GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Golden Potpourri
* European Bailout Impact
* Impaired Foreign Currencys
* Spotlight on Exchange Traded Funds
* Global Gold Price Breakout
* Critical Gold Factors at Work




HAT TRICK LETTER
Issue #74
Jim Willie CB, 
“the Golden Jackass”
16 May 2010

"Gold is money, and nothing else" -- John Pierpont Morgan (under oath before Congress and the Pujo Commission, 1913)

"Silver is like a call option on gold, with no expiry date." -- Steward Thomson

"Today you can break a country, you do not need money. You just need synthetic Euro-shorts or Credit Default Swap contracts. A trillion dollar bailout? Goldman can create 10 trillion of Euro-shorts. It dominates whatever governments can do. So basically Goldman can create shorts faster than Europe can create money." -- Jim Rickards (Omnis strategist)

"Holding dollars today represents risk without reward." -- Joseph Stiglitz (Nobel Prize economist)

"Big Money is going to be way too smart to buy the Exchange Traded Funds that have been pimped to retail investors as a way to sterlize their money and keep it out of the metals market for which it was intended." -- Stewart Dougherty

"The question we must now ask ourselves is whether 'backed by government' actually means anything anymore... But what happens when confidence in the government guarantee begins to erode? .. In our view it is time for investors to acknowledge sovereign risk. The ratings agencies can opine all they want, but it seems clear to us that the only true AAA asset to protect your wealth is gold." -- Eric Sprott

"Buffett swapped his reputation at a cheap price. It is painful to watch Buffett behaving like a hostage to Wall Street." -- Bloomberg magazine (after WB praise of Goldman Sachs)

GOLDEN POTPOURRI

◄$$$ AFTER THE EUROPEAN BAILOUT WEEKEND ANNOUNCEMENT, IT IS CLEAR THAT THE STAGED STOCK PLUNGE WAS TO SECURE A LARGE LOW PRICED POSITION FOR THE BIG ANTICIPATED RUNUP. THE RECOVERY AND FOLLOW THROUGH LAST WEEK CONSTITUTED INSIDER TRADING. $$$

My desk inbox has been abuzz since the May 6th staged roller coaster ride to bilk the public of perhaps $200 billion or more. With the weekend announcement by the European Union bankers for a gigantic $1 trillion rescue, the Wall Street crooks secured a very nice cheap huge position by scattering the sheeple and taking their shares at horrible low prices. Wall Street computer programs gunned for visible stops and secured larger positions just in time, as the public found themselves in shock, on the outside looking in. They had a few days tipoff to exploit the information not yet made public. So once again, Wall Street profited at public expense with a rabid insider trading episode.

◄$$$ A QUICK UPDATE ON THE LOUISIANA OIL VOLCANO, CLEARLY AT LEAST GROSS NEGLIGENCE BY BRITISH PETROLEUM, EVEN NEGLIGENT HOMICIDE. CREDIT TO THE OIL DRUM FOR INFORMATION. B.P. TOOK SHORT CUTS ON THE DEEPWATER HORIZON PROJECT, IGNORED SCHLUMBERGER ADVICE, WHOSE CREW ABANDONED AFTER THE B.P. SITE MANAGER MADE HIS DISASTROUS DECISION NOT TO SHUT-IN THE HUGE UNSTABLE WELL HEAD. $$$

BP contracted Schlumberger (SLB) to run the Cement Bond Log test that was the final test on the plug to prevent a blow-out. That crucial step was skipped by British Petroleum, an active decision made against the sound SLB advice on the site. SLB is an very highly regarded costly service company that places a high standard on safety. They train their workers to shut down unsafe operations without hesitation. After determining the well was too unstable, the SLB team ordered the BP company man to dump kill fluid down the well and shut-in the well. The BP company man refused. SLB then abandoned the oil rig site entirely, even ordered a helicopter from their own headquarters at their own expense. Six hours later, the gigantic platform exploded, killing eleven workers (all BP, none from SLB). No Cement Bond Log was conducted after the pressure tests. The BP company man (who survived) is liable for prosecution for 11 counts of negligent homicide. See the Oil Drum article (CLICK HERE).

◄$$$ A QUICK SUMMARY COMMENT ON THE STATUS OF GREEK BAILOUTS. THE PRIORITY WAS TO BAIL OUT THE BANKS THAT HAD HEAVY GREEK DEBT. A REVERSION TO THE DRACHMA STILL HAS GREAT PRESSURES TO BE EXERTED, AS PART OF A DEBT RESTRUCTURE (DEFAULT) AND ECONOMIC STIMULUS PLAN. GIVE IT SIX MONTHS TO OCCUR. $$$

It appears that Greece has been bailed out. More likely, the grandiose bailout was of banks that own heavy Greek debt, big difference. Recall, reported a few months ago here, that the biggest bank exposure to Greek debt was in held in Swiss banks, French banks, and London banks. SO THEY WERE BAILED OUT! Watch in the next few months as events will direct Greece to abandon the Euro. They submitted to the absurd 'Poison Pill' from IMF policy in order to receive any aid. That means accelerating recession, massive unemployment, heavy cutback in government jobs and sponsored projects, but still worse deficits (since poison). The result will probably be difficulty in financed Greek Govt debt in continuation, plus major social problems from the unemployment, like riots. The jobless will take to the streets. Their economy will continue to deteriorate. The Greek Govt will eventually decide to revert to the Drachma currency, as natural economic pressure dictates the reversion. A common Euro goes against the natural pressures. A return to the Drachma currency will enable them to lift the federal spending and maintain jobs from government posts. The Greeks have the biggest social welfare in Europe, from service in government positions, something like 11% or 12% of all jobs within the Greek Economy. Severe pressure from pushback will come from the people who wish to preserve such bloat. So the Greeks will eventually decide to go it alone with the stimulative advantage of using the Drachma. That move would appeal to their independence and pride, both wounded. They would be seen across Europe as being bold and adventurous. The Drachma would give them control by means of devaluation. They would probably devalue the Drachma by 25% to 30%, so as to reduce their debts (screw creditors) and encourage more economic activity like exports. A Drachma reversion might come in the same stroke as a Greek debt default, in a package deal complete with debt restructure. All is not as it appears. The Greek Govt was given a stay of execution, while Greek creditors were bailed out. My forecast of Germany not rescuing Greece was correct, and the other shoe of a Greek Govt debt default is still coming. Give it six months to occur, amidst intense political pressures within Greece. The default will be forced from the inside, from Athens.

◄$$$ THE POWERZ TRIED TO KNOCK DOWN GOLD & SILVER AGAIN BY MEANS OF THE USDOLLAR SWAP FACILITIES. NEW FRESH CREDIT LINES WERE OBVIOUSLY USED BY CENTRAL BANKERS ON COMMODITY CONTRACTS. WEALTH PARTIES IN EUROPE ARE FAST ABANDONING TH EURO. $$$

The arrival of the first installments from the fresh new USDollar Swap Facility brought tears of joy to the corrupt Big Four Banks, agents to the central banks under seige as their fortress suffers massive breaches, and other bankers with privileged credit lines. The big banks around the world tapped the swap funds and resumed heavy shorting of most commodities, crude oil, gold, and silver included. Some wonder if the massive short position maintained by the Big Four Banks, the nucleus of the Gold Cartel, will be forced to cover their shorts. Doing so would lift the gold & silver prices two-fold. My view is that they have never been forced to cover, and will not. However, the burgeoning global demand will force the Big Four to double down on their disastrous short positions, accept more dangerous exposure, and assure their eventual ruin. Only if prosecution comes for illegal naked shorting and improper concentrated positions without economic justification (like staggered mining output delivery), will the Big Four be forced to cover their position. Banker collusion might become an issue by regulators, used to look vigilant and tough, while still Wall Street lackey tools.

A rude awakening comes to the Big Four Banks when their government benefactors face sovereign debt default. These highly corrupted banks, cancers from the Fascist Business Model, are agents for the central banks, who attempt to defend fiat currency, a loser's proposition and fool's errand. Their losses are clearly and secretly guaranteed by the USGovt and UKGovt. Watch for one big bank to break ranks, start to neutralize their gold short position, and hope to survive in the coming years when gold doubles. Some unorthodox ideas to share... Maybe the Gold Cartel will attempt to confiscate the mining companies in nationalization initiatives, doubtful. Maybe they will attempt a more blatant confiscation with declaration of vassal ownership illegal, doubtful. The Big Four does not post 80% collateral on short contracts as required. As the gold price has risen from $300 to $400 to $500 to $600 to $700 to $800 to $900 to $1000 and more, the Big Four have not been forced, even by prudent cash management, to cover much of anything.

◄$$$ A GROSS DISCONNECTION REMAINS FIXED BETWEEN THE PHYSICAL AND FUTURES PEDDLERS AT THE METALS EXCHANGES. AN EXPERIMENT IS SUGGESTED. $$$

Take two your wealthiest friends in the gold community. Ask them to go out to locate $10 million in gold bullion for a large physical purchase. Then report back to inform who the supplier is, what the price paid would be, and how long a wait before it is delivered. The outcomes should be highly revealing. The suppliers are few & far between. The product supplied might be from 70 or 80 years old and lower quality, like what is dredged up in London. The price paid would incorporate a hefty premium over spot. The waiting time for delivery would be weeks, if at all. A global gold & silver shortage is underway.

◄$$$ APRIL WAS A CRIPPLING MONTH FOR USGOVT DEFICIT, A RECORD $83 BILLION. RECOVERY WOULD SHOW UP FIRST WITH TAX RECEIPTS. NO WAY, NOT NOW, AND LOUDLY NOT YET. THE FEDERAL HEMORRHAGE PERSISTS. $$$

The April tax deficit for the USGovt hit $83 billion, the highest April deficit on record. Usually the month is decent, given the individual tax receipts flowing into the federal coffers. Income was $245.3 billion, 8% below the sum logged last April. Spending was $328.0 billion, a sizeable rise of 14% over last year. Amidst this widely reported USEconomic recovery, and brisk return to consumer spending, the monthly deficit is four times larger than a year ago. What utter total lies told to the public. The deficit in April 2009 was $20.9 billion.

The breakdowns are ugly, each cited in annual rate of change. Tax receipts down 7.9% with Individual Income Tax down 21.5% and with Total Spending up 14.2% in summary. Some key items to reveal the problem spending areas are National Defense up 17%, Medicare up 39.4%, Social Security up 4.2%, and General Govt up 5.6%. Pain from sacred wards and aging population. On the favorable side was a 9.5% decline in Interest Payments. Be sure to expect interest rates to remain near 0% forever, or else everything shatters. See the Zero Hedge article (CLICK HERE). Sage fund manager Gerald Celente warns in his unique and loud style that the federal bailout approach toward recovery has failed before our eyes. He calls it the recovery bubble, which in my view is built upon a USTreasury Bond bubble. Evidence abounds, yet he does not believe the people seem to show much awareness. See the Celente speech on You Tube (CLICK HERE).

◄$$$ BLACK SWAN TALEB EXPECTS WHAT HE DESCRIBES TO BE A TECHNICAL DEFAULT SOON FOR AN UPCOMING USTREASURY AUCTION. EVEN THE SMOKY SIGNALS OF A FAILURE WOULD SET OFF A GLOBAL PANIC. $$$

Financial markets are in turmoil, or at least disarray, probably in a middle stage of ruin without a single market free from contamination. The European contagion within the usually calm sovereign debt arena is spreading globally. The USGovt debt situation is at best fragile, and at worst broken. The Black Swan author admits his greatest concern, namely a failed USTreasury auction. Even the impression that an auction goes so badly that the status quo is seen as altered would be enough to make a global blemish and set into motion a wider panic. Taleb suspects eventually an avalanche of USTreasury sales could ensue globally. The metrics are under scrutiny, like a noteworthy change in the Direct Bidder count, the Primary Dealer hit ratio, or something else. The hawks are watching closely. Evidence mounts for heavy monetization revealed from its poorly disguised masks. Taleb offers advice to stay away from USTreasuries, especially long-term Notes and Bonds, to avoid both the Euro and the USDollar currencies, and to have a personal collection of metals. He favors an agricultural land exposure, and regards the stock market as a circus sideshow for observation and entertainment. He made mockery comments of the mathematical algorithms and madmen whose equations helped fortify the leverage lunacy, which brought down the system. See the Zero Hedge article (CLICK HERE).

◄$$$ FANNIE MADE LOGS ITS NEXT INSTALLMENT FOR A BAILOUT REQUEST. THE BLACK HOLE CONTINUES TO SUCK IN CAPITAL. AT LEAST IT IS PHONY MONEY. THE DESTINATIONS FOR PHONY MONEY HAVE BECOME TAINTED SEWAGE SITES, BLACK HOLES, AND DENS OF WALL STREET SNAKES. $$$

Fannie Mae has requested $8.4 billion in aid after its latest outsized loss in 1Q2010. The price tag will reach $1 trillion eventually, or perhaps even already. Its credit derivative losses are kept secret, covered by he USGovt slush funds and printing press. RealtyTrac reported the number of foreclosures in April dropped 2% from a year ago, the first annual decline in five years. RealtyTrac also reported that nearly 334 thousand households, or one in every 387 homes, received a some type of foreclosure notice in April. That was down over 9% from March. However, banks seized a record 92 thousand homes last month. Home prices will continue downward as banks deliver more foreclosed properties to the market. Nearly 7.4 million borrowers, or 12% of all households with a mortgage, missed at least one month of payments or were in foreclosure as of March, according to mortgage researcher Lender Processing Services. It overall sounds like the housing decline is still in slow motion freefall, but the speed of the decline might have hit terminal velocity from mere friction created by the USGovt in its sequence of mangled programs. See the Yahoo Finance article (CLICK HERE).


◄$$$ ART CASHIN FROM THE FLOOR OF THE N.Y.S.E. REALIZES THE APRIL JOBS REPORT WAS TOTALLY VACANT. HE DOES NOT MINCE WORDS, AS HE DISMISSES ANY SEMBLANCE OF POSITIVE SHADE TO THE LABOR MARKET. $$$

Art Cashin acts as a killjoy on the NYSE floor but a realist, when interpreting the highly deceptive April Jobs report. It contained nothing positive, only fluff. From his UBS floor trade post, Cashin wrote to UBS clients, "As we suggested in yesterday's Comments, the Friday Non-Farm payroll numbers got swallowed up by the ongoing worries about Greece. But, the jump of 290,000 new jobs was a big topic on the weekend talk shows. There was a lot of 'We have Turned the Corner' portrayals. Longtime readers know I have thought some of the improvement in the data was suspect (to be kind). For the last eight weeks, Initial Unemployment Claims have averaged 450,000 per week. So, over the last four weeks, 1.8 million people were laid off. How does that fit in with the claim that 290,000 new jobs were created? The obvious answer is that it does not. So, let's drill down into the payroll numbers to see what is going on. The CES Birth/Death adjustment added 188,000 of those jobs. The Birth/Death [Model] does not refer to people but to businesses. The BLS guesses how many new companies opened versus how many closed their doors. The BLS then uses that guess to guess again how many jobs those business created or lost... Another 66,000 of the new jobs came from census hiring. Those are temporary jobs and those folks will be laid off later in the year. Speaking of temporary, another 26,000 of the new jobs were non-census temporary. Let's recap. A guess produced 188,000 of the jobs, 66,000 were census, and 26,000 were temporary. Thus, it seems 280,000 of the 290,000 new jobs were either temporary or the result of guesswork. Some turn. Some corner." Total bullshxx, if one asks the Jackass. Hat tip to Art Cashin. The interviewer was speechless, unless you count his condescending manner, mocking him for his steady negative view as a non-believer. By the way, the Cashin view is almost perfectly in parallel with the Jackass analysis put forth in the May Macro Economic Report. If Cashin were not so experienced, he might be fired for telling the truth too often. His accurate views are tolerated.

