GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Golden Nuggets
* European Bailouts Fail
* Extreme Gold Events
* Gold Price Prepares for Major Rebound


HAT TRICK LETTER
Issue #98
Jim Willie CB, 
“the Golden Jackass”
20 May 2012

"It is ironic. The United States fashioned its Iranian sanctions assuming that oil trades occur in US dollars. That assumption, an echo of the more general assumption that the US dollar will continue to dominate international trade, has given countries unfriendly to the US a great reason to continue their moves away from the dollar. If they do not trade in dollars, America's dollar-centric policies carry no weight! It is a classic backfire. Sanctions intended in part to illustrate the continued US world supremacy are in fact encouraging countries disillusioned with that very notion to continue their moves away from the US currency, a slow but steady trend that will eat away at its economic power until there is little left." ~ Marin Katusa (of Casey Research)

"My investing model is ABCD: Anything Bernanke Cannot Destroy such as flashlight batteries, canned beans, bottled water, Gold, and a cabin in the mountains." ~ David Stockman (former budget director in Reagan Admin)

"The US financial markets are but a hall of mirrors. I blame the central bankers for confusing the black art of central planning with the traditional art of central banking. The Fed owns the stock market." ~ Jim Grant (editor of Grant Interest Rate Observer, who explained the Fed comment, since they induced investors into risky assets in response to the 0% official rate)

"No asset is safe now. The only choice to hedge risks is to hold hard currency, as in GOLD." ~ Zhang Jianhua (Peoples Bank of China)

"Jim Willie is claiming that the Cabal is broken. FWIW, I can believe what JW says, although he could be manic for all I know. Be advised, I believed Blythe when she says JPM is acting on their clients behalf, be it whoever it is, to include the FED. Also, I have been called gullible before. The reason I tend to believe JW is solely from looking at the volume as it corresponds to the movement in the POG on FOREX. With the large volume spikes on FOREX and declines in the POG, there has always been relentless smaller volume which mitigates the decline. At times this small steady volume spikes to equal, or be greater than the initial spike which caused the decline in the POG. This smaller volume is always present, and is always supportive in the POG, and if left on its own, without the large spikes, the POG would continually climb. So there is support in the POG, and someone(s) could very easily be liquidating into this support. We will find out at some point what is going on. We always do." ~ Investor Village

"Since the crisis broke in 2008, the Fed and BoE have printed enough money to buy over 60% of the issuance of their respective government securities since. It makes you wonder. What would bond yields in the US and the UK look like without these purchases? Probably like those in the EuroZone periphery. Indeed, maybe the Euro debacle could have been completely avoided if the ECB had been headed up by a Ben von Bernanke, or a Mervyn Le Roi. Maybe that is why so many of my friends agree with Atlantic magazine, which praised Ben Bernanke for 'masterfully navigating' the financial crisis and avoiding another depression." ~  Dylan Grice (Societe Generale, since the Euro Central Bank cannot print money)

"My estimates of money printing under the table, here and in Europe, and what Europe is doing [covering bank assets] are far far far higher than what you will hear from them. Actually, the amount they are predicting in printing has already happened, and the amount they will have to print is more in the vicinity of $100 trillion in just the next few years. Your dollars, your lifestyle, your purchasing power is going to be destroyed." ~ Mike Larson (Safe Money Report by inflation and related problems)

"The Fed is destroying the capital market by pegging and manipulating the price of money and debt capital. Interest rates signal nothing anymore because they are zero. Capital markets are at the heart of capitalism and they are not working." ~ Tyler Durden (head of Zero Hedge)

"A crash, like in 1987 [is likely], because the market would become technically very weak. I would expect the market making a new high. If it happens, it would be a new high with very few stocks pushing up and the majority of stocks have already rolled over. The earnings outlook is not particularly good, because most economies in the world are slowing down. People focus on Greece, but Greece is completely irrelevant. What is relevant are two countries China and India with 2.5 billion people combined. They are a huge market for goods and these economies are slowing down massively at the present time." ~ Marc Faber

## GOLDEN NUGGETS

◄$$$ AN IMMINENT FINANCIAL MARKET EVENT IS SIGNALED BY A BREAKDOWN IN THE JUNK BONDS. AS THE USTREASURY BOND MARKET RALLIES, IT ACTS LIKE A BLACK HOLE SUCKING CAPITAL OUT OF OTHER COMPETING ASSETS. THE JUNK BOND YIELDS SERVE WELL AS A CANARY FOR SEVERE MARKET DISLOCATIONS. $$$

The flight to safety can be very real at times, especially bond money flight from risk to secure in the USTreasury Bond market. The USTBonds are backed by the USGovt, which means something, certainly more than a company on the ropes. A note arrived from a non-cabal banker who has a solid track record of observing key events and key submarkets. This is a major alert early warning signal, passed on by friend and colleague Aaron Krowne of the Implode Explode website. The flight into precious metals could be underway after a new short-term bottom, marred by a serious shock wave in Junk Bond land. The comments pertain to last week ending May 18th. He wrote, "I have been watching junk debt relative to nominal Treasuries (IEF/TLT) intraday. I began seeing some very wild intraday moves, with junk debt prices collapsing (yields spiking) while safer Treasurys were aggressively being bid up (yields dropping). The speed and magnitude of this credit spread widening on Wednesday was indeed meaningful. By Thursday, that spread widened even further, in a way that suggests that a credit event may be underway in the United States and that contagion is here. Here we are, 48 hours after the major movement began on Wednesday, and a look at the daily chart of junk debt and sovereign debt EMB (-0.09%) shows that a Crash may actually be here in credit markets. While the price decline may not seem like much, a Crash should be defined by how far back in time an investment sends you in its decline relative to a short time frame.

Meanwhile, Treasurys have spiked, with the 30-year Treasury below the panic 3.0% level. To say that the credit market leads the stock market is too simplistic. It is widening credit spreads which lead risk aversion, and vice versa. Credit spreads lead equities, not credit. In the past 48 hours, the magnitude of the decline of junk debt and sovereign debt relative to Treasurys increasingly suggests meaningful credit stress is occurring. If junk versus sovereign debt does not stabilize and improve shortly, the odds of a follow through sudden break in stocks in the US increase substantially. Credit spread movement and improvement as opposed to deterioration is pretty much the thing to focus on. The move in debt spreads over the last 48 hours has increased the odds of something major to come. Notice that this is not a prediction, but a statement about how such a scenario could occur if indeed junk debt deteriorates further beyond the last 48 hours, and under the assumption that the magnitude of a decline could lead equities lower. The most important question in the world may end up being answered soon after all.

◄$$$ THE ACCOUNTING LIES ARE GRAND, ESPECIALLY FOR GREECE, BUT ALSO THE UNITED STATES. THE TRUTH HAS BEEN REVEALED FOR GREECE, BUT NOT YET FOR THE UNITED STATES. THE CREDIT DEFAULT SWAP RATE FOR GREECE IS HUGE, AND FOR THE UNITED STATES NEXT TO ZERO. $$$

The Anglo-Saxon central banks have created the illusion that our governments are more solvent than they are. The cumulative accounting gimmickry is grand. The assorted budget deficits are a grand lie in Europe, to conform to the Maastricht Treaty and to abide by EU rules. In the United States the budget deficits typically do not include war costs and covert agency funds. But consider the US as having a cumulative lie on the GDP growth rate over the ten year period within the graph that was at least 2% per year. The US accounting gimmicks are professional shell games. In Europe the current Credit Default Swap prices correlate well with cumulative deficit manipulations for each nation. Paul van den Noord and Vincent Koen at the OECD should have included the United States and the United Kingdom in their chart. My abacus cannot estimate the UK lie, but the US lie is roughly depicted. Justice with seasoning will be served on a cold plate. See the Zero Hedge article (CLICK HERE).

◄$$$ USGOVT TAX TREATMENT TO PENSION FUNDS IS SOON TO CHANGE. CURRENT PROPOSALS ARE IN PROGRESS OF BEING APPROVED. THIS BITE HAS BEEN WARNED BY THE HAT TRICK LETTER FOR TWO YEARS. $$$

The bankrupt USGovt eyes the big mountain of personal savings accumulated and held by US citizens in pre-tax income. The original plan 10 and 20 years ago was to tax it when drawn upon by the individuals. The USGovt wants it now. The proposal has a few sides. The most important is that the IRS tax agency will have some claims on the $16 to $18 trillion in pension funds stored from 401k, IRA, and Keough. The details are being worked out. No specifics yet. The cost to exit most of these tax-deferred income shelters is harsh, like an ordinary tax bite plus 10%. No changes to exit fees yet. The other proposal is to limit the tax deductible limits on employers-based income down to $20,000, no longer the current $50,000. The USCongress deliberation was attempted in closed session, since they do not want the public to know the process or plan, until sprung upon them. Thanks to Bob Chapman for the source. Personal opinion by the Jackass. The USGovt (aka USGunmen) might impose an emergency 5% tax on the entire batch of funds, in order to raise almost $1 trillion, just as an example, a warning shot, a shock event, a show of strength, because they can. A popular response would be nasty.

◄$$$ THE US-OIL MARKET IS A TANGLE OF PRIVILEGE AND STEEP DISCOUNTS FOR THE BIG OIL FIRMS. THE ROYALTY SYSTEM IS ENTRENCHED AND EXPLOITED. THE US-BASED OIL DRILLERS HAVE TURNED STRONGLY TOWARD ACTIVITY IN NORTH AMERICA, ESCHEWING RISKY FOREIGN VENTURES. HOWEVER, THE USGOVT INCOME STREAM FROM ROYALTIES IS MEAGER PALTRY, DUE TO POLITICAL INFLUENCE. $$$

The US crude oil market is sometimes referred to as the Asylum, due to the disenchantment with rabid paper speculation. In fact, several global key producers rejected the West Texas crude oil price in favor of non-US benchmarks starting a few years ago. The Saudis routinely avoid the doctored US oil price for contract settlement. Look for other commodity markets to follow, in the opinion of Leah McGrath Goodman, as the United States will lose its lead role of the world's price setter in many markets. The world has responded to protected sponsored fraud and manipulation.

Many changes have taken place in the crude oil market, often shrouded in politics. For decades Big Oil has had a major controlling arm in US politics. The wide differential between West Texas and Brent oil prices has resulted in some unusual effects. The US is exporting a significant amount of refined products like gasoline and diesel, as domestic firms exploit the gap. Up to 30% of US oil produced is drilled from federally owned lands and territories. The US taxpayers are not being paid competitive rates by the oil companies. Recently the US Senate voted to reject a measure to eliminate $billions of subsidies for Big Oil, not really a partisan issue but rather an engrained practice. Between 2007 and 2010, more than 70% of the increase of oil drilling in United States took place on federal territories, representing 3.5 million barrels per day, according to the unbiased Congressional Research Service. Since then, oil drilling in the US has climbed higher, topping 6 million barrels per day for the first time since 1999. The appeal of drilling in the US has grown. Oil companies have developed new technologies to capture trapped energy resources that were previously seen as out of reach. Big Oil also has grown distrustful of the legal and financial vagaries that put at risk drilling activities in certain troubled regions, such as Venezuela, Nigeria, North Africa, and the Persian Gulf. Hence drillers see America as a safer and stabler place to do business, compared to the increasingly hostile alternatives.

Oil leases sell for peanuts in the United States, as politicians assure the low cost for their friends at Exxon and elsewhere. For  the privilege to drill on USGovt owned territories, the starting bid for 10-year leases on parcels of land is $2 per acre. More often the land is sold for next to nothing, but it can go for $1000's too. It is like time has stood still since 1987 when the oil price was a fraction of current levels. According to the US Bureau of Land Mgmt, no plans are set to revise the lease pricing system. The USGovt is typically paid by oil producers an annual royalty rate of 12.5%, based upon on open market sales. Rates remain fixed even when oil prices soar. The proposed price collars designed to fetch more royalties for higher oil prices were quickly brushed aside in the USCongress. The offshore rate structure is more hidebound. The royalty rate for a producing oil well is 18.75%, raised from 12.5% in 2007. A higher offshore rate applies to leases granted since 2007. Therefore most of the money flowing back to the USTreasury still reflects the older lower lease rate.

The non-partisan Govt Accountability Office conducted a study in 2008, the year that crude oil hit a record high price of almost $150 per barrel. The United States ranked 93rd lowest of 104 oil & gas fiscal systems evaluated on a global comparison. The US excels at lowballing itself when it comes to asking Big Oil to pay for the federal land resources, whose end product is later sold back to the public at top dollar. Efforts to renegotiate or adjust royalties have usually met with fierce resistance from the Supreme Court and USCongress, despite the GAO resistance offered by a public interest research group. In 2011, the US-based oil royalty income leaped to a record high with the jump in drilling programs, but the total collected for both onshore and offshore activities came to only $6.3 billion. Meanwhile, ExxonMobil reported 2011 earnings of $40 billion. They account for half its resource base in the Americas. See the Goodman website article (CLICK HERE).

