GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Intro Golden Nuggets
* Russia & China Forge New Axis
* Currency & Resource Undercurrents
* USTreasurys Levitated & Threatened
* Gold Acquisitions, Smuggling & Remedy
* Gold Market Upside Down
* USEconomy Sputter & Stumble


HAT TRICK LETTER
Issue #120
Jim Willie CB, 
“the Golden Jackass”
23 March 2014

QUOTES ON GOLD

"Our Western partners headed by the United States prefer not to be guided by international law in their practical policies, but by the rule of the gun. They have come to believe in their exceptionalism and their sense of being the chosen ones. That they can decide the destinies of the world, that it is only them who can be right." ~ Vladimir Putin (Russian President)

"The Chinese and Russians are strategic thinkers. To be sure, the Bank of China Intl hired Stephen Branton-Speak for his metals market experience. But they will juice the guy for he is worth and then toss him on to the banker graveyard. Just wait and see." ~ The Voice (in response to query on whether China is in league with Wall Street)

"China & Russia are rapidly converting USTreasury Bonds into cash, assets, and gold. They can exploit the situation and wait a lot longer than the United States, which is printing money. The greater capital destruction is occurring in the US, UK, and Western Europe, without any doubt in my mind. The Western media can focus all the attention they want on the East, crumbling as it is, and severe Emerging Market distress. However, the West is crumbling much faster, and the West is exporting its problems far and wide. So the West is the source of the global quagmire with an assortment of leaking toxic vats, in no way capable of achieving escape velocity. Its ongoing destructive monetary policy, ongoing crippling USGovt deficits, and ongoing war aggression with heavy costs make any recovery totally impossible, especially given the refusal to liquidate the big insolvent banks. They are the center of political banker power though, thus the systemic failure is assured." ~ the Jackass

"The transformed geopolitical stage is coming into view. The proud lofty Saudis must have a protector to continue their national plunder, and so the huge vacuum must be filled due to the hostile relations with the United States over Arab Spring. The Riyadh Royals have pissed off Russia, and therefore must curry favor toward the Petro-Yuan creation that ties to the Kremlin goals. In fact, watch China become the global mediator, the great diplomat. It will almost be funny to watch. China as diplomat in the foreground, while working with Russia to dispose of the USDollar in the background. Simultaneously, Germany moves into the European mediator position. The German-Russian-Chinese axis is forming, where the Americans and British will be left outside, looking in." ~ Jackass


"The funny thing about Putin is that if he were to retire or be removed or have an accident or heart attack, there are several other tough nuts and savvy hard rocks right behind him to take his place. And if Obama were to be booted from office, or hit by a big black SUV with USGovt plates, or be knocked off by whacko rifle advocates, there are several other pansy faggots and empty headed puppets right behind him to take his place. Such is the difference between neo-capitalist Russia and neo-Nazi Amerika." ~ Jackass (footnote: neo-Con = neo-Nazi)

"When a GATA delegation visited an editor for The Economist [prestigious magazine] at his office in London in May 2009 to give him the gold price suppression story and the associated documentation, he could not get rid of us fast enough." ~ Chris Powell (GATA founder)

"When the dollar collapse comes, it will happen two ways: gradually then suddenly. That formula, famously used by Hemingway to describe how one goes bankrupt, is an apt description of critical state dynamics in complex systems. The gradual part is a snowflake disturbing a small patch of snow, while the sudden part is the avalanche. The snowflake is random yet the avalanche is inevitable. Both ideas are easy to grasp. What is difficult to grasp is the critical state of the system in which the random event occurs. As already discussed in my previous pieces, the voices critical of US dollar hegemony have become increasingly louder." ~ Jim Rickards (Currency Wars)

"Off-market Gold transactions have their very own rules of engagement, since there are always many considerations connected. Premiums fluctuate wildly. Off-market buyers, who want to be totally off any radar screen, are doing pretty much everything to obtain physical as they convert mountains of paper into physical. It is very difficult for normal people to really understand. It will get very interesting once the system implodes and we go to barter in a big way. Some smart people believe that Gold will be commanding a price in today's US$ terms of approx $15 to $20 thousand per ounce. I concur with that assessment, as events will develop in a truly astounding way." ~ The Voice

"Use of money concentrates trust in a single central authority at the central bank. Over extended periods of time, central banks always tend to misbehave. Eventually the PRINT button on the central banker's emergency console becomes stuck in the depressed position, flooding the world with worthless notes. People trust that money will remain a store of value. Once the trust is violated, a gigantic black hole appears at the very center of society, sucking in peoples' savings and aspirations along with their sense of self-worth. When those who have become psychologically dependent on money as a yardstick, to be applied to everything and everyone, suddenly find themselves in a world where money means nothing, it is as if they have gone blind. They see shapes but can no longer resolve them into objects. The result is ANOMIE, a sense of unreality accompanied by deep depression. Money is an addiction, without substance and unreal, and sets itself up for a severe and lengthy withdrawal." ~ Dmitry Orlov (engineer and economic writer about the decline and collapse in the United States, with ANOMIE being a situation of disorder characterized by extreme instability from a breakdown of standards and values, alongside systemic breakdown)

"The failures of economists are vast and impressive. They spread their false doctrine across the spectrum, while their failures mount in a reality response. Like how socialism kills the economy slowly from sheer dead weight. Like how higher taxes kill the economy from choking the neck and binding the arms. Like how war kills the economy from broad destruction and damaging trickle down. Like how bond fraud kills the economy from disrupted capital formation. Like how excessive regulations kill the economy by encouraging business investment elsewhere, like in Asia. I am extremely unimpressed with the economist corps. They have been converted to banker harlots and apologists, who specialize in protecting the wealth printing press for their own private corporate usage." ~ Jackass

"Wishful thinking is often mistaken for positive thinking. In reality it is deceptive form of negative thinking, and not at all based in reality." ~ DaleE (wise subscriber, the final short clause mine)

"Whatever games are played with us, we must play no games with ourselves, but deal in our privacy with the last honesty and truth." ~ Ralph Waldo Emerson

"Jackass is designing a new concept in transaction currency, in development currently with a crack team. With all the talk that fiat paper currency is toilet paper, the time has come to announce BUTTCOIN. Their tissues for transactions will be disposable after usage, immediately to vanish without a trace. They will be anally retentive, stubbornly holding onto value. They will be kept in wallets called Clingons that are compatible with online accounts. They will be designed to avoid the present day sewer system linked to the banks, brokerages, mutual funds, and pension systems. Never will the backside coin become shitpaper, since designed never to be tainted by proximity of assholes. It is a work in peristalsis, a relief process." ~ Jackass (sorry, not really)

## INTRO GOLDEN NUGGETS

◄$$$ See the new Special Report on the banking system in ruins, a snapshot of the situation, complete with banker murders, in the report entitled "Big Bank Bloodbath" for March. Many are the bank losses, which continue unabated. Many are the lawsuits, which continue unabated. Many are the criminal prosecutions, which continue unabated. Many are the banker deaths which continue unabated, but whose patterns cannot much longer be made to look like suicides. The climax is in progress, as LIBOR fraud, FOREX fraud, and Gold market fraud are coming into full view. Deutsche Bank is a key element serving as crowbar to force the data, communications, and testimony into the open. The banking system insolvency has turned acute, also in the open. The crime syndicate is perceived. The systemic breakdown is their bitter fruit, offered from the Fascist Business Model altar.

◄$$$ FOCUS ON THE PRIZE, A RETURN OF GOLD TRADE STANDARD.... FOCUS ON THE PRIZE, THE ESTALISHED EURASIAN TRADE ZONE... FOCUS ON THE PRIZE, THE ALTERNATIVE SYSTEM BORN OF CRISIS... FOCUS ON THE QUANTUM JUMP IN THE PRICE OF GOLD, MULTIPLES HIGHER... THOSE PEOPLE WITH PROPER FOCUS CAN SEE IT AND SMELL IT, AS THE BACK DRAFT OF THE WARS SPONSORED BY THE UNITED STATES IN DEFENSE OF THE DYING USDOLLAR... THE USD WILL BE DEFENDED TO THE LAST BY THE USMILITARY, AS IN THE LAST 30 YEARS. $$$

When Russia finally reacts, it will be with full Chinese support. The reaction will be on the financial front, not military. Two other nations will play key roles, one hidden, one overt. The effect will be felt on the USDollar acceptance status (as in rejection by two superpower nations), the Petro-Dollar rapid demise, shifts in oil payment schemes, and diversification out of the USTreasury Bond with countless banking systems. The installation of an alternative trade settlement system, the hidden flip of Germany away from the West, the defection of the Saudis into the Russian-Chinese camp, usage of the Iran payment prototype, and huge fallout are coming. It is all coming soon. The events are in progress, moving fast. The next Global Paradigm Shift will be enormous in its effect. It is being referred to as the Global Currency Reset, but it is really the Return to Gold Trade Standard. The biggest changes will be the installation of the Petro-Yuan Standard that will have Russia determine the oil price, but set in Yuan terms. The transformed defacto petro standard will serve as a temporary device toward the full implementation of Gold Trade Settlement, which will also feature the Gold-backed Yuan new currency.

Some degree of integration will come between the Gold-backed Yuan and the Gold Trade Note, basically a new letter of credit to facilitate trade transactions but in avoidance of the omnipresent toxic USDollar. The result will be a quantum change in the Gold price and the newly introduced split Scheiss Dollar, whereas the current USDollar will become the Intl Dollar under Chinese monetary management. The quantum change will act like a financial nuclear event to the United States and London control rooms. Derivative explosions will occur in financial markets, not conventional explosions on the military battlefield. The quantum change will create a non-linear event. It will set the Gold price a multiple higher, like $3000 to $5000 per ounce overnight. It seems the great majority of Western gold analysts and financial analysts do not foresee this, with the exception of Jim Sinclair and a couple others. The birth of the Eurasian Trade Zone will have the Gold Trade Settlement as midwife. The return of the Gold Standard will come as outcome of war, a fitting development since the USDollar has had its chief support for three decades in the USMilitary element, perhaps dating back to the Noriega removal in Panama in the 1980s. The event was the installation of the narco plank to the USD support structure. Be sure to know that Ukraine is a firewall event which features a gold theft, a bank heist, and energy lands snatch, disguised as a military maneuever that relied upon a coup d'etat. These Nazis are easy to observe when tipped off on methods (MO).

◄$$$ BEN FULFORD OFFERS A DECENT PERSPECTIVE... AN UGLY REPORT ON THE NEW ZEALAND EARTHQUAKE, THE SAUDIS MIGHT JOIN AN EASTERN EMBARGO, THE RUSSIANS HAVE BOOTED OUT THE CABAL, AND THE INTL MONETARY FUND THREAT COMES FROM AN EMPTY CHAMBER. $$$

A worthwhile summary came from Ben Fulford on March 17th. On the doorstep was tossed an essay update, given on St Patrick's Day to those who are Irish and those who wish they were. His commentary is sometimes bizarre and errant, but this one was loaded with insight and sharp relevance. The following is from Fulford with my minor [edits]. Even as the cabal-controlled corporate propaganda media tries to distract everybody with lies over the situation in the Ukraine, as well as speculating endlessly about the missing Malaysian airliner, they are totally ignoring the defection from the cabal by the Gulf oil countries led by Saudi Arabia. The squabble grows. Saudi Arabia, the United Arab Emirates and other gulf countries are threatening to cut off all trade with Qatar and possibly to declare war unless that country shuts down Al Jazeera and kicks out cabal fronts like the Rand Corp and the Brookings Institute. It is an attack against the US think tanks, [vile centers]. The only major Western corporate media outlet to report this huge development has been Agence France Press or AFP. The Rand Corporation is the same bunch of psychopaths who proposed a "war with a medium sized country like Japan or Brazil" as a way to revive the USEconomy. The earthquake [think HAARP] that hit Christchurch New Zealand several years ago came immediately after Thad Allen of the Rand Corp and about a dozen congressmen asked for the South Island of New Zealand to be used as a home for one million Satanic cabal members and were turned down. [Few writers ever comment on Satanic movements, as they are laced through the Western banking and big oil centers.] Qatar is also where the cabal bases many of its murder by drone operations. [One should suspect that the Saudis have come to learn of some planned USMilitary drone attacks against the Saudi Royal Family.]

The Saudi move came during the visit to China last week by the Saudi crown prince and means that the cabal can now be cut off from access to both Russian and Middle Eastern oil. That is why the United States opened its strategic oil reserves last week. These reserves can keep the US going at current consumption rates without oil imports for 58 days. The other very telling sign that it is not business as usual for the cabal is the refusal of the UK government to participate in any form of sanctions against Russia. The Germans are also ruling out sanctions, even as they stamp their feet and make a bit of noise. The Russians, for their part, have already evacuated their funds from cabal controlled financial institutions. In addition to this, they are kicking cabal linked businessmen out of Russia and confiscating their assets. The Chinese, for their part, allowed the Renminbi to fall more than 1% on Monday in a signal to the cabal that they will not tolerate a unilateral attempt by them to devalue the US dollar.

This means that the Federal Reserve Board regime in WashingtonDC and their sister institution the European Central Bank are now being isolated from the global community. The talk by the cabal side about offering IMF funding to the Ukraine is meaningless because the IMF has no money. Ditto the revived talk about reviving Special Drawing Rights as an alternative to the US dollar. Obviously nobody is going to accept any such role for the IMF unless voting rights are redrawn in line with global economic and demographic reality. In other words, unless the Europeans and Americans lose the control, they now have of over 50% of the votes in that institution as well as in the World Bank. [Think giant strides to isolate the United States in both energy and bond finance fronts, which will result in a strangle.]

◄$$$ IRAN HAS FINALIZED A NATURAL GAS EXPORT DEAL WITH OMAN, THE TERM OF 25 YEARS, THE VALUE AT $60 BILLION... IT WILL REQUIRE THE CONSTRUCTION OF A GAS PIPELINE ACROSS THE PERSIAN GULF... IRAN IS TO BE INTEGRATED WITH GULF NATIONS, GIVEN THE USGOVT OBSTACLES ARE BEING REMOVED FINALLY. $$$

An agreement between Iran and Oman has been signed. It calls for the export of 10 billion cubic metres of natural gas per year to Oman. The deal also calls for building a pipeline across the Gulf at a cost of about $1 billion. The accord was signed during the first visit by new Iranian President Hassan Rouhani in Muscat. The deal follows a memorandum of understanding between the countries struck in August. The sale of Iranian gas to Oman is set to begin in 2015, will cover a 25-year timespan, and is valued at $60 billion. No price has been agreed for the gas, which will come from Iran's giant North Pars field in the Gulf and which would branch off an Iranian pipeline planned to export gas to Pakistan. Oman will pay for the entire cost of the pipeline and related infrastructure, estimated at around $1 billion. The Muscat Royals will be compensated for the investment through revenues generated from the gas sales.

The Oman emirate had made some preliminary agreements with Iran as far back as 2005, and a later draft deal in 2007 included plans for Oman to process Iranian gas for export as liquefied natural gas (LNG). But the USGovt obstructed the deal, with pressure put on the energy hungry Oman to source fuel from alternative suppliers such as Qatar, according to US embassy cables released by Wikileaks. As footnote, Iran is in possession of the world's largest gas reserves, according to the latest statistics compiled by British Petroleum. Its export sale will begin very soon, since no longer tied and bound as a rogue nation by the self-appointed US global masters. The Iran Nuclear Talks held in Geneva will remove the shackles, or better described as the Petro-Dollar Surrender Talks. See the Reuters article (CLICK HERE). Muscat is the capital of Oman, like Doha is the capital of Qatar.

◄$$$ THE RIGGED STOCK MARKET IS PAINFULLY EVIDENT BY THE RECORD FROM HIGH FREQUENCY TRADING FIRM VIRTU... THE FIRM HAS HAD ONE LOSING DAY OUT OF 1238 DAYS IN THE LAST FOUR YEARS... ANYONE INVESTING GOOD MONEY IS TOSSING IT AWAY, SINCE THE STOCK MARKET RIGGED BY WALL STREET AND ITS MANY POWERFUL COMPUTERS. $$$

The flash trading that deploys algorithms is way too successful. JPMorgan revealed sheepishly that it encountered zero trading day losses in the full year 2013. That is impressive, except it reeks of rigged markets, insider trading, and even illicit views of public order flow for frontrunning the flow in corrupt exploit. The high frequency trading (HFT) firm titan Virtu did better. The data is taken from its recently filed IPO prospectus. In four years of trading, Virtu has had only a single day in which it lost money. The submitted chart bears random traits of a skewed distribution, too skewed toward success. It is a smooth impressive shape that screams of corruption. They claim real-time risk management strategy and advanced technology as the reason for success. Witness the new normal for broken manipulated markets. The whoosh sound is money flying out of individual accounts, as a result of illegal order flow peeks and coordinated computer program trades to sell to each other's firms, then to dump on the public at designated local tops.

 

 

An important conclusion can be inferred. The firm Virtu is increasingly making more money in the higher net income buckets. Historically, HFT has made the most money on the low end of the distribution, where the heavy volume lies, as in billions of orders from which to scalp pennies or fractions of a penny. Therefore, the traditional strategy is no longer working. They are taking market share away from other HFT firms. The game is ending. The firm's executives are moving on. The Giga-HFT firm is going public, indicative of the founders and equity owners willing to cash out. They see the end coming. See the Zero Hedge article (CLICK HERE).

◄$$$ PIMCO'S GROSS DECLARED EL-ERIAN IS TRYING TO UNDERMINE HIM... WITNESS A POSSIBLE SABOTAGE OF PIMCO FOR UNDETERMINED MOTIVES, PERHAPS AS THE PLANTED EL-ERIAN FROM HARVARD (VIZ ENRON) MIGHT HAVE BEEN INSTALLED IN ORDER TO MAINTAIN USTBOND SUPPORT FROM THE BIGGEST BOND FUND IN THE WORLD... THE MARRIAGE IS OVER, THE DIVORCE DONE IN THE OPEN... THE JACKASS SUSPECTS EL-ERIAN ASSURED PIMCO TO SERVE AS WALL STREET PATSY. $$$

Tensions mount between Bill Gross, the co-founder of Pacific Investment Management Co (PIMCO) and departing CEO Mohamed El-Erian. Gross openly cited evidence that El-Erian wrote a February 24th article in the Wall Street Journal, which described the worsening relationship between the two men in the aftermath of the bond fund's slipped performance last year, including an internal argument in front of several colleagues at the Newport Beach California headquarters. The PIMCO funds managed over $1.91 trillion in assets as of the end of 2013. The squabble is detailed. A PIMCO spokesman stated, "Mr Gross did not make the statements Reuters attributes to him. He categorically denies saying this firm ever listened in on Mr El-Erian's phone calls or that Mr El-Erian wrote any previous media article. As a regulated company, PIMCO is required to retain records of its employee communications to help ensure compliance with the firm's policies. This is an astoundingly incorrect claim about a thoroughly reported article that was in the best tradition of The Wall Street Journal." El-Erian was recently named to a part-time position as chief economic adviser to Allianz, the German financial services company that owns PIMCO. He was moved sideways but no longer in view. He might have served his purpose.

PIMCO saw its assets under management shrink by $80 billion in 2013 due to outflows and negative returns. In February, the main flagship PIMCO Total Return Fund had $1.6 billion of net outflows, its 10th consecutive month of outflows. The fund lagged 71% of its peers with a return of only 0.52% last month, according to Morningstar. In 2013, it suffered a negative total return of nearly 2 percent. In internal confrontations between Gross and El-Erian at the HQ, Bill Gross is quoted by the Wall Street Journal to have challenged his former partner one day last June. He said, "I have a 41-year track record of investing excellence. What do you have?" To which, El-Erian responsded "I am tired of cleaning up your shit." Mohamed was referring to conduct by Gross that he felt was hurting PIMCO. Bill Gross denies the veracity in the entire WSJ account, implying it is a fabrication. See the Reuters article (CLICK HERE).

