GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Golden Potpourri
* Europe Ready to Boil Again
* Currency War in Full Swing
* Global War Centers on Gold & Silver
* Gold & Silver Price Stabilize


HAT TRICK LETTER
Issue #86
Jim Willie CB, 
“the Golden Jackass”
22 May 2011

 

"The days of the US dollar as the world's reserve currency are numbered." ~ Zimbabwe central bank governor (during announcement of potential trading diamonds for gold, as part of a plan to create a gold-backed currency)

"Millions of people and some institutions have Gold they can sell and buy back via futures contracts. When they choose not to, that is the beginning of the end of the current financial system." ~ Keith Weiner (on permanent gold backwardation, where spot price is higher than futures contract price, implying a negative carry cost and tremendous shortage)

"Under the circumstances, we doubt that Silver will need much base building to launch an assault on the supposed $50 barrier. We view that number not as impenetrable supply, but rather, as a fat carcass waiting to be picked clean by voracious buyers. Huge supply tends to coax forth huge demand. As traders like to say, opportunity moves to size. And while the bad guys may have deep pockets and the ability to create tons of paper bullion at will, any suspicion that they are trying to cap Silver at $50 is going transform otherwise docile, go-along buyers into aggressive opportunists. This will prove to be equally true for Gold, we are certain." ~ Rick Ackerman

"As a firm, we have covered all of our hedges on Silver and we have started to accumulate physical silver. If you are a cash buyer of physical silver, then you should now be accumulating silver. There is always a danger in catching a falling knife, but you have to remember that Silver has intrinsic value. Nonetheless we are keeping an eye on the US dollar which could continue having a bounce post Trichet's comments. This is the start of a great opportunity to accumulate silver. All of the key fundamental issues in the world have not gone away, nor those specific to silver such as the fact that it is under-owned and short of supply in the medium-term. All of those conditions are still in place for silver. On corrections beyond 20% in a secular bull market, you are supposed to be buying. The Gold market has been dragged down with the precipitous fall in silver, but we believe gold will hold above $1450. Between now and August we will find a floor and the next up leg in gold will begin. That next leg higher in gold should take us over $2000." ~ Ben Davies (comments made after decline to $35, who correctly called the sudden silver correction to the $35 level)

"So what is ahead for this current correction? Repeats of 2004 and 2006, or another 2008? My guess is none of the above. It took several months after these three previous corrections before Silver climbed above the high price that preceded the correction. This time I expect Silver will take only several weeks before exceeding $49.78, the 31-year high reached on April 25th. The reason? As evidenced by Silver's backwardation, which began in January and continues to this day, the demand for physical Silver has really accelerated. As a result of last week's price decline, backwardation has roughly doubled in size. This is clearly a a signal of strong demand for physical Silver, and further evidence of a point I have been making for some time, that the paper Silver market is losing its significance as a price discovery mechanism." ~ James Turk (last comment means COMEX is becoming irrelevant in the price divergence from physical)

"The current USTreasury yield at 3.2% is a strong signal that the bond market anticipates a resolution to the debt ceiling and USGovt budget process." ~ Senator Pat Toomey (clueless voice from the Upper House, who ignores the USFed debt monetization process while the USCongress lollygags along with bickering, posturing, and avoidance of difficult decisions on the road to default marred by hyper-inflation)

GOLDEN POTPOURRI

◄$$$ DOMINIQUE STRAUSS-KAHN BECAME AN ENEMY OF THE SYNDICATE THAT CONTROLS THE UNITED STATES AND OWNS THE FRAUD PRIVILEGES EXTENDING FROM THE USDOLLAR DOMINANT ROLE. FROM HIS POST AT THE INTL MONETARY FUND, THE RECENT DEVELOPMENTS TO CREATE A NEW GLOBAL CURRENCY BASKET WERE TOO CLOSE TO A REALITY. UNWISELY, HE SET FOOT ON AMERICAN SOIL. WHETHER INVOLVED IN RAPE OR MOLESTATION IS NOT THE CENTRAL STORY. $$$

The story is one filled with global finance intrigue and sordid shadowy events. If rape was involved, then all the uglier. But the main story is of a financial theme and the inherent threat to the Almighty Dollar. Saddam Hussein committed a similar crime by accepting Euros in crude oil sales. Qaddafi committed a similar crime by attempting to organize a Gold Dinar currency for North African oil sales. The shorter this segment is reported, the more effective the impact in comprehending its importance. Dominique Strauss-Kahn (DSK) put his full weight behind the IMF Special Drawing Rights basket of currencies, as an attempt to instill greater stability in the global financial system. Masters of the USDollar are not impressed by such maneuvers. This basket has been analyzed fully in the last couple months of the Hat Trick Letter, with its full frailty. The SDR consists of the USDollar, the British Pound, the Euro, and the Yen. Strauss-Kahn openly promoted a wider SDR usage as a global currency held in reserve. He also openly promoted selling SDR-based bonds for usage as bonds held in banking systems as reserves. The two concepts championed by DSK opposed the USDollar and its merchants directly. Russian President Dmitry Medvedev advocated the inclusion of Brazil, Russia, India, and China in the SDR basket as well, to offer it more stability, the beneficiary of strong surpluses, inviting the BRIC nations to the inner circle. See the UK Telegraph article (CLICK HERE).

The final blow might have been the DSK proposal made on behalf of the IMF that senior bond holders of Irish Govt debt accept a Euro 30 billion loss. To date, all attempts to impose losses on the bankers have been repelled and rejected. US Treasury Secy Geithner snuffed one plan in recent months. See the Irish Times article (CLICK HERE). DSK also tried to advocate for the redistribution of wealth, a concept utterly abhorrent to bankers. So in summary, Dominique Strauss-Kahn had to go, judged by elite circles. Traps might have been laid, but he seemed to walk into them foolishly. He showed unusually bad judgment in setting foot on US soil. The actual charges are not the real story, but rather the motive to have him removed from his IMF post. Watch his replacement be more suitable to the banker needs. If an accident happens, the replacement might be a banker with stronger ties to China and the BRIC nations in a grand backfire. The Chinese might seize the moment. See the Global Research article (CLICK HERE).

◄$$$ BARGE TRAFFIC HAS CAUSED SEVERE DISRUPTION FROM MISSISSIPPI RIVER FLOODS OVER FOUR STATES. THE $5 BILLION BARGE BUSINESS IS TOTALLY STALLED. SIGNIFICANT SUPPLY CHAINS ARE INTERRUPTED. DEMAND FACTORS RELATED TO THE USDOLLAR HAVE BEEN JOINED BY SUPPLY SHORTAGE FACTORS. $$$

The USEconomy is a leading global exporter of agricultural supplies that include cotton, corn, wheat, and soybean. That is traffic heading out. Traffic heading inward supplies 87% of US cities off the great Mississippi River. In all, the river is responsible for 800 million tons of barge traffic per year. It accounts for 20% of all coal movement. Also, 11 large gasoline refineries lie on the banks of the lower Mississipppi from Baton Rouge to New Orleans. They produce 2.5 million barrels per day of gasoline, 13% of the national needs. Geographically, the great river is responsible for 41% of the flow from the entire American river systems, from sources touching 31 states. At a time when the USFed has done its dead level best to wreck the USEconomy in a powerful cost squeeze, resulting in rising commodity prices from the demand factor (and inherent pricing mechansims), an unforunately profound display of natural forces contributed to worsening the impact. So from monetary sources, prices rise from heightened demand and even hedging against inflation, and from distribution sources, prices rise from basic shortage of supply. The imbalances are so magnificent that years will be required before an equilibrium is reimposed, but probably not before the landscape resembles the Third World.

◄$$$ HIGH GASOLINE PRICES ARE NOT SNUFFING OUT JOBS, BUT RATHER SAVING LIVES ON THE HIGHWAYS. THE PATH TO THE THIRD WORLD DOES HAVE ITS BENEFITS. THE MEDIA SPIN IS AS PATHETIC AS COMICAL. ORWELL LIVES. CONTRAST SUCH LUNATIC SPIN WITH THE REALITY OF RISING COSTS. TAKE THE GAP FOR INSTANCE, WHICH WARNED ABOUT PROFITS SQUEEZED FROM RISING INPUT COSTS LIKE COTTON. $$$

Never under-estimate the US news media for its gross distortions and public deceptions, even creativity. Lately, during the expanding financial crisis and economic morass, the challenge in putting a positive spin on the higher energy prices has been difficult. Notice how the spin turns absurd. Higher gasoline prices are saving lives from the reduced miles travels on the highways. See the YouTube video (CLICK HERE). But Texas responded by raising the speed limit on the open road, a news item too. In January the Jackass howled in laughter when the Bloomberg anchors discussed whether higher energy prices would be good or bad for the USEconomy. An anchor guided the masses by pointing out how energy firms will earn more profits, always a good thing, which could lead to more jobs. Somehow the uniformly higher cost structure, pinch on profits, and squeeze on households was not on their radar. The financial media is full of charlatans, clowns, muppets, balcony jiggle, carnival barkers, and idiots.

Jackass warnings of business profit squeeze are beginning to strike the corporate bottom lines. The story has been developing for a few months. The latest warning came from The Gap, the big clothing retailer with factories worldwide. The company anticipated that the input cost of goods would increase during the back half of the year, but costs are actually above the initial estimates. Product input costs per unit have risen 20% in the final months of 2010. The cost push has overwhelmed their own retail price increases. As a result, the company has chopped off 30 cents per share in expected earnings, down to the range of $1.40 to $1.50. The squeeze has come despite their own imposition of higher product prices at stores. That is about a 20% chop. The squeeze is on, much more broadly than just food firms like Kraft.

◄$$$ HOUSING STARTS HAVE PLUMMETED, AS HOME PRICES DECLINE FAST. A HOUSING MARKET RECOVERY REQUIRES THE NEW CONSTRUCTION SECTOR TO GO QUIET. IT WILL NOT. BUT IT WILL PROVIDE AN INDICATOR OF EXISTING HOME SALE PRICES GOING BELOW CONSTRUCTION COSTS. THE NIGHTMARE OF ADJUSTABLE RATE MORTGAGES IS NOWHERE FINISHED FOR THE BANKS. THE HOUSING FACTOR WILL KEEP THE USFED FIRMLY DEVOTED TO QE PROGRAMS AND THE EXTREME MONETARY INFLATION WITH DEBT PURCHASES. $$$

New home sales have been routinely misleading, since they do not account for the other end. Cancellations on new home purchases have recently been reported as high as 35%. The new home sales chart shows a plummet over the last couple years, a necessary event for any housing market recovery. At the national level, 28.4% of homeowners are upside down on mortgages, owing more on loans than their homes are worth, the plague of negative equity. People continue to walk away from these homes in willing defaults, as bloated bank inventories forbid any price recovery. My forecast remains that prices will decline into a bottom stage until they are 20% to 30% below construction costs.

A second wave of adjustable rate mortgage resets has finally arrived. The Hat Trick Letter has featured such warnings in the past. The present pressure has arrived. The infamous Option ARM loans will force huge increases in mortgage payments thrust upon homeowners. They will assure a steady flow of defaults, foreclosures, and additional bank inventory. No housing market recovery is visible in the foreseeable future. Any halt to QE2 by the USFed, without a fresh QE3 to begin, will lift mortgage rates and assure more destruction to the housing market. However, a strong resumption in QE3 or a transition where QE is engrained in monetary policy will assure more USEconomic cost structure increases. The job loss would also keep the housing market submerged. No solution exists. Some form of official QE (aka hyper monetary inflation) will happen, the only unknown is the name and the manner concealed. The red star is the present.

◄$$$ THE USPOSTAL SERVICE PENSION SITUATION HAS QE3 IMPLICATIONS. THE MANY USGOVT FUNCTIONS CALL THE BLUFF OF THE USFED ITSELF IN A LAUGHABLE DISPLAY OF BAD POKER. OBVIOUSLY QE3 WILL OCCUR, SINCE SO MANY AGENCIES AND FUNCTIONS DEPEND UPON CONTINUED FUNDING. AN EVENTUAL DEFAULT BY THE POSTAL FIRM IS INEVITABLE WITHOUT ACTION ON NUMEROUS FRONTS. $$$

The USPostal Service is set to default on $5.5 billion in pension benefits, as a big payment is due on September 30th. The USFed debt monetization (QE) is certain to continue. It will be extended past QE2, and later increase exponentially. Too many USGovt and related functions are at risk of interruption, such as high profile payment of soldiers fighting private wars. Furthermore, the current USGovt fiscal morass does not even consider the major debt storms brewing at the local or state level. The USPostal Service will begin to default on its financial obligations in four months unless the USCongress takes action to relieve it from the obligatory pre-funding of retiree health care accounts. The USPS argues the prepayment for future retirees is a financial burden that none of its competitors must live with, not even government agencies. The requirement was attached to a 2006 postal reform bill that was passed when mail volume was at its peak. Payments were also based on what was then a much larger employee base. USPS has cut its workforce by 113,000 people since then. The USPS has turned unprofitable after a few years of good times. It expects to post a net loss of $8.3 billion for this fiscal year, equal to the loss last year. Postmaster General Patrick Donahoe said that without action, the organization will inevitably default on payments to employees and suppliers as well. See the Silver Doctors article (CLICK HERE). A Third World nation does not have postal delivery.

◄$$$ THE SOCIAL SECURITY TRUST FUND SLIDES DEEPER IN THE HOLE BY ABOUT $100 BILLION PER MONTH, A HEFTY $1.1 TRILLION IN THE LAST YEAR. REMEDY WOULD HIKE PAYROLL TAXES SHARPLY. NO POLITICAL RESOLVE EXISTS FOR REMEDY. THE PROBLEM SIMMERS. JUST ANOTHER MULTI-$TRILLION HOLE TO FILL. $$$

In its annual report to the USCongress, the Social Security Admin admitted its condition had deteriorated in 2010. Their remedy is a horror show. They reported, "The open group unfunded obligation over the 75-year projection period has increased from $5.4 trillion (present discounted value as of 1 January 2010) to $6.5 trillion (present discounted value as of 1 January 2011). For the combined OASDI Trust Funds to remain solvent, the payroll tax rate could be increased an immediate and permanent 2.15%, (or) scheduled benefits could be reduced by an immediate and permanent 13.8%." So the total unfunded obligation has grown by a cool $1.1 trillion in the last twelve months, when a supposed USEconomic recovery has taken place. That is in the wrong direction by 20.4%, a horror show. The shortfall proves a USEconomic recession and a Baby Boom aging population. One solution calls for reduced benefits, my forecast all along and the subject of a heated argument with my own father in year 2000, when my opinion was expressed that the Jackass would never see a single dollar from the fund, even after 24 years of contributions. The solution calls for a 14% cut in Social Security checks going out. Another solution calls for a 2.15% increase in payroll taxes, but political support is not there. It could be slipped through on a popular war spending bill to protect the nation from sundry external threats real and imagined.