◄$$$ THE C.O.M.E.X. IS DYING A SLOW DEATH THAT CANNOT BE STOPPED, A RESULT OF ITS CORRUPTION AND AVOIDANCE. ITS LACK OF ACTIVITY INDICATES A MINIMAL PULSE. A PICTURE SPEAKS VOLUMES LIKE AN E.K.G. ON BRAIN WAVES. CONTRACT OPEN INTEREST VERSUS THE GOLD PRICE IS A GOOD METER. $$$

◄$$$ THE COST OF LEAVING THE EURO MONETARY UNION IS SLOWLY BEING ESTIMATED AND QUANTIFIED. BRITISH SOURCES EXPECT A $1 TRILLION ECONOMIC COST IF GREECE WERE TO DEPART. EXPECT PERHAPS $5 TRILLION MORE IF SPAIN AND ITALY WERE TO DEPART THE COMMON EURO CURRENCY SYSTEM. $$$

The cost of a Greek exit from the common Euro currency union has been put at $1 trillion in EuroZone economic GDP (5%) decline, according to Doug McWilliams of the Centre for Economic & Business Research in London. An orderly Greek exit could result in about a $400 billion GDP (2%) decline. The government debt, commercial debt, household debt, along with bank recapitalization and reconstruction will sum up to a very heavy toll across Europe. If the exit is disorderly, the cost will be greater, from the destruction, violence, and market dislocation. The British Govt is making urgent preparations to cope with the fallout of a possible Greek exit from the single currency, after the governor of the Bank of England, Sir Mervyn King, warned that Europe was tearing itself apart. London banks are on the hook for major losses, not well publicized since they control many press networks. Reports from Athens have come that massive sums of money were being removed out of the country in basic capital flight. In ten days following the May 6th election, $3.8 billion was withdrawn from bank accounts, the worst single day removal being $1.0 billion. The bank run trend is picking up speed quickly. The border tells a certain story too. My European source tells that the Greek businesses are hastily building small factories and other commercial sites just outside the Greek border in Bulgaria. Harken back to the same concept over the border down Mexico way in the late 1990 decade after the NAFTA rules changed the way the United States did business.

Officials from the Bank of England and its agencies are drawing up plans that expect an inevitable Greek departure from the monetary union. The officials anticipate the damaging fallout to the global economy will match the collapse of Lehman Brothers in September 2008. The central bank remains somewhat clueless and foolish, calling for bold steps to stimulate growth. They must liquidate the big dead banks, just like Western Europe, just like the United States. Otherwise, stimulus strips the gears and accomplishes nothing. They cannot liquidate, since the banks hold the power and will not relinquish it. They benefit from deep corruption. Leaders warn of stagnation, when they should be concerned about collapse and popular uprisings. The leaders are awakening to a nightmare. The Spanish prime minister Mariano Rajoy told its Parliament that the country faced challenges to finance debt as borrowing costs shoot up to astronomic levels, in his words. The Irish finance minister Michael Noonan said Dublin might not be able to count on capital markets in late 2013 to finance its debt. The triggers have fingers on them. Both the Euro Central Bank and the Bundesbank are threatening to cut off Greek bond financing if Greek banks do not amass enough capital and the Greek Govt does not make more budget cuts matched by tax hikes. A high stakes game of chicken has been going on for months, which must end. The analysts and think tanks have assessed the social, political, and economic damage to the entire European Union from a Greek exit as potentially incalculable.

Bank of England governor Mervyn King spoke in plain realistic language. Despite the candor, he avoids reflecting upon Britain plagued by similar symptoms. King summarized the problems, saying "Europe is tearing itself apart. We have been through a big global financial crisis, the biggest downturn in world output since the 1930s, the biggest banking crisis in this country's history, the biggest fiscal deficit in our peacetime history, and our biggest trading partner, the Euro area, is tearing itself apart without any obvious solution. What is so depressing about it is that this is a rerun of the debates in 2007/08. These are not liquidity problems, they are solvency problems. Imbalances between countries in the Euro area have created creditors and debtors and at some point the credit losses will need to be recognized and absorbed and shared around. Until that is done, there will not be a resolution. That is why just kicking the can down the road is not an answer. The European Central Bank has performed heroically in trying to buy time, but that time has not been used to put in place fundamental underlying solutions." Amazing that King comprehends the systemic insolvency problems, given his wide application of liquidity solutions. See the UK Guardian article (CLICK HERE).

Exactly Mr King! England suffers the identical problems, and the identical lack of will to work toward solutions. England also kicks the can down the road, but on a road in England. The United States suffers the identical problems as well, but controls the hyper monetary inflation machinery, and the derivative distortion tools, enough to conceal the stresses. But that is changing fast, with the revealed JPMorgan breakdown. Make the easy leap, that an exit of Spain and Italy alone from the Euro Monetary Union with defaults galore could bring about a GDP decline in the EuroZone of perhaps $2 trillion (10%) if orderly and $4 trillion (20%) if disorderly.

◄$$$ THE MOTHER OF ALL WHIPSAWS MIGHT BE COMING FOR THE EURO CURRENCY. MOST ENLIGHTENED ANALYSTS EXPECT THE EURO TO CHANGE IN ITS PARTICIPATING ALLIANCE. MOST EXPECT FOR GREECE TO DEPART. MY SOURCE HAS INFORMED THAT GERMANY IS PLANNING TO TAKE THE EURO AND RUN AWAY WITH THE STRONGEST PLAYERS IN EUROPE. GERMANY MIGHT PUT ON A GOLD COMPONENT IN A NEW LOOK. THE PATH OF LEAST RESISTANCE MIGHT BE GERMANY HOLDING THE CORE NUT OF THE EURO, CAUSING ITS RISE, AS THE ROTTEN PULP IS CUT OFF. DEPARTING NATIONS WOULD CAUSE HEAVY BANK LOSSES, CAUSING A EURO DECLINE DURING THE REVERSION PROCESS ADOPTING FORMER CURRENCIES. ANTICIPATE MAJOR SWINGS AS THE COURSE IS PLAYED OUT. $$$

The immediate threatened important change to the European Monetary Union is the expulsion of Greece. The decision by Spain to depart the EMU is also an event with rising possibility. The difficulty in Germany moving away with the Euro ball in hand, shared by Netherlands, Austria, and Finland sounds like the wisest pathway, but the practical implementation might be too difficult. The incremental process appears the most likely in any sequence bound by the extreme forces and pressures found in the modern financial system. Banks want to preserve their portfolios, enjoy rescues, and not give them up for lost. Germany wants to be freed from the shackles of Southern Europe, but they cannot easily cut loose from the forces of their own banks, whose vulnerable positions are enormous. The local frustrations within Spain might push the entire process into a disorderly situation, something in my lens that grows in likelihood with each passing week. The dire conditions inside Spain are not adequately reported, probably because they are so horrible and untenable. The Euro currency is going to become transformed into an emotional meter closely linked with whacks from anticipated bank losses but lifted by planned bank recapitalizations. Germany running without southern limbs would make the Euro powerfully strong, a sudden transformation.

Here is a possible sequence. The events in France to reject austerity budgets along with the elite conduit symbol in Sarkozy might embolden Spain to exit the Euro voluntarily. The Latin emotional spirit is most pronounced and heated in Italy and Spain, as cultural experts will testify. Spain watches the events in France, having already selected Rajoy as the socialism defiant leader. Imagine warning an unloved discouraged angry Spanish woman (or Italian woman) that she cannot leave a marriage since it would cost too much and bring shame, if not some confusion. She would kick the man in the shins, scream in his face, and defiantly walk off, not too concerned about the consequences with matters of the purse. My forecast is that Spain will decide they cannot survive as a nation under the Euro yoke, and must default on debt, and must permit some banks to fail, even big banks, and must recapitalize on their own, and must endure the consequences like price inflation and harsh devaluation after returning to the former Peseta currency. Spain can only survive as a nation, and avoid the calamity witnessed in Greece, can only retain their unique cultural identity, if they leave the Euro and devalue the currency and rebuild their banks. They observe Iceland, which defaulted, caused bank losses to foreign creditors, and nationalized their banking system. One can be deadly certain that Spanish experts are measuring an Iceland tailored fit for the Spanish wardrobe.

If Spain departs the Euro, and orders the tough medicine, then expect Italy to do the same and follow the exact course. The Euro currency would suffer an immediate 20% decline and test 100 parity. If Monti obstructs the pathway, he will be tossed aside in an overnight dismissal, maybe off a palace balcony. Italy would have to order similar medicine with debt default, bank failures, and Lira currency devaluation. The biggest obstacle to progress, in the form of amputations and regrowth, come from the inability to default and devaluate, due to the common Euro chokehold. CAPITALISM IS INTERRUPTED IN EUROPE, KILLING THE CONTINENT!! The Greek lesson is frightening. Neither Spain nor Italy will walk down such an ugly obvious destructive path that could bring down the national culture and tribal identities. As Spain and Italy go, so will go France, a proud nation but nowhere near as emotionally charged in displays of anger. France craves independence again after ten years of acting as German squires. They will wish to preserve their national identity, and loudly so, even if costly. The departure of their southern neighbors will make the decision easier. When the trio of Spain, Italy, and France depart the Euro, or any member of the trio departs the Euro, the continental currency will decline hard in exchange rate versus the USDollar. It will also decline versus the British Pound, the Swiss Franc, and the Japanese Yen. After the storm from bank losses, bank failures, major bailout costs from the governments, and possible recapitalization costs born under the Euro banner, the Euro currency would stabilize.

When Germany takes the healthy core away, or is left with the strong core following the trio departure, the powerful surviving Euro core will be recognized for its strength. Only after the painful ordeal of losses, failures, and reconstruction will the Euro be capable of seeing the light above. When that day comes, the Euro will be fresh from having its rotten putrid limbs teeming with gangrene removed. Every major group dreads the amputation process. They wish to avoid a civil war on the continent. Greece should frighten them into some rational solution. Look for a defiant faction like in Spain to seek the Iceland model solution that screws bankers. When Germany is left free of the southern rot, the southern commitments, the southern drag, then the Euro led by Central Europe can float much higher, like up 50% in the following 9 to 18 months. Germany with its cadre of strong trade partners can run fast and hard, with enviable trade surpluses piled high, and hefty savings. After a scary ride below 100 parity for the Euro exchange rate, it could easily sail past 150 with a German core free from the southern ill wind. What a mammoth whipsaw!

The preview on France (offered as Editor Note to the April Hat Trick Letter, with story followup in this report) being booted from the Euro Monetary Union was more like a mortgage notice of departure painted like unavoidable harsh grafiti on the banker walls, impossible to ignore. The conference message made sense, but was not a definitive expulsion. The deed was preparatory. The concept must sink in, like a preliminary treatment prior to surgery. Behind the curtains, one must wonder if maybe all three nations Spain, Italy, and France will depart the Euro together, in defiance to the bankers and to the incompetent European Commission. France might have been selected to lead the departure, since the PIGS are so weak and lost. The trio could at least find emotional and spiritual strength together in a stunning decision with shock, following the major amputation and transfusion. Preserved culture and national identity will be a key factor on decisions. Their native Peseta, Lira, and Franc would each decline. The first two by around 50%, and the French by around 25%. Just rough educated guesses. Beware that a core Euro led by Germany et al would emerge powerful, but be vulnerable to its own success. A rising currency harms export trade. That is when the group of new strong currencies must enter center stage to form a critical mass in global trade, supplanting the current major currency cast.

## EUROPEAN BAILOUTS FAIL

◄$$$ THE WRECKAGE OF EUROPE CAN BE SEEN IN FIVE EASY GRAPHS. $$$

The five charts provide an aerial view. 1) Debt as percentage of GDP, 2) Defict spending as percentage of GDP, 3) Shadow economy as percentage of GDP, 4) Exports as percentage of GDP, 5) Size of the public sector as a percentage of the population. None of the EU nations meets the 60% debt limit. Underground economies are very big in Europe, especially in the South, which remain untaxed. Few European countries have much of an export trade at all except Germany. Overly generous pensions and health care have exacerbated the socialist programs. See the pictorial article on the Greek Crisis (CLICK HERE).

◄$$$ FRANCE IS TO BE BOOTED FROM THE EURO MONETARY UNION. THE PROCESS WILL CONTAIN SEVERAL STEPS AND BE MET WITH GREAT RESISTANCE. BUT THE WRITING IS ON THE WALL, WRITTEN BY THE MOST INFLUENTIAL ECONOMISTS AND PROFESSORS THAT HAVE THE EURO CENTRAL BANK EAR. THEY ADVOCATE AN URGENT DISSOLUTION OF THE COMMON EURO CURRENCY, AND SUGGEST A CURRENT UNIT SYSTEM AS A DEVICE TO FACILITATE THE RETURN TO FORMER CURRENCIES. $$$

The following is the translated transcript of a formal Appeal to the governments of the European Union. Unclear are the next steps, where France is forced out of the Euro currency. The process will be slow, but the advisors are powerful, including men with Euro Central Bank advisory experience. Thanks to Dave the Duesseldorfer for help in translations from German.

Thirteen years after the implementation of the Euro, it is obvious that the Euro Currency Experiment not only not honoured its promises, but that its continuation will even lead into a chaos. For this reason fourteen well-known German and French economic experts come before to the governments of the European Union with an appeal. The experiment of the common currency has to be abandoned. For that purpose the following measures must adopted:

1)      We suggest to the European States to return to national currencies, first of all to be able to solve national problems on the labour market in the interests of national sovereignty.

2)      Doing so will ensure by a competent institution, that the national states look for solutions to the problems in the interest of the European domestic market.

3)      The particular governments can independently determine their parity to the member states, whereby such a redetermination orients priorities toward cooperation within a framework of a European currency conference.

