GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Golden Nuggets
* COMEX Destruction in Slow Motion
* Euro Banks Toppling
* Victims of Currencys at War
* Gold Accumulated, Hidden & Stolen
* Strong Hands Hold Gold
* Mining Stock Glimpse

HAT TRICK LETTER
Issue #92
Jim Willie CB, 
“the Golden Jackass”
20 November 2011

"Debt monetization is the original sin of central banks." ~ Wolfgang Stanz

"Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights." ~ Alan Greenspan (1966, long forgotten)

"Buying gold is just buying a put on the idiocy of the political cycle. Capitalism without failure is like Christianity without Hell. You have to have atonement for ridiculous levels of spending both the US and Europe have gone through. The spending idiocy of the world is going to catch up to itself. And that is where we are today." ~ Kyle Bass (founder of Hayman Capital Hedge Fund)

"Signals of market stress are increasing, with a growing number of measures now flashing yellow and some on the verge of flashing red. The longer this persists, the greater the risk of very large market moves in either direction, depending on the economic and financial catalysts. In the absence of proper policy responses, the dislocations have decisively breached the Italian firewall and have now spread to the core of the EuroZone. The result is an across the board disposal of assets on the part of increasingly stressed institutions." ~ Mohamed El-Erian (from PIMCO)

"One of these days the market is going to blow up in JPMorgan's face because they will not have enough physical supply of silver to meet delivery demands. We will be reading about JPMorgan the same way we are reading about MF Global, only it will be many multiples more severe. It will potentially be catastrophic to the US dollar and any remaining faith thereof. You want to make sure you have as much of your paper money moved into Gold & Silver because when the market does blow up like that, the end game will be near and Gold & Silver will undergo a breathtaking move higher. Behavior like we are seeing by JPMorgan this week indicates that the blow-up event is getting closer." ~ Dave in Denver (referring to JPM showing higher silver inventory, almost equal to the amount undelivered due to MFG failure)

"What Europe, the United States, China, and Japan have now are leaderships that substitute lies for fact, obfuscation for transparency, artifice for feedback, and propaganda for communication. The essential negative feedback of dissent has been choked off, leaving only self-reinforcing positive feedback loops in the system, feedback that inevitably leads to runaway collapse." ~ Charles Hugh Smith (of Two Minds)

"What we witness in the world today is astonishing, enough to make your jaw drop. I knew the curtain would close soon, but I do not believe what I am seeing. As the final act of the banker drama plays out, the sickest, most gut wrenching part preceding the close of the grand finale is most people are clueless, exposing yet another crime, the crime of ignorance." ~ JeffH (Hat Trick Letter subscriber in Virginia)

GOLDEN NUGGETS

◄$$$ GERMANY PREPARES THE DOOR WITH PATHWAY FOR EXIT FROM THE EUROPEAN MONETARY UNION. CURIOUSLY FRANCE IS ASSISTING IN THE EXPLORATION PROCESS, DESPITE SOON BEING THRUST INTO THE P.I.I.G.S. PEN THEMSELVES AS THEIR PRIMARY WOUNDED CREDITOR. AS DENIALS GROW LOUDER, THE EXPULSION BECOMES OBVIOUS. THE SOUTHERN NATIONS ARE DRAGGING DOWN THE ENTIRE CONTINENT. HOWEVER, IT CANNOT BE CLEAN SINCE DEPARTING THE EURO WOULD HAPPEN WITH DEBT DEFAULT AND BANK RUIN CONTAGION. TO BE SURE, A SMALLER EUROPEAN UNION IS BEING NEGOTIATED. THE CONTAGION IS SPREADING GLOBALLY. $$$

Many analysts are correctly concluding it is Game Over for the European Union. The central core nations are exploring the idea of kicking out the most offensive nations, beginning with Greece. It is not so simple, either politically, or economically, or with banks. The big Euro banks do not want defaults to occur, since their losses would be huge, much greater than the absurd small writedowns recorded to date on their balance sheets. Contagion would spread beyond Europe to London and New York. The economic implications are thorny, since contractual commitments are prevalent on trade in the entire supply chain. While the PIIGS debt is pulling down the entire financial system for Europe, expulsion of even one or two nations would result in sudden debt losses slamming faster than a tsunami. The result would be 20 to 30 banks being killed overnight. Reuters reported two weeks ago, "German and French officials have discussed plans for a radical overhaul of the European Union that would involve establishing a more integrated and potentially smaller EuroZone, EU sources say. French President Nicolas Sarkozy gave some flavor of his thinking during an address to students in the eastern French city of Strasbourg, when he said a two-speed Europe, the EuroZone moving ahead more rapidly than all 27 countries in the EU, was the only model for the future. The discussions among senior policymakers in Paris, Berlin, and Brussels go further, raising the possibility of one or more countries leaving the EuroZone, while the remaining core pushes on towards deeper economic integration, including on tax and fiscal policy." This is wishful thinking without consequences tied to reality. The irony is thick, since France is not included in the key Eastern Alliance deals between Germany, Russia, and China, with the Persian Gulf tagging along. The more likely path would have France to lead the PIIGS into the Second World, at risk of falling into a wickedly worse environment. Strong price inflation and unresolved debts will be devastating to the southern nations

Europe is preparing for the end of its union, and the dissolution of the existing structure. Customs, trade, and currency must be reorganized. The Franco-German motor has generally been the driving force in steps forward for European integration, but the Paris banks are broken, insolvent, and soon to fail. Treaties would have to be rescinded and reworked. The extreme treachery lies in any attempt to put Europe into a tighter straitjacket politically with a single clearer bolder more brutal leadership from a castle. That in my view was the original plan for the European Union, which the planners forced upon Germany for instance, tempting the weaker southern nations with lower undeserved interest rates. The outcome was predictable, although the Jackass was not at the top of his game on this. My thought was that the Euro would challenge the USDollar for global reserve leadership. My error was not foreseeing that the internal finances would break Europe apart, north from south, and result in vast seizure of collateralized assets by the big Euro banks, and vast acquisitions on the cheap from distressed ruined companies with valid assets. The breakdown in the United States in late 2008 spread to Europe, making debt rollover next to impossible in the PIIGS nations. Instead, the New Nordic Euro will rise from the ashes and challenge the USDollar, as the key trade currency within the Eastern Alliance that forms. Regardless, this is the end of the unified Europe. It will evolve into two blocs. People who cherish freedom should hope for two blocs, and further de-centralization. See the Zero Hedge artic le (CLICK HERE), the Reuters article (CLICK HERE), or the Business Week article (CLICK HERE). One thing is certain. Pandora's Box has been opened, the evil released, only hope remaining. Continuation of the same structure dooms all. The strong must step out or force the weak to depart.

A restructure of the European Union is being negotiated, but France has a small voice unless it leads the broken PIIGS into the dark unknown. The current EuroZone is no longer tenable. Senior EU officials admit to intense discussions being underway. The practical goal is a smaller EuroZone. One anonymous senior official said, "France and Germany have had intense consultations on this issue over the last months, at all levels. We need to move very cautiously, but the truth is that we need to establish exactly the list of those who do not want to be part of the club and those who simply cannot be part." The high level talks have moved from intellectual in nature to operational or technical. The French finance ministry denial should be regarded as confirmation. Opposition to the overhaul is certain, but the momentum of the destruction in progress will overrun such opposing forces. The EuroZone is a failed experiment, reminiscent of the forceable attempts by tyrants of the past. A breakup is inevitable, hopefully without war. Structural flaws were too great, worsened over the years, due to vast industrial incompatibilities, tax differences, technology disparity, education differences, work ethics inconguities, and more prevalent corruption in southern governments.

The German Supreme Court has ruled out a fiscal union, and with it credit expansion, unless German voters approve it. The Italian bond market blowout, the spread to Spain last week, the intransigency of various governments to cut spending, the impossible nature of fiscal reform without galloping economic recession, all these assure more crisis and less solution. Despite attempts, politics can no longer delay, since the bond markets refuse to permit such delays. The key remains Germany. An intact EuroZone means German taxpayers must continue bailing out foreign countries, foreign banks, and their own banks. Even the big German banks are in line to be wounded. If Germany were to leave, the debts to German banks will not be paid back in DeutschMarks but rather in deflated Euros, or worse, new Latin devaluated Euros. However, Germany exiting the EuroZone would be less disruptive than the corrosive inflation scenarios assured. Watch the Euro Central Bank and its favoritism shown France. The EuroCB is very likely to print money that bails out the French banks, a step urged by French President Sarkozy but vehemently opposed by the Germans. The story not told is how German leaders and bankers have given up on the French. They are to be cast aside.

Expect the contragion from Europe to grow and to disperse globally. The process has already begun, with more impact each week. The financial contagion cannot be contained. Check the intriguing interview with superstar Greg Weldon on Financial Sense. He puts forth the notion that 25 out of the 27 EU countries are in violation of their debt and deficit obligations as part of the European Union charter. He wonders aloud if the Euro will be the next debasement curre ncy. See the interview (CLICK HERE). For a nice tutorial with plenty of background on the complex European theater, see the Gonzalo Lira article (CLICK HERE).

◄$$$ A GOVT ACCOUNTABILITY OFFICE AUDIT REVEALED $16 TRILLION IN LOANS TO THE ELITE BANKERS, ALL DONE IN FULL SECRECY WITHOUT APPROVAL OF THE USCONGRESS. BE SURE THAT THE USDEPT TREASURY WAS WELL AWARE, THE OUTPOST RUN BY GOLDMAN SACHS. THE T.A.R.P. FUND WAS A MERE DISTRACTION FROM THE MAIN EVENT. SHOW THE ICING, HIDE THE CAKE.$$$

A new amendment to the Dodd-Frank Bill (aka FinReg Bill) forced the first audit ever by the GAO (Government Accountability Office). The added clause with teeth was due to work by Ron Paul, Alan Grayson, Jim DeMint, and Bernie Sanders. USFed Chairman Ben Bernanke, Alan Greenspan, and numerous high ranking bankers vehemently opposed the audit. The  culpable always object to sunlight. They distorted to the extreme both the financial market effect and the disruption to the power structure. The results of the first audit of the US Federal Reserve was completed in its 100 year history. The financial press did not cover the story. The results were posted on Senator Sander's webpage. The audit was startling. Zeros deserve to be shown. The central bank doled out $16,000,000,000,000 in secret loans to US banks, US corporations, and foreign banks. The recipients span the globe from France to Scotland, even Japan. Between December 2007 and June 2010, the USFed conducted hidden bailouts of many of the world's largest banks, corporations, and governments through their central banks. Officially, the center of the Western financial crime syndicate, the US Federal Reserve, refers to these secret bailouts as a comprehensive loan program. Quite the generosity though, since none of the money has been returned, all loaned out at 0% interest. The largesse to the elite and central bank stewards of the monetary system went without notification to the USCongress, while American public has been struggling to find jobs and keep their homes.

One must put the amount in perspective. The size of the USEconomy (its GDP) is $14.12 trillion. The entire national debt of the USGovt is $14.5 trillion. The annual budget actively debated in Congress is $3.5 trillion. There was no debate over $16 trillion in doled out loans to the elitist system titans and henchmen. The $800 billion TARP Fund as the visible portion to cover executive bonuses and preferred stock for the deeply damaged Wall Street banks. Regard this fund as a total distraction for the big pie, the $16 trillion. Be aware that at the time of the comprehensive loan program, the commodity and equity markets were being actively slammed. Hence, the beneficiaries to the gigantic loans were in a position to do some serious bargain shopping, if not carpetbagging. Details of the charitable elite benevolence will come out. But Citigroup received $2.5 trillion, Morgan Stanley received $2.04 trillion, and Goldman Sachs received $814 billion. The also-rans were Royal Bank of Scotland and Deutsche Bank, which together walked off with $1 trillion. My theory is simple. These big banks needed huge sums of money for two purposes, to cover their vast derivative losses from the September 2008 collapse, and to invest in the next chapter when assets were intentionally crushed in price. The harsh spotlight is on the USFed and other major banks. They continue the grip of power and holding court before the subservient press. See the Silver Bear Cafe article (CLICK HERE).

Really, what is the problem? Maybe the bankers really needed the money. Without generous executive compensation, they cannot attract the best talent. Without ample liquidity, the system's credit apparatus cannot function from seizure. Without coverage of derivative losses, the financial nuclear option would be triggered. Without a grand fix, our system of life and standard of living would deteriorate badly. Yada yada yada. Amazing that so many people believed the nonsense as rationale.

◄$$$ BANK OF AMERICA HAS ENGAGED IN PREDATORY ACTION AGAINST MF-GLOBAL VICTIMS. THE SNAKES ARE FEEDING OFF THEIR CLIENTS. IF NOT IN THE UNITED STATES, THE GANG OF BIG US-BANKS WOULD BE DECLARED AS CRIMINAL, PROSECUTED, AND LIQUIDATED, WITH EXECUTIVES GOING TO PRISON. $$$

The villains are graduating to predators against their neutralized victims. Bank of America is actively soliciting holders of claims against MF Global to buy them at distressed prices. The victims who have begun lawsuits against the busted firm have begun to field offers from the insolvent giant BOA, itself the most significant money laundering bank. The audacity is beyond description. Bear in mind that BOA is a debtor party operating with JPMorgan. Together they are attempting in court to weaken the claims of the other holders of debt, which certainly include clients whose assets were likely stolen. The thief in my view is JPMorgan itself. See the Cafe Americain article (CLICK HERE). A lawsuit has begun against the decision to form a board of creditors for review, due to blatant conflict of interest. Bring on the RICO law applications designed to carve up assets by criminal organizations. However, these gangs control the USGovt.

◄$$$ JOB CUTS BY THE BIG BROKEN BANKS CONTINUES APACE. WELL OVER 200 THOUSAND HAVE COME TO NEW YORK AND LONDON, THE CENTER OF THE GRAND INSOLVENCY AND SYNDICATE CONTROL CENTER. MORE JOB CUTS HAVE BEEN RECENTLY ANNOUNCED. $$$

The released bankers are having a difficult time finding new jobs. Welcome to the real world. A fresh new wave of job cuts is planned, following the over 200 thousand jobs that have vanished in the last three years. Ending bond fraud has that kind of effect, as does bust of housing and mortgage finance bubbles. The biggest announcement was by HSBC, which plans to cut up to 30,000 staff by year 2013. Following earnings reports on the dismal side, loaded with accounting gimmicks, the reality is major losses in pre-shenanigan profits for the big banks. The partly UKGovt-owned RBS bank has cut staff by 28,000 since the onset of the financial crisis. Lloyds has announced a further 15,000 job losses in June. UBS and Credit Suisse will each cut 2000 posts from their investment banking divisions. Bank of America will cut 3500 more posts. See the UK Telegraph article (CLICK HERE). They can always start up the ranks by being bagmen delivery boys or shakedown artists for the Mafia, a similar line of work.

◄$$$ THE CRUDE OIL COULD REACH $150 PER BARREL IF PERSIAN GULF TENSIONS ERUPT INTO ARMED CONFLICT. MY FORECAST IS FOR NO WAR, SINCE IT WOULD BE MUTUALLY DESTRUCTIVE. CHINA OFFERS A PROTECTIVE BLANKET ON THE GULF REGION. THE RISE OF CRUDE OIL PAST $100 PER BARREL INDICATES THAT DEFLATION THREATS ARE FADING, REPLACED BY A THREAT OF WAR. $$$

As preface, notice that the crude oil price has risen from $77 to above $100 despite the settlement of violent war in Libya. Their oil output is slowly ramping up. The motive for that war was to steal Qaddafi's $90 billion held vulnerably in US, London, and European banks. The money was badly needed by the captains on sinking structures. If regional tensions escalate in the Gulf, the crude oil price might surpass the $150 level again. War involving Iran could lead to supply disruption and a mad race to hedge against a systemic event. Among global supplies, about 30% of crude oil passes through the Straits of Hormuz. A wider war would interrupt such shipments, and lead to higher costs of insurance and shipping. My view has been steady and stubborn over the last seven years. Any attack on Iran for whatever reason, to squash their nuclear program or to punish them for Iraqi insurgence, would result in a flash retaliation that would flatten the nation conducting the attack, even if a US ally. No nation, however irrational or suffering from internal disorder, is bent on suicide. So far since 2004, the annual hubbub that comes every August has not resulted in any Iranian attacks. Smart people have been wrong for years on end. Maybe as an extension of the Arab Spring, some sort of attack on Iran will come. But the Jackass doubts it, since too commonly discussed. The indicator that is most troubling is the surge in crude oil price above the $100 level. It could mean that substantial hedging has been put on against the USDollar and Euro, two major currencies in dire straits fundamentally with budget deficits and insolvent banking system woes. But the rising oil price could instead be a preliminary signal of massive bets in favor of a wider war in the Gulf region. See the Guld News article (CLICK HERE).

