strike by foreign creditors is still on, nothing changed there. Perhaps a combination of factors is at work. The month of February was a whopping record setting deficit month, at $231.7 billion, possibly too large to hide from the price dynamics of Supply & Demand. The other factor at work could be diverted atttention to Europe, which has been sent $1.2 trillion in credit lines, after a credit line almost as large on Christmas Day. The USFed and EuroCB might not want to ruin the data and create a giant red flag signal. The stupidest story of all is that the TNX yield indicator is rising quickly as other new opportunities have arisen. Like crude oil, commodities, Gold & Silver were not clearcut favorites in recent weeks and months. Maybe money is truly chasing discounted mortgage bonds. That remains to be seen.

◄$$$ THE USDOLLAR MONETARY AGGREGATE CONTINUES TO GROW AT A MONSTROUS RATE, TYPICAL OF HYPER-INFLATION EPISODES. THE Q.E. PROGRAMS HAVE BEEN A CONSTANT FIXTURE THAT NEVER HALTED, DESPITE SILLY DEBATE. A RESPITE OCCURRED IN 2009, LONG PAST. BANK CREDIT HAS RETURNED IN FORCE, MOST LIKELY TO COVER TOXIC BONDS HELD ON IMPAIRED BALANCE SHEETS. $$$

Adjusted Monetary Base measures the money supply but adjusted for statutory (legally required) reserve requirements enforced on banks. Two major events increased the monetary base in recent years, exercises in powerful growth of the monetary aggregate. The morons talk about deflation without benefit of knowing its definition or the many contrasting sides. Let them flap their gums in stupidity. This is hyper monetary inflation like never seen since the 1930 decade. Witness Weimar Amerika.

The M2 Money Supply represents the cash plus readily available liquid accounts like savings, certificates of deposit, and money market funds. After the Lehman orchestrated kill job event, the system endured a significant death of money. In response, Quantitative Easing was born, embraced, and continues without interruption. More stupid talk persists about the dawn of QE3. The more accurate description is that QE morphed into Global QE by all major central banks in order to take pressure off the USDollar, while the ruse of Operation Twist was born. Observe the Change in M2 Money Supply in circulation.

Excess Bank Reserves stored at the USFed are an embarrassment to any economy claiming to be either free market or in expansion. They are evidence of a banking system that withdrew in its banking function. The reserves sequestered at the USFed represent a concerted effort by the central bank to avoid systemic hyper price inflation on Main Street, like 20% per year instead of the steady 8% to 10% seen each year. The USFed has become the banking system proxy, a major blemish.

Bank Credit of Commercial Banks has struggled ever since the death of the US banking system by its largest members. The late 2008 level has shown to be a formidable obstacle to overcome. Most of the new commercial bank credit is to supply inventory and to replace toxic bonds held on broken balance sheets, hardly the stuff of economic expansion.

Time is running out on the USDollar, the fiat currency experiment, and the central bank franchise system. The entire world that operates with benefit of intelligence and experience realizes the limited remaining lifespan of the brutally debased global reserve currency. Sir Alan Greenspan can be located at the scene of the crime, blowing money and any other tubes from the bankers. With the fading USDollar will go the viable sovereignty of the United States of America, as it slides into a fascist military dictatorship tragically but inexorably. Few believed my forecast four and five years ago of systemic failure, gross insolvency, and a fall into fascism. It is happening, led by financial factors, whose agents of change are the bankers.

◄$$$ THE ENORMOUS NEW USTBOND SUPPLY WAS MET BY EQUALLY LARGE EUROPEAN BOND DEMAND AIDED BY THE USFED SWAP LINES. THE EURO CENTRAL BANK ACTED AS INTERMEDIARY. THE RESULT WAS A NON-EVENT IN BOND YIELD MOVEMENT. THE USTBOND SAFE HAVEN IS A TOXIC PIT. ALSO, PRIMARY DEALERS HAVE BEEN CONSISTENTLY WRONG WITH USTREASURYS. $$$

The USTreasury market until March had been bustling, but the buyer is the sidekick USFed, the central bank, partner in crime. Primary dealer purchases of Treasuries are running at record levels. They are the dedicated intermediaries under contract. The bank purchases are also at record levels, under an implicit coercion. So are bond fund purchases, seeing no alternatives, or at least preferring the lack of risk. Furthermore, foreign central bank purchases have been running at the highest levels in 14 months. In late February, the European Central Bank flooded the European banking system with over EUR 300 billion in hot money straight off the USFed swap machine. The lion's share went to US Primary Dealers and banks who invest in USTreasurys. One might conclude that the ultra-low bond yields would have fallen further, but they did not. Instead, the 10-year yield rose above 2% on a couple of occasions. Notice how the hapless constricted primary dealers have fared poorly. They have been consistently long and wrong or short and stupid, as the harsh but astute Lee Adler of the Wall Street Examiner points out. The bond yield scale is inverted on the right. The dealers went more committed long almost exactly when bond yields rose to cause loss in principal values.