◄$$$ BANKRUPTCIES CONTINUE TO SET RECORDS, DEFYING ANY PRETENSE OF RECOVERY. FOOD STAMP ROLLS SWELL TO RECORD LEVELS, PART OF THE AMERICAN TRAGEDY. $$$

January and September bankrupties in the US totaled 388,148 filings, a 17% rise from a year ago, according to the Administrative Office of the US Courts. The breakdown was consumer filings rose 18% to 373,541, while business filings edged up 2% to 14,607. Sequentially, the BK filings rose 4% from 4Q2009, evidence of no recovery. In fact, Q4 then Q1 were the first back-to-back quarterly declines since 2006. Lastly, for the 12 months ended March 31st, there were 1.53 million filings, up 27% from the previous similar length of time, the worst decline since 2006 also. The states that stand out in worst shape are again Nevada and Arizona. See the Reuters article (CLICK HERE).

Nearly 40 million Americans received food stamps, whose record grows each month. Enrollment is highest during times of economic distress, a reflection of basic hunger born of poverty. The USDept Agriculture reports 39.68 million people, or 1 in 8 Americans, were enrolled for food stamps during February, an increase of 260,000 from January. Enrollment has set a record each month since reaching 31.78 million in December 2008. They estimate the fiscal year cost to be $59 billion. For fiscal 2011, average enrollment is forecast for 43.3 million people.

◄$$$ CHINA COULD EMBARK ON YET ANOTHER MAJOR STIMULUS PROGRAM. THE MAJOR NATIONS OF THE WORLD HAVE COMMITTED TO A COURSE OF EXTREME STIMULUS, RESCUE, AND MONETIZATION. THE NATIONALIZATIONS COME TO THE DYING NATIONS. CHINA MIGHT NEXT ANNOUNCE A FRESH NEW 4 TRILLION YUAN STIMULUS, VALUED AT $580 BILLION. $$$

Rumors swirl that China is soon to announce a new 4 trillion Yuan stimulus package. Its value would be roughly translated to $580 billion, a complement to the US $2 trillion total (stimulus plus monetization) and the European $1 trillion. The global wreckage of money is universal. The Chinese find themselves bound to the same fiat money straitjacket with US$ embroidery, whereby the debt deflation and asset bubble dissipation prompt new stimulus demands. The effects of previous stimulus have worn out. Without openly stating so, they search for revival of asset bubbles to deliver calm and reassurance, false progeny of the fiat system. The plan, from China's National Development & Reform Commission, will likely cover nine industries including information technology and new energy. Notice how the major economies of the world are caught in a nasty pattern of stimulus packages, bank bailouts, toxic asset redemptions, market interventions, slush fund creation, that result in extreme monetary expansions. They are working in a corner, with fast disappearing options, as an implosion continues despite their best efforts to prevent it. The ZH author calls it a Keynesian supernova that comes, thus producing very little new debt. In the case of China, they have the luxury of using actual savings from a gigantic war chest. See the Zero Hedge article (CLICK HERE). The dutiful efforts of governments and central bank elite actually make the global monetary system worse, no different from extra cases of Jack Daniels Whisky combined with JD intravenous lines to a dying man in the Intensive Care Ward.

◄$$$ KIEV VOTES TO EXTEND THE RUSSIAN NAVAL PRESENCE, JUST ONE MONTH AFTER THE POLISH GOVT VANISHED IN A CRASH. A PHOTOGRAPHER WHO FILMED THE CRASH SITE WAS STABBED TO DEATH IN A HOSPITAL. $$$

This is really ugly stuff! The parliament in Kiev ratified a controversial agreement that will prolong the stay of Russia's Black Sea Fleet at a Ukrainian port in return for lower natural gas prices. Although not coming from Poland, the agreement certainly is hatched in the shadow of Warsaw and the infamous crash (or missile fire). See the Financial Times article (CLICK HERE). Russia is expanding its influence in Eastern Europe, perhaps with bulldozer tactics to match the aggressive methods used by the United States in the last decade. The blowback against the USMilitary is increasing. My position is that the nucleus of the Polish Govt was killed in a crash, an ordered hit by missiles. In response, Ukraine concedes with an extension to the Kremlin. Eastern Europe will roll over to Russian desires and plans as important but hidden bonds with Germany are being forged.

The photographer who captured pictures of the crash site has met an untimely death, part of the cleanup process. Those photos will not be aired widely, if at all. He was apparently stabbed by three men, taken to the hospital, and then stabbed again by three more men, who pulled his body off life support. The story did not make it to the mainstream media. See the Prison Planet article (CLICK HERE). Parallels to the Yugoslavian plane crash in 1996 which took the life of Secy Commerce Ron Brown and a dozen US corporate executives are brought to memory, both with the airborne execution and slayings of witnesses on the ground. Standard operating procedure for heads of state, which better resemble crime syndicates.

◄$$$ THE HIGH OIL PRICE FORETELLS OF SLOWER ECONOMIC ACTIVITY IN BOTH THE UNITED STATES AND EUROPE. COMMODITY PRICES FOR RAW MATERIALS, LED BY RUBBER AND LUMBER AND THE PLATINUM GROUP. THE COST IMPACT TO THE USECONOMY IS CLEAR, AS IS THE IMPACT TO THE GLOBAL ECONOMY FROM RISING COST STRUCTURE. $$$

The rising blue line in the graph below represents higher crude oil costs. Notice in the previous four spike examples since 1970, the delayed effect was distinct, of worse economic activity, even recession. The result in 2010 from rising crude oil prices will also be recession. The recent currency turmoil has left the Western Economies at great risk as financial players seek safety in crude oil hedges. Not only is the crude oil price higher in nominal US$ terms, but with the falling Euro, the rising crude oil price in Europe is even more acute in its shock effect. The rising oil costs in European context have been mentioned before in these reports. Look for economic recession to deepen in the West. The falling money supply in the US only adds intensity to the anticipated recession. Thanks to the Casey gangsters for the chart.

The cost of raw materials is generally rising, due to strong demand from Asia and possibly weak currencies. The impact is to corporate profits, stock valuations, and sometime to consumer prices. These are not exotic items. Take rubber for example. The rubber price has climbed over 70% this year after rising 92% in 2009. Industry leaders Goodyear in Ohio and Bridgestone in Tokyo have warned investors about a potential smack to profits. Product price hikes are next. Tire shipments in the US fell hard by 21.1% from 2007 to 2009, according to Modern Tire Dealer. Goodyear raised prices up to 8% on some tires recently, citing higher raw material costs, a move followed by rivals. Bridgestone wishes not to pass on costs to customers through higher prices, and will attempt to cut costs internally through efficiency.

Rubber's rise is driven by powerful demand in China, where car sales rose 56% in March compared to a year ago. Indonesia and Malaysia have endured a wet winter, harming natural rubber output. The recycling process is brisk, but not enough to stem the impact to business bottom lines. Also, a similar story is told for palladium, a key ingredient in car exhaust systems. The palladium price is up almost 40% this year. The impact to car makers is clear, although it is one of a great many components. Then take lumber, a major item for home builders. The lumber price is up almost 60%. The home builders really should shut down for two years, but that is not practical, a vital step to relieve the supply glut. Higher lumber prices have added $2400 (=1.1%) to the median priced home, according to the National Assn of Home Builders. Pitch in material costs to the mortgage rates creeping higher, both threats to housing generally. Iron ore prices are on the rise, while copper prices have also continued an upward path atop last year's sizeable rise.

Here is where the comedy comes. The Bureau of Labor Statistics admits the Producer Price Index showed that crude goods such as iron ore, construction sand, and wood pulp shot up 44.5% on a yearly basis, the fastest rate since 1974. Consider the higher energy and food costs, along with crude goods, whose combined prices rose 33.4%. But the overall PPI remains tame, when all its components are rising fast. Thanks to the wonders of adjustments, like cutting the reality down by a factor of 5:1 or more, so as to announce a palatable report to the public, based in pure nonsense with a large dose of drivel. Strains between emerging market nations and the developed world are growing over such cost pressures, which directly affect economic growth. The lesser nations seek alternative price systems, including barter.

◄$$$ EUROPEAN LEGAL PROSECUTION IS UNDERWAY. INVESTIGATIONS ARE DEEP AND RUN BY STRONG PEOPLE WHO HAVE INDEPENDENCE FROM POLITICAL LEADERS AND SYNDICATE BOSSES. EXPECT MORE BANKER MURDERS, AN UNFORTUNATE CONSEQUENCE OF THEIR IMPUNITY PRIVILEGE. A BIG RISK FOR THE BANKSTERS IS JUST ONE BANK C.E.O. OR C.F.O. TO SING IN A PLEA BARGAIN, PART OF TURNED STATE EVIDENCE. $$$

In digestion of the event and its impact, an exchange took place with a very well connected global banker with a strong track record in advance notifications of important events from the autumn months of 2008. He gave three weeks advanced notice of Lehman Brothers and AIG busts, which the Jackass actually guessed upon prompting, but not AIG (no correct guess). My message to him centered on the legal prosecution initiatives against JPMorgan and implicitly Goldman Sachs also, with unleashed violence. The Jackass message went, "Someone is gonna die if they push too hard against JPM, like suicides seen with the CFO for Freddie Mac two years ago. A staged suicide within the GSax fortress would enable a black hole to form that could make easy the disappearance of many damaging documents. Look what happened to the US stock market last week with the Senate pushed to force a USFed audit!! Few seem to connect the dots. It was like a TOTAL NEWS BLACKOUT on the Senate alteration of USFed Audit provisions last week. The Senators blinked in the face of the staged financial meltdown. My guess is the Wall Street lieutenants collected $200 billion from the roller coaster ride. Some of the funds, like maybe $10 billion, could easily be used to create a slush fund to bribe Senators, SEC, and CFTC officials for the next two years. The heavy handed influence led by basic bribery would stop any USFed audit and stop any meaningful JPMorgan investigations. I smell limpwristed whitewashes from commissions, one after the other, with little change to the status quo. I sure hope I am wrong."

The global banker response was longer than most, which in itself indicates an important sensitive topic. This is the same gentleman who revealed Goldman Sachs might be labeled a criminal organization by Interpol in Europe, cited in the May Crisis Coverage report. He replied, "Your points are very well taken about possible violent deaths. The AMN Amro banker death was almost simultaneous with the Freddie Mac murder suicide. More deaths to come since too many midlevel bankers know too much information about bond fraud cover-ups and pathways. All it takes is one bank executive to sing to the high level police authorities for the system to have a huge hole poked in it. Watch the Kauptring case of the Iceland banker for such a hole. He might sing loud. Please note that there is a heavy duty investigation ongoing in Europe into the activities of the US investment bankers. Since the European and International Criminal courts are involved and have unleashed their attack dogs, it appears not to go away for the Boyz. European judges and official prosecutors are not easily intimidated and get very nasty very quickly if being pressured. I happen to know a couple of the top dogs there, since I went to school with some of them. These guys are totally independent and have enormous powers not many people are aware." If you think Interpol is only working in Europe, think again. The European contact above gave an update. He wrote yesterday that "INTERPOL is on the ground in the Untied States in full force." If the USGovt legal authorities are corrupt to the core, then Interpol will take over, and has done exactly that!

North American readers should take note that European legal authorities have much more independence and autonomy written into their charters. Following World War II, numerous provisions were rooted and installed for autonomy. They cannot easily be influenced, steered, or sent on retaliatory missions, like what is typical in the US. In the United States, the FBI (national police), the SEC (stock regulators), the CFTC (commodity regulators), the IRS (tax collector), CIA (hired killers), and USDept Justice (attorney general), these groups are often part of the private army and security apparatus available to the US President and his Administration, and thus form extensions to the financial crime syndicate for carrying out vendettas, harrassment, armtwisting, personal assaults (like of GATA head Bill Murphy by the FBI, a broken jaw), murders (like Freddie Mac CFO), and nasty dirty deeds (like tax audits). The Germans have almost totally independent legal authorities. The United States resembles a Third World nation in legal apparatus, consistent with its syndicate operations in bond fraud, currency counterfeit, offshore financial entities, and narcotics money laundering. The regulators and FBI often are critical in coverups, like in the theft case of the illegal Goldman Sachs front running flash trading software stolen by one of their own employees. The FBI rushed to the scene and arrested the man, kept the lid on the event, and prevented further damage to GSax, their master. The FBI in no way enforced the laws against illegal insider trading and advanced sophisticated devices like the Unix box that GSax used (and still uses) to frontrun trades after it views millions of them before execution.

◄$$$ THE S.E.C. PROMISES TO INVESTIGATE THE U.S. STOCK CRASH. THEIR REPORT WILL PROBABLY STRESS ALL THE WRONG EXPLANATIONS, JUST TO GIVE COVER TO THE PARTIES MOST RESPONSIBLE. APPARENTLY, REPORTS SAY WADDELL & REED WERE THE AGENTS USED BY THE HIDDEN VILLAINS. THE BOYZ SOLD 842 THOUSAND E-MINI CONTRACTS TO KNOCK OFF $1 TRILLION IN STOCK MARKET VALUE IN A MERE 20 MINUTES, A TRIBUTE TO FINANCIAL ENGINEERING. GOLDMAN SACHS & JPMORGAN WERE CITED IN A REPORT. $$$

Do not be too encouraged by a Securities & Exchange Commission pledge, complete with subpoenas, to get to the bottom of the stock crash. Sure, the SEC is pursuing Goldman Sachs and JPMorgan, even Morgan Stanley. But the core of the SEC agency is still beholden to Wall Street. Hopeful observers might expect to hear an unredacted unbiased look into the inner workings of High Frequency Trading operations like Getco, Medallion, Citadel, and Goldman, as Tyler Durden wonders aloud. He questions the outcome of another past SEC investigation into Renaissance, an older probe which ended as quickly as it began. Anticipation and baited breath from the harsh light of subpoenas will likely yield only bitter tastes and disappointment. The bigger motive is the heralded probe rather than the probe itself. See the Zero Hedge articles (CLICK HERE and HERE).