◄$$$ SINOPEC PLANS TO ACQUIRE A SIZEABLE STAKE IN A BRAZILIAN ENERGY FIRM. THE VAST PROJECTS OFFSHORE BRAZIL ARE A MASSIVE TARGET ZONE, WHICH WILL BE DEVELOPED FOR A FULL GENERATION, LIKE 30 YEARS OR MORE. DESPITE STRAINED RECENT RELATIONS WITH BRAZIL, A DEAL WAS STRUCK. $$$

Sinopec agreed to pay $3.54 billion for a 30% stake in the Galp Energia unit in Brazil. The price tag was a little lower than expected, but the deal is huge. Asia's largest refiner China Petrochemical took the major stake in Galp Energia Brazilian unit in the nation's largest overseas acquisition this year. Chinese energy companies have bid at least $16 billion for overseas oil & gas companies and deposits in 2011, to expand its reserves and supply line. The Galp subsidiary has an important claim to the Santos Basin discovery offshore Brazil, one of the two biggest discoveries in the western hemisphere since 1976. Galp is a Portuguese firm listed in the Lisbon exchange, the nation's largest oil firm. Some controversy arose from the valuation of the deal. The entire Brazilian business owned by Galp had been valued at $15.7 billion. Contrast that figure to the $12.5 billion enterprise value for Galp inferred to its unit after the deal. Galp has stakes in four offshore blocks in Santos Basin of Brazil, including a 10% share in Lula, formerly known as Tumi. It stands as the largest crude discovery in the Americas since the Cantarell field of Mexico in 1976. Lula contains an estimated 6.5 billion barrels of recoverable oil and equivalents. Galp boasted its legitimacy as a major player in offshore Brazil oil, ensuring development of the company assets.

China inked a deal just one month ago. China Investment Corp invested EUR 2.3 billion (=US$3.1 bn) in a subsidiary of GDF Suez, related to oil & gas production and exploration. Sinopec Group also paid $7.1 billion for a stake in the Brazilian unit of Repsol YPF last year. Repsol is a Spanish oil giant. China has a string of deals in recent years. Sinopec bought Addax Petroleum Corp for CAN$8.3 billion in 2009 to gain reserves in Kurdistan (disputed province of Iraq) and West Africa. Sinopec might submit a bid for a stake in the Angolan operations of Marathon Oil. Deepwater exploration by a few multi-national giants off the Angolan coast have made the country the second biggest African oil producer after Nigeria. See the Bloomberg article (CLICK HERE).

◄$$$ FUTURE VISION BY A SAVVY VETERAN. THE BOYZ ARE FAST LOSING CONTROL. SIGNIFICANT BULLION METAL IS MOVING OUT OF THEIR CONTROL. THEIR ARROGANCE IS EXCEEDED ONLY BY THEIR CRIMINAL ACTIVITY AND FADING POWER. $$$

Much gratitude is directed to a veteran gold trader with strong ties in Central Europe. He shared his views in a general sense after hearing hot air by Jim Rickards. The all too much revered Rickards is brilliant when discussing finance, banking, and economics. But he is a shill deceptive insider artisan when describing the gold bullion situation for central banks. He served as legal advisor for Long-Term Capital Mgmt over a decade ago, when the fiasco resulted in the complete loss of gold bullion for Bank of Italy, the central bank. He has been a total liar about the USGovt gold reserves since then. Everything he discusses on central bank gold is full of deception with an agenda at work. My source countered.

The veteran gold trader said, "It appears, at least from where I am sitting, that many of these discussions on the internet like the Rickards interview are a lot of hot air. These people have partial information as they shovel nonsense into whatever microphone that they can get access to. We all agree that the information on precious metals (Au and Ag) is incorrect. Germany fully recovered their gold held in New York several years ago, I can assure you, all kept quiet. Only a fool would disclose the actual location of the national treasure. The real issue is water and food. Precious metals are just an important cornerstone in a commodity backed monetary system that will have to emerge. The system that will replace the fiat monetary fraud game will be barter. The new barter system will utilize 21st century technology to trade and settle. Basically this is back to basics by utilizing the most advanced technologies. All these people out there on the internet think, talk, and behave according to the old system. They analyze and talk about a dead horse, while standing on a collapsing stage. On a side note, the people with real metal holdings are moving their physical inventories to vaults they have access to and that are managed by people who are totally independent.

The MF Global incident has hastened the removal of metal from many popular vault systems. The destination vaults are in jurisdictions where there is no political risk of having those assets blocked or frozen, available for movement at the beneficial owner's will. The BOYZ have long lost control. They have caused a grand reaction that has vastly reduced the bullion metal in the US and London vaults under their control. That is nature's vengeance. Their phone calls are not being returned any longer. They are being shunned and isolated. They are all Papandreous and Berlusconis. They are tigers without power, speaking with oversized mouths. Notice that the power lies increasingly in Asia, where few if any arrogant loud-mouths can be heard or seen." He should know about details on the new barter system to replace large segments of global trade, since he is integrally involved. He should also know that the US$-based trade settlement system is to be scrapped soon, since he is on a team of several persons in charge of the USDollar Kill Switch. My guess was that it was related to the crude oil payment mechanisms, which he confirmed as correct. Think crude oil sales in more than one currency. He also assured that Venezuela has fully recovered its gold held in London, another false dangling story that serves a purpose. He knows some men who retrieved it, another story full of intrigue told later.

◄$$$ THE US-BASED PRODUCER PRICE INDEX IS CORRUPTED IN OBVIOUS WAYS. THE DISTORTIONS CONTINUE ON ALL INFLATION MEASURES. $$$

Take a simple approach. From early October to mid-November, crude oil has risen from $75 to $98, while the PPI energy component put out by the clownish USGovt officials is highly negative. Even the commentators find it hard to report the Producer Price Index without raising eyebrows, even questions of doubt. The distortion is overwhelming. The official PPI for October was listed as minus 0.3%, down from the plus 0.8% in September. No credibility whatsoever can be given to the PPI energy component, reported as negative last month, an utter falsehood. The gimmicks are visible in the open to the dullest observer.

COMEX DESTRUCTION IN SLOW MOTION

◄$$$ WITNESS THE END OF THE C.O.M.E.X. AS THE ONLY GUARANTEED OUTCOME. IT WILL TAKE TIME. EXTREME EVENTS ARE DUE. DESPITE HOW THE EXCHANGE WILL TRANSFORM INTO A CASH & CARRY MARKET WITHOUT MARGIN OR LEVERAGE, THE DIVERGENCE MUST COME FIRST. THE PAPER PRICES WILL DIVERGE FROM THE TRUE PHYSICAL MARKETS UNTIL THE ENTIRE EXCHANGE IS DISCREDITED AND SHUTS DOWN. THEN COME THE LAWSUITS. $$$

People often regard the Jackass as crazy, until the next breakdown occurs and the past wild forecast seems obvious. The Jackass has long claimed that at least for precious metals market, the COMEX would eventually be discredited and shut down after an extreme divergence took place. The Gold & Silver prices would fall on the paper side, rise on the physical side, and finally the COMEX would shut down, empty of inventory, a carnival of corruption exposed. That day is coming. The details are always extremely difficult to predict. MF Global is the seminal event toward the inevitable COMEX end. Its reign of financial terror has limited days remaining. Attacks against it will feature lawsuits, brokerage house departures, charges of raided inventory, and discontinued inflow of client funds. Suspicions are ripe for criminality. Regulatory reaction is overdue, possibly to come from a corner of the USCongress, probably from a prominent agricultural state like Iowa or Nebraska or Illinois. To be sure, the end of the COMEX is near. The financial press is missing this story. This is Madoff times 100 applied to an important structure to American finance and business. This is AIG times 100 applied to risk management. Count the days. The thermometer for its destruction will be evident in a divergence forecasted by the Jackass for a few years. Watch the Gold & Silver paper prices descend from the corrupt futures arena, while the physical prices rise powerfully. The confirmation will be seen as inverted curves, called backwardized. The spot prices will dominate reality. The COMEX will become a game unto the thieves, marketing without product, stealing anything not nailed down, like MF Global cash accounts. The harsh spotlight will eventually be clear, even if the light is provided by torches.

◄$$$ UNDELIVERED GOLD & SILVER ORDERS TESTIFY TO A TOTALLY BROKEN AND CORRUPTED RUPTURED FUTURES CONTRACT MARKET. IT SHOULD BE SHUT DOWN AND TRANSFORMED INTO A CASH & CARRY MARKET. THE MF-GLOBAL RAMIFICATIONS ARE ABSOLUTELY ENORMOUS. WITNESS THE END OF THE C.O.M.E.X. AND THE L.B.M.A. IN A MATTER OF TIME. IT IS HARD TO PUT INTO WORDS THE  BROKENNESS AND CORRUPTION OF THE FUTURES EXCHANGES. THEY ARE BLEEDING ON STAGE IN FULL VIEW WITHOUT PROPER PRESS REPORTING. THE REACTION UNDENIABLE IS THE ABANDONMENT BY HONEST BROKERS, A PROCESS BEGUN. $$$

The CME has advised that 1.42 million ounces of registered COMEX silver inventory is unavailable for delivery due to MF Global bankruptcy, as well as 16,645 registered ounces of gold also unavailable for delivery. Keep in mind that these are under contract, and no Force Majeure has been invoked. That is a lot of bullion in breach of contract. The lawyers will be lined up very quickly to carve the metals exchanges into pieces. The COMEX is totally broken, unable to honor basic contracts, unable to deliver from committed legal contracts. The cash accounts are frozen, and being pilfered. The ransacking continues while delivery is obstructed. As JPMorgan and the authorized thieves continue to loot the 150,000 accounts held by MF Global, countless stories are coming to the surface. The Silver Doctors report that inventories at the London Metal Exchange are being liquidated. Not coincidentally, MFG had a big involvement in the London trading pits. One should be aware that a significant landmark event has occurred. A climax of theft is in progress, like a black hole vacuum. My view is that the COMEX and LBMA are both in the process of erupting in a climax event of corruption and ruin. The almost humorous part of the story is that many analysts and harsh critics find themselves victims, like Gerald Celente. He should still be admired for his courage, even if he trusted a system he viciously critized with his money. The Jackass would not touch the COMEX with a ten foot pole, for fear of corrupted outcomes, the least of which would be loss from naked shorting, the worst would be loss from basic theft. See the Silver Doctors article (CLICK HERE).

◄$$$ TED BUTLER DECLARES THE FUTURES EXCHANGE MARKET IS AN UNMITIGATED DISASTER. EVERY PHASE OF THE CHICAGO MERCANTILE EXCHANGE AND ITS C.O.M.E.X. ADOPTED CHILD IS CORRUPT. CLIENT ACCOUNTS REMAIN IN LIMBO, SUBJECT TO MORE THEFT, BUT WITH SOME POSSIBLE DEGREE OF JUSTICE. THE PRECIOUS METALS MARKET IS POISED FOR A GRANDIOSE RISE, AFTER PERHAPS A FINAL DAY IN THE PROFITABLE ILLICIT DARK SIDE BEFORE THE SUN SHINES. $$$

An unmitigated disaster is in progress. The following are comprehensive thoughts by Ted Butler, the irrepressible indefatigable precious metals analyst. He is a true veteran. Any criticism of his idealism and frequent forecasts for incredible price breakout releases must be forgiven. His analysis is always solid, even if his forecasts are consistently lofty. Here is a stream of his thoughts. The significance of truly historic events is often not fully appreciated at the time they occur. The bankruptcy of MF Global is such an event. Its disaster comes on many levels, certain to result in changes in the commodities market, maybe its regulatory structure. For the first time in modern history, the main guarantee of the clearinghouse system has completely failed its most important constituent, protection of the customer base and its segregated accounts. They were violated and openly commingled. One should always stress that fund commingling is a serious criminal offense. So watch for prosecution, or lack thereof to boldly proclaim such illegal practices are permitted. The sacred nature of segregated accounts is the very glue that holds the futures market together. No longer is the US futures market regarded as having integrity. Almost all MF Global commodity customers are in limbo, accounts frozen, probably stolen. Promises of 65% redemption have surfaced. With a shuttered bank, the accounts are at least insured by the FDIC. Not here. The Butler accusations of the CME being a criminal enterprise are actually understated. The CME Group was the front line regulator for MF Global, responsible for auditing and insuring the customer funds, their guarantor. The Chicago Mercantile Exchange failed at every turn and permitted the account theft, even after learning of the vulnerability of the missing funds. The audacity of CME is amplified by its website boasts that between $8 billion to $100 billion in protection is available in the event of a clearing member failure. They lied. They failed. They are criminals in league with JPMorgan.

The entire futures market clearing system has been destroyed, as trust is gone. What makes the situation worse is the lack of comprehension by the financial press in recognizing the gravity of the profound damage and consequences. The bankruptcy trustee has snatched up full control of assets, like cash, unencumbered assets, registered warehouse receipts for silver, gold bars, and other commodities. They are lost in the legal bankruptcy system, subject to further theft, blamed on the chaos. Some quick action is required, starting with stripping the CME Group any regulatory powers that remain. A clear conflict of interest has plagued the futures market, in having a for-profit entity set its own rules and regulations. Contempt for its own member customers is shown. Among the victims are farmers and airlines that must hedge their risk. No longer can the CME stand before the USCongress and argue the legitimacy of being a self-regulatory organization. It failed before the world in grand style. Let's see first if MF Global clients are given swift remedy, and secondly made whole. The Jackass expects neither, as cynicism has proven a very consistent reliable forecast tool whenever Wall Street is concerned. They have a near perfect track record of criminal fraud since the Robert Rubin era began, with impunity. The delays enable more complete theft.

The appearance of the big US banks on the creditor boards ensures more complete theft. One should assume that the longstanding investigation into the silver market will be terminated, for reasons of diversion or distraction, by bigger issues. For the last three years, the CME has owned the COMEX and hidden behind the CFTC curtains. Witness the destruction of the US-based futures market. For years, we did not know how or when the end would come, but what has unfolded so far seems like on the irretrievable path to shutdown. Butler closes by saying, "I am purposely confining my comments to the emergency at hand. There is no change in the silver outlook. It is still a crooked market destined to go much higher in the long run. The sooner the CFTC cracks down on the CME and then addresses the silver manipulation, the sooner those higher prices will come." My belief is that a foreign based assault is being planned. When an enemy is wounded, the time has come for a well organized, well planned, well funded, calculated attack that kills the beast. The US banksters have made countless enemies over the years, have defrauded countless victims, have dispersed thousands of phony gold bars to foreign locations, and have rigged the system for consistent illicit profits at the expense of countless aggrieved parties. The vengeance is coming swiftly, like a bonzai attack at dawn. The timing is unclear. More rational thought goes behind this expectation than hope. My deep desire is for justice against indescribable whtie collar crimes.

◄$$$ MF-GLOBAL FALLOUT WILL BE DEEP AND FAR REACHING. SOME MAJOR FUTURES BROKERS WILL EITHER FOLD OR QUIT. THE PROCESS HAS ALREADY BEGUN WITH BARNHARDT CAPITAL MGMT. THE C.O.M.E.X. IS IN THE PROCESS OF LOSING THE TRUST OF ITS OWN CLIENTS. THE COMMINGLING AND THEFT OF CLIENT ACCOUNTS HAS TREMENDOUS CONSEQUENCES. THE C.O.M.E.X. WILL EVENTUALLY BECOME A CASH & CARRY STORE. THEN LATER SHUT DOWN AND PROSECUTED FOR BROAD CRIMINAL ACTIVITY. THE RISK MANAGEMENT BUSINESS IS LEFT VULNERABLE. $$$

A message has been shouted from the hilltop that the entire system has been utterly destroyed by the MF Global collapse. The issue is trust, and security of account funds. Violations have ruined the sacred bond required of market investors. The first notable casualty is Barnhardt Capital Mgmt, which has ceased operations. Its head made a public statement of shutting down operations and offices, complete with reasons. Ann Barnhardt stated, "After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator. The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets, because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy. The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible, so that they have the best chance of protecting themselves and their equity. The system is no longer functioning with integrity and is suicidally risk-laden. The rule of law is non-existent, instead replaced with godless criminal political cronyism." She went on to make a bold statement that the firm would not re-open until the USGovt leaders are replaced, the system sufficiently reformed with adherence to and enforcement of the rule of law. See the Zero Hedge article (CLICK HERE).