4)      To realise a higher level of flexibility, bandwidths of plus/minus 15% are provided. Additionally the national governments can accommodate their parity to changed economic conditions.

5)      A unit of account (ECU) will be established, in which the national currencies can be adopted in, according to its weight (aligned to national GDP). Their weight rises or falls on revaluation or devaluation.

6)      It is optional to national governments, to consolidate within currency unions on a voluntary basis.

7)      During the transition from Euro to national currency, particular attention has to apply to the banking sector.

German subscribers: Bruno Bandulet, Rolf Hasse, Wilhelm Nölling, Karl Albrecht Schachtschneider, Wolf Schäfer, Dieter Spethmann, Joachim Starbatty.

French subscribers: Professeur Alain Cotta, Jean Pierre Gerard, Jean-Luc Greau, Roland Hureaux, Gerard Lafay, Philippe Murer, Michel Robatel.

◄$$$ A CLEAR AND PRESENT DANGER EXISTS  OF DEUTSCHE BANK FALLOUT ON ITS MANY EXCHANGE TRADED FUNDS. IF THE GIANT GERMAN BANK FAILS, THEY MIGHT RAID SEVERAL IMPORTANT POPULAR EXCHANGE TRADED FUND UNDER THEIR GUISE. CLIENT ACCOUNTS MIGHT GO MISSING LIKE WITH MFGLOBAL. $$$

The insolvency and illiquidity causing deep distress inside Deutsche Bank could put at risk the investments in their commodity sector. The DBA vehicle is on the Hat Trick Letter portfolio. Witness a potential repeat of MFGlobal client thefts, but on European soil. The ETFunds have investors across the world. D-Bank has a tremendous stake in the paper commodities sector. Their safety could be an illusion, if the giant bank enters a failure mode and collapses. The list of the popular commodity funds under their management and aegis include: DBA in Agriculture, DGL a Gold fund, DBS a Silver fund, DBB a base metals fund, and DBC an oil fund. Bear in mind that Deutsche Bank is to the German central bank what JPMorgan is the US central bank. But D-Bank is nowhere as vile and criminal. They are involved at the center of the gold suppression game and narco money laundering game though.

◄$$$ THE ELECTION OF HOLLANDE (AND OUST OF SARKOZY) IN FRANCE HAS LIT THE FUSE. AUSTERITY WILL BE BRUSHED ASIDE. BUDGETS WILL EXPAND WITH OBSTACLES. CLEANUP AFTER THE SARKOZY ERA MUST BE DONE. LOOK FOR PRESIDENT HOLLANDE TO CHALLENGE THE USDOLLAR REGIME IN GLOBAL FINANCE. $$$

The people next will be subjected to the ruin of money, the ruin of savings, the shock of change, the vengeance of bankers, and the advent of much more price inflation when the money flows are restricted by elite firewalls. Usually in such chaotic conditions, the people lose when the money flows are unrestricted. Many hidden bags of traps, feces, and rotten cables will be discovered, left behind by Sarkozy. The major challenge for France will be to preserve its identity, to return to the Franc currency, to stabilize their economic condition, to restore some sense of order, and to resist the USDollar regime. Hollande wishes to end the US financial dominance. Harken back to 1971 when Charles DeGaulle challenged Nixon and the result made history as the Gold Standard was abandoned. Maybe when France challenges the US next, the Gold Standard will be reimposed by the Eastern nations. See the Max Keiser interview of Pepe Escobar (CLICK HERE).

◄$$$ A EUROPEAN BANK RUN IS IN PROGRESS. THE BRUNT IS OCCURRING IN SPAIN AND GREECE. IT SHOULD SOON SPREAD TO ALL OF EUROPE, EXCEPT GERMANY. IT WILL PICK UP SPEED LIKE A BOULDER DESCENDING A BIG HILL, AND JUST AS HARD TO STOP. $$$

Citizens of Spain withdrew $1.27 billion in cash from one of the countrys largest banks over the past week. The process is gathering momentum to pull cash from the vulnerable banks across Spain. Across the continent in Greece, more than $1 billion was withdrawn from banks on Monday alone last week. Keep in mind that Greece is one quarter the size of Spain. When the bank runs hit Italy, the continent will be on fire. My German banker source informed in late April that Italy was the final straw, too big for Germany to bail out. When Italian Govt Bonds and their banks showed the deep distress two months ago, the Germans altered their course and cut off bailout funds. A bank panic is on the verge of spreading throughout Europe, which will lead to greater Gold investment as safe haven, along with the USTreasury Bonds. The French are removing bank account funds, in favor of Scandinavian secure locations. The French debt problems are going to take a turn for the worst soon. Portugal is reeling. Bank runs are very difficult to stop since they are powered by lost confidence, not easily restored.

◄$$$ FRENCH DEPOSITORS ARE HEADING TO NORDIC NATIONS FOR SAFETY. THEY WILL BE MOVING BUSINESS OPERATION SEGMENTS OUT OF FRANCE SOON ALSO, DUE TO HIGHER TAXES. THEY WILL BE MOVING RESIDENCE OUT OF FRANCE SOON ALSO, TO AVOID HIGHER PERSONAL TAX RATES. SOCIALISM NEVER WORKS, BUT IS OFTEN REPEATED. $$$

Human nature does not change much over time, despite the crises. Mob psychology routinely tries to take from those who have, but harm all in the process. The Jackass dislikes socialism since it spreads misery equitably but causes a diminished pool of overall wealth in almost every example. The Jackass respects individual rights and worker opportunities, best served in more capitalist applications. PatrickH in France offered a quick note about the reaction by the French people to preserve their savings. He wrote, "Lastly, I have heard from different sources (not high ones) that lots of French people are upset with their cash deposits held in France. There are lots of fund transfers to other countries such as Nordic ones." Savers are worried. He refers to the Scandinavian nations. Capital flight has already begun, a natural course, with bank runs next. This was an easy forecast made in April.

◄$$$ SPAIN IS BACK IN RECESSION. THE SPANISH BANK OFFICIALS ARE WORKING ON A SLOPPY PLAN FOR A BAD BANK TO HOLD TOXIC ASSETS, WHILE A BANK BAILOUT AND NATIONALIZATION PLAN ARE POORLY ADMINISTERED. THE NATION COMMITTED AN EGREGIOUS ERROR BY PLACING ITS SAVINGS IN ITS OWN GOVT DEBT, WHICH IS TAKING HUGE LOSSES. IT CANNOT BE ROLLED OVER. THE FIRST SYSTEMIC FAILURE IN SOUTHERN EUROPE IS HAPPENING IN SPAIN. A DEBT DEFAULT IS POSSIBLE VERY SOON. THE MASS PROTESTS ARE HUGE, AND SO FAR PEACEFUL AS PRESSURE RISES. THE JOBLESS RATE IS NEAR 24%. $$$

To hell with austerity, has been the battle cry by conservative Mariano Rajoy for election as Prime Minister. Back in December the Spanish Govt announced it would post a 2011 budget deficit of 8.5% instead of the previous 6.0% promised. Conditions went worse. Late last week, the officials announced they expanded the budget deficit by another EUR 4.2 billion, to a fresh new total of EUR 95.5 billion (=US$122bn), equal to 8.9% of GDP. A quick comparison to the USGovt deficit on population proportion would be only a $730 billion deficit (the yawning US deficit is twice that figure). Expect a rise in the Spanish Govt Bond and a margin hike of its futures contract. Also to come will be a rise in their Credit Default Swap insurance. One must wonder if JPMorgan is the guarantor. The nation is officially in a strong recession, currently estimated at minus 0.3%, whose most visible blemish (mancha) is the 24% unemployment rate. The United States by comparison has a 22.3% jobless rate, very similar. Sadly, the US is Greece and Spain only bigger. But the big story in Spain is the banking distress, clumsy bank bailouts, and even bank runs.

The country might be far beyond the applied tool of a Bad Bank to contain the majority of toxic swill. Leaders are moving fast to clean up Spain's banks, which have EUR 300 billion of exposure to property assets. They might find that after the toxic vat is filled with all qualifying acidic paper, not much else remains in the banks afterwards. The goal would be to relieve the financial pressures. The urgency of the issue was highlighted by ratings agency Standard & Poors in late April. The rating agency downgraded the debt of 11 Spanish banks, including Banco Santander, the largest bank in the EuroZone by market capitalization. Recession damage was the stated issue. The Spanish prefer solutions without open commitment to handle the cost. While Ireland created a Bad Bank in 2009, it did so with public funds and liquidated assets at reduced prices. The Spanish talk about a Bad Bank without taxpayer funds, like in a fairy tale. Their bailouts have escape clauses for the banks to avoid pain. So do not expect much to come from any such solution, really no solution at all, a travesty or vapid leadership for the world to see.

The biggest bagholder is the Bank of Spain, which as central bank collected a burden of EUR 175 billion (=US$230bn) in troubled real estate assets. The government in Madrid has been pushing the financial firms to strengthen their finances by merging. The government has introduced rules that require banks to set aside an estimated total of EUR 50 billion (=US$65.7bn) more in provisions by the end of the 2012 to cover their toxic real estate assets. They do not have such funds for provisions. The public protests continue. They speak out against emergency reforms, lack of job prospects, and austerity measures. Tens of thousands routinely march, but in certain gatherings, a quarter million people appear in protests. So far they have not been disruptive or violent, but it could change overnight. See the Washington Post article (CLICK HERE).

The Spanish Govt has nationalized Bankia, a crippled lender in a dramatic move to contain the esalating crisis and restore faith. The move was triggered when Deloitte refused to sign off an audit amidst allegations of EUR 3.5 billion of inflated assets. Half of the EUR 37 billion of property exposure at Bankia is deemed problematic by regulators. The lender will receive EUR 4.5bn in loans, converting the cash into ordinary shares. The Spanish Govt will retain a 45% stake in the bank. The Bank of Spain has demanded Bankia to liquidate assets as part of the rescue. The long awaited accounting and liquidation process has finally begun with a sputter. The Hat Trick Letter has reported, along with a gaggle of analysts, that Spain had been the worst perpetrator of delays and denials of their wrecked insolvent banking system. Therefore the shock of addressing it will be the most severe.

The Spanish shoe is dropping with a big bang. The contagion risks are badly under-estimated. If Greece is forced out of the Euro, a flight of bank deposits will occur across Southern Europe. London banks would take huge losses. A blueprint for exit is being created, one that Spain might take. My forecast is that they will exit before 2012 ends, or be on the verge of exit by then. Spain has been shut out of capital markets since August. It must make radical changes, and an exit would permit debt default together with currency devaluation. The hapless ill-designed amateurish LTRO solution was no solution, but rather a trap that Spain fell into. The pressure is on the Euro Central Bank to buy Spanish Govt Bonds. If it refuses, Spain will default. As Ambrose Evans-Pritchard commented, "The nasty twist is that Spanish banks bought their own country's debt as a place to park money at a profit, until they needed it to roll over their own debts. This game has backfired horribly." Bear in mind that the EuroCB funding ultimately comes from the Bundesbank, and the Germans are saying no more. Bundesbank chief Jens Weidmann said two weeks ago that "monetary policy is not a panacea," suggesting that the bank had done all it can and will commit no more funds. They are in effect forcing the Southern European nations to exit the Euro common currency and to default on debt. See the UK Telegraph article (CLICK HERE).

◄$$$ GERMANY HAS PAINTED A ROAD FOR GREECE TO DEPART THE EURO, WHEREBY THEY WOULD LOSE THE EURO CURRENCY BUT RETAIN THE UNION MEMBERSHIP. THE ATHENS GOVT OFFICIALS MIGHT NOT COMPLY WITH STERN CONDITIONS FOR THE NEXT BAILOUT FUNDS. GREECE IS THE EXAMPLE TO AVOID FOR THE REST OF SOUTHERN EUROPE. EXITS AND DEFAULTS AWAIT. THE MARSHALL PLAN II CLEANUP WILL COST AT LEAST $6 TRILLION. $$$

German Lawmakers have made preparations for Greece to exit the EuroZone, a paved road given adequate lighting. A Handelsblatt report came in early May that German coalition lawmakers are open to a Greek departure, and have begun to pave a road out. It wrote, "Politicians of the CDU-FDP coalition will no longer look on the goings on passively. Given the uncertain political situation in Greece, they are advocating for a withdrawal of the crisis-Mediterranean Heads of State from the EuroZone. We should offer Greece, leaving the EuroZone controlled, without withdrawing from the European Union. The dogma that no country is allowed to leave the EuroZone has already caused too much damage on European policy. It also offers more opportunities than a stubborn Greece continuing to track the chosen erroneous path."

The deep pockets and stalwart nation of Germany has no other choice. The Der Spiegel magazine drove home the same good riddance message with a push to the back. The Euro Central Bank issued an ultimatum to Greece, telling politicians in Athens that if they abandon the austerity measures that go with the second rescue package of EUR 130 billion, the European Union backers from Germany will cease making further contributions. The Nobel Prize winning economist Robert Nash developed the concept of optimum group outcomes. The Nash equilibrium is achieved here though mutual defection of several PIGS nations in Southern Europe, the worst possible shock for Europe. When the trees fall, the USFed Dollar Swap Facility will be called upon to double or triple all existing credit to date in a bank recapitalization initiative, a veritable Marshall Plan II. That would mean an additional $6 to $8 trillion in currency debasement and dilution. See the Zero Hedge article (CLICK HERE).