An internal document from CME Group stated that on May 6th during a 20-minute period, 842,514 e-mini contracts were traded. The US stock markets plunged in response, wiping out nearly $1 trillion in market capital at the time. The big mystery seller of futures contracts was not a hedge fund (typical scapegoat), but the money manager Waddell & Reed Financial. Although it is believed now not to be a high frequency trader, certain computer trading systems can certainly deploy the e-mini contracts with coordination from other Wall Street firms, and hire Waddell & Reed to conduct the trades as agent. Few questions have come as to the identity of the W&R clients. That much capital requires big pockets like the Wall Street firms working closely with the USFed itself. The SEC might soon find a way to put the trading tag on W&R, and end the story. The first shred of evidence led regulators and exchange officials to focus upon the Waddell sale of 75,000 e-mini contracts, which they thought "superficially appeared to be anomalous activity." The CME document shows that during the sell-off and subsequent rally, other active traders in e-minis included Jump Trading, Goldman Sachs, Interactive Brokers, JPMorgan Chase, and Citadel Group. There is your line-up of mug shots of the villains. See the Ritholtz article (CLICK HERE).

EUROPEAN BAILOUT IMPACT

◄$$$ THE EUROPEAN BAILOUT PACKAGE OF $1 TRILLION IS COMMITTED. THIS IS TO MATCH THE $1.3 TRILLION FROM THE UNITED STATES LAST SUMMER. THE CHINESE HAVE JUST ANNOUNCED THEIR OWN $760 BILLION PACKAGE. THE WORLD HAS EMBARKED ON A DEMENTED VOYAGE OF Q.E. ON SHIPS SENT DOWN THE RIVER OF TAINTED LIQUIDITY. THE MAJOR CURRENCIES OF THE WORLD ARE IN RUIN, THE QUANTITATIVE EASING LEVERS SIGNIFY THE EPITAPH WRITTEN IN CLEAR TERMS. GOLD IS FINALLY RECOGNIZED AS THE ULTIMATE SAFE HAVEN PORT IN SUCH A STORM WITH RECKLESS POLICY. CREDIBILITY OF CURRENCIES AND CENTRAL BANKS HAS BEEN SHREDDED. $$$

The Quantitative Easing is finally global on all three major continents, North America, Europe, and Asia. In order to prevent the disintegration of the Euro and the European banks, their central banks will pony up nearly $1 trillion, actually $962 billion in converted value. The grand move only assures collective socialized evenly distributed failure and ruin of the Euro through devaluation versus Gold. Every member central bank, under the orchestration of the US Federal Reserve, will toss a stream of money at the problem, but it will persist, much to their frustration. The USDollar and Euro will be bound together in their fates, just like the European nations will be bound together. At least that is the European plan.

The plan is a short-term fix that will prove fleeting in its effect. The proverbial race to the bottom for the major currencies has turned toward climax, with elimination of the Euro as a competitor to the USDollar in reserve currency. Gold is the only valid alternative to the imminent collapse of the fiat system, in full gait. The toal reluctance to pursue a remedy via liquidation was averted, since power was to be maintained by the guilty parties. A collectivism solution is pursued, which will put all major currencies on a course that pulled them together over the waterfalled cliffs to their watery graves. Like any fast moving waters, the erosion to capitalism has been astonishing in the wreckage of capital formation and undermine of savings through the absence of the key mechanisms founded in bankruptcy and renewal. Gold will absolutely thrive in this environment, whose testimony is its breakout in every single major currency, except the strongest commodity currencies. Not only did the EU Bank Bailout plan undercut the viable competitive standing of the Euro with respect to the USDollar, but the plan shredded credibility of fiat paper currencies generally and the central bankers specifically. The dilution of the Euro currency is clear, an effect in the open. As a dire consequence, nations like China will not find it prudent to use the EuroBonds as an investment alternative when diversifying their assets in the Sovereign Wealth Funds.

European leaders, including both politicans and bankers, unveiled an unprecedented rescue package worth almost $1 trillion to be devoted to a bond purchase program. It is designed to stop a global sovereign debt contagion that threatened to shatter confidence in the Euro, but which is highly likely to spread to Great Britain and the United States. Nothing will stop the path of the wreckage. The Western leaders only bought some time. The contagion is most directly felt in the falling Euro currency, but more specifically lately in the fast rising bond yields in Portugal and Spain. The ¬750 billion aid package (=US$962 billion) was agreed by 16 European nations in Brussels Belgium, HQ of the European Union. The Intl Monetary Fund provided its backing, more verbal than tangible. Under the loan package, EU member nation governments pledged ¬440 billion in loans or guarantees, with ¬60 billion more in loans from the EUs budget, and up to ¬250 billion from the IMF (conduit to member nations). The Euro Central Bank will next purchase sovereign and private debt securities. They wish to prevent the collapse of both the Euro currency and the European banking system, which is deeply intertwined with member nation sovereign debt, from Greek to the other PIGS nations.

The ¬110 billion bailout package for Greece, approved only a week before by the EU and IMF, failed to calm the sovereign storm or to bolster the Euro currency. So the fiat fat fools decided to up the ante on the same dismal path, a stroke of desperation. They will not pay for the package, but rather print the package. French Finance Minister Christine Lagarde boldly and confidently claimed in Brussels that "The message has gotten through: the EuroZone will defend its money." Yes sure, but with the wrong medicine or fortification. These are paper walls on a fortress easily attacked by paper slings and arrows geared with leveraged bows and catapults. The power of the gestured move will be met with an equally powerful reaction from basic physics, as the Gold price will skyrocket. Money will be ruined with hyper-speed in full view. Marco Annunziata is chief economist at UniCredit Group in London. He said, "This truly is overwhelming force, and should be more than sufficient to stabilize markets in the near term, prevent panic, and contain the risk of contagion. This is Shock & Awe, Part II and in 3-D." Silly man! The benefit will be short-lived, as already seen in the Euro continued decline, and trigger a chain reaction like a strong geyser to lift Gold, and Silver too.

The European Union is forbidden by its own rules to provide direct central bank lending to member governments. To skirt the rules, the EuroCB will follow the USFed pattern of conducting interventions to ensure depth and liquidity in the bond markets. They claim the purchases will be sterilized, not to increase the overall money supply in the financial system, but that is a lie. They will NOT reduce bank liquidity in offset. Another USDollar Swap Facility will be put to work again. The desperation grew from the perceived need to short circuit the negative feedback loop which was beginning to threaten the entire sovereign debt market. The EuroCB will provide backstops for the bond market, while central banks of Germany, France, and Italy all claimed they have begun to purchase government bonds already. Bond yield spreads have relaxed versus the benchmark German Bunds. Like with the Greek Govt bonds, the relief will be fleeting, last a month or two, but no more in my view. An acceleration in breakdown is visible and profound. Andrew Bosomworth is from Pacific Investment Mgmt in Munich Germany, and a former EuroCB official. He said, "A very thick line has been drawn in the sand. This is all in. What more could they have done?" The line in the sand has been washed away in a few days. The poker analogy is appropriate, full commitment, do or die, perhaps do and die anyway. See the Bloomberg article (CLICK HERE). Major currencies are being trashed at warp speed, precisely as forecasted in the last two to three years.

◄$$$ USDOLLAR SWAP LINES HAVE BEEN RENEWED. THEY ARE CRITICAL IN SHARING THE WORKLOAD IN MONETARY EXPANSION. THIS SPIGOT IS PRECISELY WHAT LIFTS THE GOLD PRICE, THE GREAT MONETARY INFLATION LEVER. $$$

The US Federal Reserve issued the following press release on May 9th, heralding the facility. It enables the printing of money for immediate usage by foreign nations, as they essentially print their own money but use the USDollar wellspring as conduit. See the USFed press story (CLICK HERE). This announcement should be viewed as a response to debt abuse. The public balance sheets have systematically built up greater debt in order to rescue private banks from ruin. The government leverage upward has enabled a private bank leverage downward, with little success however, as perception of wreckage is pervasive and turning universal. The bond market recognizes the ruin has shifted from banks to sovereign accounts, the government debt arena. So the USFed will produce mountains of new money, and gold notices the debasement process. The USFed press release read as follows.

"In response to the reemergence of strains in US dollar short-term funding markets in Europe, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing the re-establishment of temporary US dollar liquidity swap facilities. These facilities are designed to help improve liquidity conditions in US dollar funding markets and to prevent the spread of strains to other markets and financial centers. The Bank of Japan will be considering similar measures soon. Central banks will continue to work together closely as needed to address pressures in funding markets.

The Federal Open Market Committee has authorized temporary reciprocal currency arrangements (swap lines) with the Bank of Canada, the Bank of England, the European Central Bank (ECB), and the Swiss National Bank. The arrangements with the Bank of England, the ECB, and the Swiss National Bank will provide these central banks with the capacity to conduct tenders of US dollars in their local markets at fixed rates for full allotment, similar to arrangements that had been in place previously. The arrangement with the Bank of Canada would support drawings of up to $30 billion, as was the case previously. These swap arrangements have been authorized through January 2011. Further details on these arrangements will be available shortly."

◄$$$ BOND BAILOUTS ARE WHERE THE RUBBER MEETS THE ROAD AND THE FULL INTENDED IMPACT IS TO BE DIRECTED. COORDINATED BOND PURCHASES WILL COME, WITH BACKSTOP ASSISTANCE PROVIDED INSIDE THE BOND MARKETS BY THE EURO CENTRAL BANK. $$$

The combined effect will be like lifting a man by his arms directly, but having a bigger man push his arse from below out of view. The Euro Central Bank will buy government and private bonds as part of an historic bid to prevent a total sudden financial cave-in across the old continent. The bond support announcement came less than an hour after European finance ministers unveiled a loan package worth almost $1 trillion to address the market turmoil. Economists and financial analysts have been calling it the 'Nuclear Option' quite rightly. EuroCB bankers arrogantly called their own sovereign bond markets dysfunctional, suggesting the zooming bond yields were unjustified. Then again, they drink from the fiat wine vat filled with wormwood. The ECB reversed policy and will again offer banks as much cash as they want for terms of three and six months. It will also tap a swap line with the US Federal Reserve and sell unlimited amounts of US currency for seven and 84 days. The process has begun. Relief was needed since logjams had been created.

Stress signals were found in the European banks as they began to hoard money. Overnight deposits with the ECB surged to a 10-month high of ¬290 billion on May 6th, signaling lack of willingness by banks to lend to each other, for fear of exposure to high deficit countries. The same phenomenon was seen in the United States in 2008 as banks suspected the commercial paper contained mortgage bond bad paper. Like the USFed, the most toxic debt in Europe is to be targeted for redemption. James Nixon is economist at Societe Generale in London. He said, "They are not cranking up the printing presses. This is a much more targeted, surgical approach. They buy the duff stuff that no one in the market will touch." They buy what is worth nothing, that which clogs the markets. It is the printing press though, since sterilization will not occur, and the effect will spread system-wide from the backstops. The problem is that more exists than they estimate. The ¬750 billion aid package is as arbitrarily guessed for a final figure as the TARP Fund in the United States was, pure guesswork amidst ignorance of the total size of the dead financial tissue.

The 'Nuclear Option' was foreseen. Dominated by Germany, but influenced by their squire France, the deal should turn out to be a bond swap window manifestation. The EuroCB is set to buy a mass of existing Greek, Spanish, and Portuguese sovereign debt from German and French banks using newly printing money, the basic Quantitative Easing Part 2. Add fresh new debt issuance over time to the mix. The same banks buy the new sovereign debt but immediately resell it to the EuroCB at a premium, lifting earnings and justifying further executive bonuses. Liquidity is restored, presto! However, on a scale even worse, ECB would become the the irrevocable toxic bank with over a trillion Euros in unrecoverable assets. The carousel of debt swaps and QE initiatives should alert the FOREX markets to the absence of taxpayers legally backing up these purchases. The Euro would take on Weimar status overnight, and join the USDollar! Strictly speaking, the ECB lodged in the bond market would have no legal legitimacy. Bond spreads stand at risk of widening, since as Evans Pritchard comments, "It would be like adding petrol to the fire, with contagion spreading to Germany itself. Axel Weber knows this and is the very reason he has warned against turning the Bundesbank (read ECB) into a 'money printing machine for the bankrupt countries of EMU'." Evans Pritchard warns of a metastasis into an credibility issue of the institutions and governments behind the Euro and EU project itself. See the UK Telegraph article (CLICK HERE).

Even Bundesbank President Axel Weber admits a compromise of banker integrity in expedience, referring to the lesser of two evils. While Weber does not see the threat of contagion from the Greek fiscal crisis meriting "using every means, .. measures that damage the fundamental principles of the currency union and the trust of the people would be mistaken and more expensive for the economy in the longer term." Plain enough! The gradual unbridled increase in the amount of money created and put into circulation will produce inflation. Time will tell if the EuroCB contains the bonds and locks them up like the USFed has in Excess Bank Reserves (the loan loss reserves proxy funds), or whether Europe will be the ultimate site of massive spillover. They wish to achieve containment but will probably not have the cold hearted deviousness and brutal hand to do so.

A key future issue is the monetization of new government deficits. Past debt securities will be bought in heavy volume. Member nations promise to reduce their deficits, an absurd promise impossible to meet. Spain's budget deficit reached 11.2% of gross domestic product last year. Portugal's was 9.4% of GDP, and in Greece it was 13.6% of GDP. Marco Annunziata is chief economist at UniCredit Group in London. He said, "Much will depend on whether or not EuroZone governments quickly follow through on their pledge [to reduce deficits.] If they do not, it will be hard for the ECB to fight off the charge of monetizing excessive fiscal deficits." Past and future debt will be monetized without a doubt, rest fully assured. It will be too easy.

Here is a limited summary of the interwoven exposure. European banks had claims on Greek debt totaling $193.1 billion at the end of 2009. They had claims of $832.3 billion exposure to Spain, and claims of $240.5 billion to Portugal, according to the Bank for Intl Settlements. Look from another individual nation angle. For combined PIIGS nation debt, Germany owns $522.8 billion, France even more at $783.2 billion, the United Kingdom less at $236.3 billion, and the United States at $422.6 billion. So not only is each national debt shared, but each nation has broad exposure. This is a highly interwoven system of debt ownership. See the Bloomberg article (CLICK HERE). And over-paid analysts claimed Greece was isolated. Similar over-paid analysts agreed that US subprime mortgages were also isolated. The Jackass rightly called it all absolute bond contagion in 2007.

◄$$$ THIS IS QUANTITATIVE EASING FOR EUROPE, A MAJOR CONCESSION. OPEN THE FLOOD GATES FOR $2000 GOLD. AN ADMISSION OF DEFEAT FOR WESTERN BANKERS, WHOSE ENTIRE FINANCIAL SYSTEM IS IN RUINS. THE UNSPOKEN SURPRISE IN THE NEXT 12 TO 24 MONTHS IS THAT ANOTHER $2 TRILLION WILL BE NEEDED FOR THE UNITED STATES AND EUROPE COMBINED, MAYBE MORE. THE FUTILITY OF THE SUPPOSED REMEDY PROCESS IS THE SHOCK, SLOWLY RECOGNIZED AT THE FRINGE. $$$

Jim Rickards of Omnis has recently been shown massive media exposure on crucial topics from the JPMorgan silver manipulation scandal to the Greek debt default. On a CNBC interview two weeks ago, he provided a fascinating insight on the futility of the monetary solution to the bond crisis. One can conclude beyond any doubt that attempts by Europe to print its way out of its current default is doomed. He said, "Look at what Soros did to the Bank of England in 1992. He went after them. They had a finite amount of dollars. He was selling sterling and taking the dollars. And they were buying the sterling and selling the dollars to defend the peg. All he had to do was sell more than they had and he wins. But he needed real money to do that. Today you can break a country. You do not need money. You just need synthetic Euro-shorts or Credit Default Swaps. A trillion dollar bailout? Goldman can create 10 trillion of Euro-shorts. It just dominates whatever governments can do. So basically Goldman can create shorts faster than Europe can create money." The world is watching a war of phony paper against artisans of financial engineering with their own leveraged paper weapons, in a grand neutralization game. The reviled CDSwap so-called speculators hold all the important cards in the poker game. See the Zero Hedge article (CLICK HERE) and the Central National Business Comedy (CNBC) interview (CLICK HERE).