This investment firm shutdown action is certain to be followed by numerous other firms. Thousands of account holders will close out and demand return of their funds before they are stolen, actually what is left of their funds. The Jackass believes a similar incident like MF Global will occur soon with mutual funds and stock brokerage accounts, then later a bigger incident with bank savings accounts and certificates. My warnings have sounded lunatic for a few years, but no longer. Private accounts will be stolen as much as possible by the Syndicate that has wrested control of the USGovt from the financial center grappling hooks. Witness a gradual methodical grinding climax in the death event being played out slowly. The COMEX is ruined. It will gradually transform into a theft arena, a killing field that victimizes the most trusting and the least aware. Many months from now, lawsuits will pile up until the COMEX is just a Cash & Carry market. The farmers and airlines and legitimate banks (selling mortgage products) need a utility for hedging risk, not a casino attached to USGovt corrupt appendages given license to pilfer. That is what we see today.

◄$$$ AN ADVERSE EFFECT FROM THE CME/MF-GLOBAL SHUTDOWN AND CLIENT THEFT MIGHT BE A DISRUPTION TO THE FOOD SUPPLY CHAIN AT THE WHOLESALE LEVEL. WORSE, THE ENTIRE SUPPLY CHAIN MIGHT BE DISRUPTED IF RISK MANAGEMENT CANNOT BE PROPERLY INTEGRATED INTO THE BUSINESSES. REFER TO AIRLINES AND BANKS. $$$

The MF Global bankruptcy will have important repercussions for the grain markets and probably much more. The financial markets are all tied together. Recall the MF Global kill shot was done in the European sovereign debt market, with damage extending to the entire futures brokerage and trade clearing firm. At the Chicago Board of Trade, between 30% and 40% of all the traders used to clear the transactions through MF Global. Also, 33 trading firms used to clear through MF Global. And the majority of activity at the Kansas City Board of Trade also used to clear through MF Global. Market analyst Arlan Suderman from Farm Progress believes the seventh largest bankruptcy filing in US history will continue to impact grain markets. He said, "So [grains accounts] were essentially locked out of trading. They had positions on that were vulnerable because the market kept moving. They were unable to get out of their positions until they were able to get their accounts transferred to other brokerage firms. So when you have a lack of those trading firms and traders involved in the market, you have a sharp drop in trade volume that can create some very erratic trade and creates a lot of uncertainty. This was the first casualty of the European sovereign debt crisis. There will be other casualties. They may not affect the grain market as directly as what MF Global's fall did, but they will have a similar impact on market psychology and the confidence of the market." Blame should not be directed simply at the European sovereign debt crisis, but also the global financial crisis that has its basis and roots in New York and London. The roots extend to the housing bust, the mortgage finance bust, even to the removal of signicant industry to China. The entire globalization experiment is a grand wooden shoe tossed into the Western economies and their financial apparatus.

Fanning out with damage to investments, business accounts, essential hedged risk, and basic speculation is grand uncertainty about the integrity of the trade system and safety of private funds. That uncertainty creates volatility in both the futures markets and the local cash prices at regional grain elevators. The farmer's market has been jolted by an interruption that requires account transfers. Furthermore, those accounts are not secure. Some private accounts have been stolen or frozen, which in my view means in the process of being stolen under the collusive eye of regulators. If grain suppliers and grains buyers cannot have their trades properly cleared like with defunct MF Global, the result will be to handcuff that buyer in his ability to be competitive in the cash market, and to freeze the action of the supplier who cannot manage the risk. What is happening with the grains market will extend to the bean market, the meats market, then to the energy market. Integrity thoughout the American system of finance is being torpedoed, and predictably so. The Fascist Business Model bears bitter and rancid fruit. Permission of fraud is the rotten core.

The businesses all must be able to manage the risk of fluctuating fuel costs. Next the events will extend to the airlines and banking sector, the legitimate portion that sells honest mortgage products. They must manage the risk of fluctuating fuel costs and interest rates. The entire supply chain is at risk, especially if the MF Global rupture and theft is repeated with other brokerage and clearing firms. If more asset management firms like Barnhardt shut down, the sheer ability to manage risk and to even trade in basic terms will be interrupted. For such disruption and disorder to take root, the entire supply chain is at risk. Empty shelves will soon be seen, which has been a Jackass forecast for over two years. It is finally coming to pass. See the Farm Progress article (CLICK HERE). Keep in mind that banks are part of the supply chain too. The effect has already been felt in isolated pockets, where bank ATM machines have not reliably dispensed cash. The banking industry suffered intermediate supply problems three years ago with commercial paper and inter-bank lending. Those problems have been overcome, are not?

EUROPEAN BANKS TOPPLING

◄$$$ EUROPEAN BANKS ARE DUMPING SOVEREIGN BONDS, HAMPERING THE ALREADY STRAINED MARKET. THEY ARE FORCED TO COMPLY WITH TOUGHER NEWLY ENFORCED RESERVES REQUIREMENTS. THEY ARE FIGHTING TO SURVIVE, BUT EXPOSING THE GOVT BONDS AS JUNK. THE PRIVATE BANKS MUST BE DISENTANGLED FROM SOVEREIGN BOND INFECTION. THE EURO CENTRAL BANK WILL SOON BECOME THE MAJOR HOLDER OF SUCH TOXIC BONDS. THE BOND YIELDS ARE RISING. WATCH ITALY WITH FOCUS. $$$

European banks are selling sovereign bonds in heavy volume, thus worsening the debt crisis. The French giant BNP Paribas and German giant Commerzbank are dumping sovereign bonds at a loss, as the flight out of government debt continues. BNP Paribas took a loss of EUR 812 million (=US$1.1 bn) in the past four months as it reduced European sovereign debt assets. By contrast, Commerzbank took losses as it cut holdings of Greek, Irish, Italian, Portuguese, and Spanish bonds by 22%, down to EUR 13 billion on the balance sheet this year. The British giant Barclays cut sovereign debt holdings of Spain, Italy, Portugal, Ireland, and Greece by 31% in the last three months. The biggest British giant Royal Bank of Scotland reduced central and local government debt of the PIIGS nations to GBP 1.1 billion (=US$1.8 bn) from GBP 4.6 billion at 2010 yearend. European bank lending to the Irish, Portuguese, and Spanish public sectors also fell, according to the Bank for Intl Settlements. That means government debt securities.

Banks are being pushed by regulators to maintain higher reserves so as to manage possible losses. But the policy is forcing big losses, perhaps the sinister plan. The European Banking Authority has required lenders to boost capital by EUR 106 billion after marking their government debt to market values on balance sheets. Credit extended will fall and borrowing costs will rise, thus dragging down the EU Economy. Otto Dichtl is a credit analyst at Knight Capital Europe in London. He said, "European regulators and leaders are shooting themselves in the foot because a big investor group for sovereign bonds has been taken out of the market. The downward spiral will continue until policy makers find a back-up solution for the sovereigns." The process of unwinding the grotesque leverage will continue to be painful, assuring a strong recession. It will also cause a bank failure in my view. They are shooting themselves in the chest, not the foot. Financial firms can reduce risk through asset writedowns, direct sales, and hedge purchases, as well as by permitting bonds to mature.

The region's biggest financial firms must achieve a core Tier 1 ratio of 9% by the middle of 2012 after marking their sovereign holdings to market, an exercise omitted during bank stress tests in July. The tests were thus a farce just like in the US. Most major European sovereign debt was considered risk-free in the past. The recapitalization of European banks is also turning out to be a major dampening process. Forcing the banks to boost capital based on sovereign markdowns will cause a number of serious problems. Losses finally stated on Greek debt have hurt Q3 earnings notably and justiably, as reality has entered. Commerzbank Chief Financial Officer Eric Strutz blamed regulators for worsening the situation by including mark-to-market rules in the stress tests, effectively encouraging banks to sell sovereign bonds. Ironically, the regulators move in a direction that creates more supply in the market. The risk is for fire sales of sovereign debt, and pushing the bond market into the Euro Central Bank. The European bank bailout rescue fund has been revealed on stage as being grossly inadequate by a factor of three to five. The rescue fund is ill-equipped to make sizeable purchases on the secondary market. Of EUR 355 billion in outstanding Greek debt, about EUR 127 billion is held by the European Union, the Intl Monetary Fund, and the ECB, while about EUR 90 billion is held by private European banks, led by Greek lenders. About EUR 80 billion is held by foreign non-banks such as hedge funds and insurers. The current challenge is to disentangle the link between banks and sovereigns. Data is scarce, making estimates difficult, according to economic analysts at Open Europe. Some Greek government bonds may be bought by hedge funds or private equity, while Italian debt is still being purchased by asset managers and pension funds. Big gaps have been created by the absence of private domestic banks in countries such as Greece and Ireland, which filled the demand gap when foreign demand for slipped. See the Bloomberg article (CLICK HERE).

◄$$$ OLD REAL ESTATE DEBTS DRAG DOWN EUROPEAN BANKS, JUST LIKE IN THE UNITED STATES. BUT THEIR SOVEREIGN DEBT ASSETS DOUBLE THE DAMAGE AND ASSURE MASSIVE WRECKAGE. THE COUNTER-PARTY GUARANTOR RISK FURTHER AMPLIFIES RISK, ESPECIALLY TO DEUTSCHE BANK, WHICH IS DEAD MEAT ON A HOOK. EXPECT 20 LEHMANS TO APPEAR IN EUROPE, AND 5 MORE IN THE UNITED STATES. NO BAILOUTS CAN SAVE THE AFFECTED BANKS. THE ENTIRE SYSTEM IS COLLAPSING. AT THE HEART OF THE VULNERABILITY IS THE FRACTIONAL BANKING SYSTEM ITSELF. INSOLVENCY ARRIVES QUICKLY AND ONLY WORSENS UNTIL A RUN OCCURS. THEN COMES THE FAILURE. $$$

With eyes focused on Greece and Italy, the PIIGS country sovereign debt is not the only banking system threat on the immediate horizon. The largest European banks have held onto a mountain of toxic paper from the housing bubble. They have resisted any and all markdowns. They are vulnerable to the utmost degree as the sovereign debt losses have begun to be recorded on balance sheets. European banks large and midsized are sitting on exotic mortgage products and other risky assets that predate the financial crisis. Pressure is multiplied on lenders that also are holding large quantities of EuroZone sovereign debt. The infamous toxic Collateralized Debt Obligations and other leveraged assets never went away, and were even avidly gobbled by European banks. They still own tens of billions of Euros of such toxic assets, most of which are totally worthless, due to inherent leverage. They also have substantial portfolios of US commercial real estate loans and subprime mortgages. Many have lost half their value, or like subprimes almost all their value. While US banks dispatched truckloads of toxic property assets to the USFed window, the Euro banks have sat on such ruined debt, since the Euro Central Bank has been busy buying up toxic sovereign debt from Portugal, Italy, Ireland, Greece, and Spain, the PIIGS pen.

Consider the biggest 16 European banks. They are holding a total of about EUR 386 billion (=US$532 bn) of deeply impaired credit market and real estate assets, according to a recent Credit Suisse report. The European banks are leveraged with a 26:1 ratio. The norm is more like 10:1 whereas the Americans boast of a 15:1 ratio. Given the toxic self-valued assets, the US ratio is actually closer to the European ratio. The volume exceeds the entire EUR 339 billion they held at December 2010 of PIIGS government debt combined from those five beseiged nations, as reported by the charade stress test conducted last year. The EU Economy falters and goes into a deeper recession, assuring that several hundred EUR billion more in commercial and consumer loans will fall victim to heavy loss in those same countries. The big banks passed the stress tests, and are now prepared to die. How predictable! The charade was to promote investor confidence and to prevent bank runs, nothing more. The same farce occurred in the United States. Banks in the United Kingdom, France, and Germany hold the lion's share of such wrecked assets, even after reducing their exposures. The four biggest British banks reduced their holdings by more than half since 2007. The four French banks trimmed their exposure by less than 30%. Thus the higher attention given to France, as the PIIGS pen credit provider.

Barclays owns about GBP 17.9 billion as of September 30th in toxic assets that include Collateralized Debt Obligations, composed of securities backed by assets like mortgages, commercial real-estate loans, and leveraged loans that helped finance corporate buyout deals. They are all totally worthless, yet carried on the books with some claimed fictional value. Credit Agricole owns EUR 28 billion, the biggest portfolio of such assets among the French banks, according to Credit Suisse. Their June 30th financial report claimed EUR 8.6 billion of CDOs backed by US residential mortgages. Call them worthless. In addition, Credit Agricole owns over EUR 1 billion of US mortgage backed securities, some subprime loans among them. Call these badly impaired, or possibly worthless. Also affected harmfully is Deutsche Bank, which is holding EUR 2.9 billion in US residential mortgage assets, including subprime loans. It has another EUR 20.2 billion in commercial mortgages. An intriguing report by Mediobanca estimated that D-Bank's exposure to such assets amounts to more than 150% of its tangible equity. That indicates deep insolvency. Mediobanca actually said that everyone who understands these markets knows that Deutsche Bank is either delusional or dishonest, since they bear the bulk of counter-party risk. My best German banker source has harped for over two years that Deutsche Bank is insolvent, busted, and in ruins. D-Bank has been identified as a major CDSwap guarantor. It is not only vulnerable to credit losses, but to the debt insurance losses. D-Bank is toast awaiting a plate to be served. Imagine a dead entity parading as a guarantor of debt default insurance. See the Dollar Collapse article (CLICK HERE).

◄$$$ FRANCE INTRODUCED AUSTERITY, A SUREFIRE TIME BOMB FOR THE BIG BANKS THAT TEETER IN PARIS. ITS BANKS BEAR THE LARGEST LOAD FOR ITALIAN GOVT DEBT, MORE THAN DOUBLE THE GERMAN LOAD AND ALMOST HALF THE ENTIRE EUROPEAN LOAD. FRANCE IS TIED WITH THE LETHAL UMBILICAL CORD FROM ITALY. $$$

France has unveiled the toughest austerity measures in 60 years. The officials have committed to reduce the national deficit by another EUR 65 billion, to a total of EUR 112 billion, in a desperate attempt to save its AAA rating. Its banking system ruin is assured, as a collapse is coming. They wish to ward off a bond market attack that sends its bond yield higher, like Italy. The elements of a poison pill are clear, as measures include a 5% super-tax on big companies and a hike in the VAT tax on restaurants and construction, as well as cuts on pensions, schools, health, and welfare. An uncharacteristic bit of wisdom came from Danny Blanchflower, the former UK bank authority. He said, "It is like the 1930s: imposing austerity on countries already in recession is the way into a death spiral." The recession in France will grow much worse, and the deficit will grow also, thus confounding the economic morons who guide the ship of state. A recent slew of grim data has come from Europe, confirming that the region is on the early stage of renewed recession. Deficits would be bad, but with austerity measures imposed, deficits will be much worse, as no escape is offered. The policy pushes the big banks to the brink. French Govt financial officials wish to avoid a situation where foreigners dictate terms of spending, bank liquidations, and asset seizures. OK, so the failures will be managed internally as a result of dictated policy. The national goal is to reduce the deficit to the target of 4.5% of GDP next year, from the current 5.7% this year. They believe the spending cut plan will insulate the nation from the unfolding disaster in Italy. It will accomplish nothing, much like not feeding firemen who work to contain a fire.

If the regional recession does not pull France down, its banks will. In fact, the economy and banks will pull each other down. The banks will lose all vigor as credit engines, since they will succumb to horrendous Italian exposure. Notice the French banks have three times as much debt with Italian companies, versus Italian Govt debt. As the Italian Economy slides rapidly into recession, a considerable portion of the nearly $400 billion in total debt exposure will go rotten. One can see that Italy is Greece times seven, but France is tied by Italian rope around its neck. German banks are also on the hook for Italian sour grapes, but less than half the total. Some details on exposure to Italy, but the data is a few weeks old. From the Italian bank sector, Intesa SanPaolo has EUR 64 billion and Unicredit has EUR 39 billion. From France, PNB Paribas has EUR 12 billion and Credit Agricole has EUR 8 billion The Belgium bank Dexia has EUR 13 billion, and the German bank Commerzbank has EUR 9 billion. See the UK Telegraph article (CLICK HERE).