To really fix the insolvent SSTrust, taxes on all workers and employers must rise by $110 billion per year and rise further every following year to compensate for a shrinking base of workers paying into the system. Its regressive tax nature means lower income workers are hurt the most, since all income over a certain amount ($106.8k) is untaxed. In fact, the USCongress is working in the opposite direction, leading the fund deeper in the hole with a payroll holiday of 2% for year 2011. Meanwhile, unfunded liabilities grow at $100 billion per month. Delays and popular mandates are the norm. The entire SSTrust has been out of control for years, simmering. Yet another multi-$trillion black hole to fill, and thus debase the USDollar further when it is rescued with phony money off the Printing Pre$$. Just one more reason to perpetuate Quantitative Easing. See the Zero Hedge article (CLICK HERE).

◄$$$ MUNIS ARE SET TO BUST ALL OVER TOWN. THE FISCAL SITUATION HAS GROWN WORSE SINCE MEREDITH WHITNEY PROCLAIMED THE ASSURED MUNI BUST. HER DETRACTORS ARE SHALLOW SHILLS. LOOK FOR THE USFED TO POSSIBLY SUPPORT A QE3 PROGRAM TO COVER MUNI BONDS. EITHER DEFAULTS OR MONETARY INFLATION WILL BE THE ANSWER. $$$

Meredith Whitney made news in predicting correctly a Citigroup dividend cut over two years ago. She recently defended her controversial 60 Minutes forecast made in December for hundreds of $billions in municipal bond defaults. In her update, she pointed to local governments in states such as California, Nevada, Arizona, and Florida that would continue to struggle financially, since they are dependent on the housing and construction industries for higher tax revenue. In a display of basic financial common sense, she said "States have been spending at 2-1/2 times their tax receipts. The states then are cutting off aid to their local governments, which rely on them for over a third of their monies. The local municipalities have nowhere to go. They [operate under] a bias to save their constituents before they save their bondholders. There is nothing controversial about that call, if you look at the numbers. This municipal issue, you can criticize me for anything you want. I am numb to it, because I have more conviction on this than I have had on any single thing in my career." Strong words, certain outcome to prove her correct again. Even JPMorgan publicly agreed with her, after first labeling her forecast preposterous. Whitney mentioned the Farm Belt states as exceptions, such as Iowa, that are benefiting from rising agricultural prices. They will see stronger growth than the rest of the nation, and thus relieve some municipal debt strain. To emphasize her argument, a highlight of the profound distress is made. She mentioned that if New Jersey were to relieve their deficit, they would need to increase their total tax revenues by 37%, which in the current economic environment is not feasible or possible.

Extreme shallow rebuttal came from the Goldman Sachs corner. Their David Solomon replied "I do not think we are doomed. I would be more balanced on it. Ultimately tax receipts will have to go up and there is only one way to do that, and that is increase taxes. The US economy is going to perform better over the next year or two than the general consensus." What an idiotic rebuttal not deserving comment. Look for a national initiative, once the cascade of defaults occurs or when the state and city services are reduced severely with job cuts and project eliminations. The national response will be either a federal bailout or a USFed QE program to cover the muni bonds. Since already wrecked, no big deal to shove another toxic $1 trillion on the USFed balance sheet. Acid poured over toxic swill is a sweetener. See the Bloomberg article (CLICK HERE).

◄$$$ MORE FAKE TUNGSTEN GOLD BAR EVIDENCE, BUT FROM THE PAST. THEY ARE TIED TO HIGH PEOPLE IN HIGH PLACES AMONG THE AMERICAN ELITE. $$$

Notice the reference to the large Gold derivative contracts owned by the Rockerfellers. In the face of deep derivatives losses, they executed a payment to China in 2008 that were gold plated tungsten. This is a highly controversial, extremely dangerous topic, and will not be expounded. The salted gold bars (majority cheap tungsten, cost of about $30 per kilogram) were first found in Hong Kong banks. The key to understanding the nature of the fraud is to examine the foundry seals and distribution routes. Much of the contents of Fort Knox were not only leased and sold by Wall Street and the syndicate, but were swapped with counterfeit bars before sold and delivered. They were stolen twice. Do your own research if interested. See the YouTube video (CLICK HERE).

◄$$$ AFRICA SEEKS ALTERNATIVES ON THEIR OWN TO I.M.F. SOLUTIONS, AWAY FROM THE LONG WESTERN SHADOWS RIFE WITH EXPLOITATION. BIG CHANGES ARE COMING TO AFRICA. THE EMERGING ECONOMIES ARE DOING WELL, AND AFRICA IS ON THE BRINK OF SOME SUCCESSFUL EXPANSION AND EMPOWERMENT. MEANWHILE, THE WESTERN EXPLOIT OF CONGO AND KENYAN MINERALS MIGHT BE IN REVERSAL. $$$

African nations are working to develop alternatives to the typical IMF strategy. Defying IMF inflation warnings, parts of African are borrowing and investing in projects that will create jobs, relieve poverty, and lead to greater empowerment. After three decades of Intl Monetary Fund direction and a strategy imposed upon African economies, African countries are now looking for perhaps their own decision-making process and their own strategies for development. The past colonial strategy has pushed privatization pathways and considered price inflation a more dangerous problem than high unemployment. Times are changing. Leonce Ndikumana at the African Development Bank stresses that African countries should own themselves and own their strategies in the goal to reduce poverty, and should design their own key frameworks. Some success has been given proper attention in Kenya, where the Central Bank and the Ministry of Finance crafted some very good innovative instruments to finance infrastructure. They are in the process of revamping the whole infrastructure in Nairobi. They have already started rebuilding roads and expanding the highway system. Traffic is has been a big nagging problem in African countries.

Ndikumana advocates formalizing informal activities, which would embrace the numerous fringe players. That leads to an increased savings base, and an increased tax base. The government activities would generate more tax revenue from the expanded economic activity. The informal sector in African countries has great size, estimated at 50% to 60%, loaded with profitable activities. They are not taxed, thus foregone tax revenue. The goal is to create innovative instruments which bring participants into the formal economy through the opening of bank accounts to buy into the bonds. From their generated revenue, the government is going to generate more taxes, in a modernization process for the economies. The African Devmt Bank official stressed how in the past decades, the public sector was pushed to the side in a recognized wrong approach. The better approach is to build a strong public sector which is well regulated. They strive for efficiency, but they must overcome the temptations of corruption. They plan to drive the infrastructure investment. Regulation is the role of the public sector. See the Real News interview transcript (CLICK HERE).

EUROPE READY TO BOIL AGAIN

◄$$$ SPAIN AND GREECE ARE THE TWO EUROPEAN KETTLES READY TO BOIL OVER. GREECE GRABS THE NEWS HEADLINES, BUT SPAIN REPRESENTS AN EQUALLY GREAT RISK. SPAIN IS A MUCH LARGER NATION LOCATED IN THE HEART OF WESTERN EUROPE. IT HAS DELAYED BANK ACCOUNTING LOSSES FROM THE PROPERTY MARKETS FOR TWO YEARS. RECKONING COMES SOON. A FALTERING ECONOMY WILL FORCE THE ISSUE. $$$

The financial crisis in Spain has not resulted in a single important move toward reform, let alone bank writedowns. Their economy is slowing rapidly. Price inflation is rising. The consistent delays and lack of action have put the Spanish Govt Bonds at risk, since supply has risen due to greater deficits. They are on the verge of a technical breakdown with bond yields set to push upward. The 2-year bond threatens a move above 3.8% and beyond 4.0% while the 10-year bond threatens a move past 5.5% and beyond 6.0% into the danger zone. A political election has lifted concerns.

 

The range that has held for five  months on the 10-year bond makes for more risk of a sudden upward thrust in the bond yield. A move past 6.0% would sound European alarms. Sentiment over the Euro currency is certain to take a damaging blow. Consider a unique and remarkable chart below to reveal the pulse of European finance. The jagged line sitting at 2.40% today is the spread between the Spanish 10-year bond yield versus the German Bund 10-year yield (shown in dark blue). It is extremely well correlated with the inverse of the Euro currency index, the other jagged line fluctuating below the Bund spread in the last month (shown in green). The movement is very highly correlated in almost a lockstep. Although not calculated, it seems at least 80% correlated by the trained eye. Keep in mind that the green line is the inverse Euro index, so moves up mean a weaker Euro and moves down mean a stronger Euro. The index is composed of 30% USD (United States), 30% GBP (Great Britain), 20% JPY (Japanese), 10% CHF (Swiss), and 10% SEK (Sweden). Any continued widening of the Bund spread for the long-term Spanish Govt bond yield would signal a trigger for the Euro currency to fall. Among the many EU nations, the Spanish bond serves as the best indicator. The lost leg of this European stool is the next support leg in the USDollar. The Competing Currency War lifts one currency by weakening the others. The USDollar will see some lift in the coming weeks from a Euro currency exposed for its rotten Spanish underbelly.

◄$$$ SPAIN IS THE BIG MUDSLIDE WAITING TO HAPPEN. ITS BANKS ARE IN SUSPENDED ANIMATION FROM PERMITTED ACCOUNTING LAXITY. ITS ECONOMY IS COLLAPSING GRADUALLY. THE BIG ENCHALADA OF EUROPE IS SPAIN. THE CONDITIONS BEHIND ITS REQUIRED BAILOUT WILL PUSH EUROPE PAST THE TIPPING POINT. THE MOMENT FOR THE SEPARATION FROM THE EURO CURRENCY IS COMING AS PRESSURE BUILDS. $$$

Spanish Govt tax revenues declined by an unprecedented 16.2%, as their economy slides rapidly into recession. The official data hides the recession, as any and all estimates masquerading as forecasts cite very slow growth in a comedy. Some openly wonder how overall revenues are down only 16.2%, given the spate of bad news. A bailout of Spain is coming, to be confirmed soon by a skein of denials. The official schedule of deficit targets has been thrown out of line. The Spanish Govt budget is already tight after spending cuts and salary reductions, which suggests higher taxes might be next on stage while greater borrowing is urgently needed. The common austerity pills are to be applied, with the same disastrous results. The natural consequence is for interest rates to rise in anticipation, as they did in Greece, then Ireland, then Portugal. We have seen this movie before. Some summary points of the Spanish slowdown are shocking. Personal income taxes are down 19.4% this year. Corporate incomes taxes are down 42.7% this year. VAT collection is down 22.4% this year, the value added tax, like a sales tax. Excise duties are down 40% this year. As the Spanish Economy continues to deteriorate, the favorable undeserved low bond yields will not remain in place. They will rise naturally. Any sharp rise results in large bank losses outside Spain, as the European banks are interwoven. A bailout of Spain in the cards, but perhaps this time around, Spain is simply too big to bail out. Its population and economy are over four times larger than Greece. Talk has not begun of their exit from the Euro Monetary Union and a return to the Peseat former currency. That would enable a fast devaluation that the common Euro prevents. See the Global Economic Analysis article (CLICK HERE).

◄$$$ A GREEK GOVT BOND DEFAULT IS ASSURED, AS GERMANY PUSHES THEM OVER THE EDGE. THEY ARE FED UP WITH THE ENTIRE SOUTHERN RIM OF BANKRUPT EUROPEAN NATIONS. THE BACKLASH OF REALITY WILL BE THE IMPACT TO EUROPEAN BANKS WHEN THE GREEK DEBT IS RESTRUCTURED, AS IN MASSIVE WRITEDOWNS. LAST WEEK A RESTRUCTURING PLAN WAS REJECTED, IN A CLASH BETWEEN BANKERS AND POLITICIANS. THE BANKERS FEAR A CASCADE OF BANK FAILURES, LARGE EURO CENTRAL BANK LOSSES, AND A CREDIT DERIVATIVE MELTDOWN. $$$

A Greek Govt debt restructuring plan was rejected by Euro Central Bank officials. A grand battle royal is in full bore with European Union politicians. No progress has come in the ultimate solution, debt writedown, reschedule of debt payment, and hits to bond holders. Everything to date has been delay and patching over the rancid sores with IMF money. Greece continues to fester despite past bailouts and supposed solutions that were vacant, useless, misdirected, and a waste of money. The EuroCB position was laid out well by Executive Board member Juergen Stark. He said, "A Greek debt restructuring is not the appropriate way forward. It would create a catastrophe" with full implication to extreme damage in the banking system. Fellow board member Lorenzo Bini Smaghi said further that "A solution for reducing debt but not paying for it will not work. Time has been lost talking about how to come up with a way to reduce the debt. But if we accept this, we will jeopardize all of Europe." Greece is not staying current on former debt agreements, so new ones cannot be fashioned. The essence of a debt writedown in the real world is ugly. Bankers want a full redemption like in the United States with big bailouts and TARP Funds and numerous USFed facilities to avoid major losses. Bankers are always first in line at the financial soup kitchen. European Union finance ministers have finally proposed the idea of extending the Greek debt repayment schedule, in response to their failure to keep on schedule to meet the terms of the previous Euro 110 billion (=US$156 billion) rescue. The Greeks are in a bind, since they will not be able to return to markets and sell Euro 27 billion of bonds next year. They are behind on their debt payments, from terms devised in the previous bailouts. They are expected to need nearly Euro 30 billion (=US$43 billion) of extra financing for the 2012 fiscal year. The yield on Greek Govt 10-year bond rose to 15.8%, more than twice the rate at the time of the bailout a year ago. The solution last year was a travesty, a farce, a denial of reality. Their sovereign 2-year bond yields almost 25%, like a bad junk bond. See the Wall Street Journal article (CLICK HERE).

From Luxembourg, the head of EuroZone finance ministers Jean-Claude Juncker hinted that a soft debt restructuring is possible for Greece, provided the Athens government takes additional steps to cut the budget, such as completing state asset sales. The Greek Govt has sparked riots in Athens over plans to sell state-owned assets and land in order to raise up to $60 billion in the next four years. On the sell block are casinos, marinas, and former Olympics venues. Deutsche Bank is advising on the asset sales, including the extension of the gambling concession company Opap SA and the sale of a further stake in it. The German bankers want to seize some collateral rightfully, after years of wasted support. See the UK Daily Mail article (CLICK HERE).