In my view, the heralded Quantitative Easing Part 2 coming from Europe, a belated echo from the massive QE from the United States, opens the floodgates to $1500 gold and possibly $2000. It should be regarded as a white flag of defeat for Major Western Bankers. They have failed, and entire global banking system on the Western flank is in ruins. The surprise they are not planning for is the next $2 trillion needed by the US and Europe. My eager eye salivates to witness the effect of the New Core Euro, the Northern Euro, the Nordic Euro. It will upset the FOREX balance of power and equilibrium like nothing in 50 years. It is essentially just a return to the DeustcheMark.

◄$$$ FRANCE IS NEXT ON THE BLOCK FOR HEAVY SCRUTINY ON SOVEREIGN DEBT. IT STANDS ON QUICKSAND. ITS BANKS ARE HEAVILY EXPOSED TO GREEK DEBT AND PIIGS DEBT DIVERSIFICATION. ANY BAILOUT WOULD NOT SO MUCH BE FOR GREEK BENEFIT BUT FRENCH BANK BENEFIT. $$$

The Credit Default Swap pricing patterns are excellent for forecasting the next trouble spot. They accurately tipped off the Bear Stearns and Lehman breakdowns. They serve as warning of major players abandoning ship. These speculators take part in the free markets, make a gob of money, but in the process are branded as quasi-sovereign terrorists. They work off the different EuroBond yields within the union, and the different exposure to PIIGS debt. Such is the stuff of markets, actual arbitrage at work ripping ramparts already broken. So the CDSwap signals are important for the French Govt debt, as a shakedown comes. France, Spain, and Portugal are lined up like ducks at a bond market shooting gallery. The CDS traders benefited handsomely from Greek and Dubai CDSwap contracts grabbed long before default events became headline news. By mid-April, the volume of CDS in Greek Govt debt had dwindled down to $8 billion, the largest single week reduction yet, $367 million less. CDS traders have turned focus to the one country which is more on the hook in terms of Southern European exposure than even Germany. Enter France on the radar coming from the left side. It is France, with a staggering $783 billion in total debt assets. According to the IMF, the total amount of foreign claims of sovereign debt securities from PIIGS nations of Southern Europe, from banks scattered across Europe is $1.54 trillion. Not yet a household fact known is that France has greater exposure than Germany. France has much more at stake than Germany, whose banks have only $523 billion in Southern European claims.

Any PIIGS string of defaults, or teetering on the edge with extreme yield rise and principal decline like what was seen to short-term Greek debt, and the financial sector of France will implode. This is what CDSwap traders are betting on currently. Actually, all three nations in France, Spain, and Portugal are targets for heavy CDS contract bets for crash courses, as Net Notional saw the largest increase. Also on the same radar of rough spots is Japan. See the Zero Hedge article (CLICK HERE or HERE).

◄$$$ BANK RISK SOARS TO HIGHS ABOVE THOSE SEEN PRIOR TO THE LEHMAN COLLAPSE. GOVERNMENT DEBT IS BEYOND THE RISK THRESHOLD. THE SIGNAL THAT WOKE UP CENTRAL BANKERS, MOTIVATING THE $TRILLION EUROPEAN BAILOUT, MIGHT HAVE BEEN THE GOVT BOND INSURANCE IN RISING CREDIT DEFAULT SWAPS. $$$

In the week before the massive ¬750 billion government bailout of the European banking system, the cost of insuring against default on European bank bonds soared to a record. The levels rose above those triggered by the collapse of Lehman Brothers bust. The CDSwap rates had been extraordinarily high for both sovereign bonds and big bank bonds.

Mohamed El-Erian has become recently a fine spokesman for the global currency system breakdown, the government bond breakdown, and the banking system breakdown. He is co-CEO of Pacific Investment Management Co (PIMCO). El-Erian has stated his belief that the European crisis has the potential to spread across the globe, since governments have borrowed too much money, their underlying economic growth is inadequate, and many of the biggest banks remain insolvent. Not only are sovereign bonds at risk, but major private banks are too. Attention was directed at large banks such as Banco Comercial Portugues in Portugal, Banco Santander in Spain, Royal Bank of Scotland in the United Kingdom, and others which suffered a sudden rise in their CDSwap insurance contract protection.

Focus for the moment on sovereign debt CDSwap rates, which insure 5-year bonds. They have come down since the $962 billion bank system bailout scheme was hatched, released, and put into effect. CDSwaps on Greek Govt debt surged to 1008 basis points (=10.08%) at its height. CDSwaps on Portuguse Govt debt reached 502 bpts at peak, and Italy to 255 bpts. The UKGovt debt insurance CDSwap contract rose to 99 bpts, within the shadow of 1%. The massive bailout package was a response to a failure of a ¬110 billion bailout package just two weeks ago to relieve pressures and ease concerns. For instance, Markus Ernst, a credit strategist at UniCredit Munich, wrote that "We do not see a clear sign that markets will calm down in the absence of decisive action by authorities, which so far have ignored the opportunity to convince investors that they are capable of battling the European sovereign debt crisis." Since the big bank bailout was announced, the Greek Govt debt CDSwap has relaxed down to 585 bpts, the Spanish to 173 bpts, the Portuguese to 230 bpts. These are roughly half the level before the bailout news hit the streets and markets. Relief to bonds has come, but the Euro currency is being trashed. See the Bloomberg article (CLICK HERE).

◄$$$ PIIGS DEBT FINANCE NEEDS ARE COLOSSAL IN THE NEXT THREE YEARS, A GROTESQUE UNDER-STATEMENT. ITALY DWARFS GREECE IN ITS NEED FOR DEBT FINANCING BY ALMOST 10-FOLD. THE FIASCO IN SOUTHERN EUROPE WILL CONTINUE FOR MANY MORE MONTHS. THE COST TO FUND SUCH DEBT JUST ROSE MARKEDLY, AS THE MARKET SIMPLY REJECTED THE NOTION OF NORMALCY. ANY BROAD BAILOUT MUST FACTOR IN THE NEW PRICE REALITY. ONLY A SWEEPING BAILOUT CAN CHANGE THE ENTIRE SOVEREIGN BOND SHORT-TERM PRICES. $$$

The attention given to Greece is out of proportion to the volume of its funding needs, relative to the other Southern European nations. In 2010, Italy has almost 10 times as much debt funding needs as Greece. Yet Italy is almost never in the news. The financial news networks have done a notable job in distorting the emphasis to Athens, the problem child among several delinquents and violators. In the current and next three years, the expanded PIIGS (includes Ireland) have total funding needs of an estimated $1.93 trillion!! That covers both the rollover refinance of maturing debt and fresh new deficits to securitize. The expanded PIIGS funding needs for 2010 alone total $614 billion, almost 20x that of Greece. Given that Greece has debt funding needs through 2013 of only $153 billion, one must ask whether Greece is a whipping boy. It surely is, in my view. What is not spoken is how a very large portion of the Greek debt is owned by Swiss, London, and French banks, details for which were provided in Hat Trick Letter recent reports. So any bailout is also of banks from other nations. The IMF contribution to bailouts, aid, and rescues is a bit of a Straw Man. They only possess pledges from member nations, own no kitty fund of substance, and own no gold either.

This table summarizes the funding needs of just the PIIGS nations for the next few years. On the days when the 2-year Greek Govt bond yield surged to 38% then settled at 24%, the entire PIIGS debt entered the unfundable zone. The contagion has spread, and European leaders have reacted. The shock will come and go, not to be cured by any means, since sovereign debt is in a state of ruin. Any broad bailout simply shares the burden, tethers the nations together, and assures a delay in the day of reckoning. The only winner is Gold, which will rise relative to the mutually damaged currencies. See the Zero Hedge article (CLICK HERE). The short-term funding needs should convince any analyst with a pulse that the $1 trillion is not enough!!! Popular economist Nouriel Roubini believes the next trouble spot in Europe is Spain. He believes the debt situation in Spain is worse than Greece. See the Yahoo Finance article (CLICK HERE). Heck, Italy and Spain are both the next problem.

IMPAIRED FOREIGN CURRENCYS

◄$$$ THE E.U. BAILOUT HAS RESULTED IN NO RALLY AT ALL IN THE EURO CURRENCY. WHAT IT GAINED ON MONDAY MORNING WAS LOST BY MIDDAY ON MAY 10TH. THE EURO ENDED DOWN ON THE WEEK IN A SHOCKING DISPLAY OF WEAKNESS. MEANWHILE, GOLD ROSE LAST WEEK DURING THE USDOLLAR RALLY. REGARD THIS AS A SIGNAL THAT ALL MAJOR CURRENCIES ARE NOT ONLY BROKEN, BUT NOT FIXABLE. EVENTS SUPERCEDE SIMPLE BILATERAL DOLLAR FACTORS. GOLD IS THE STABLE CURRENCY, THE TRUE SAFE HAVEN, FINALLY RECOGNIZED. $$$

The key point to notice and fixate upon is that the Gold price rose during a USDollar rise in the last two week perioda, during a tectonic earthquake with epicenter the global monetary system. Think of five guys beating each other up badly on a stage, bloody messes, broken arms, looking for dominance, one the shylock, but the entire stage is collapsing. That stage is the fiat currency stage, rejected by its creditors, soon to face the REPO-Man. Either a string of defaults occurs or fast rising bond yields strike in a whiplash. The USDollar is going to serve as a key factor for most markets, but in a different way. The US$ has become the collapse of financial market indicator, the indicator that screams YES or NO on the deflation threat from toxic assets losing value fast. A steady or rising US$ should signal a powerful move in Gold, due to a global monetary inflation initiative that has captured the United States, Europe, and China, Japan too. A dark cloud hovering over parts of Europe at the moment will drift west to England and then gradually engulf the United States. What is seen with each PIIGS nation (Portugal, Ireland, Italy, Greece, Spain) in sequence, the dread will arrive at London's doorstep, then finally on the American doorstep.

On the day of the EU Bank Bailout announcement, a rejection took place. The Euro currency lifted an impressive 200 basis points in one day May 10th, only to lose the gain by the end of day. Worse, in the four subsequent days, a powerful Euro rejection took place, leaving the Euro exchange rate over 300 basis points lower than even the Monday close. It was loud; it was fugly! The FOREX trashed the Euro in a loud vote of NO CONFIDENCE in the hackneyed pathetic solution heard the world over. Conclude the grandiose gargantuan mostrosity of a EUROPEAN UNION SOLUTION to be a feeble futile failure of monetary policy tossed out in desperation by dishonored bankers heavily reliant upon broken tools. They are ambassadors of fiasco, and the world is taking notice.

◄$$$ THE EURO CURRENCY HAS TURNED INTO A LITMUS TEST THE FAILURE OF THE MAJOR CURRENCIES TO GOVERN VALUE AND SERVE AS ARBITER FOR ECONOMIES. THE NEXT ROUND OF USDOLLAR LIFT COULD SIGNAL MONETARY HYPER-INFLATION AND THE NEXT STRONG UPLEG IN THE GOLD PRICE. $$$

The gigantic Quantitive Easing Part 2 does not repair anything except the liquidity of their sovereign bond market. Its size and consensus born of desperation attests to the failure of fiat currencies generally. With this failure recognized, the USDollar is to be relegated to a deflation indicator. As the US$ simply achieves stability within a limited range, or enjoys a slight uptrend, regard it as a signal that INFLATION WINS AND CURRENCIES ALL LOSE. That translates to a Gold rally to $1500, then $2000, and a Silver rally to $30, then $50.

The Euro currency has suffered a massive breakdown, worse than my forecasts. In February, some stability was noted in my analysis, not sufficient for a rebound. In April, some support was noted in my analysis, with an expectation of a new chapter to permit the launch of a New Core Euro. But no recovery came about, probably from too much political obstruction. My analysis was incorrect, too optimistic. The movement to the New Northern Euro is unstoppable, just a little slower than my anticipation. Its architects know when the timing is right. The EU Bank Bailout plans to throw $962 billion at the sovereign debt plague that inflicts Europe. It should be sufficient to force a rebound starting next week, if the Powerz can stage events to instill more confidence, even false confidence built upon false stories. But risk is too great to place personal positions for such a rebound, when the Gold long-term position is much safer.

An attitude is spreading across Europe, that the Euro currency in its present form is doomed. Hence large capital movement is in progress, leaving the Euro, entering USTreasury Bonds to some extent, but entering Gold to a greater extent than in the past. More money will pursue the false treacherous supposed haven of USTBonds, only to be burned later. Fiat paper participants will learn the hard way. The Euro could very easily decline to 117 (the 2005 support), if the abandonment continues in volume, which is ultimately my forecast. It is possible to see an attempt at rebound that sends the Euro toward 130, an even proposition, but it will not stand the test of time and the power of the FOREX market. The European Monetary Union that manages the Euro will be forced to yield to the New Northern Euro amidst collapse. Recall that a falling Euro assists the export trade but raises the crude oil price, along with many commodity items. The economic pressure to form a new & better Euro will be acute, powerful, and urgent. The motive will center on re-creating a stable financial foundation.

◄$$$ A STEADY USDOLLAR LEVEL MEANS HYPER-INFLATION COMES, COINCIDING WITH SUPPORTED SOVEREIGN DEBT. THE USDOLLAR SHARES THE SAFE HAVEN ROLE WITH GOLD. THE SHARED STATUS IS RECOGNIZED WIDELY BY THE FINANCIAL EXPERTS. $$$

The USDollar has changed in dynamics. It now represents in my view an indicator of bond market illiquidity and the general deflation threat. A USDollar DX index that falls hard and resumes the decline means that the bond market crisis grows worse, that yields will rise dangerously, that sovereign bonds will collapse. A US$ decline means the bond crisis is spreading to the UKGovt debt (UKGilt) and the USTreasury Bond. THIS IS UNCHARTED TERRITORY, difficult analysis. A rising USDollar DX index, or even a stable DX index means that the door is opening to hyper-inflation on a global basis, from the rescue of sovereign bonds. So the US$ DX tells the financial markets whether the central bank response will succeed in avoiding a sudden disaster with failing sovereign bond markets. The ruin of a foreign currency reflects as a benefit to the USDollar in a perverse way. For that reason a rising stable USDollar should go in lockstep with hyper-inflation in a slowly developing mushroom, complete with spillover. Never lose sight of the most significant currency finally being recognized in Gold.