◄$$$ A RUN ON ITALIAN BANKS IS EXTREMELY LIKELY. IT WILL SPLIT THE EUROPEAN MONETARY UNION WIDE OPEN, AND LEAD TO AN EVENT IN FRANCE, WHERE THE FRACTURE WILL BE DEVASTATING AND FINAL. THE KEYS ARE DECLINING DEPOSITS, HEAVY DEPENDENCE UPON THE EURO CENTRAL BANK, AND RISING BOND YIELD SPREADS VERSUS THE GERMAN BUND. $$$

Greece has lost 25% of its deposits in financial institutions, the pace for which is accelerating. They are down to EUR 110 billion. Irish financial institution accounts hold only EUR 350 billion, down 32% since 2009. The same effect of shrinking deposits has begun to happen in Italy. One of the main leading indicators of a national bank run is the increasing reliance of its banking system upon the EuroCB for refinancing facilities. The share of ECB loans to the Italian system used to be under 4% during 2008 and 2009, but that share had risen sharply to 13.7% by late summer. Since July, the share of ECB refinancing attributable to Italian banks rose to a historically high level of 18.8% at the end of October. The pace is alarming. In August, Italy drew EUR 85 billion from the ECB, a further EUR 105 billion in September, and another EUR 111 billion in October 2011. Take a different measure. As a proportion of total national banking system assets, countries such as Greece and Ireland are far more reliant, but the proption for Italy is going up rapidly. See the CityWire article (CLICK HERE). What assures the run on banks, the balloon in deficits, is the economic recession that has strong momentum.

John Raymond at CreditSights in London shared views on the bank run threat. The Italian private banks are being squeezed badly, damaged from all sides of their balance sheets, both commercial, consumer, and now sovereign. He said, "This is all symptomatic of what is going on around the banks. Everything hinges on the sovereign." The Italian Govt austerity program, which includes hefty cuts to health care, pensions, and regional subsidies, add to the recession risk. Consider one big bank. Intesa Sanpaolo reported its intention to increase ECB-eligible assets to EUR 100 billion from the current EUR 83 billion. Italian banks by and large do not have access markets to the bond markets, isolated and trapped. Suki Mann from Societe Generale in London said, "Italian banks have been crushed in the carnage in the government bond market. It could get worse." Think fractional practices and 10x to 20x multiples on the impact to their lending capital. They will call in loans and accelerate the implosion. See the Business Week article (CLICK HERE).

◄$$$ THE SPANISH BANKS ARE BADLY CRIPPLED, BUT IN FULL VIEW. LIKE US-BANKS, THEY ARE STUCK WITH UNSELLABLE PROPERTY, AS HALF OF THE LOANS ARE IN DISTRESS. THEIR BOND MARKET IS REALIZING THAT NO SOLUTION EXISTS FOR SPAIN'S MASSIVE STRUCTURAL PROBLEMS, JUST LIKE ITALY. IN FACT, SPAIN HAS MORE DEBT THAN ITALY, AND MORE IMPAIRED CREDIT ASSETS RELATED TO THEIR HOUSING BUST. $$$

The doomed fate of both Spain and Italy has been a regular forecasted topic in the Hat Trick Letter since 2008. The climax is nigh. Spanish banks hold at least EUR 30 billion (=US$41 bn) of real estate that cannot sell, according to a risk adviser to Banco Santander and five other lenders. The banks are under pressure to comply with tighter bank reserve requirements, and must cut property backed debt. Spanish lenders hold EUR 308 billion of real estate loans, about half in distress, according to their own central bank. Land in some parts of Spain goes without bid. The practice of mark to market for banks is rare, as they operate in a fairy tale world that is fast being kicked aside. Proper accounting would force the majority of Spanish banks to generate more capital. A wave of debilitating defaults in subordinate RMBS bonds is coming. The Spanish residential mortgage market is in shambles. In far too many cases, inadequate collateral from vast tranches of properties has crippled the ability to service mortgage bonds from required cash flows. The mortgage bonds are basically non-performing. Defaults are coming in a big way. Not Italy, but Spain soon will become the Eurozone's weaker link. Italy has had nowhere near the insane housing and property speculation as in Spain. Borrowing costs are rising extremely fast in Spain, as seen with their Govt Bond yield moving toward the 7% level. The consultancy McKinsey makes some startling conclusions. If you add together all debts (government debts, corporate debts, financial institution debts, and household debts) internal to Spain, then the nation can be seen as much more indebted or leveraged than Italy. In general Spanish businesses geared up, or took on huge amounts of additional debt, especially those in the property and utility sectors. See the Bloomberg article (CLICK HERE), the Reuters article (CLICK HERE), and the BBC article (CLICK HERE). Thanks to Michael Shedlock for laying out the Spanish bank and finance risk story.

◄$$$ THE DEXIA EXPOSURE TO GREECE AND ITALY HAS BEEN DETAILED. $$$

The Franco-Belgian giant Dexia registered big losses on Greek debts. A total of EUR 6.32 billion (=US$8.7 bn) of losses were recorded as part of the a wider restructuring, which included EUR 2.3 billion on Greek Govt Bonds in the third quarter. Dexia was the first big European bank to get a bailout in 2011 because of the EuroZone crisis, one that cost the French, Belgian, and Luxembourg governments EUR 90 billion. Revealed was its EUR 10 billion exposure to Italian Govt Bonds, along with EUR 1.84 billion in Portugal. The Dexia board agreed a capital injection of EUR 4.2 billion to comply with French financial regulations on minimum capital levels. Only an idiot would invest in such secondary stock issuance to a standing dead bank. The bank will convert EUR 2.5 billion of loans into capital to meet the requirement. See the BBC article (CLICK HERE).

◄$$$ GERMAN BANKS ARE NOT IMMUNE FROM BIG LOSSES, NOR IMMUNE FROM THE FINANCIAL CRISIS. COMMERZBANK SUFFERED A BIG LOSS, TYPICAL OF THE GERMAN BANKING SECTOR. WITH ALL THE ATTENTION LAST MONTH GIVEN TO THE BIG FRENCH BANKS, THE WEAK LINKS INSIDE THE GERMAN BANKING SYSTEM ARE COMING TO LIGHT. $$$

Commerzbank reported a loss due to Greek debt. The damage is starting to be felt among the multitude of European banks. The second largest German bank reported a loss for 3Q2011 after taking further writedowns on Greek debt. The actual loss was EUR 687 million (=US$949 mn), compared with a EUR 113 million in profit a year ago. The direct hit was EUR 798 million on its Greek assets. The bank is 25%-owned by the German Govt. They will reduce future commitments of credit to the EuroZone, a retrenchment as new capital requirements must be met. A Brussels accord struck in October calls for banks to swallow 50% losses on their Greek credit assets, as well as to build more capital to protect themselves on the next hits. Commerzbank is heavily exposed to Greek debt, as are French banks. Two weeks ago, France's biggest bank BNP Paribas revealed a 72% drop in profits, to EUR 541 million, after liquidating some of its sovereign debt. The banks prefer to call it limiting the exposure. See the BBC article (CLICK HERE).

◄$$$ DEUTSCHE BANK SUFFERED A LIQUIDITY BLOW AS MONEY MARKET FUNDS WERE PULLED. BUT THE EFFECT ON FRENCH BANKS WAS WORSE, IN PARTICULAR CREDIT AGRICOLE. $$$

The biggest US-based prime money market funds cut their investments in Deutsche Bank by $8.1 billion in October. The EuroCB rate cut triggered the withdrawals. The German giant suffered the largest drop among 35 of the banks in Europe, the United States, Japan, and Canada. Furthermore, the amount of Deutsche Bank short-term obligations held by the eight biggest US funds eligible to purchase corporate debt, such Fidelity Investments, JPMorgan Chase, and BlackRock, declined by 56% to $6.3 billion in the month of October. So D-Bank is being squeezed by money markets and short-term debt being pulled. Data is according to Bloomberg. The D-Bank CFO Stefan Krause estimated that the money market and other funds provided 3% of the total bank funding. He claims the bank increased its discretionary unsecured wholesale funding to EUR 135 billion from EUR 113 billion in the first calendar quarter. The big European banks are all feeling the strain from the financial crisis and its contagion to sovereign bonds and interbank lending. D-Bank is better prepared than most. The French banks realized a 25% decline in their money market funding to $16 billion in October. That followed a 44% decline in September. Over the last twelve months, the eight big money funds have pulled 78% of their funding from French banks, equal to $61.3 billion. Credit Agricole suffered the worst damage, losing 66% of such funds. Call it unintended consequences from cutting the cental bank interest rate. See the Bloomberg article (CLICK HERE).

◄$$$ US-BANKS ARE DEEPLY EXPOSED TO EUROPEAN GOVT DEBT DEFAULT INSURANCE. THE RISK IS NOT OFFLOADED, BUT RATHER SHARED AND JOINED. THE RISKS ARE RISING ASTRONOMICALLY FOR AMERICAN BANKS, WHILE LARGE COMMITMENTS ARE MADE, AND PARTNERSHIPS ARE FORMED. THE US-PRESS BLITHELY REPORTS A CONDITION OF NEAR IMMUNITY FROM THE FINANCIAL CRISIS SEPARATED BY AN OCEAN. $$$

Selling more default insurance against Europe debt has properly raised the risks for several large US banks. They are not disclosing their exposure. The Credit Default Swap is not part of quarterly reports to investors, a key element to the shadow banking system. The big US banks increased sales of insurance against credit losses to holders of Greek, Portuguese, Irish, Spanish, and Italian debt in the first half of 2011. The risk for substantial, even catastrophic payouts in the event of defaults, has been increased. Guarantees have been provided by US lenders on government debt, bank debt, and corporate debt in those countries, which have risen by $80.7 billion to $518 billion, according to the Bank for Intl Settlements. The bulk of the increased exposure is in the form of CDSwap contracts that insure against debt default. BIS data shows CDSwaps account for two thirds of the total related to the five nations. The crux of the systemic risk is mutual counter-party risk. The victims are insuring against each other and their deaths. They cannot lift each other if they are all falling into the abyss. The banks actually call their exposure offset and thus neutral. Tell that to two men tied together and tossed over the cliff's edge.

The payout risks are higher than what JPMorgan, Morgan Stanley, and Goldman Sachs report, those standing as the leading CDS underwriters in the United States. The banks report on a net basis, since they claim offsets reduce risk. Instead, in the world of reality, nothing is offset and everything is amplified. Potential losses are  not being reduced, claims Frederick from Keefe, Bruyette & Woods. He said, "The big problem with all these gross exposures is counter-party risk. When the CDS is triggered due to default, will those counterparties be standing? If everybody is buying from each other, who is ultimately going to pay for the losses? What if they sold protection to some banks and bought protection from others, and they cannot get paid by the ones they bought protection from?" These are basic questions that will be asked when the dominos fall and banks fail. The CDS contracts held by the big US banks are almost three times as much as their $181 billion in direct lending to the five countries at the end of June. Adding CDS raises the total risk to $767 billion, a 20% increase over six months. A Lehman/AIG moment is coming soon to Europe. The Greek debt default will cause a run on other PIIGS sovereign debt, triggering payouts from CDSwap insurance, resulting in several important events where banks cannot meet the payout demands or margin calls. Numerous Lehman type deaths lurk. Numerous AIG type drains lurk. A quick look at the 2008 chapter of history easily reveals that AIG fell to ruin, the great insurance backstop. It quickly ran out of cash and had to be gobbled up by the greater bankrupt organization, the USGovt. That served also to hide the corruption. See the Bloomberg article (CLICK HERE).

◄$$$ THE BANK LEADERS HAVE ATTEMPTED TO REDEFINE DEBT DEFAULT, AS PART OF THE BAILOUT FUND NEGOTIATIONS. THIS IS YET ANOTHER DEEPLY CORRUPT PRACTICE. ANY LOSS OF ORIGINAL DEBT SECURITY TERMS IS A DEFAULT, WHETHER VOLUNTARY OR BLESSED BY THE ELITE CARTEL. EXPECT COURT ACTION AND LAWSUITS IN RESPONSE. THIS IS A HUGE ISSUE NOT ADDRESSED THAT INVALIDATES AN ENTIRE MARKET. IF SOVEREIGN BONDS CANNOT BE HEDGED EFFECTIVELY AND PREDICTABLY, THE BOND YIELDS WILL RISE FAST FROM LACK OF DEMAND. WATCH OUT BELOW FOR ITALY. EUROPEAN BANKS WILL SUFFER LOSSES WITHOUT BUFFERS THAT EXPECTED TO SERVE AS HEDGES. $$$

Lack of reliable CDSwap debt insurance is the principal reason why Italian, Spanish, and French Govt Bond yields are rising quickly. This is obvious. Doubt has been cast as to what a bond hedge means. Perhaps murder is not illegal, if ordered by a government or its security agencies. Perhaps bond fraud is not a crime, if perpetrated by a Wall Street bank. Perhaps mortgage document forgery is permitted, if the bank involved is too big to fail. Enough foolishness!! Contract law is being shredded by the latest European bond bailout negotiations. Their big banks, not so much American banks, are in line for enormous losses without relief from purchased hedges. The hedges mean nothing!! Credit Default Swaps are designed to pay the buyer face value in exchange for the underlying securities or the cash equivalent, should a borrower fail to adhere to its debt agreements. But to receive the payout, the owner must release the bond. The 50% haircut on Greek Govt Bonds constitutes a debt default event, even though executed by the bond investors themselves in balance sheet writeoffs. Fitch Ratings declared that the formal agreement by European leaders created an event of default. They concluded, "The 50% nominal haircut on the proposed bond exchange would be viewed by the agency as a default event under its Distressed Debt Exchange criteria." Fitch went on to mention significant challenges for Greece, whose debt burden is well over 100% of its GDP. Padhraic Garvey is a credit analyst at ING Groep in Amsterdam. He said, "It is highly likely that all three rating agencies will classify this restructuring as a technical default. Even if it is voluntary, investors are left with a product that is lower in value to what they originally agreed." Many banks do not release the affected bonds for the dream of full redemption later. Analysts see the default event clearly. Exactly. See the Bloomberg article (CLICK HERE).

The International Swaps & Derivatives Assn (ISDA), whose market decisions are binding, has not said whether the $3.7 billion of Credit Default Swaps linked to Greek Govt Bonds should pay out awards. However, it has indicated the decision hinges on whether investors accept losses voluntarily. What a sham! A credit default event can be caused by a reduction in principal or interest, postponement or deferral of payments, or a change in the ranking or currency of obligations, according to the New York-based trade group rules. The Greek Govt debt insurance events are troublesome. The failure for Credit Default Swaps to trigger casts doubt on the contracts as a viable hedge. Thus the run on such bonds. The European Union ability to write down 50% of Greek bonds held in banks without triggering $3.7 billion in debt insurance contracts threatens to undermine confidence in CDSwaps as a hedge. Bond yield borrowing costs will shoot up notably. At issue in some cases is a bond exchange, toxic for new. If the ISDA agrees the exchange is not compulsory, then CDSwaps tied to the nation's debt should not pay out awards. The ISDA rebuts claims that CDS contracts do not function as a hedge. They define a shell game! Their website posted a statement, "It has always been understood that the restructuring definition cannot catch all possible events. If a creditor is hedging using CDS, and declines to participate in a voluntary restructuring, then the creditor would still hold its original debt claim and its CDS hedge." The key is holding the original bond. Very serious questions over the legitimacy and value of CDS contracts will be raised, already happening, to be settled someday in the courts.

The CDS market itself is under a specter of wariness and confusion. Coercion was used. Bond investors were threatened with full default if not in accord on the 50% loss. ISDA General Counsel David Geen said his organization considered the agreement to be voluntary, even though it included a lot of arm twisting. Banks that use CDSwaps to hedge their holdings of government bonds are being forced to seek offloading of risk elsewhere. Their hedging desks are eagerly trying to re-evaluate their use of default swaps. Take Deutsche Bank for instance, the biggest German bank. As of June 30th it put on CDSwaps to effectively reduce to EUR 996 million (=US$1.4 bn) its net sovereign risk related to Italian Govt debt. The risk had been EUR 8.01 billion six months earlier. That is an 88% risk reduction. The giant bank reported in late October an increase in its risk associated with Italian debt, as it stepped up market making. They are selling CDSwaps more, apparently since the likelihood of payouts has diminished. Dislocations in the debt insurance market is on the way, for certain. Naturally, the Greek swaps rallied after the grand accord was shoved down private banker throats by central bankers and their regional overlords. The cost of insuring Greek debt fell to $5.6 million in initial advance cost, from $6.0 million the day before. Lower cost increases the swap contract value, much like a bond sees higher principal value when the bond yield falls. See the Bloomberg article (CLICK HERE).