The bond markets display the results of two powerful forces, monstrous supply but staggering monetary largesse. An enormous dump of USTreasury supply hit and settled as the March month arrived. The torrent of EuroCB buying soaked up the supply eagerly and effectively, in true monetary hyper inflation style. The ECB arrived in the form of Long Term Refinancing Operation (LTRO) to save the USTBond day. The big European banks were beneficiaries of hundreds of $billions in nearly free money from the ECB, almost obligated to invest the tainted money in the supposedly safe haven of USTreasury paper. It is the sanctioned toxic paper pit. In all, a whopping equivalent of $425 billion hit the market as USTreasurys demand in one swoop. Not all found its way to USTBonds, the rest tucked away at the ECB in the form of reserves, exactly like at the USFed. The US and London based bond dealers are being whipsawed and whacked. This is precisely why price inflation has not struck more severely in the main economies. The firewalls have been built and enforced within the banking sector. As Adler pointed out, given the insolvency and inadequate capital of the banking system, not much of the funds are likely to be deployed anywhere but central bank depositories. After the bluster, the hue and cry, and the fanfare, the end effect of the ECB money bomb turned into a non-event. Witness the new sterilization of hyper monetary inflation during sovereign bond ruin. See the Wall Street Examiner article (CLICK HERE).

FOREIGN CENTRAL BANKS & POOR HARVEST

◄$$$ THE RIFT GROWS BETWEEN BUNDESBANK AND THE EURO CENTRAL BANK. THE GERMAN CENTRAL BANK HAS FOR A DECADE BEEN THE DRIVING FORCE AND POWER CENTER FOR THE CENTRAL BANK IN EUROPE. AS THE SOVEREIGN DEBT CRISIS LINGERS AND FESTERS, THE BOND HAS BROKEN. STRAINS ARE OBVIOUS. THE TWO AUGUST BODIES WILL SOON PART WAYS. THE GERMAN BANKERS AND GERMAN PEOPLE REFUSE TO FINANCE THE SOUTHERN EUROPEAN WELFARE AND UNJUSTIFIED ELEVATED STANDARD OF LIVING FOR ANOTHER DECADE. THE INEQUITABLE LOW INTEREST RATES STOOD FOR YEARS, BUT NO MORE. A GRAND DIVORCE IS IN PROGRESS THAT COULD PAVE THE WAY FOR AN ANNOUNCED ALLIANCE WITH RUSSIA. $$$

A battle royal is underway of extreme significance. The German bankers, long a fortress of monetary prudence and well managed wealth, is pitted against the Goldman Sachs machine that continues in the Euro Central Bank. The Germans are breaking the alliance. The new head Mario Draghi might be Italian, but he is of GSax pedigree first and foremost. So the Bundesbank stands opposite to the venerable criminal firm in Goldman Sachs, as the divorce unfolds. Germany cannot break away from the Euro currency without a full blown divorce in the financial bedroom. The rift has gathered attention during the difficult intractable Greek debt negotiations. The pattern has been clear for over a year, as the German politicians forge deals but the German bankers undercut them, permitting the deals to fizzle.

While Euro Central Bank head Mario Draghi is privately content with his recent decision to flood the markets with cheap money, Bundesbank President Jens Weidmann warns of the dangers. The policy rift grows wider by the month. By the time Draghi made his appearance at the most recent G-20 meeting in Mexico City, most participants had completed discussions. Draghi was a non-event and non-player. He proclaimed a victory to an audience of himself and his squires, saying "The Euro is now a safer place than it was at the time of the last G-20 summit in Cannes." In the first week of March, the EuroCB pumped more than EUR $500 billion into the markets to maintain the liquidity in the monetary sector. European banks have suffered a painful lack of liquidity ever since a large number of Northern banks reacted to the extreme crisis by severing nearly all lines of credit to financial institutions in the South. The second huge Draghi cash injection enabled the ailing Southern European banks to grant loans and purchase sovereign bonds from their home countries. Some see the ease of the ongoing debt crisis on the Continent, making him Europe's rescuer in the eyes of many politicians and financial managers. The other side of the wall features his leading partners who grow increasingly concerned. Two days before Draghi made his G-20 presentation, President Jens Weidmann of the Bundesbank gave a rebuttal at the Mexico summit. He said, "The crisis cannot be resolved solely by throwing money at it. This can particularly become a problem if banks are discouraged from taking action to restructure their balance sheets and strengthen their capital base." He should have said phony money, or used the word Gold.