◄$$$ A PATHETIC STORY CAME FROM SPAIN, THAT FRENCH PRESIDENT SARKOZY BULLIED GERMAN CHANCELLOR MERKEL INTO SUBMISSION ON SEVERAL CHAPTERS TO THE GREEK BAILOUT. THE STORY IS PURE FICTION. PERHAPS THE STORY IS INTENDED TO DEFLECT ATTENTION AWAY FROM REPORTS THAT THE DEBT RATING AGENCIES ARE SOON TO DOWNGRADE FRENCH GOVT DEBT. DEBUNKING IS REVEALING THOUGH. $$$

The Spanish newspaper El Pais reported last Friday that during the difficult negotiations over the Greek Govt debt bailout, French President Sarkozy succeeded in gaining German Chancellor Merkel's reluctant support by pounding the table and threatening to exit the Euro Monetary Union if Germany did not comply and support the massive aid package. What a piece of fiction! The false story might have originated from the staff of Spanish Prime Minister Jose Luis Rodriguez Zapatero, whose aids passed on an account of a meeting between Zapatero and Sarkozy. The aid was quoted to have said, "Sarkozy banged his fist on the table and threatened to leave the Euro, which obliged [German Chancellor] Angela Merkel to bend and reach an agreement." Another source at the meeting with Zapatero relayed that, "France, Italy, and Spain formed a common front against Germany, and Sarkozy threatened Merkel with a break in the traditional Franco-German axis." See The Atlantic article (CLICK HERE).

The first rebuttal is simple, that debtors never dictate terms or agreements unless they hold a military gun over the table, such as the USGovt does regularly with the USMilitary. The Bundesbank is in possession of 94% of the entire French Govt debt, which negates any power in any French voice. A German banker contact added, "What a bunch of bullshxx the story of Sarkozy bullying Merkel. It is fascinating [ironic too] that 65 years after Germany's unconditional surrender, it is to be the Germans who are the ones fixing Europe after the Anglos and French establshed the Fourth Reich after WWII. What a clown show this all is." Quite the opposite is the harsh reality. Several months ago, the same German contact mentioned in exchanged messages to the Jackass that without a granted reprieve (stayed execution) by the Germans, the French would be grouped with the PIIGS nations, and suffer their same fate. The French will be joined at the hip as tagalongs to any German plan. Curiously, the lack of opportunity for the French Economy to respond to a devalued Franc currency, upon reversion for stimulus, will render any return to economic vitality much less likely.

A possible motive for a false story could be to defuse the growing likelihood of an official downgrade of French Govt debt. The bulwark of analytic brilliance, the bloodied but boisterous analyst straight out of the Wall Street caverns, Tyler Durden passes on reliable rumors that the Euro currency is plunging because a French Govt debt downgrade is imminent. Such downgrade would signal sovereign debt contagion. He wrote, "The country that Zero Hedge has long claimed is the glossed over black sheep that will take down the core of the EuroZone, France is about to be downgraded. At least that is the case according to the latest flurry of market rumors. [After the $1 trillion EU Bank Bailout,] the EURUSD is now moving down 10 pips with each trading block, not higher. Look for support somewhere in the mid 1.23 range." See the Zero Hedge article (CLICK HERE). Nice diversion from Spain on the bilateral pressure, probably a work of fiction. We are entering information wars clearly.

The leaders in Spain had better keep a closer eye on social effects extended from the wretched labor market. Unemployment in Spain has run past 20% officially. The data leaked out through an embargo, a news blackout pierced with no effect. The number of unemployed in Spain increased from 4.3 million to 4.6 million between the end of 2009 and end of March 2010. The jobless ranks among Spanish youth is a dreadful state, an epidemic. The unemployment rate for people under 25 years in the 1Q2010 was 40.9% but 18.0% for those over 25 years. See the Zero Hedge article (CLICK HERE).

◄$$$ THE EURO CURRENCY SPLIT IS NOT IMMINENT, BUT A NEWLY DESIGNED EURO CURRENCY FORMS THE TAIL OF A FORMAL LEGAL COMPLAINT. BOTH THE LISBON TREATY AND THE UNIFIED FINANCIAL BAILOUT MECHANISMS ARE BEING CHALLENGED IN THE GERMAN HIGH COURT. THE NEW EURO WILL BE SPLIT FROM A LATIN EURO CERTAIN TO BE TRASHED. THE NEW EURO IS PLANNED TO HAVE A GOLD COMPONENT. ITS LAUNCH IS SET FOR JUNE 2011 NEXT YEAR, NOT PUBLICLY KNOWN. $$$

Some background. Dr Dieter Spethmann is a former head of Thyssen, a major German conglomerate firm. He has served as advisor to the Euro Central Bank. He has become an elder statesman and counselor to the pathways of the German evolution vis-a-vis the European Union. He predicted the collapse of the Euro currency eight years ago, due to structural inadequacy and inherent gross differences among the member nations. He has written a book on the subject but has recently been the spearhead to launch a Constututional complaint. He is in process of filing a second Constitutional complaint. Spethmann is a Hat Trick Letter subscriber, fluent bilingual, but not a Jackass wannabee since a true gentleman. My best source of German bank information believes firmly that Spethmann's action will lead to the Euro currenty being split into a Northern Euro and a Latin Euro (aka Club Med Euro disrespectfully). The current Euro currency is not a homogeneous entity. Backing all fiat currencies is debt and the formal bond securities. The different Euro Notes are clearly identifiable by nation, marked by a letter in front of the serial number. The Germany denotation letter is X. My German contact, the banker contact was personally at the table for three days in April where the battle plan was designed, decided, and agreed upon. The risk, if not intrigue, centers on an aspect involved that might constitute high treason by certain politicians and upper level civil servants.

The initiatives against the Lisbon Treaty, the Euro currency, and EU Bailout actions are conducted through a formally aligned Group. At the end of April, The Group filed a complaint with German Constitutional Court against the European Monetary Union currency (the Euro users) and the bailout of EU member states, for pacts they deem unconstitutional. This is the second complaint filed by The Group. This is already all over the news in Germany and Europe, with hardly a mention or even a footnote in the intrepid lapdog US press, which is clearly run by an allied nation. Spethmann keeps very much in the background but is the real brain behind the initiatives. The other four core group members are all elite constitutional lawyers and experts, all German citizens and residents, working as visible key players. See the Spiegel article in German language (CLICK HERE).


The German banker contact provided a summary after attending certain high level meetings, as impressions with notes were gathered. His steady sharing of information has been very valuable on matters pertaining to gold, currencies, and bank assets in Central Europe. He wrote, "The first complaint unhinged the Lisbon Treaty that only was implemented after we turned it into a Swiss Cheese, except with 1000 times more holes in it than normal, from heavy motions. The actual Lisbon Treaty enacted looks more than having been treated with a double barrel shotgun multiple times. It will not stand the test of time. However, this time there is a juicy component added which deals with criminal elements and high treason committed by high ranking, political government members, and civil servants. With the Greek situation in the crapper and Portugal, Spain, and Italy to follow shortly, it is safe to assume that the constitutional court in Karlsruhe will be more careful in giving the complaint the attention it deserves. The politicians (Berlin, Brussels, ECB-Ffm) are pretty much defenseless this time and The Group will push them easily over the cliff.

The EURO is toast in  its current composition. There will be a Northern Euro made for use by Germany, Netherlands, with Austria and Finland too, split from the Club Med Euro where all the losers will unite. Those Latins must learn to pay for their own keep. Their citizens will not like it. The Northern Euro will eventually be commodity backed with Russia coming into the equation. The route that will be taken is via Helsinki, since in Finland they have all wires in the box already. The remaining piece is connection by German and Russian 'electricians.' The entire issue is one of economic survival of the people in the Northern European countries, whose nations have been drained by support of ineffective southern neighbors that has essentially been nothing short of welfare costing $300 to $400 billion annually. Nothing more and nothing less. Furthermore, if NATO is not scrapped, we shall see Russia becoming a full member not before long. [The Polish leader plane crash] will encourage Poland to be more cooperative in the new direction. What is in store is a re-run of history with more modern means. This all quite interesting."

In an exchange last week, the German banker contact revealed that June 30th of 2011 is the date set in the construction of the Northern Euro, in the documents, in the formal support mechanisms in the FOREX and commodity markets, and in the contractual agreements with member nations tied to their central banks. The new accord will involve more autonomy, enforcement, and activity by member nation central banks in maintaining the balance among the Northern Euro, the Latin Euro, and other major currencies. Gone will be the bureaucratic Euro Central Bank, the centralized body located in Brussels Belgium. Although the German Bundesbank is the lead dog in the EuroCB sled, the central bank has been highly politicized. The new Northern Euro currency will be jointly managed. Strong cooperation has existed for decades between The Netherlands and Germany. The Benelux natios will partner for lead control of the new Euro. Expect the Northern Euro to rise in valuation strongly upon its launch versus the USDollar, something like 20% to 30% over three to six months. Expect the Latin Euro to fall in valuation, something like 20% to 50%, really, over three to six months. Pay close attention to the role played by Russia and Gold in the Northern Euro currency in the plan.

THE NEW NORTHERN EURO WILL EMERGE FROM THE EXISTING EURO CURRENCY, BUT WITH A GOLD COMPONENT. When pressed on the launch date, the German banker said no formal announcements ahead of time are being planned. It is expected in 14 months, with little advanced warning. My view is that crisis events could dictate an earlier launch, or at least more formal news of its imminent launch in order to achieve some greater currency stability. What is really needed is 'When Issued' Northern Euro and Latin Euro currency trading vehicles. The new Northern Euro will provide intense, sudden, and powerful competition for the USDollar. When the New Euro arrives, the USDollar will resume its deep long-term decline. The US$ has benefited undeservedly from the Euro distress and disruptions in the perverse and vicious Competing Currency War. When the Northern Euro arrives, especially if it contains key commodity components like gold and crude oil, the US$ will suffer immediately enter a crisis stage. A run on the USTreasury Bond would then be extremely likely. The sequence will define the monetary crisis toward climax.

◄$$$ SOME HALF-BAKED FALSE START WAS REVEALED BY GERMAN CHANCELLOR MERKEL, ON A NEW EURO CURRENCY HATCHED IMMINENTLY. THE KEY TO BE AWARE OF IS MERKEL WALKS AS A LAME DUCK, SOON PHASED OUT. HER ADMINISTRATION DOES NOT CONTROL THE CURRENCY TABLE. KUNSTLER ADDRESSES GOLD AND CURRENCIES PATHOGENESIS, WITH BELIEF OF DE-CENTRALIZATION WITH GOLD COMPONENTS. BIANCO JOINS WITH SERVED NOTICE OF FAILED PAPER CURRENCIES. $$$

Merkel has given a news glimpse of a New Euro supposed announced last Friday afternoon. The money has been printed and the bills are ready to be distributed over the weekend. Sharing the offered glimpse is the Kitco website, the precious metals price provider and agent for coin sales. Its half-ready webpage has created excitement since it lists precious metals in DeutschMark units. See the Zero Hedge article (CLICK HERE). See also the news from Merkel on the Godlike Productions article (CLICK HERE) or the German language article (CLICK HERE).

One must bear in mind that Merkel has transformed into a Lame Duck; she is in office but out of power. She has led a group in the thorny German political arena that has maintained one leg firmly in the US-UK power pool. In the background, out of view, has been The Group with significant leverage and influence, working steadfastly and diligently to restore German sovereignty and independence, to rip and remove the umbilical cord connected to Southern Europe that has drained $300 to $350 billion per year of German wealth for a full decade. The keys to Germany here & now are that Merkel is out and a New Northern Euro is planned outside her realm, hatched soon from beyond her sphere of influence. Here is the response from the same German banker contact. He said, "The New Euro is happening but not the way reported. I was personally at the table two weeks ago when the real decisions were made by the real people, in The Group. Germany and the Benelux/Netherlands will carry the ball using the Finns to link into Russia. This is a done deal. Merkel is being retired along with the others who screwed things up. This is not ready for publication yet. We have one shot at getting this right." Be sure that Merkel will retire with a pension and live comfortably. Some of her henchmen will possibly be prosecuted or suffer in a unique way with lost freedom.

The currency tables are like victims in a global earthquake. The tectonic plates are shifting quickly, as old masses are showing a great instability. The AngloSphere is losing control rapidly and completely. New currencies are being planned, soon hatched, that will completely alter the currency world. Nothing can be done by the US from WashingtonDC or Wall Street. Nothing can be done by England from London or Downing Street. The role of Gold will be built into the solutions, into the new curencies, a testament to the absence of anchor in the entire global fiat currency system in full blown failure mode. James Howard Kunstler is unabashed. This outspoken analyst pitches in. He believes the new solutions will be de-centralized and each contain some gold component, consistent with my source. He wrote, "The truth is that the imbalances of global finance are so grotesque now that the whole money system is hanging together with nothing but spit and prayer. I get rafts of e-letters every week warning of a supposedly coming global currency, a companion idea to the notion of a one world government. Both are idiotic fantasies. Events are taking the nations of the world in the other direction: towards break-up, down-sizing, down-scaling. Likewise, if major currencies such as the Euro and the dollar blow up, they are much more likely to be replaced by more local Bank Notes backed by gold than by some hypothetical Amero or Globo-buck." The One World Govt concept is slowly being discarded, or at least de-railed. That is great news for people who cherish freedom.

Jim Bianco is a financial superstar from Arbor & Bianco Research, former market strategist at UBS Securities. He trumpets the news that gold has reached new highs in all major currencies, with the most recent high in Swiss Franc terms. This event in Switzerland is the first time in over thirty years. He reasons that the Gold Rush, early in its genesis, is due to a revulsion towards paper currency and paper assets. Gold is now the 'Anti-Paper Currency' especially mainland Asia and Europe. The United States will be last to awaken to such reality, bludgeoned by Wall Street and its control over the financial press networks. Bianco put forth the following belief, that if gold went to new highs with the dollar while stocks fell, then we should watch out because it would mark a growing revulsion towards paper assets that would mark a sea change in the world economy, and the beginning of the end for the USDollar reserve currency. At long last, the endgame comes nonetheless, he claims. In his view, investors who rush for safety into the USDollar will discover that Bernanke has abused their confidence rather badly. He continues to expand the money supply and direct liquidity to support the toxic balance sheets of the banks, including even his own at the USFed itself. The move in precious metals so far has been impressive, but he warns that if the USDollar wobbles, we will see a move in Gold that will eclipse by an order of magnitude what has been seen in the Gold bull so far this year. Can you say $1500 gold? See the Cafe Americain article by Jesse (CLICK HERE).