Economists foresee big trouble in bond market confidence, as extension to the CDSwap decision not to pay out. The agreement on the hefty size of the haircut on Greek debt banks, bigger than the 30% to 35% urged for by the banks, could carry serious consequences for all the so-called PIIGS sovereign debt market. Without the protection of CDSwap insurance against default, bond yields are expected to rise, compounding the problems of the EuroZone debt crisis. However, not all investors believe that the insurance value of CDS has been wiped out entirely by the IDSA ruling. Carl Weinberg is the chief economist at High Frequency Economics. He pointed to the Intl Swaps & Derivatives Assn dictatorial decision that accepted bond losses was not a credit event to warrant CDSwap insurance payouts. Weinberg said, "After a ruling like this, people holding CDS on Italian, Spanish, and Portuguese bonds could reasonably doubt that those contracts offered insurance against anything. Remove the credibility of the insurance, and the market price of CDS tells us investors want 4.5% yields on top of yield of the underlying security to hold 10-year Italian debt. For now, yields on PIIGS issued bonds will continue to rise. We predict safe-haven trades into safe bonds will continue. Yield curves will flatten. But yields cannot fall forever. Risk of a catastrophic correction in prices for safe bonds hangs over the markets. Then, higher yields and capital losses on bond holdings become inevitable." Weinberg argues that the Govt Bond yields must rise by the value of the CDS insurance, since no insurance is offered. He expects the German Bund to suffer a potential correction. He forecasts that Italian Govt Bond yields are heading towards 10%, not lower. See the CNBC article (CLICK HERE).

Mike Riddell is the manager of the M&G Intl Sovereign Bond fund. He expects European Union banks will be most affected by current debt insurance decisions, because they are among the most active buyers of European sovereign CDSwaps. Furthermore, the risk arises that the CDS market will lose credibility as a buffer for sovereign bond investors. If they cannot buy protection against risks of severe loss, then the sovereign bonds will go begging at auction. Bond yields will rise quickly and dramatically. Riddell believes the recent episode casts a shadow over the ability of the European Financial Stability Facility, the bailout fund, to persuade investors to insure part of the value of EuroZone sovereign bonds. Not all parties feel aggrieved, like the debt insurers. According to the Bank for Intl Settlements, American banks have little indirect exposure to Greek debt through derivative contracts. Their data does not differentiate between private and sovereign CDSwaps, as in a bank bond versus a government bond. Look for some new analyst scrutiny on bank exposure that is netted away from hedges, since the hedges seems less like hedges, and more like another corrupt segment of the shadow banking system. Banks have been playing down their exposure to European debt by claiming that large amounts of risk have been hedged away. Such protection is only as good as the counter-parties that banks opposite to in contract. See the Fund Web article (CLICK HERE). Thanks to BobO in Kansas for his intrepid help in sharing stories on this important topic.

Moodys Investors Service pitched in. They issued a statement claiming the plan to resolve the region's debt crisis made Credit Default Swaps covering Greece ineffective, thus rendering Italy as highly vulnerable. They stated, "European banks and others that have hedged their cash position in Greek debt by buying Credit Default Swap protection on Greece would not receive a compensating credit protection payment. The demonstrated ineffectiveness of the CDS hedge on Greece would put into question the credit protection they have purchased on other sovereigns." The Italian Govt Bond yield jumped briefly past the 7% mark. Soon even the Spanish Govt Bond yield will push toward 7% and trigger alarms. The law of unintended consequences has made the Greek bailout voluntary, thus avoiding a credit event, but the entire deal has actually made the situation worse. No hedge exists on the entire Southern Europe periphery. Watch out below, Italy. Their coalition government has dissolved, and chaos might not be reined in by Mario Monti.

Another final twist on CDSwap exposure from Greece. Sorry for the belabored topic, but it is of extreme importance. The question centers upon how the maximum losses relating to a Greek Govt default on its $480 billion debt could amount to only $1.85 billion. The actual calculations might indeed by only $350 million. A significant proportion of that net exposure is secured with collateral, like telecomm firms, port facilities, and even stakes in banks. This detail can be found in a report from the Intl Swaps & Derivatives Assn, which estimates up to 90% of the total exposure could be collateralized. Keep in mind that the ISDA has a vested interest in minimizing the potential disruption and insured loss. The estimate does nonetheless reinforce the mystery surrounding the EuroZone obsession for dictating no triggered payouts on CDS bond insurance. See the Wall Street Journal article (CLICK HERE).

VICTIMS OF CURRENCYS AT WAR

◄$$$ CHINA HAS RAISED THE PROPOSITION THAT EUROPE (AND THE REST OF THE WORLD) DESIGN LOANS IN YUAN CURRENCY. NEXT THEY WILL REQUIRE PAYMENT FOR FINISHED PRODUCTS IN CHINESE YUAN, BUT DOWN THE ROAD. THE BATON IS SLOWING BEING PASSED TO THE NEXT GLOBAL RESERVE CURRENCY. IF LOANS ARE IN YUAN, THEN RESERVES MANAGEMENT WILL SHIFT AWAY FROM USTREASURY BONDS. THE BANKING SYSTEMS WOULD CHANGE IN THEIR STRUCTURAL MAKEUP. THE OTHER BATTLEGROUND IS TRADE TOWARD US$-BASED TRANSACTIONS AND SETTLEMENT. $$$

In the shadows of wrangling over European debt, China served a cold reminder that they might soon be forced to borrow in Chinese currency in order to gain a credit line from the huge creditor. This is a bombshell. The idea has been put forward by Beijing as a device to reduce Chinese risks caused by further exposure to Europe in the FOREX market, a legitimate concern and realistic demand. China already holds well over $1 trillion in USTBonds. Some wild notions are being promoted, like European government debt, even USGovt debt, being floated in Yuan-denominated securities. That would make history. Klaus Regling, the head of the European EFSF rescue fund, was in Beijing selling debt at discount like in a bazaar. He did not rule out funding in Chinese currency in the future. The Beijing leaders are angry over several issues. They do not want to be solicited for vast funds in a broken system. They were miffed by the EU postponement of regular high level meetings due to the extended EU summit. They do not care for assumptions of Chinese granted funding in the press.

Regling had been clumsy in references to past aid. Losses are vast to date, like over 50% in Greek Govt Bonds bought many months ago. Think gold collateral seizures in Athens. French President Nicolas Sarkozy explained the latest bailout measures to President Hu Jintao. The Chinese leader responded with a bland comment about stability in financial markets, and working toward economic recovery. China prefers the IMF route, where deals can be struck more effectively, like raiding central bank gold bullion. Bejing prefers that type of leverage. Their leaders are openly frustrated with the current system, where they export finished products, receive USDollars in return, invest in European bonds, suffer losses in all corners, and are expected to pitch in more. One Chinese source explained that China would be better off investing in infrastructure for developing countries or buying high-tech European companies. See the Market Watch article (CLICK HERE).

Soon China will want to be paid for exported finished products in their own Yuan currency, not USDollars. Such a dramatic shift would end the USDollar hegemony quickly, force the United States to dismantle its overseas bases, and cause a plummet in the global reserve currency valuation. The Chinese Yuan exchange rate would rise, but there would be no time to shift production to India or Latin America or back to the US, because the network of suppliers is based in China. The Beijing leaders are clearly kicking the pylons of the stage in their own stress test. A grand cost increase shock would come to the global economy, as almost all commodities are priced in USDollars. Therefore, watch for a shift in global trade for type of currency in settlement. It represents the tangible side of the equation, which might dictate the financial side in credit lines. Presaged is a shift in Yuan-based trade. To date, much trade has changed by means of Chinese bilateral accords, but commodities are almost exclusively based in US$ transactions.

◄$$$ THE EURO IS SUCCUMBING TO INTERNAL DESTRUCTIVE FORCES. DESPITE HIGHER BOND YIELDS TO ATTRACT FUNDS, THE LIKELY FRACTURE OF THE UNION HAS RESULTED IN FLIGHT OUT OF THE EURO CURRENCY. THE ONLY LIFT IT RECEIVES IS FROM ENORMOUS BAILOUT ACCORDS, WHICH DO NOT HAVE FOLLOW THROUGH POWER. THE EURO HAS NO SECONDARY GLOBAL RESERVE POTENTIAL ANY LONGER, ZERO. $$$

◄$$$ EUROPEAN BANK LEADERS PREPARE A PATH FOR GREECE TO EXIT THE EURO CURRENCY. THEY ARE RESIGNED TO ITS INEVITABLE DEPARTURE, OR BETTER DESCRIBED AS EXPULSION. GREECE MUST LEAVE, SINCE IT DRAGS DOWN THE ENTIRE EUROPEAN UNION. WHEN IT DOES LEAVE, THE IMPACT WILL BE LIKE A POWERFUL EARTHQUAKE TO THE BANKS. $$$

The EuroZone must prepare for the inevitable, and cut the cord to Greece. It is rendering unspeakable harm to Europe, especially its big banks. The leaders are working on a possible exit of Greece from the Euro Monetary Union, confirmed by Eurogroup head Jean-Claude Juncker. He stressed the desire that other members of the currency union must not be damaged in such an event. When a neighborhood burns hot, it is hard to prevent some homes burning down. Juncker made clear he did not want Greece to leave the EuroZone, but he speculated about plans for a possible Greek exit in candid style. Responding to issue of German taxpayer money usage if Greece departed or was booted out, Juncker said "We are working on the subject of how to ensure there is not a disaster for the people in Germany, Luxembourg, the EuroZone. We are absolutely prepared for the situation." Greece was informed during the Cannes G-20 Meeting in early November that further European aid would depend upon its intention to stay in the EuroZone. The regional overlord Juncker paid respect to the Greek people's desire with mere words, while internal pressures snuffed the referendum until it was canceled. See the Reuters article (CLICK HERE).

◄$$$ THE ITALIAN & SPANISH GOVT BONDS ARE IN BIG TROUBLE, BUT THE SLEEPY STORY IS HOW FRANCE WILL SOON JOIN THE P.I.I.G.S. AS THE LEADER IN THE PEN. SOME HEAVY DAMAGE IS BEING QUIETLY DONE ON FRENCH BONDS, WHERE THE BANKS HOLD MUCH OF THEIR OWN NATIONAL DEBT AND THE ITALIAN DEBT. THE PROSPECT OF BAILING OUT BOTH ITALY AND SPAIN TAKES THE ENTIRE STORY TO IMPOSSIBLE. WELL OVER 2 TRILLION EUROS WILL BE NEEDED. SPAIN RENDERS THE STORY A GAME BREAKER. THE RETREAT INTO GERMAN BUNDS HAS BROUGHT A NEW DISTORTION, WHERE RATES ARE TOO LOW. $$$

Not much attention had been given the Spanish Govt Bond, but that changed totally in the last two weeks. As the Italian sovereign bond yield came back down below 7%, the Spanish sovereign bond yield rose toward 7% to meet it. They are almost equal. If observers thought the emergence of Italy onto the crisis stage was powerful with immediate impact, expect double that effect with Spain having arrived on the same crisis stage. Reality is striking. The combined population of Italy and Spain is 110 million, versus Greece at under 10 million. The prospect of bailing out both Italy and Spain is a total impossibility, without a EUR 2 to 3 trillion bailout fund. The required monetary inflation to satisfy such a requirement will be staggering, if consensus can be forged. Gold smells the chaos building. The disorder level has grown. It will increase much worse, as inflation or collapse are the two alternatives. Follow the sovereign bond yields yourself, with a click for Italy (HERE) and Spain (HERE) and France (HERE) and Germany (HERE).

   

 

Spain brings different questions to the table, such as enormous credit losses to the banks from their vast property portfolios. Recall Spain is the vacationland for Northern Europeans. Entire little communities have been bulldozed, to remove excess supply. Their banks have not made any conceivable progress in writing down loans. Vast airpockets exist under the entire Spanish banking system. Plenty of optimism among analysts has been prevalent concerning the situation in Spain. It is as wrong and full of false conclusions as the denial for the situation in Italy. Reality is striking. Europe is fracturing. But watch France. If their sovereign bond yield rises above the 3.8% level with the current notable momentum, it could reach 5% quickly. It already has made distance separating from the German Bund. They were once considered a tagteam of strength. No more, since the big French banks are walking dead, wiped out by the PIIGS credit losses. Reality is striking. The ruin of all Southern European sovereign bonds has been a Jackass forecast for over a year. It is happening to script. The frightening next potential powderkeg threat could be an unstable German Bund market. With all the retreat to Germany for safe haven in Europe, a situation is developing much like Switzerland two months ago. Their interest rates are too low, not reflecting reality, not rewarding risk, only providing protection. While the Germans do not have a unique currency to run up dangerously in valuation, they do have an interest rate that can badly distort the cost of money. Asset price distortions can occur. A strange event could hit Germany soon, which destabilizes their markets.

◄$$$ SPANISH GOVT BOND YIELDS SURGED ALMOST TO 7% AS THE CONTAGION HAS SPREAD. THE BONDS OF SPAIN WILL ENDURE SIMILAR PRESSURES AS ITALY. THEIR BANKING SYSTEM OPERATES ON FAIRY TALE RESERVES. THE SPANISH ECONOMY IS WEIGHED DOWN BY A 23% JOBLESS RATE. SPANISH BANKS ARE BURDENED BY TOXIC CREDIT ASSETS RELATED TO PROPERTY, AND MORTGAGE BONDS THAT DO NOT PERFORM. THE UGLY SECRET IS THAT THE SPANISH TOTAL DEBT IS GREATER THAN ITALY. ALL P.I.I.G.S. NATIONS WILL BE CRUSHED BY THE CRISIS, NO NATION SPARED. $$$

The pain in Spain in mainly on the gain! Spain entered the red zone as their sovereign bond yield moved quickly over 6% as the contagion has spread to Madrid. It will not be spared a crushing event of bond market rejection. They have solved nothing, dealt with nothing, and downgraded no bank assets, preferring to live in a make believe world. Large crowds have gathered in Madrid, much more peaceful than elsewhere across Southern Europe. They have their own Occupy Madrid anti-banking demonstration, where crowds have filled Plaza Mayor. While the Italian Govt Bond yield has relaxed toward levels below 7%, the Spanish Govt Bond yield has risen steadily since August from 5% to above 6% in an unrelenting march toward its 7% goal. It took five weeks to breach the 6% level, once the 5% level was breached. The Euro Central Bank is reported to be actively purchasing sovereign bond from both countries, to stem the crisis. Their efforts are futile, since private bank sales rise to supply the central bank in a dumping exercise. Rather to sell at silly high prices than to buy. After the official purchases, the private banks are highly reluctant to purchase anew, since that bond market has been badly tainted and principal price is artificially elevated. The benefit given to Spain will soon evaporate like a mist over their coastline, when they realize the recession has more wrecking ball momentum, and the Madrid Govt has been hiding the profound damage to their banking system.

Last Wednesday, the Spanish Govt yield spread versus the benchmark German Bund rose to 4.56%, as the Italian rose to 5.29% on the same spread. As bond yields rise, the principal loss on those bonds increases. The demand for safe haven bond assets has become a main issue and urgent priority. The Italian Treasury last Monday sold EUR 3 billion of Notes, due in September 2016. The yield paid out was near a record at 6.29%, the highest paid since 1997. Spain has bond auctions planned also, as it struggles with a 23% unemployment rate and a budget deficit equal to 6.6% of GDP. When bank assets are under the microscope, and reserves ratios being managed, the losses inflict great harm and raise the risk of a flagship bank teetering in insolvency from failure altogether. See the UK Telegraph article (CLICK HERE).

◄$$$ CAPITAL FLIGHT IS GOING TO LONDON PROPERTY AND TO SWISS BANKS. A HIGH RISK POLICY OF FORCING MONEY BACK TO GREECE COULD BACKFIRE, HOT MONEY THAT HAD BEEN DIRECTED TO SWISS SAFE HAVENS. THE PATH TO GOLD IS BEING PAVED. $$$

A tidal wave of Italian and Greek money has moved into London property in year 2011, amounting to GBP 400 million (=US$600 mn). The two countries account for more than 10% of all foreign property investment in the City, on course for a 120% rise over past year. The influx has accelerated during the past three months as rich Greeks and Italians scramble for safe havens. The emphasis is not so much owning the right home, but rather removing funds from the beseiged countries. An even more dangerous risk-filled event is in progress, a forced repatration after vast capital flight to Switzerland, more major moves to seek safe haven. Greeks have moved billions of Euros to Swiss banks in an effort to preserve their wealth. The exodus has helped cripple the Greek banks, with a natural fallout to the big European banks that make all the rules. A new policy is forming in Brussels among the European Union commissioners to force the Swiss Govt and banks to return the assets of Greek citizens back to the Greek banks.