Some deeper Jackass editorial comments. My respect for Gross is stern and steady. My disdain for El-Erian has been a matter of record, extending to his Harvard Univ role in their endowment fund management. He was at Harvard during the time of the Enron Corp birth, gutting, and death. Harvard rode the Enron stock up, piling on huge profits. Harvard also rode the Enron stock down, shorting it all along the way, piling on doubled huge profits. Thousands of investors lost a fortune, which ended up indirectly in the multi-$billion Harvard Fund. Enron was a concept born at the Harvard Business School by its professors. Enron was a gigantic project hatched in Harvard, funded by Citibank, developed by JPMorgan, and with auditing function by Arthur Anderson. El-Erian (EE) is a Harvard insider on the entire Enron game. The role of JPMorgan was the most extensive, with off-shore shell corporations created, slush fund channels created, false research created, and phony electricity markets created, all by JPMorgan. So if Gross and EE have a public dispute, my support goes to Gross. Then came the suspicious activity within the bond arena with respect to USFed monetary policy. Recall that EE had extensive JPMorgan contacts, and JPM runs the USFed operations in the bond market.

The entire bond game changed radically a few years ago. After a couple years of bond performance, it looked like Gross and PIMCO benefited from USFed inside information. Later it seemed like PIMCO was a victim of bad strategy that ignored either QE bond monetization buys or Interest Rate Swap activity, an incredible development. It seemed that after 2011, Gross was unfortunately duped into believing the USTreasury Bonds would suffer from gradually loss of creditor bids at auctions, while USGovt debt soared. It was as though El-Erian was encouraging PIMCO to keep a steady course in USTreasury Bond support. It seemed that Gross was not tipped off about either USFed bond monetization or the powerful interest rate derivatives to be used. These are clear EE specialties, yet PIMCO lost on investments.

My firm belief is that El-Erian was a syndicate plant to be installed at PIMCO to monitor its investments and to ensure no contrary manuevers to be made against the USTreasury Bond complex. My belief is that El-Erian by his presence guaranteed the Wall Street would profit at the expense of PIMCO. That EE is leaving PIMCO indicates his syndicate role has been completed. The open confrontation with accused false stories could prove the smear job upon exit by the slimy EE, always well spoken and charming at the interview desk on CNBC and elsewhere. He always managed to be critical of USFed policy with a smile, using the most tactful words imaginable, a polished speaker. However, he could not assist Gross in profiting from all his insider knowledge. The PIMCO losses are timed exactly with the EE working years. The Jackass often used profanity directed at him during his many interview, talking to my television set. Basic sabotage by EE was suspected since the Lehman bust in 2008. Methinks EE is as dirty as they come from his Harvard tenure. The Harvard Fund took on heavy losses in derivatives after El-Erian left, more evidence of JPMorgan linkage.

◄$$$ MOODY'S DOWNGRADED CHICAGO'S CREDIT RATING, THE LOWEST OF ANY MAJOR CITY EXCEPT DETROIT... CITED WERE THE CITY'S UNFUNDED PENSION LIABILITIES, WHICH ARE RAPIDLY GROWING... THE US-CITIES REMAIN DOMINOS TO FALL, PERHAPS 20 OR MORE VERY WEAK. $$$

In early March, Moodys Investors Service downgraded the Chicago credit rating, citing the city's unfunded pension liabilities. The downgrade from A3 to Baa1 applies to $8.3 billion in debt, just three notches above junk bond status. The agency gave Chicago a negative outlook, which assures another downgrade without any pension address or fix. Moodys offered comment, saying the rating reflects the city's massive and growing unfunded pension liabilities, whose liabilities threaten the city's fiscal solvency unless major revenue and other budgetary adjustments are adopted, using their words. The city of Chicago is facing a notable spike in its annual bill for the pensions which are promised to current and retired workers. Next year, the city's required contribution will more than double to $1.07 billion. The consequence of the downgrade is that the city with broad shoulders and an oversized debt backpack will have to pay high interest rates. Chicago now has the worst credit rating of any major American city except Detroit. The agency actually suggested a higher tax rate to alleviate the problem, which is a true braindead concept. The solution is to reduce the dead weight on the payrolls, to reduce the social welfare system, to reduce the pension benefit inputs, and to cut back on administrative overhead for the entire city. The schools and parks will experience a blowback effect. See the CNN Money article (CLICK HERE) and the Bond Buyer article (CLICK HERE).

◄$$$ MYRA CONFUSION, FACTS, AND REACTIONS... MANDATORY SAVINGS APPEARS THE HIDDEN OBJECTIVE... CONFISCATION OF US-BASED PRIVATE PENSIONS LIES DIRECTLY AHEAD... THE USGOVT MUST FINANCE ITS GARGANTUAN DEBT, AS THE NEW SPLIT SCHEISS DOLLAR IS TO BE LAUNCHED. $$$

If you like your private pension plan, you can keep it. So the joke goes, as the Obama Admin suffers round after round of revelations of lies, deceit, corruption, incompetence, stupidity, and altered loyalty. The USGovt employee MyRA (My Retirement Account) will be ransacked, ravaged, and raped, in a queer patriotic duty. Review some of the straight facts, and then review some opinions. The official goal of MyRA, as described by the White House occupant, is to give small employers a simple device to help low wage workers who have no other retirement plan. They are to be encouraged to save more. The MyRA is not mandatory. Employers will not be obliged to offer the plan to their workers, and workers will not be obliged to enroll. Those who wish to enroll, the workers can open a MyRA with as little as $25 to start, then add as after-tax payroll deductions.

With MyRA, no investment choices are offered. The cash will go into a special type of high yielding Treasury bond with the principal guaranteed by the full weight of the hollow fractured USGovt. If and when a worker's MyRA balance reaches $15,000, they will be compelled to convert it into a Roth IRA, like a strong measurable unit. Nothing about MyRA will change existing retirement plans. It will likely cost the USDept Treasury some money to pay higher yields on the MyRA bonds. The amount will depend how many people enroll and how much money they save over time. But their meager contributions will reduce by one millionth the weight of supporting the pigs on Wall Street, while giving the leaders an opportunity to wave the flag before a betrayed population.

The reaction to MyRA is between tepid and pathetic. Even professional investment advisors are not enthused by the official voluntary plan. The industry trade publication Investment News offered a skeptical viewpoint about Obama's MyRA proposal. Here is an excerpt. In it George Papadopoulos (owner of investment advisory firm of same name) said "Although encouraging more retirement savings is noble, the opt-in feature will undermine the MyRA effectiveness. People will procrastinate, and they will not sign up. It is not going to go anywhere. It adds to the alphabet soup of all the different kinds of IRAs." Another viewpoint was from John Hauserman, president of Retirement Quest Wealth Mgmt. He said, "It is ironic that Obama touted the growth of the stock market over the past five years just before introducing a retirement plan based on government bonds." Maybe the President does not know the difference between stocks and bonds, never having held a job. He never co-authored a single piece of Congressional legislation either. Hauserman went on, "Silly is the word that came to me when he presented it last night. It is not a good long-term portfolio prescription for the majority of people, particularly those who are low and middle-income and need long-term growth. He proposes a retirement plan that will not let people be in the stock market." There is the twist in exposure. The USGovt wants people to finance the USGovt debt (via bond investment), not corporate business capital investment (via stock investment). This is Black Hole logic. Later as private pension plans are forced from stocks to bonds, the motives will be clear. Right now, the public seems to have no clue, no interest, and no pulse.

Apparently, the White House thinks making the MyRA risk-free, along with the low minimums, will help people form a savings habit. Earning more secure income would go much farther, and encouraging business expansion in the USA (not Asia) would seem constructive, and eliminating ObamaCare would clear the logjam in businesses, and reducing war spending would lighten the load of debt itself. Just the Jackass musing. The liberal weblog FireDogLake is also unimpressed with MyRA, but for different reasons. The FDL lead dog Jon Walker is rightfully suspicious and on track. He believes the hidden Obama objective is mandatory IRA accounts for everyone. He wrote, "From Obama's statements, it seems his official goal is to try to force Congress to write a law for automatic IRAs. That is what he really wants. Since Obama has not gotten that yet, he is creating MyRA to try to show a portable automatic saving system can work. It seems like more a proof of concept than a long-term plan." Excellent observation, Bait & Switch!

The Obama State of (Dis)Union was plain as day. The confiscation of federal employee pension funds, as in the Thrift Savings Plan (TSP), was announced. It did not cause as much horror and dismay as it should have, since once more the American public seems distracted, dopey, and duped. The MyRA empty room plan will serve as a test run. Down the road is clearly marked with more draconian measures and plans. The 401k confiscation will be easy as pie, done through corporate fund funnels, with the short lists of approved funds. The IRA confiscation will be almost as easy, done through brokerage houses, of finite number. The corporate pensions will be the big enchalada to capture and swallow, done through major and midsized company offices under penalty of heavy fines and prison time for non-compliance. The Brave New World will soon marry Big Brother to form a veritable nightmare.

◄$$$ SNOWDEN CLAIMS NSA HAS BEEN PRESSURING THE EUROPEAN UNION LEADERS INTO CREATING A VIRTUAL EUROPEAN BAZAAR OF SPY NETWORKS... WHEN THE USGOVT NSA IS NOT CONDUCTING CORPORATE SPYING FOR THE CAPTURE OF TRADE SECRETS, IT IS RECRUITING OTHER NATIONS TO JOIN IN THE ESTABLISHMENT OF BIG BROTHER. $$$

The exposure of the USGovt National Security Agency continues. The prime figure remains Edward Snowden, who answered questions before the European Parliament. He did so remotely from Russia, using the nifty information technology so often abused by the government agencies. He claimed that the United States spy agency pressures its allies to take steps towards further enabling widespread and indiscriminate surveillance. The facts are coming out gradually in a very scummy manner. The NSA lobbied heavily for leaders in Sweden, the Netherlands, New Zealand, and Germany to authorize mass surveillance operations, including programs in which intelligence is gathered and then shared across borders with nations in the greater alliance. They are building a Big Brother Network.

Snowden said, "One of the foremost activities of the NSA's FAD, or Foreign Affairs Division, is to pressure or incentivize EU member states to change their laws to enable mass surveillance. Lawyers from the NSA, as well as the UK's GCHQ, work very hard to search for loopholes in laws and constitutional protections that they can use to justify indiscriminate, dragnet surveillance operations that were at best unwittingly authorized by lawmakers. These efforts to interpret new powers out of vague laws is an intentional strategy to avoid public opposition and lawmaker insistence that legal limits be respected. Each of these countries received instruction from the NSA, sometimes under the guise of the US Department of Defense and other bodies, on how to degrade the legal protections of their countries' communications." Snowden offered a concrete example that applied to Germany. The officials there were allegedly pressured by the USGovt to modify the country's G-10 law to appease the NSA while at the same time it eroded the rights of German citizens under their constitution. The activity is criminal espionage by any other name. The goal has been, surely in progress to this day, to increase surveillance capabilities and to adopt new technology which work to formally create a European Bazaar. Across Europe, the member states would be in a position to share, to analyze, and to funnel intelligence to select firms around the globe.

According to Snowden, the game is on to deceive nations, to dupe them with phony guidelines that are supposedly followed. It is akin to a shell game on information, its gathering, and its usage. Snowden described the dual nature of deception in detail with two countries in another example. He stated, "An EU member state like Denmark may give the NSA access to a tapping center on the [unenforceable] condition that NSA does not search it for Danes. And Germany may give the NSA access to another on the condition that it does not search for Germans. Yet the two tapping sites may be two points on the same cable. So the NSA simply captures the communications of the German citizens as they transit Denmark, and the Danish citizens as they transit Germany, all the while considering it entirely in accordance with their agreements. Ultimately, each EU national government's spy services are independently hawking domestic accesses to the NSA, GCHQ, FRA, and the like without having any awareness of how their individual contribution is enabling the greater patchwork of mass surveillance against ordinary citizens as a whole. By the time this general process has occurred, it is very difficult for the citizens of a country to protect the privacy of their communications, and it is very easy for the intelligence services of that country to make those communications available to the NSA, even without having explicitly shared them." It is a matter of collecting data en masse by whatever means, using meaningless boundaries as guidelines.

The nations are contributing to a stanglehold of surveillance, monitor, and espionage. The data moves easily and without barrier across countries, where different phony rules are applied in a grand juggling exercise. See the Russia Today article (CLICK HERE). See the vile nazi piece of human excrement Joseph Goebbels versus the literary visionary and hero harbinger of horror, George Orwell. The teachings of Goebbels are commonly used in the US press and the USGovt press releases, laced with deception and lies, in attempts to steer public perceptions and to shape public opinion. Both Huxley and Thoreau join Orwell as Jackass heroes. The former wrote "Brave New World" and the latter "Civil Disobedience" as classic pieces of literature. Within a couple years, books by Orwell, Huxley, and maybe Thoreau might be banned in the United States as subversive, to strengthen the union, to uphold security, and to preserve liberty. My deep fervent hope is that the Nazis are revealed for their Satanic roots and goal to destroy the earth, with Vatican headquarters for two millenniums, who use the bankers to manifest their goals.


 
  VERSUS 
 

## RUSSIA & CHINA FORGE NEW AXIS

◄$$$ CHICKEN KIEV IS SERVED, AS OBAMA BACKS DOWN ON CRIMEA... THE SUPER-POWER STANDOFF IS A CRIME SCENE WITH BANKERS AND ENERGY FIRMS INVOLVED... IT APPEARS THE USGOVT WISHES RUSSIA & CHINA TO KILL THE KING DOLLAR AND TO DISABLE THE USTBOND TOXIC AGENT, IN ORDER TO DEFLECT BLAME, TO ENABLE A FALSE FLAG ATTACK, EVEN TO INSTALL MARTIAL LAW IN THE UNITED STATES AFTER CERTAIN BLOWBACK. $$$

The Obama Admin suffered yet another grand foreign policy defeat on March 16th when the people of Crimea voted overwhelmingly to reject Washington's Nazi-backed junta in Kiev, the foul Maidan regime. They chose to join the Russian Federation instead. Next comes a possible Moldova vote in chain reaction. The ballot was voted around 93% in favor of approved splitting off and joining Russia in a grand gesture. The Jackass guess on record was 80% to 85% in favor. The liberation of Kiev by the West has been refuted in the seaside province. Next is grinding Third World poverty and widespread disorder, with examples manifested in Iraq, Afghanistan, Libya, and Syria, ther other sites of US liberation spread like the cancer it is. The Obama Admin publicly rejected the nearly unanimous referendum, in clownish amateurish bellicose manner. It will push for economic sanctions on Russia, which will all surely backlash and boomerang on the United States. Its extreme supply and debt finance vulnerability will be exposed to whack the nation. Then comes martial law, probably the plan all along. These Nazis want total power and control.

In response, Russian President Vladimir Putin has brushed off the hysterical accusations and threats issued almost daily by President Obama or his vaudeville mouthpiece John Kerry, more often recently called an incompetent buffoon whose actions have brought disgrace to the USDept State. The Team Obama is replete with fantasy, propaganda, subterfuge, spin doctors, thieves, and globalists who lack pragmatism and strategic thinking. It sometimes seems as though their only true motive is targeted thefts and strategic chaos. See the CounterPunch article (CLICK HERE)

◄$$$ USGOVT SANCTIONS HAVE A HOLLOW RING, A BASELESS FORMALITY, AND AN EMPTY LOOK... CERTAIN COSTS ARE TO BE LEVIED ON RUSSIAN BANKS & BILLIONAIRES... OBAMA SIGNED A DECREE FOR POSSIBLE IMPOSED SANCTIONS ON KEY SECTORS OF THE RUSSIAN ECONOMY, LIKE METALS, MINING, DEFENSE... THE INSANE LEAD BY THE UNITED STATES WILL LIKELY RESULT IN REDUCED COMMODITY SUPPLY AND DEBT FINANCE (SHOOTING IN THE CHEST, AND EVEN THE FACE)... THE USGOVT HAS VERY LITTLE LEVERAGE. $$$

The potential cited is for dangerous risks of escalation, but President Obama is proceeding without the support of the USCongress. The empty White House suit has signed an Executive Order authorizing further penalties on several Russian individuals and also a major bank. The individuals are regarded as having substantial resources and influence who provide material support to the Russian leadership, as well as a bank that provides material support to these individuals. The list includes Bank Rossiya (the 5th largest Russian bank), and 20 more individuals including billionaire Gennady Timchenko, and Duma Deputy Speaker Evgeny Bushmin. Obama claims he has also signed a new executive order that would allow the United States to sanction key sectors of the Russian economy. The new penalties mark the second round of economic sanctions the US has levied on Russia in the single week. The first round of penalties had little impact in stopping Moscow from annexing the strategically important Crimean Peninsula from Ukraine. The USGovt appears to be the world's terrorist, its bully, its gold thief, its judge, and its policeman. The Eastern Hemisphere and Latin America are not impressed. See the Zero Hedge article (CLICK HERE).

◄$$$ UKRAINE TO SOON LAUNCH A NEW SCHEISS HRYVNIA CURRENCY, SURE TO BE DEVALUATED... IT WILL USHER IN RABID PRICE INFLATION. $$$

Heard from Hat Trick Letter client with a Ukrainian wife, the news out of Kiev is the government will soon issue a new Hryvnia currency. Expect it to be severely devaluated, thus ushering in powerful price inflation. The deficit nationally will be a shocker, and absent in debt finance, solved by money growth. Belonging to the European Union has its heavy cost. Refer to Latvia.

◄$$$ RUSSIA COULD CRUSH THE PETRO-DOLLAR WITH A PETRO-GOLD HAMMER... EXPECT RUSSIA TO ALTER THE STANDARD VERY SOON, WITH FULL SUPPORT FROM CHINA... THEY NEEDED A FLASH POINT, OR TO BE PUSHED AGAINST THE WALL... UKRAINE AND CRIMEA ARE EXACTLY THAT FLASH POINT TO FORCE RUSSIA'S HAND... NEXT ON THE PETRO-DOLLAR ALERT IS PUTIN READY TO ANNOUNCE A GIANT GAS DEAL WITH CHINA, CALLED THE HOLY GRAIL. $$$

If Russia accepts payment for crude oil & natural gas in any currency other than the USDollar, then the US Petro-Dollar system will collapse quickly. It does not matter whether it is Gold, the Euro, the Ruble, the Yen, the Rupee, or other currency. Any switch to pricing petroleum would spell the end of the USDollar as the world's reserve currency, period! The entire global financial system depends upon the US$-based oil payments in order to justify storage of extreme volumes of USTreasury Bonds in the banking system worldwide. If Russia demands any bilateral trade denominated in either Russian Ruble or Chinese Yuan currency, even Gold bullion, the great King Dollar is pushed off the tilted throne. Add to the mix Iran, Iraq, India, Japan, SKorea, Brazil, and soon the Saudis, who all might not go along with the isolated Prince of Folly Obama. Recall that Saudi Arabia is China's largest foreign source of crude oil, whose crown prince met with President Xi Jinping toward expanding trade further. The Saudis will play a key supporting role in de-throning the USDollar.