A soft restructuring, also referred as reprofiling, involves a pure lengthening of maturities for existing bonds without changing the principal and the interest rates. The big European banks, led by Germany, wish to avoid a chain reaction of claims linked to Credit Default Swaps, which would be forced to pay up. They are an equal scourge in Europe and hidden motivation for many decisions. The cold reality is that any debt restructuring would have a direct impact on Greek banks. Their capital would be instantly wiped out. The banks would become dead credit engines, with grave implications to the Greek Economy. The German offices of the EuroCB are concerned that allowing Greece to renege on some of its obligations would create similar expectations by Portugal and Ireland, other members of the extended PIIGS pen. In other words, default would have rippled effects in contagion. The EuroCB is caught in a trap. They would stand to lose also, since they have purchased Euro 76 billion worth of bonds from fiscally stressed countries in the past year, as buyer of last resort. In an intriguing survey, 85% of international investors surveyed by Bloomberg recently said Greece will probably default on its debt, with the majority predicting the same fate for Ireland and Portugal. The Greek Govt debt is zooming skyward. It will reach 166% of GDP by next year, the highest for any country in European history, soon to rival Japan. See the Bloomberg article (CLICK HERE). Any restructure of Greek Govt debt would remove their bonds from usage as collateral with the Euro Central Bank. Greece would be totally isolated, but free to revert to their native currency and a stern devaluation. The cascade effect would be profound, extending to the big European banks. My belief is that the CDSwaps might renege and not pay out, as the shadow banking system is corrupt to the core. They are a true Ponzi Scheme protected in the US and Europe.

Rejection has begun from the upper periphery, regardless of the core in Europe. Norway is a unique nation, with great wealth accumulated from North Sea oil operations. They, like Germany, are lenders in Europe. The nation of Norway will halt all further financial aid payments to the embattled debt soaked Greece. The Oslo Parliament cited the unfulfilled obligations from past bailout rescue deals. Norway is a member of the European Economic Area, and a solvent European nation. They urge an initiative to let the chips fall where they may, with Greece serving as the first chip to fall. The other PIIGS nations are all lined up to follow Greece on the insolvency path to default, just a matter of time. See the Zero Hedge article (CLICK HERE). After enough creditor rejection and futility to roll over debt, Greece will eventually face the inevitable and revert to the Drachma currency, then devaluate it 30%, maybe over 50% eventually. What is preventing it is NOT the Greeks but rather the big EuroZone banks that stand to lose huge. Some banks will fail, maybe many banks, even very big banks.

◄$$$ THE CASCADE OF EVENTS FOLLOWING THE GREEK GOVT DEBT DEFAULT WILL BE TRULY AWESOME TO WATCH. THE POWERZ WILL ATTEMPT TO HOLD IT TOGETHER, BUT ALL HELL WILL BREAK LOOSE. THE MOMENTUM OF THE CASCADE WILL BE POWERFUL AND GROW FAST. THE ONLY QUESTION IN THE FOREFRONT IS WHAT CONSTITUTES A DEFAULT TO TRIGGER THE IMPLOSION PROCESS? THE RIPPLES WILL SPREAD ACROSS THE P.I.I.G.S. NATIONS AND TO THE MAJOR EUROPEAN BANKS. REVERSION TO OLD CURRENCIES WILL BE ALL THE RAGE, COMPLETE WITH DEEP DEVALUATIONS AND PROUD NATIONALISM TAKEN TO THE STREETS. RIOTS AND PROTEST WOULD MIX WITH DEFIANCE AND NATIONAL PRIDE IN A BIZARRE DISPLAY, A CAULDRON OF CHAOS. THE WILD CARD IS THE CREDIT DEFAULT SWAPS AND THEIR UNPREDICTABLE PATH OF DESTRUCTION IN THE FALLOUT ZONE. GOLD WOULD AND WILL SOAR. $$$

Andrew Lilico of the UK Telegraph laid out a logical credible flow of events following a Greek Govt debt default, whose potential is a lock guarantee with only the details lacking. Greece would face an immediate crisis, with grossly insolvent banks being nationalized or shut down, accompanied by riots and curfews as people will have difficulty removing their savings from the banks. Greece would return to the Drachma currency, an event marked by redenominating its debts into the old currency. The next domino would be the most deadly, a currency devaluation of at least 30%, probably closer to 50%. Effectively, creditors would have to deal with a default of one-third to one-half of the Greek loans on their books. Then would come the other PIIGS nations, which would either decide to default on their debts, or have it forced upon them by the bond markets. Rollover of any PIIGS debt would be impossible, a brick wall of refusals and closed doors. The PIIGS pens would all savor the wondrous double-edged elixir of devaluating currencies of the former type in a strange parade of nationalism and defiance. The big bank losses would multiply from the original debt defaults, compounded by currency devaluations kicking in. A repeat of Eastern Europe credit losses would occur, the debt default compounded by currency devaluation.

The big European banks in France and Germany, even London, would then be forced to recapitalize at the Euro Central Bank spigot of liquidity. The EuroCB would print money, an act forbidden by its charter, but that has not prevented bailouts used for Greece, Portugal and Ireland either. Big banks are not subject to laws in the Western Fascist Business Model noxious groundswell of the last decade. Compromises would be made, all sounding good. The Big Enchalada in Spain would be the crowning blow. They might default on their sovereign debt. They might force through a debt swap for equity, basically an exchange of used toilet paper for unused toilet paper. Carnage would come to the sovereign bond market at the European periphery, to their bank bonds, to the bank stocks, and to their stock markets thought to be immune. Their economies would deteriorate rapidly from absent credit and liquidity blockage across the system. Finally, across the sleeve, the London banks would face capitalization needs from renewed generosity at the Bank of England. The London banks own bonds all over the entire global landscape. See the Global Research article (CLICK HERE).

A big ugly wild card is the Credit Default Swaps. They would trigger and require payments to bond holders. Expect that some big banks would quietly die a sudden death, an event surely to be covered up. The CDSwap game is a hidden banking system full of fraud. It is my contention that the big European bankers want to avoid a Greek Govt debt default because they want to avoid both major bank losses and the unpredictable explosions and domino effects across the continent. The fraud would be egregiously exposed in this unregulated privileged casino game, which could extend to the United States. Never lose sight of the effect of all the sovereign bond wreckage, amplified by EuroCB monetary inflation to recapitalize the big European banks, the Gold & Silver price would and will soar. It will start off as a Gold breakout in Euro currency terms, then spread to Gold in Pound Sterling, then to Gold in USDollars. The Global QE process will blossom like a massive cancerous mushroom, and complete the trifecta of US, Japan, Europe.

 ◄$$$ ITALY IS NEXT TO JOIN THE CRISIS. THEY ARE READY TO COMPETE WITH SPAIN FOR THE NEXT GOAT BONNET OF SHAME. ITALY HAS STAYED OUT OF THE

NEWS FOR A LONG TIME, CALLED IMPROPERLY MORE HEALTHY. ALL P.I.I.G.S. NATIONS WILL FALTER, SINCE ALL ARE BASKET CASES NURSED ALONG, WHOSE FINANCES ARE FUDGED AND DELAYED BEFORE TRUE RECKONING. A POWERFUL RECESSION IS DUE TO HIT THE ENTIRE SOUTHERN EUROPEAN ECONOMY. $$$

Italy is lined up next to seek a bailout from the European Union and the Intl Monetary Fund as a slow motion banking crisis unfolds in the country. This is the firm belief of an excellent financial analyst and fund manager. The veteran Felix Zulauf is president of Zulauf Asset Mgmt. He said, "Everyone is focused on Spain. I think the next country to go is Italy. What I notice is a tremendous deposit outflow. It is a slow motion banking crisis, and the banking system has been the big buyer of government bonds in Italy. The banks have been buying between 60% and 90% of the bonds issued in recent years. And the way the balance sheet is developing in the Italian banking system, they will not be able to do that. Later, I wonder who will buy those bonds. The EU is trying to dictate a very severe austerity program, which will lead to a lengthy recession. I would call it a depression. We will see later this year that Italy, Spain, and virtually all the peripheral countries will be in negative growth again. I think there is a 90% likelihood of another recession in Europe beginning later this year." Zulauf expects tremendous upward pressure on Italian Govt bond yields that could push the nation into a new recession. See the CNBC article (CLICK HERE). When banks are the primary buyers of sovereign bonds, that means a quasi debt monetization is taking place. Italy is in far worse shape than the incompetent financial analysts have given it credit in the last two years. One should expect a split economically, as a powerful recession hits the Southern European nations, but the Central European nations led by Germany experience flat growth with stern headwinds. Italy will welcome the former Lira currency. They hate the Euro.

CURRENCY WAR IN FULL SWING

◄$$$ THE BOUNCE IN THE USDOLLAR HAS PUT THE US-STOCK MARKET AT RISK. TOO MUCH CONNECTION EXISTS WITH LEVERAGE BETWEEN THE S&P500 STOCK INDEX AND THE WEAK USDOLLAR. THE STOCK MARKET ACTUALLY HOLDS THE USDOLLAR HOSTAGE, MUCH LIKE THE US-HOUSING MARKET HOLDS THE USFED HOSTAGE. THE USDOLLAR RALLY WILL END VERY SOON, IF NOT ALREADY. $$$

The High Frequency Trading is estimated to account for roughly 70% of trading volume on the New York State Exchange, a total travesty and embarrassment, evidence of its corruption and ruined condition. Worse, HFT outlines how the S&P500 stock index and Dow Jones Industrial stock index hold the USDollar hostage. Many opposite moves in the USDollar exchange rates and equities are often due to flash trading programs running algorithms that buy the SPDR spider basket when the US DX index drops and sell stocks when the it rises. One combat veteran from the stock warfare commented. Trader Mark said, "If you are bringing anything above and beyond first grade logic to this market, it is too much. It just amazes me that literally armies of PhDs cannot come up with an algorithm a bit more sophisticated than 'IF DOLLAR ZIG THEN MARKET ZAG.'" Actually, sophistication is not needed when corruption is openly permitted, like front running and peeking at the order flow, even moving in front of changes in USGovt policy, a Goldman Sachs specialty. One does not need a complex robbery scheme to succeed when a simple holdup and mugging suffice. Clearly, a USDollar that grows much stronger than a mere bounce off the basement floor would be a bad omen for both equities and commodities. Stocks are vulnerable to the galloping USEconomic recession. The position of the US housing market holding the USFed hostage on interest rates is obvious, and often mentioned by the most uninspired and uninsightful analysts. The USDollar urgently needs higher interest rates in order to avoid dredging the rancid floors of scummy liquidity seabeds. But the USFed is stuck. Likewise, the US stock market is stuck, dependent on a weakening USDollar. Almost the only growth prospects for many US corporations lie overseas. Thus they too are dependent upon a weaker USDollar. The trade gap, the USGovt deficits, the absence of US industry, the rigged US stock market, these factors all scream a required lower USDollar.

◄$$$ THE USDOLLAR WAS DUE FOR A REBOUND AFTER A FOUR MONTH DECLINE. THE FALSE PREMISES ARE INSUFFICIENT TO SUPPORT A SUSTAINED REBOUND. NOTHING CAN STOP THE MONETARY SYSTEM BREAKDOWN, OR THE USGOVT DEBT JOINING THE OTHER SOVEREIGN DEBT SINKHOLES, OR THE GLOBAL REVOLT AGAINST THE USDOLLAR. THE RALLY IN THE US DX INDEX IS ALMOST EXHAUSTED, BASED UPON A LIE AND EURO WEAKNESS. $$$

◄$$$ THE PRIVATELY ENFORCED FIAT PAPER MANIFESTO IS AN INVITATION TO DISCARD THE USDOLLAR IN EXCHANGE FOR A TANGIBLE ASSET. A GREAT AWAKENING HAS BEGUN, AND A HORROR AWAITS THOSE SLOW TO THE CONVERSION PROCESS. $$$

As of 5 May 2011, the total public debt subject to the debt limit (Table III-c from official USGovt websites) was $14,269,975,000,000. The sheer size of the debt burden to carry should cause great unease to anyone whose life savings or pension fund is locked in USDollar denomination. The insanity lies in the fact that the majority of American investors treat the debt burden fiasco as normal, if not necessary to market function. Most investors pay little heed to the notion that Federal Reserve Notes has no inherent value, except for a promise of redemption. They care little that the notes themselves are hardly a firm promise anymore, given the USFed has destroyed its own balance sheet. The bearers of FRNotes are gambling that the game being played will not end suddenly, with a mass public epiphany of no value. The USDollar hangs on the tenuous and vaporous premise of the 'Full Faith and Credit of the United States Government' which is fast imploding in a global view, even as it is deeply committed to narcotics production, distribution, and money laundering. The USDollar is clearly not a rational place to store wealth. The FRNote is actually a confidence game, whose value is in direct proportion to the confidence that bearers maintain faith in it. Conversely, Gold & Silver, along with other physical commodities, are a place to store wealth. The pricing of gold & silver in FRNote terms is irrelevant in a perfect world, but the setting of price is a common heretical practice in the world we live in. The precious metals along with other commodities have inherent value. That is the ultimate truth in value.

In a sense, investing in real commodities is a version of Pascal's Wager. The physical commodity investor has nothing to lose and everything to gain. After the exchange, the investor has acquired a real asset with inherent value and disposed of paper with notional value, whose value is arbitrary and within the control of a ruling syndicate. The real asset has value not tied to counter-party risk or debt of any kind, a pure entity. Attempts to denominate that value in terms of the notional form is irrelevant, such as pricing Gold & Silver in COMEX price discovery methods. Thus the conversion process continues to a logical or irrational end. Either way, the conversion will continue, since the great awakening has begun. The USDollar is an instrument of a vast Ponzi Scheme, an instrument for bond fraud, an instrument for hoarding power, an instrument to expand warlike aggression, an instrument to act as a credit card that enables living beyond the nation's means. If truth be known, the USDollar is an instrument that has killed the national economy and its financial structure. The global revolt has been in progress since before 2008, when the cardiac arrest of the US banks was first manifested. It was a death event little recognized.