◄$$$ GREEK BANKS MAKE PREPARATIONS FOR THE FINAL RETURN TO THE NATIVE DRACHMA CURRENCY. THE GRAND EXPERIMENT LAID WASTE AND DESTROYED THE GREEK ECONOMY ALONG WITH MUCH OF ITS CULTURE AND SPIRIT. A BANK RUN IS HAPPENING IN GREECE. THE EXIT SEEMS INEVITABLE IN THE IMMEDIATE. THE COST OF A GREEK EXIT IS ESTIMATED AT EUR 400 BILLION (US$520 BILLION). $$$

Following the financial crisis of 2008, the real damage began in late 2009 when the slow motion collapse struck. So far the Greek GDP in real terms has contracted by 16% since the 2008 peak, the trajectory still down hard. Nadeem Walayat concluded, "The reason for this is solely due to Greece's membership of the EuroZone, which has prevented Greece from defaulting on its debts since early 2010 and engaging in a sharp currency devaluation, as markets would have corrected for the fact that Greece cannot compete against other countries." Greece is actually more indebted than before 2009 when economic collapse began. A 50% currency devaluation after reverting to the Drachma would have enabled Greece to rebuild its industry, to encourage export trade, to enlist new waves of tourism, and to end the stream of imported goods & services from across Europe.

The fixed Euro common system is a straitjacket. Hence Greece has been caught in an economic death spiral. Walayat suggests the probable order of EuroZone exits. He based the order upon debt/GDP ratio and economic contraction to date. He lists 1) Greece, 2) Spain, 3) Portugal, 4) Italy, 5) Belgium, 6) Ireland, and 7) France. My view is that France might volunteer for the lead departure to trigger the process, after given a reward by Germany for doing so. See the Market Oracle article (CLICK HERE). Check out the finance ministry office in Athens, a symbol of the nation's destruction for not defaulting on debt and leaving the Euro Monetary Union.

Greek banks are preparing for the inevitable break from the Euro, and release from its shackles. Many banks and corporations never removed the Drachma from their computer systems, much like Italy. A flick of the software switch, and they are good to go. Greek banknotes and coins must come back, but only after decisions are made on their valuations. Hartmut Grossman of ICS Risk Advisors has a US office and works with Wall Street banks. He referred to widespread preparations across Europe already in place. He said, "But there really has been contingency planning at all the financial institutions for that to happen. Greece leaving the EuroZone is not a new idea." Greek voters are pushing the limit, having voted this month in favor of parties opposed to a bailout with the EU and IMF. The elections threw into doubt the EU/IMF aid package that came at the price of harsh austerity measures, and was reached only after much haggling between banks and politicians over a EUR 100 billion debt reduction. The solutions to date have caused a disaster. A Greek departure from the Euro would create legal and practical problems for the banks which would greatly overshadow the outlined mechanical task of dealing in a new currency. See the Reuters article (CLICK HERE).

The endgame for Greece is in view. Opposition to austerity has shown its teeth. A bank run is in progress, having drained nearly $900 million in deposits from Greek banks on last Monday alone. Money is leaving Greece in a torrent. The return to the Drachma will slash life savings in half. As the anti-austerity parties take power in Athens, the bailouts will stop, the capital flight will accelerate, and the banking system will crash. Analysts estimate that the losses for financial institutions could be as high as EUR 400 billion, but the estimate might not include London or New York banks. The EuroCB backstops must be made ready to deploy emergency funds for the teetering banks certain to be overwhelmed. Refusal to act will send the continent into chaos. Economists are concerned that the Greek virus will spread to other countries that are already battered by high unemployment, negative growth, and rising yields on government debt. A Greek default will undermine the entire Euro project like a string pulled on a tattered sweater. Expect a exodus of capital across Europe to ensure, which will increase the risk of a breakup of the 17-member union. The bank runs are occurring in Spain and Italy.

◄$$$ DE LA RUE WARMS UP NEW DRACHMA PRINTER, BUT NOT ALONE. $$$

The Greek exit is inevitable. The electronic mechanisms will be easier to handle the reversion to the Drachma currency, a longstanding Hat Trick Letter forecast since early 2010. The big challenge will be to provide adequate New Drachma currency bills for circulation. The UK banknote printer De La Rue is ready to meet the task. Reuters reports, "De La Rue has drawn up contingency plans to print Drachma banknotes, should Greece exit the Euro and approach the British money printer, an industry source told Reuters on Friday. The news comes as EU trade commissioner Karel De Gucht said the European Commission and the European Central Bank are working on an emergency scenario in case Greece has to leave the EuroZone, the first time an EU official has confirmed the existence of contingency plans." A major demand for the returning Drachma will result. A handful of global firms like De La Rue could be called on to meet the emergency demand, with extra capacity to be brought online. See the Zero Hedge article (CLICK HERE). A strain is on the currency system inside Greece. The Athens officials are reportedly printing Euro notes without proper authority, creating an inflation problem, angering the EU commissioners. Also, special markings on Euro notes has begun to place red symbols in order to block their movement across borders. ATM machines dispense bills with markings according to selections made. The Greek cash will be trapped before devaluation.

◄$$$ BRITISH BANK AUTHORITIES BELIEVE MORE STIMULUS IS DUE. POSEN REVERSED A PREVIOUS POSITION. HE NOW CALLS FOR MORE STIMULUS. SMALL BUSINESS FAILURES NATIONWIDE ARE ACCELERATING, UP TO 70 PER DAY WHILE THE BROKEN UK-BANKS REFUSE TO LEND. A UKGOVT LENDING LINE HAS BEEN A DISMAL FAILURE SINCE BUSINESSES ARE IN BAD SHAPE. $$$

The UKEconomy and financial system might need more Quantitative Easing, a euphemism for bond monetization. So warned Adam Posen from the Bank of England as he retires from the Monetary Policy Committee of the central bank. He admitted too much optimism in earlier calls to avoid further stimulus. The monetary dove had been in favor of looser monetary policy, until he voted against an extension to the GBP 325 billion program in April. The UKEconomy in faltering in a recognizable manner. In the past he argued that economic conditions were in better shape than suggested by the Office for National Statistics. Last month the agency revealed Britain fell back into recession in 1Q2012. Posen also admitted his short-term price inflation forecasts were wrong, expecting it to fall faster than it has. His incompetence as a forecaster is typical of central bank brain (dis)trusts. See the UK Telegraph article (CLICK HERE). USFed Chairman Bernanke makes similar errors and worse errors, but is revered. Central bank economists are horrendous at their own craft.

Up to 70 businesses are failing down each day as the British banks still refuse to lend. The ultimate problem in Britain and the United States is similar, bank insolvency. They can call their own balance sheet values, but such gimmickry does not free capital to lend. They are broken. Nearly 70 firms are collapsing every day, the largest number for two years, as borrowers can find no way out. Researchers found that 2112 businesses became insolvent in March alone, equal to 68 per day. Most victims were small firms employing between one and 50 on staff. Almost 20% of firms applying for an overdraft were denied. The toll is the largest number of business deaths since March 2010. Credit rating agency Experian identified four sectors of the economy as dominating the list of failed firms: building & construction, leisure & hotels, non-food retailing, and business services. The latest life raft tossed to small businesses has been National Loan Guarantee Scheme. The lack of firms coming forth with creditworthy business status has obstructed the plan for the UKGovt to guarantee GBP 20 billion in loans. See the Daily Mail article (CLICK HERE).

◄$$$ MOODYS SLASHED DEBT RATINGS A SLEW OF 16 SPANISH BANKS. MOODYS SLASHED DEBT RATINGS FOR ITALY AND A SLEW OF 26 ITALIAN BANKS. WEAKNESS FROM HOLDING TOO MANY SOVEREIGN BONDS WAS DECLARED ALONG WITH A CITED RECESSION THREAT. THE MOVE WILL FORCE BANK RUNS, WHICH IN A VICIOUS CYCLE WILL LEAD TO MORE DOWNGRADES. THEN COMES A MASS OF BANK FAILURES, TIMED WITH THE GREEK DEFAULT. THAT WILL BE A DEFINING EVENT, HARDLY A CLIMAX EVENT. $$$

The borrowing costs in Spain have rocketed to unsustainable levels as their banking sector was hit by mass downgrades. On May 17th, Moodys slashed the ratings of 16 Spanish banks, citing the reduced ability of the Spanish Govt to provide support to the sector, aggravated by a renewed recession. The rating agency downgraded Banco Santander to A3. The equity of Bankia is sinking like a stone, down by 29% on a single day last week. The Madrid gang adopted a black hole. The Bankia depositors withdrew EUR 1 billion in the past week alone. The government borrowing costs are rising fast, up 50% since March for funding a EUR 2.5 billion bond. Concurrently, Fitch slashed the Greek Govt credit rating deeper into junk, from B- to CCC, as it cited the potential for a Greek exit from the Euro currency. Fitch went further to warn that all European banks would face downgrades, since at risk if Greece exited. A break-up contagion is seeping across the Spanish Bond market. The Spanish Govt ministers scurried to assure that required steps are being taken to fiscal responsibility and structural reforms, but it is all empty words based in nonsense. They are not doing much at all except delay and lie. They are so lost as to deny bank runs in progress, echoed by the Bankia chairman. See the UK Telegraph article (CLICK HERE).

The borrowing costs in Italy have risen to high levels as their banking sector was hit by mass downgrades. The Italy Govt debt was lowered one notch to A3 (four levels above junk) with a negative outlook. On May 14th, also UniCredit and Intesa Sanpaolo were among 26 Italian banks that had their credit ratings cut one to four levels by Moodys Investors Service. They cited weakened earnings and a poor economic outlook. Italian banks have a huge amount of government bonds in their portfolios, which undermine their financial positions. Unione di Banche Italiane was lowered to Baa2 from A3. Banca Monte dei Paschi di Siena was downgraded to Baa3 from Baa1. Banco Popolare was cut to Baa3 from Baa2.

The Moodys statement said, "Italian banks are particularly vulnerable to adverse operating conditions, which are likely to cause further asset quality deterioration, earnings pressure, and restricted market funding access. These risks are exacerbated by investor concerns over the sustainability of the Italian Govt's debt burden, which has contributed to the difficult wholesale funding conditions faced by Italian banks." The debt downgrades are like a cascade, since the downgrade decision came one day after a similar Moody ratings cut of Italy and five other countries, including Spain. Doubts are festering over the region's ability to contend with the debt crisis. See the Bloomberg article (CLICK HERE).

## EXTREME GOLD EVENTS

◄$$$ THE CHINESE YUAN MIGHT SUPPLANT THE USDOLLAR AS THE RECOGNIZED GLOBAL RESERVE CURRENCY. GLOBAL TRADE AND THE FLOW OF FUNDS TO SETTLE THE TRADE WILL SOON DICTATE THE CHOSEN CURRENCY FOR SPECIAL STATUS. THEN COMES USAGE AND STORAGE WITHIN NATIONAL BANKING SYSTEMS. FOR THE TRANSITION TO OCCUR, NUMEROUS PLATFORMS AND CABLE LINES MUST BE BUILT WHICH CAN ENDURE BATTLE TESTING. $$$

In a gradual process, China is eclipsing the United States in economic prowess. The emerging giant has almost reached the US level of purchasing power within the economy. It has much greater exports. It has a huge reserves booty. Their rise creates the proper conditions for the rise of the Chinese currency into prominence, out of expedient need. It is already the center of several bilateral currency swaps, the essence of barter. Arvind Subramanian from the Peterson Institute for Intl Economics expects the Chinese Yuan to eventually displace the USDollar as the world's main reserve currency within a decade. My expectation is for the displacement to occur in the next few years. China still must follow through with a wider range of significant modifications and improved reforms, starting with making the Yuan fully convertible. Big players must be able to trade Yuan for Euro, BPound for Yuan, USDollar for Yuan, Brazilian Real for Yuan, Swiss Franc for Yuan, and Yuan for Yen. They cannot freely here and now. Progress is being made. Subramanian points out the characteristic Chinese way of the process being micromanaged in a interventionist manner from an enclave-based center. Recent developments include active efforts to promote London as an offshore trading center for the Yuan currency, like in new bond issuance. More events are coming. The Middle Kingdom seeks a way out of the decades-old and controversial growth strategy of keeping the currency undervalued and the economy closed to foreign capital, in his words. See the Bloomberg article (CLICK HERE).

◄$$$ THE GERMAN PARLIAMENT WANTS ACCOUNTING OF GOLD RESERVES BUT THE BUNDESBANK RESISTS. DEMANDS ALSO COME TO LOCATE THE GOLD BULLION IN THE BUNDESBANK ON GERMAN SOIL EXCLUSIVELY. TRUST IS VANISHING FOR NEW YORK AND LONDON, THE GLOBAL CENTER FOR FINANCIAL CORRUPTION. $$$

The German Parliament is called the Bundestag. It is peering carefully into the accounting of German gold reserves managed by the central bank. The Parliamentary Budget Committee has requested a critical study by the Federal Audit Office, the newspaper Bild reports. The Bundesbank opposes the scrutiny. Bear in mind that the operating arm of the Bund is Deutsche Bank, much like JPMorgan is the operating arm of the US Federal Reserve. They are accomplices in the gold games. Both big banks are under fire. Both are insolvent, dead in the water, struggling with liquidity challenges, facing lawsuits, defending a system with extreme leverage, holding enormous toxic bond portfolios on their balance sheets. The pressure mounts.