To be sure, the Petro-Dollar is doomed, its demise guaranteed by the USGovt pressure with sanctions. The US is a debt ridden nation whose entire list of allies is deeply dependent on energy and minerals. The Western European nations will break away very soon from the US errant lead. Wave goodbye to the Petro-Dollar, whose dismantled structure assures the harsh landscape of economic war ruin. Expect to seee price inflation, supply shortage, and civil disorder in the United States in backlash. See the Global Research article (CLICK HERE). The Kremlin and China might soon deliver the one-two death punch to the USDollar by working toward formal Gold payments for energy shipments. Both the Examiner and GoldCore have cited the extreme risk in developments toward a Petro-Gold option, the true Achilles Heel for the toxic USDollar. See the Gold Silver Worlds article (CLICK HERE).

Europe is avidly scrambling to find alternative sources of energy in the event that Gazprom pulls the plug on natural gas exports to Germany and Europe. The biggest deal of the centruy has taken years to put together, but progress is steady. The Ukraine crisis has put urgency on the table. Russia is preparing the announcement of the so-called gigantic Holy Grail energy deal with China, a move which would send geopolitical shockwaves around the world. The deal would merge the two nations in a commodity backed axis, define trade settlement terms, and join their economies. They would forge an alliance with a shared foreign policy. The Tyler Durden editorials have hinted that a commodity backed reserve currency could emerge from the Russia-China Axis, which bypasses the USDollar. In the Jackass opinion, Gold bullion is the natural medium of exchange for the Eurasian Trade Zone, along with a gold-backed Yuan. The Russian finance minister Siluanov was very clear in suggesting that Russia work around the Western obstacles. The Kremlin will simply bypass Western purchases of Russian debt, skip past funding by Chinese purchases of US Treasurys, and go straight to the source. The USTBond has been used widely by China to make payments for Russian contracts, in a practice called Indirect Exchange. More direct funding between Russia & China would work to construct the foundation of the Eurasian Trade Zone. The Holy Grail for Moscow is a natural gas supply deal with China that is apparently close to completion. It might be signed and sealed when Putin visits Beijing China in May. It would demonstrate that global power has shifted eastwards, and do so emphatically.

Details are large scale on the big energy deal, which has been mentioned several times in past Hat Trick Letter reports. The state-owned Russian gas firm Gazprom hopes to pump 38 billion cubic meters (bcm) of natural gas per year to China from 2018 via the first pipeline between the two superpower nations. They form a network with the world's largest producer of conventional gas and its largest consumer. The month of May is the openly stated goal for completion of the agreement. It would be logical to expect the deal during the upcoming Putin visit. The White House keeps prodding at Russia, pushing it into a reaction mode. "The worse Russia's relations are with the West, the closer Russia will want to be to China. If China supports you, no one can say you are isolated," said Vasily Kashin, a China expert at the Analysis of Strategies & Technologies (CAST) think thank. The isolation that comes will be of the United States, separated from the vast European and Asian alliances, separated from the Arab & Moslem worlds, separated from its Latin American neighbor nations, and separated even from its Western European allies. The Obama Admin is uniting Russia & China, pushing them to the table, whose persistent inflexible differences politically and economically have kept this grand energy deal from being sealed and completed. The folly is unspeakable. See the Zero Hedge article (CLICK HERE).

◄$$$ THE G-8 NO LONGER EXISTS (SUSPENDED), BUT THE G-7 WILL BECOME AN IRRELEVANT HALL IF IT BOTHERS TO MEET AT ALL... GERMANY IS BENDING AND MUST SHOW A TOUGH INTERIOR, AS THE NATION WILL EVENTUALLY TILT EAST AND AWAY FROM THE BELLICOSE WEST. $$$

German Chancellor Angela Merkel is making a fool of herself, or simply placating the US master fools. She has warned Russia to expect escalating EU sanctions. Merkel pontificated that the G-8 no longer exists, since Russia cannot be included in its hostile state. The German leader is losing political ground rapidly. She must plan for working relations with the Kremlin, not the sinking White House buffoons and Wall Street temple of crooks. The rift deepens with other member states. Russia has said it will demand compensation from France if Paris tears up a contract to provide Moscow with two Mistral helicopter carrier ships. France is considering suspending the deal, under US pressure.

These European leaders have a memory lapse. The last few G-8 Meetings have either been brief coffee breaks or canceled engagements. They are an irrelevance. Watch the G-7 simply disband rather than continue to meet without Russia. The once important group used to find leadership by the US and UK, no more. Merkel risks being called two-faced as she caters to the Atlantic crowd while assuring Putin of calm. Last week she repeated that Russia remains a member of the G-8 as she contradicted reports on Russia being booted out of the group. The French Foreign Minister Laurent Fabius had reportedly said the Western states agreed to suspend Russia's G8 membership. Merkel stressed that so far, only plans for the G-8 summit in Sochi are being suspended. The Olympic Game glow is gone, along with the flame. The G-8 includes Russia and seven leading industrialized nations (G-7), with the United States, Canada, France, Germany, Italy, Japan, and Great Britain. These nations are largely bankrupt, yet hostile. See the EuroNews article (CLICK HERE) and the BRICS Post article (CLICK HERE).

◄$$$ A RUSSIAN INVESTMENT GROUP AGREED TO A $7 BILLION ENERGY DEAL WITH THE GERMAN RWE FIRM... IT WAS A BACKDOOR STAKE GRABBED... THE INTEGRATION OF RUSSIA AND GERMANY CONTINUES. $$$

Another energy deal was announced in mid-March between Russia and European firms. The world's biggest oil company Rosneft will acquire a 26.2% indirect stake in Italian tire maker Pirelli. The Russian giant will take 50% control of a new company that will buy Camfin's stake in Pirelli, according to Reuters. The other 50% stake will belong to Nuove Partecipazioni, a company with 80% ownership in current Pirelli from indirect shares held. It is yet another large Indirect Exchange where Russia dumps USTreasury Bonds as currency in a tangible asset deal. Europe is slowly being integrated with Russia, despite resistance given by the American Nazis. See the Russia Today article (CLICK HERE).

A German banker source pitched in an opinion. He has ties to several large corporations via personal friendships with CEOs. He said, "RWE has EUR 30 billion in debt on its books. The stupid energy politics Berlin promotes is killing all the energy companies. The Russians bought an incredibly valuable strategic asset, with outlets in North Africa, Europe, and elsewhere. They did it for peanuts, using USTreasurys as currency, to be sure. One wonders what the real trade-off might be that made that deal happen." RWE is Rheinisch-Westfalisches Elektrizitatswerk, a German electricity producer conglomerate. Perhaps Russia & China together have a corporatized plan to rescue Southern Europe, and pull not only Italy, but also Spain and Portugal into the Eurasian Trade Zone by their tires.

◄$$$ RUSSIA MIGHT DEMAND FROM UKRAINE THAT IT PAY ITS $20 BILLION SHARE FOR EX-SOVIET DEBT THAT LINGERS ON THE BOOKS. $$$

As Tyler Durden so cleverly put it, the move is Rook to G7, check. The new Kiev Regime comprehends that the Soviet-era debts with Russia are unsettled. The Kremlin reserves the right ot insist that Ukraine repay $20 billion on the debt. It seems like a nasty vindictive maneuver. But when the West led a very illegal coup d'etat in Ukraine, they opened the gates for games with heavy stakes in blowback. At least $3 billion in bonds are coming due very soon, and Ukraine is on the hook. Ukraine owes the sum to Russia in bonds that have been issued under UK law. The story was cited in the Ukraine Crisis Report. One of the clauses stipulated explicitly within the bond framework is that if the Ukraine Govt debt-to-GDP ratio should exceed 60%, the bonds will become immediately callable. The Kremlin installed the covenant years back, and cleverly so. Once the Ukraine gets funding from the IMF, the event would trigger the covenant clause. Therefore, the first $3 billion of any aid to Ukraine, like from the Intl Monetary Fund, would right away flow into the Russian coffers. Expect litigation and chest pounding and gnashing of teeth on stage. To the Doubting Thomases in the crowd, the outcome has ample precedent. As Greek bondholders learned from their experience, all those who held bonds issued under UK law were actually paid in full, while everybody else was dismissed with empty pockets and empty hands. See the Zero Hedge article (CLICK HERE).

◄$$$ SAUDI IS COURTING CHINA, THE GLOBAL ROBED CONCUBINE IN NEED OF PROTECTION... SAUDI ARABIA WILL BE IMPORTANT IN CEMENTING THE PETRO-YUAN STANDARD AND KILLING OFF THE PETRO-DOLLAR... ALSO THE SAUDI KINGDOM COULD BE THE CRITICAL FOURTH LEG IN THE EURASIAN TRADE ZONE TABLE... OBSERVE THE SAUDI HARLOTS CURRY FAVOR TO BOTH THE UNITED STATES AND RUSSIA, AS RUSSIA WILL PLAY A MISSILE CARD SOON. $$$

On March 13th, China's President Xi Jinping met with Saudi Arabian Crown Prince Salman Bin Abdulaziz Al Saud at the Great Hall of the People in Beijing. The Saudi Crown Prince made the visit to China in order to bolster investments, and to kiss some Chinese ass. With the USGovt and USMilitary no longer protecting the Saudi Royals, their kingdom is at high risk. The Saudis angered Russian President Putin in January, and must repair the damage with Russia while they cement the Chinese support. The Chinese Navy is required in the Persian Gulf in the peacekeeping role, as buffer to Iran. The Saudi Royals must have updated protection in order to continue their ongoing multi-$billion plunder of the nation. It has lasted over half a century with US & UK protection. Bilateral trade between Russia & Saudi Arabia already exceeding 2015 target levels, according to the Chinese ambassador to Riyadh, Li Chengwen. The path for additional investment is clear.

The Saudis have been China's largest trading partner in Western Asia and Africa over the past ten years and it is the largest state oil exporter to China. All is acknowledged. The Saudi–Chinese bilateral trade had risen 14% over 2012, to reach US$73 billion, well ahead of the trade volume target of US$60 billion set for 2015. Abdul Rahman Al-Jeraisy, the president of the Saudi–Chinese Business Council, claims the bilateral trade has exceeded US$76bn. Several deals are expected to be signed during the visit, including economic and energy deals. See the Asharq al-Awsat article (CLICK HERE).

The Saudi overtures toward China are moving into high gear and heavy pitch, exactly as the Jackass forecasted only a few months ago. The four legs to the Eurasian Trade Zone table will be Russia, China, and Germany, with either Saudi Arabia or Iran added (possibly the entire Gulf community of nations). Be sure to know that the Saudi gift of $1.5 billion to Pakistan was a pure bribe, used to induce them to halt progress on the Iran-Pakistan pipeline. They did the USGovt bidding, and curried favor with the United States. But the Pakistanis are a poor nation and are short on energy. They will take the funds now, only to continue the pipeline project later when the US sanctions are removed. The construction contractors have backed off due to the sanctions. The Saudis will curry favor with Russia very soon, in order to halt what Pepe Escobar calls a threat to place ballistic missiles of S-400 type in Iran. Many are the Kremlin poker cards held. See the Asia Times article (CLICK HERE and HERE).

◄$$$ WITH CLEAR RECIPROCITY, CHINESE PRESIDENT XI HAS CALLED FOR CLOSER TIES BETWEEN SAUDI ARABIA AND CHINA... THE TOTAL CHINESE TRADE WITH THE GULF COOP NATIONS HAS SURPASSED $150 BILLION... THE LOVE FEST IS GROWING, AND AS IT DOES, THE USDOLLAR REJECTION WILL GATHER GLOBAL MOMENTUM... THE OIL FOR YUAN ELEMENT IS FAST APPROACHING VIEW. $$$

Presiden Xi Jinping has put his weight and influence behind stronger cooperation Saudi Arabia and the entire set of Gulf region nations. The two nations plan to expand their cooperation beyond the traditional field of energy, like into areas such as aviation, space, and new energy technology, according to the Beijing leader. He reminded the visiting Saudi Crown Prince Salman of their ongoing friendship, and reliable trade partnership in the Middle East and the Gulf region. President Xi stressed the elevation of their strategic relations. He wants China to work with Saudi Arabia to push forward negotiations on the free trade agreement between China and the Gulf Cooperation Council. The GCC is a political and economic union of six Arab states that border the Gulf (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates). It is an uneasy union that typically misses a couple key emirates. All six are major oil exporters. Interestingly, China might serve as the glue to keep the GCC unity, since squabbles over the US-led Moslem Brotherhood have caused deep divisions. The Free Trade Agreement negotiations began in 2004 and have produced a number of major pacts. China's trade volume with GCC countries in 2011 surpassed $100 billion for the first time. In 2012, trade exceeded $150 billion.


 
 
 

The Chinese President invited Saudi Arabia to take part in China's proposal to build the Silk Road Economic Belt and the 21st Century Maritime Silk Road, and to provide strong support for the required transportation infrastructure linking the two strategic nations. Regard the trade zone as linking China with the Middle East and Moslem-Hindu beltline (like Pakistan & India). He offered to consolidate communication and cooperation in order to jointly promote regional peace. In return, the Prince reiterated the Saudi respect for China's importance for stability in the Gulf region and the Middle East. Think Gulf Protectorate invitation. He cited the objective and fair stance that China has all along held. The desire is for some influence in resolving the Syrian conflict. The event was a love fest. At one point early in the conference, in front of reporters, Xi spoke of the timely Saudi donations after the May 2008 Wenchuan earthquake, which killed more than 87,000 people in the Sichuan province. On the spot, Saudi Arabia donated $50 million in cash and $10 million in relief materials. The leader stated in clear terms that the Chinese people will not forget the deed.

The visit and conference went beyond the formalities, to include meetings with Premier Li Keqiang and Defense Minister Chang Wanquan for intensive discussions. The Chinese welcomed the broader discussions, since they wish to establish greater strategic relations. The Chinese are keenly aware that the Saudis can provide valuable yeoman support for the upcoming Petro-Yuan defacto standard in supplanting the aged US$-based benchmark currently in place. It is falling apart. The world is coming closer to Oil for Gold trade, and Oil for Yuan trade as an important intermediary step. See the China Daily article (CLICK HERE).

◄$$$ BOTH RUSSIA & CHINA HAVE A PRESENCE IN GLOBAL SHIPPING VESSELS... BE ON THE LOOKOUT FOR THE BRICS NATIONS TO ESTABLISH THEIR OWN MARITIME INSURANCE, WHICH WOULD COMPETE WITH LLOYDS OF LONDON... ANOTHER IRANIAN END AROUND SOLUTION COULD BE IN THE MAKING. $$$

As of 2007, the CIA statistics counted 4295 oil tankers worldwide with 1000 long tons deadweight (DWT) capacity or greater. Panama was the world's largest flag state for oil tankers, with 528 vessels in its registry. Six other flag states had more than 200 registered oil tankers: Liberia (464), Singapore (355), China (252), Russia (250), the Marshall Islands (234), and the Bahamas (209). Those bearing Panama, Liberia, Marshall, and Bahama flags are open registries which are considered by the Intl Transport Workers Federation to be flags of convenience. Colleague Craig McC added an excellent commentary, a sharp point that reflects on his own insurance experience. He wrote, "I have wondering for several years why the BRICS have not founded their own maritime insurance exchange to compete against Lloyds. It would likely be centered in Shanghai or Singapore. Doing so sure would make transporting Iranian crude easier and less expensive." Another sanctions workaround is possibly coming. See the Wikipedia summary (CLICK HERE).

◄$$$ THE GLOBAL ECONOMY IS IN GALLOPING RECESSION... THE EVIDENCE IS SEEN IN A COLLAPSE OF CHINESE EXPORTS... THEY ACTUALLY RECORDED A TRADE DEFICIT, THE SECOND LARGEST ON RECORD... TO BE SURE, THE CHINESE ECONOMY IS IN TROUBLE, BUT THE WESTERN ECONOMIES ARE IN FAR WORSE CONDITION, WITHOUT PROPER REPORTING BY THE FINANCIAL PRESS. $$$

The Chinese Economy is in deep trouble, no doubt. This published report cannot delineate the entire situation adequately. The enormous decline in Chinese exports was a huge miss for the analysts, who actually forecast very little accurately anymore due to their bank marketing function and errant conventional methods. The Chinese exports fell by 18.1% year over year versus an expectation of a 7.5% rise, using data ending February. When combining the last two month's data which smooths over the holiday, exports are still down 1.6% year on year. Reasons cited are many, from the Lunar New Year, US weather changes, credit issues over their property market pullback, in addition to tensions over Ukraine, dispute over Japanese islands, shipping container issues, and many more. The 45 economists who forecast this data are mostly hacks from big banks, and cannot explain the six standard deviation error which should occur once every 2500 to 3500 years. Think more simply, that China's customers are reeling, collapsing, dying on the economic vine, a message the biased hack economists never touch upon.

The veritable billboard flash message is that China's trade balance has entered into its second largest deficit on record, signaling a turning point down for the global economy, and which demands a reformed currency system. The toxic blood system has put the patient in the Intensive Care ward. China remains bound and tied to the USEconomy and EU economy, despite all efforts to break loose, due to their longstanding monetary policy to maintain a semi-peg to the USDollar since the late 1990 decade. The entire pair of systems is shared more than recognized. Small departures do not break the linkage, and besides, China is really busy draining the West of its Gold bullion. The global recovery is nowhere, the evidence coming from China, the global manufacturer and exporter. The global recession has touched the emerging markets in a big way. Exports from China to the rest of the BRIC nations were down over 20% uniformly. See the Zero Hedge articles (CLICK HERE and HERE). Tyler Durden has been all over their slowdown, not missing a beat, like white on rice. No forecast miss for the indefatigable analyst and superb staff, excellent contributors too.

## CURRENCY & RESOURCE UNDERCURRENTS

◄$$$ NEW SPLIT SCHEISS DOLLAR WILL CAUSE AN IMMEDIATE PROBLEM... ITS SHORT-TERM RISK CANNOT BE HEDGED... THE GREASE TO COMMERCE IS SOON TO GO AWAY WITHIN THE SUPPLY CHAIN... FOREIGN SUPPLIERS WILL BE RELUCTANT TO ABSORB THE RISK, AND FOREIGN INVESTORS WILL BE HESITANT TO PUT CAPITAL AT RISK IN INVESTMENTS... THE CHALLENGE WILL BE TO SET THE NEW SCHEISS DOLLAR AT A LOWER LEVEL WHICH HAS IMMEDIATE PERCEIVED STABILITY BUT WITHOUT A GRAND SHOCK. $$$

Introduction of the new Split Scheiss Dollar is not anticipated, not even by gold community analysts. The external pressures will be acute, from foreign USDollar holders who object to the constant USFed debasement. The USDollar with its USTreasury Bond reserve vehicle is about to be discarded as the Petro-Dollar defacto standard is tossed out as victim to the Ukraine crisis. When the United States loses its global reserve currency, it will be forced to create its own domestic Dollar, assured to quickly be tabbed a Third World currency from horrendous fundamentals. The internal pressures will be acute, to fund the USGovt deficits when support vanishes. Its launch will not be easy. It might be an impossible task. Once launched, expect several key devaluations. The challenge will be to devalue in such a way as to cause confidence in a perceived equilibrium quickly. The technical challenges are enormous. Commercial players will not be in a position to hedge risk, not with any futures contract. The commercial paper (trade lubrication) is subject to risk in devaluation. Contract satisfaction is usually over 30 to 90 days, the risk exposed. With nothing resolved on the trade deficit and federal deficit, pressures will remain constant for daily, weekly, monthly devaluation. Foreign investors will not wish to invest in plant & equipment or property, knowing that the local Scheiss Dollar would continue to decline. The pressure for numerous devaluations in sequence is utterly astounding and crippling. This is how nations fall into the Third World. This is how price hyper-inflation is introduced. This is how supply chains are disrupted. This is how internal economies suffer systemic failure.