◄$$$ JAPANESE INDUSTRIAL OUTPUT FELL BY 15% AND CAR PRODUCTION FELL BY 57% IN MARCH. THE RECOVERY FROM THE STAGGERING TOLL OF THE EARTHQUAKE AND TSUNAMI WILL TAKE MUCH TIME. MANY EXPECT A RECOVERY IN THE NEXT FEW MONTHS WITH OUTPUT RETURNING TO NORMAL. THE SCENARIO SEEMS ROSY OPTIMISTIC SINCE THE NUCLEAR FALLOUT IS WORSE THAN A MONTH AGO. THE FUKUSHIMA REACTORS HAVE ALL MELTED DOWN. $$$

Big differences are identified between the news coming from Japan about the nuclear reactors in April versus May. All five Fukushima nuclear reactors have suffered core meltdowns. No gigantic plumes of radiated steam have occurred, which is important for fallout to reach North American land masses in high altitude movement with more dangerous concentration. The other contrast is the virtual news blackout. In April the nuclear radiation news was unending, but lately the public is treated to mere sound bites, when the true story in Japan is an order of magnitude worse. News has shifted to Libya, the new good war. As the radiation spreads across Japan, some cities are seeing pervasive cracks in the city streets with water levels rising slowly. It is impossible for the Jackass to anticipate any full recovery to the vast industrial torso of Japan when its upper region is spewing radiation in uninhabitable zones and the cities might be gradually sinking. The fuller story is beyond the scope of this newsletter, what with demons playing haarps.

The earthquake and tsunami have taken a much larger toll on the Japanese Economy. Estimates of economic damage have proved to be very conservative. Current estimates of slowdown remain very cautious to the point of inaccurate in my view. The Bank of Japan cut its forecast for the year to under 1% growth, with apparent pressure not to make a negative forecast. It will be negative for the year as sure as the sun rises like in their national flag. Factory output fell a whopping 15.3% from February to March (a single month), the biggest drop since the post-WW2 era. The carmakers are the most visible among the sprawling gigantic Japanese industrial complex. Toyota, Honda, and Nissan reported that domestic output plunged in March. Japanese overall exports declined in March for the first time since November 2009. Toyota went on record on April 22nd that its production would return to normal in Japan by July. Time will tell, doubtful. Japan's domestic vehicle production fell 57.3% to 404,039 units in March, the Japan Automobile Manufacturers Assn reported. Export of cars dropped 26% to 312,478 units. Details are ugly. Toyota Motor's output in Japan plunged 63% to 129,491 vehicles in March from a year earlier. The company estimated it may lose production of 300,000 cars in Japan and 100,000 abroad through the end of April because of earthquake related shutdowns and supply interruptions. The broad spectrum has entered rosy recovery estimates that seem out of touch with reality. Industrial companies plan to increase output 2.7% in May after some revival in April. Lastly, household spending fell 8.5% from a year earlier. See the Bloomberg article (CLICK HERE).

◄$$$ THE BANK OF JAPAN IS UNDER EXTREME PRESSURE TO PURCHASE DEBT AND AVOID AN EVEN LARGER GOVT DEBT BURDEN. THEIR PARLIAMENT, FINANCE MINISTERS, AND OTHER GROUPS ADD TO THE PRESSURE. THE WESTERN DEBT RATING AGENCIES PUT THE B.O.J. IN A BIND WITH A NEGATIVE OUTLOOK. THE POLITICALLY ACCEPTABLE ALTERNATIVE WILL BE TO SELL FOREIGN ASSETS. IT WILL SEEM LIKE A PERFECT EXTERNAL SOLUTION, BUT IT WILL LIFT THE YEN CURRENCY AND ADD STRAIN TO THE INDUSTRIAL SECTOR. $$$

Falling confidence in Japanese Govt debt is yet another victim, adding insult to injury. Standard & Poors downgraded its outlook for the Japanese Govt debt rating in the first week of May. Fitch followed suit last week in a pig pile of downgrades. Notice a common thread, the reluctance to rely upon pure monetary inflation. The proposal submitted by Deputy Governor Kiyohiko Nishimura to expand the BOJ asset purchase fund was rejected by the policy board, which voted to keep policy unchanged. They rejected debt monetization, aka hyper inflation. BOJ Governor Masaaki Shirakawa has repeatedly opposed more aggressive stimulus, like direct financing of government debt. He cites the risk of stirring up inflation. Their Parliament and former Cabinet ministers continue to apply pressure for more central bank purchases of government bonds. A bipartisan group of senior Japanese lawmakers has been pushing for the government not to raise taxes to pay for rebuilding. They urge the central bank to buy more government debt instead. More stimulus is expected, but it might come as basic fiscal support that adds to the already sizeable (over-sized) government deficit.

The challenge is to finance and rebuild during the reconstruction phase and engender a recovery without adding to the world's biggest public debt burden. S&P cut the outlook on Japanese AA- local currency credit rating to negative from stable. Rating companies are concerned that politicians may fail to come to a consensus agreement for dealing with a debt equivalent to about 200% of Gross Domestic Product. So either the Japanese Govt Bond (their USTreasury Bond equivalent) will see higher bond yields, or the BOJ will step in and monetize the bonds. The choices on the table are higher interest rates or more price inflation. The core consensus in Japan will eventually choose the other alternative, selling foreign assets!! That is my forecast, since it will be very palatable politically. By the way, the Japanese have a debt burden equal to 200% of GDP as a direct result of asset busts and a chronic 0% rate that has failed to produce a broad economic recovery for 20 years!! They have an industrial base and commanded a trade surplus all that time. The USEconomy has none of these advantages, in much worse condition. Therefore the US will suffer either a collapse or hyper-inflation. My guess is the inflation scenario since that is the raison d'etre for American bankers and economists. In their arrogance, they believe they can control inflation and deflation. They cannot do either.

The Bank of Japan kept fixed its asset purchase program at 10 trillion Yen (=US$122 billion), and also kept fixed the benchmark interest rate at a range of 0% to 0.1%. Such a rate for two decades is a financial death thermometer reading. The BOJ also kept its bank credit facility at 30 trillion Yen. The BOJ raised its price inflation forecast from extremely low to very low. The reality in Japan is similar to the United States with disorted government estimates of the CPI, but in Japan it has been lower. The rising JapYen currency has softened and mitigated the blow of higher energy costs. However, the West Texas Crude Oil price in JapYen terms is still higher than all of 2009 and all of 2010, adding broadly to their internal cost structure. Japan imports over 98% of the crude oil consumed. The industrial complex contains countless heavy energy users, all intensive work. So both the higher JapYen and higher energy costs undercut industrial profits. Everyone wants to be confident about a resuscitation of Japanese industry. If it occurs, it will be slow and must be subsidized, which is not mentioned in any financial journal or political circle.

◄$$$ THE VERY SAME FACTORS THAT FORCED THE EMERGENCY G-7 MEETING TO CAP THE YEN HAVE RETURNED. A HIGH YEN EXCHANGE RATE RENDERS THEIR VAST SUPPLY INDUSTRY AS UNPROFITABLE, IMPOSING GREAT STRAIN. EXPECT ANOTHER EMERGENCY MEETING, WHICH IN MY VIEW SHOULD BE DESCRIBED AS A GLOBAL QUANTITATIVE EASING SINCE THE MAJOR CENTRAL BANKS WILL COORDINATE THEIR ACTIONS TO BUY THE VAST TRANCHES OF USTREASURY BONDS THAT JAPAN NEEDS TO SELL. THE TRIGGER FOR SUCH A CONVENED MEETING WILL BE A STRONG YEN RISE PAST THE 125 LEVEL. $$$

A high Yen exchange rate pushes the vast Japanese supply industry toward unprofitable, imposing great strain. The Japanese Yen has been the beneficiary of the global USDollar counter-trend rally. It is certain to reverse soon, since the US fundamentals are worse than pathetic. Expect another emergency G-7 Meeting of major finance ministers when the Yen currency rises in exchange rate past the 125 level in a convincing move. QE has gone global, but its continuation will be much more secretive, just like the USFed and further rounds of QE. The accord as a meeting outcome in my view could be better described as a Global QE since the major central banks will once more coordinate their actions to buy the vast tranches of USTreasury Bonds that Japan must sell in order to raise funds. The large Japanese financial institutions must close their finance gaps and avoid price inflation. Doing so without asset sales would cause a pure unfiltered inflationary effect. They do not want additional woes in addition to what grotesque strain has already come. The exercise will be repeated, as the Jackass forecasted a month ago. My forecast is for a secret G-7 Meeting to agree to USTBond purchases to push down the Yen currency, but without any publicity, zero press coverage, all in total secrecy. It is a development factor far bigger than any QE conducted solely by the USFed. Since coordinated the world over, call it Global QE. Look for some distortion of purpose for any suddenly convened meeting of finance ministers. They might call it coordinated global monetary planning, or cooperation with emerging economies, or adjustments to global trade settlements, or some such deception. It is just another side to the Competing Currency Wars. The underlying force behind the rising Yen is their industrial slowdown, the arrival of a trade deficit, and the urgent need to finance reconstruction costs by foreign asset sales without causing price inflation.

Insurance companies will play a surprisingly large role. They face mammoth claims from damaged buildings and stalled factories. The large Japanese financial institutions must close their finance gaps and avoid price inflation from pure monetary inflation. Foreign asset sale is the key. Their deficit is growing, industry faltering, electricity supply spotty, supply chain unreliable, and US bond sales rising. The reconstruction is underway. The financial markets still need help. Their economy faces an unprecedented slowdown more accurately called a general coordinated breakdown. As the nation must pay for its reconstruction, expect big waves of bond sales to match big stimulus and monetization. Foreign asset sales will be the compromise made politically. Although palatable, they will cause the JapYen currency to rise further, enough to sound alarms and cause even more profit squeeze.

Watch the Yen currency closely. Two weeks ago, it jumped to 125.5 in a brief spurt. Few took notice. My preference is to use the Yen exchange rate in US$ terms, despite the inverse used widely and with confusion. The Yen chart had a few 123.5 peaks before it zoomed to 128 in April to cause a major problem. Those peaks were briefly surpassed in the second week of April. Support is being tested in a highly important struggle, but with an uptrend. The Yen has settled back, but might soon stage another assault. This month, the Yen has been testing the 122-124 range of resistance, after rising above 125. The past four peaks since 2011 began have occurred within the 122-124 ribbon, which later might serve as new support for an upward move. If the Yen returns up toward 128, the full array of warning lights will go off, making urgent another G-7 Meeting. My analysis has called it the Global QE initiative, a factor far bigger than any QE conducted by the USFed.

◄$$$ CHINA TRIMMED USTREASURY HOLDINGS FOR THE FIFTH CONSECUTIVE MONTH, ALTHOUGH BY A SMALL AMOUNT RELATIVE ITS $1.145 TRILLION TOTAL. THE PROCESS OF SHEDDING THE AMERICAN WATER-LOGGED COAT IS LONG AND PAINFUL. THE USGOVT IS STUCK IN A PARALYSIS WHILE THE DEBT BURDEN GROWS WITHOUT CONTROL. BY WITHDRAWING FROM USTBOND PURCHASES, CHINA PUTS PRESSURE ON THE USFED TO CONTINUE ITS DEBT MONETIZATION. $$$

While the USGovt looks extraordinarily irresponsible, reckless, and partisan to the point of destructive, the Chinese wealth funds reduced their USTreasury Bond holdings. It was the fifth consecutive month in reductions. China remains the largest foreign creditor, in terms of USTBonds held in reserves. The USCongress and White House seem unable to properly deal with the debt situation, arguing over small amounts, perserving certain spending as sacred such as Social Security, Medicare, USGovt & USMilitary pensions, and the endless wars for private syndicate profits. The USGovt cannot respond capably to the specter of debt limitations. While China has reduced USTBond holdings, the total of $1.145 trillion is higher than a year ago. That is probably due to the reclassification into a wider definition that might include USAgency Mortgage Bonds backed more fully by USGovt guarantees. China might be reducing their holdings, but they still own a boatload of USTreasurys. Beijing leaders have openly expressed their concern over the growing risk for US$-based bonds generally, even raising the prospect in public discussions of a USGovt debt default. Such is hostile talk. Although they want to vastly reduce holdings, it is not practical to dump bonds. The roughly $20 billion in bilateral monthly trade surplus with the United States makes it difficult. Therefore, observe uneasy partners turned trade warriors in heavy constant friction. See the Bloomberg article (CLICK HERE). The US and China in my mind resemble old individual battles between Western native indians and white man hunters and settlers. A custom was to tie the two arms from the men together with rawhide straps, as each was equipped with a knife in the other arms to do battle to the death.

◄$$$ THE CHINESE TRADE SURPLUS SURGED AGAIN. TALK OF A CHINESE ECONOMIC CRASH IS ABSURD. THEY OWN A $2000 BILLION SAVINGS ACCOUNT TO HELP THEM WEATHER THE STORM. SOME HICCUPS ARE TO BE EXPECTED, SINCE THEY SHARE WIDE USAGE OF THE USDOLLAR IN MONETARY SYSTEM AND TRADE INCOME. THE TRADE DEFICIT ANNOUNCED TWO MONTHS AGO WAS A VERY SUCCESSFUL DISINFORMATION PLOY. PRICE INFLATION HAS PICKED UP. THE EFFECT HAS BEEN SOME ELECTRICITY RATIONING. $$$

The Chinese trade surplus surged in April, to put to rest any deep concern over any big industrial slowdown. One must give them credit for the ruse in the first quarter on a supposed alleged heavy trade deficit. They must feel they flicked the noses of the data doctors at the USGovt agencies effectively. China registered a strong April trade surplus of $11.4 billion, against a backdrop of slowing imports and higher commodity prices. The surplus was nearly four times greater than expected, and arrives at a tense time, as China has been holding high- evel economic and strategic talks in WashingtonDC. The USGovt criticism turned much softer, as some rapprochment seems evident. Treasury Secy Geithner had a long session with an old colleague from a decade ago. They talked nice, but when reporters were not present, be sure that talks focused on strained topics. The USGovt continues to object to the strong Yuan currency, believing its appreciation has to date been small and entirely inadequate. Meanwhile, the Chinese juggernaut continues to collect USDollars in trade, and to complain about ruined USGovt finances. Increasingly the Chinese are the new players in global finance.

The Chinese exports rose by 29.9%, stronger than anticipated, to reach a record $155.7 billion. Imports climbed 21.8%, but were seen as disappointing, much below analyst estimates. Some doubt exists over whether industrial weakness has set in, or purchases were deferred due to fast rising commodity costs. Tao Wang, economist with UBS in Beijing, summarized saying "Exports are much stronger, that is the basic thing. Global demand is still pretty strong, a bit stronger than many people feared. On the import side, we think that commodity exports had been very strongly up until February and there has been quite a bit of inventory build-up. So right now we think it is going through some adjustment." On the contrary side was Xu Biao, an economist with China Merchants Bank in Shenzhen. He sees a warning in the lower imports, a sign of reduced internal final demand. He said, "Concerns about a slowdown have certainly intensified, and the risks of a worst case scenario for the Chinese economy, namely a relatively low growth rate and a high inflation, are on the rise." Japan was an obvious facctor. Imports from Japan were $16 billion in April, down 14.9% from March, amidst production and shipments interruptions.

