"Empires are built on theft, pillage, slave labor, and finally money printing" - Egon von Greyerz (Matterhorn Asset Mgmt)
◄ CORRECTION: On the supposed Senate Bill SB-2099 for gun registration on IRS tax returns. It apparently is a false story, my apology. HR45 is a real bill on the same proposal, that was submitted this year and in 2008 (under a different number, but the same name). Fortunately, it has no co-sponsors and will almost certainly die in committee, as did the previous version. The so-called SB-2099 is not a real bill, and is not even numbered in the way federal legislation is numbered, although some states use the SB-#### designation for their state senate bills. It is unclear that such gun legislation is in effect for any state.
INTRODUCTORY MACRO UPDATE
◄ See the new Hat Trick Letter Special Report entitled "New I.M.F. Role as Global Bank Proxy" for this month. A surprising insult jab came from the World Bank, whose position can be seen as an early defection against USDollar. Goldman Sachs prep school graduate and current World Bank President Robert Zoellick came out with a shocking comment last month that the USDollar's primary role standing is not a certainty, and should not be taken for granted, as he warned of upheaval to alter influence. End of USDollar supremacy comes, confirmed openly by the HSBC currency chief. The G-20 Meeting finished, accomplished nothing on the global economic front, having endorsed continuous stimulus. The approved ongoing life support is tacit statement of a broken system under constant intensive care.
President Obama made an absurd comment about broad reform to rescue the global economy from the brink, when no bank or monetary reforms have been instituted. The formal G20 communique stated, "We will avoid any premature withdrawal of the stimulus." So the Zero Interest Rate Policy will continue worldwide. The new Intl Monetary Fund role is emerging as a pseudo central bank, with a $750 billion war chest. The IMF is given a new mandate. It will clearly manage the global currency basket, and guide transactions using it. It will dispense funds from formal aid initiatives. In time it will issue a greater volume of bonds in basket terms. Its first mandate is rumored to be a 30% to 50% USDollar devaluation.
◄ See the second new Hat Trick Letter Special Report entitled "Open Evidence of USGovt Gold Suppression" for this month. The US Federal Reserve has disclosed to the Gold Anti-Trust Action Committee that it has Gold Swap arrangements with foreign banks that it does not want the public to know about. A released CIA document confirms the gold suppression strategy. A motivation is established to control the gold price in order to protect the USDollar from a mountainous flow of monetary expansion. The bankers openly discussed in the 1970 decade the limited gold reserves, and heightened risks to the US financial structure. Deals were cut for central banks to limit purchases & sales except to each other. Exchanges are told between then USFed Chairman Arthur Burns and caretaker President Ford. Burns explained the risk to hold the system together after Nixon broke the gold standard. A frenzy followed, as inadequate gold backing for banks was the issue. A monetary system was created that gave the United States the sole privilege to print money. It was a prescription for global financial dominance and control, carefully crafted.
Gold versus central banks is the revealed warfare. An astute analyst explains the next USFed strategy, surely impossible to implement. An excellent strategic summary is provided by Jim Rickards, a financial analyst at Omnis in Virginia. The USFed wishes to pre-empt and interrupt the USDollar collapse, as they devalue it by 50% in a managed decline, while maintaining a stable gold price. Rickards believes that if gold reaches $1500 to $2000, the USFed will be compelled to hike rates by 50 to 75 basis points immediately in currency defensive measures. The move of the Intl Monetary Fund into the forefront prepares and exposes the USDollar to a powerful decline, which the bankers will attempt to manage.
◄$$$ THE NEW YORK CITY APPEAL TO OPEN A NEW INVESTIGATION OF 9/11 ATTACKS HAS BEEN REJECTED. AS OF NOW, IT WILL NOT APPEAR AS A VOTER REFERENDUM. $$$ Justice Edward Lehner of the State Supreme Court approved the decision not to establish a local commission to investigate the events that was put to a November 3rd referendum vote. No consideration of the arguments put forth by the Petitioners was given. The City of New York callously dismissed as 'irrelevant' the appeal for a new investigation. The the patriotic call for legitimate defensible answers by hundreds of 9/11 families, first responders, and survivors has been stifled. The will of the people of NYCity once again is denied, as the syndicate continues. Their stock & trade is murder, theft, fraud, bribery, and coercion. An appeal of the decision is possible. NYC CAN is weighing its options. This fight is only the beginning. A decision by the US Supreme Court would make sense in deciding whether a Bloody Military Coup d'Etat should be upheld. See the NYC Can article (CLICK HERE).