SPOTLIGHT ON EXCHANGE TRADED FUNDS

◄$$$ G.L.D. AND S..L.V. INCORPORATE A PRICE PENALTY INTO THESE CORRUPT EXCHANGE TRADED FUNDS. A 2% PENALTY DISCOUNT IS IMPOSED FOR PARTICIPATION WITH THE CARTEL, A JUST FEE FOR GULLIBLE STUPIDITY. WHEN THE LAWSUITS OR FORCED REDEMPTIONS COME, THE PENALTY WILL BE MORE LIKE 35% TO 40%. THE CONTROVERSY WILL ACTUALLY BE FUN. $$$

Wow! Two pictures tell a very big loud story. The infamous but widely cited GLD and SLV Exchange Traded Funds do not match the gold and silver prices respectively. Take the ratio of the GLD fund share price to the GOLD metal price. It should be flat and stable. A penalty is built into their prices, a penalty of over 2% which is trending worse over time. Their managers have argued in lame style that management fees and vaulting fees are required. Critics charge that their bullion on deposit, for both funds, is much less than the shareholders would be entitled to in proper bullion ownership. Thus the vault fees might be fraud on its face, charging for a service not provided. Notice the move down in the 'Integrity Ratio' (my label) in the last week for the gold fund.

It is my considered consistent controversial view (shared by many analysts) that in time, the GLD and SLV funds will forcibly cash out investors. They would be redemptions in cash. My belief is that bullion on deposit has been delivered to the gold cartel, whose firms serve as custodians from the start, the inception and birth of these well designed frauds. Their entire purpose from the onset was to steal the bullion, to negate the physical demand by the investor public. It was a stroke of absolute genius by the cartel. Those who will eventually be unfortunate to be cashed out, they will find themselves on the outside looking in. They might even be compelled to wait a long period of time before receiving their money, at which time the gold & silver prices might make big upward moves. The defrauded investors would lose twice, once in lower gold price exits, and second from missed price increases from the revealed fraud. Catherine Austin Fitts lays a solid foundation for the fraud case against the GLD and SLV Exchange Traded Funds. See her document entitled "Disclosure in the Precious Metals Puzzle Palace" (CLICK HERE). It might serve someday as the basis for a fraud lawsuit, like a class action.

◄$$$ THE STREET TRACKS G.L.D. EXCHANGE TRADED GOLD FUND SEES A BIG INCREASE IN BULLION HOLDINGS. THE BARCLAYS S.L.V. SILVER

E.T.FUND ALSO HAS AN INVENTORY OF HELD BULLION. RUMORS OF HEDGE FUND ABANDONMENT WERE INCORRECT. PUBLIC SCRUTINY HAS FINALLY BEGUN. ANALYSTS ARE OPENLY DOUBTING THAT THESE FUNDS ACTUALLY CONTAIN THE BULLION METAL IN DEPOSITS. $$$

On Friday May 14th in the space of 30 minutes, the leading business television networks in North America reported doubts that gold Exchange Traded Funds have the gold they claim to have or can obtain enough real gold to meet likely demand. Never has such doubt been openly blurted on major networks. The first declaration was expressed by Rick Santelli on CNBC in 5 minutes 30 seconds into the segment (CLICK HERE). The second doubt was declared by Niall McGee on BNN in Canada, whose comment was more lengthy (CLICK HERE). Implicity, the financial networks are joining the consensus that GATA has championed for years, to take physical possession, and not to trust the custodians of your metal. Recall the obvious risk factor, that the largest gold and silver ETFunds are also the biggest gold and silver shorts, a basic conflict. Lazy investors play into the cartel's hands, who remove the metal from the depositor vaults illegally. They are members of the gold cartel. See the GATA article on the grotesque and unacknowledged conflict of interest (CLICK HERE).

A recent report testifies to the SPDR Gold Shares (GLD) Exchange Traded Fund sizeable lift in gold bullion inventory. They reported adding 19.78 tonnes of new allocated Good Delivery gold bars to the metal holdings, current at 1185.79 tonnes. Over two reporting days, GLD reported adding 26.79 tonnes, a total 2.3% increase. In the eight trading days since April 26th, the GLD fund added 46.66 tonnes, equal to 4.1% to its metal holdings. The official StreetTracks story actually claimed the inventory is held in ultra-secure gold warehouses in and around London, in their words. They must be referring to the London banker vaults containing gold paper certificates after the gold cartel took the gold bullion from a willing donor, the managers of the GLD fund. JPMorgan is the custodian of GLD gold, a fact that should never be forgotten.

Regardless of the corruption of inventory, this shipment is the largest single day addition to the GLD gold hoard since mid-February 2009 when the gold trust reportedly added 22.94 tonnes.  Other significant single day additions occurred in November 2004, right after the corrupted GLD launch, when it reportedly added 49.76 tonnes, and in July 2008 with a 45.99 tonne addition. Their prospectus dictates that their authorized custodians add net gold to correspond with a net increase in the number of GLD shares, in response to more buying pressure than selling pressure. It would sell gold if net pressure favored sellers. See the graph, where in chartreuse pink the solid line displays the gold holdings. The sharp rise in the Gold Held since late April must be doubted as phony. The dimwitted investment public still is being conned into buying physical gold, which is immediately made available for the gold cartel to swap for paper certificates. Never anticipate awareness to dawn on the public.

The other precious metal tells a different story. The Blackrock iShares Silver Trust (SLV) reported an addition of 68.6 tonnes of 1000 ounce silver bars to its allocated stockpile. That vault is also located in London, crammed with the swapped paper certificates. For the week ending April 26th, the SLV reportedly added 98.56 tonnes (equal to 1.1%) to reach 9011.50 tonnes in inventory. Notice the extreme contradiction in a vivid anomaly. The two recent additions are the first positive money flows for the largest silver ETFund since February 26th. During the two month period, silver rose from a price of low $16 range to the current $18 handle. So the public is led to believe a recovery took place in the silver price, but investors in SLV shares sold into the rally. The only way the inventory would decline during a silver price rise is precisely that, investor selling. This is pure nonsense, a corrupted story fast becoming a bold lie in your face. Instead of questioning the corrupt inventory management by Barclays, the custodian in charge, the story has been a diversion. Like why has silver not pushed toward new highs? The answer is intertwined with the SLV exchange traded fund corruption. Silver has been subdued in price ecause in all likelihood, Barclays has interrupted the silver recovery rally by shipping the SLV silver into the hands of the gold cartel. In simple terms, SLV supply has helped to halt the silver price rally. My considered conjecture is that without the SLV silver supply handed to the corrupt London bankers just since January, who meet heavy demand, the silver price would be squarely in the $20-21 price range.  

Follow up with reports disclosing the activity up to May 11th. The SLV silver fund run by BlackRock cites a total 9115 tonnes of silver bullion under deposit, equal to 293.1 million ounces, worth $5.4 billion as of May 11th. No mention has come of the available storage space, let alone where the deliveries came from. Since May 5th, the BlackRock Silver Trust reports adding 202.21 tonnes of new allocated bar silver held by a custodian in London. SLV reported holding 9115.15 tonnes of silver which is about. Sleuth reporters should track down the warehouse location and its capacity.

◄$$$ EVEN THE STUBBORNLY LOYAL AND GULLIBLE INTELLECT OF GOLD ANALYSIS ADAM HAMILTON HAS BEEN FORCED TO NOTICE THE CORRUPTION IN THE S.L.V. FUND. HE HONES IN ON THE CONTRADICTION OF PRICE VERSUS INVENTORY. HE FAILS TO CONCLUDE CORRUPTION, YET NOTICES EVIDENCE OF THE CORRUPTION. HE CALLS IT A DIVERGENCE. $$$

The divergence is visible in the above graph, with the chartreuse Silver Held solid line falls while the silver price rises. The popular gold analyst Adam Hamilton of Zeal Intelligence has identified the divergence in the leading silver Exchange Traded Fund. He at least he identifies the festering symptom that screams of impropriety and fraud. One must wonder why Hamilton has been unable or unwilling to admit the fraud in the gold & silver ETFunds. Is he naive, or obtuse, paid off, or ignorant of corruption? One should sincerely doubt a payoff for the blind eye. As a result, he appears to be clearly the slowest guy in the room. See the Hamilton article entitled "Silver ETF Divergence" (CLICK HERE). His obtuse analysis borders on stubborn dimwittedness if not bizarre myopia. He is either an analysis not blessed with curiosity to dig deeper and notice corruption across the entire Wall Street spectrum, or else he is part of the corruption, given a cash bonus every month to supplement his income and support his important work. Here is what Hamilton writes, with some naive useless conclusions. Bolds are added to his key points. My sassy insults are inserted in brackets, with no respect intended. For over five years, the Jackass has read his implied support of the GLD and SLV as legitimate investment vehicles, enough to sicken the stomach. He has in the process encouraged perhaps thousands of investors to enter a field of quicksand with future bitterness and lost opportunity. Hamilton wrote [with my disrespectful interjected comments] the following. He deserves attention for his myopia and sluggish mind.

"A strange divergence has developed in SLV's holdings since early March. Over a span of time where silver has rallied nicely, SLV's holdings have plunged rather sharply. I have been watching this with increasing interest [but not much intelligence or suspicion]. It is readily apparent in this chart, where SLV's holdings are plotted in red along with the silver price in blue. This divergence is the largest ever. On March 1st, SLV's holdings ran nearly 305 million ounces of physical silver bullion. At the time, silver was trading around $16.50 and had rallied nicely (9.6%) since its interim low a few weeks earlier in February. But despite silver continuing to rally on balance, SLV's holdings started falling rather sharply. Almost 7 weeks later, SLV had shed 6.0% of its silver over a span where silver actually rallied 7.7%. This is quite literally unprecedented. Prior to this past month, SLV's largest decline in holdings over the same span of time was merely 3.5%. And that was near the heart of the stock panic in December 2008, an exceedingly rare event that wreaked unbelievable havoc on the silver price [YES, when the silver price was pounced upon and driven down by JPMorgan, the climax silver price drubbing after JPM took over the Bear Stearns pro-gold portfolio, and subsequently drove down silver from over $20/oz to under $10/oz]. Today's psychological environment is obviously vastly different from the one driven by plunging silver during the panic. At one point this metal's price had plummeted 33% in just 4 weeks! Put in quantity terms, SLV has shed over 18 million ounces of silver since early March. This physical silver bullion has hit the marketplace, retarding the advance of silver's new upleg [precisely, the SLV silver interrupted the silver price advance!]. This is a staggering amount of silver to hit in a short period of time, more than the 17 million ounces elite market darling Silver Wheaton produced in all of last year. I have really been trying to understand the psychology behind this odd divergence [but without much intelligence or suspicion]... Yet as is clear from the sharp reduction in SLV's bullion holdings, SLV demand from stock investors has waned considerably. They are not the least bit excited about this new silver upleg yet. [Hamilton cannot see two trees standing side by side, one stealing the sunlight of the other, pathetic, pitiful, sorry excuse for analysis.]

One possibility is that stock investors are actually selling SLV, reducing their silver exposure. It is hard to rationalize the psychology behind this possibility though, especially given silver's strong performance lately and its current high levels relative to most of today's bull. A second possibility is stock investors are just buying SLV at a slower rate than silver itself is being bought. In order to prevent SLV from falling behind silver and decoupling, its custodians have sold bullion and used the cash to buy back shares. [The second is an extremely lame conclusion offered, the first possible if fraud awareness has grown.] While we cannot know for sure what is going on in the hearts and minds of all SLV investors, this second possibility seems far more likely. As I discussed last week in a Silver/Gold Ratio analysis, gold is the primary driver of silver psychology. Silver traders endlessly watch it for trading cues. And though gold has rallied respectably since early February, its rally has not been exciting. There have been few fast surges and no new highs, gold has kind of been melting up slowly much like the general stock markets. And without fast moving gold to spark some excitement in silver, the stock traders have not had much incentive to add to their SLV holdings. [Incentive is stomped on by a flood of new naked silver short contracts, something overlooked by his shallow analysis.] The net result is SLV exposure has been drifting and lagging silver's advance, necessitating this ETF's bullion selling to buy shares to maintain tight silver tracking. As soon as gold's upleg accelerates and gets silver traders excited, SLV's waning holdings should reverse. [More like, until gold hits new US$-based highs, the ease of stealing SLV silver bullion will continue to be easy.] But at the moment, SLV's custodians have had to dump over 18 million ounces of silver onto the markets in less than 7 weeks. [HUH?? He got right the dumping, but missed the motive and effect.] Roughly equivalent to the annual production of some of the world's biggest and best primary silver producers, this had to weigh on silver's young upleg [exactly, which addresses and identifies effect with motive]. If relatively low SLV demand had not forced this ETF to dump so much physical silver, I suspect silver's gains since early March would have been considerably larger." Hamilton struggles to make sense of obvious corruption, doing contortions within his confined Honesty Box.

A final constructive comment. Two explanations offered to counter Hamilton's extremely shallow and vapid analysis. First, Barclays is probably halting the silver price advance by converting investor inventory to paper certificates. The process enables fast sales of silver bullion into the market, thus suppressing the silver price directly. Second, maybe, just maybe, investors are wising up. Investors might be selling the SLV silver shares, slowly abandoning the corrupt SLV vehicle as a legitimate claim to silver holdings. Maybe they are converting SLV shares during a recovery rally directly into silver bullion with purchases through dealers. They could be using honest funds like GoldMoney or BullionVault, or might arrange for direct shipment of silver from the SLV share proceeds. My firm belief is that over 80% of the bullion inventory drainage comes from Barclay's corrupt management in illicit SLV sales of inventory, and up to 20% of the effect is explained by investors abandonment of SLV as a corrupt fund vehicle. Either way, Hamilton is a grand disappointment and something of a fool worthy of derision and a steady stream of emails. Look for the SLV share price divergence to reach 35% to 40% from the silver price, in the midst of a rash of investor lawsuits.

Stories circulated in recent weeks that certain prominent hedge funds had sharply reduced their positions in GLD. Reports indicated that in late April, over 50% of the hedge fund shareholders sold their positions in GLD. Trackers who follow the holdings reported that they dropped from 195 holders with 10.7 billion in holdings down to 91 holders with 5 billion in holdings. Soros and Blackrock were named, as having sold into their GLD holdings along with 100 other funds. It was a false alarm. In the following one week time, the GLD inventory was updated. Of course, the update might have the same legitimacy as the procedures used to sell GLD investor inventory to the LBMA in order to meet delivery demands. A tip of the hat to Rob Kirby, who informs that Street Track exchange traded fund (GLD) shows no sudden losses in holdings.

◄$$$ A QUICK EXAMINATION OF THE BAR LIST FOR THE G.L.D. EXCHANGE TRADED FUND SHOWS BARS HAVE BEEN ADDED TO THE LIST. WHETHER VALID OR NOT, ONE CANNOT BE CERTAIN. GREAT DISCREPANCIES ARE THE NORM FOR THEIR BAR LIST. $$$

Rob Kirby has shared data on the SPDR Gold Exchange Traded Fund (GLD) Bar List of bullion holdings. They purchase in baskets. On April 8th, a total of 33 baskets entered and cleared two business days later. That brought the Bars inventory to an all time high of 91,439 bars. On April 9th, another 2 baskets entered, roughly 49 bars, which took longer than usual to clear, strange, if not a red flag. Then on April 30th, another 39 baskets were added, totaling 950 bars. The gold being reported via the GLD Bar List is continuing to make new records in number, last reported to be 92,848 bars at on April 30th. Rumors of significant hedge fund selling seem completely false, if the data is valid. The addition of baskets indicates an excess demand for additional shares. However, some tell-tale delays have been seen from a recent audit conducted by Inspectorate Intl Ltd, whose audit spanned four months. That is too long and suspicious of itself. The auditors found 100 bars to be incorrectly identified, but the story did not muster up much news, certainly not controversy. Banks ordinarily are not so sloppy, as Kirby points out, to misplace or falsely lable $500 million worth of gold bars. See the inspectors report (CLICK HERE).