The trade surplus for full year 2010 was $183 billion. Chinese officials openly desire a smaller trade surplus with the rest of the world in order to ease criticism from key trade partners over the controlled steered Yuan exchange rate. The Chinese export growth was 10% last year. The latest data showed that China, the world's second largest oil buyer, imported 1.7% more crude oil than a year earlier, bringing in an average 5.24 million barrels per day in April. That is evidence that contradicts economic or factory slowdown. Imports of copper were much weaker, down 14% from March in volume terms. But rather than concluding a slowdown in Chinese economic activity, analysts believe the shortfall indicated that higher priced supplies from the global market were refused, in favor of using local producers and tapping stockpiles. The Chinese Govt sees little sign of a hard landing (crash) in the economy. The Peoples Bank of China has raised bank reserves requirements several times in a cautionary move. The decision to float the Yuan a little higher could be a direct attempt to lessen the impact of price inflation, which hit 5.4% in March, a 32-month high. Unlike the United States, the Chinese leaders run a small risk of tightening too much.

The Chinese Economy already must contend with occasional electricity rationing. Officials have been warning for weeks that shortages would be more severe than usual this year, as the most severe electricity shortages since 2004 have been suffered. A national shortage of 30 million kilowatt hours is expected this summer, equivalent to the consumption of three Chongqing cities (population 6.5 million). Their electricity companies face financial pressure from the increase in global energy costs. Beijing ministers refuse to increase state controlled electricity prices because of concerns over inflation, choosing rationing instead. They might turn to Yuan currency management policy next with permission of a higher exchange rate versus the USDollar, in order to tackle inflation and reducing its pressure. A delicate balance is sought, since a higher Yuan valuation means higher export prices and lower foreign demand, possibly leading to factory cutbacks and some job losses. See the Chinese News Daily (CLICK HERE) and the Economic Policy Journal article (CLICK HERE).

◄$$$ CHINESE WAGES ARE RISING. THE TREND WILL ENABLE MORE CONSUMER ACTIVITY, BUT ALSO RAISE EXPORT PRICES TO THE US MARKETPLACE. THE USECONOMY WILL IMPORT PRICE INFLATION IN THE COMING MONTHS. $$$

Chinese wages are rising, which combined with higher material input costs, are pushing upward final product prices. The global prices will soon be higher across the entire spectrum, since they export in a wide variety of sectors. Observe the possible end of an ultra-cheap era of imported goods. William Fung is the managing director of one of the world's biggest manufacturing & outsourcing companies, many of which are based in Hong Kong. Wages for the tens of thousands of workers are surging. He predicts overall that Chinese worker wages will increase 80% over the next five years. In turn, prices for Li & Fung produced goods will rise too. He expect the next 30 years will feature Chinese inflation, in a stunning admission. The wave of outsourcing to China will come to an end, motivated for years by 20% to 30% lower labor costs, as he described. They have been more like 50% to 60% lower in my view. It was pure labor arbitrage, but the advantage has in many cases vanished. Li & Fung traces the start of rising wages to the Foxconn Effect, the trade name of Hon Hai Precision Industry, maker of iPads for Apple, and computers for Hewlett-Packard, among other popular products. After a string of worker suicides last year at one of its Chinese plants, the Foxconn executives raised wages 30% or more in a bid to improve worker conditions and to defend their image. Workers at other factories, including a Honda Motor parts plant, also went on strike for higher pay, and won the pay hike as a concession. The trend across all of China is for higher wages. The Chinese Govt has supported higher wages so as to deal with labor unrest, but also as way to boost domestic consumption. In the process, they have reduced reliance upon exports to expand the economy. They concede smaller trade surpluses in the process. Notice some sizeable pay increases in five major cities.

GLOBAL WAR CENTERS ON GOLD & SILVER

◄$$$ ERIC SPROTT EXPECTS A MUCH HIGHER SILVER PRICE FROM BASIC SHORTAGE IN THE FACE OF HUGE WORLDWIDE DEMAND. SPROTT EXPECTS THE GOLD/SILVER RATIO TO DESCEND TO 16:1 AGAIN, AND TO OVERSHOOT TOWARD ABOUT 10:1 EVEN. HE DOES NOT EXPECT THE COMEX RAID TO SUCCEED IN STEMMING THE SILVER BULL MARKET, SINCE THE PHYSICAL MARKET ALWAYS DOMINATES IN THE END, WHICH IS APPROACHING. $$$

Max Keiser had Eric Sprott as guest for a pointed interview, where the Silver price and the Gold/Silver Ratio were his dominant themes. Sprott said, "I have always looked at silver and gold as a situation where the demand will exceed the supply. When I looked at gold in the last decade, we had a great change from the demand side from which central banks used to be sellers and then became buyers. We used to have no Exchange Traded Funds, and now we have ETFs. We used to have mining companies with hedgse, and now they do not hedge. The shifts in ownerships have been dramatic in a market where we really have seen no rise in supply in the case of silver. As we witnessed people buying silver, [one easily realizes] that there would not be enough silver to buy. As examples, the USMint today sells as many dollars of silver as dollars of gold. When you realize that silver trades at 40:1 ratio, it means people are buying 40 times more physical ounces of silver as they are buying gold. When we sold our gold ETF, we raised C$440 million. When we sold our silver ETF we raised C$550 million.

James Turk of GoldMoney sells more dollars of silver than gold. We have a little company called Sprott Money that sells gold and silver coins. We sell way more dollars of silver than gold. So here we are in a situation where the prices are at a 40:1 ratio, but the dollars going into it are almost dead equal. So I cannot see the price ratio staying in this range. We have been net buyers of silver every day. I will be a buyer of silver today. I will be a buyer of silver tomorrow. We have not lost any faith to what happened to silver. I have no fear of silver here. [Its price path] will be parabolic but later on it will be more parabolic than we have today. I have always thought that silver would trade at 16:1 ratio in terms of prices to gold. To make it simple, if we measure the gold at $1600 that would suggest that silver could go to $100. I think the ratio might even overshoot downside may be trade as much as 10:1. The reason why is that gold today is the de-facto reserve currency. But silver has always been a currency people treat as a currency. Silver is a very very small market. There is no way that with roughly $50 billion of silver inventory around [the world] that we can make it a currency at these price levels. Therefore, I see the silver price going much higher." His ratio arguments, combined with the flow of investment funds equally into silver & gold imply much higher silver prices in the near future.

Sprott directly accused the COMEX of manipulating the price of silver down. He pointed out the gross imbalances in market activity. In a single week, the COMEX silver trade activity averaged 1.2 billion ounces per day. Yet a much lesser 700 million ounces are mined globally in a year. Only 33 million ounces of physical silver stand available for delivery by the commercial short conmen. If a mere 3% of the contracts in trading silver demanded physical delivery in one day, the entire COMEX silver inventory would be drained dry empty. He reminds a major quintessential fact, that the key market is always the physical market. Sprott does not expect the recent raid is going to succeed in keeping down the silver price or ending the frenetic demand. See the Zero Hedge article (CLICK HERE).

◄$$$ THE SILVER MARKET TODAY IS ALMOST THE EXACT OPPOSITE AS IN 1980 WHEN THE HUNT BROTHERS ATTEMPTED THEIR SUICIDAL CORNER OF THE PAPER MARKET. THEY WERE DESTROYED EASILY WITH SIMPLE MARGIN RULES CHANGES. WHEN NAKED SHORT MANEUVERS BY THE CARTEL REDUCE THE SILVER PRICE, IT GIVES A BIG DISCOUNT TO FOREIGN PHYSICAL BUYERS, WHO ARE GRATEFUL. THIS IS NOT 1980, BUT RATHER THE EXACT OPPOSITE!! $$$

The Hunt Brothers tried to corner the paper silver market, a stupid stratagem and an exercise in suicide, since their opponents controlled the rules of the game. The COMEX has almost no silver in inventory nowadays, or extremely little. In the face of huge May delivery notices for silver, the COMEX used the same tactic as in 1980. They raised silver margin requirements. This time, although a price decline went from $49/oz to $35/oz, and speculators were run over by armored trucks, the end effect will prove to be futile in stopping the global silver bull market dynamo. Foreign sovereigns have been accumulating silver in huge volumes. The combination of higher margin rules with continued leveraged naked short ambushes has provided a discount to the physical buyers, who are more emboldened as they foresee an imminent failure event. That phenomenon was not present in 1980, since no grandiose silver demand was concurrent to aid the Hunts. They tried to dominate paper silver in futures contracts without control of rules that governed the game. They tried to dominate paper silver when no great global silver demand reinforced their attempt to dominate. Therein lies the difference from today versus 1980. Today tremendous physical Asian demand has come to dominate the silver market while US demand for coins and bullion is huge and growing. The Asians are waiting for the nutball leverage junkies (who never learn) to be cleared off the deck and their blood washed off. People who make comparisons to the Hunt Brothers often display total ignorance of the silver market, and are an embarrassment to themselves. The opposite dynamics are at work today, the exact opposite. Most such clowns making Hunt comparisons know nothing about the current market, but rather parrot the mainstream press deceptions. Although the COMEX response mechanisms are similar, the market is 180-degrees different in makeup from 1980. The physical demand is ultra-strong. It waits for the stable lower price at which more silver bullion will be gobbled up. The upward trend will continue before the end of June.

◄$$$ MOODYS CHOSE TO MAKE FOOLS OF THEMSELVES IN CALLING $40 SILVER UNSUSTAINABLE. THEY COMMENTED THAT COMPANIES DEPENDENT UPON SILVER ARE UNDER PRESSURE, BUT MINING COMPANIES WILL NOT STAND TO HAVE THEIR DEBT RATINGS IMPROVED. MOODYS TYPIFIES THE CORRUPTED MINDSET OF THE FINANCIAL SECTOR. $$$

One must begin by recalling that Moodys was among the debt rating agencies that granted subprime mortgages a AAA rating, and held that rating right until their collapse. Moodys kept AAA ratings for Wall Street banks whose capitalization fell over 90%, like Citigroup. Moodys also keeps a AAA rating for the USGovt debt. They acknowledge the strain on companies like Carestream Health, Eastman Kodak, Fujifilm, and Avon Products. They acknowledge the gigantic profit margins for the mining firms on the opposite end of the pain spectrum. Moodys seemed to pound its chest, two shoe lengths below an empty cranial cavity, promising no improvement in an upgrade to the mining firms debt rating. They have some mental acumen though. Moodys reasons that Silver has risen in price from investment activity, without stating the investment is motivated by crippling unbridled USGovt debt, astounding USFed monetary inflation, crumbling sovereign debt, and debased currencies. Moodys also attributes macro-economic factors for the Silver price rise, without identifying a ruined housing market and over one quarter of US homeowners suffering from negative equity. But they insist on urinating on the mining companies, treating their own liquidity streams to the vast land expanses that contain precious metal ore deposits. Moodys thus made a political statement, that they will support the corrupt system, and will not do their assigned job. They are a laughing stock. They do not believe Silver can sustain a $40 price. They will therefore be left in an embarrassing position when it hurtles north of $50 in the second half of the year. That embarrassment will be compounded when their AAA-rated USGovt debt entertains another couple $trillion in the next year or two, and is negotiated for debt forgiveness while still AAA rated. See the Research Recap rag article (CLICK HERE).

◄$$$ SILVER IN INDIA IS BEING SCOOPED UP AT DISCOUNT. DEMAND HAS RISEN ELASTICALLY AFTER THE PRICE DECLINE. USAGE OF SILVER AS AN INVESTMENT HAS EXPANDED. SOME OBSTACLES PERSIST FOR REGULATORY APPROVAL OF SILVER EXCHANGE TRADED FUNDS, BUT APPROVAL IS NEAR. $$$

The Silver price correction has raised demand for silver in India. Some companies hand out silver coins as part of employee bonus packages, while jewelry stores promote silver as an affordable alternative to gold. According to an official of Sonawala Traders, a bullion house, silver has become a red hot commodity. He said, "This year, traders and jewelry houses have bought a large number of coins in 100-lots, since many corporate executives have decided to present a silver coin to their employees along with their annual increment and bonuses. It is a new trend with most companies who are doling out their annual payments this month. Since the price fall of both precious metals has been huge over the last week and since gold coins are still quite unaffordable as a give-away present, bosses are giving smaller denomination silver coins along with the annual salary perks.'' Funds have been diverted to buying silver bars instead of gold biscuits, during the start of the Akshaya Tritiya festival, usually focused on gold. In India, a transition has taken place to emphasize silver over gold. Silver purchases have far outpaced those of gold in recent months, a reaction to a higher gold price but still a low silver price.

Several Indian mutual fund houses are planning to launch silver Exchange Traded Funds when given regulatory approval. As prices rise, demand has shifted from gold and silver jewelry or small bars, to investment products such as silver ETFunds. India already has some Gold ETFs, but the advent of the Silver ETFs is eagerly awaited. The challenge for their debut is to find secure storage and assure metal purity. The traditional practice within the nation is to hold gold in a physical state, since silver is considered more of an industrial metal. However, times are changing, and with them customs. To match the investment demand, mutual fund houses across India are planning to launch Silver ETFs as soon as the regulatory authorities give them the clearance, namely the Securities & Exchange Board of India (SEBI). Debate persists over regulatory domain being the SEBI or the commodity markets regulator, enough to slow down debuts and the flow of funds during launches. Chiranjeeva Mehta at Quantum Asset Mgmt noted the major battle fought for hearts & minds of silver investors. Silver has two opposite forces determining its price. The demand as an industrial metal slows during economic recession, in opposition to demand that rises from the pursuit of a safe haven during times of price inflation and monetary system crisis. Indian silver demand is 73% devoted to industrial demand. But precious metals analysts have been making successful stands that silver has gained prominence as an investment vehicle, whose investment process in India is far from efficient. Some firms turn to the corrupt US and UK funds like the iShares Silver Trust SLV due to laziness and desire to avoid storage logistics and related costs. See the Mining Web article (CLICK HERE) and the Financial Times article (CLICK HERE).