Venezuela has provided the model, which is now a nation in chaos. After two rapid Bolivar curency devaluations totaling 73% in the last two years, the nation has not found the elusive equilibrium. Notice the price inflation, the supply shortages, and the social disorder. The South American country serves as as showcase to preview what is to come to the United States when it loses its coveted global currency reserve status. It must then fend for itself, but with Third World finances staring at it.

◄$$$ CHINA IS READY TO BACK THEIR CURRENCY WITH GOLD... THEY ARE ACCUMULATING GOLD, AND BROADLY ACQUIRING MINING FIRMS, AND DEVELOPING A GOLD MARKET STRUCTURE... THEY ARE CONVERTING FOREX RESERVES IN A HIDDEN MANNER, PREPARING FOR A NEW GOLD CURRENCY STANDARD AND TRADE STANDARD. $$$

Stansberry Research produced a compelling video lecture on China. It is over 30 minutes but excellent. For those not familiar with the countless aspects of the global gold war, this is the video to watch. China will not dump $1.5 trillion in US$-based bonds and buy gold bullion, since doing so would harm their reserves and raise the cost of their gold purchases. China has finally lost faith completely in the USDollar, well publicized in their newspapers. Since 2011, Beijing has accelerated their plan to acquire gold bullion, to acquire gold mine producers, and to establish a gold market structure. They announced plans that advocate a de-Americanized global financial system, a direct challenge on the geopolitical stage. China is preparing for a Gold-backed Yuan currency. The United States backed China into a corner with worthless paper piles in FOREX reserves, and they responded by working on a multi-faceted project to launch a new Gold Standard for currency and trade. China has a whopping $3.7 trillion in total reserves, with $1.3 trillion stuck in USTreasury Bonds. They have opened a New York City office for conducting investments, like AMC Theaters and Smithfield Foods, just the beginning for conversion of paper assets to tangible assets. China is the leading global gold producer at over 400 tons annually, and a major gold importer, mostly through Hong Kong. They are making great progress in cornering the gold market. One hundred years ago, China had a currency backed by Silver, but in the next round it will be backed by Gold. Their purchase of gold and citizen consumption of gold is well known.

The long list of Chinese gold mine firm acquisitions is less known, with targets in South Africa, Africa, Mongolia, Australia, and elsewhere. Their firms on the acquisition trail are China Natl Gold Group Corp (GNGGC) and Zijin, each a giant conglomerate. The total in such deals was $1.96 billion in 2012, but rose to $2.24 billion in 2013. Their contract with Coeur d'Alene for buying gold concentrate could become a model used more widely, with payment done in seven days. The evidence points to China having acquired over 5000 metric tons of gold bullion since 2009 (verified by Jim Rickards), when they last admitted their reserves total. Gold supply in the international market is fast vanishing, the drainage worst in London and Switzerland. The Shanghai Gold Exchange is fast maturing as a gold trading center, with Yuan based futures contracts. They offer a premium to London prices, and encourage an arbitrage.

Global events in the financial arenas are accelerating rapidly. Expect some big news possibly in late April, whose target date has been leaked out. Perhaps the Chinese Govt will announce a path to an internationalized Yuan currency and a Gold-backed Yuan currency. Perhaps they will offer a preview to their staggering Gold reserves at their central bank. See the Stansberry video lecture (CLICK HERE). Also, a well-done short 3-minute video by Mike Maloney exposes the Chinese buying spree in a gradual move to corner the world's entire gold mine supply. See the Hidden Secrets of Money video (CLICK HERE).

◄$$$ CHINESE YUAN HAS BEEN ALLOWED TO FALL, FOR CHEAPER CHINESE EXPORTS, AND FLICK OF USGOVT NOSE... KEEP IN MIND THAT A HIGHER USDOLLAR FROM THE BEIJING PERSPECTIVE MEANS BETTER CONVERSION VALUE ON ASSET PURCHASES... WEAKER YUAN MEANS CHEAPER EXPORTS, WHICH RELIEVES THE STRESS... ONLY NITWITS BELIEVE THAT CHINA IS CRASHING, WHEN THEY POINT TO THE YUAN EXCHANGE RATE... CHINA CAN USE THE CRISIS TO AMPLIFY POPULAR GOLD DEMAND, BUT IN HONG KONG A GROWING PANIC HAS BEGUN IN THE PROPERTY MARKET. $$$


 

 

Nothing is as it seems in the FOREX currency world. Games are played. Banks are rescued. Bonds are redeemed. Attacks are waged. Financial war games are deployed. Count on China having a motive and plan for allowing its Yuan exchange rate to fall as it has. To be sure, the nation has problems but the United States has problems at least 100 times larger. Based upon Exchange Insider activities, it looks like the USDollar is in for a sharp decline over the next 30 days or more. Attention has come to the Specialist Short Sale index. Some big events are underway. The Jackass experience is to expect the USDept Treasury, its Exchange Stabilization Fund, the JPMorgan CIO derivatives, and Wall Street support at the New York Fed to strongarm whatever market they wish, whether the US DX or the USTBonds. See the Engineer by Trade article (CLICK HERE).

The Chinese Yuan decline has had a direct effect in Hong Kong. The stories are widespared about fire sales of Hong Kong property by Chinese investors desperate to raise cash, some slashing their prices by 20% for a quick sale. Its real estate had become a bubble ripe to pop, due to huge mainland influx of funds. A liquidity squeeze in mainland China has already led to the collapse of Zhejiang Xingrun, a real estate investment firm. It is the biggest property failure so far. The Yuan has weakened in recent weeks, in a clear break with the longstanding Chinese policy of slow appreciation. Geoffrey Kendrick, from Morgan Stanley, pointed out that the currency has broken through the 6.20 level, where a cluster of structured products are triggered. The losses on target redemption funds have already hit $3.5 billion.

◄$$$ CHINA WILL PERMIT DIRECT YUAN TO NEW ZEALAND DOLLAR EXCHANGE... BILATERAL TRADE ROSE OVER 25% LAST YEAR. $$$

China now permits direct domestic trading of the Yuan currency against the New Zealand Dollar, as the Chinese currency continues its internationalized path. The central bank announced the policy change during a visit by New Zealand Prime Minister John Key to Beijing. The Chinese Mainland is the largest export destination for New Zealand, in particular its dairy products. Trade between the two countries rose by 25.2% to NZ$18.2 billion (=US$15.71bn) in 2013, along with a significant increase in capital flows. The direct currency exchange will reduce the costs of trade and investment transactions between New Zealand and China. The Beijing leaders strive to gradually relax control over the Yuan and turn it into a global reserve currency, thus reducing any risk from any USDollar instability. See the CNBC article (CLICK HERE).

◄$$$ FAR FEWER CASH BILLS HAVE BEEN PRINTED, WITH EMPHASIS GIVEN TO US$100 BILLS DISTRIBUTED... PERVASIVE ATM MACHINE SHORTAGES ARE EVIDENT FROM NO NEW CASH IN PRODUCTION FOR ATM MACHINE USAGE... IT IS LIKE THE SYSTEM IS PUTTING A SQUEEZE ON RETAIL CASH FOR CIRCULATION, POSSIBLY AS A RESULT OF BROADER BANK INSOLVENCY. $$$

The USDept Treasury has made significant changes in the printing of new cash. They are indeed printing new bills, but the mix has been altered. They printed a stack of the new $100 bills back in September 2013, which were released the following month in October. On internal links, one can see details on printed $100 bills with serial numbers. The new currency from the Sept 2013 batch with new $hundreds might have the Jacob Lew signature. The new trend is clear. The USDept Treasury focus in recent months has been an altered emphasis. They are printing less of the smaller denominations compared to the $hundreds (aka Benjamins) when history is checked back for 30 years. The January 2014 printing report shows the following:

  • $1 Bill = 173 million
  • $10 Bill = 38 million
  • $20 Bill = 173 million
  • $100 Bill = 83.2 million

Something like over 80% of all new money (in value volume) is printed in $hundreds. The change in Federal Reserve Note denomination printing was depicted in an SRS Rocco article back in 2013. Below is a chart on the breakdown in Federal Reserve Note Bill printing, compliments of Rocco. Consider the changes from 1992, 2002, and 2012, with the mix of $hundreds going from 21% to 54% to 84% on the three snapshot years. It would seem absurd to say the the USGovt has changed the mix of new bills printed as a result of debit card usage or online shopping patterns. A squeeze seems obvious. The Jackass believes that the $100 bills are used by the syndicate in private transactions and slush funds (done in cash), but the banks are not sufficiently solvent to support more cash in circulation. Thus the reduced small bill printing. See the USDept Treasury printing report (CLICK HERE).


 

 

◄$$$ THE CHILE PESO FELL SIGNIFICANTLY, AFTER A DEFAULT IN CHINA DID COPPER HARM... WITNESS A NEW DISORDER IN INDUSTRIAL METALS... THE GLOBAL ECONOMY WAS GIVEN A 10% DISCOUNT ON ITS MOST IMPORTANT METAL (BESIDES IRON). $$$

Chile is a powerful industrial metal giant nation. It lies at the heart of the Andes region, the longest mountain range in the world. An event recently occurred. China experienced its first domestic bond default. The Chile Peso depreciated 1.3% to 566.07 per USD on a single day in Santiago, the weakest level since June 2009. It is considered a commodity currency, closely tracking certain metals like copper. The copper price registered its biggest one-day loss since December 2011, falling 4.1 percent. Industrial commodities are in a degree of chaos over a roughly 10% copper price sudden decline. Felipe Alarcon is economist at Banco de Credito & Inversiones in Santiago. He said, "That default in China has created chaos in industrial commodities. It is notable that the Peso has fallen the most in the world even after the inflation data. It has fallen more than the other commodity currencies." Expect the cost structure for Western industries to benefit. The global recession appears to have a potential victim lined up in Chile. The implication is of lower global industrial demand at the same time. See the Bloomberg article (CLICK HERE).

 

 
The Jackass stumbled across an old Economist magazine at a dentist's office. It is outdated at April 2013, but contained some useful background data. One article stood out among its diverse selection. It used to be a prestigious journal, but it has moved into the syndicate fold. The article that caught my attention was about Chile, the copper solution, the dependence of their economy on the copper price. It included a feature on the Escondida mine, the world biggest copper mine responsible for 5% of global supply. In all, Chile produces one third of the world's copper. The entire expansive copper mining business accounts for 20% of the national GDP, and the metal comprises 60% of its export trade. Small shifts in the copper price make headlines in their national newspapers.
 

 

Escondida is a copper mine in the Atacama Desert in the Antofagasta Region of Chile. See the Wikipedia blurb for much technical detail (CLICK HERE). By the way, the word Escondida means Hidden in spanish. The elongated area of the deposit is a cluster with dimensions 18 km going north & south and 3 km going east & west. It is associated with the 600 km long fissure system called Falla Oeste (translated Western Fault). At mid-2007, Escondida had total proven and probable reserves of 34.7 million tons of copper, of which 22.5 million tons is estimated to be recoverable. Total site resources (including reserves) were 57.6 million tons of copper, of which 33.0 million tons should be recovered. Exploration continues with a vast complex operated by the global giant BHP Billiton. The project has 4000 workers on the site, and another 13,000 contractors nearby. The actual location is Escondida is remote, situated 1300 km (=800 miles) north of Santiago, in the middle of a big desert. BHP operates two mine pits there, the bigger one at 3.9 km wide and 650 meters from brim to bottom. The operation is 24/7 around the clock, resulting in 1.5 million tons of raw ore hauled per day, done by trucks as big as houses. In 2012, Escondida produced one million tons of copper. The nearest town is the port of Antofagasta, 170 km (=105 miles) away, where copper plates are loaded onto ships along with some ore. The big Codelco state owned firm has suffered from lack of investment and other burdens like inefficiency. Changes in corporate governance is making Codelco more like a private firm, but the transition is slow.

During the 2000-2005 timespan, the Chile Govt income from all mining averaged $2.1 billion annually. As a result of Chinese industrial expansion and other emerging market growth, the annual mining income zoomed to $11.5 billion during the 2006-2011 timespan. The mines of Chile are dealing with age and depletion. When Escondida began producing in 1991, its yield was 1.4% copper. Now it is right at 1.0% flat, still viable. The mine open pits are deeper today than a decade ago. The trucks haul ore from deeper tracks, using more fuel and taking more time, adding to cost. The poorer ore grades require more crushers as part of the concentrator steps. Energy is costly to Chile-based mining firms. The nation has few domestic energy supplies outside the hydro-electric plants. Its green movement is described as muscular. BHP attempts to accommodate the politicos by using desalinated water pumped from nearby sources, instead of draining the local water tables. All these measures add to cost. See the imperfect graphic of Chile GDP growth versus Copper price per lb, made by my smartphone, which shows the correlation. (passable for a non-Fotoshop)

 

 

The biggest recognized threat to the Chile Economy and its mining business is China, which is responsible for buying 40% of the world's copper. Emerging markets of the world, led by China, are consuming copper that goes into cars, homes, bridges, and electronics. The chronic global recession has caused a decline in demand and price. Copper deposits are rare. The other rich sites of Zambia and Congo cannot compare with the stability exhibited in Chile.

◄$$$ PANAMA SEEKS $1 BILLION FROM VENEZUELA OVER TRADE ZONE VIOLATIONS... THE GREAT VENEZUELAN OIL BUST IS A PUBLIC SPECTACLE IN THE POST-CHAVEZ ERA... THE NATIONAL OIL FIRM MIGHT ENTER FAILURE MODE, WHICH WOULD ACTUALLY MARK PROGRESS... VENEZUELA RECEIVED MORE THAN $7 BILLION IN COMMERCIAL INVESTMENT AID FROM FROM CHINA AND RUSSIA, THE NATION HAVING BEEN CONVERTED TO AN EASTERN COLONY... THE ENCIRCLEMENT OF THE UNITED STATES IN ITS OWN HEMISPHERE IS ADVANCED. $$$

Venezuelan companies have failed pay the nation of Panama for participation in the Free Trade Zone following partial devaluations of the Venezuelan Bolivar. On March 5th, the embattled Venezuelan President Nicolas Maduro broke off diplomatic and commercial relations with Panama, while making wild accusations that they stoked foreign intervention. Maduro accused Panama of charging a 20% markup to Venezuelan companies. Currency devaluation is a bitch. Some background. The Colon Free Trade Zone (CFZ) is the largest free zone in the Americas and the second largest in the world. Created in 1948, the free zone contains 1751 merchants. Its nations receive more than 250,000 visitors annually from all parts of the World. The CFZ generated trade valued at more than US$11.4 billion in 2010. See the Business Panama article (CLICK HERE).

The recent oil sector target was announced by Venezuelan oil minister Rafael Ramirez. It featured a goofy ambitious new target of six million barrels per day by 2019, but the reality is chronic failure and public criticism in disbelief of propaganda. The last five-year plan had a goal of 5.8 million barrels per day by 2012, only to finish that year at just 2.9 million. The trend is down, after Chavez gutted the PDVSA national oil company, filling its staff with ignorant corrupt cronies. The national output was 3.2 million barrels per day back in 2005. Speculation swirls about how long Petroleos de Venezuela SA can carry on, crippled by failure and corruption, made worse by chaos within the Caracas government. Senior managers remain mostly political appointees. Rumors are circulating about accidents, breakdowns, and critical shortages of even the most basic supplies needed to run their oil business. A failure of the state owned oil firm would be tremendous news, a forced restructure to come. The corrupt ignoramuses would be dismissed from important posts all at once. See the Globe & Mail article (CLICK HERE).

Venezuela agreed to more than $7 billion of financing from China, Russia, and France. The investment comes from major energy companies, to be devoted toward infrastructure and oil project development. Oil output will not go to the USEconomy. China has agreed to lend Venezuela $5 billion, the third tranche from their China-Venezuela Fund (discussed in recent Hat Trick Letter reports). The funds will mostly be used to finance large infrastructure projects, provided the corrupt officials do not skim significant portions off it. The embattled nation seeks external financing as it combats shortages of goods and medicines. The economy is enduring 56% price inflation, despite national resource riches, a tribute to the Chavez Era of corruption, cronyism, mismanagement, excessive subsidies, and colossal waste. He called it socialism, when it was more like kleptocracy. China has emerged as a strategic source of financing, lending the OPEC-member more than $40 billion since 2008, apart from the most recent funding deal. Furthermore, Venezuela also signed a memorandum of understanding with the Russian energy giant Rosneft, toward $2 billion in financing for oil projects in Venezuela. The funds were approved directly by Russian President Vladimir Putin, in the great encirclement initiative. The United States will lose both Mexico and Venezuela to the Eastern Alliance. See the Bloomberg article (CLICK HERE).

◄$$$ PUTIN QUIETLY IS MAKING A LATIN AMERICAN PLAY WITH BASES TO ENCIRCLE THE UNITED STATES... VENEZUELAN OIL MIGHT BE THE PRIZE. $$$

The Russian defense minister announced plans to construct bases in Cuba, Venezuela, and Nicaragua. In response to Ukraine, the national security team working under President Putin met to discuss increasing military ties in the Central American region. Senator Joe Donnelly from Indiana commented at a Senate hearing, "They [Russians] are on the march. They are working the scenes where we cannot work. And they are doing a pretty good job." Got that right! It looks like Russia wants to give the United States a taste of military encirclement, like seen in Eastern Europe. The USGovt has no compunction to violate NATO treaties that help to surround Russia, if such a feat is possible, given its breadth. One must wonder if such potential bases will be traded off against US objections to Russian expansion in Eastern Europe. Perhaps, the bases will simply enforce the crude oil flow from Venezuela away from the United States, the blockade done in Cuba and Nicaragua. See The Hill article (CLICK HERE). The Jackass experience leads to conclude the USGovt is too focused on narcotics in Central America to notice the Russian naval presence.

## USTREASURYS LEVITATED & THREATENED

◄$$$ FOREIGNERS ARE CALLING THEIR USTREASURY BONDS HOME, AWAY FROM USFED CUSTODY... THE POTENTIAL FREEZE IS AN OBVIOUS THREAT... THEY PROBABLY WISH TO DUMP THEM IN HIDDEN FASHION, USING WELL CLOAKED INTERMEDIARIES, SO AS TO AVOID BOTH THE ATTENTION AND THE RISK RETALIATION... DISTRUST OF THE USGOVT IS ACUTE IF NOT VIRAL. $$$

Official USTreasury bond holdings kept at the Federal Reserve dropped by the most on record in a recent March week. Clearly the crisis in Ukraine, and deep distrust of the sanctions rampage is sparking the move. It appears that Russian entities, both the government and financial, are shifting all manner of USTBond holdings out of the USFed and into safer locations like offshore accounts. The Russians can regain the control to buy or sell from portfolios, in the event of the USGovt imposes economic sanctions joined by its European allies. USTreasury securities held in custody for foreign official and international accounts tumbled by $105 billion in the week that ended March 12th, according to USGovt data. The total USTBonds held in custody by foreign central banks fell to a 15-month low of $2.855 trillion, still not much below the record high of $3.02 trillion set in December. It is all part of the continuing theme of US isolation. Keep in mind this data is current, taken from the USFed's foreign custodial account data, not the delayed TIC Report.

 

 

Political and financial forces are at work. The US allies will gradually isolate the United States on the geopolitical stage, while the financial sector reacts to developments and brings further isolation. The motive and plan appears to be plainly clear. Financially experienced hands have hinted that nations are removing them from USFed custody, the roof no longer trusted. Then these parties can sell the bonds in hidden fashion using intermediaries, shell corporations, other slush funds and other third parties, even deeply hidden devices, in order to avoid retaliation. The isolation of the US will be accompanied by its slide or tumble into the Third World.