Money is turning hostage, soon tossed into insolvent home bank fires. A portion of the money that goes back to Greece will certainly be lost. Greeks are livid angry with this development. An agreement with Switzerland is being negotiated to repatriate as much as $81 billion tucked away in Swiss bank accounts. If made law, capital flight will have been made illegal. Money in movement will be diverted, and go to Spain, to Italy, to England, and to the United States, maybe even to the Caribbean and to Panama. Money subjected to forced repatriation will seek the ultimate remaining safe haven, GOLD. Witness some important 'Lights Out' events. The unelected technocrats in Brussels are trying to institute capital controls by putting a gun to the Swiss government to achieve their objectives. The fear of broader capital controls and more repatriation will spread like wildfire. Capital flight is a natural response in our current environment. Such policies will undermine confidence further and create a panic. The entire pathway is being paved to GOLD.

◄$$$ THE CHINESE DAGONG RATING AGENCY MIGHT CUT THE USGOVT DEBT IN ANOTHER DOWNGRADE. A SECOND DOWNGRADE MIGHT CAUSE MORE PROBLEMS, EVEN THOUGH THE FIRST WAS DROWNED OUT BY MASSIVE INTEREST RATE SWAP ACTIVITY AND PERMISSION FOR THE US-STOCK MARKET TO GO INTO DECLINE. THE PERCEIVED RISK IS FURTHER SUBSTANTIAL DECLINE IN THE USDOLLAR, ADDING TO DEFAULT RISK. $$$

Sounding the warning, the Chinese Dagong Global Credit Rating has made a statement. If the USGovt adopts the QE3 program with another round of massive USTreasury Bond purchases, including perhaps mortgage bond purchases as well, Dagong is prepared to cut the USGovt sovereign rating for the second time since August. The monetization of debt with hyper monetary inflation is a dangerous risk-filled initiative with deep consequences. It is the most basic of sins a central bank can commit,which lead to numerous other worse sins. The Dagong agency lowered the US sovereign rating one level to A on August 3rd, the same level with Russia and South Africa. They cited the raised USGovt debt ceiling, expecting risk toward a national crisis. The QE3 resumption is widely speculated to save the US financial system bacon, but it will unleash more cost inflation and more USDollar devaluation. A Dagong downgrade will have unclear consequences. Zhang Jun from Dagong said, "If the United States adopts more Quantitative Easing policies, we may downgrade or put it on the negative watch list. We are closely monitoring it." Zhang believes any resumed QE3 bond purchase activity will cause the USDollar to weaken, thus raising the risk of a default. The Dagong chairman Guan Jianzhong made similar comments in an Al Jazeera interview, reported by the UK Guardian. See the Bloomberg article (CLICK HERE).

GOLD ACCUMULATED, HIDDEN & STOLEN

◄$$$ CENTRAL BANKS LOADED UP WHEN THE SEPTEMBER CHEAP GOLD PRICE WAS HANDED TO THEM, OR CREATED BY THEIR AGENTS. THE KEY WAS NOT ONLY VOLUME BUT ADDITIONAL PLAYERS. THEY SEE THE RUIN IN THEIR OWN MONETARY SYSTEM. THEY ARE DIVERSIFYING OUT OF THE STANDARD USTBONDS AND EURO BONDS. $$$

Central Bank Gold purchases made a 40-year high in 3Q2011, in response to the sweet low price made available in September against a backdrop of magnificent sovereign bond destruction in secondary nations. The sharp price decline enabled them to shift to bullion in a diversification tactic. The net +148.4 ton addition in the month of September was much greater in revision, enough to surprise veteran traders. The data was published in a quarterly report by the World Gold Council, which declined to identify of the central banks behind the majority of the buying. They did mention that a "a slew of new entrants emerged wishing to bolster gold holdings." The expanding breadth of buyers is great news for the gold market, as the lesser nations are noticing the ruin in the global monetary system. Gold purchases among central banks was at the highest level since the group surged as a net buyer of the precious metal in 2Q2009, according to the quarterly report. Central banks and other official institutions had bought 66.5 tons of gold in the second quarter and 22.6 tons in the third quarter of 2010. So the Q3 purchase was more than double the Q2 total in a grand acceleration. They notice that currency debasement through monetary expansion has not borne a solution. They notice that new mountains of debt do nothing to remedy the damage from excessive debt and the associated bubble & bust cycles. They are diversifying out of USTBonds and EuroBonds. Given the large volumes involved, central banks are important drivers of the gold market. They are tight lipped about their maneuvers naturally. See the Financial Times article (CLICK HERE) and the Wall Street Journal article (CLICK HERE).

◄$$$ JPMORGAN TRIPLED ITS REGISTERED SILVER INVENTORY IN AN MYSTERIOUS OVERNIGHT SUCCESS. THE GAIN IS ROUGHLY EQUAL TO THE UNDELIVERED C.O.M.E.X. VOLUME RELATED TO THE MF-GLOBAL FIASCO THEFT. THE METAL WAS PROBABLY DIVERTED TO THE JPMORGAN VAULTS WITH REGULATOR BLESSING. BUT IT COULD BE MORE BASIC SEIZURES OF S.L.V. INVENTORY FROM THE EXCHANGE TRADE FRAUD. A BELIEF IS FORMING THAT JPMORGAN ACTED DESPERATELY TO ACQUIRE SILVER, EVEN IF BY SABOTAGING MF-GLOBAL, IN ORDER TO MEET DECEMBER HUGE SILVER DELIVERY DEMANDS. THE SUPPLY WILL BE TIGHT IN DECEMBER. $$$

On the November 16th update to the COMEX silver inventory, JPMorgan has made a massive adjustment of physical silver into its registered vaults. They moved over one million ounces from Eligible into Registered overnight! No interruption with their operations, even perhaps some exploitation of the COMEX from the MF Global shock and vomits. The actual detail is JPMorgan adjusted 1,103,280 ounces out of Eligible vaults, and into Registered vaults on the official inventory tally. Their Registered inventory tripled from 557,265 ounces to 1,660,545 ounces last Tuesday! They choose not to explain their good fortune in defiance. One should conclude that MF Global events are good for JPM business. Maybe the giant criminal titan is preparing for substantial delivery demands coming due in December, doing what is required. The similarity between the 1.1 million ounce adjustment into Registered and the 1.4 million ounces of Registered silver that remain blocked for delivery due to the MF Global fiasco is striking. Do not expect the CFTC regulators to look into the diversion of metal due to be directed into client hands, hardly a priority. Regardless, the Morgue is moving to prevent a COMEX default due to the 1.4 moz being unavailable for physical delivery.

The flood of Delivery Notices will come. Clients realize they do not want to end up like Gerald Celente with empty pockets and alert minds. Witness the next stage marred by massive loss of confidence in the paper COMEX market, triggered by the theft of client assets at MF Global. Once confidence is lost in the paper market, it is essentially game over. The next stage, gradually to appear, will be a Cash & Carry market without margin, where orders are placed, money is deposited, and product is hauled away like a hardware & building supply store. Although it is easy to point the finger at MF Global, one should never lose sight of the fact that the easier and less conspicuous method of supplying inventory from the back door is to raid the SLV Silver Exchange Traded Fund. It too is a gigantic fraud. The JPMorgan custodian shorts the SLV shares, and takes silver bullion off the loading dock in the middle of the night. Investors in SLV and GLD are some of the dumbest and laziest sacks the Jackass has ever seen. The custodian of the SPDR Gold Trust is JPMorgan, and people should know that fact. Adam Hamilton is a trusing fool. See the Silver Doctors article (CLICK HERE).

Put aside questions about the verifiability and validity of the reported COMEX inventory of Gold & Silver, from which the JPMorgan benefit is derived. The sheer size of the reported inventory move by JPMorgan is unusually large. It suggests that JPMorgan is anticipating the required delivery of mammoth silver volume for the December delivery month. Some analysts estimate that JPMorgan is likely short at least 17,000 of the current 34,000 in recorded Open Interest, equal to 85 million ounces. There are still eight trading days until the First Notice day for December silver, which is November 30th. The OI could decline between now and then to a considerable degree. The naked shorting ambushes that took the Silver price below 32 tend to reduce positions as the victims are forced to liquidate. JPM must reduce the futures contract positions much more, in big liquidations from vast illicit shorting. Even with the newly arrived silver in inventory, the situation calls for JPMorgan to be in a very difficult spot for delivery. The silver inventory supply could be very tight this month. See the Truth in Gold article (CLICK HERE).

◄$$$ INVESTMENT DEMAND FOR GOLD ROSE 33% IN Q3 VERSUS 3Q2010, BUT JEWELRY DEMAND FELL. THAT IS NORMAL FOR A RAGING BULL MARKET, EVEN DESIRED FOR THE BULL CONFIRMATION. $$$

Global gold demand increased by 6% from the previous year to just over 1000 tons during 3Q2011, according to the World Gold Council (WGC). Frank Holmes attributes the growth to the potent cocktail of inflationary pressures in the emerging world and the European sovereign debt fiasco. The surge occurred during a bull market and rising gold price. Gold prices averaged $1700 per ounce during 3Q2011, a hefty 39% higher than the same time last year. The kicker was investment demand, which increased 33% on a year over year basis to reach the third highest quarter of investment demand on record. The scope was broad, as gold bars and coin purchases rose 29%. All global markets except for India, Japan, and the United States saw solid gains in investment demand. See ther US Global Investors article (CLICK HERE). Compare the gold price rise with the US Stock market paltry gains eaten by inflation.

◄$$$ CHINA IMPORTED A HUGE AMOUNT OF GOLD. THE SEPTEMBER VOLUME WAS HALF OF THE ENTIRE 12-MONTH TOTAL FOR THE ENTIRE YEAR 2010. $$$

China has taken advantage of the big September price Gold decline. Their Gold imports hit a record high. Once more the so-called American experts were dead wrong. They are shills, not analysts. They expected a liquidation cascade in China, where citizens would dump all holdings at the first hint of deflation. They were supposedly loaded to the gills in gold. The Financial Times reported that "Chinese gold imports from Hong Kong, a proxy for the country's overall overseas buying, leaped to a record high in September, when monthly purchases matched almost half that for the whole of 2010. After hitting a nominal all-time high of $1920 a troy ounce in early September, the yellow metal fell to a three-month low of $1534 an ounce later in the month. Chinese investors snapped up the metal as prices fell." The natural bid under gold will remain solid, even if the Shanghai stock market suffers some downdrafts and declines. The main sellers were the usual suspects, the paper merchants with their illegal naked shorting, selling metal they do not own and cannot locate on the other side of the trade. Also, some big players like the Paulson Fund were victimized, motivated by their Sino Forest blunder and liquidation pressures. See the Zero Hedge article (CLICK HERE).

◄$$$ DUBAI CONTINUES TO ENCOURAGE ITS CITIZENS TO BUY GOLD. NEW  COMMEMORATIVE COINS ARE BEING PROMOTED FOR SAVINGS PROGRAMS. $$$

Dubai has launched a popular Financial Incentives Program to encourage citizens to invest in physical gold. Such a program would never occur in the United States, the center of false money and active propaganda against valid money. JRG Intl Brokerage DMCC, a leading broker and clearing member of the Dubai Gold & Commodities Exchange, has put forth a innovative scheme to encourage a savings culture through systematic investment in new gold coins labeled Visions of Dubai. The event took place on 11 November 2011. The brokerage firm will offer information support. The new commemorative coins depict as souvenirs how Dubai contains visionary leadership for the Emirates. Some coin images Shaikh Mohammed bin Rashid Al Maktoum on one side, while Burj Al Arab is engraved on the other. Other coins in the series feature landmark images of Dubai that identify the emirate. See the Silver Doctors article (CLICK HERE). The initiative can only add to demand.

◄$$$ NEGATIVE REAL RATES FUEL GOLD DEMAND IN INDIA. PRICE INFLATION IS RISING IN A VERY GLARING MANNER. THE PEOPLE HAVE REACTED BY RAMPING UP GOLD PURCHASES ACROSS THE CROWDED AND INCREASINGLY AFFLUENT NATION. MONEY IS MOVING OUT OF SAVINGS PLANS AND INTO GOLD FUNDS. THE SAVINGS RATE IS BELOW THE PREVAILING PRICE INFLATION IN INDIA. $$$

Investors in India have gone haywire, but in a good way toward Gold investments. The reported gain contradicts Frank Holmes, but perhaps the Indian demand is classified as physical savings. They are withdrawing from sovereign bonds and general savings programs. They instead are pouring record amounts into Gold. Mutual funds that invest in government backed debt securities fell in size by 4% in September, to INR 30.2 billion (=US$606 mn). INR means Indian Rupees. Mutual funds with a gold emphasis rose by 8% to a record high of INR 81.73 billion on the month. Funds that invest in Gold have more than doubled from INR 35.2 billion at end 2010. Individual investors withdrew INR 78.7 billion between April and September from standard savings deposits, like formal plans run by post offices. The removals are the most since 2000. The sovereign debt funds have been reduced by 26% to INR 30.3 billion. The Indian Govt Bond yield is on the rise, and bond losses are the new norm, as price inflation has held above 9% since December. Investors seek shelter from inflation and bond damage. Here is the key item. The bond yield on Indian Govt debt securities, in particular the 10-year Notes, is 76 basis points below the rate of inflation. In normal times, the bond yield should be a full 2% above the CPI to provide a reward for risk and to attract funds. The opposite is happening, as absent reward deters investment. Compare to other Asian sovereign bonds. In South Korea, the bond pays 14 basis points below their CPI, but in Indonesia the bond yield is 179 basis points more than the CPI. In Mumbai, Debasish Mallick heads the IDBI Asset Mgmt firm that oversees $1 billion. He said, "There is asset switching, and people are betting more on Gold as it is a safer asset and offers a hedge against India's high inflation and the economic uncertainty affecting the world. Investing in Gold is a very prudent asset allocation strategy." Their first Gold mutual fund gathered 1.1 billion rupees from 12,000 individual investors, planned for launch on November 17th.

The national savings plans offer much more to clients than the US or England or Western Europe. But the 8% offered by the state run savings plan is beaten by the 9.25% offered by the nation's largest lender State Bank of India. Unlike the West, the Indian Govt does not lie deceive and cheat on reporting price inflation. The wholesale price index rose 9.72% in September from a year earlier after climbing 9.78% in August, according to their rather honest official data. Inflation is running ahead of bank deposit rates, and the public has noticed then responded. The phenomenon is called Negative Real Rate of return, since after subtracting a valid CPI rate, the saver loses money to inflation. People are seeing the value of their money eroding. The spotlight of truth has that effect, a lost concept in the United States. See the Bloomberg article (CLICK HERE).

◄$$$ GERMAN GOLD BULLION IS SAFELY STORED IN GERMANY. THE FLOATING STORY IS PURE RUBBISH. LISTEN TO RICKARDS ON MONETARY MATTERS AND FINANCIAL ANALYSIS, BUT IGNORE HIS GARBAGE CLAIMS ABOUT GOLD MANAGEMENT. HE WAS A COG IN THE SYSTEM 10 YEARS AGO, AND A PROPAGANDA PUPPET TODAY. $$$

Jim Rickards continues to mouth off about Germany being vulnerable to the whims of the USFed, regarding gold bullion owned by Germany but held at the New York Fed. The story is pure rubbish, reinforced by his new book. Books in print do not prove anything. Rickards continues to drop comments about the vast gold reserves owned by the USGovt in his fumbled potential gold price calculations. It is important to realize something about Rickards. He is brilliant, but his commentary shines with intelligence only when it refers to monetary and banking matters, as well as the finance of economics, but NEVER to gold management. He is a liar. He was a key advisor to Long-Term Capital Mgmt in 1999, when it went bust and lost all the gold bullion for the Bank of Italy. He appears to pay homage to the syndicaee by perpetuating lies about Fort Knox gold assets and lately the German gold held as hostage. Pure rubbish. My solid German gold banker contact assures that all German gold was demanded and returned in 2005 and 2006, in anticipation of the housing & mortgage bust that led to the US banking system rupture into insolvency. The German brain trust saw it coming. What disappoints me further is that GATA adds legitimacy to the distorted story about German gold. They should refute it. No link will be provided to the GATA story that honors Rickards for his attempted deception. The other nonsense floating story is that Venezuela continues to struggle to bring home its gold bullion from London. It is all back in Caracas, assured by a gold trader who knows what happened in Swiss banks to ensure its return, big gold deliveries made to London. Both phony stories reinforce the facade of London virility, long gone.