◄$$$ TED BUTLER COULD SOMEDAY GRADUATE TO AN IDIOT SAVANT, BUT THE PROCESS NEEDS MORE COOKING. HIS TRUST FOR THE SYSTEM IS KOOKY. HIS BREAKDOWN ANALYSIS OF THE SILVER FUTURES  MARKET IS SOLID. HIS FORECASTS ARE ALMOST NEVER CORRECT. HIS IS A BUFFOON IN ANALYST CLOTHING. $$$

The continual faith shown by popular silver analyst Ted Butler in the CFTC and Gary Gensler is nothing short of amazing. It is borderline psychotic. His analytic work on the silver market and his dissection of the Commitment of Traders reports for years has been brilliant. However, his other side is delusional. His ability to comprehend the truth within the US system with respect to regulation of the securities markets tends toward complete ignorance. He is baselessly full of hope and tragically naive. Perhaps Butler suffers from what is known as Stockholm Syndrome, wherein hostages express empathy and have positive feelings towards their captors, whose lack of abuse is mistaken as acts of kindness. See the Truth in Gold article (CLICK HERE). Butler has a streak in his forecasts, 86 consecutive wrong forecasts, despite excellent futures market analysis.

◄$$$ PIMCO FUNDS LOVE GOLD, A FACT NOT MENTIONED MUCH EVER. THEY HAVE SHED USTREASURY BONDS, BUT GOLD BULLION HOLDINGS HAVE GROWN. THEY JOIN THE RANKS OF CENTRAL BANKS, ADDING TO GOLD HOLDINGS. $$$

Anne Gudefin is global equities portfolio manager at PIMCO. She invests heavily in gold. Before Fortune magazine, she said "The largest position in our fund is gold, which we think is a very good form of protection against what can go wrong. We were encouraged by the fact that a lot of the central banks, especially in Asia, are big buyers. We think that is an underlying trend that is very favorable for gold." The PIMCO investment coincides with central bank investments in gold reserves, like by Mexico, Russia, and Thailand. The chronic sovereign bond crisis in Europe, the runaway USGovt deficits, the dead US housing market, the USFed debt monetization (QE) purchases, the Chinese property market bust, even the Chinese price inflation, they all add to gold demand by such central banks on a worldwide basis. Against the broad backdrop of financial crisis, Gold is seen as an immutable precious metal that is immune to such uncertainties since it contains no counter-party debt risk. See the Intl Business Times article (CLICK HERE). In recent interviews, PIMCO head Bill Gross denied that his fund was heavily short in USTBonds. He said the category cited contains many different instruments that are have a bearish leaning against the USGovt debt. Interpret that to mean Gross has bought a stack of TNX and TYX stock-like positions that profit from higher 10-year and 30-year bond yields, and a stack of Credit Default Swaps that profit from greater likelihood of USGovt debt default. Gold works too, the primary nemesis to toxic US$-based securities.

◄$$$ GOLD COIN SALES CONTINUE THEIR TORRID PACE WORLDWIDE. THE MONTH OF MAY WILL LIKELY SEE NO BUMPS OR INTERRUPTION IN THE PACE. IT IS A GLOBAL PHENOMENON THAT WILL SURELY EXIST AS LONG AS THE WESTERN NATIONS CONTINUE TO RUIN THE SOVEREIGN BONDS AND CURRENCIES AND RUIN THE GOVERNMENT FISCAL CONDITIONS AND SELL MONEY FOR FREE. $$$

The longest Gold bull market in nine decades has farther to run, much farther. The USMint sold 85,000 ounces of American Eagle coins since May 1st alone, hardly a drip or trickle pace. History is a good guide. The last time sales reached that level, the Gold price rose 21% in the next year. A Bloomberg survey of 31 analysts, traders, and investors with actual knowledge and experience with Gold (unlike shills paraded before the financial networks, whose sponsors reside on Wall Street fraud factories) revealed that Gold is expected by them to advance 17% to a record $1750 an ounce by December 31st and keep gaining in 2012 since ultra low interest rates will prevail. That is their median estimate. Given that the USFed is expected to keep rates on hold through the fourth quarter, the gold rally is sure not reverse any time soon. A negative real rate of interest is the most reliable longstanding indicator of a continued bull market in gold. It is identified by the Fed Funds rate far below the prevailing CPI in the world of reality. People must also contend with USTBill and USTBond yields near 0% and at 3% to 4%, which in no way compensates savings vehicles for either the USGovt debt risk (runaway debt, even default) or the USEconomic risk to price inflation (asset erosion).

Accelerating coin sales are a global phenomenon. Rand Refinery makes the Krugerrand in South Africa. Their sales are heading for their best month since August, according to a May 13th update. Demand for physical gold was the strongest since early February, claimed Standard Bank of South Africa in another recent report. UBS of Switzerland, the biggest of Swiss banks, had its second best day for physical sales this year on May 9th, several days after the ambushed silver price. Sales by UBS to India, the world's top bullion consumer, are on pace over 10% higher than in 2010. The USMint sold 62,000 ounces of American Eagles in the first week of May, the week of the decline in silver price. The American Precious Metals Exchange, an online US bullion dealer, had its three best sales weeks ever in April and May. They expect to ship as many as 15 million precious metals coins or bars this year, double the amount from last year. See the Bloomberg article (CLICK HERE).

◄$$$ THE AUSTRIAN MINT CONTINUES TO SEE STRONG SILVER DEMAND FOR THEIR CLASSY PHILHARMONICS. $$$

Muenze Oesterreich is the Austrian Mint. Its gold coin is the best selling in all Europe. The company expects silver coin production to rise by 36% in 2011. The mint will produce up to 15 million 1-ounce silver coins in 2011, a 44% increase over the 11 million coins produced last year. But gold coins are their main event. The mint sold a record 903,047 of its flagship 1-ounce Philharmonic gold coins last year. CEO Gerhard Starsich said, "Silver continues to boom while gold has retreated a little bit because of the price." The 800-year old Austrian Mint halted the production of silver coins for general circulation in February after the price of the metal doubled in a year and exceeded its 10-Euro face value. They were for circulation though, a different matter. They focused on collector items and bullion coins. See the Bloomberg article (CLICK HERE).

◄$$$ CHINA HAS OVERTAKEN INDIA FOR #1 IN GOLD INVESTMENT DEMAND. INDIA HAS SWITCHED EMPHASIS TO SILVER FOR INVESTMENTS. $$$

◄$$$ GOLD OUTPUT IN CHINA JUMPED 27% IN APRIL OVER LAST YEAR, WHILE SILVER OUTPUT IN CHINA JUMPED 15% IN THE FIRST FOUR MONTHS OF 2011 VERSUS LAST YEAR. INDUSTRIAL METAL OUTPUT IS GROWING EVEN FASTER, AS ARE FINAL PRODUCTS. $$$

Chinese gold mine output rose 26.5% in April compared to last year, reaching 61.1 metric tons. Higher gold output saw its pace soar in the second half of 2010. A slightly different success story holds for silver. Chinese silver output only rose by 2.0% in April compared to last year, reaching 930.6 metric tons. However, a strong 15.4% growth was seen in silver output from January through April versus the first four months of 2010, reaching 3629.7 metric tons. Notice the huge gains in industrial metals lead, nickel, copper, tin, and alumina in the table provided. The factories are maturing in China, as the products have seen significant rises in output. The annual growth data is provided by the China Federation of Logistics & Purchasing, whose figures are in metric tons. See the Zero Hedge article (CLICK HERE).

◄$$$ JPMORGAN HAS PRODUCED 190 THOUSAND OZ SILVER IN TWO WEEKS TIME. THEY WILL BE ABLE TO SATISFY THE MAY DELIVERY REQUIREMENTS UNDER CONTRACT. THEY BOUGHT A LITTLE TIME, NOTHING MUCH IN THE SCHEME OF THINGS. KEEP IN MIND THAT JPMORGAN IS SHORT 3 BILLION OZ SILVER, AND THE BIG EIGHT BANKS ARE SHORT ALMOST HALF A YEAR OF GLOBAL OUTPUT. THE AMBUSH IS NOT AN EVENT THAT CAN BE REPEATED. MARGIN HIKES ARE DONE, AND WILL HAVE LOST THEIR EFFECT AS THE SECOND HALF OF 2011 IS ENTERED. $$$

The background is important, a sign of a desperate situation. JPMorgan was approaching an important May delivery schedule, with a mountain of Notices for Delivery filed for silver. They amounted to multiples of what JPMorgan had in inventory. They were caught in the corner, as global investors led by China were pounding the silver market with demands for the metal. The big banks were facing a magnificent event that would reveal their lack of inventory, exposing their phantom supply, and probably leading to a default at the COMEX. The eight largest banks have been net short 150 days of global silver production for the longest time. It represents an unsettled short position that simply rolls over, is never closed out, is never subject to the rules, never posts collateral, enjoys official favoritism, and festers while supporting a corrupt broken USDollar currency. The response by JPMorgan was a pure power display, leaving them with almost zero future ammunition. The banksters can rig the paper game by raising margin requirements that force speculative paper buyers to dump their positions like they did 30 years ago. The outcome this time will be different, since the physical market is depleted and global investors smell blood. The speculators profited from the decline on a net aggregate basis, and will return to the silver battleground. The COMEX game is almost in ruins, almost.

The May 5th report showed 461 thousand silver ounces in the JPMorgan ledger column. In one week, they produced 41% more silver, an amazing feat. The truly astonishing fact, beyond the vision of the CFTC regulators, was that over eight times the global production of silver was traded in corrupt paper silver futures contracts in that week. By May 12th, JPMorgan was the proud holder of 651 thousand silver ounces, a notable rise. The other big banks barely budged in their ledger item for silver holdings. The COMEX is below 33 million ounces in the registered category, and at 101 million ounces overall. Most of the 33 million is imaginary, a fixed phantom in inventory made of vapor not metal. Thus the urgency to take action.

◄$$$ SHANGHAI HAS CUT THE SILVER MARGIN REQUIREMENT ON SILVER FUTURES CONTRACTS. THEY HAVE BEGUN TO REVERSE PAST MARGIN HIKES. WAR HAS BEEN WAGED. AN EVEN MORE IMPORTANT DEVELOPMENT IS THE INTRODUCTION OF A HONG KONG SILVER FUTURES CONTRACT, SETTLED IN USDOLLARS. ITS TRADING ACTIVITY WILL REMOVE THE OVERNIGHT POTENTIAL FOR AMBUSHES BY JPMORGAN, WHEN THIN TRADING OCCURS. THE BATON WILL BE PASSED SMOOTHLY TO ASIA. $$$

The Shanghai Gold Exchange cut silver futures contract margins on May 13th. Although small at 19% down to 18%, the move is symbolic of the battle royal over gold between the United States and China. Trading volumes for the contract have surged. Data from the SGE show volumes rose over 30-fold from the start of the 2011 year, enough to cover 2.256 metric tons. The margin decision marks a reversal of three past margin hikes that followed suit with the COMEX. They hiked together. Shanghai has broken ranks, a mild declaration of war. As colleague Craig McC said, "The Chinese appear to be putting the silver screws to JPMorgan and the other Boyz. If the SGE is set up to allow deliveries in physical silver and gold, it seems designed as a delivery system to destroy the LBMA and COMEX." An opinion from a seasoned veteran in the gold trading industry was given upon solicitation. He was direct and crisp. He said, "The Shanghai Gold Exchange will bury the LBMA and COMEX. The world is shifting East." The war is on, as China buys physical when New York sells paper. The East invests in wealth while the West peddles counterfeit paper. See the ShareNet article (CLICK HERE). Soon a baton will be passed from New York to Shanghai and then to London, before it goes back to New York.

The Hong Kong Mercantile Exchange (HKMEX) has received authorization from the Securities & Futures Commission to begin trading a 1-kilogram gold futures contract offered in USDollars with physical delivery in Hong Kong. It will have a trading debut on 18 May 2011. The HKMEX will offer state-of-the-art electronic platform to trade commodities, with at least 16 members including some of the world's largest financial institutions as well as several well-established brokerage houses in Hong Kong. A highly liquid and avidly traded exchange will link China to the rest of Asia and the world. Barry Cheung, chairman of HKMEX, said, "Global demand for core commodities has in recent years been driven by Asia, especially China and India. However, market participants in the region have had to rely on Western exchanges for price discovery, bearing the basis risk exposure in the process. Our new platform will offer Asia a bigger say in setting global commodity prices. It will also enable market participants to more actively manage their risk exposures, using products tailored to Asian market needs." Consider the statement a declaration of war over precious metals and a rejection of the COMEX fraudulent system for price discovery, where fraud has been a chronic permitted fixture. The HKMEX announcement should be regarded as a direct assault on the COMEX monopoly, which assured upcoming clashes. The last straw appears to be the five straight margin hikes in nine days done by Wall Street to preserve their power and avoid a silver default. The after hours ambushes by Wall Street firms, most notably JPMorgan, will lose their impact as Hong Kong takes the baton in overnight trading activity. One must expect China and Hong Kong reserves to be converted more easily into gold & silver bullion by means of the exchange, especially if the Shanghai exchange can secure reliable and plentiful supply routes. See the Commodity Online article (CLICK HERE).

◄$$$ THE MEXICAN CENTRAL BANK HAS DIVERSIFIED WITH ALMOST 100 TONS OF GOLD BULLION PURCHASED. THEY ARE MOVING AWAY FROM THE USDOLLAR AND EURO. GRADUALLY TOXIC BONDS OF FOREIGN MARKINGS ARE BEING REPLACED BY GOLD BULLION BY CENTRAL BANKERS WORLDWIDE. $$$

The Mexican Central Bank has quietly purchased almost 100 tons of Gold bullion. Mexico bought 93.3 tons of gold in February and March, according to the central bank, in a haul valued at $4.5 billion at current prices and equivalent to 3.5% of annual mined output. The lot is worth $4.6 billion at current prices. The central bank has not publicly announced the move, but has reported it on its balance sheet, posted online, and to the Intl Monetary Fund's database of international reserves.The country's FOREX reserves have risen dangerously since last summer, a consequence also of interventions in the currency market to prevent the MexPeso from appreciating. Gold is correctly seen as a prudent instrument in which to diversify away from assets denominated in the USDollar or Euro. The unspoken story is that central banks around the world have embarked on the biggest bullion buying binge in 40 years. More than a binge, it is a return to common sense and prudent management, as they realize toxic bonds kill entire national banking systems and undermine economies. Bear in mind that foreign bonds have been purchased to prevent a rise in the MexPeso exchange rate. Therefore the Mexican central bankers are selling USTreasury Bonds and EuroBonds to fund the gold purchases. Such bonds had been purchased originally to prevent the MexPeso from rising, and thereby harming Mexican export trade. So regard the USFed as possibly funding these sales, just like in Japan. The evidence of Global QE is clear and visible for those with open eyes.