The rift among top ranking officials at the Euro Central Bank extends to its Governing Council and the Bundesbank. Note the departures, viewed as loud votes of dissent. Two leading German ECB officials, chief economist Jurgen Stark and Bundesbank President Axel Weber, resigned because the monetary authority was buying up sovereign bonds from Greece and Portugal. They directly and openly opposed the monetized bond purchases as a policy practice. Later, Weber's successor Weidmann objected to the ECB purchase of government bonds from Italy, also heavily indebted and headed on the same path of ruin. More recently, Weidmann has rebelled against the stream of Draghi cash injections given to European banks. Bear in mind that the ECB headquarters is located in Frankfurt, called the EuroTower. The honeymoon with Draghi is over, kaput. The conflict between Europe's two most important monetary bodies has become both apparent and of shrill volume, compounded on a weekly basis by contentious new issues. Consider that Weidmann voted against special conditions for the ECB with regard to the Greek debt haircut, then he objected to the long maturity makeup on the loans Draghi gave to banks. When it came to drafting his bank program, Draghi ignored all requests by the Bundesbank to limit the duration and scope of the measures. Sources at the Bundesbank complain that although Draghi admittedly takes pleasure in repeatedly praising Germany's culture of stability, a marked discrepancy exists between his words and actions.

Last week, the conflict escalated to a new level. Weidmann complained in a letter to ECB President Draghi that the central bank was accepting increasingly lower-grade collateral in exchange for its cash injections. This poses a danger, he warned, in plain specified terms. As the central banks in the North of the EuroZone are owed ever growing amounts of money by their counterparts in the South, a EuroZone breakup would leave the Bundesbank holding too much of its bad debt from so-called TARGET2 loans. The fresh toxic paper currently amounts to some EUR 500 billion (=US$660 bn), he elaborated publicly. Such open opposition has no precedent. No longer is the EuroCB a German-led entity. It has gone rogue. A foundation is being laid in my opinion for a divorce between German bankers and Goldman Sachs, later to be consummated in a new marriage with Russia as Germany looks East.

Among leading ECB officials the Weidmann letter was seen as violating a taboo, whose meaning actually signals a Euro breakup. TARGET2 refers to the central banks internal payment system, which has accumulated massive imbalances in the last three years. These inequalities are not problematic or demanding or urgent, as long as the monetary union remains intact. Until recent weeks, the Bundesbank has always denied such a breakup risk. However, all is changing, since the Weidmann opposition sends what is seen as a disastrous schism signal. In the perspective of monetary observers, and ECB executives, the Bundesbank for the first time ever is no longer ruling out a breakup of the EuroZone. They are in fact announcing it implicitly. At issue are the entire spectrum of monetary practices, from loan conditions to interest rates, but at the core are solutions that combat a debt overload failure and ongoing collapse with evermore debt in a grand shuffle within a queer bond hierarchy. Germany is the center of monetary prudence. The nation's bankers finally have objected and said NEIN. Although debt and cheap money triggered the global financial crisis, the central banks of the United States, Europe, the United Kingdom, and Japan continue to reduce interest rates, flood the markets with newly printed money (euphemistically called liquidity), and relax the rules for companies, banks, and countries to acquire new debts. The EuroCB has ordained itself the bagholder of toxic debt worth half the value given generously at the window. Germany objects and rightfully so. Less hidden is the slap by German bankers of GSax face. The first signs of a renewed local problem within Germany could be in the real estate market. Some warn of a subprime redux on German soil.

A dire warning has come from an unlikely source, the Bank for Intl Settlements (BIS), which acts as an umbrella organization for the central banks. The Basel-based institution foresaw the big crisis back in 2003. It warns against the dangers of the commonly administered lax monetary policies. The Swiss fortress, a combination of syndicate stronghold and think tank, believes that such policies remove the incentive for political reforms, increase the risk of price bubbles on stock exchanges and real estate markets, and make it increasingly difficult to return to normal conditions. Obviously! BIS Deputy General Manager Herve Hannoun recently referred to the "illusion of unlimited intervention [and] surprising inflation rate" as a result of the supposed solution. See the Spiegel article (CLICK HERE).