Lastly, Eric King of King World News presents himself as a bit of a bootlicker in his frequent interviews of Jim Rickards. Mr King lacks the knowledge and wisdom to know when his guest is shoveling feces in his direction, or else lacks the spine to resist the phony flow. King has many excellent guests, and should be complimented for providing excellent information in an age of grand fraud and deceit. But he needs to improve his own BS meter capability. In 2009, the Jackass engaged in at least six or seven long telephone conversations with Eric King in Tampa Florida, each over 30 to 40 minutes, some lasting 90 minutes. It was a pleasure. But my strong impression was that King was an amateur attempting to build a radio business. The phone calls were to educate him, as it turned out. His knowledge was shallow, even naive. The Jackass explained concepts on several subjects related to gold and currencies and central banking and monetary policy that seemed basic. My four part series on "Systemic Failure" in September and October of 2009 with King World News was my first and last, even though a big hit according to Eric. Due to King's arrogance and sneid nature in personal exchanges last year, we have parted ways. My wish is for his continued exposure of the financial world for its corruption, and some more edification of his knowledge. He just cannot detect or resist propaganda at times, which actually undermines his own credibility. Aint my problem after his cocky preppy insincere behavior. He could use an editor for his sloppy transcriptions too.

◄$$$ OFFSET THE NONSENSE WITH SOME SOLID ANALYTIC POINTS ON GOLD, AGAIN BY RICKARDS. HIS BELIEF OF THE S.D.R. RIDING ON A WHITE HORSE IS A REAL LONGSHOT THAT LACKS A BASIS IN REALITY OR PRECEDENT. A PAPER BACKED CURRENCY CANNOT REPLACE A RUINED GLOBAL PAPER BACKED RESERVE CURRENCY, NEVER. THAT IS A STANDING LAW LIKE GRAVITY. $$$

The global currency situation is very precarious, in the opinion of Jim Rickards, the star consultant from Tangent Capital Partners and previously Omnis. Rickards expects the IMF blessed Special Drawing Rights to make a strong appearance to fill the credibility void. He is dreaming or working an agenda. My belief is that Rickards exaggerates, since the IMF is fast losing its muscle and credibility for that matter. The rise of SDR is unlikely since its supporters are all sinking in a sea of insolvency. Worse, the component currencies within the SDR basket are all objects of massive monetary inflation. The following are points by Rickards. The United States is the biggest currency manipulator, far worse than China, which receives a lot of bad press. The US is perversely motivated to trash the USDollar, since devaluation is the fastest way to stimulate exports. President Obama has stated a goal to double US export trade, made possible only by a much weaker USDollar. Rickards also overlooks that the US lacks significant industry, a rookie oversight. The US-EU-China establishes a global triangle in currencies that supports the entire system. China could lift the Euro by significant sovereign bond purchases. In the background, the USFed might provide Swap facility support for monetary expansion toward Euro purchases, with ample past precedent. He points out that bonds, banks, and currencies represent three separate entities. The bonds are under siege. The banks are troubled by insolvency. But the currencies trade somewhat independently. Do not expect Greece to return to the Drachma currency anytime soon or at all, in his opinion. Their debt default and banking system collapse might make their return to the Drachma obligatory.

Watch for the IMFund to give another major push to the SDR as currency, the basis of some new bonds. The Printing Press is a powerful monetary force, not accountable to anyone. The Intl Monetary Fund has the privilege of printing money, by granted authority of its member nations. Expect the IMF to print SDR to replace the USDollar as global banking reserve, so claims Rickards. The SDRs are not new, as they have been around since 1969. The Jackass believes Rickards makes a lot of sense except for the SDR concept, too little too late. Besides, a paper backed currency can NEVER replace a faltering crumbling corroding paper backed global reserve currency. As in never! That is a principal law of economic nature, an inviolable concept like gravity. The wily snake veteran should know better. See Rickards solo on the YouTube video (CLICK HERE).

Rickards quipped about how many analysts complain that the USDollar and Euro are set to go backwards, in a retrench, with greater reserve ratios in the banking system, tighter USGovt and EU member nation spending. He suggested that going backwards in the currency arena is not a bad idea when going over a cliff. He recounted some history, when discussing his new book "Currency Wars: The Making of the Next Global Crisis." It is making a splash, and causing some waves since it disputes some Bernanke recollection of the Great Depression. Before that horrendous chapter of modern history, the US and London fixed the Gold price, but to a level pre-WWI, a great error by Churchill and his advisors. The British led the movement, as the United States was a young inexperienced nation. The Gold Exchange Standard was flawed, with an entirely inappropriate Gold price at work, which probably did contribute in significant ways to the painful enduring depression. What followed was the economic depression that gripped the Western world, partly due to the gross errors in under-valued bank asset reserves and the resulting impact. Fast forward to today. The USFed might have the best of intentions, but the central bank is repeating every single error made by Japan, in Rickard's viewpoint. The Land of the Rising Sun was caught in over a decade of economic lethargy and difficult insolvency that made traction next to impossible. Rickards calls the money supply not a thermostat, but rather a nuclear reactor under risk of meltdown. It should not be played with, as the Bernanke Fed is doing. Rickards is giving the Bernanke Fed a stern warning.

The Resolution Trust Corp was very effective in 1990 in liquidating the housing mess back then, as the process lasted a mere two years. The current evasive path could last another ten years, which Rickards hinted was irresponsible and reckless. He was asked to provide insight on the price of Gold, and how to determine the right Gold price. He was excellent in describing how one must answer the right questions in preliminary to such determination. How is money defined? It can be money in circulation, or extended to include deposits, even checking accounts and more. What countries are in the club of money for purpose of definition? Europe, England, China, Japan, he believes. What percentage of Gold backing is appropriate for a currency generally? In the past, 20% was used in England in the 19th Century, and 40% in the US long ago. The Jackass believes a 5% cover clause would result in tremendous stability, as does Jim Sinclair. Rickards concluded that based on his answers to the preliminary calculus, the proper Gold value is $3000 per oz, with a high end of $44,000 per oz. In the same conversation, the sidekick Jim Grant expressed his belief that the USFed is doing incalculable harm with the series of Quantitative Easing initiatives. He offered his own concept toward a calculated Gold price. It is inversely proportional to faith in central banks generally, which is very low. Thus the proper Gold price is very high. Amusing, pithy, but based in harsh reality, and indisputably so. See the Got Gold Report article (CLICK HERE) with the Bloomberg video (CLICK HERE).

◄$$$ THE AUSTRIANS ARE IMPLICATED IN A STRANGE DEAL WITH THE PEOPLES BANK OF CHINA. THE DEAL PROVIDES FOR A SPECIAL PRIVILEGE, WHEREBY AUSTRIA CAN INVEST IN YUAN-BASED ASSETS. THE GLITCH IN THE SYSTEM IS KICKBACKS TO PRINT SHOP MANAGERS, WHICH ARE OWNED BY THE AUSTRIAN CENTRAL BANK. $$$

The Austrian central bank has struck a deal that raised eyebrows, suspicions, disapproval, if not laughter. The Oesterreichische Nationalbank (OeNB) usually has delivered bizarre and obscure headlines to be sure in the last several months. A secretive agreement has come to light between the OeNB and the Peoples Bank of China that makes Austria the first non-Asian country permitted to engage in Renminbi investments with its Chinese counterpart as the intermediary. Media inquiries were not answered. The press release read, "Based on the excellent longlasting contacts between the Peoples Bank of China (PBOC) and the Austrian central bank (OeNB), the Governors of the two central banks, Mr Zhou Xiaochuan and Mr Ewald Nowotny, today signed an important agreement in Beijing. This agreement enables the OeNB to invest via the PBC in Renminbi-denominated assets. This is the first agreement of its kind signed by the PBC with a non-Asian central bank, and can be seen as an important step in the good relationship between the PBC and the OeNB." Be sure to know that this is a well engineered game plan, using Vienna as the gateway to the East for German benefit. The Austrian officials could not do anything without Berlin's consent. An agenda is being worked.

Financial cushy deals are replete behind the scenes, some outright fraud, others borderline in their benefits. It appears that Austria has pursued a financial income source of a clever variety that serves a Berlin agenda. Calls of corruption have reached the central bank in Vienna. Legal authorities are busily following an exotic money trail between Austria, Switzerland, and Panama that originated at the money printing shop Oesterreichische Banknoten & Sicherheitsdruck Gesellschaft (OeBS). The shop is a 100% subsidiary of OeNB, the central bank. Reports cite how two former managers of OeBS and two lawyers are in custody. Allegations include money laundering. Media reports descibe a kickback scheme whereby the OeBS employees receive money through a Panama firm named Venkoy. The OeNB governor Ewald Nowotny has been aware throughout the process, according to board meetings. The alleged damage was reported as EUR 14 million in bribery.The central bank fired the printing shop owners in late October.

◄$$$ A TACO BELL PROMOTION STICKS AN ELBOW IN THE RIBCAGE OF THE GOLD CARTEL IN A SYMBOLIC GESTURE. THE PROMOTION SHOULD INCREASE AWARENESS ABOUT GOLD BY THE PUBLIC. EXECUTIVE MANAGEMENT FOR THE CHAIN MUST BE GOLD AFICIONADOS. $$$

Taco Bell has launched a promotional contest for an opportunity to win actual US Gold Eagles. The prize is $1142 in real traditional gold. Taco Bell began the contest where the winners are allowed to choose whether they receive the prize in Federal Reserve debt notes, namely cash, or in solid US Gold Eagles. The battle cry is "Yo Quiero Taco Bell's Oro!" (I want Taco Bell's Gold). While the resulting ownership in gold is trivial, the exposure to the public about gold and its tangible value, as opposed to corrupted paper and corrupted financial markets is stark, loud, and clear. One must expect that the restaurant chain CEO is a follower of gold and the movement toward legitimate assets unblemished by fraud. See the Silver Doctors article (CLICK HERE).

STRONG HANDS HOLD GOLD

◄$$$ THE CANADIAN MINT HAS OFFERED A FUND THAT PROMISES BULLION METAL HOLDINGS. DO NOT TRUST IT. INSTEAD PUT YOUR TRUST IN OTHER FUNDS WITH AN HONEST TRACK RECORD. THIS IS A GOVERNMENT SPONSORED DIVERSION OF SOLID DEMAND, MUCH LIKE THE G.L.D. FUND IN THE UNITED STATES. THEY OFFER GOLD CERTIFICATES, AND NOTHING MORE. TRULY THE BEST ALTERNATIVE REMAINS A VAULT FACILITY SERVICE IN ASIA WITH INTEGRITY. $$$

The Royal Canadian Mint has announced an initial public offering of Exchange Traded Receipts (ETR) under its new Canadian Gold Reserves program. Each ETR (translation: certificate) provides a link to ownership in physical gold bullion held in the custody of the Mint at its facilities in Ottawa. Sounds more like a promise. They have expanded the business, but red flags are raised. They boast of being a world class custodian of precious metals. They promote convenience and efficiency for investing in and owning physical gold. So does the SPDR Gold Trust, the fraud with trading symbol GLD. The Mint claims that the purchaser of an ETR owns the actual gold rather than a unit or share in an entity that owns the gold. Sounds like a lie, since a receipts is a unit. The net proceeds of the offering will be used to purchase gold at the London PM fix price on the official closing date. Subject to certain restrictions, ETR holders will be entitled to redeem their ETRs for physical gold bars or coins, or for cash based on the future gold price or market price of the ETRs. That last item is a zinger. What restrictions? Sound like at the whim of the mint itself. Will redemption be pushed to cash? See the official Mint website article (CLICK HERE). When a crass veteran Canadian gold trader and consultant was asked his impression, no minced words came back. He said, "What a fraud! Incredible! Only metal you have under your control and access to 24/7/365 is safe to own and hold. If you do it any other way, you will end up like Gaddafi in a sewer pipe before they put a bullet into your head." He might have referred to very large gold bullion holdings. The Jackass response is to compare the ETR offering from the Canadian Mint to the GLD Exchange Traded Fund. It is difficult to find any difference except the custodian. Go with the Central Exchange Fund in Canada, 55% gold and 45% silver. Go with the Sprott Funds in Gold (PHYS) or Silver (PSLV). Go with the GoldMoney storage, but choose Hong Kong vaults, never London or Zurich. Sadly, only a few honest precious metal funds exist for investments.

◄$$$ ALL REMAINING COLD METAL SILVER IS IN VERY STRONG HANDS. THE SHAKEOUT IN THE LAST SEVERAL MONTHS HAS REMOVED THE WEAK INVESTORS, THE JUNKIES, AND THE NAIVE. WHAT IS LEFT IS VERY STRONG AND STUBBORN INVESTORS WHO SEE WHAT IS COMING WITH MONETARY HYPER INFLATION ON THE NEXT ROUNDS. $$$

The Silver Doctor is a reliable analyst with an excellent vision of the market and its potential. He believes that nearly all investors of silver in the past 40 years who waited for a generous price to sell for a handsome profits, have now done so. He refers to many who bought near the $50 price back in the 1980 era. Of course, some adrenalin junkies who purchased above $40 in March fall in the same category, not understanding why they purchased it, will dump their positions as silver again approaches $50. But they are a small group, the volume bears out. Nearly everyone who might sell physical silver held for years anywhere near current prices has probably already done so. An easy conclusion can be made. The Silver Doctor said, "The remaining holders of physical silver have a firm understanding not only of the value of silver, but also of its spectacular Supply & Demand fundamentals, the global epidemic of Quantitative Easing, the systemic debt issues among all Western nations, the potential collapse of the Euro and the USDollar, and the over $1.25 quadrillion in worthless derivatives that are the ultimate reason for the entire financial collapse." The great fundamentals, ample QE, toxic sovereign bonds, ruined major currencies are reason enough. The icing on the exploding cake is the worthless derivatives. Notice the strong-arm definitions of a debt default imposed during the Greek negotiations. The bankers realize the derivatives are the weakest hidden link, an explosive chamber. The big Western banks do not protect each other, do not offset the risk, but rather are tied around the neck together with cement rings. If and when a nation defaults on debt, or some big banks fail, the derivative fraud will be exposed. Counter-parties will both fail and die, and certainly not protect each other.

The derivatives effect is manifested in two ways, 1) continued bailouts assure the extreme debasement of money to avert the collapse followed by significant price inflation, 2) an end of bailouts would cause the sudden failure of a long string of banks followed by massive recapitalization needs. Either way, Gold wins in the disaster prevention or the disaster cleanup.

The remaining holders of physical silver understand why they purchased their silver. They do not intend to sell back for fiat paper, under disguise as Federal Reserve Notes, actually debt. They will shun the current prices, not considering a sale, knowing the true value. They are the strongest of strong hands. They await triple digit silver prices and a USDollar collapse. Both are assured events, no longer crazy thoughts. The Silver Doctor made a final rally call. He wrote, "Combine this with QE3 and also the fact that The Morgue [JPMorgan] will likely not be massively increasing silver shorts into the next major rally for the first time of this bull market due to the coming (albeit at least a year out for non-spot month contracts) implementation of position limits for silver, and we are looking at the potential for silver to literally go supernova when $50 is cleared decisively. This is the basis for The Doc's $70 silver call for the end of 2011, as the next rally in silver should be the sharpest and steepest of the entire bull market to date. When this rally kicks off and whether silver sees $70 by the end of 2011 or in 2012 will depend on when the Fed publicly announces the launch of QE3. Judging by the level of FedSpeak over the past few weeks, it appears official QE3 is nearing. Any corrections back into the lower $30's need to be bought aggressively, as once The Bernank kicks off the next rally in silver, the train will have left the station." See the Silver Doctor article (CLICK HERE). Clearly the gold cartel has more ambushes left, like what was seen last week leading to the Silver option expiration on November 23rd. The Jackass never puts too much credence on enforcement of position limits. JPMorgan has been immune from all the rules for a long time. Usually when pressed, JPM relies upon national security for exemptions to any onerous rules.