◄$$$ BELGIUM CONTINUES TO INCREASE ITS OFFICIAL USTREASURY HOLDINGS, NOW THE THIRD LARGEST FOREIGN HOLDER OF USGOVT DEBT... CLEARLY THE HIDDEN QE VOLUME IS DONE BY THE EUROPEAN CENTRAL BANK IN BLATANT FASHION TO MAKE LIARS OF THE USFED TAPERING. $$$

The disturbing new trend continues, easily revealed. As of January, the USGovt has a brand new third largest holder of USTreasury Bonds. It is tiny Belgium, with wrecked economy, deficits galore, and no surpluses anywhere in sight. In the past two months, Belgium has added over $100 billion in USTreasurys, bringing its total from $201bn in November, to $257bn in December, and an impressive $310bn at end January. The USFed is in obvious cahoots with the Euro Central Bank to conceal much greater QE bond monetization volume, and probably active currency management. Worse, Tyler Durden cited from his effective soapbox the glaring confirmation that all TIC data is made up on the fly, without any real backing, and merely goal-seeked like much of the other economic data. The old TIC bond data and updated TIC bond data were so far apart across the board as to expose the extensive fudging exercise, hardly intelligent estimates. They did not even qualify as guestimates. See the Zero Hedge article (CLICK HERE).

◄$$$ USTREASURY BOND EXPLOSIONS WENT OFF IN LOWER MANHATTAN... BOND YIELDS FELL ON A CONVENIENT RALLY, AGAINST A WEAKER USDOLLAR... SOME HIDDEN CROSS CURRENTS MIGHT BE AT WORK WITH CHINA AND THE EURO, OR RUSSIA AND ITS RUBLE DEFENSE... EXPECT THE USFED TO MOP OVER THE EASTERN DUMPS AND TALK ABOUT A US-BASED RECESSION TO COVER ITS ACTIONS. $$$

The American Weapon of Mass Destruction went off in Lower Manhattan last week, as foreigners discharged a record amount, over $100 billion of USTreasurys. Either they sold the bonds or moved them to safer locations, where sale would not be easily detected or traced. Despite the $100 billion removal from the USFed ledgers, the last accounting in mid-March, a rally took place. Hardly a strong rally, but surely no selloff in the pristine flagship toxic bond for USGovt debt (in)securities. Enter the USFed with its hidden channels of bond monetization to soak up the excess toxic sludge on the bond room floors. Enter the JPMorgan Chief Investment Office to join the effort. They probably received ample assistance from the British, working shoulder to shoulder, mops in hand. Enter the interest rate swap derivative device, which creates a mountain of artificial demand, enough even to create a fictional rally in late 2010. The derivative prevents the alarm from going off and awakening the sovereign bond markets, the financial markets in general, or even the US citizenry sheeple. Expect the USFed and the USGovt mouthpieces to cite a weaker USEconomy, offering a modicum of cloud cover for the foreign abandonment.

A month ago the TIC data dispensed by the USDept Treasury indicated that China had dumped the second largest amount of USTreasury Bonds in history. The TIC data is not current, often lagged by a couple months or more. A much more accurate reliable indicator of foreigner bond movements is the less known data series called Treasury Securities Held in Custody for Foreign Official & Intl Accounts. Its data is updated by the USFed on a weekly basis. For the week ended March 12th, the total USTreasurys held in custody by the USFed dropped by $104.5 billion to reach a still high $2.855 trillion. It the grandest drop (dump) of USTreasurys held by the USFed in history. The current level equals that of December 2012. During these 15 months, the USFed has monetized well over $1 trillion in USGovt toxic debt. So in one week, they handled 10% of volume handled in over a full year. The conclusion is clear, obvious, and indisputable. Russia has been joined by other nations in the bond dump exercise, and monetary inflation machinery is working in overdrive and overtime. Its recent account showed only $138.6 billion in US debt owned, based on December data. The country has been a net seller for a combined $11.3bn of USTBonds over the last two months for when data is available. Notice the falling TNX bond yield during the massive dump (bond rally) in contradiction to flows. It was quickly reversed.

 

 
Bond professionals at Stone McCarthy remarked, "One thing that is striking about the drop is that the last several days was not a period of heavy market buzz about central bank selling of Treasuries, at least to the best of our knowledge. China and Japan are by far the largest holders of Treasuries, with $1.269 trillion and $1.183 trillion in holdings at the end of December, respectively. China's holdings are more skewed to central bank holdings. Selling of Treasuries would appear to be at odds with China's recent effort to depreciate its currency, although on March 5th and 6th there was a brief correction in that trend." So scratch China and Japan. It could very well be that 30 other nations joined Russia in the bond dump, friend and foe alike, enemy and ally, all worried about a reckless aggressive nation on war footing. The victim will be the big debtor nation, the United States. Notice the falling US DX index during the massive dump (bond rally) in accordance with flows. It was quickly reversed, actually faster than the bond.
 

 

◄$$$ CROSS FOREX ACTIVITY INDICATES CHINA MIGHT BE MOVING FUNDS FROM USD TO EURO... THE HIGHER EURO EXCHANGE RATE COULD AID IN GREATER IMPORT POWER FOR CHINA, AND EXPLAIN THE LOWER YUAN EXCHANGE RATE... RUSSIA MIGHT BE USING THE EURO AS A WAITING ROOM FOR VAST TRANSFERS, LATER TO FIND THE HOME RUBLE... BE ON THE LOOKOUT FOR THE PETRO-YUAN INTRODUCTION, WHICH WOULD BE INTEGRATED WITH RUSSIAN CRUDE OIL... THE DYNAMIC DUO CHINA & RUSSIA MIGHT BE PLAYING THE UNITED STATES AND EUROZONE IN A GRAND MANEUVER, A PINCER. $$$

Some more data. The Wednesday-to-Wednesday decline was much larger than the weekly average $46.6 billion decline in USTreasury holdings. The weekly data tends to explain the limp behavior of the US DX index. The Euro kept a strong bid all week, even touching a high of 1.3967 before easing back after some open mouth commentary from Prince Draghi. The poor folks at the Euro Central Bank are struggling to prevent the rising EUR exchange rate, as its debt and equity securities are all the rage. The activity underlines the difficulties the EuroCB is encountering to stop the strong EUR from reducing inflation expectations in the EuroZone. The whopping $104.5 billion decline in the week to Wednesday March 12th marks the biggest single weekly fall on record and compares with just a $13.5bn drop the previous week. The four-week average decline has been a mere $1.5bn. The selling over the last week coincides with the latest US employment statistics, a run of weak data from China and the escalation of the situation in Crimea and Ukraine. Conclude that China dumped USTBonds to buy Euros, thus making the European import power stronger with a relatively weaker Yuan.

One more consideration. Possibly conclude that Russia dumped USTBonds to support the Ruble, which Wall Street and London have attacked. The Ruble lacks liquidity, which means the Russian central bank might be using the Euro as a temporary waiting room. If a more complex scheme is in progress to introduce Russian crude oil into the FOREX equation, it will come out in time. A Petro-Yuan Standard would require the crude oil from Mother Russia. A coordination might be in progress between Russia & China, with far more inherent complexity than is apparent. The last item: conclude all nations of the world were dumping just because the USGovt debt paper is toxic rancid, even coyote ugly. See the Zero Hedge article (CLICK HERE).

The fire sale of USTreasurys is a warning of acute stress across the world. The other side of the USTBond, the coin of the realm, is rotten. A broad array of nations might be selling, with the threat of war rattling nerves. The latest financial bond movements go beyond Russia, as they reek of stress in the international system. The Russian central bank is clearly under siege, in defense of the Ruble currency. The Russian corporations and citizens are moving money out of the Western banks at breakneck speed, in an attempt to stay in front of any potential USGovt sanctions that would freeze accounts. David Bloom is currency chief at HSBC in London. He said "Countries are intervening all over the place to defend their currencies, which means they are tightening. Their central banks built up huge war chests of reserves for a rainy day, and now it is raining." A little known fact during this global squabble. Ukraine agreed to give up its nuclear weapons in 1994, at the time the world's third biggest arsenal. They did so in exchange for a guarantee by the superpowers for its territorial integrity. Russia was one of the signatories. It is being blamed by the West for the violation, even though the US-led faction committed the violation. See the UK Telegraph article (CLICK HERE), which is a little biased silly. It cites the full hammer of the G-7 is about to fall on Putin. The G-20 Meeting has overshadowed the obsolete G-7 Meeting to such a point that the G-7 does not even meet anymore.

◄$$$ THE US-HOUSE APPROVED A HIGHER USGOVT DEBT LIMIT WITHOUT CONDITIONS... THE THREATS HAVE GONE AWAY, BUT NOTHING HAS BEEN RESOLVED. $$$

Ending three years of brinkmanship, the House of Representatives in February voted in favor (221 to 201) to raise the USGovt borrowing limit until March 2015. They corrupt divided body did so without any conditions attached. No concessions were made. No great spending cuts were made. No tax or entitlement cuts were made. No progress or reform was made. No reduced warmongering was agreed upon. By holding the vote, Speaker Boehner of Ohio effectively ended a three-year showdown largely inspired by Tea Party supporters. The threat of debt default has lifted. The threat of federal office shutdown has lifted. The threat of shattered economic confidence has lifted. The threat of perceived inability for the USGovt to govern has lifted. The showcase of deep partisan divisions has lifted. The USCongress increased the debt limit, but they resolved nothing. This is a Third World nation busily in movement, but going nowhere, just digging a hole. See the New York Times article (CLICK HERE).

◄$$$ DAVID STOCKMAN GAVE A STERN WARNING OF ECONOMIC CALAMITY AMIDST THE CACOPHONY OF USFED CONFUSION... HE DESCRIBED HOW THE USFED HAS BECOME TRAPPED IN A POLICY NIGHTMARE WITH NO EXIT (JACKASS VIEWPOINT SINCE 2006, REITERATED IN 2009)... THE MONETARY POLICY IS BROKEN BUT STUCK IN PLACE... THE KEYNESIAN ENDGAME IS CLEAR, AN UGLY INTRACTABLE FAILURE WITH A DEBT EXCESS THAT CANNOT BE WASHED AWAY OR REMOVED WITHOUT A MAJOR HISTORICAL DEFAULT EVENT... NEITHER THE USFED NOR THE USGOVT CAN ESCAPE OR DEPART FROM THE ZERO PERCENT CORNER, AS SYSTEMIC FAILURE LIES AHEAD. $$$

As former Budget Director in the Reagan Admin, David Stockman has become along with Paul Craig Roberts lone voices of dissent. While Roberts warns steadily about the folly of aggresive war as a foreign policy, Stockman warns steadily about the folly of heretical monetary policy to cover the gaping intractable holes. The author of "The Great Deformation" has been bold in describing the wrongful position of the entire USEconomic system. He held nothing back in this brief 3-minute primer on how everything is wrong with the American economic system (and the CNBC anchors definitely did not want to hear). He summarized accurately the trapped, lost, and reckless position the USFed finds itself in. He wrote, "We never should have painted ourselves so deep in this QE corner in the first place, because the whole predicate [of Fed policy] is false. We are already at peak debt and forcing more into the economy did not work. The private credit channel of monetary transmission is busted." The USFed had no choice after a string of enormous errors under the Greenspan Fed. One error followed another out of great expedience. Stockman offered yet another stern warning that the current bond monetization path will not work to restore the health and balance. The lunatic QE merely funds Wall Street's latest carry trade to nowhere, while it encourages fiscal irresponsibility in WashingtonDC. See the Zero Hedge article (CLICK HERE) which includes the CNBC interview.

Harken back to Stockman's summary of the Keynesian Endgame, complete with folly, excess, heresy, desperation, absent reform, gross imbalances, banker chokehold, with the hijacking and distortion of doctrine to embark on erroneous pathways which have produced a systemic failure. Expect no solution. The man is full of wisdom and insight. A year ago he outlined the wrong policy and errant path very capably and thoroughly. Some main points follow. The precarious plight of the Main Street consumer has been obfuscated by the manner in which the state's unprecedented fiscal and monetary medications have distorted the incoming data and economic narrative. These distortions implicate all rungs of the economic ladder, but are especially egregious with respect to the prosperous classes. The economic morass was born of the Greenspan Fed, the main architect of asset bubbles. This current cycle is very different, and screams of an economic system caught in a downward spiral, heading to systemic failure. Monetary policy is the opposite of stimulative. The performance of bellwether Wal-Mart is the best indicator of the terminal decline. Their inventory methods will reveal the broken economy very soon, with empty shelves. The popular commoner retail chain sales are down by 3% on an inflation adjusted basis in the last five years since the Lehman-Fannie-AIG crash, which is very generous on the CPI handling. Reality imposed by Jackass calculations would make the decline more like 10% to 15%. Contrast to the high end retail chain sales in the same five year period, which are up by 30% on an adjusted basis. Any hint of recovery must come from the Main Street masses, but instead policy favors the elite through subsidies to the prosperous classes. Class warfare is stoked.

In March 2013, Stockman summarized the heretical folly of destructive monetary policy, on the Keynesian endgame. It applies even more today, since the view was correct, and the blemishes all the more visible, the monetary truck stuck in muck. "Accordingly, the central banking branch of the state remains hostage to Wall Street speculators who threaten a hissy fit sell-off unless they are juiced again and again. Monetary policy has thus become an engine of reverse Robin Hood redistribution. It flails about implementing quasi-Keynesian demand–pumping theories that punish Main Street savers, workers, and businessmen while creating endless opportunities, as shown below, for speculative gain in the Wall Street casino. At the same time, Keynesian economists of both parties urged prompt fiscal action, and the elected politicians obligingly piled on with budget busting tax cuts and spending initiatives. The United States thus became fiscally ungovernable. Washington has been afraid to disturb a purported economic recovery that is not real or sustainable, and therefore has continued to borrow and spend to keep the macroeconomic prints [official data] inching upward. In the long run this will bury the nation in debt, but in the near term it has been sufficient to keep the stock averages rising and the harvest of speculative winnings flowing to the top one percent. The breakdown of sound money has now finally generated a cruel endgame. The fiscal and central banking branches of the state have endlessly bludgeoned the free market, eviscerating its capacity to generate wealth and growth.

This growing economic failure, in turn, generates political demands for state action to stimulate recovery and jobs. But the machinery of the state has been hijacked by the various Keynesian doctrines of demand stimulus, tax cutting, and money printing. These are all variations of buy now and pay later, a dangerous maneuver when the state has run out of balance sheet runway in both its fiscal and monetary branches. Nevertheless, these futile stimulus actions are demanded and promoted by the crony capitalist lobbies which slipstream on whatever dispensations as can be mustered. At the end of the day, the state labors mightily, yet only produces recovery for the one percent." His highly critical harangue is one of the best dissenting opinions to be found anywhere. See the year-old Zero Hedge article (CLICK HERE). Colleague George from Chicago was heard from the COMEX corner, as he offered a quick reaction to the Stockman perspective. He said, "His powerful on-point analysis describes well what has and is occurring, and what it has reaped. It is unclear why CNBC continues to invite him back. His point becomes more clear, more strident, and more accurate each month."

For contrast, an essay by Kira Brecht expounds upon the intractable position for the USGovt ever to repay its debt. The interest rate dilemma is real and acute. The rates cannot return to normal, since doing so would wreck the USGovt budget by raising the borrowing costs. Not only is the USFed trapped in a low rate corner, but the USGovt is also trapped in the same corner. The challenge means there is no way ever to pay off the federal debt. See the on Kitco article (CLICK HERE).

## GOLD ACQUISITIONS, SMUGGLING & REMEDY

◄$$$ CHINA IMPORTED A RECORD $70 BILLION IN PHYSICAL GOLD WITHOUT SENDING THE PRICE OF GOLD SOARING... THE CHINA COMMODITY FUNDING DEALS ARE IMPORTANT FOR AN ASSORTMENT OF COMMODITIES IN ACQUISITION... CHINA USES THE FABRICATED PRODUCT FLOW, THE OUTSIZED OPEN INTEREST IN COMEX CONTRACTS, AND THE INTEREST RATE DIFFERENTIALS TO COVER THE CASH FLOW... AS A RESULT, THEY KEEP FROM AFFECTING THE GOLD PRICE. $$$

China uses complex financial devices. Their commodity purchases are structured in financing deals that include gold, copper, iron ore, and to a lesser extent nickel, zinc, aluminum, soybean, palm oil, and rubber. Chinese gold financing deals are processed in a different way compared with copper financing deals. However, both types are intended at facilitating low cost foreign capital inflow to China. Specifically, gold financing deals involve the physical import of gold, offset by export of gold semi-fabricated products to bring the foreign currency flow into China. Consequently, their trade data does not truly reflect the vast Chinese gold financing deals. In contrast, Chinese copper financing deals do not need to physically move the physical copper. It is not shown in trade data published by China customs.

In detail, Chinese gold financing deals includes four steps:

1) Onshore gold manufacturers pay Letters of Credit to offshore subsidiaries and import gold from bonded warehouses or from Hong Kong to mainland China, which inflate import numbers.

2) Offshore subsidiaries borrow USD from offshore banks via collaterizing Letters of Credit they received.

3) Onshore manufacturers get paid by USD from offshore subsidiaries and export the gold semi-fabricated products to bonded warehouses, which inflate export numbers.

4) Repeat step #1 to #3.

Through the structured financing deals, the positive interest rate differential between China and other nations turns commodities such as copper from negative carry assets to positive carry assets. This means holding copper incurs storage cost and financing cost. Conversely, the interest rate differential revenue exceeds the storage cost and financing cost. This change in the net cost of carry affects the spreads, placing upward pressure on the physical price, and downward pressure on the futures price, all else equal. As result, the physical future price differentials are made higher than they otherwise would be. Back to the main issue. China imported a mindboggling 1400 tons of physical gold, amounting to roughly $70 billion. Such extraordinary demand under normal conditions would send the equilibrium price soaring. Yet the price in fact dropped. The answer is simple, found in the gold paper market.

Goldman Sachs offered a fine explanation, and probably helped China to set up the methodology 10 to 15 years ago, possibly during the time the Most Favored Nation status was negotiated and granted. They wrote, "From a commodity market perspective, financing deals create excess physical demand and tighten the physical markets, using part of the profits from the CNY/USD interest rate differential to pay to hold the physical commodity. While commodity financing deals are usually neutral in terms of their commodity position, owing to an offsetting commodity futures hedge, the impact of the purchasing of the physical commodity on the physical market is likely to be larger than the impact of the selling of the commodity futures on the futures market. This reflects the fact that physical inventory is much smaller than the open interest in the futures market. As well as placing upward pressure on the physical price, Chinese commodity financing deals tighten the spread between the physical commodity price and the futures price." See the deep Anirudh Sethi Report (CLICK HERE). Hence the Chinese will pressure the USFed and USGovt not to permit short-term interest rates to rise, since the differential greases the Chinese gold acquisition scheme.

A quick final comment. The Jackass suspects that since the Quantitative Easing programs were begun in 2011, China has not caused a big ruckus for the huge monetary debasement of their multi-$trillion USTBond reserves. China hired Wall Street firms to help keep the gold price down, or worked with them in the same direction with some naked contract shorting procedures, most likely both. Also, the Great London Drain has an element of gun to head. It is entirely likely that JPMorgan was buying gold bullion for China. At the same time that JPM stopped delivery on gold futures contracts in New York, they were probably sending the gold bars to Hong Kong and Shanghai in Brinks shipments. Also, JPM facilitated in huge amounts of GLD Fund inventory being shipped to China. The Chinese property conglomerate acquired the JPMorgan headquarter complex in South Manhattan during this entire long episode. A partnership has been at work, and it stinks. The Voice confirmed that the above viewpoint in comment is essentially correct, and that the gold bullion acquired by JPMorgan is almost all located in Hong Kong and Shanghai.