◄$$$ A MASSIVE HIDDEN USFED BAILOUT OF EUROPEAN BANKS IS UNDERWAY, WELL ALONG, HARDLY NEW, BUT VOLUMES GROW. THE STORY IS MORE OF A HEADLINE VARIETY, UNSEEN IN THE PAST. THE DEVICE WAS USED IN 2009 AND 2011, AGAIN IN 2012. FINGERPRINTS ARE EVERYWHERE. EVEN A FED MEMBER HAS OPENLY DISCUSSED THE USAGE. VOLUMES OF THE MONETARY HYPER INFLATION DEFY DESCRIPTION. $$$

During the height of crisis in 2009 following the Lehman Brother killjob collapse, during the European sovereign debt crisis middle stage eruption events in 2011, and again in the last couple months, the USFed Dollar Swap Facility has been used in historically unprecedented volume. On Christmas Day less than three months ago, the USFed handed over $600 billion to Europe in a single day, done intentionally when the holidays distracted attention. The bond markets have not imploded, since the hyper monetary inflation machinery has been working overtime, but their integrity has been destroyed. The swap facility usage has received some occasional press coverage, whereas in the past none. The USFed is swapping USDollars for Euros in a covert method to bail out the largest of the European banks. Some dissent has come in the form of an op-ed piece posted in the Wall Street Journal. The former Vice President of the Federal Reserve bank of Dallas, Gerald O'Driscoll revealed some details on the swap abuse. He confirmed that the US Federal Reserve is indeed bailing out Europe by operating in the shadows, going largely unnoticed by American citizens. By participating in a currency swap, the USFed cannot technically be accused of loaning money to the EuroCB. The incensed O'Driscoll believes this arrangement is wrong for various reasons. The deal conceals risk, aids the broken system, will likely not be repaid, and further debases the already tained currency system. Bernanke routinely avoids disclosing details to the American people in Congressional testimony, choosing the dodge as well as the obfuscation card preferred by Greenspan.

The USFed is using what is termed a temporary USDollar liquidity swap arrangement with the European Central Bank. Permit an explanation of their detailed inner workings. There are similar arrangements with the central banks of Canada, England, Switzerland, and Japan. On a massive scale, the USFed trades (swaps) USDollars for Euros and Pounds and Francs and Yen. In compensation, the US (more like global money supermarket) receives payment of an interest rate currently set at 50 basis points, or one-half of 1% above the overnight index swap rate. The ECB proceeds to lend the converted funds to European banks under its own decision rules. The ECB guarantees to return the funds to the USFed at an exchange rate fixed at the time the original swap is agreed upon. This phenomenon explains why the Euro is stronger than it should be during an implosion episode. Its usage creates artificial Euro currency demand.

The two central banks use the shell game of tainted money in a roundabout procedure, often described as a fig leaf to cover the inflationary genitalia. The USFed is embarrassed by its steady largesse with foreign banks. The funny part of the sham is that in strict accounting the currency swap with the EuroCB is not technically a loan. The USFed is reluctant to load its toxic balance sheet further with more debt. So it is not called debt, but a swap. The central banks are trading under the table their counterfeit paper posing as money, like cheaters at a private poker table. Somehow Economics textbooks do not cover the current practice in their prestigious Money & Banking courses, which the Jackass wisely dropped in college. The course seemed like a spaghetti cookbook of recipes with all ingredients being junk paper. A much more useful Statistics class was picked up.

◄$$$ JAPAN ANNOUNCED AN INITIATIVE TO PURCHASE CHINESE DEBT IN AN EFFORT TO DIVERSIFY AWAY FROM THE USDOLLAR . THE ANTI-DOLLAR REVOLT CONTINUES, THIS TIME FROM A LOYAL PARTNER. $$$

Japan announced last week approval given by the Chinese to purchase 65 billion Yuan (=US$10.3 bn) in Chinese Govt debt. The Tokyo leaders implicitly have issued a billboard signal to diversify its massive reserves away from the toxic USDollar. Instead, Tokyo intends to strengthen economic ties between the two Asian countries further. Look for Japan to begin with small amounts and then increase purchases, as promised by Finance Minister Jun Azumi. See the Reuters article (CLICK HERE). USTreasury Secy Geithner could not be reached for comment, but his clownish coolee assistants believe the initiative is part of the Strong Dollar Policy embraced worldwide.