◄$$$ THE GOLD PRICE IS WAITING FOR CLEAR DIRECTION. THE MONETARY SYSTEM IS BROKEN, MADE EVIDENT IN EUROPE. THE USGOVT DEBT SITUATION IS NO BETTER, BACKED BY A PRINTING PRESS. THE EUROPEAN BANK BAILOUTS AND VAST RECAPITALIZATION ARE OBVIOUSLY TO COME, BUT THE POLICY CANNOT FIND FIRM FOOTING, SINCE SO DANGEROUS ON INFLATION. GOLD SMELLS IT, BUT IS RELUCTANT. THE $2000 MARK IS PLAIN AS DAY. THE ILLEGAL NAKED SHORTING CONTINUES WITHOUT RESPITE. $$$

◄$$$ THE SILVER PRICE HAS TWO PROBLEMS. IT TAKES LEAD FROM GOLD, WHICH IS UNCLEAR. IT STILL HAS LINGERING PERCEPTIONS OF BEING AN INDUSTRIAL METAL. IT STRUGGLES TO ESTABLISH A BASE FROM WHICH TO PROPEL PAST THE $50 MARK. WHEN GOLD SURPASSES $2000, THE SILVER PRICE WILL ZOOM TO MAKE IMPRESSIVE HIGHS. THE ILLEGAL NAKED SHORTING CONTINUES WITHOUT RESPITE. $$$

◄$$$ ALF FIELDS FORECASTS A REVISED $4500 GOLD PRICE. HE IS CREDIBLE AND RATIONAL, A FOLLOWER OF THE WAVES THAT HAVE SHOWN THEMSELVES LIKE BLAZES ON FOREST TRAILS. HE MAPS OUT BOTH THE PEAKS AND CORRECTIONS IN A REALISTIC MANNER. THE THEORY WORKS BEST IN PRICE BREAKOUTS WITHOUT PAST HISTORY AS GUIDE, LIKE NOW, BUT NOT AS ABSOLUTE GUIDES. $$$

Alf Fields predicts a target of $4500 for Wave III, typically the most powerful of the five wave cycle. The series of waves has full minor sequences wrapped within individual major sequences. A full minor (intermediate) five wave cycle constitutes a single impulse up or down among the major waves in cycle. The new target issued by Fields is a substantial revision from his initial Wave III target of $3500. This would be followed a few years afterwards in a top monumental run for gold in Wave 5 climax. He offers a guide to the current situation. Once the correction in the past few months has been completed, an Intermediate Wave III of Major III will be underway. This should be the largest and strongest wave in the entire Gold bull market seen and enjoyed in more than ten years. The target for this wave should be around $4500, but a cautionary note, with only two 13% corrections to be expected.

Fields offered some price analysis of expected wave intensities, which turned out to be more positive than even the Elliott Wave Theory forecasted as guide. For instance, the Gold price actually reached beyond $1000 in March 2008, a four-fold increase rather than the calculated three-fold rise to $750. That was the anticipated point at which the 32% correction was due. Over the ensuing seven months the Gold price in the spot market declined from $1003 to $680, an exact 32% correction. The high at $1003 and the low at $680 established the extremities of the first two major waves of the bull market. Their precise recording enables more accurate peak forecasts for the next wave. The Gold bull market is in the process of firing its most potent cylinders, working its way upward through a Major Wave III, often the longest and strongest wave in the bull market. However, it will not begin until the current correction has been completed. Notice all the fundamentals are aligning properly, and the near perfect psychology coincides like a hand in a glove. Prepare for a $4500 gold price target. See the Silver Doctors article (CLICK HERE). The Jackass does not put full faith in the Elliott Wave principles. They have shown to contain the most value and integrity only when no past history for scattered resistance and support levels are prevalent. One must integrate criminal entities interfering with free markets as well. Refer to breakouts without history, into uncharted waters. LIKE NOW!!

◄$$$ PRICE IRREGULARITIES IN THE PRECIOUS METALS MARKET HAVE BECOME PREDICTABLE, LOW PRICES COME AT THE LONDON FIX, FOLLOWED BY A RISING PRICE ALL DAY LONG AFTERWARDS. INTRA-DAY PRICE MOVES REVEAL THE CORRUPTION. THE LONDON FIX IS THE PRIMARY ANCHOR, WHICH IS CONTROLLED WITH A FIRM SUPPRESSED HAND. $$$

 

Price moves occur with statistically measurable frequency. The market corruption for Gold & Silver is blatant and obvious, best seen in intra-day price movement. The firms in collusion are many. They act in concert, even direction, by the USFed and USDept Treasury. Their motive is to protect the Gold nemesis in the USTreasury Bond, the vehicle for the USDollar itself. They wish to cap inflation expectations or perceptions, altering the measure. Little difference is seen in the signatures for Gold and Silver on intra-day movement, down hard for the London fix with a slam, and up the rest of the day after a brief kick in the groin at 10am when New York opens. The statistical likelihood of such a repeated signature is nil, like one in a billion odds over the course of a year. The time of day pattern points a firm finger at the London price fix process, the horizontal axis above being the time of day. This price averaged charts were calculated on the basis of millions of one-minute price bars. Behold the importance of the London fixing and the related 10am New York open as a benchmark for the market in order to comprehend that anchor. See the Silver Doctor article (CLICK HERE).

◄$$$ GOLD PRICE CORRECTIONS HAVE BEEN BUMPS IN THE ROAD ON A TERRIFIC DECADE LONG UPWARD TRAJECTORY. THE AMBUSHES AND POUNCES, ALTHOUGH UGLY PAINFUL AND CRIMINAL, PROVIDE PHYSICAL BUYERS AN OPPORTUNITY TO SNAG LOWER PRICES. THE SHORT-TERM LEVERAGED TRADERS ARE HARMED EACH TIME. THEY MUST MIGRATE TO PHYSICAL. THE RIDE HAS A LONG WAY TO GO, AS ALL FUNDAMENTALS IMPROVE EACH MONTH AND YEAR. $$$

Much hue & cry can be heard each time the Gold & Silver prices take a hit, usually from illicit naked shorting and criminal market interventions to support an unsupportable collapsing system. My usual mental technique is to think back one or two months, and to recall that the current price even after ambush is higher. The trend is up. The hits are temporary. The big beneficiaries are the patient unfettered investors who accumulate physical and ignore the wild daily swings. The Gold price was whacked down to the low $1600's this April. Yet after ambushes in September, October, and November, it is above $1700 and all primary daily moving averages. Why all the complaints? Just buy more physical if funds allow. Check out the frequent monthly gold price corrections of 8% in size. They are bumps in the rising road. Gains are over 400% in a decade, sure to continue when the big monetary patches are applied. It pays to maintain a big picture focus. It means buying dips can be done with a high degree of confidence. The fundamental factors driving gold are only improving. Government debts cannot be reduced. Economies are sliding into recession. The banks are turning more insolvent. The monetary system is crumbling. The major currencies are locked in debasement paths. Endless wars persist with heavy cost. Alternatives to Gold are fast vanishing.

◄$$$ PLATINUM IS ULTRA-CHEAP RELATIVE TO GOLD. ITS INDUSTRIAL DEMAND IS LAGGING. A GREAT OPPORTUNITY IS PRESENTED. THE HISTORICAL 35% PREMIUM OF PLATINUM OVER GOLD IS GONE. INSTEAD AN 8% DISCOUNT TO GOLD IS CURRENTLY OFFERED. $$$

Precious metals have had an important role as currency during stable times. Lately, except for Gold, they have more industrial demand that has aggravated shortages. To be sure, both Silver and Platinum are used more in reserve asset investments even though they play a role as industrial commodities. In fact, Gold, Silver, Platinum, and Palladium each have an ISO 4217 currency code. During the ongoing financial crisis, the monetary system is breaking down in recognized manner. Through the back door, precious metals are in the process of regaining their role as currency. They cannot be printed like fiat money. Never to be overlooked ar the other precious metals in the platinum group metals: ruthenium, rhodium, palladium, osmium, iridium, and platinum, of which platinum is the most widely traded. Historically, precious metals have commanded much higher prices than common industrial metals. In recent months, the misguided perception that deflation would take control has sent the Platinum Group Metals down in price. If such deflation nonsense klaptrap were true, the crude oil price would be $50 per barrel. Instead it pushed over $100 recently, aided by massive monetary expansion, aka inflation. Since 1972, Platinum has traded at about 1.35 times the price of Gold on average. However, it currently trades at 0.92 times the price of Gold. Such is a rare situation, occurring only in the early 1980 decade and briefly in 1974. Based on this ratio over the last 40 years, Platinum is cheap versus Gold. An opportunity is presented. Bear in mind that if USGovt nazis attack Gold owners on frivolous baseless legal grounds, they will probably not attack owners of either Silver or Platinum. See the Profit Times article (CLICK HERE).

MINING STOCK GLIMPSE

◄$$$ JOHN HATHAWAY STILL LOVES MINING STOCKS, HIS STOCK & TRADE. HE MAKES SOLID ARGUMENTS ABOUT A HIGHER GOLD PRICE. THE EUROPEAN SOVEREIGN BONDS ARE TOXIC, THE ALTERNATIVE BEING BUBBLY USTBONDS OR GOLD. MINING STOCKS HAVE BEEN RESILIENT IN STOCK MARKET DECLINES, BUT TRADE AT A $1400-1500 GOLD PRICE. THE CENTRAL BANKS CANNOT PUSH GOLD DOWN. WHEN EUROPEAN LEADERS FINALLY HAMMER OUT A REALISTIC RESCUE PLAN, GOLD WILL REACT POWERFULLY TO THE UPSIDE. $$$

John Hathaway is the veteran manager of the Tocqueville Gold Fund. He was asked about the hectic action in both Gold & Silver in early November, after a decent positive bounce. Hathaway provided an interesting if not folksy overview. Unfortunately, the ruin is broad, having extended into precious metals prices. The pushdown in Gold before a major European bailout deal has finally happened, made easier by the massive MF Global fraud. See the King World News interview (CLICK HERE).

"Get used to it. We are going to see $50 and $100 days both ways [in gold price swings]. To me we have had our correction, shaken out a lot of people and now there is seller's remorse. Those people are not able to get back in except by paying a higher price. So this is classic bull market action. To the extent that this is a rigged game, the game is now over. We are not quite at stampede levels yet, but we will be. Who wants to hold Euros [or their sovereign bonds]? And if the US starts to intervene through some form of central bank asset purchases, lines of credit, whatever it is they use, nobody is going to want to hold the Dollar either. The fact that sentiment is so bad right now in Gold & Silver is just great. It is really what you want. We had a complete liquidation of the COMEX longs and sentiment was terrible two weeks ago [in mid-October]. Everybody who has been faked out or forced out of their longs, and has maybe even gotten short, is now just wondering what to do. [Recently the stock market] was down 200 points on the Dow on the news flows out of Europe and maybe some disappointing news reports here. But guess what the best group was? It was gold stocks, which were up about 2.5% in the face of the stock selloff. Equity investors just cannot sit losing money in the usual stuff. They are going to have to look for answers. One of those answers is going to be gold stocks. Everything cues off of Gold. It has been held low and now looks ready to go to a new high. The move to new highs could happen very quickly. The mining stocks are still cheap here, even with the XAU pushing 200. It is not too late and the mining stocks are at a terrific entry point.

We potentially have nothing but air to the upside in Gold. We could see a big number on the Gold price before the end of the year. Nobody is going to want these paper currencies going forward. We are close to a big breakout. To the extent they were trying to get Gold down in advance of whatever this agreement is supposed to be regarding Europe, it has clearly failed. It was not very successful. Whatever bureaucrat in the basement of whatever central bank was in charge of that, he has probably been fired. If he was not, he is probably not going to be so brave this next time around. The central banks are losing to the extent that they are failing to keep the Gold price down. You know whoever is fighting this battle is fighting a losing battle. There is not going to be much courage left on the central bank side. If this latest London Gold Pool style manipulation fails and at the same time you see more of this disgust with paper currencies, that is where you will get nothing but air to the upside."

◄$$$ THE H.U.I. MINING STOCK INDEX HAS BEEN A GRAND DISAPPOINTMENT, BUT EXPECTED BY THE JACKASS. NO MEANINGFUL ENDURING GAINS HAVE COME FROM A HIGHER PREVAILING GOLD PRICE. BULLION METAL ACCOUNTS ARE PREFERABLE, SINCE THEY DO NOT CONTAIN THE LONG LIST OF RISKS. SHARE DILUTION IS A SCOURGE OF INFLATION. RISING COSTS AND HOSTILE JURISDICTIONS ARE A MENACE. $$$

◄$$$ MINING STOCKS ARE JUST PIECES OF PAPER TOO. AS STOCKS AND BANKS AND SOVEREIGN BONDS ARE SLAMMED, ONE SHOULD REMEMBER THAT MINING STOCKS CONTAIN PAPER RISKS TOO, LIKE INFLATION THROUGH DILUTION. THEY ALSO HAVE RISKS OF RISING COSTS, HEAVY CAPITAL EXPENSE (MILLS), MORE CHALLENGING DEPOSITS, LONG WAITS FOR OUTPUT, SHORTAGE OF HIGH SKILLED ENGINEERS, AND JURISDICTION THREATS. $$$

In the wake of SSRI taking a 33% tumble last week, BrotherJohn made a comment on the risky proposition of investing in mining stocks. His view coincides with the Jackass since early 2008. He wrote, "There are so many reasons not to buy these stocks. The biggest reason is they are just pieces of paper. And as we have seen with MF Global and as we will see on a daily basis going forward, the promises based on paper can go up in a puff of smoke. It is just a really terrible idea to invest in these mining companies." The current SSRI price is on par with a $7.50 silver price, back to the 2003 breakout level. The risks are many. To keep operations going with projects, often new stock issuance takes place to raise funds. This is dilutive, much like monetary inflation. Their cost structure is rising with diesel, lumber, steel, cement, along with the economies. They have heavy capital expense, not just for mills, for road construction, and the conveyance of water and electricity to remote areas. They have long waiting periods to realize the benefits of successful projects, like what is seen in product development or building a service clientele. Mining deposits are more challenging than ten years ago. Last is worse, as jurisdiction risk can be isolated catastrophes. Numerous cases exist, cited in past Hat Trick Letters, where foreign governments seized properties, altered contracts, claimed environment pollution, or sided with worker strikes. Venezuela recently nationalized their mining industry, cutting out the big firms. The Jackass has much preferred the bullion metal vault investment without counter-party risk, even without leverage. The vault storage fees are puny. Besides, mining stocks seem like dead money. Most leveraged players lose on the unpredictable volatility, victims of market manipulation and corruption, which does not come as a surprise. The patient bullion vault investor can sit back and exploit the lower prices offered after the short-term junkies on margin are left as litter on the road.

◄$$$ SILVER WHEATON TRIPLED ITS DIVIDEND, AND DEMONSTRATED IT IS A BREED APART FROM THE CROWD. THE KEY IS CONTRACTS AND LOW COST FOR OBTAINING SILVER AS THE BY-PRODUCT. THEY HAVE A BRILLIANT BUSINESS MODEL WITH A SMALL AMOUNT OF LEVERAGE. $$$

Silver Wheaton is like a LEAP option three years out. Amazingly, Silver Wheaton has announced its dividend will triple in the current quarter. They respond to amplified cash flows, which will be directed toward shareholders. The formal notice read, "Commencing immediately (November 9th), the quarterly dividend per common share will be equal to 20% of the cash generated by operating activities in the previous quarter divided by the Company's outstanding common shares at the time the dividend is approved, all rounded to the nearest cent." The other astonishing factoid is that the quasi royalty company has revenues primarily derived from the third-party sale of silver, keeping its operating cash costs down at around US$4 per ounce. The next dividend payout will occur on November 23rd, and distributed on December 15th. They enjoy a continued growth profile. They pursue high quality silver streams in accretion.

Their business model is difficult to fully describe. They make contractual deals with industrial metal producers, like zinc or lead or tin. The silver is a by-product for the producer involed in the deals, not the primary target. Silver Wheaton agrees to purchase all the by-product silver, but at a very attractive low pr ice. They seal a low price by offering a contract that extends over many years. The producer gains an income stream to offset costs, which importantly can be relied upon in their own business model, as in obtaining loans and credit lines. My belief is such deals favor Silver Wheaton, but they reveal how secondary in significance the silver is to the industrial metal output. Add together several such contracts with several producers, and the result is a monster silver purchase plan, a very low price, a mammoth cash flow, and a great investment. They are distributing the cash flow under strong management. That is why it was added in March 2008 at $19/share. It reached $40 in September, and is consolidating along with the silver market. In my view, it does not contain the many risks of typical mining companies. See the Yahoo Finance article (CLICK HERE).

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