◄$$$ SPROTT EXCHANGE TRADED FUND IS VALUED WITH A PREMIUM, OUT OF THE GATE, A TRIBUTE TO HONESTY AND INTEGRITY. THE CONTRAST TO OTHER E.T.FUNDS WILL SOON BECOME AN IMPORTANT STORY. $$$

Investors immediately have shown willingness to pay a 31% premium to net asset value (NAV) for the Sprott Physical Gold ETF. The traded symbol is PHYS, for added emphasis of physical, in contrast to the SPDR (GLD) fund that is a fraud, dealing in gold paper certificates with perhaps thorough saturation in corrupt swaps. In response to a global recognition of flawed money, damaged currencies, bloated sovereign debt, and the prospect of endless bailouts, rescues, and monetization schemes, gold demand is rising. Over the past month, gold has quietly gained a more widely regarded and elevated role as true flight to safety. Given the flood of USTreasurys, the gradually revealed heavy monetization, the mammoth USGovt deficits, and the endless outsized costs of Black Holes (Fannie Mae, AIG, Wall Street itself), the USTreasury Bond is fast losing its luster as an asset serving the essential role of financial safe haven. An important shift is taking place in gold sentiment, seen directly in more scrutiny given to the ETFunds. In the same wave, the gold funds are thriving. Enter the new Sprott fund. The newest one might be the most honest gold fund, loaded with integrity from the Sprott good name. The Sprott ETFund is seeing over a 30% premium paid for the simple knowledge and assurance that the gold backing its assets actually exists. See the Zero Hedge article (CLICK HERE). However, the premium should limit the purchase appeal, and actually encourage Sprott fund managers to bring down the premium and in the process build an internal cash surplus account.

The PHYS fund is not alone with a premium paid over NAV. The Central Exchange Fund of Canada (symbol CEF) trades at a 13% premium. Next come the Hong Kong Exchange Traded Gold Funds, also surely to be full of integrity. The US and UK based ETFunds are the most corrupt on the planet earth. They will soon be pariahs, a pox on the Anglo metals arena.

◄$$$ IF INVESTORS INSIST ON PAPER GOLD INVESTMENTS, THEN MAJOR AND MIDSIZED GOLD MINING STOCKS ARE PROBABLY THE BEST. THE H.U.I. REVERSAL IS IMPRESSIVE. NEW HIGHS ARE IMMINENT. $$$

What a wild roller coaster ride mining stock investors have been forced to endure. A 70% valuation decline in the wake of the autumn 2008 collapse of Wall Street and US banks was a nasty episode, a vicious unjust blow to investors with claims to real tangible wealth production. However, in the last year, the HUI precious metals mining stock index uptrend has been strong and impressive, returning the wealth lost. The momentum should soon send the HUI index northward. Two important separate reversal patterns are at work, a long-term about face and a short-term swing. The targets are 575 (another 18%) and then 830 (another 70%) in the extreme impulse. The HUI on a weekly basis is in breakout mode here & now. Not only will the HUI out-perform the corrupt GLD and SLV funds from leverage off mining firm profit, but the HUI will be recognized as an honest vehicle when the corrupt face of these Gold Cartel swindle devices is unmasked for all to see.

GLOBAL GOLD PRICE BREAKOUT

◄$$$ GOLD FACTORS AND RELEVANT ITEMS ARE LISTED FOR A POWERFUL GOLD BREAKOUT THAT WILL GRIP THE ENTIRE WORLD BY THE THROAT. GOLD IS BEING SEEN MORE AND MORE AS ZERO RISK REFUGE,  A VALID HEDGE AGAINST A BROKEN MONETARY SYSTEM. GOLD IS BREAKING OUT TO NEW HIGHS IN ALMOST ALL MAJOR CURRENCYS. LOOK UPON A LONG LIST OF RELEVANT GOLD FACTS & FACTORS THAT EXPLAIN AND DIRECTLY BEAR ON GOLD. $$$

  • Gold is rising in every single major currency
  • Gold is making new highs in almost every single major currency
  • Gold is not a hedge against price inflation, but rather against ruined monetary system
  • Gold had consolidated in price for four months, the base for breakout
  • Gold could reach $2000 in price within the next two years time
  • Gold is desperately needed to anchor the failed fiat paper currency system
  • Gold is planned for a component role in the new Northern Euro currency
  • The sovereign debt crisis has fueled demand for Gold, gradually exposing the central bank franchise system as a failure along with the fiat currencies
  • Quantitative Easing is monetary hyper-inflation, the fuel of the Gold rally
  • Gold is urgently needed as a bank reserve to ensure proper function
  • Gold contains no inherent counter-party risk
  • Gold is in the midst of vast supply shortages
  • The Gold Cartel is seeing defections among its allies, who are buying gold bullion after the cartel knocks down the price
  • Nations are hoarding their gold mining output, the latest possibly Venezuela
  • Gold is seeing panic buying in parts of Europe, like Austria
  • Gold mining output is trending down for the past few years
  • Gold was by far the #1 performing investment asset in the entire 2000-2009 decade
  • The US Dow Jones Industrial Average is in multi-year decline, in Gold terms
  • Gold is protected from human corruption, except in its theft and hollow replacement
  • Gold market is receiving heavy scrutiny for corrupt metal exchanges
  • The London Bullion Market Assn has been in default since December, bribing on contract delivery demands to receive cash settlement with a 25% premium paid
  • The GLD gold exchange traded fund is a corrupt diversion from metal ownership
  • Hong Kong is soon to offer several Exchange Traded Funds for Gold
  • Gold can and does rise in price concurrently with the USDollar
  • Future payment for oil shipments will require a gold-backed currency
  • New barter systems of trade will contain a gold core component
  • Gold is the ultimate safe haven asset
  • The USTreasury has no gold reserves, as Fort Knox is empty, since the Clinton-Rubin gang leased it and sold it all
  • PIGS nations have more gold reserves than the United States
  • Switzerland and Canada have almost zero gold in national reserves
  • The IMF gold sales are lies, actually closed out USGovt gold short transactions from past years when the Clinton-Rubin gang leased European gold for sale
  • Gold leased from the Italian central bank was forfeited by LongTerm Capital Mgmt
  • Bear Stearns was targeted for a kill, since it was long in gold, defying Wall Street
  • China participates with the IMF sideshow game in order to buy its pledged gold
  • If Gold were revalued at 3x to 5x the price, many national banking systems would be restored to health and solvency
  • Price hyper-inflation is the eventual blemish on the US landscape, which will fuel broad public gold demand
  • Any attempt by the USGovt to confiscate gold would result in a gigantic backfire, with the gold price doubling in price, and US foreign assets subjected to freezes
  • Gold will reach its high range when US bankers along with London bankers face a Nuremberg style criminal trial on the global stage
  • Prepare for the arrival of a small group of new Gold-backed currencies, the USDollar death knell
  • As John Pierpont Morgan once stated under oath before the USCongress and the Pujo Commission in 1913, "Gold is money, and nothing else"
  • Pull out the Elliott Wave manual for gold & silver at last, since its guide is excellent only after the first huge upleg following a powerful breakout that soon comes, with the horse bridle left in the corral along with the manure.
  • Money is being created from fire hoses without respect for systemic integrity in utter desperation, while gold notices!!

◄$$$ GOLD HAS BROKEN OUT, HELPED BY A REVERSAL SINCE THE DUBAI AND SOVEREIGN DEBT CRISIS BEGAN. GOLD IS FINALLY SEEN AS CURRENCY AND A SAFE HAVEN. THE GOLD PRICE RISES WITH THE USDOLLAR. $$$

◄$$$ SILVER STRUGGLES FOR RECOGNITION AS A CURRENCY HEDGE, RATHER THAN AN INDUSTRIAL COMMODITY. SILVER IS STILL SEEN AS SPECULATIVE. ITS ROLE AS BOTH ASSURES MUCH GREATER GAINS THAN GOLD WHEN THE EXTREME BREAKOUTS ARRIVE. SILVER HAS A MIDTERM BREAKOUT UNDERWAY AMIDST A NICE UPTREND. $$$

Tom Szabo of the SilverAxis provides a solid perspective on the silver market. It has lagged gold at times, or been damaged more than gold at times, and generally received less attention than gold. The perception of silver is on the verge of change, toward more of a tandem precious metal with a strong role as a hedge against currency dilution, debasement, and ruin. Szabo wrote, "Silver is not being bought as a crisis hedge, at least not in a widespread manner. The second monetary metal did have periodic indications of strong buying today similar to gold on the basis charts, but the price action is quite telling. With gold up $30 or almost 3%, silver was actually down 20 cents or about 1% at one point. In the last few minutes, we are finally seeing some sanity return to silver, and it is now up 20 cents for the day. Expect more sanity in the days ahead, if gold is able to maintain $1200. Still, we should not expect silver to be a big performer as long as the market is being driven by fear and flight to safety (which I do not think will last for long). Silver is apparently still being viewed mostly as a speculative investment and not an instrument to store wealth to shield it from the financial storm. That will change, as it apparently has changed for gold since the Fall of 2008, but we are not there yet. Perhaps the change will come in a manner similar to the 1970s when all hell broke lose after only a single billionaire family attempted to move all of their wealth into silver." See the SilverAxis article (CLICK HERE). THE TRANSITION IS ASSURED, WHERE SILVER WILL LINK TO GOLD IN PSYCHOLOGY AND MOTIVE, NO EXCEPTION IN HISTORY.

The vulerability of the Powerz to lose control of the silver market is much greater than for gold. The silver shortage is acute. The USGovt 6 billion ounce silver hoard set up by President Theodore Roosevelt in 1905 was depleted a few years ago. Silver substitutes like rhodium have shot up many fold in price. To be sure, a hidden large volume seller like India might be at work, currying favor. Imagine a silver price shooting up 50% in a few weeks. That is its potential. Such an event would signal a monetary crisis in full bloom. The Powerz cannot afford that. At the same time, the silver market is easier to suppress with the naked shorting tools. Silver has a long history of a secondary metal currency, dating back to the ancient Greek Era, and to the 19th Century United States with the Bimetallic Standard. Its unique position as monetary hedge will return in force. All in time. Beware of the chemistry, whereby in the Periodic Table of the Elements, silver resides in the same column as copper and gold. They are special metals with special characteristics.

◄$$$ DAVID ROSENBERG ARGUES FOR $3000 GOLD. LOST CONFIDENCE IN SOVEREIGN DEBT, FRACTURE OF THE EUROPEAN UNION, AND BALLOONING CURRENCY PRODUCTION MAKE THE BASIS OF HIS BELIEF IN ALMOST A TRIPLE RISE IN THE GOLD PRICE. $$$

David Rosenberg has always been one of my favorite competent economic analysts. He consistently has been a no-nonsense analyst with a sharp eye on the relevant factors. He left Wall Street when the corruption became stifling. Rosenberg has put forth his opinion that gold will head to $3000 per ounce without much difficulty. He builds his hypothesis upon a broken Euro currency stage. He catches our attention by calling the Euro Central Bank no Bundesbank, and the Euro currency no DeutscheMark. That is certain. My view is that Rosenberg might not fully appreciate the sovereign bond market calling the bluff of the IMF and EuroCB, in serious doubt of the German willingness to provide rescue aid. He wrote, "So contagion risks loom and there are simply not enough trees on the planet that can provide enough paper currency to backstop countries like Portugal and Spain." The following are Rosenberg's arguments for a much higher gold price. If the relationship between gold and the M3 money measure where to revert to the 1990 high, gold would move to $5700 an ounce.

See the Business Insider article (CLICK HERE) and the Zero Hedge article (CLICK HERE).

  • The EuroCB has heavily compromised its banking swap practices, as it has accepted sub-investment grade Greek bonds as collateral. This practice will backfire.
  • The vast Quantitative Easing assures a mountain of Euros in bank rescues with bond redemptions and hidden support. No doubt it comes.
  • Greek-type problems in Spain and Portugal are due, forewarned by CDSwap rates.
  • The sovereign debt crisis will be a different animal from the Wall Street collapse in 2008. The US brand of crisis was founded in illiquidity. Europe's crisis is founded in lost confidence in government debt securities. History shows that crises of confidence are tougher to repair over the near-term than liquidity crunches, a great point.
  • Spain is in negotiations with the Intl Monetary Fund to secure ¬280 billion.
  • Rosenberg anticipates contagion to spread and monetary expansion to go out of control when the needs of Spain and Portugal come to the fore. Moreover, much political foot-dragging in Germany and other EU countries has occurred to approve a Greek bailout.
  • Gold has broken out to the upside even as the USDollar has done likewise on the back of a renewed flight to safety bid. Thus, Gold is increasingly being viewed as a currency of its own merit.
  • Fiat currencies globally are met with a skeptical eye by investors, especially after the Euro Central Bank is to use the USDollar Swap Facility for blatant debt monetization.
  • While monetary policy offers near 0% rates, the Gold leasing rates will do likewise.
  • Gold is a hedge against instability of all kinds, like financial, economic, and political.
  • Gold, the hedge against inflation, will come much later as the icing on the cake.
  • If central banks were to ever be compelled to hold the same share of Gold in reserves as banks to back up their monetary aggregates, the Gold price would rise to $3000 an ounce, a conservative forecast.

◄$$$ LOUSIE YAMADA DESCRIBES THE GOLD CONSOLIDATION AND END OF THE STOCK BULL UPTREND. $$$

Eric King produces a powerful ongoing stream of important radio guests on his show. The Jackass was fortunate to be included in a four-part series with him several months ago. Guest Louise Yamada is a superstar technical analyst within the Wall Street aren, but still quite independent. Yamada gave a tremendous 4-minute interview on CNBC discussing gold and the stock market. Louise commented on the counter-trend stock rally over the last several months, without mentioning its foundation in the phony FASB accounting heralded in April 2008. She said, "If we consider the overall view which is ours at least that this is a cyclical [stock] bull within a structural bear, that bear claw can come out at any time." In other words, a nasty stock decline could arrive at any day or week. When asked about gold, Yamada stated, "Well, gold remains in a structural bull market. It came out of the 18-month consolidation through 1034 [last October], and what has happened over the past few months is nothing more than a normal consolidation. So we would be looking for gold to continue to rise." She pointed out that the uptrend in the stock market has been broken in loud fashion, and that serves as a clear warning sign. Eric King introduces Louise as one of the best technicians in the world. Listen to her CNBC and King World News interviews, both linked (CLICK HERE).