◄$$$ BRAZIL HAS ENTERED THE CURRENCY WAR AGAIN WITH GUNS BLAZING. BRAZIL DECLARED A NEW 'CURRENCY WAR' AGAINST FOREIGN DEVALUATIONS. THEIR PAST ACTION TO TAX HOT MONEY SEEKING TO EXPLOIT HIGHER INTEREST RATES KEPT THE WOLVES AT BAY. BUT THE BATTLE IS NEVER-ENDING IN SUCH A POWERFUL PAPER WAR. $$$

The Brazilian Govt has declared a new front on the Competing Currency War, with opposition directed at the United States and Europe. The Brazilian Govt has extended a tax on foreign borrowings and threaten further capital controls in an effort to protect the domestic struggling manufacturers. As finance minister, Guido Mantega manages the war room. He openly referred to the Currency War as a controversial term in 2010. He defends the aggressive action, announcing changes to the so-called IOF tax, refusing to sit passively. Brazil has resisted the monetary inflation game, refusing to lower interest rates far below the prevailing price inflation rate. Thus they encourage hot money to enter, which seeks to benefit from alternatives to the 0% offered by the US, England, Europe, and Japan. Two years ago, Brazil slapped a tax on foreign funds seeking bond investments. Mantega perceives hostile monetary policy to be aimed at nations like Brazil. He captured the essence of the currency war, called sometimes a race to the bottom. He said, "When the Real currency appreciates, it reduces our competitiveness. Exports are more expensive, imports are cheaper, and it creates unfair competition for businesses in Brazil." It is a losing battle, since export effectiveness is diminished and the capital drain comes one way or the other. See the Financial Times article (CLICK HERE).

◄$$$ INDIA HAS CUT THE RESERVE RATIO FOR BANKS, AS THEIR ECONOMY SLIDES TOWARD RECESSION OR FLAT GROWTH. THE STRAIN IS ON. A RESPONSE CAME. THEY JOINED OTHER NATIONS MAKING A SIMILAR DEFENSIVE MOVE. $$$

The Indian central bank cut its reserve ratio as a broad cash squeeze threatens their economy. In an unexpectedly move, the central bank slashed the amount of deposits lenders need to set aside as reserves. The plan has been to ease a cash squeeze in the banking system that threatens to deepen an economic slowdown. The Reserve Bank of India reduced the cash reserve ratio to 4.75% from 5.5%, according to a press release in Mumbai. The move was the first policy action outside a scheduled meeting since July 2010, signifying some sense of urgency. The move is expected to add 480 billion Indian Rupees (=US$9.6 bn) into lending institutions. The previous move was a 50 basis point reduction on January 24th. The unscheduled step before a March 15th policy review underscores the central bank's concern the shortage of cash in the banking system will hurt the economy. In doing so, India joins China and the Philippines in reserve requirement relaxation. They act to protect growth as the European debt crisis and US deterioration threaten to derail the global economy.

GLOBAL ECONOMY IN RECESSION

◄$$$ THE BITTER FRUIT OF THE GLOBAL QUANTITATIVE EASING (Q.E.) AND THE ZERO INTEREST RATE POLICY (Z.I.R.P.) IS PERVASIVE SYSTEMIC ECONOMIC DETERIORATION FROM BOTH MISPRICED ASSETS AND CAPITAL DESTRUCTION FROM RISING COSTS. THE EFFECT IS SEEN IN ALL MAJOR ECONOMIES. $$$

The Competing Currency War forces major central banks to reduce interest rates to the low level maintained by the US Federal Reserve. Not following suit puts the export trade at risk, since a higher currency exchange rate results, lifting prices of export products. The mispriced money leads to a total mispricing of assets, as well as rising cost structure. The hyper monetary inflation from the Global QE lifts the entire cost structure, while Chinese industry puts a lid limit on wages from Asian competition. The capital destruction has gone global. Evidence is piling up. What is promoted as stimulus is actually organized destruction, as equipment and machinery is taken offline from lost profit margins. The economist and banker blind spot is complete and total. Witness the deterioration of the entire global economy. The moronic policy begins in the United States, where the economic and bank leadership still believes that consumption (not investment) powers the economy, where the same bereft wayward leadership focuses attention of maintained asset prices (instead of equilibrium).