The Christian Social Union budget expert Herbert Frankenhauser cites the decision as being unanimous. An accusation has been alleged for account cheating regarding the German gold reserves. According to the Bild newspaper report, the federal auditing office complained of "inadequate diligence of the accounting of the gold reserves. Repatriation of the gold reserves is demanded from foreign locations. The German gold reserves are in part held at foreign central banks, including New York and London. They facilitate trade and banking operations, thereby precluding the need to keep shipping the gold bars across the ocean back and forth. But the system depends upon trust, and that trust is eroding, if not vanished. A movement is afoot to require the nation's large gold reserves to be housed only in the secret shelter of the Bundestag. Germany owns 3400 tons of gold, the world's second largest gold reserves. They are currently mismanaged by the Bundesbank, made available to the Wall Street and London bank criminals. See the Welt Online in German language (CLICK HERE).

◄$$$ THE RESERVE BANK OF INDIA RECEIVED A HIGH COURT NOTICE TO EXPLAIN GOLD DEPOSITS WITH BANK OF ENGLAND AND THE B.I.S. IN SWITZERLAND. THE INDIAN CENTRAL BANK HAS BEEN CHALLENGED IN COURT TO REPATRIATE THE NATION'S GOLD. THE LEVEL OF DISTRUST FOR US-UK BANKERS IS REACHING HIGH PITCH ON A WORLDWIDE BASIS. THE ABSENT GOLD BULLION MUST BE FROM THE BLOCK SALE ORCHESTRATED BY THE INTL MONETARY FUND IN 2009. EVIDENCE IS GLARING FOR THE GOLD PAPER SHUFFLING GAME LED BY LONDON. RECALL THAT INDIAN OFFICIALS TOLD G.A.T.A. LAST YEAR THAT THEY HAD FULL POSSESSION OF THEIR GOLD RESERVES. THEY LIED. $$$

Almost half of the official Indian Govt gold reserves reside in London. Such an aberrant fact of financial life is disconcerting at best and proof of accounting fraud at worst. Raghunath Shankar Kelkar is a technically proficient public interest litigant. He has challenged the practice of locating in London over 265 metric tonnes of gold deposits owned by the Reserve Bank of India (RBI). It is not held in India, as they claimed. The stock of Indian gold reserves totals 557.75 tonnes. Kelkar has filed a public interest litigation in the Bombay High Court, with a demand that the precious metal be brought back into the country according to the provisions of the law. The petition filed by Kelkar contradicts Section 33(5) of Reserve Bank of India Act of 1934, which stipulates that 85% of the bank's gold reserves must be kept inside India. The Bombay High Court bench saw nobody from the RBI appear before the court in defense. The court granted the central bank one final opportunity. Three previous notices of the issue had been granted to the RBI without response.

Kelkar has petitioned the Indian Govt to be another respondent in the case. He eagerly read the biannual report published by the RBI on management of foreign exchange reserves. In it the bank stated, "The Reserve Bank held 557.75 tonnes of gold, forming about 9.2% of the total foreign exchange reserves. Of these, 265.49 tonnes are held abroad in deposits or safe custody with the Bank of England and the Bank for International Settlements." Kelkar has in the past challenged imprudent reserves management that resulted in financial loss not disclosed to the Parliament. The court challenge charges that the RBI move was in violation of the legal provision, since the bank had put 46% of its gold reserves out of the nation's borders. The petition urged the high court to block the any gold from being removed from India to external locations. News Flash!! Wake up call!! The gold was never shipped from India.

A factual note was passed on via GATA, from Nicholas of Midas. A couple of years ago, an IMF spokesman told Chris Powell (head of the Gold Anti-Trust Action group) that India was one of the custodians of its gold reserves. An open admission has come that India does not even have possession of half of its own reported gold reserves. A bogus reason was given for the decision to place the gold reserves outside India, stated for safe custody. Many questions were raised in the actual challenge, like the implied lack of safety for gold held inside India, capability by India to guard the treasure, even the fate of the gold in the event of war with England. The gold bullion is being stored, as reported, in two locations at the Bank of England and the Bank for International Settlements in Basel Switzerland. See the Pune Mirror article (CLICK HERE).

The explanation closes a loop that was the topic of a Hat Trick Letter accusation in 2009. The Intl Monetary Fund claimed to sell several truck loads of gold to India, the amount being around 200 metric tonnes of a total 400 tonnes sold. The IMF is like a madame in a whore house, arranging for johns to be duped by awaiting aging hags upstairs. My suspicion back then was that no gold bullion would change hands or be shipped. The Indian Govt fell victim to the ploy, buying supposedly IMF gold but completing the transaction with an agreement to leave the gold bullion with London and the BIS. India bought gold certificates of gold bullion that long had been sold by the cartel in defense of the fiat currency monstrosity, the real explanation. The transaction was just another ploy perpetrated by the gold paper certificate shufflers to maintain the paper fiat currency regime in place. The objective has been to avoid having the Western bank powers lose their gold, or at least not lose control of custody of that gold. Most likely the motive was to conceal the fact that London did not have the gold any longer, as India bought gold certificates, the victim of a congame. The only item that changed was entries on the Bank of England gold ledger.

The accounting game reaches the most proposterous when one reads the IMF inventory of gold holdings to be 2800 tonnes. But the amount is nothing but pledges by participating nations. The origin of the gold pledged does not even lie in the nation's reserve vaults, since long ago sold, replaced by gold paper certificates. Hence, the IMF gold is double counted from a base that no longer contains gold. The entire Western gold accounting is a massive fraud. On the other side, the Eastern gold accounting is vastly under-stated. Nations like Russia and China have at least ten times, perhaps as much as 50 times, as much gold as reported. Their government officials are aware of the Western congame, and play the false data game.

Friend and colleague Aaron Krowne of the Implode Expode website pitched in. He wrote, "The latest story makes no sense. The IMF is an organization having to go out and beg for cash, or secondarily sell gold, not outlay cash to accumulate gold. Something is very wrong here." Yes indeed! These wayward elitist tools do not have the money in which to buy gold. China will not hand the IMF cash to buy gold, when they want first crack at whatever gold is available. This is a death cry by IMF in my opinion with empty hands, since they have been marginalized to the extreme. Christine Lagarde might be a sharp cookie, but she hopped about a derelict vessel with nobody aboard that bears several flags not respected anymore.

◄$$$ INDIA IS CONSIDERING THE ISSUANCE OF GOLD BONDS. THE PROBLEM IS FAST RISING GOLD IMPORTS BY NON-RESIDENT INDIANS. THE GOLD BONDS WOULD BRING THE GOLD INTO THEIR BANKING SYSTEM AND REDUCE IMPORTS OF THE PRECIOUS METAL. THE INDIAN RUPEE CURRENCY EXCHANGE RATE IS AT A RECORD LOW. A BENEFIT COULD BE SAVINGS INCOME FOR CONSUMERS, AND AN AVENUE TO HIDE BLACK MARKET GOLD FROM VARIOUS ILLICIT SOURCES. $$$

The import of gold and silver into India has caused a problem. Payment for the imported gold has taken the Rupee exchange rate down hard, at a record low level. The Indian Govt wishes to mobilize the vast amounts of gold floating in the country, but outside its banking system. They are contemplating issuance of gold bonds, much like Turkey, in order to address the brisk trade outside the banking system. India accounts for nearly one third of the total world demand for gold, a top position soon likely to go to China. The gold bond concept drawn up by the Reserve Bank of India would be designed to attract dollar inflows from Non-Resident Indians and to help stabilize the Rupee. The government is also considering the usage of gold bonds for infrastructure companies. Some investment bankers believe the side benefit could be interest income for the consumers who are strapped to earn from savings. Central bank officials discussed a proposal for gold bonds that would have varying maturity periods between three and seven years and could be redeemed for physical gold. The bonds would be issued against the deposit of metal with a tenure of 10 years, with a provision that the source of gold will not be questioned. The RBI is trying to attract illicit gold, black market gold, and holdings from illegal enterprise.

◄$$$ THE SHANGHAI FUTURES EXCHANGE WILL BEGIN A SILVER FUTURES CONTRACT TRADE. THE NATION COMMANDS LARGE STOCKPILES. THE NATION PRODUCES THE MOST SILVER. VERY LIKELY, THE NATION WILL BECOME THE BIGGEST SILVER IMPORTER. ALL PRECIOUS METAL ROADS ARE LEADING THROUGH CHINA. $$$

Silver has a unique history in China, one coming full circle. When China abandoned the Silver Standard in the 1930 decade, the world was stunned. Last week, the Shanghai Futures Exchange began trading silver futures contracts. The absence of silver trading capability in China has made the market less liquid. The storied history of silver is one of volatile price swings. Most Chinese retail investors prefer the white metal to gold, due to lower purchase value. But silver is also imbedded in the Chinese psyche in a unique way. It long served as the basis of Chinese currency. In 1935 the Finance & Commerce journal in Shanghai reported personal hoards of the metal in China to be estimated at 1.27 billion ounces.

China is both the largest gold producer, soon to become the biggest importer too. A rising silver demand for the nation is not assured, but it is expected since additional investment demand for gold occurred after the restrictions were lifted. Possibly Chinese corporations will seek new silver projects in the mining industry. The bullion strategist at Standard Bank wrote in February that China has very large stockpiles of silver, estimated as being sufficient for 15 months of fabrication demand. Whereas China does not need physical silver today, the other motive for government officials might be to work toward establishing a fair market silver price. The New York and London shamans interfere with the silver price, which disturbs the stockpile value held by China. Once more, it seems all the gold and silver roads are leading to China. See the Australian article (CLICK HERE). It remains to be seen if the Shanghai Futures Exchange will suffer the same fate of contamination by the Western elite. The Rothschild family submerged the Pan Asia Gold Exchange before its inception. Just a final asterisk note, that the new Shanghai exchange might play a role in an eventual gold & silver backed Yuan currency. Any backing by precious metal would possibly include silver, due to the historical monetary mindset centered on silver.

◄$$$ A PROPOSAL IS BEING WEIGHED FOR REMOVING MORE METAL FROM US-COINS. THE RISING VALUE OF COINS FLIES IN THE FACT OF USGOVT BANKING OFFICIALS AS EVIDENCE OF DEBASEMENT OF THE CURRENCY FROM CHRONIC DEFICIT SPENDING AND BOND MONETIZATION. THE COST TO PRODUCE SMALL US-COINS IS OVER DOUBLE THEIR FACE VALUE. THE UNITED STATES IS FOLLOWING THE PATH OF THE ROMAN EMPIRE IN ITS LAST CHAPTER WITHOUT SHAME OR AWARENESS. $$$

Having removed all gold from the paper currency forced in usage as legal tender, the USGovt has systematically reduced the precious metal content. The USCongress is taking testimony on using more steel, less copper, and less zinc in its coins in order to save money. The irony is that even if the USMint received free metal for usage in minting one-cent (penny) and five-cent (nickel) coins, the remain equipment, technical expertise, labor, and shipping costs would exceed their face values. Switching to a steel layered composition for all circulating US coin denominations would save $millions annually in production costs. Testimony was heard on April 17th before a House Banking Subcommittee hearing by Rodney Bosco. He advocated the recovery from selected circulating coinage in their current compositions for metal reclamation. Bosco is from Jarden Zinc Products, which is a licensee of the Royal Canadian Mints multi-ply plated steel technology. Jarden is also currently the lone supplier to the USMint production facilities at Denver and Philadelphia with ready-to-strike planchets with certain special rims for multiple coin denominations.

In his April 17th testimony, Bosco testified that coin recovery and salvage could yield approximately $2 billion in reduced costs for the Mint. The USGovt makes it official policy to reduce the value of its coins. See the Coin Modernization Oversight & Continuity Act of 2010. Employing steel as the dominant component of a new alloy for the Roosevelt dime, Jefferson 5-cent coin, and the America the Beautiful quarter dollars would reduce the costs of raw materials for the three denominations by 84% to 89%, according to Bosco. More than half of production costs are tied up in metal acquisition. The copper & nickel clad dime and quarter dollar are currently produced from outer layers of 75% copper and 25% nickel bonded to a core of pure copper. The 5-cent denomination is composed of a homogenous mix of 75% copper and 25% nickel. Overall raw material costs for all denominations could be reduced by 80% in a switch to the steel layered technology. Changing the composition of circulating US coins could save the Mint up to $200 million annually, in estimations done by Bosco.

The production cost for each Lincoln penny is 2.41 cents and for each Jefferson nickel 11.16 cents. With donated free metal to produce the coins, the costs would still exceed the dictated face value. The Jackass prefers calling them centavos, whereby 100 equal one American Peso. The movement to debase coins has gone global. Since being introduced, multi-ply technology has been adopted internationally by 28 different countries, covering more than 60 denominations. See the Coin World article (CLICK HERE). Bank in the Roman Empire times, the leaders would remove gold from coins, and steal it. The historical accounts abound. The people revolted. The price of bread rose by the same amount as the price of American homes in the last few decades. In the United States, the removed precious metal is not stolen. The Wall Street bankers went one step further. Through bond fraud, they stole one quarter of the entire value of American homes, around $6 trillion, leaving tens of millions of American households with negative equity, poverty, despair, and anger.