CRITICAL GOLD FACTORS AT WORK

◄$$$ JPMORGAN IMPLICITLY STATES THE DEFENDERS OF FIAT CURRENCY MUST PRODUCE UNLIMITED AMOUNTS OF PAPER GOLD. THEY MUST OFFSET THE PERCEIVED THREAT OF UNLIMITED PHYSICAL GOLD DEMAND. $$$

A JPMorgan Securities analyst named John Bridges made a comment in an internal report that has been circulating. It explains why central banks hate gold, the competitor with their own ineffective forms of money over the ages. Bridges wrote, "A German banker once told us that gold normally trades like a commodity. However, when investors lose confidence in currencies, because the pool of gold is so much smaller than the pool of currencies, demand for gold can effectively become unlimited. We believe the European version of Quantitative Easing is generating serious currency worries." YES INDEED IT IS, AND GLOBALLY!! Implicit to the statement is that unlimited paper gold must be produced in offset, in the form of gold short futures contracts. Without the offset, a gold price rise with enough gusto would attract global attention, and cause a major Gold Fever. My suspicion is that the fever has begun in the last month, and even increased paper short gold production will not stop the flood of physical demand. In fact, the flood of paper gold in response will become a major topic of public discussion, fueling the physical demand, maybe criticism, maybe even blame to central bankers! The globe is realizing the failed condition of debt-backed money. The unstable flip side of money, its debt, has been revealed in stark form as the sovereign debt crisis continues, expands, and persists.

◄$$$ THE BIG FOUR BANKS, THE HEART OF THE GOLD CARTEL, ARE MORE ISOLATED AS THE SWAP DEALERS BREAK RANKS. SINCE DECEMBER, THE DEALERS HAVE BEGUN TO COVER THEIR GOLD SHORT POSITION. THE LARGE COMMERCIALS ARE ALL ALONE, MORE EXPOSED WITH EACH GOLD PRICE RUNUP. $$$

Thanks to the disaggregated Commitment of Trader reports on the precious metals markets, the CFTC regulators have begun to put the Swap Dealers in a separate class on the data. The Commercials can be seen with greater focus. Gene Arensberg of the Got Gold Report and Dan Norcini of the JSMineset website with Jim Sinclair have each noticed the early evidence of a rupture in the Commercial fortress. A defection of the more exposed dealers is noticeable among camrades in arms on the tail of gold cartel support. The pattern is more clear in gold than in silver. The gold cartel is more isolated than ever, having lost the support of their lieutenants since the December gold price correction. The gold cartel big players, the Big Four Banks, are isolated in their role as last resort sellers to oppose the rising relentless gold price. They will be slaughtered if USGovt and UKGovt lunatic largesse is withdrawn. The gold price will rise fast & furious if regulator prosecution freezes them.

   

Briefly stated, the Large Commercials went deeper into a short gold position as the gold price pushed above the $1200 mark in early May. The Large Comm net short position rose 13.5%, going from 190,865 contracts to 216,753 from December 1st to May 11th. The Swap Dealers broke ranks, less protected from rule exemptions and USGovt largesse. The Swap Dealer net short position was more than cut in half. It fell 56%, going from 117,366 contracts to 51,475 from December 1st to May 11th. A sharp contrast screams defection between the Producers & Merchants and the Swap Dealers, who do business with legitimate hedging operations like with managed funds, wealthy individuals, and smaller commercial clients. Notice the jagged COMEX contracts series (in blue) for each graph and its inverted scale of Net Position in Gold on the right side. The Large Comms went deeper negative, but the Swap Dealers reduced their negative position. In two to three more months, the Swap Dealers might be gold neutral, like they are with silver.

◄$$$ SCOTIABANK HAS MADE DEMAND FOR DELIVERY OF 1.7 TONNES GOLD. THEY MIGHT BE COVERING THEIR BACKS AFTER HORRIBLE EXPOSURE TO HIGH RISK FRACTIONAL MANAGEMENT METHODS. REGARDLESS, THE SCOTIABANK DELIVERY REDUCES MORE GOLD SUPPLY AND WILL ENCOURAGE OTHER FUNDS TO PROPERLY BUILD THEIR GOLD DEPOSITS. $$$

The Bank of Nova Scotia has decided to take delivery of 1.7 tonnes of gold from the reviled COMEX inventory, fast in depletion. The delivery schedule for the May gold contract on the COMEX has come, and the statistics from late April are revealing. Bank of Nova Scotia officially 'stopped' a total of 699 big contracts, or roughly 1.7 tonnes of gold. Note carefully that the bulk of the delivery is to be supplied by JPMorgan. In a point of background, the Canadian bullion bank Scotia Mocatta is a subsidiary of Bank of Nova Scotia. The formerly highly respected Scotia Mocatta was recently involved in a hint of a scandal when some investors (the Organ brothers) went to visit the vault where their gold was stored and found it to be extremely under-supplied, a shock. In the April Hat Trick Letter Gold & Currency Report, a mention was made that the Organ brothers might have made a sloppy premature claim that was critical of ScotiaBank for under-supply upon inspection. A personal message to me from them indicated the sloppy reporting was by the timid press, which deleted some of the Organ account on the matter. The press article removed what they considered to be hearsay, unsubstantiated claims, which left the accusations to be somewhat unsupported. Apologies are owed the Organ brothers, true soldiers in the gold wars, for their brave work.

Two perspectives at are work, both valid in my view, as almost never is one viewpoint entirely true at the total expense of the other. The Bank of Nova Scotia acted with two motives, clearly. They were forced to support their gold paper, the certificates held by investors that entitles them to their gold on deposit. Also, and just as important, Bank of Nova Scotia (BNS) reacted to some demands to close out investor accounts. Many investors were obviously alarmed at the fractional gold banking that was revealed. Regardless, BNS has taken the proper steps, which many other fund managers and bullion bankers might do well to follow before the eruption comes. BNS might be averting a bank run on its gold under fractional management. Fraud charges and criminal complaints could come, as time will tell. The tough question of cash settlement for gold accounts is likely to be faced. It remains an option, just like with the London Bullion Market Assn. However, cash settlement is not considered ethical, in fact it is considered part the ass end of a Ponzi Scheme. BNS is known for higher ethical standards towards its customers, versus its larger more famous American counterparts among the gangs of New York. See the Cafe Americain article (CLICK HERE).

Here is where the ScotiaBank action turns ugly, but apart from the bank's complicity. Since JPMorgan serves as the custodian for the StreetTracks GLD fund, the bullion to supply ScotiaBank will with very high likelihood (say 90%) come from the GLD inventory. The raid on GLD inventory should continue. A monitor of the data published by GLD is advised on a regular vigilant basis. Recall that GLD has opened its doors to corruption at both ends. Its GLD shares are commonly used to offset the cartel's short gold futures contracts positions, so that the big banks are spared the annoyance of buying physical gold. Also, GLD bullion is reportedly used in direct supply lines to the LBMA, so as to relieve the London exchange of pressures during heavy demands for gold delivery. When my best gold banker insider contact was asked to comment on the likelihood of JPMorgan snatching GLD gold bars to deliver to ScotiaBank, his reply was simply "SPOT ON" in full confirmation. The corruption continues. Watch the StreetTracks gold inventory in the GLD exchange traded fund, for a rise that does not keep pace with the gold price. In the next big price push in gold, expect some controversy as the GLD inventory badly lags or is even depleted on a noticeable level. Lawsuits come, whether of just the StreetTrack fraud princes or bullion bankers, all in time.

◄$$$ EVERBANK REVERSED ITS POLICY OF UNILATERALLY CONVERTING METAL FUND ACCOUNTS TO CASH. APPARENTLY PRESSURE FROM BAD PUBLICITY CHANGED THEIR COURSE.

In the April Gold & Currency Report, mention was made of a duplicitous policy pushed upon Everbank Metals Fund investors. They could be cashed out at any time, arbitrarily and without cause, if losses were suffered by Everbank. The implication was of lack of proper gold participation, even gold certificates sifting through the balance sheet in a hint of malfeasance. The bad publicity must have prompted a more thoughtful honest approach. President Frank Trotter of EverBank Direct did a reversal, admitted improper internal review, and removed the right to cash out investors. To be honest, the sequence of dates is not clear to me. He wrote, "We have noticed some blog and newsletter comments concerning the new Terms & Conditions for our EverBank Metals Select accounts. As part of our periodic review of these contracts we recently standardized and consolidated the Terms & Conditions for all EverBank accounts and products. In connection with this process, we have included the new language in Section 6.3.7.3 of the Terms & Conditions that has been quoted in some commentary." That section cited might be expunged altogether soon.

Everbank has fixed perhaps some internal practices that reduce the risk of custodial services. Good thing! They even reassured redemption in metal via actual delivery with the comment from Trotter, "As a reminder you can request that metals held in any EverBank Metals Select account be shipped to you (in the case of allocated accounts) or converted to a specific physical form and shipped to you (in the case of non-IRA pooled accounts) at any time." They might have been threatened with lawsuits. The walls are closing in on numerous parties, as some react responsibly.

◄$$$ PANIC COMES WITH GOLD COIN PURCHASE. A RUN ON GOLD & SILVER IS ON ACROSS EUROPE, IN PARTICULAR AUSTRIA. $$$

People are noticing the need for gold as protection. The see how thoroughly the currencies are being ruined through federal deficits, banking system welfare, endless stimulus, and more. The people are buying more gold & silver. Here is a coin story. The Austrian Mint on May 12th announced the sales of 243,500 ounces in gold coins and bars in the previous two weeks, more than the entire 1Q2010. The orders for gold products are coming entirely from Europe in the last few weeks, in a style to signal panic buying. People in Europe openly fear the demise of the Euro currency and are working feverishly to protect their savings. Popular reporter Slim Beleggen claims the situation in the silver market is just as bad and has also spilled over to Germany. The contagion is no longer one of sovereign debt, but of precious metal physical inventory, as Slim interprets. The primarily silver precious metal online retailer Kronwitter not only has halted taking any new orders, but has shut down the popular website. The retailer promised to ship all coins previously purchased and paid for. They hope and intend to re-open very soon. Vigilant warrior Tyler Durden expects to see a run on physical and a total collapse of the 100x fractional banking metals exchanges at an LBMA vault near you, the crooked precious metal market. See the Zero Hedge article (CLICK HERE).

◄$$$ THE LOWLY PIIGS NATIONS ARE IN POSSESSION OF GOLD. CENTRAL BANKS HAVE AN OUTLET TOWARD A SOLUTION. NATIONS THAT OWN GOLD BULLION IN QUANTITY CAN ESCAPE THE INSOLVENCY TRAP QUICKLY BY A SHARP UPWARD REVALUATION IN GOLD. $$$

Ironically, the major central bankers of the world can produce a rapid solution, surely very disruptive, but nonetheless a solution. The solution would sink the Big Four US Banks, the core of the gold cartel. Central banks can solve some problems quickly with a coordinated agreement to permit the gold price to rise substantially, perhaps even three-fold or more. Nations in possession of gold bullion without the usual Wall Street and London entanglements can escape the crisis in a relatively smooth fashion. All they need is ample gold bullion without hedges or paper certificate contamination. As soon as the central bankers feel unbearable heat, sense a collapse of the faulty paper fiat monetary system, or notice a popular uprising against a corrupt system exploited by the elite, they can release the gold price and experience the wondrous benefits of nearly instant solvency and relief from some of the crisis. Harken back to December 2008. In the wake of the credit market collapse, the former US Federal Reserve Governor Lyle Gramley indicated that a large upward revaluation of gold could play a key part in any USFed attempt to rescue the US financial sector, and the USGovt balance sheet. He is half right.

Three important comments are warranted. First, Gramley might not be too aware that the USGovt has almost zero gold in its possession. The 'Deep Storage Gold' listed on its balance sheets is actually unmined gold ore lying beneath mountains and leached valleys. Mythical gold reserves will help the USGovt not at all during a gold revaluation. That is probably why the United States is not a principal proponent of such a solution. Second, many smaller nations boast a beneficial quantity of gold reserves, sufficient to pull themselves out of the credit crisis fires, at least partially. Greece alone has 14 times as much gold per capita as China. Actually, China, although it has over 1050 tonnes of gold in reserve, has a puny small gold ratio versus its entire reserves. China also has a small gold reserve per capita. The PIGS nations of Portugal, Italy, Greece, and Spain each have officially listed gold reserves per capita roughly equal to that of the United States. The PIGS nations collectively have 25 tonnes per million people. The United States has 26 tonnes per million people, well, not really, but officially. The PIGS nations collectively own 34 times as much gold per citizen than China. Third, it is highly doubtful that Italy has much gold more than in minimal volume. During the LongTerm Capital Mgmt fiasco in 1998, the hidden story was that Italy forfeited its gold during the crisis. The LTCM idiot savants pledged the Italian gold as collateral in the highly leverage schemes that backfired and blew up in their faces. Italy has been running a pure fiat game on fumes ever since, owning almost zero gold. A return to the Italian Lira might invite a speculative attack to test the mettle of a New Lira. See the Friends of Friends of Another (FOFOA) article (CLICK HERE).

◄$$$ VENEZUELA CONSIDERS NATIONALIZATION OF GOLD MINING INDUSTRY. CHINA AND RUSSIA HAVE COMMITTED TO SNATCHING ALL NATIONAL GOLD OUTPUT WITHOUT CORPORATE TAKEOVERS. CHAVEZ THREATENS TO SEIZE GOLD MINE PROPERTIES. $$$

President Hugo Chavez has threatened to nationalize gold mining concessions in Venezuela, under the facade of mining companies damage to the environment and violate worker rights. Both might be true, but they are false pretenses to seize. He must believe that Gold is either a savior to his nation or a great target for corrupt theft by his gang of henchmen thugs. Chavez ranted and raved about capitalist greed and laying waste to pristine jungles. His strongman regime has nationalized businesses in the steel, telecommunications, electricity, cement, and oil sectors. The gold industry lies in his path. Clashes have occurred repeatedly with international and national gold mining companies in recent years during the permit process. The country's southeastern regions are rich in gold and diamonds. Chavez has vowed to gain greater state control over the Venezuelan mineral resources in a manner to supplement the nation's faltering income from the dominant oil industry, which has been the object of nearly a decade of mismanagement, corruption, cronyism, and gross inefficiency. Past battles have involved the US-based Gold Reserve Inc (over 10.2 million oz gold deposit), and Canada-based Crystallex (over 17 million oz gold deposit). See the Yahoo Finance article (CLICK HERE) and the Bloomberg article (CLICK HERE).

A second side to Chavez thug behavior was seen, as Venezuelan police raided FOREX offices in Caracas, arresting one man. Analysts have warned this strategy might backfire and create a fourth illegal market for USDollars. The raid could possibly hasten another devaluation by the government. The Bolivar was devalued recently in January. See the Reuters article (CLICK HERE). Curiously, nations can have multiple illegal markets. My understanding is one illegal market is used directly by Venezuelan Govt officials, sort of an official wholesale black market, not too greedy, but plenty of profit. The other illegal market can be pure black market with no ties, run purely by independents. The government players actually operate an unofficial arbitrage, buying & selling for profit, protected by their friends on the police force. By the way, the Credit Default Swap market is currently forecasting a 50% default rate on Venezuelan Govt debt.

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