◄$$$ THE JAPANESE TRADE DEFICIT IS GROWING, A PHENOMENON NOT SEEN IN FOUR DECADES. SUCH IS THE BITTER FRUIT OF 20 YEARS WITH FIXED ZERO PERCENT RATES, COMBINED WITH THE USFED JOINING AT A PERMANENT ZERO PERCENT RATE ALONG WITH EUROPE AND ENGLAND. THE ASIAN POWERHOUSE IS IN TROUBLE. THE PROXIMAL BLAME IS GIVEN TO THE EARTHQUAKE AND TSUNAMI, BUT CHINA ENCROACHES WHILE THE ZIRP CORRODES AND EUROPE DECAYS. $$$

Recall the Jackass forecast made last April and May 2011, that the Japanese Economy would suffer from a rising Yen currency, then post some big trade deficits. Few paid attention, but both happened. The Yen has recently surged downward after yet another gigantic QE, the 527th in twenty years by the Bank of Japan. The more important data point is the newly posted January trade deficit of JPY1.382 trillion (=US$17.0 bn), a new historical record. The deficit is up 245.9% compared to the period one year ago. The matching Current Account deficit totaled JPY 437.3 billion in the month, much larger than economist forecasts. The C/A deficit accounts for financial flows in asset purchase. The forecast of a trade deficit occurred on schedule. China has many new shiny factories, with Japanese owners and plant output that supplies the Japanese Economy. They also feature fields of Japanese equipment. Both the natural disaster and Chinese creep are responsible, but the proximal cause is the Global QE and globally adopted 0% rate that is killing capital worldwide. The trade deficit far exceeds a JPY 967.9 billion trade deficit recorded in January 2009, in the wake of the investment bank failure at Lehman Brothers. For the full year 2011, Japan marked a trade deficit of JPY 2.493 trillion. The gap is accelerating wider. It was the first time in 31 years that the country had a trade deficit on an annual basis. The Japanese exports in January stood at JPY 4.51 trillion, down 9.3% from the corresponding month in 2011. It was the fourth consecutive monthly decline on a year-on-year basis.

Some details. By region, exports to Asian countries declined 13.7% in January 2012 versus January 2011. Exports to China alone fell 20.1%, both declines the largest since 2009. Sluggish demand in Europe was given much of the blame. Conversely, imports to Japan increased 9.8% in January from the same month a year earlier, marking the 25th straight year-on-year monthly increase. The increase was partly due to a rise in imports of liquefied natural gas (LNG) to be used in thermal power generation. As operations of nuclear reactors are mostly suspended throughout Japan due to the accident at the Fukushima nuclear power plant last March, demand for LNG is increasing as fuel for thermal power generation. See the Asahi article (CLICK HERE) and the MarketWatch article (CLICK HERE).

◄$$$ A GERMAN INDUSTRIAL SLOWDOWN HAS ARRIVED. IT FORETELLS OF A POWERFUL ECONOMIC RECESSION IN THE EUROZONE. AS GERMANY GOES, SO GOES THE BEST PART OF EUROPE. $$$

Germany did not forfeit or abandon its industry like the mindless disloyal American corporate chieftains. Germany did not trade factories for financial engineering like the errant American helmsmen. Germany did not embrace asset inflation and debt generation mills in lieu of legitimate value added industry, like the quacks on Wall Street. Now finally, the German juggernaut is sputtering. German factory orders unexpectedly declined in January, led by slump in foreign demand. Orders fell 2.7% from December on an adjusted basis, accounting for seasonal swings and price inflation. Orders rose by 1.6% in the previous month. Versus on year ago, orders declined by 4.9% when adjusted for work days. The largest European economy contracted in the fourth quarter of 2011 as the sovereign debt crisis curbed demand for its goods across the entire Euro region. Confidence measures remain dubiously elevated, a mere vacant fleeting benefit of the latest Greek bailout and Euro Central Bank liquidity exercise on the floodplain known as the banking system. Carsten Brzeski is an economist at ING Group in Brussels. He said, "The crisis has finally arrived in Germany but, contrary to the rest of the EuroZone, it is only a temporary stopover. The German industrial sector is still robust, mainly driven by a healthy domestic economy and export diversification. Recession is not on the cards." Consider his words a marketing flyer bent on promotion, hardly a reflection of reality. This is typical of the investment bank sector. In a couple months, he will regret his words but receive a bonus from his bank employer. Orders from outside the 17-nation Euro region plunged 8.6% in January after surging 12.1% in December. Orders from within the EuroZone orders slipped 0.4% after a 6.5% decline in December. Domestic orders within Germany itself increased 0.9% in January.