◄$$$ CHINA IS TO ACQUIRE THE CONGO COPPER MINE INTEREST OWNED BY IVANHOE... THE CHINESE PURSUIT OF AFRICA IS VORACIOUS... AFRICA IS AN UTTERLY HUGE CONTINENT IN LAND MASS, RICH IN MINERALS, KEPT IN CHAOS FOR EXPLOIT. $$$

China National Gold Group Corp is in talks with Ivanhoe Mines toward acquiring a stake in a Democratic Republic of Congo copper project. It is Robert Friedland's company, whom the Jackass met once in Munich Germany. CNGGC is the giant mining conglomerate on the global warpath, which seeks to obtain a 15% stake in Ivanhoe's Kamoa project. The firm Ivanhoe is also pitching for China to make an investment stake in the entire firm. The Kamoa mine had a net present value of about $2.5 billion, according to Ivanhoe's accounting. The biggest global mining companies are selling their higher cost projects and writing down asset values after the lower gold prices have slammed profitability and rendered many properties as idle projects or outright losing operations. Other Chinese companies are also in talks with Ivanhoe for picking up a stake. The firm wishes to add one or more strategic partners to help finance the development of the Kamoa copper project. The Kamoa project is located about 270 kilometers (=168 miles) west of the provincial capital of Lubumbashi. It is 95% owned by Ivanhoe, with the Congo Govt owning the rest. The mine is estimated to cost about $1.4 billion to build and could produce 300,000 tons a year of copper. It holds an indicated resource of 43.5 billion pounds of copper, according to Ivanhoe. The mining firm also owns the Kipushi zinc and copper project in the Congo and the Platreef platinum and copper project in South Africa. See the Bloomberg article (CLICK HERE). Africa is truly huge. Its land mass could contain several very large nations of the world like the United States, China, and India, plus all Western Europe. The size of Congo alone equals almost that of the entire Western Europe.

 

 
 

◄$$$ TAIWAN WILL ALLOW BANKS TO SELL GOLD & SILVER COINS FROM CHINA, AS TRADE & FINANCIAL TIES EXPAND. $$$

Taiwan will allow local banks to sell gold and sliver coins delivered from China, the policy change announced by the island nation's Financial Supervisory Commission. The move comes amidst improved deepening bilateral relations. Trade and financial ties between Taiwan and China have gathered momentum since Taiwanese President Ma Ying-jeou took office in 2008. A slew of trade pacts have been signed since his arrival. See the very brief Reuters article (CLICK HERE).

◄$$$ THE INDIAN CURRENT ACCOUNT GAP NARROWED TO A FOUR-YEAR LOW ON GOLD TRADE IMPACT... THE RESERVE BANK OF INDIA'S FOREIGN EXCHANGE RESERVES FELL BY 15% IN GOLD... INDIA WILL PERMIT MORE BANKS TO IMPORT GOLD AS IT EASES THE RULES ON GOLD CURBS. $$$

The official Indian Current Account Deficit narrowed to a four-year low as gold imports reduced significantly. The Rupee currency is seeing some reprieve, having recovered in recent months. The CADeficit was $4.2 billion in October through December, compared with $5.2bn for the third quarter. The shortfall was equivalent to 0.9% of gross domestic product. The current account is the broadest measure of trade, which tracks goods and services in addition to investments (like property, businesses, debt securities). The Indian Govt increased taxes on gold imports three times last year, in an attempt to reduce the trade imbalance. India is the world's second biggest gold consumer. The great tilt had pulled down the Rupee exchange rate and caused domestic price inflation. The currency has gained about 11% since reaching a record low on August 28th. Dharmakirti Joshi is chief economist with Crisil Ltd in Mumbai. He said, "It [CADeficit] has come down for all the wrong reasons. If the economy picks up, imports will rise and you will see the current account deficit go up again." He believes the government should begin the process of phasing out restrictions on gold imports. The policy is rendering great harm to the domestic economy and disrupting its traditional jewelry industry. See the Bloomberg article (CLICK HERE). The Jackass maintains that India needs to develop a gold mine industry off the Himalayan foothills, which would alleviate imports. It has capital, labor, and engineering, in addition to the mineral resources.

The Reserve Bank of India (central bank) saw its foreign exchange reserves in gold fall by a significant 15% in value between March and September last year. Investors are not alone on the losing end. Gold accounted for about 8% of the total FOREX reserves in value terms at a recent data flash. The value of precious metals with RBI was $21.765 billion at the end of September last year, down from $25.692 billion in March last year. The RBI claims reserves of 557.8 tonnes in gold, of which 265.5 tons are held abroad with the Bank of England (the invisible bar type) and the Bank for Intl Settlements. About 63% of the central bank's total foreign currency assets of $248.8 billion were invested in securities at the end of September 2013. Another 35% was deposited outside the country. The remaining balance 2% was with foreign commercial banks and funds placed with external asset managers. See the Economic Times article (CLICK HERE).

India has permitted five domestic private sector banks to import gold, as it finally begins significant steps towards easing the tough curbs on gold imports. The policy has been a real disaster, even though it has cut the country's trade deficit. It is mere medieval bloodletting to appease the Western bankers. The move could boost gold supplies and bring down premiums for the metal in the world's second biggest consumer nation after China. The Reserve Bank of India has allowed gold imports by HDFC Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank, and Yes Bank, in an leaked statement. India has enforced the so-called 80/20 rule since July, making it mandatory to export a fifth of all gold imports. In the past, the open trade was done mostly state-run lenders. The RBI has now permitted gold imports within prescribed limits by the private banks on a wider basis. The industrial experts expect gold shipments to rise near 40 tons per month from the 20 ton level seen in February. India used to ship in as much 70 tons per month, which along with crude oil had pushed the Current Account Deficit to a record high in the year ended March 2013. As a result of policy changes, supplies will be more steady and prices premiums should come down. The unpopular 80/20 rule is to be slowly phased out. See the Reuters India article (CLICK HERE).

◄$$$ GOLD SMUGGLING HAS EXPLODED IN INDIA, INCLUDING CREATIVE METHODS... IT HAS ANCIENT ROOTS IN DEFIANCE OF OFFICIAL RULES... GOLD IS SMUGGLED BY MULES, AIRLINE PASSENGERS, ARTISAN CRATES, AND FLOWER POTS, IN DEFIANCE OF IMPORT LIMITS... INDIA'S GOLD JEWELRY EXPORTS ROSE FOR THE FIRST TIME THIS FISCAL YEAR, SEEN IN THE FEBRUARY DATA... THE EXPORT ROSE BY 1.04% TO BEGIN A POSSIBLE RECOVERY WHICH WILL AFFECT FAVORABLY THE LABOR MARKET. $$$

Returning home to the southern Indian state of Kerala from Dubai last month, the welder Mohammed Ahmed Jaffer was arrested after customs agents discovered gold in the lining of his brass flower pot. Jaffer allegedly was offered 30,000 Rupees (=US$490) from a comrade who wanted to bring in 1-kg of bullion valued at about $50,000 without paying the 10% customs tax. Such is the struggle and the methods used. The stories are commonplace across India, and include mule teams crossing the border, the popular airline passengers coming from Dubai, diverse artisan crates, and even flower pots. Ceramics and art works are popular methods, encased in the works like with porcelain or wax. The Arabs often use coffee and honey. The Indian Govt raised duties on gold three times in year 2013. The estimated illegal imports almost doubled to about 200 metric tons, the World Gold Council estimates. My EuroRaj savvy contact claims the smuggling is double that figure, more like 300 to 400 tons annually. While Prime Minister Manmohan Singh has made strange policy to increase gold tax levies, the intended repair to the national record setting Current Account Deficit has been fostering the black market for diverse intense smuggling. The value of illegally imported gold in 2013 totaled about $9 billion, which should be doubled to $18bn when entering reality. See the Bloomberg article (CLICK HERE).

Ten Afghan nationals were arrested at Indira Gandhi Intl airport in New Delhi on March 18th, as they allegedly tried to smuggle in 38 kilograms of gold worth US$1 million. It was the first case involving recruitment of Afghan nationals. Several cases of Afghan nationals trying to smuggle gold into the country have been reported in the last 15 days. The gold seizures are surging. See the MineWeb article (CLICK HERE). For further information on standard and unconventional smuggling techniques across the Indian border, some as amusing as entertaining, see the Economic Times article (CLICK HERE).

India's export of gold jewelry rose by 1.04% in February. It is the first increase in a sequential month since the many official restrictions went into place, the first rise in fiscal 2013-14. According to figures from the Gem & Jewellery Export Promotion Council (GJEPC), cumulative gold jewelry exports from April 2013 to February 2014 fell 45.6%to $6.352 billion. So the full year is still showing decline. Exports of gold products have suffered badly in the last year, disrupting an important economic sector and affecting the labor market. With the prospect of relaxed restrictions, expect the exports to pick up gradually. See The Hindu article (CLICK HERE).

◄$$$ THE OFFICIAL GOLD MARKET WILL OPEN IN SOUTH KOREA... THE OUTWARDLY STATED MOTIVE IS TO BRING THE UNDERGROUND MARKET INTO THE FORE FOR MONITOR AND TAX PURPOSES. $$$

The openly stated goal is that gold transactions on an official market will pull the vast underground economy into the open. The Korea Securities Depository (KSD) will soon facilitate in open sales of gold products, currently an organization that stores gold for the gold market. The standard item is 1-kg gold bars with 99.99% purity, bearing the seal of the Korean Mint. The bars had been produced by a Korean metal refinery. The KSD announced that once the gold commodities market takes off, it is expecting to handle an average of 4 to 7 tons each day, equal to 4000 to 7000 gold bars. The general public is now able to trade in gold on the market, just like with stocks, by means of the KRX gold market. It is scheduled to open on March 24th. The market enables ordinary investors to buy and sell gold through accounts with securities companies or futures trading companies. The SKorean Govt wishes to set up a gold market, where sales of the precious metal are more transparent. Trade executions will soon take place at an official exchange (transactions, not firing squads). In the past, transactions in gold took place off the exchange and were not recorded. The underground market has been popular for the widespread tax evasion. The opening of the gold exchange is connected with the current administration's policy of bringing the underground economy into the light. See the English Hankyoreh article (CLICK HERE).

 

 
 

◄$$$ MORE INDUSTRIAL SUPPLIES ARE SPOTTED IN EXPORT, WITH A HUGE JUMP UP OVER DOUBLE THE PREVIOUS MONTH... LIKELY THE USGOVT IS MAKING RESTITUTION FOR PAST FAKE GOLD BARS SENT TO HONG KONG... THE DATA IS HIDDEN IN CENSUS REPORTS, WHICH ARRIVE EVERY MONTH IN A RECOGNIZED PATTERN. $$$

The March 7th FT900 report is out, which contains some gems buried deeply in Census Report. Check on page 7 and Exhibit 7 for the list of exports under Industrial Supplies & Materials. It is the gigantic red herring, the huge thumb, the black swan. The item Non-Monetary Gold had an increase from $1.522 billion in December 2013 to $3.377 billion in January 2014, well over double in a single month. This item easily bested all other ledger items on increase. It is a gross understatement to say the item sticks out. The gold surely did not come from US mined gold. For rough napkin math, the $3.377bn in gold comes to about 2.6 million ounces, for a single month. The US produces annually about 225 metric tons of gold, worth approximately $9.4bn. So the gold export from non-monetary gold hidden in the industrial supplies ledger item, when annualized over 12 months, is at a pace of $40.5bn, or roughly four times the entire US mine sector output for gold. Something stinks, and methinks it is making good on past deep fraud. See the USGovt Census website (CLICK HERE).

Something very fishy is going on. As reported within the Hat Trick Letter on a few previous occasions, the regular recipient of Gold export in Industrial Supplies has been Hong Kong. The idiotic mainstream press tries to make the gold export look as though it is positive, a growing item to bring balance to the trade imbalance. It is a gold hemorrhage, or worse, evidence of profound past fraud. The USGovt is hiding something very ugly. They are rumored to be heavily involved in formal restitution with Hong Kong bankers after a large number of fake gold bars (at least several hundred, perhaps a few thousand) were shipped by the Clinton Admin in the 1990 decade. My nose tells that Clinton, Rubin, and Bush were involved at the crime scene, with cover provided by the USFed, USDept Treasury, and the CIA, using Panama routes in the narco trade. The incident will not be permitted to appear in the mainstream press.

## GOLD MARKET UPSIDE DOWN

◄$$$ ANDREW MAGUIRE BELIEVES AN GOLD MARKET DEFAULT IN LONDON WAS DELAYED... THE IMMINENT THREAT OF DEFAULT WAS AVOIDED, BUT WILL STILL ARRIVE... TOO MUCH GOLD HAS LEFT THE SYSTEM THE BANKSTERS CONTROL... NEITHER THE USFED NOR THE BANK FOR INTL SETTLEMENTS ARE LEASING THE BIG BANKS GOLD ANYMORE... GOLD WILL EVENTUALLY BE MARKED TO MARKET. $$$

London metals trader Andrew Maguire believes that an LBMA default was delayed by the banker cabal, but it is coming anyway despite the West's frantic efforts to avoid it. All the central bank gold has multiple claims against them. After more than two years of frantic activity, most vaulted gold lies outside of the closed loop of the LBMA system, out of their reach, never to return. The problem is deadly for the cabal, an imminent threat still that has only been delayed. Maguire claims the banksters have been trying with no success to talk the gold price down to the $1000 level, for use of an escape hatch. The gold grab described below to meet daily demand could very well be Saudi gold stolen, since they are the new USGovt enemy, the discarded cutouts, rich in London gold. Maguire concluded the following. See the King World News interview (CLICK HERE).

"It is now inevitable that there will be an LBMA bullion bank default. It is just been delayed. As I have noted now for over 18 months, the Bank for International Settlements (BIS) is no longer providing any real bullion to the bullion banks. They are just issuing them credit by way of a book entry to sell bullion bank owned gold, unallocated gold, on the spot market. When deliveries are demanded, they are actually forced to borrow gold from their own unallocated inventories. Courtesy of a lack of regulatory oversight, they are able to rehypothecate bullion from their clients allocated accounts [think unguarded Saudi gold]. Even in the unlikely event that gold were driven to the bullion bank target of $1050, the resulting discount would only cause China, Russia, India, and all of these other countries to take all physical gold that was offered, allowing very little bullion to be repaid. So that would be a lose/lose situation.

The bullion banks are not going to allow what happened last year, when a Fed sanctioned raid resulted in a mass exodus of bullion to China. Either way, discount or not, we are approaching a forced LBMA cash settlement [which they will try to call a non-default]. Western central banks are increasingly being forced to compete against each other to look after their own interests now. It has become apparent that the BIS and the Fed do not have the gold they claim to have, despite the paper claims to gold being shown as a physical asset on their books. This very act neuters the Fed's ability to control the gold leasing. In short, the bullion banks will be forced to mark paper gold positions to market, creating a gap up in the gold price as true supply/demand fundamentals are finally realized." By mark to market, Maguire refers to marking to the physical market, where gold changes hands, comes off a ramp with armed guards and is loaded on a truck, not the electronic corrupted entries.

◄$$$ CHINA'S GOLD DEMAND IS UP 51% SO FAR THIS YEAR VERSUS THE SAME PERIOD LAST YEAR... THE JUGGERNAUT IS NOT DETERRED BY INTERNAL STRIFE IN CHINA, BUT MIGHT BE AIDED BY THE TURMOIL. $$$

Koos Jansen introduces yet another fine update with a quote, "The longer this insatiable demand continues, the more I start to ask myself where this gold is coming from. We know from Swiss refineries, they are having a very hard time to source this much gold for China." The answer is London gold, being drained from their corrupt bankers with an extreme vengeance, cited by The Voice.The Shanghai Gold Exchange (SGE) has resumed publishing their trade reports. The latest report covered the trading week February 17 to 21. The amount of physical gold withdrawn from the vaults is of foremost importance, since it equals Chinese wholesale demand. Withdrawals in the recent week accounted for 49 tons. So far year to date in Shanghai, a robust 369 tons have been withdrawn from the vaults. It comes to an average demand of 7.09 tons per day over a 52-day period. This includes weekends and the one week holiday at Lunar year when the SGE was closed.

 

 

Compared to last year, the SGE gold demand is up 51% versus the same period last year. Note the spike observed in April 2013 when withdrawals exploded to 117 tons. Large spikes of such size should not be expected this year. Therefore expect the growth to slow down on yearly comparison soon when April is passed. Nevertheless, the daily average in 2013 was 6.02 tons, from a total 2197 tons moved. This year is slightly higher as of the latest week recorded, surely to come down through April. China is on schedule to establish a new record, and more importantly, has surpassed the world mining output for gold (seen in yellow bars). In fact, Chinese SGE demand has been flirting above the world output levels during the months of 2014. When the 200-day moving average lies above the world output, some fireworks Chinese style will be visible across the our special blue marble. See the In Gold We Trust article (CLICK HERE). Thanks to Koos Jansen for the chart.

◄$$$ INDIA'S SILVER IMPORTS ARE UP 189% to 6125 TONS, EVEN AS SMUGGLED GOLD IS ABUNDANT... THE GOLD RESTRICTIONS PUSHED MANY INDIAN SAVERS AND INVESTORS INTO SILVER... GOLD IS HIGHLY LIQUID AND PLENTIFUL IN INDIA, DESPITE THE HARSH RULES... THE INDIAN MAFIA IS EXPANDING ITS REACH AND WEALTH, THE AMBITION WISHING THE RESTRICTIONS TO REMAIN... INDIA HAS NO CURTAILMENT IN GOLD SUPPLY, ONLY REDUCTIONS IN GOVERNMENT TAX INCOME. $$$

Gold researcher and GATA consultant Koos Jansen continues his excellent report to cover the silver market. The India's silver imports at 6125 tons were up 189% in 2013 in reaction to the government obstruction of gold imports. Jansen confirms that Indians are securing all the Gold they need through smuggling. Using their traditional smuggling methods, laced within organized crime, collecting on premiums, the trade remains brisk for both Gold & Silver. As a rule of thumb, increase the gold smuggling volume by 50% to 100% for a reality based estimate. He cited an Indian veteran in gold smuggling into India, who remarked it is quite easy as customs at the airport and the army at the border are eager to take a bribe. Traffic is huge through Dubai and Singapore airports, legally and illegally. It is also ample through the Bangladesh border and even through Nepal and Pakistan on the ground. The Bangladesh border is reportedly the easiest, a small bribe to the army soldiers sufficient. His contact said, "I often hear analysts saying that there is shortage of gold in India. Incorrect. It is more liquid a commodity than water is. The spread is so thin that you can often buy and sell at the same price, the trader makes his margin from making jewelry."

Since before the 1990 decade, gold import was heavily regulated with a big customs duty levied. A substantial mafia had built up in Mumbai and Dubai, mostly catering to Indian gold demand, using various smuggling techniques. Two results occured. 1) The Indian Govt lost all prospects of earning revenue from gold imports, and 2) Smugglers ran a ruthless empire in several Indian cities, which extended to illicit and legal industries. Some analysts called them the unofficial rulers of Mumbai. The progress mimicked the history of alcohol prohibition in the United States during the 1930 decade (refer to Al Capone and Joseph Kennedy). Expect history to repeat with extended mafia power in India. To be sure, all the required gold to satisfy the Indian market is already coming through smuggling. Oddly for the nation, and naturally for the criminal element, the smugglers want restrictions on gold imports to stay in place. They are thriving.