◄$$$ USMINT GOLD COIN SALES ARE A FRENZY. $$$

The USMint gold sales are doing a very brisk trade. People are taking advantage of the price decline, some probably comprehending the corruption in the paper price discovery mechanisms, others shocked by the European bond collapse, some aware of the USFed hyper monetary inflation reminiscent of Weimar. The USMint sales of American Eagle gold coins rose 12% to 22,500 ounces so far in less than two weeks of May activity, compared with 20,000 ounces for all of April. The May pace corresponds to more than double the April pace.

◄$$$ TURKEY IS EXPORTING MASSIVE AMOUNTS OF GOLD TO IRAN AND ARAB NATIONS CONTENDING WITH CIVIL UPRISINGS. IRAN HAS REACTED TO SANCTIONS, BUT MUST DEFEND AGAINST A 30% CURRENCY DECLINE AND THE PRICE INFLATION THAT RESULTS. AN ODD BENEFIT COMES TO TURKEY, WHOSE CURRENT ACCOUNT DEFICIT IS REDUCED, THUS TAKING PRESSURE OFF THEIR EMBATTLED LIRA CURRENCY. $$$

Iranians and Arab Spring countries are buying massive quantities of gold in order to protect their wealth from political instability and depreciating currencies. Iran boosted imports of gold, precious metals, and jewelry from Turkey by 37-fold in the last twelve months. The amounts shows a huge rise, to $480 million in March alone from $13 million in March 2011, according to Ankara. Ironically or perversely, the gold market was the biggest contributor to a $4.3 billion improvement in the Turkish trade balance this year. They export gold bullion. The effect brought about desired decline in Turkish Bond yields on benchmark 2-year notes by 155 basis points this year, the biggest drop among major developing nations. Despite assurances made by Turkey to the USGovt to cut purchases of crude oil from Iran by 20% this year, its total trade with the Islamic Republic increased 47% to $4.8 billion in the first quarter compared to a year earlier. Sanctions aimed at isolating Iran, combined with revolutions in the Middle East, have spurred a tripling in the regional purchases of Turkish precious metals and jewelry to $942 million in the first three months, versus $282 million in the same period last year, almost a 4-fold rise.

The physical side of the gold market has enormous demand, while the paper side celebrates its climax of corruption and fraud. The big rise in Iranian and Arab physical demand sustains the gold price during the recent slam. Citizens in Iran and Arab Spring countries switch to portable wealth, feeling insecure about both their native banks and government regimes. Iran said in February it would accept payment for crude oil in any local currency or gold. The Iranian ambassador to the United Arab Emirates Mohammed Reza Fayyaz confirmed that China is paying in Yuan currency for Iranian oil. Currency wars recently escalated when the Iran central bank and more than 20 other Iranian banks were expelled from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) in March. Iran has come to rely upon alternative methods of payment, based in gold or other currencies, and has even used barter between nations, in its defensive maneuvers against the economic warfare waged by the USGovt. The Iranian currency has plunged by over 30% in the last six  months, to 17,300 rials per US$ from 13,200 on November 2nd. The central bank recorded a price inflation rate at 21.5% for the full Iranian year that ended March 19th.

Turkey is somewhat resilient, as they resist unilateral dictums made by the USGovt. They have agreed to cut oil imports from Iran, but their officials claim not to be bound by broader sanctions imposed by the United States and European Union, beyond those from the United Nations. The economic cost from fallout due to sanctions has been borne by Turkey, not just by Iran, said Economy Minister Zafer Caglayan. Turkey imports almost all of its energy supply. Every $10 per barrel increase in the price of oil adds $4 billion to Turkey's import bill. Iran supplies about 40% of the oil consumed by Turkey, its largest single source. With the diverse gold exports from Turkey, its Current Account deficit has narrowed, helping to support the Turkish Lira currency. Turkey is playing a destructive game to forfeit its valid gold wealth in order to preserve an invalid fiat paper currency regime. Its Lira suffered the largest drop in 2011 among the currencies, a ripe 18% decline, but this year the Lira has risen 7.3% in the first four months of 2012. A strange reversal is underway due to gold trade. Turkey has been a net exporter of more than $1 billion of gold, precious metals, and jewelry so far this year after importing a net $411 million in the same period last year, according to official statistics. Much remains within Turkey still, where the citizens have a strong preference for using gold as a store of value and gift items from births to weddings.

Turks are believed to possess a massive 5000 tons of gold in homes and basements. In March, the Turkish Govt faced a sizeable Current Account deficit and foreign capital flight risk from the banking system. In response, have been coaxing the citizens to transfer their vast personal holdings of gold into the country's banking system. Results are not known yet. See the Financial Sense article by Mark O'Byrne (CLICK HERE). One must be suspicious that the exported gold at the Arab destinations is vulnerable to theft, confiscation, and London seizure. It might be looted at the other end if regimes fall, as in Libya. The 144 tonnes of Libyan gold booty snatched from the Qaddafi account remains in London, where it never moved. Only ownership ledger entries changed in the theft. The bankers there have cited 287 requirements that must be met by the new Libyan Govt in order to have the gold returned. Maybe the list will be up to 387 requirements by the end of the year. It will never leave London, where it is needed.

◄$$$ EGON VON GREYEZ REPEATS A STERN WARNING. JPMORGAN DERIVATIVE LOSSES WILL BE ORDERS OF MAGNITUDE GREATER, ALL IN TIME. THE DERIVATIVE MONSTER IS MUCH LARGER THAN REPORTED. HE WARNS THAT THE BANKING SYSTEM WILL NOT SURVIVE. GOLD & SILVER HELD OUTSIDE THE BANKING SYSTEM ARE THE PROTECTION FROM MAJOR LOSSES, VANISHED ACCOUNTS, BROKEN BONDS, AND RUINED MONETARY SYSTEM. BEWARE OF COUNTER-PARTY RISK AND RE-HYPOTHECATION RISK LIKE VAST PITS. $$$

Egon von Greyez is a fund manager in Switzerland of high repute and competence. He warns, "A very big domino fell yesterday with JPMorgan having lost US$2 billion on a derivative position that was taken to hedge their portfolio. JPMorgan does not even know the size of their exposure, but they admit that their losses could be a lot bigger. No doubt the rocket science employee who lost this amount in the banks London office has been earning $millions in bonuses every year for taking positions that nobody understood. I have warned investors for more than a decade that the current $1 quadrillion plus (the $700 trillion figure is incorrect) of outstanding derivatives is a timebomb of colossal magnitude. It is guaranteed that we will see losses in the $trillions in the next few years. That is why wealth preservation is so critical and investors should not worry about a relatively small correction in the price of precious metals.

The most important investment you can hold today is physical gold and silver stored outside the banking system. This is the only investment that protects your wealth against the destruction in value of most assets including paper money and also avoids counter-party risk. Investments within the banking system will always involve major counter-party risk. With most banks having massive toxic loan books with nowhere near adequate provisions and derivatives in the $trillions with no provisions, the whole financial system is today extremely fragile. Central banks and governments are fully aware that without money printing in the trillions of dollars and more likely in the tens of trillions, the banking system is unlikely to survive. So if investors are nervous about this correction in gold and silver, take my advice: Stop looking at the price and go on holiday." The primary risks are that big entities on the opposite side of staggering huge positions will die, wrecking the party across the table, and leaving losses to trickle down in every direction. Also, the big financial firms have been shown in the MFGlobal case to have used improperly client funds as collateral for their pyramid game structures in ugly re-hypothecation. In some cases, the practice is legal, since the tiny font-3 print in contracts for account creation includes permission.

◄$$$ ERIC SPROTT CALLED THE FINANCIAL MARKETS RIGGED. HE POINTED OUT HOW HONG KONG EXPORTED TO MAINLAND CHINA AN EQUIVALENT OF ALMOST A FULL YEAR OF GLOBAL OUTPUT IN GOLD MINES. HE LAID INTO THE BUFFET GANG AND BILL GATES FOR SHALLOW GOLD COMMENTS. GOLD WAS THE INVESTMENT OF THE LAST DECADE. HE STRESSED HOW LAST YEAR AN EQUAL DOLLAR VOLUME OF SILVER WAS BOUGHT OVER GOLD IN THEIR FUND, DESPITE A 50:1 PRICE RATIO. SILVER DEMAND IS VERY STRONG, LEADING HIM TO EXPECT HUGE PRICE GAINS IN SILVER, BIGGER THAN GOLD. SPROTT IS BOLD, VOCAL, AND EXPERT. $$$

See the interview in th Silver Doctors article (CLICK HERE).

"When we had the LTRO announcement on February 29th, gold got crashed, which seemed somewhat counter-intuitive. I am going to fall back on Jim Grant's statement here on CNBC when he said all markets are manipulated. We know the credit markets are manipulated. The central banks that are fighting this contagion out there do not like gold going up. It is again somewhat counter-intuitive. The people who sell paper gold and paper silver can rule the markets over the short term. But in the longer run the physical participants will win the day.

Correct, I call silver the investment of the next decade. I will tell you why I have not changed my mind on gold. First of all, there was a data point that came out yesterday, where the exports of gold from Hong Kong into Mainland China went up 600% year over year in the month of March. In the last nine months, really ever since LTRO [European bank loan program] started, the Chinese have been buying massive amounts of gold. Most people would not recognize as significant 67 tons. But global mine supply, ex-China and ex-Russia, whose output never reaches the market, is only 22 tons a year. Then all of a sudden they buy 64 tons in a month. That is a significant part of the mining market. I was a little surprised that gold reacted negatively yesterday, because the physical data is overwhelmingly in favor of gold. I think Gold will go over $2000 by year end, and silver, I think it will go back over $50 by year end.

I find it really interesting, particularly with those gentlemen [Charlie Munger, Warren Buffet, and Bill Gates] make that [negative gold] comment, since gold was the investment of the last decade. It blew away any investment you could make, including Microsoft and Berkshire Hathaway, probably by a factor of 500%. In other words, they missed the trade big time. I should NOT respect their opinion at this point in time. All the evidence points to reasons to own gold. And yes, you can look at it as an non-interesting paying asset. Gold went up 17% a year for 12 years now. It is in a bit of a funk at the present time. The year is not over, and the evidence seems to amount that the physical buyers are prepared to take the metal off the system, with central banks having come to buy something like 58 tons of the month of February, way beyond what they bought the year before. These are non G-6 central banks. There are unintended consequences to everything. When the G-6 had their unlimited swaps and the LTRO and the threat to print money, if you are not a G-6 member but you are looking in, you are wondering what is going on. Do you really want to own a USTreasury Bond yielding 2% when they are printing money? Do you want to own a European bond when you realize the banking system is falling apart? Those non-G6 central banks stepped up buying gold, as has China.

We [at the Sprott Fund] have our own trust PSLV, where the asset is located in Canada. It is held by the Royal Canadian Mint. People can exchange those trust units for [physical] silver. It has tax advantages over the SLV. I have to recommend that. Why do I think that silver will out perform gold? I look at two or three metrics that suggest it. As an example, last year the USMint sold as many dollars worth of silver coins as gold coins, the same dollar amount. In other words, people bought 50 times more physical silver than gold. When we did our last two traunches of the PHYS gold trust and PSLV silver trust, both of those raised $349 million. We bought 50 times more silver than gold in volume. People are not forced to buy these things. That is their decision. People are not forced to buy coins from the USMint. That was their decision. If the common guy is going to buy silver in a ratio of 50-1 [in favor of silver to] gold, but only available at 6.5-1 ratio, I have to believe the price of silver is going to outperform gold." Stress how PSLV silver trust shares can be redeemed upon demand for silver. The corrupt SLV exchange traded fund run by JPMorgan can be redeemed, but with big restrictions. No obstacles exist for JPM to remove silver bars from its back door by shorting the shares it managed, and doctoring the bar list. Call it embezzlement by any other name. The Sprott Silver Trust is honest with strong integrity, thus the premium in price.

◄$$$ THE SOUTH AFRICAN GOVT DECIDED NOT TO IMPOSE A MINING TAX HIKE. THE MARXIST IDIOT LEADERS CAME TO THEIR SENSES. STILL THE TAX LOAD IS A BURDEN. YET THE TREND IS GOOD IN THE IMPORTANT NATION OF SOUTH AFRICA TO KEEP THE MINING INDUSTRY VIBRANT. IT IS STRUGGLING UNDER MARXIST RULE. $$$

The South African Govt decided to cut the marginal tax rate from 43% to 34%, already a benefit to firms like Gold Fields. Its CEO Nick Holland said, "The gold industry has already taken royalty taxes, which is about 300 million Rand (=US$36.14 mn) a year to us. Now we have a mooted carbon tax coming which is probably another 300 million Rand. We cannot really take much more." The marxist idiots found the ways of reason when they backed off the radical idea of mine nationalization, and put aside the stupidity of a carbon tax. That measure would have taken the total tax to 50% of profits. Some credit is given to the only movement in reduced mining tax in the world, but from a ridiculous high level. The Mines Minister Susan Shabangu assured that any future changes to tax policy would seek to keep the sector competitive, since it remains a vital source of employment. While gold miner tax rules have changed, the formula is not yet to be applied in other sectors, such as platinum and coal. The reversal in trend is a fresh breeze. The trend had been to raise mining taxes and royalties in a seeming punitive manner. Other nations in Africa have been harsh, from tax hikes in Ghana to an attempt in Zimbabwe to force foreign mining houses to surrender 51% stakes in their local operations to local investors. See the Reuters article (CLICK HERE).