◄$$$ BRAZIL HAS RECORDED A TRADE DEFICIT. PRUDENT CONTROLS CANNOT STOP THE IMPACT OF A HIGHER EXCHANGE RATE IN RECENT YEARS AND FAST MONEY MOVEMENT IN AND OUT. THEIRS IS A GROWTH STORY, LED BY IMPORTS. A STRONG REAL CURRENCY ENABLES A BRISK IMPORT TRADE TO POWER THE DEFICIT. $$$

Brazil posted its first monthly trade deficit in 12 month. Faster economic growth in Latin America's biggest economy helped to lift imports. More currency pressure has come to the Real, in addition to what has been felt in powerful terms from a prudent higher interest rate policy. Brazil realized a trade gap of $166 million in the month of January, compared with a $2.18 billion surplus in December, according to the Trade Ministry. Once more, economists were hopelessly wrong. They forecasted a $1 billion deficit in a Bloomberg survey of 11 economists, doing the job they are paid to do. Faster economic growth coupled with a stronger currency has boosted demand for imports. Look for Brazil to post its smallest annual trade surplus this year since 2002. The Current Account deficit will more than double to a record by the end of 2011. Diego Donadio is senior analyst for Latin America with BNP Paribas. He said, "The trade performance is contributing to the weakening of the Real currency. A greater aversion to risk worldwide and the fact that Brazil's external accounts are more dependent on capital inflows to remain balanced are also weakening the Real." As a direct result of higher offered official interest rates in Brazil, the Real exchange rate rose by 33% in 2009, to become the best performance among the major currencies. It reversed course in 2010 to become the biggest decliner. In FOREX trading, the Real loss against the USDollar was 7.6% in year 2011. Policy makers signaled they could lean toward the first rate increase since September 2008, after keeping the overnight rate at a record 8.75% for several months. The prevailing price inflation has ranged between 4% and 5%, higher than the Western industrialized nations. See the Bloomberg article (CLICK HERE). As footnote, Mexico has announced a halt of exported vehicles to Brazil for a three-year period.

◄$$$ AUSTRALIA HAS REGISTERED A TRADE DEFICIT, A VICTIM OF ITS OWN PRUDENT HIGHER INTEREST RATE AND CHINESE INDUSTRIAL SLOWDOWN. PERHAPS THE REAL ESTATE BUST HAS FINALLY HIT HOME ON THEIR ECONOMY, OR ELSE THE FLOODS OF LAST YEAR. $$$

Australia recorded a trade deficit in January, its first in 11 months, as weaker shipments of iron ore and coal led to the biggest drop in exports in almost three years. In all exports fell by 8%, a significant amount. Imports outpaced exports by A$673 million (=US$715 mn), compared to a revised A$1.33 billion surplus in December, according to the Bureau of Statistics. The trade deficit was the biggest shortfall since March 2010. The data add to pressure on Reserve Bank of Australia Governor Glenn Stevens to end a pause over the last two months in interest rate cuts. The Aussie Economy slowed last quarter and payrolls fell in February. The Aussie Dollar currency has strengthened this year on a A$456 billion pipeline of resource projects driven by companies such as BHP Billiton. The equally large factor is China, which accounts for about one quarter of Australian merchandise sales abroad. Exports to China fell by 23% in January. The trade report was the latest in a string of weak Australian economic reports. The benchmark interest rate from Canberra is the highest among major developed economies.

Gross Domestic Product in the final quarter 4Q2011 grew 0.4% versus the previous quarter, a big surprise disappointment to hapless economists. They overlook the impact of chronic 0% rate and its harm to capital. Business profits unexpectedly dropped in the three months through December by the most in 2-1/2 years, as earnings weakened at mining and financial companies. Gross operating profits for the two key sectors fell 6.5% in the fourth quarter to A$66.3 billion from the previous three months. A new report showed Australian employers cut payrolls by 15,400 jobs in February as the unemployment rate rose to 5.2%, for the first time since August. Reserve Bank of Australia Deputy Governor Philip Lowe has stressed how the labor market is one of the primary indicators the central bank uses to monitor the economy. He said, "Over the next few years, mining sector investment will reach new highs as a share of GDP, and is likely to account for around 40% of total business investment. Structural change is also clearly evident in the export numbers, with resources now accounting for around 60% of total exports, up from 35% a decade ago." See the Bloomberg article (CLICK HERE). No mention is given by economists Down Under to two big factors and their impact, the housing decline and the floods of last year.