The gold purchase was made known within monthly data published by the Mexican Central Bank. It marks the latest in a series of very sizeable gold buys by emerging market nations. They are diversifying reserves away from the faltering and increasingly toxic USDollar. The nations of China, Russia, and India have acquired large amounts of gold in recent years, in a continuing scheme. China announced in 2009 that it had bought 454 tonnes of gold over the previous six years, probably much more. India bought 200 tonnes of gold directly from the Intl Monetary Fund in October 2009, actually with money borrowed from the IMF. Also, Russia has bought about 400 tonnes on the open market over the past five years, probably much more. The year 2010 is noted as the turning point when central banks became net buyers of gold after two decades of heavy selling, a grand reversal that has joined the private sector in protecting wealth from colossal erosion. Including the purchase by Mexico, central banks and sovereign wealth funds are on track to record their largest collective purchase of gold since the collapse of the Bretton Woods system in 1971. The Mexican gold purchases represent the most rapid accumulation on record by a single nation, possibly as part of a silver monetization plan. Apart from India's off-market purchase in 2009, the 78.5 tonnes bought in March by Mexico is the largest monthly purchase by a central bank in at least a decade, according to the World Gold Council. The lackey precious metals consultancy group GFMS had forecasted that the official sector would make net gold purchases of 240 tons this year, but now admits that estimate will prove to be low. The recent record was the peak of 276 tons in 1981. The shift reflects the Global Paradigm Shift. Witness the end of an era marked by widespread but misplaced faith in paper currencies and sovereign debt. See the CNBC article (CLICK HERE).

Some speculation has come from Canadian sources that the giant purchase by Banco de Mexico of gold bullion had an ulterior motive, part of a grander scheme. The angle reported is that the US Federal Reserve is using the Mexican CB as proxy in a big gold accumulation, which would precede a North American Union. Like with the Amero currency, the practicality cannot float. The concept simply cannot cope with the forces that obstruct convenient sidestep solutions to avert implosion and ruin of USGovt debt, if not the entire upper echelon of the US banking system. My belief is that they would need 10,000 tons of gold, not 100 tons, in order to monetize some continental union currency and to collateralize its monetary foundation. Although the new NAU Fed Notes are pretty, they belong on the attic wall next to Ty Cobb and Mickey Mantle baseball cards. See the Liberty News article (CLICK HERE). When a solid gold source of information was asked for a quick comment about the North American Union and the viability of a NAU Dollar (shown below, more like a Peso), a quick dismissal comment came back. He said, "I believe it is a mute issue due to the fact that the political, economic, and geo-tectonic changes will overpower all and everything. It is a Disney show." In my view the NAU concept is nothing than discredited bankers suffering from grotesque insolvency and gradual removal from power. They hatch wild plans while masturbating in that same attic. The notes shown below are the latest in a series of wasted expense in currency production. An entire warehouse stores useless Amero currency. The Amero failed in large part because the USGovt cannot by decree render global commercial contracts null and void, since it does not have the jurisdiction in world contract law. It is that simple. This currency shown would become an irrelevant vehicle quickly also, unless it could purchase crude oil.

◄$$$ MEXICAN BANKERS MULL OVER A SILVER MONETIZATION DECISION. ALL 31 OF 31 MEXICAN CENTRAL BANK GOVERNORS VOTED TO MAKE SILVER LEGAL TENDER. THIS COULD BECOME A MAJOR CRACK IN THE WESTERN MONETARY FORTRESS WALL, ONE THAT MATCHES THE CRACK CREATED BY THE INDIAN GOVT OF SIMILAR TYPE. $$$

Not much to claim for details. Bill Murphy leaked the story from his GATA perch, as a reliable source in Mexico provided the information on a unanimous central bank vote to make silver legal tender. Any attempt at implementation must follow, a totally separate matter, a rocky path. The nation of Mexico is rife with financial problems, over-run by the drug cartel, rapidly depleting Cantarell elephant oil field, on the edge of becoming a net oil importer, and owner of a Peso currency that has fallen by 10% against the already globally weak USDollar. A motion to establish Silver as a monetary metal would make waves, especially since done within the long nearby shadow of the United States. The USMilitary is already closely involved with the Mexican Govt in several initiatives. It is an uneasy relationship.

In a loose form of confirmation, Hugo Salina Price adds credence to the notion that Mexico will in some manner monetize silver in the coming months. In an interview, he mentions how the Mexican Central Bank normally follows the USFed policies in lockstep. He was surprised to hear that it had purchased so much gold bullion recently, a huge amount actually. He makes a practical point, wondering aloud where the Mexican purchase of 93.3 metric tons might actually held, stored, and vaulted. He asks whether its central bank merely has paper certificates or actual physical bullion. Price believes that silver coins might be on Mexican street in 12 to 36 months and maybe as earlier as September of this year. He describes the American monetary condition as being in total chaos. He lastly made a somber comment about his own security, hoping for no accidents or troubles. See the King World interview (CLICK HERE).

◄$$$ JESSE OFFERED THOUGHTS ON A SILVER DEFAULT AT THE COMEX. HE EXPECTS AN ULTIMATE FORCE MAJEURE AND FORCED SETTLEMENT OF FUTURES CONTRACTS IN CORRUPTED S.L.V. SHARES. GIVEN HOW THE POPULAR JPMORGAN-LED SILVER EXCHANGE TRADED FUND HAS FAR LESS SILVER BULLION THAN CLAIMED IN INVENTORY, THE SETTLEMENT WOULD BE A SHAM THAT HANDS OVER SILVER PAPER CERTIFICATES. THAT WAS THE PLAN FROM THE BEGINNING WITH THE JPMORGAN CONGAME POSING AS AN EXCHANGE TRADED FUND. $$$

Jesse of the Cafe Americain offered his view on the final chapter for both the COMEX and the I-Shares Silver Trust, the SLV exchange traded fund, two highly corrupt entities. Jesse wrote, "Someone asked me what it might be like if the COMEX was unable to meet its deliveries, and there was a cascading effect to the metals encumbered by counter-party risk in the two big ETFs, if they were hit by a wave of redemptions as large shareholders sought to lock in supply. I did not see their scenario of multiple days of up limits until the market clears, simply because it seems to be a few large members important to the exchange who seem to be holding the bag in this case. Market solutions are for the little people and relative outsiders like the Hunt Brothers. Rather, I would anticipate a declaration of Force Majeure, and a forced settlement in cash and shares of SLV, which themselves are probably representations of bullion rather than the metal itself. I do not know what the rationale for this might be, and it is not quite clear to me that they would even need one except for cosmetic purposes. When you have power and have learned to use it with ruthless hypocrisy, the only thing you need to respond to is a greater force of power that calls you to accounts. This is one of the great lessons from the recent financial crisis. When the government and the regulators do not uphold their responsibilities, fraud becomes fashionable. The COMEX has about 32 million ounces of deliverable silver on their books, and they are dragging out the delivery process each month, as virtually no new inventory becomes available to replenish their supply." Keep in mind that a significant portion of the 32 million ounces of silver in inventory is a base foundation of imaginary silver. It is their dirty secret.

Jesse went on to describe the steady stream of customer withdrawals of silver from inventory. In the most recent month, another 3.5 million ounces was withdrawn. The tide of disinformation works to sustain the corrupted system, while people are very concerned about a potential shock to the credibility of the system. Trust is in short supply, and the natives are growing restless. Jesse warns that when and if the supply of silver bullion drops below 30 million ounces deliverable, great strain will come to the COMEX to continue their congame. That is probably because much of the base inventory is a fiction. A silver futures contract on COMEX controls and contains 5000 ounces, making that inventory critical level equivalent to a mere 6000 contracts. The typical quantity of open contracts is usually well over 100 thousand contracts. Many silver contracts since January have settled in cash under a non-disclosure agreement. Jesse calls the COMEX less a market, and more a game of musical chairs, if not a shell game. The likelihood of severe market dislocation is here and now. Disorder has crept into the market. Rules have changed so quickly as to cast extreme suspicion on the exchange itself. The system defies reform and has chosen corruption, fraud, deceit, and strongarm tactics.

GOLD & SILVER PRICE STABILIZE

◄$$$ THE POWERFUL SILVER RUNUP IN PRICE HAS THE PLAIN LOOK OF A MAJOR SHORT SQUEEZE. THE KEY IS THE SLIGHT DECLINE IN OPEN INTEREST. MY GUT SAID DUMB GAMBLERS WERE REPEATEDLY WRONG IN CYCLICAL SHORT COVERING AT A LOSS. THE SILVER MARKET HONED IN ON THE MAGIC $50 MARK IN AN OBVIOUS DISPLAY. $$$

If the Silver market runup in price were solely a speculative mania, then Open Interest in futures contracts would have gone up steadily and rapidly. It did not. When price rises but the number of participants and contracts actually reduces, then it is a very different phenomenon. My intrepretation is a powerful reaction to a decaying and increasingly toxic USGovt debt situation, compounded by a broken crumbling sovereign bond foundation to the global monetary system. The speculative label is easy to apply, when little thought it given and when shoddy analysis is applied. A strange thought came through much of March and April during obsevations. It seemed many speculators attempted to short the silver metal sequentially, constantly and repeatedly in error and at great loss. Gamblers kept coming back to short after every additional $2 or $4 was added to the price. They were stunned that it kept rising, even tripling in  price from the summer 2010 levels, as Asians pushed it up overnight time after time. They kept losing on their short positions in a cyclical cascade of red ink. Sadly for them and their drawn down accounts, they were wrong as they misread the market badly. They must not have little comprehension of the global financial crisis at all. They must be ignorant of the huge annual deficit of silver supply. They must not be aware of the transition to silver as a monetary metal. See the evidence in the efficient graphic, provided by Sentiment Trader.

◄$$$ THE VOLUME OF SILVER SPECULATIVE LONGS REMAINS LOW, A CONTRADICTION THAT IT IS A BUBBLE. THE GREAT SILVER AMBUSH WAS NOT A GRAND EVENT TO CRUSH THE SPECULATION. IT JUST BROUGHT THE SILVER PRICE DOWN AND THE CARTEL SOME TIME, A DELAY OF EXECUTION AT THE FINANCIAL GALLOWS. THE SILVER GAME IS STILL ON. FUND MANAGERS STILL HAVE STRONG LONG POSITIONS. IN FACT, SMALL TRADERS PROFITED FROM THE SMACKDOWN, AS THEY HAD A RECORD HIGH NUMBER OF SHORT POSITIONS READY FOR THE PRICE DROP. THE HIDDEN BUBBLE IS IN STOCKS, WHERE MARGIN IS EXCESSIVE AND NET INVESTMENT LOSSES ARE STACKING UP. $$$

In early May, many believed incorrectly that the Silver market saw a critical sequence of events that crushed the speculative bubble. The five consecutive margin requirement hikes make it encumbent upon responsible competent analysts to check the facts. Few do, since they follow with their biases and corporate marching orders. The definitive breakdown of speculative indications within the CFTC's Commitment of Traders report tells the unvarnished story. After such a bone crushing silver ambush, the net positions for non-commercials, substracting shorts from longs showed relative tranquility with no big decline at all in their positions, thus still a bullish commitment. They have fewer positions, but the game is still very much on. Hedge funds do show the lowest net long silver position since February 2010, but still a solid position. The disaggregated COT report showed that traders the CFTC classifies as Managed Money (like hedge funds, commodity trading accounts) held 22,250 COMEX silver futures contracts long and 4973 short for a combined net position of 17,457 contracts long, excluding the spread positions. This is a strong bullish position still. The COT data goes contrary to the notion of crushing the speculative silver bubble. Instead, the data supports the story that silver has merely corrected. Indeed, the Managed Money net long exposure is the lowest since 23 February 2010, when the veteran speculators then held 12,624 contracts net long, but way back when the silver had a $15.85 price. Notice that Managed Money ledger item contained net sellers of silver futures during the rise from $30.75 in February to nearly $50 in late April. They profited from the rise as they reduced positions, and were not wounded by the rise!!

So the silver traders to a large extent used the recent runup in silver price to exit their long silver positions, despite the false stories told by the lapdog distorted US financial press. The COT also shows that the Small Trader ledger item recorded the largest pure short position since August, with 18,605 contracts short silver on 26 April 2011, when silver had a $45.45 price. Actually they registered their largest short position since the 1990 decade. They were actually net short, since their pure long position was 17,500 contracts. Conclude that many of the small guys, the good guys, were correctly positioned for the harsh smackdown on silver in the first week of May. The small speculators profited from decline!! They and the fund managers will be back, bigger than before, bolder than ever, with their ears taped back ready for more blood. It seems abundantly clear that the major driving force behind this current silver market has been actual demand for physical silver metal. See the Got Gold Report article (CLICK HERE).

For a bug-eye comparison to a true bubble, check out the US Stock market. The declining investor net worth is shown at the solid black body in the graph. It has turned negative, the second lowest level in recent history. Then compare the margin debt, evidence of speculative leverage. It is surging again, just like the late summer and autumn months of 2008 when the big bust occurred. Leveraged debt has backfired on stock investors, not silver investors. They are heavily leveraged, and losing money in the stock market, something not reported by the subservient corrupt information purveyors in the mainstream press. See the Zero Hedge article (CLICK HERE).

◄$$$ TURD FERGUSON LAYS OUT A FORECAST FOR THE SILVER PRICE TO RETURN TO $42/OZ BY THE END OF JUNE. THE KEY IS NOTICES FOR DELIVERY AT THE COMEX, WHICH USUALLY RELEASE THE PRICE TO MOVE UPWARD. $$$

Do not let names deter. It is indeed hard to take a guy seriously named Turd, but after having spoken personally with the Jackass, we are two solid peas in a disrespectful pod. The man is at the top of his game. He has a great feel for the silver market. In the phone call, he mentioned how the harness on silver would be loosened by the end of June, when the Notices for Delivery begin. In the past months, that event signaled big imminent moves in the silver price. Here the Turd comments on the size of the upward price moves, posted publicly to delineate his shared thoughts. He wrote in the week of May 18th, "Now, here is where it begins to get even more interesting. To me, the 'proper' percentage gain for a rally into first notice day is 26.23%. This is coincidentally the exact gain made from 22Oct2010 to the margin hike highs of 9Nov2010, and the gain from 25Jan2011 to 28Feb2011. If we can now all agree that the price action of late April was a blow off top, where the Cartel stood aside and let silver roll up all the way to $50, then we can assume that silver should have rallied only to about $43.25. Ultimately, this post is concerned with what we can expect for the next six weeks, as we head toward first notice day for the July11 contract. So here is what I anticipate: 1) Silver continues to base this week between $33 and $35. Next 2) by Friday but no later than next Wednesday, silver will be chugging higher. Next 3) applying a 26.23% gain to a low of $33 or $34 gives us a price target of $42 to $43 by 30June2011, the first notice day of the July11th contract. The main thing and the point of this exercise is to illustrate that the savage beating silver has taken over the past two weeks was brutal but not unexpected. Pattern and timing now strongly suggest that silver will once again swing higher very soon. Be patient but have faith. Opportunity again awaits just over the horizon." The silver bull is merely resting after an ambush, licking minor wounds, preparing to run roughshod over the evil herders. When it surpasses the $50 mark, it will again make global headlines and cause great alarm.