◄$$$ ALLEGATIONS HAVE BEEN LODGED OF THEFT, FRAUD, IMPROPER USAGE, AND OVERCHARGED FEES IN AUSTRALIA, INVOLVING PRIVATE VAULTS FOR STORING PRECIOUS METALS. A SUPREME COURT LAWSUIT ENSUED. ONLY THE HIGHEST REPUTABLE VAULTS SHOULD BE USED. FRAUD IS LACED ACROSS THE GLOBE, BUT MOSTLY IN ENGLISH SPEAKING REGIONS. (ENGLISH IS SPOKEN WIDELY IN SWITZERLAND). $$$

The Reserve Vault, an underground vault in Queensland, is used by the wealthy to store hundreds of $millions in gold, silver, and other valuables. It is at the center of a broad range of allegations and charges. Legal claims appeared in Supreme Court documents filed, which describe a search for at least $150,000 worth of missing silver ingots. Concurrently a battle for control of the company running the high security vault is underway. Peter Rex Sands was the previous manager of the vault, but he was declared bankrupt in December, thus making it illegal for him to be a director of a corporation. An unusual Supreme Court order last month barred Sands from any role at the vault, yet the The Courier-Mail witnessed him leaving the vault in late April. The vault is one of only a handful of such facilities in Australia.

One bullion trader informs that the high security vault was used by rich individuals, hedge funds, foreigners, and other investors highly distrustful of banks and dealers in precious metals. Numerous allegations swirl. Court documents claim that security cameras were not properly monitored. The company appeared to be trading while insolvent, not keeping proper business records. Even Sands had been closely tangled in its operation after barred from involvement. A shareholder in the company running the vault, Owen Kelly, said in an affidavit filed in court he had concerns about silver owned and stored by his own firm at the company's premises.

## GOLD PRICE PREPARES FOR MAJOR REBOUND

◄$$$ A STORY DIRECTLY FROM A MIDEAST GOLD CLIENT, WHO CITES LONDON MARGIN HIKE CHANGES. THE LONDON GOLD SUPPLY HAS VANISHED TO RETAIL DEALERS. THE RAIDS AGAINST THE CARTEL MIGHT HAVE SOME VISIBLE EVIDENCE OF STRAIN, AS IN VACANT SHELVES IN INVENTORY. $$$

On May 15th, a retail gold dealer from the MidEast contact informed a colleague of mine about particulars within the London gold market, which is his supplier. Strain is evident. Supply is not forthcoming. Gold margin hikes are happening regularly, a nasty device used to harm speculators and add to inventory supply. Omar wrote, "No physical gold as of this afternoon. We all have money deposited to pick physical. The banks keep saying wait until we get instructions from London. Wait until we get instructions from London. Deep inside I am soo soo soo happy. I know this is the bottom. You ask about premium. They refuse to give a fixed one for the day. Each hour it has been going higher. Now the premium has doubled from yesterday. I am reporting things as they unfold, since London opened. It is complicated. They refuse to give you gold despite the money already deposited and transfered to London and New York. We have been selling our own stock from yesterday noon, but we cannot continue. We need stock of gold. If the scrap inflow is zero and banks refuse to give us gold, then we cannot continue simply. We need to replenish our own stock. I am anticipating one more price spike lower."

On the following day May 16th, Omar provided an update. Here is the salient part. From the MidEast he wrote, "Premium tripled for gold today and still no gold supply. Only 30% will be delivered, they promise. I am really getting skeptical about [the price falling to] 1400 unless all central banks decide to sell gold at once. Now the story is only Iranians and Indians want gold."

◄$$$ GEORGE SOROS HAS INCREASED HIS GOLD EXPOSURE VIA THE FAULTY BIASED G.L.D. VEHICLE BY FOUR-FOLD. HIS GAINS IN GOLD WILL BE OFFSET BY LOSSES IN HIS JPMORGAN STOCK (DOWN 25% SINCE THEIR NASTY NEWS). SOROS IS A SHOWMAN WHO LIES ROUTINELY IN PUBLIC STATEMENTS. $$$

George Soros (born Gyorgi Schwartz) loves gold but talks it down in public with blatant deception. He knows where the global monetary system and trade settlement apparatus is heading, to a stable gold core. He can see the ruined European Govt Bond market, and the need for a new monetary system. The Soros Fund Mgmt picked up a new stake in JPMorgan Chase (symbol JPM) in the first quarter, precisely in time to take massive losses. The fund held about 606,000 JPM shares as of March 31st, along with call options to buy another 95,000 shares, according to the filing. The options will go worthless. The fund also sold out of Google (GOOG). The big news is the fund quadrupled its exposure to the SPDR Gold Trust (GLD), shown in their quarterly portfolio disclosure. The filing reports a bigger gold ETF stake of about 320,000 shares, versus 85,000 shares at the end of last year. See the Barrons Blog (CLICK HERE).

Other large and respected institutional buyers of the tainted corrupted tool GLD version of gold ownership were PIMCO and the Teacher Retirement System of Texas. Eton Park Capital also bought  739,117 shares in the SPDR Gold Trust during the first quarter. The New York fund held zero GLD shares as of December 31st. The Paulson Fund chief remains a steadfast GLD investor. John Paulson reiterated the message to clients in February that gold is a good long-term investment, serving as protection against currency debasement, rising inflation, and a possible breakup of the Euro. Sage words indeed. The bruised fund manager will restore his reputation in the coming months when the gold price zips higher.

◄$$$ THE GOLD C.O.T. REPORT CONFIRMS THE EASTERN COALITION MODUS OPERANDI. THEY MIMIC THE GOLD CARTEL IN DRAINING THEIR MEMBER BANKS OF GOLD BULLION, BY PUSHING DOWN THE PAPER GOLD PRICE. BUT THEY HAVE LETHAL MOTIVE, TO TAKE PHYSICAL DELIVERY. THE CHANGES IN THE C.O.T. REPORT CONFIRM A BULLISH SIGNAL. $$$

Almost two weeks ago, evidence surfaced within the Commitment of Traders data on gold that massive amount of covering among the Commercial class of investors. Harvey Organ reported that Large Speculators who have been long in gold decided to exit 3438 contracts from their long side. The Commercials who were long in gold added a monstrous 7453 contracts to their long side. The Commercials who have been short in gold covered a humongous 19,095 contracts from their short side. As has been the case for years, the Commercials signal the way, and they are covering short positions and adding to long positions in a very big way. The wrong-way Specs confirm by reducing their longs. Check the contrary indicator tally box. The almost always wrong Small Speculators who have been long in gold reduced 3698 contracts from their long side for reducing future profits. The Small Specs who have short in gold added a dramatic 5760 contracts to their short side for future losses. This is bullish, as smart Comms covering shorts and dumb Small Specs adding to shorts. Harver Organ, said "Conclusion: we have a new player here controlling the gold sector. Maybe Jim Willie is right that foreign interests who are familiar with the antics of the bankers are mimicking their Modus Operandi to obtain metal." Thank you, very much, with hat tip to The Voice, my gold trader who is very generous and usually warm-hearted, motivated to bring justice to the financial world.

Quick update with the most recent COT gold data shows the covering pattern finishing off in the same way. The Commercials who were long in gold added another monstrous 9579 contracts to their long side. The Commercials who have been short in gold covered a respectable 2959 more contracts from their short side. As my friend George from the Chicago pits said, "the fat lady is singing as far as I'm concerned." This is a bullish update from last week. Thanks to GoldSeek for fine summary graphic tables.

◄$$$ A GOLD FAT FINGER DAY HAPPENED AGAIN. THE AMBUSHES ARE OCCURRING MORE OFTEN. MARK APRIL 30TH AS YET ANOTHER DAY OF UGLY NAKED SHORT AMBUSH. BUT THE INCIDENTS ARE BEING RECOGNIZED LATELY BY MAINSTREAM FINANCIAL EYES. CHEERS TO THE WALL STREET JOURNAL FOR EXPRESSING DOUBT ON THE REGULARITY AND ABNORMALCY OF SUCH SELL ORDER ACTIVITY. ZERO HEDGE ATTEMPTED TO IDENTIFY THE PERPETRATOR OR HIS CAMP. $$$

On April 30th, another naked short ambush took place on the COMEX in the gold market. When a large $1.24 billion gold sell order slammed the market, some eyes on mainstream news noticed. Finally the Wall Street Journal has reported on the powerful gold slam which shows disregard for market disruption. In other words, sellers sell without caring about maximum sales proceeds for the contract. The harm to the market is much like a Mack Truck passing through a schoolhouse. The WSJournal does not realize these are naked short contracts, not sale of existing long contracts. The journal calculated the requisite margin cash to post, without noticing that zero margin is typically posted on naked shorts, very illegal. They did not do their homework tasks. The gold bid was slammed with reckless abandon, demonstrating brute price manipulation force. The motive appeared to be to demoralize further buying and to render harm to sentiment. Those who enter to buy are quickly overrun, facing immediate losses.

The journal noted the vulnerable points, like a slow market day with Asia largely closed. No big seller would sell on such a thin day, which addresses motive. The routine monthly gold slam made it to the mainstream media. Attempts at manipulation are so glaringly obvious, not even the obedient financial networks pretends to give them the credence of legitimacy anymore. Normally, the main financial journals ignore the gold market ambushes, best left alone. The frequency of mindless sell orders for the gold market often occur two to three times per day, like when New York awakens. It has a name 'Good Morning, New York' since so regular.

The WSJ wrote, "The CME Groups Comex division recorded an unusually large transaction of 7500 gold futures during one minute of trading at 8:31 am EDT. The sale took out blocks of bids as large as 84 contracts in one fell swoop and cut prices down to $1,648.80 per troy ounce. The overall transaction was worth more than $1.24 billion. Gold traders buzzed with speculation that the transaction was an input error, a so-called fat finger trade. One indicator that the transaction was a mistake was its size. At 750,000 troy ounces, such large trades are rarely conducted amid very thin trading volumes. Monday trading was expected to be quiet, as market participants in China and Japan are out on holiday, and many European traders are preparing for a holidays there. 'NO ONE WHO HAS THE ACCOUNT SIZE AND THE MONEY TO TRADE THOUSANDS OF GOLD CONTRACTS WOULD DO IT IN ONE TRANSACTION, THAT IS JUST STUPID, said one trader. The collateral required to purchase 7500 contracts is about $75.9 million in cash that the trader would have deposited with his broker. Moreover, the likely mistake is symptomatic of the shift to electronic trading. Computer trading systems are vulnerable to input errors, as they do not question the order before executing the transaction."

Tyler Durden, bruised but bold and holder of great truths, attempted to unmask the perpetrator, or at least identify his camp. Mikael Charoze is a trader at the Bank for Intl Settlements, whose office is in the Basel area of Switzerland. Charoze has wide experience as a central bank broker. Durden provided his photo and job description, with an implied accusation that his regular duty is to crush credibility in gold. In his own profile the young man describes himself as a market maker for central banks for all gold products, who holds and manages proprietary positions on all currencies including gold. So one might conclude that the BIS regards gold to be a currency. See the Zero Hedge article (CLICK HERE).

◄$$$ THE GOLD COVER CLAUSE IS AN IDEA WHOSE TIME HAS COME. THE MASSIVE CREATION OF NEW PAPER MONEY WITHOUT BASIS HAS CREATED A CRISIS WITHOUT END. A SOLUTION IS BEGGED. THE GOLD STANDARD IS THE ANSWER, WHICH MAKES MONETARY COUNTERFEIT AND BOND FRAUD MORE DIFFICULT. JIM RICKARDS HAS SPOKEN AGAINST THE PRACTICALITY OF THE GOLD STANDARD. THE JACKASS TAKES EXCEPTION. THE GOLD COVER CLAUSE ENABLES 3% OR 5% OF THE MONETARY STOCK TO BE REDEEMABLE IN GOLD UPON DEMAND. A MUCH HIGHER GOLD PRICE (LIKE OVER $7000/OZ) COMBINED WITH A COVER CLAUSE WOULD ENABLE THE RETURN OF THE GOLD STANDARD. $$$

Any solution that centers upon a return to the Gold Standard must begin a a gold price rise to $7000 to $10,000 per ounce in order to cover the mammoth unbridled new money creation over the last 30 to 50 years. Silver would need to rise to $200 to $400 per ounce in like kind. The other commodities would not join, in my view. The crude oil and natgas and copper would not participate like that, since not monetary in nature. Jim Rickards never mentions the Cover Clause whereby perhaps 5% of money would be redeemable in gold. A string of other nations like Russia and China and the Persian Gulf could enter the mix with a 2% to 3% cover clause in Ruble, Yuan, and Dinar backing. The Euro Mark led by Germany could give the entire process respect and credence, at a time when both are gone. Instead of changing official interest rates, the central banks could alter their cover clause percentages.

Rickards is at times brilliant until he discusses gold management and gold-based solutions. Then he turns into a hired public relations talking head for the establishment. He constantly talks about the USGovt physical gold held in reserve, when as consultant to the LTCM in the 1990 decade, he had intimate knowledge of its systemic raids from the Clinton-Rubin schemes. Rickards cites 31,000 tons of gold in central bank vaults as though it is fact. It is not. The Western central banks might be 20,000 to 40,000 metric tons short of gold bullion after two decades of gold leasing and certificate fraud. That is precisely what my main gold trader source has been lecturing about for two years running. The central bank fiat currency game has been defeneded only by depleting their entire gold supply, and going into hock. They are short thousands of tons of gold, soon to be revealed in a gigantic scandal. The partner bullion banks have defrauded clients, which are undergoing legal challenge and absent resolution in Switzerland with multi-$billion class action lawsuits.