◄$$$ A CHINESE TRADE DEFICIT HAS HIT THE BOOKS. DECLINES IN THE EXPORT ECONOMY ARE BROAD AND UNIFORM,  HITTING EVERY SINGLE MAJOR NATION INVOLVED IN ITS EXPORT TRADE. $$$

The world has experienced a major stall in exports. Topping off the export economy malaise is China. They join Japan, Germany, Brazil, and Australia in export declines. A new pattern is evident that spells global economic recession, noticed broadly. Similar stories are likely the case in South Korea and India. Let it be known that China has posted the biggest trade deficit since 1989 as crude oil imports surged. They put much blame on the European mess. Some misguided souls place blame on the Chinese Lunar new year, a baseless naive concept. Note the glaring statistic, as February imports came in at $146 billion, a 19% increase compared to January. The second consecutive record high in monthly crude imports accounts for most of the import data. The Chinese trade deficit came as imports rose by 40% to $146.0 billion, while exports rose only 18% to $114.5 billion. This is hardly a collapse, more like an adjustment toward domestic demand. The quick summary featured slower price inflation, slower industrial output, and slower retail spending. Juxtapose imports with the huge selloff of USTreasury securities by China in the last few months. One might argue that on a net basis, China is in effect converting US fiat paper into hard tangible goods such as energy products. Expect that additional conversion is going to Gold. See the Zero Hedge article (CLICK HERE).

◄$$$ GREEK MANUFACTURING PLUMMETED IN FEBRUARY. THE NATION NEEDS BADLY A LOWER CURRENCY. THE GREEK AUSTERITY PLAN IS WORKING EXACTLY AS THE JACKASS EXPECTED, CAUSING AN IMPLOSION. BLAME WILL BE PLACED ON EXPLOITS OF FOREIGN BANKERS, CAPITAL FLIGHT, EVEN STREET RIOTS. THE RAPID DEGRADATION WILL FEED UPON ITSELF. $$$

Greek manufacturing plummeted at its fastest rate in at least thirteen years in February, as production and new orders declined at record rates. The industrial sector went deeper into recession, thus forcing companies to cut jobs even more rapidly. Witness the fruits of austerity budget plans imposed by the foreign creditors, hellbent on destroying the rest of the nation of antiquity. The official Greek unemployment rate hit 20.9% in November, actually on par with the United States if truth be told. The painful impact of higher taxes and cuts in public sector pay and pensions continues to suppress economic activity. Manufacturers reacted to competition and weak demand with price discounts, as output prices fell at the sharpest rate in 33 months. The currency exchange rate devaluation is being done at the microcosm level, by companies, since Greece is trapped in the common Euro. The resulting smaller profit margins will assure a vicious cycle of more business shutdowns and more job cuts. Greece has applied additional fiscal austerity to shore up its finances as condition for rescue packages struck in deals with its EuroZone partners and the IMF. The stated goal is to avert chaos and meltdown, but the result of such austerity is chaos and meltdown from massive spending cuts and project elimination and pension reductions and higher taxes, all of which spell doom, not recovery from a severe debt crisis. Sooner or later, mavens and pundits will recognize austerity for what it is, suicide forced with financial pills.

The Markit Manufacturing Purchasing Managers Index for Greece fell to a survey low of 37.7 points in February from 41.0 in January. Like with the US-based PMI index, an index reading below the 50 mark indicates contraction, seen over the past 30 months. Production and new order volumes fell at the sharpest pace in the near 13 year history of the survey as austerity sapped demand and spirits. New export orders fell for a sixth straight month and at the steepest rate since May 2010. The overall Greek Economy of EUR 215 billion size shrank by an estimated 6.8% in 2011, its fourth straight year of recession. The true decline is bigger. It is seen contracting this year as well in an accelerated manner. Deteriorating conditions led firms to lower their purchasing activity and reduce inventories to cut costs. Higher prices paid for fuel, plastics, and steel led to a rise in average purchase costs in February. Markit senior economist Paul Smith summarized the ruin, He recognized the ruinout austerity directive. He said, "The latest survey provided another stark reminder of the difficulties the Greek Economy is facing. Problems of accessing credit, combined with austerity, are undermining activity and demand with little evidence of this situation improving anytime soon. While companies are trying to maintain employment via reduced working days and hours, the inevitable impact of rapid declines in output and sales is further cuts to payroll numbers, which fell at a marked and accelerated pace."

The vicious cycle will continue, complete with riots and eventually elements of systemic shutdown and freeze. The plan is not designed to improve, but rather to implode, thus enabling foreign credit seizure of prized assets, and removal of the Greek central bank gold inventory. Foreign creditors prefer an implosion on Greek soil rather than vast bank losses on their own soil. Think gutting! Installation of syndicate puppets at the prime minister posts is part of the plan for a united fascist Europe, but that is a dirty concept not to be discussed. See the Reuters article (CLICK HERE).

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