 

 

The 15% premium on gold through official tax and customs levies has pushed a great many Indian savers into silver. The Indian silver import in 2013 was 6125 tons, and all-time record, up 189% from 2115 tons in 2012. The growth in silver demand is growing sharply, even astoundingly. In December, silver import accounted for 825 tons, up 108% month over month, and up 65-fold from last year's volume. The next big question relates to the influence of the Indian mafia and its legion of smugglers. The EuroRaj contact informs that many political leaders are captains in the smuggler trade. So expect a slow removal of restrictions in compromise. See the In Gold We Trust article (CLICK HERE) and the SGT Report (CLICK HERE). Thanks to Koos Jansen for the chart.

◄$$$ TURKEY'S GOLD IMPORTS FELL BY 93% IN FEBRUARY... THE DECLINE IS LARGELY DUE TO THE END OF THE NATION'S GOLD-FOR-GAS ENERGY TRADE WITH IRAN, FOR WHICH TURKEY SERVES AS INTERMEDIARY... THEIR SILVER IMPORTS IN DECEMBER WERE STRONG. $$$

Following a record year for gold imports, the Turkish inflow has suddenly declined sharply. Turkey's gold imports fell in February to 1.27 tons (a trickle), a 93% drop compared with the same month in 2013. The driving factor is the termination of the nation's role as gold intermediary provider for Iran sales of crude oil. It is the Gold-for-Oil trade, which the Jackass prefers to call the Gold Trade Settlement prototype. It will be emulated, copied, and duplicated on a widespread basis for the entire Eurasian Trade Zone. Under the controversial scheme, conducted with full motive in circumvention, Turkey avoided Western sanctions by paying for Iranian crude oil and natural gas in gold. The legal window was the broad usage of private Iranian banks, not the central bank in Tehran. The Halkbank in Ankara claims such transactions ended last summer. The gold and silver imports continued to rise significantly in the last six months of 2013. In December silver imports reached their highest levels since 1999. A drop in the Turkish Lira exchange rate also had an effect on their gold imports, lifting it in domestic price terms. According to Hurriyet, in December Turkey imported 32 tons of gold. See the Mining article (CLICK HERE).

◄$$$ TEAM SPROTT STUBBORNLY MAINTAINS A GOLD PRICE TARGET OF $5000 WITHIN A FEW YEARS... ERIC SPROTT HAS BEEN OVERLY OPTIMISTIC IN THE LAST COUPLE YEARS, WITH FOCUS ON MONETARY FACTORS AND NOT CURRENCY FACTORS... OLIVER POINTS TO GOLD INVENTORIES, CHINESE DEMAND, MATCHED GLOBAL MINE SUPPLY, AND A LIKELY DJIA STOCK INDEX RATIO CONVERGENCE... HOWEVER, THE GUY IS TOO FOCUSED ON THE ESTABLISHED GOLD MARKET WHICH IS DUE FOR A SEVERE SHAKEUP. $$$

Charles Oliver joined Sprott Asset Mgmt in January 2009. He cites tremendous gold market fundamentals. He stated, "I believed throughout 2013, with the price of gold coming down, the fundamentals were only getting better. During that time, the Chinese bought like mad and the Fed printed another trillion dollars through QE. Nonetheless, heavy selling took the gold price down. Today, the difference is that the sellers are exhausted, and physical demand is catching up. One of the numbers we are looking at is the quantity of registered inventories on the COMEX for gold. That is the amount of physical gold that is available when someone asks for physical delivery instead of a cash settlement."

Oliver expects the COMEX market to break in the near future. Their inventory is largely depleted. The demand coming from China is mindboggling. Their demand surpasses the global mine output. Import of gold through Beijing complements the staggering volume passing through the Hong Kong window. Much of the 800 tons of gold bars sold from ETF holdings probably were shipped to Asia. Oliver went on to cite the attractive valuations of gold mining stocks which are paying bigger dividends, which the Jackass does not favor. Sprott Mgmt does sell its book. However, he notes how Asian entities have been pursuing gold companies for the last decade, with the Chinese making a few acquisitions in the Australian market last year. They continue to acquire gold companies in many different jurisdictions, but in takeouts that have little effect on stock prices. The Sprott Asset Mgmt firm has recently launched two important partnerships with major sovereign and semi-sovereign funds in South Korea and China. We all wish the Sprott firm would enable the mining firms to avoid the COMEX altogether, and go directly to Asian central banks and markets.

Oliver continued with a discussion of the critical COMEX price levels, which seem not worth the time to focus on. The big story is the developing Eastern alternative to the Petro-Dollar and US$-based trade settlement generally, which will cause a quantum jump in the gold price in a great dislocation. Oliver closed with an interesting point about the Dow Jones Industrial Average versus Gold, the ratio. He concluded, "In 1980, when the gold price peaked at $800, it took one ounce of gold to buy the Dow Jones Index. After 1980, financial assets took the lead over hard assets. In 1999, it took 44 ounces of gold to buy the Dow Jones, at a gold price of $250. If gold were to regain the position it held in 1980, we could easily see a 3:1 ratio. [Possibly] gold at $5000 given the current level of the Dow Jones, or even $15,000 if gold returns to the 1:1 level. Ultimately, I believe that the gold price could reach $5000 within a few years, and perhaps go well beyond. Deficits and rising debts, exacerbated by demographic issues, are here to stay. And money printing and higher gold demand along with them." See the Sprott Global article (CLICK HERE).

These are all fine points, but Oliver has a blind spot on the entire Eastern Hemisphere, complete with its gold trade settlement, the Iran prototype, the Russian response to Ukraine sanctions in new demands for oil payments, the Chinese development of the international Yuan currency, the Chinese supplanted Petro-Yuan defacto standard, the Saudi courting of China, and the death of the USDollar while King Dollar is kicked off the throne. The result of these Paradigm Shift events in development would be a quantum jump in the Gold price from vast dislocations, probably coinciding with the shutdown of the COMEX gold market.

◄$$$ WILLIAM KAYE CITED A STRANGE CALM IN THE GOLD MARKET... HIS EYES ARE PROPERLY FOCUSED ON UKRAINE AND RUSSIA... BUT HE DOES NOT YET DISCUSS GRAND DISRUPTIONS TO THE SOVEREIGN BOND MARKET, THE FOREX CURRENCY MARKET, THE TRADE SETTLEMENT DEVICES, AND THE GOLD MARKET... HIS FOCUS (LIKE MANY ANALYSTS) IS ON THE RISK OF WIDER WAR... RUSSIA WILL RESPOND WITH A FINANCIAL FRONT ATTACK. $$$

Veteran hedge fund manager from Hong Kong, William Kaye gave an update on the higher level financial markets. He used to work for Goldman Sachs in mergers and acquisitions 25 years ago. He commented extensively on the $1350 level in the gold price. It is surely importantly, and any move above could quickly bring it to $1400. Further, a move over $1445 would open the gates. But if these levels are broken, it could instead be from a quantum jump in a new global event, rather than simply a short squeeze or strong rally. He pointed out that no longer is the persistent backwardation seen in gold, evident for so many months. That features future month prices below the current spot monthly price. Even the GOFO rates are normalizing, as in Gold Forward Rates. He implied that the gold market is distracted by the conflict in Ukraine and the Russian seizure of Crimea. Kaye concluded, "Russia is not going to sit idly by and allow its interests to be compromised. Russia is feeling encircled. They are not going to want the US and the EU to eventually deploy missiles in Ukraine. The odds of things getting much worse before peace prevails are unfortunately quite high."

Kaye did not follow through, and did not mention how Russia might retaliate. He is focused on the military aspects. Even Kaye does not address the diverse developments in the East on alternatives to the USDollar, for displacing the USTreasury Bond in the banking reserves system, and a return to Gold Trade Settlement. This is odd, since Kaye has offices in Hong Kong. He observes the war threat, and not the financial response to such a strong threat. See the King World News article (CLICK HERE).

◄$$$ LOUISE YAMADA ADDS HER SOLID EXPERTISE ON GOLD & SILVER CHARTS... IMPORTANT BULLISH DIVERGENCE IS DISPLAYED FOR BOTH METALS, BUT STRONGER IN GOLD... DOUBLE BOTTOMS IN GOLD & SILVER PRICE CHARTS INDICATE A MASSIVE BREAKOUT WHEN THE RESISTANCE CEILINGS ARE TAKEN OUT... THE SIGNALS POINT TO POSITIVE BIG PICTURE DEVELOPMENTS. $$$

Let's make this short and sweet, since the signals are very clear and the implications are extremely positive. Louise Yamada is considered one of the foremost technical analysts. She shared her charts for the precious metals using a several year look. Something big is in progress. The Jackass has held back on charts for two years or more, justifiably. Take a look at the Gold chart since 2010. In the last year a double bottom has occurred in the Gold price. At the same time, the momentum cyclical index has shown an upward bias with a clear positive tilt. This pattern is called a Bullish Divergence, and is a highly reliable indicator for a big upward move. The downtrend is about to be reversed, with recognition as soon as the trendline is broken on the upside. It appears imminent in gold.

 

 
Next consider the Silver chart since 2010. In the last year a similar double bottom has occurred in the Silver price. It shows less volatility than gold, but it still is highly similar. At the same time, the momentum cyclical index has shown an upward bias with a slightly less pronounced positive tilt. This pattern is called a Bullish Divergence (still forming), and is a highly reliable indicator for a big upward move. As Yamada points out, the momentum is still slightly negative but slowing. It is not a strong pattern just yet, but very close to full formation. The downtrend is about to be reversed, with recognition as soon as the trendline is broken on the upside. It appears nearby in silver, not quite as imminent as in gold. Yamada also included an interesting historical chart of the S&P500 stock index ratio to the Gold price. Its upward movement since late 2012 confirms the powerful USFed QE initiatives, since USGovt support is in the stock index, while the gold price is suppressed. If the chart moves back toward trend, the Gold price will jump while the stock market declines and watches gold shine. See the King World News article (CLICK HERE).
 

 

## USECONOMY SPUTTER & STUMBLE

◄$$$ THE LABOR FORCE PARTICIPATION HIT A RECORD LOW FOR AMERICANS IN THEIR 20'S... THE TREND IS HARD DOWN FOR THE LAST 13 YEARS... AT END 2008, THE LABOR FORCE PARTICIPATION RATE FOR 20 THROUGH 24 YEAR OLDS WAS 74.3 PERCENT, BUT HAS SINCE DROPPED TO 70.7% IN THE LAST FIVE YEARS... THE YOUTH INDICATE A DARK FUTURE WITH FADING HOPE. $$$

The labor force participation rate in 2013 for Americans in their twenties hit the lowest level recorded since 1981. In that year, the Bureau of Labor Statistics started releasing employment data for the full age bracket of 20 through 29. The labor force participation rate for people ages 20 through 24 years (tracking since 1948) hit a 42-year low in 2013. Since 2008, during the Obama Admin, the number of Americans in their twenties not in the labor force has climbed from 8,756,000 to 10,511,000 which reflects an increase of 20 percent. The idle count not in the labor force in 2013 is the highest ever recorded by BLS. The labor force participation rate is defined as the percentage of people in the civilian non-institutional population who either have a job or actively sought one in the past four weeks. That excludes military, prison, hospital, or nursing home. The labor force participation rate for 20 to 29 year old citizens had an average of 75.5% in 2013. The figure is down 3.3% from 2008. Labor force participation for Americans in their twenties peaked in 1989 at 81.3 percent.


 

 
Drill down to the younger set in that age bracket. In 2013, the labor force participation rate for 20 through 24 year olds was 70.7%, its lowest level since 1971. In 2008, the last year before Obama took office, the labor force participation rate for 20 through 24 year olds was 74.3 percent. Step back to the entire population. The overall labor force participation rate, including all age groups 16 and over, was 63.2% in 2013, mired at a 35-year low. The last time participation in the labor force was that low was in 1978, when the post-OPEC embargo impact hit hard and caused a multi-year recession. The youth employment rate is very difficult to fudge, one of the most reliable to indicate the actual condition of the USEconomy. The Jackass had all kinds of young man jobs, from construction humping of lumber and materials, to driving a taxi, to emptying railroad cars of boxes, to data entry of labor records, to gruntwork in software programming. The jobs indicated a degree of health in its business. See the CNS News article (CLICK HERE).

◄$$$ AMERICAN RETIREES ARE RETURNING TO REVERSE MORTGAGES FOR INCOME STREAM, AS DESPERATION SETS IN... THE BIG BANKS STAY AWAY, SINCE RISK WOULD BE HELD WITHIN A FALLING MARKET. $$$

US citizens are aging and have had their home equity vacated by Wall Street and the USFed during an era of reckless monetary policy. They have not saved effectively, but they have surely partied hearty. The Baby Boomers are desperate for retirement income, and many still have homes. Regardless of depleted value, the home equity remains a strong piggy bank, especially for those who own their homes outright from decades past (like my father). They are increasingly returning to the reverse mortgage, which after the housing bust had been largely abandoned as a financial product. Recall the Jackass forecasted in 2005 that reverse mortgages would become a widespread tool for income stream. It indeed did, but then faded away. It is back in vogue. A reverse mortgage allows the homeowner to borrow against home equity in a structured loan product that pays an income stream. The bank pays the resident each month, which reduces the home equity balance gradually. They make no payments, but rather receive a monthly check from the bank. It works much like an annuity that depletes the asset over time, and robs the heirs who sometimes are seen as grubby kids who never visit. The consequence is felt only upon sale of the home, moving out (rental not an option), or death. Borrowers took out $15.3 billion of the loans in 2013, an increase of 20% from the year before, according to Inside Mortgage Finance. The record year was 2009, when a total of $30.21 billion in reverse mortgage loans were made. Expect the volume to grow significantly. These are desperate actions by a desperate middle class. See the Reuters article (CLICK HERE).

◄$$$ CHRIS WHALEN BELIEVES THE US-HOUSING MARKET IS DETERIORATING... EVEN HALF-BLIND SHILLER SEES IT WEAKENING... THEY DO NOT MENTION THE KEY IMPETUS, THE PRIVATE EQUITY FIRMS WHICH ARE BIDDING ON LARGE TRANCHES OF BANK OWNED PROPERTIES IN KEY CITIES... THE PROP IS SHAKY AND TENUOUS... MANY ARE THE HEADWIND FACTORS INTERFERING WITH THE HOUSING MARKET, FROM BUYER SIDE AND LENDER SIDE AND ECONOMIC FACTORS. $$$

Chris Whalen made his name at the Instutional Risk Analyst. He is a private free lance brilliant bank analyst and investment banker currently. He assesses that the US housing market is not in good shape. He perceives many parts of the USEconomy as growing, but the housing sector is increasingly a drag on consumption and job creation. Most indicators show home price increases are slowing significantly, with a few hot markets accounting for most of the upward momentum. The hot markets, not mentioned by Whalen or other analysts, is a result of tremendous inflows from private equity funds extended from Wall Street. They are gobbling up enormous tranches of residential homes, and to a minor extent commercial properties. Their focus is on eight to ten American cities. Only six cities registered home price gains in December, according to the Case-Shiller index. Whalen believes that home prices probably peaked overall in the second quarter of 2013. A sizeable time delay in that housing index masks this reality. Home prices might have returned to 2004 levels, but the nightmare continues. Fully 20% to 30% of US homeowners remain either underwater on their mortgages, or unable to sell their homes due to nil equity. The private equity impetus might disappear soon. They face an unexpected obstacle with hostile tenants, deep damage to homes, considerable renovations, lawns gone to seed with rubbish gathered, and unfamiliar ground in management. On at least a dozen occasions, Whalen has penned a stellar article that has resulted in some true learning by the Jackass, with gratitude. He is a sharpie.

Nobel laureate economist Robert Shiller of Yale University is co-founder of the 20-city housing price index bearing his name. He has recently warned about the housing market, without benefit of much insight or depth of analysis. He relies on the conventional viewpoints and obsolete methods, never capable of noticing trend changes or structural twists like private equity involvement. His commentary is usually fit for a mediocre high school student class. Notice the absent brilliance unworthy of his laureate status. He said, "There are pitfalls ahead. At this point they [home prices] are going up pretty fast. My instinct is that this momentum will dissipate, but we will not see a reversal this year. I think it will still be up. [Home prices will rise] at a fairly good pace, but I think they may weaken. There are a lot of signs showing that the housing market is weakening." Wow! Hardly impressive, zero depth, no factors brought to the table, no mention of bank inventory overload or clearance, nothing on private equity firms, nothing on busted sales on failed loan applications, nothing on difficult appraisals, nothing on job loss factor, nothing on juxtaposition with USFed destructive monetary policy. This Shiller is highly revered, but a total simpleton bordering on a moron. His insights lack any and all insight. He adds nothing. He is a one-trick pony with a successful book to his credit. He should retire to a vegetable garden and continue to live off his royalty income and university pension. He never teaches the Jackass anything.

Whalen is by contrast a source of insight and depth with a stiff spine. He hits some important lightning rod points. Loan applications for home mortgages stand at their lowest levels in more than a decade. Whalen wrote, "While many observers blame rising interest rates for the paucity of new loan applications, factors such as a poor job market, flat to down consumer income, and excessive regulation are probably more important." Exactly! Lawrence Yun is chief economist of the National Assn of Realtors. He cited weakness in the housing market too. While weather is wreaking havoc with the industry, other factors like tight credit, rising prices, higher mortgage rates, and limited inventory are hurting the market. He anticipates these issues will hinder home sales activity until stronger job growth boosts demand. See the Money News article (CLICK HERE).

The Jackass has a viewpoint based on the new harsh realities. New loan applications are down partly from tougher bank lending standards, party because lenders wish to get rid of inventory and not to add to their bloated portfolios, partly from buyers knowing they do not qualify for loans, partly from buyers not having 20% down payments, partly because buyers cannot prove job security and income reliability, partly because sellers cannot afford to spruce up the home for sale, partly from lenders not having the mortgage bond slush fund channel filled with funds, partly from sellers being stuck in homes without equity, partly because the brisk market movement of homes is dominated by private equity firms, and partly because the banking industry has no confidence in the USEconomy that bears no trace of recovery.

◄$$$ GENERAL MOTORS HAS ENDORSED SUBPRIME LOANS IN A BIG WAY... THE MAJORITY OF THEIR CAR LOANS ARE SUBPRIME (WITH USGOVT BLESSING)... THE LOSSES COULD RESULT IN $5 BILLION IN WRITE-OFFS... THE ENTIRE US-CAR INDUSTRY IS STRETCHED WITH MULTI-YEAR LOAN DURATION AND VERY HIGH RATES... THE MARKET WILL POP. $$$

After the wondrous General Motors recovery, inspired by USGovt infusions and easy accounting permitted, the once mighty GM is a dead man walking over the cliff. Their car loans totaled $700 billion back in 2010, but have returned to bloat territory at $860 billion today. Their accounting shows far more rot. The GM outstanding receivables grew $12 billion last year. Over 80% of the GM outstanding loans are subprime. The outstanding subprime car loans total $22 billion. It all smells of poor underwriting, slack standards used, a bad economy, just to move inventory and to show success for the tainted USGovt bailout deal. The proof is in the smoke, not the pudding. GM stopped reporting details on their loan book recently, surely a federal favor granted. It was last reported in 2012, at only $8 billion in receivables with FICO (credit rating score) under 599, versus $3 billion with FICO under 540. Below the 600 line marks the poor credit client, thus the subprime level. Porter Stansberry projects that half of these GM loans are deep subprime and expects $5 billion in write-offs in this category. Furthermore, the distribution process is in full swing. The Wall Street securitizing and selling these loans in structured bonds is occurring as fast as possible, despite a recent surge in defaults, and a dramatic increase in dealer inventory, called channel stuffing. The pop might be heard with huge value declines in such collateralized toxic bonds. Compare the slack underwriting of GM car loans to what is going on generally in the industry. In the United States, 84.5% of car sales involved lease or loan, and the loans showed 5 to 9 years in duration. They are in negative equity after the cars are driven off the showroom lot. These structured bonds are worthless. Loan rates are sometimes as high as 18%. This is Third World pawn shop level of integrity, just like in 2002 to 2006 for the US housing market. It went bust.