A return to the Gold Standard would not be deflationary from a lack of adequate gold bullion, as Rickards claims. Even at a $10,000/oz gold price, the money stock would be far greater than the gold stock. A small cover clause would work, which Rickards should mention in order to solidify the argument. He is dead wrong about the full cast of commodities rising in value. No need or force would push up the crude oil price, or copper price, or cobalt price, or cotton price. Their production costs and availability would dictate their market price. Restoration of the monetary system through proper gold pricing is not an inflationary event. It is the exact opposite. The gold & silver prices are unique, and must match the monetary aggregate, the supply of money. That supply has gone haywire in the most insane episode of modern history amidst gargantuan frauds and thefts, not to mention chronic aggravated assault in market interference.

Chronic shortage of silver with annual deficits dictates a silver price multiples higher to attract new supply and achieve equilibrium. A much higher gold price would enforce honest legitimate monetary management, and encourage new supply to the point that the gold price might come down 10% after two years of imposed new gold price in a Gold Standard return. Rickards is correct that gold must be priced much higher, and a return to the standard is feasible. But his facts and constructs are lousy and sloppy for such a clearly intelligent man. My belief is that his brain stem is compromised by consulting fees with the system players, and non-disclosure agreements signed from his LTCM days. He knows personally that the Bank of Italy lost 100% of its gold from tht LTCM fiasco. He was there. See the US News article (CLICK HERE).

Rickards wrote, "Gold cannot be used as a monetary standard because there is not enough gold. This is one of the most frequent charges used by Gold Standard opponents. In fact, the quantity of gold is never an issue. The issue is one of price. There are approximately 31,000 metric tons of gold held by central banks today and another 130,000 metric tons in private hands. It is true that if this gold were valued at the current market price of about $1650 per ounce, a money supply of equivalent value would be far less than the current money supply. This would be highly deflationary and probably result in a contraction of world trade and gross domestic product. However, the same quantity of gold valued at, say, $10,000 per ounce would support today's paper money supply at a reasonable ratio of gold-to-paper in line with historic gold standards. So, the issue is not the quantity. It is the price. Central bankers do not want to face up to the fact that they have printed so much paper money that a return to sound money would involve a one-time hyper-inflationary spike in all hard asset values and a concomitant destruction of paper wealth. This adjustment will take place eventually. It always does. The issue is whether we will face up to the reality sooner than later in a studied and orderly way, or wait for a disorderly and catastrophic day of financial reckoning." The adjustment, better called a revolt in transition, will be conducted and led by the East, namely China, with Russia and Germany at their side. For more descriptions of the gold cover clause, with potential layouts, and new currency discussion, see the public article entitled "Gold Cover Clause Guidance" on Gold Eagle by the Jackass (CLICK HERE).

Here is an excerpt from the public Jackass article on a favorite topic of mine. The competing new currencies could conceivably form a stable critical mass around which to develop both a global trade system and a global monetary system. Obviously, the United States, United Kingdom, and Southern Europe within the industrialized world would not participate. They would be lodged in the New Industrialized Third World which would suffer tremendous economic hardship in proportion to their monetary and banking crimes and abuses. The Jackass wrote, "The flexibility of a gold cover clause device could enable a few competing currencies. They would float, but the linkage to gold would prevent much fluctuation beyond recognized bands. If the Russian Ruble were backed by a 2% cover clause, then that currency could float but drift lower in value. If a Chinese Yuan were backed by an 8% cover clause, then it could float with a higher drifted bias. If a new Euro Mark currency were backed by a 5% cover clause, then it could float with an even keel. The kicker could be the Gulf Dinar, which might be required for purchasing crude oil. The varying cover clause could act in the future monetary system backed by gold as a flexible system where the major nations could alter their percentage in gold cover redemption in much the same way they do nowadays with official interest rates. The many major central banks could actually manage the gold supply in a responsible manner, resorting to mundane duties like counting money and acquiring more gold, rather than the present function where they oversee reckless monetary expansion, control currency debasement, coordinate bond fraud, dispense gigantic grants to the elite caste of banks, and conceal narcotics money laundering."

◄$$$ CENTRAL BANK REDISTRIBUTION OF GOLD TO STABILIZE THE MONETARY SYSTEM IS A CONJURED PIPELINE, ONE FOUNDED IN REASON BUT LACKING LOGIC. PRUDENT NEED DOES NOT TRANSLATE INTO PALLIATIVE ACTION. THE WEST IS FORFEITING ITS GOLD. THE EAST IS GATHERING GOLD. THE NEXT SOLUTION AND RADICAL NEW PLATFORMS WILL EMERGE FROM THE EAST FOR TRADE SETTLEMENT. THE MONETARY SYSTEM WILL FOLLOW THE TRADE BREAKTHROUGHS.          THE WEST IS ON ITS HEELS FACING AN ABYSS, IN NO POSITION TO MAKE ANY DECISIONS EXCEPT DEFENSIVE MEASURES AND CRIMINAL CONTINUATION. $$$

To be sure, the central bank problems administering over insolvent banks, insolvent government budgets, insolvent households, and insolvent brain stems require some urgent palliative action to remedy the damage, to sooth the ills, and to repair the broken platforms. The central banks are responsible for the insolvency. The promoted asset inflation with a sequence of devastating busts, and capital destruction seen in industry with squeezed profit margins both require urgent remedy. Do not expect it to come from the West, which will be desperate to commit crimes, hog the public aid, deceive the public, rig the markets, their usual plied trade, in order to preserve the system in which they hold both power and command great wealth. The solution will come from the East, not the Wall Street or London City corner offices, certainly not the Swiss castles. In their May letter, Paul Brodsky and Lee Quaintance of QB Asset Mgmt in New York argued that the investment case for gold is based upon its likely official revaluation upward to support fiat currencies confidence. The fiat currencies have lost the market's confidence. That sounds all too wise, but lacks practical logic. They talk of central banks obtaining the required gold bullion, ready for redistribution to the many central banks. The accumulation is being done by Eastern central banks though. The disgorgement is being done by the failing Western central banks. This is typical errant asset management counsel that is 180 degrees off the mark in its analysis.

Brodsky and Quaintance wrote, "The key to a successful transition is a credible monetary reset. Gold is the default collateral for money because it has a long and established precedent in this role. All that would be needed would be a fairly equitable distribution of gold among global monetary authorities (taking place now?), and an agreed upon exchange rate vis-a-vis baseless paper. It would have to be an exchange rate at which central banks could successfully monetize assets by tendering for physical gold with newly manufactured paper money, an exchange rate high enough to attract enough gold to cover unreserved credit held in the banking system. It is a high figure. The relative cost of holding physical gold today is minimal, (above ground bullion or in-ground bullion through mining shares), against the negative real returns offered by the preponderance of financial assets in float. We suggest one keep identities straight. Invest with central banks, not against them, and consider the hollow rhetoric of the establishment that may temporarily suppress its paper price a gift. They are working for physical gold holders, not against them."

Incredibly shallow work!! The major banks, including central banks, in the West are being drained of gold. The principle in gold investment is correct, but the reasoning is beyond inept. The central banks cannot redistribute that which they do not possess. The Bank of England has been scraping the bottom of their 100-year old barrel in order to satisfy LBMA demands for gold bullion, showing at times 1930 vintage serial numbers. The US and British central bankers are finding themselves in clumsy rules restrictions since the old gold bars are from a different era, where past owners enforced different rules. The United States and Canada have zero gold, long ago dumped on the market with complex leveraged schemes to earn $trillions in profit. The Swiss have mountains of gold, but they are as tight as an orphanage director. The only way the central banks can reload and restart the fiat currency system again is if the Bank For Intl Settlements redistributes gold. They will not, since that would be tantamount to decentralization of power. The BIS is all about domination in secrecy, not equitability.

◄$$$ MY GOLD TRADER SOURCE IS PRIVY TO SOME GOLD TRANSACTIONS AS WITNESS. THE WALL STREET AND LONDON FIRMS PUSH THE GOLD PRICE DOWN WITH NAKED SHORT PAPER FUTURES CONTRACTS. THE EASTERN COALITION PUSHES IT DOWN FARTHER, IDENTIFIES THE ILLIQUID BIG BANKS WITH MARGIN CALLS, REFUSES CASH TO SATISFY, AND FORCES GOLD SALES AT DISCOUNT PRICES. THE VICTIMS ARE DRY OF CASH, HURTING MAINLY FROM EUROPEAN DEBT. THE CARTEL MEMBER BANKS ARE TARGETED IN A MODEL EXECUTION. THE PHENOMENON IS NEW. THE SLOW PROCESS IS EXPLAINED. HERE ARE SOME SKETCHY DETAILS. $$$

The following note came in early May. The important part is that the transactions are conducted off-market. The reason can only be surmised as higher powers are at work, calling the shots, angry at the criminal banker roles, conducting redress, announcing a new Sheriff in town ready and willing to cause some pain in old-fashioned justice, with feet put to the fire. These are financial executions and kills from a repeated model. My suspicion is that the Eastern entities are large hidden creditors who have returned with vengeance in mind but justice in their hearts. He wrote, "There are much bigger things going on behind the curtain. This has very little to do with the usual suspects. It is a small Eastern group that is taking very substantial quantities in off-market transactions from people under liquidity pressure. The cartel bank business is suffering, as credit market worsens, sovereign bonds are hurt, even FX bets are not working. Margin calls ring every day. The latest LTRO backfired in their faces, as most new positions with the fresh borrowed Draghi funds are underwater. The cartel targets are again vulnerable. It only takes 1.5 to 3.0 metric tonnes to drive the official market through the floorboards. At that point another big cartel bank is forced to part ways with its gold bullion at a price they truly hate, thus resisted, making for slow clearance of the standing orders. Since these big off-market transactions are done on a spot basis, these buyers depress the prices to get the price they want.

The process, new since last autumn, has continued with each round of paper ambushes conducted by the same banks that are being stripped of their gold. The sheeple have no clue what goes on and neither have the idiots in front of their trading screens, analysts included. It is a new game, and within 18 to 24 months, almost all cartel gold bullion will be shipped off their loading docks. Relax, as precious metal prices will regain its market with integrity. The gold price will skyrocket once they are done with what must be done. Sit tight. What you are seeing right now on price is totally irrelevant in context of the bigger picture."

A colleague confirmed a piece of what is happening. He has some excellent contacts. He wrote, "I know a guy who traded FOREX for Canada for 30 years. He said to me last week, regarding losses in FOREX, that many big banks are TOTALLY DRY OF CASH.  ZIPPO."

◄$$$ TAKE A BREAK FROM CHARTS. THEY MEAN LITTLE RIGHT NOW. THE CONDITIONS ARE BEING MADE FOR SIGNIFICANT UPWARD PRICE MOVES, BUT NOT WITHOUT SOME SCARY VOLATILITY. EXPECT CONVULSIONS. $$$

The Jackass enjoys Technical Analysis, values the charts, and really stuck with it from 2004 to 2009. In the last year, big temptations have been pondered not to include charts at all in a certain monthly report issued. Three big forces are at work: 1) Inflation from central banks, plus govt deficit spending. 2) Collapse (deflation) of housing and mortgage assets, lately sovereign bonds. 3) Market interference, lately in hyper-drive. Item #3 makes the rest temporarily irrelevant. When precious metals prices break out to new highs again, Elliott Wave pattern chart projections might deserve to be brought out. Until then, many charts have been worth tossing into the dustbin, including my own at times. The official market interference has gone to the extreme in recent weeks, making a mockery of charts.

The stage is set for the Gold price to surpass new highs, and Silver price too. It might not seem like it, but the upside resistance is being removed in a painful process. Clearing the global monetary stage of the powerful bank cartel is a task worthy of the history books. Expect much greater volatility like heavy spring rain and wind, until the summer sun arrives, perhaps later this year. My full expectation is to see breathtaking upward price moves by the end of this year. In the next couple years, look for the Gold & Silver prices to double or more. In the meantime no further charts will be presented this month, as a celebration of mortal wounds to the gold cartel member banks, whose gold supply is mostly drained, like 5000 metric tons in the last three months.

A grand Paradigm Shift has occurred to deliver deep wounds to the gold cartel and render it more toothless. They still control the paper price mechanisms, but the COMEX is soon to become irrelevant. The COMEX has become a weapon used against the gold cartel finally. At the same time, extreme distress in the banking sector of Europe is causing massive liquidations and asset sales to raise cash. Unfortunately, a repeat of 2009 is occurring in a parallel episode, somewhat against my expected sequence. This time is different though, since 5000 tonnes of gold bullion have been snatched by Eastern entities from the Western banking cartel. The horizon is looking very bright for future gold & silver prices without heavy cartel muscle to intervene in markets. The obstacles are being removed by force. While the cleanup project is underway, the charts mean little except to worry. They are paper price discovery in nature, where the corruption is peaking. Extreme price volatility is likely to arrive soon, big jumpy moves up, sudden swoons down, only to be followed by fantastic moves up. The movement will frighten many. Prepare.

## 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.