◄$$$ GOLD IN EURO TERMS IS SET TO BREAK OUT. IT TOO WAS MOTIVE TO POUNCE ON PRECIOUS METALS IN EARLY MAY. A POWERFUL BOOMERANG REVERSAL AWAITS GOLD IN EUROS. THE FUNDAMENTALS OF A RUINOUS EUROBOND MARKET ENCOURAGE SAFE HAVEN GOLD PURCHASES. THE SPANISH GOVT BOND HAS NO PLACE BEING AS LOW AS 5.0% to 5.5%. MORE MAYHEM IS DUE IN THE EUROPEAN BOND MARKET. AS GREEK GOVT DEBT DEFAULTS OR COMES UNDER RESTRUCTURE, MORE MAYHEM IS DUE TO EUROPEAN BANKS. $$$

The financial world puts far too much focus on the United States. To be sure, it is an important factor to most price movement. But Asia and Europe are important also. As most eyes were on the Silver Delivery Notices for May, few observers caught sight of the Gold price situation from the European perspective, the near breakout. In Euro terms the gold price has been largely consolidating for almost a full year. The rise in the Euro currency from 130 to 150 had eliminated any breakout in the Gold price. When the Euro stabilized in April, albeit at a high level, and the Gold price continued upward, the EuroGold price neared the point of surpassing an important extremely critical resistance point. The Gold price in Euros was on the verge of a major breakout. Such a breakout in Europe would have ignited the global Gold market in a very big way. It would have brought renewed harsh criticism to the motley carnival crates serving as bond platform for the Euro currency. The Euro is a very sick damaged currency. It has found relief from the effective differentiation among the different national bonds, like the Spanish, the Italian, the French, the Portuguese, versus the German. The Euro is free to float more independently of its true value, which like the USDollar is nothing.

The EuroGold price chart shows twin pillars left and right with a vivid W-shape reversal pattern ready for the moment to break north of the 1100 level. The pattern is intact and clear. The left side lip and the right side lip are well identified. The target is 1225, which if approached, will make major news across the globe. It would bring acceptance that the Gold rally is global, not just a function of a weak USDollar, but rather a fractured crumbling monetary system.

◄$$$ THE NEW YORK TIMES HAS WARNED OF INVESTORS BEING CAUGHT IN THE GOLD BUBBLE. THE OLD GRAY LADY HAS BEEN WRONG EVERY SINGLE TIME SHE SPEAKS WITH A FIRM EDITORIAL OPINION REGARDING GOLD, RATHER THAN TO REPORT OBJECTIVELY. IT IS BOTH A RELIABLE CONTRARY INDICATOR AND A PART-TIME WALL STREET HARLOT ON THE PORCH. $$$

Credit to the Rick Ackerman column, where guest Chuck Choen laid out the argument simply and succinctly. A gold bull signal has been logged, as the infallible New York Times contrary indicator has returned. In the past, it has demonstrated its consistent accuracy in being wrong. Last August at the market bottom, amidst broad gloom on Wall Street, the Old Gray Lady decided to interview the loudmouthed and shallow minded gold bear Bob Prechter (without dunce cap) on the dire market situation. It turned out coincidentally that the interview outlining his wrong opinion was published within a week of the gold bottom. At the time, Cohen adroitly mentioned the Times contrarian indicator in a lengthy essay published at LeMetropole Cafe, which proved prescient, alert, and correct. The history of the New York Times is classic objective and competent, but with a rare example where they stray and take sides in a particular market. They bend to their cast of Wall Street, equity fund, and mutual fund advertisers. When they step away from objectivity, they are consistently on the wrong side.

Last Sunday May 15th, the New York Times did it again. They wrote about the interminable gold bubble and the danger of being caught in it for heavy loss. They equated the size of a market correction with its ended bull nature. What shabby analysis and mediocrity in journalism!! Note that during the housing market, which incidentally produced $billions in Wall Street profits, the Times published several hundred positive articles on the housing boom, all through the mania several years ago. They never doubted the boom, even after the subprime cracks showed. They were reportedly isolated, an echo of the USFed Chairman Bernanke's wrong perception, and opposite the steady Jackass viewpoint. They proved to be systemic, as outlined in the Hat Trick Letter.

While the Times reports on the yawning untreated USGovt deficits and the hopelessly futile attempts to rein in spending, they overlook the path to USTreasury Bond default. Neither do they report on the global revolt against the USDollar and the broad base of counter-US$ trade facilities. They do not report on the Saudi grumblings and their search for a new security protector, which has Petro-Dollar implications. The New York Times is a biased newspaper too closely located to the Wall Street criminal paper factories. Cohen concluded, "If the Times barometer continues to hold, we should be ready for something very special for the anxious gold community. For the first time in months, my own reticence has receded and I believe we are at, or nearly at, another terrific buying point for the gold shares. You know I have been cautious for several months, especially as the spike of silver was in full bloom, and as the bank stocks continued to deeply underperform the markets, both definite warning signals. But with the drop in silver, gold, and other commodities as the dollar rallied, the speculative air has seeped out of these markets. And it feels good to be positive again." He focuses on the gold mining stocks, but the contrary point on the most influential US newspaper in its history remains the same applied to Gold itself.

◄$$$ THE SILVER BULL MARKET IS INTACT, AS NOTHING HAS CHANGED IN THE OVERALL PICTURE. THE REASONS WHY SILVER ROSE IN STRONG FASHION REMAIN FIRMLY IN PLACE. THE MONETARY SYSTEM BREAKDOWN IS THE LEADING FACTOR BEHIND THE STRONG SILVER FUNDAMENTALS. RESERVE ASSETS SEEK SAFE HAVEN OUTSIDE THE WESTERN WORLD, WHILE CONSUMERS GLOBALLY SEEK PROTECTION FROM PRICE INFLATION AND ASSET EROSION. TRADERS WERE LARGELY UNHARMED BY THE COMEX AMBUSH. NOTICE THE CLEAR SIGNALS IN THE BACK TO BACK WEEKLY PATTERNS, DOJI STAR FOR STABILITY AND BULL HAMMER FOR POSITIVE BIAS. $$$

◄$$$ A BOLD FORECAST HAS COME FOR GOLD & SILVER FROM GRIFFITHS. HE GIVES CREDENCE TO A MAJOR PRICE RISE, A PARABOLIC EXPLOSIVE RISE, JUSTIFIED BY THE FUNDAMENTALS. HE SEES A CHANCE THAT GOLD WILL SHOOT PAST $10,000 PER OUNCE AND SILVER WILL SURGE WELL PAST $200 PER OUNCE, ALL IN TIME. ALL FACTORS AND FORCES ARE IN PLACE. TWO OTHER RESPECTED ANALYSTS OFFER A SIMILAR FORECAST. $$$

Currency and inflation risks are the main motivators to invest in Gold & Silver. Robin Griffiths of Cazenove Capital is a highly respected global technical and macro strategist. His firm is one of the oldest investment houses in the world, whose origins trace back to the 17th century. It manages money on behalf of elite upper class British clients and is widely believed to manage some of the British Royal family wealth. He has come out with an eye-popping forecast, or at least a credible scenario, but with justification. Griffiths is on record with a $450 potential silver price and a $12,000 potential gold price, as a result of the chronic and profound debasement of paper currencies. During one part of an Eric King interview, he was asked if the $350 silver price forecast is realistic. Griffiths replied, "That is absolutely not unrealistic. If you adjust the old all-time high for inflation, that gives you $450 for silver. Then you add in the fact that they are printing money, you can take it higher than that without any difficulty at all. Bulls [bull markets] are very successful at wobbling people out at the wrong time." He referred to the $50 silver price and the more accurate Shadow Govt Statistics estimate of the CPI. The proper adjustment from the 1980 silver high takes the present day value of that peak to $450 per ounce, incredibly. The price inflation has been astonishing and huge in its compounded effect. His wobble comment directs attention to the naive investors who fall victim to Wall Street propaganda or lose their nerve or have limited comprehension of crucial factors or whatever, as they exit the bull market locomotive prematurely.

Griffiths is colorful. He has previously described investors who do not own gold today as exhibiting a form of insanity, even unhealthy masochistic tendencies, possibly warranting medical attention. He has been highly critical of the Western media for their superficial coverage of gold and their obsequious devotion to Warren Buffett who utters ignorant comments on gold. The media often ignores or overlooks, in his opinion, the heavy money printing and international currency debasement on a scale never before seen in history. My view is that the Western media points to the monetary inflation and debasement, but downplays it in an attempt to paint the gold & silver stories as exaggerated responses.

Two other extremely optimistic views follow, from rational people. Jim Rogers has said that silver was not and is not a bubble. After the recent price correction, he said "I do not know what caused it. Maybe it was short covering. Maybe it was rumors. I have no idea. Silver went down a great deal, but if you raise margin requirements 150% to 200%, you would expect something to collapse. I hardly see how silver could be a bubble when, even at its top, it is still below its all-time high. That is not much of a bubble." He referred to the same $450 inflation adjusted 1980  peak price, which was the nominal $50 peak over 30 years ago.

Mark O'Byrne from GoldCore in London is another expert. He and the Jackass had a 90-minute phone conversation in the spring of 2008. Bright fellow, well spoken, nice guy, successful gold business. He wrote, "If silver goes to $150 this year, all other things being equal, then I would say you better sell your silver. If it goes to $150 in 10 years, then I would say that is a normal progression up and that is the way things work. But if the US dollar suddenly turns into confetti, then you better hold your silver at $200. So it depends on the circumstances and the timing more than anything else. Since 2003, GoldCore has said that gold and silver would reach their inflation adjusted highs of $2400/oz and $130/oz. Our estimates appear increasingly conservative especially given the fact that the official inflation statistics have been debased over the years and are not an accurate reflection of real inflation. Predicting the future price of any asset class is impossible. Predicting that gold and silver will continue to protect against financial and economic shocks and crashes and global currency debasement is possible. The current correction should be used as another buying opportunity in order to protect against the continuing extraordinary degree of macro-economic, monetary, and geopolitical risk in the world." Sage advice, realistic perspective on the various scenarios, exciting targets. See the Intl Business Times article (CLICK HERE).

◄$$$ THE H.U.I. GOLDBUG MINING STOCK INDEX IS REALLY STRUGGLING. IT MUST FIND SUPPORT AFTER THE AMBUSH, IN A LOUSY EQUITY ENVIRONMENT. SUPPORT IS SEEN AT THE 500 LEVEL. TWO IMPORTANT DRAGS ARE AT WORK. RISING COMMODITY PRICES ADD TO OPERATING COSTS UNIFORMLY. CORRUPT NAKED SHORTING SPONSORED BY CANADIAN BANKS HINDERS VALUATIONS. ATTENTION TO THE PRACTICE IS NOT MAKING ANY PUBLICITY. PROFIT MARGINS ARE STILL EXCELLENT. THE JACKASS HAS FAVORED SILVER BULLION SINCE EARLY 2008. $$$

◄$$$ THE ALPHA GROUP IS A NAKED SHORT SELLER PUMP STATION IN CANADA, PROTECTED BY THE LARGE BANKS. THE PRACTICE OF NAKED SHORTING OF SMALL MINING STOCKS IS WIDESPREAD. THE EVIDENCE HAS BEGUN TO BUILD ON THE PERPETRATORS. A PLANNED MERGER MIGHT PUT THE ALPHA FRAUD MORE PROTECTED INSIDE DEEP FORTRESS WALLS. $$$

Credit once again to Mexico Mike, who has a strong track record of integrity and factual reporting on internet bulletin forums. He leads one particular focused bulletin board thread. He updated information on the Alpha Group and their trade distortions on Level2 and volume data. One fellow stated, "One has to wonder if you are buying real shares or phantom shares from naked short sellers. Toronto Dominion assured me they were bonafide shares. However, they gave a very poor excuse as to why the TSX volume did not reflect my trades. They said data from Alpha trading was not available to their systems. But if that is the case, how do they buy through them." Basic contradiction, a notable facade of the corrupt system. In early 2008, the Jackass decided that owning silver bullion was a far safer and likely more profitable route than mining stock shares. That opinion was shared in the Hat Trick Letter reports. See the Mexico Mike trails laid out (CLICK HERE).

Mexico Mike follows up with a commentary of his own. He wrote, "In a way, consoldiation of the Alpha Group into the TMX deal would improve transparency. Right now, when I enter an order in my online account, I have market depth only for the TMX. I have put in a number of orders lately and expected to be filled by was not, even though my bid was the highest showing. It turns out that if orders are routed through the Alpha at the same price, I may not be filled. I have tried to resolve this several times. I think as a retail investor, my interests are not being handled fairly by my brokerage house, since the house is one of the owners of Alpha. To me this seems like a conflict of interest. Since I am charged the same commission, I should be able to indicate a preference on what exhange my orders get filled on, so that I am not forced to take a back seat while other orders are filled ahead of me." Filling orders out of rank is probably done so that phantom shares can be dumped and disposed of finally, a higher priority. The financial fraud seems to be attempting to expand its network, and in doing so, work to cover the stock trading fraud more completely. It has covered up the permitted blatant naked shorting of small mining stocks for years.

Some controversy looms at an even higher level, with motive to block the TMX Group merger deal. Enabling greater exposure is not part of their objectives. One alternative believed to be under consideration is a takeover bid using Alpha Group, which has a trading system that competes with TMX's Toronto Stock Exchange and TSX Venture Exchange. All of the big Canadian banks and the Canada Pension Plan Investment Board are shareholders in Alpha. The Globe & Mail reported on the matter. They wrote, "Trying to combine Alpha and TMX may raise questions with competition regulators in Ottawa, given that TMX and Alpha together would control about 90% of stock trading in Canada. Also, provincial stock market regulators who spent the past 10 years promoting competition to the TMX might view the consolidation of TMX and its biggest rival as a step backward. So too, might other users of the TMX's markets, who have benefited from the competition of Alpha and other rival markets, because the multiple players have driven down trading fees. There are other hurdles to a transaction involving Alpha. Two of Alpha's major shareholders, Royal Bank of Canada and Bank of Montreal, are working as advisers on the TMX-LSE transaction. The CEOs of both banks are on the record as supporters of the proposed deal." See the Globe & Mail article (CLICK HERE).

## THANKS

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