◄$$$ PRICE INFLATION HAS RISEN NOTICEABLY, AS THE PEOPLE NOTICE... THE LATEST EVIDENCE IS FROM DAIRY AND BEEF PRODUCTS. $$$

The milk price hits a record on surging demand for US dairy exports, which have depleted supplies available for domestic consumers. Shippers sold 162,999 metric tons of milk powder, cheese, butterfat, and whey in January, up 19% from a year earlier, according to the US Dairy Export Council. Almost 15% of the entire milk production went to exported goods, up from 12% a year earlier. Cheese shipments climbed 46 percent. A rise in global demand for US dairy goods comes as a drought threatens output in California, the nation's top producer. Milk prices have jumped 21% this year, while the cost of cheddar cheese also reached a record level. See the Money News article (CLICK HERE). Beef prices posted a powerful surge, the biggest monthly rise since November 2003. Costs for meats, poultry, fish, dairy, and eggs drove the gains in the overall food price menu. Most notably, beef, and veal prices surged. See the Wall Street Journal article (CLICK HERE).

◄$$$ RETAIL DOWNTURN EVIDENCE IS LOUD AND BROAD... RADIO SHACK AND STAPLES ARE THE LATEST MAJOR CHAINS TO MAKE THE NEWS ON BROAD SHUTDOWNS... THE CONSUMPTION EMPHASIS FOR THE USECONOMY IS A DREADFUL TRAIT, A SIGN OF EATING CAPITAL THAT ARRIVED IN THE 1980 DECADE WHEN THE CANCER BEGAN... CONTAINER TRAFFIC AT LONG BEACH IS DOWN BY 0.6% OVER THE LAST TWELVE MONTHS. $$$

March has brought bad tidings, of large retail chain closures. On March 4th, Radio Shack announced it will close up to 1100 US stores. The decision came after reporting a massive net loss of $191.4 million in 4Q2013. Then on March 6th, Staples announced it will close 225 stores in North America by the middle of 2015. The office supplier reacted to much weaker sales. The shuttered stores represent 12% of all its total stores in North America. In 2013, the company shut down 40 stores in North America. Other retailers, such as Famous Footwear, Sbarro, and Albertson's have also announced that they will be cutting back the number of their store locations. The USEconomy has a grotesque distortion toward consumption. It is not normal, not healthy, and a sign of extreme abuse of capital. Think eat the furniture or home equity for both necessities and frivolous expenses. Healthy would be making furniture and building business equity.

The US Gross Domestic Produce is 70% based in consumption. A strong economy would be much more based in production, business formation, and intermediary supply activity, building rather than eating. The delicate equilibrium in income distribution versus economic growth has led to evidence showing up in the retail sector. Let it be known, that economic vitality does not come from distributing and selling foreign made products. The entire US nation has been inculcated with rubbish on economic concepts, from schools, from news networks, from government barkers. The January retail series was revised down to negative 0.6% in sequential monthly growth. The USGovt prefers to revise down the previous month, in order to make the current month look better, an established obvious pattern. The two-month average is negative 0.15%, still in decline despite the gimmicks.

A social effect has become visible. According to the Washington Post, the number of homeless families in WashingtonDC is on pace to double this year. A recent study released by the Coalition for the Homeless showed that the number of homeless people staying overnight in New York City shelters has now surpassed the record high number of inhabitants reached last year, incredibly over 50,000 per night. In October of last year, the USDept Education reported an all time high in the number of homeless students attending public schools, the figure at 1,168,354 which is acknowledged to underestimate the problem. These are Third World data points. See the Wall Street on Parade article (CLICK HERE). In the article, the authors quip that no amount of presidential executive orders can compensate for a busted economy. The Jackass claims that Obama does not devise, write, or sign the Presidential Executive Decrees. His manager handlers do from Langley, as the project for advancing the totalitarian state. They even use a presidential stamp for his signature. It is very doubtful that during a press conference, Obama could recall the signed decrees bearing his signature unless prepped for the questions.

Added confirmation of the slower USEconomy comes from data from the Long Beach California port traffic for shipped containers. On a rolling 12-month basis, inbound traffic was down 0.6% in the latest period, compared to the rolling 12 months ending in January. Outbound traffic was down 0.2% compared to 12 months ending in January. Container traffic offers an excellent glimpse on the volume of goods being exported and imported. This huge LA port handles 40% of the nation's container port traffic. The data pertains to the TEUs (Twenty foot Equivalent Units for 20-foot long cargo container). See the Calculated Risk article (CLICK HERE).

◄$$$ A SIGNIFICANT NEGATIVE SIGNAL IS GIVEN BY GENERAL ELECTRIC, WHICH IS SPINNING OFF ITS LENDING BUSINESS UNIT... REGARD THE GE NEWS AS THE NATION HAVE GONE PAST THE POINT OF PEAK CREDIT IN SERVICE TO THE USECONOMY. $$$

General Electric is far more than just a company that makes light bulbs, electrical fixtures, electric appliances, and electric motors. It is a giant conglomerate which has a major role in the train and jet engine business, as well as a huge finance subsidiary. The corporation has been reducing its reliance on GE Capital, the financing arm. Many years ago, GE Capital amazing accounted for almost half of the entire company's profit. The unit's extreme difficulties during the 2008 financial crisis nearly wrecked the entire company. The big tell, the big hint, the big neon billboard related to GE Capital was clear as daylight. On March 13th, the General Electric credit card business unit filed for an initial public offering. The IPO is regarded as the first step in the conglomerate's long-awaited plan to exit retail finance. They have stated plans to reduce dependence on the financing arm. Back in November, the parent GE announced plans in to spin off the North American retail finance business into a publicly traded company. The investment bankers estimated it could be worth $16 billion to $18 billion. In the first issuance, GE seeks to raise around $3.5 billion from the IPO for entry to the coffers. They would like to effectuate an overall valuation of $20 billion to $25 billion for the unit in market capitalizaiton.

With the spinout of the retail lending business, GE hopes to focus on its industrial divisions and to better compete with rivals such as Honeywell and United Technologies, which have smaller financing arms. As a smart colleague reminded me, this is this surest sign that we have reached peak credit. It will go down from here very fast for the USEconomy, since the credit engines have been reduced below critical mass. Expect to see more retail chain shutdowns and more lending unit closures within corporations. See the Reuters article (CLICK HERE). As footnote, a spinout occurs when the parent corporation retains over 50% of the shares from an IPO, while a spinoff occurs when more than 50% of shares are distributed publicly in the IPO process.

◄$$$ STAPLES HAS GONE INTO REVERSE, A BELLWETHER INDICATOR (MY OLD EMPLOYER)... STAPLES SHOCKED THE MARKET WITH NEWS OF PLANS TO SHUTTER 225 STORES IN THE UNITED STATES AND CANADA... SALES ARE DOWN, AND EARNINGS SUFFERED A BIG SHORTFALL. $$$

No recovery here, but also the company has been affected by a shift in buying patterns. The largest US office supplies retailer, Staples forecast another quarter of sales decline, as it has been losing customers to other major chains and online retailers. The company announced it would close up to 225 stores in North America by year 2015. The closures represent up to 12% of the company's 1846 stores in the United States and Canada. The company expects the multi-year cost reduction plan to generate annualized cost savings of about $500 million by next year. Nothing shouts economic recovery like a major retailer drastically missing revenue expectations, slashing earnings projections, and announcing broad store shutdowns. It is truly the Non-Recovery recovery from Reich Economics land in the Fascist State. To the firm's credit, they did not blame the weather. Tyler Durden is clever with a turn of phrase. He wrote, "Isolating Staples is a little unfair but as the largest (and most bellwether-ish), it is perhaps time to question the constant meme of escape velocity, improving fundamentals, and cleanest dirty shirt scenario growth." Very true. Worker cuts are certain. My best buddy SteveB has moved on after 17 years with the firm, four of which at my side. We keep in touch, now he a father of four kids and husband of a lovely wife. The Jackass was his assigned mentor in 1997. After the first year, he taught me plenty.

Some details. The company forecast earnings of 17 to 22 cents per share for the first quarter. Analysts on average were expecting 27 cents per share, a big miss. The Staples revenue fell by 10.6% to $5.87 billion in the fourth quarter ended February 1st. That came in $100 million below the average analyst estimates. Remove the impact of an extra week in the quarter one year earlier, and sales declined by 4%, which is huge. The so-called Sales Comps fell by 7% in North America, which is disastrous. The metric measures the same stores in their growth compared to last year, and therefore excludes any stores newly opened or newly closed. On specifics, Staples sold fewer business machines, technology accessories, office supplies, and computers. The data was worse in the company's international division, where sales fell 13%, centered on Europe and Australia. See the Zero Hedge article (CLICK HERE) and the Bloomberg article (CLICK HERE).

A personal digression, with some stories from my old home work site for five great years. Staples is a Jackass resume item, where work was a pure joy from 1996 to 2000. It was loaded with excellent colleagues and a stack of Harvard MBA types. CEO Tom Stemberg preferred to hire his own, from the same alma mater. One day in late 1996 at the cafeteria, the Jackass spotted Stemberg loading a truly huge amount of cheese on his bowl of chili. He stuck out in the crowd, clothes badly strewn and shirt tail never properly tucked in. So my quip was "Hey Tom, you like chili with your cheese, do you?" He did not get my joke, muttering something in absent bemusement. Sharp guy, great business sense, surrounded himself with brilliant VPs, but lacking on the personal side. Staples was a tremendous place to work, with wonderful statistical and forecasting challenges in my sales analysis group. The Jackass had complete charge of seasonality coefficients, kept like in a locked cabinet and adapted only every 2 or 3 years. Unlike the USGovt which adapts the seasonality every couple months, to serve its deceptive purposes. My colleagues were intelligent and hard working, always alert and usually very young (some eye candy too, like BethS and AmyB). Team building was the theme, as a co-worker taught me many things on Excel Spreadsheets including macro executions, linked files, copy techniques, and conditional formatting. They were great to be around for office conversations and lunch talk. Hardly ever was my body dragged to work. Not one contrived mental health sick day was taken in five years, not one.

My manager AlanG was a pioneer and brilliant man, responsible for the Site Allocation Model, another item kept in a locked cabinet, but which he regularly updated with tweaked improvements. His work was a company trade secret, whose model helped to locate several hundred stores successfully, under several options that depended upon the local demographics and business environment. AlanG was a fellow PhD, his degree in Demographic Statistics from the Univ Michigan, ten years my elder. He was the best manager of my 23-year career in business. Nothing but mutual admiration between us, plenty of difficult stimulating design and analytic development issues that we overcame together. My biggest feather was designing and building the forecast model that married the store unit forecast with the inventory replenishment by product and department. It stood intact ten years after my departure. The project was a baby hatched by AlanG, but who handed it off to me since he never had the required time to develop and finish it. The group management took up half his time. He was a working manager, a player coach as he called it. By using the Kruytoff algorithm, discovered with a little research, the Jackass knocked it off in four months. Great memories, plenty of good war stories, during a decade of massive success and a quadruple in the stock price. The two matured stock option packages were big enough almost to purchase a modest house. AlanG retired from Staples in 2007, to tend to a private consulting practice and his vegetable garden.

Only one VP ever clashed with the Jackass, a loser nicknamed Brunhilda. She was a true fouktard imported from Marshalls who was fired one year after my walk out of the door in 2000. The folks at Personnel heard an earful from me about her during my final year, and on my exit interview. She made every conceivable error in the book, except she shined well her own manager's arse. She blocked a plan to create a special product pricing group, after a big success in an elasticity pricing study with my buddy RonG. She claimed the Jackass had no MBA, and therefore no business savvy. She read that somewhere on a wall. We joked that she did not know what statistics were. She even called me and AlanG academics during staff meetings, even though we knocked off difficult projects left and right. A brusque retort of mine during one such meeting met with a grunt of approval by my manager in attendance and brief supporting comment. My manager would ask the empty suit VP if she had any more difficult projects for us to knock off with our usual success and aplomb. He was a tough nut too. We defended our record in a professional manner.

With our 25 test stores, RonG and the Jackass lifted the profit margin for boxed paper (three classes of draft, regular, quality) from 19% to 26% in just twelve weeks of work. Not a sexy product, but a stimulating project using the double-log sales model to estimate the cross-elasticity coefficients. Multiply the product's $450 million chainwide annual volume to arrive at a ripe $31.5 million boost to profits, with only a trifle of extra work. We spent only two months of part-time effort on the project. The Jackass would have headed up the special new group, which had my manager's full support in the adjunct group. He called the VP an utter fool in an open meeting, when my criticism was directed at her steady poor judgment exhibited from the VP post. My clash with Brunhilda was not isolated. We had many successes. The dolt VP followed up our elasticity project by blowing $500k on a pricey Lexington consulting firm contract, where some sharp MBAs with zero statistical experience worked onsite for 18 months. They accomplished exactly nothing and were not renewed, unable to spell double-log, but they sported nice suits with sleek silk ties. Brunhilda followed them out the door, with a small push from AlanG. During my tenure there, the store count in the United States went from 280 to 1100 in a staggering growth story and fun ride, well managed. The ride is over, now in reverse. The USEconomy is deteriorating at an accelerating rate, pushed down hard by the capital destruction of QE bond monetization and the hyper monetary inflation.

◄$$$ RADIO SHACK PLANS TO SHUT 1100 STORES AS Q4 SALES PLUNGE... AN OUTSIZED 19% DECLINE IN COMP SALES WAS RECORDED AT STANDING STORES... THE RETAIL OUTFIT FACES EVENTUAL BANKRUPTCY IF THE CASH BURN CONTINUES. $$$

RadioShack announced another quarter of heavy losses. It registerd a staggering decline in store sales, with a Comp Sales decline of 19% broadly. The struggling electronics retailer will shut down 1100 stores. The retail chain logged a net loss of $191.4 million in 4Q2014, compared to a loss of $63.3 million a year earlier. Revenue dropped 20% to $935.4 billion, well below the estimate of $1.12 billion. Even gross profit margins slid to 29.8% from 35.8%, a sign of price cuts to move inventory and bring customers into stores. Given the horrendous pattern of results, RadioShack announced plans to shut down as many as 1100 under-performing stores. The company will continue with over 4000 locations in the US after the closures. RadioShack has an acknowledged cash burn that has alarmed investors, the details not available here. The company just completed a new five-year financing that brought $835 million in the cash ledger. The deal was led by General Electric's GE Capital, probably not a good bet by GE. See the Fox Business News article (CLICK HERE).

◄$$$ THE NAGGING $1 TRILLION IN STUDENT LOAN DEBT IS STARTING TO HURT EVERYONE... A WORKER SADDLED WITH SUCH LOANS TENDS TO DELAY MANY IMPORTANT PURCHASES THAT CONTRIBUTE TO THE USECONOMY... WORSE, STUDENT LOANS ARE MAKING SOME SECURE STREAM BONDS LOSE VALUE FROM THE TOXIC TRANCHES. $$$

Across the country, students are taking on increasingly large amounts of debt to pay for higher educational costs. From year 2000 to year 2010, the annual cost has risen approximately 70% at public and private two-year and four-year institutions. The data is provided by the federal Institute of Education Sciences. Figures released in mid-February by the New York Fed showed that aggregate student loan volume nationwide has continued to rise. At the end of 2003, American students and graduates owed just $253 billion in aggregate debt. Fast forward. By the end of 2013, American student debt had ballooned to a total of $1.08 trillion, an increase of 300%. The USGovt is the primary underwriter. In the past year alone, aggregate student debt grew 10%. According to the Institute for College Access & Success, seven out of ten students in the class of 2012 graduated with student loans, whose average debt was $29,400. The NYFed cites inflow as much higher than outflow, a result of the chronic recession and poor job creation for graduates.

Delinquencies on student loans have risen dramatically over the past decade. At the end of 2103, a notable 11.5% of graduates were at least 90 days late on loan repayment. Compare to 6.2% delinquent on student loans in 2003. Worse is a hidden point. Nearly half of all students with debt are not currently in repayment, due to deferments and forbearances and delays to repay until a job is secure. Another comparison sticks out. Delinquencies on student loans rose to 11.5% in 4Q2013, even as credit card and mortgage delinquencies fell. Both higher costs of education and poorer economic prospects are blamed. Household incomes are not rising at the same rate. Notice that compared to the improving credit card business and mortgage portfolios, the student loan business is growing worse over a full decade of time.

 

 

One must question the value of a higher education within the United States, as the economy is deteriorating and business investment focuses on Asia plus the emerging markets. Some professional students like in medical, dental, and law school actively choose to default in order to afford the high investment requirements for opening their own shops. For many graduating students, their loan balance upon completion of school exceeds their annual salary. It can take 10 to 15 years to pay it off. The process of paying off a student loan actually puts a drag on the USEconomy. The students who have significant debts will tend to spend less money on goods and services. They will delay in buying a home, delay in upgrading the car, and not enjoy that nice vacation, even purchase fewer techy toys, but maybe not prolong the improvement in wardrobe. Without doubt, the aggregate drag from excessive student debt is a notable factor on the economy. The old argument about the marginal benefit to society and the economy at large is spurious, especially when the jobs being created are at the low end, even part-time. When factoring in ObamaCare, the argument vanishes. The effect on the bond market is also very harmful. The toxic rot is laced as tranches within other secure stream bonds like mortgages. Just like subprime loans, the impairments are moving quickly to the surface. The damage is broad. The next subprime loan niche in student loans has joined the car subprime loan niche, as the income streams are not as secure as originally believed. See the Business Time article (CLICK HERE).

◄$$$ OBAMACARE PREMIUMS ARE SET TO SKYROCKET, DUE TO POOR ENROLLMENT AND INHERENT FLAWS TO THE SYSTEM... HEALTH INDUSTRY OFFICIALS ANTICIPATE THE PREMIUMS WILL DOUBLE IN SOME PARTS OF THE UNITED STATES... SEBELIUS REMAINS CLUELESS AND OUT OF TOUCH. $$$

The Ulsterman Report has caused a major stir in WashingtonDC, and the Obama Admin is working hard to back-pedal in damage control. Due to the failures of the rollout volume of subscribers, and the inherent serious flaws within the plan on legal aspects, national healthcare premiums across the nation are set to skyrocket in the coming months. A liberal publication The Hill has issued a report, a charge of the Light Brigade, which tries to set expectations accurately. Health industry officials say premiums for ObamaCare will double in some parts of the country, countering claims recently made by the officials who are mismanaging its cancerous spread.

The timing will be bad. The expected rate hikes will be announced in the coming months during the mid-term elections. The fallout could be more Senate control taken by the Republicans, and a severe slowdown in ObamaCare insurance enrollment efforts for the rest of 2014 and 2015. People do not like higher premiums, and will balk. The industry complaints come as more backlash, less than a week after Health & Human Services Secretary Kathleen Sebelius attempted to downplay concerns about rising premiums in the healthcare sector. She told lawmakers on the House Ways & Means Committee to expect rate increases in 2015, which would grow more slowly than in the past. Her comments contradicted insurance officials, who said it runs counter to industry consensus about next year. See the Ulsterman Report (CLICK HERE) and the Before Its News article (CLICK HERE). Recall that under 5% of Obama Admin officials had any business experience before called to service for our nation. The pattern of SNAFU continues unabated.

## THANKS

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