◄$$$ TREASURY SECY GEITHNER CIRCUMVENTS THE USCONGRESS ON GOLDMAN SACHS HENCHMEN. CHANGED TITLES AND ORGANIZATIONAL SPOT ELIMINATES SENATE APPROVAL. $$$ Treasury Secy Geithner furthers the Goldman Sachs chokehold with appointments. He has hired three 'assitants' to his staff. All three earned over $1 million in total compensation last year, according to mandatory financial disclosure. They worked on Wall Street at Citigroup, GSax, and a hedge fund. None has to be scrutinized by Senate confirmation due to the specific title he bestowed upon them. They are all intimately involved in the hundreds of billion$ if not trillion$ funneled into the banks. The advisers include Gene Sperling, who last year earned $888k from Goldman Sachs plus $158k for private speeches to financial firms. Another top aide is Lee Sachs, who reported more than $3 million in salary and partnership income from Mariner Investment Group, a New York hedge fund. So much for transparency, fresh blood, and change. The slippery ogranizational change solidifies the syndicate in the USGovt finance ministries. The neutering and neutralizing of the USCongress continues. The nation is being ransacked. See the Bloomberg article (CLICK HERE).
◄$$$ SUPERSTAR KIYOSAKI EXPECTS ECONOMIC COLLAPSE. $$$ The financial markets are rigged by the USGovt, USFed, and the Big US Banks, as Russia, China, and Brazil have lost confidence in the USDollar. Kiyosaki calls the system broken and points to the USFed admission that $2 trillion in printed money is unaccounted for. It is called fraud! The best deal in his eyes is silver under $20 per ounce. See the video clip of Economic Collapse by Robert Kiyosaki, superstar investment manager (CLICK HERE).
◄$$$ RON PAUL EXPLAINS THE INFLATION SCOURGE AND ITS DESTRUCTIVE TENDENCIES. $$$ The financial system lacks any foundation, as US politicians fail to understand either economics or monetary features of bank structures. Paul described one member on a USCongress bank committee who actually believes the USDollar is on the gold standard. Our leaders are either corrupt or clueless. The US system is based insanely upon consumption and printed money, which destroys the Middle Class. Simply stated, money creation steals from the people who produce and enables confiscation of industries, eventually resulting in a destroyed financial system. He explains the inflation tax. See the video clip of Ron Paul on the collapse of the USFed (CLICK HERE).
◄$$$ JAPANESE PRIME MINISTER HATOYAMA VISITS CHINA. HIS FIRST STATE VISIT WAS TO BEIJING, INDICATIVE OF SHIFTED LOYALTY. THE PARADIGM SHIFT INCLUDES DEEP CHANGES IN JAPAN. $$$ In breaking from a tradition in Japanese diplomacy, the newly sworn prime minister Hatoyama visited Beijing immediately. The forged ties between Japan and China will be made firm and clear, with repurcussions in geopolitics relating to the United States and the West. No more will Tokyo leaders be the American lackeys. The new Japanese Govt is preparing to adjust a foreign policy stance adopted since the end of the Cold War. Almost 150 years after Japan renounced its Asian identity to align with Europe and the West, it seems inclined to return to Asia. The billboard paints a decade of Asian dominance ahead. A recent impasse in Asian territorial security where the US ignored Japanese concerns has left Japan to turn to its own region for leadership. See the Asia Times article (CLICK HERE).
◄$$$ NEWLY ELECTED MERKEL MUST WORK WITH A PRO-BUSINESS COALTION, AS GERMANY TURNS AWAY FROM SOCIALISM. THE FIRST ACT BY MERKEL WAS TO SIGN INTO LAW THE LISBON TREATY. THE BATTLE BEGINS. THE TREATY REMAINS DEAD IN ITS TRACKS. $$$ Immediately after the election, the German president signed into law ratification of the Lisbon Treaty. It was a power play. Under cloak of a lower court ruling, claims by former business executive Dieter Spethmann did not qualify for a hearing. A battle has begun between legal camps, each fortified by financial powers. The last challenge to install the Lisbon Treaty, which would formalize a European Parliament and forfeit member nation sovereignty, failed at Germany's constitutional high court. See the Earth Time article (CLICK HERE). My contact from Germany personally knows Spethmann, who is actually a subscriber and has sent documents to me. He claims the battle is early in progress, that Spethmann will kill the Euro with a well devised strategy. Germany is robbed of €400 billion annually in equalization transfers that support the crippled nations of Southern Europe. Consequently, the German citizens relative income (as in purchasing power) has suffered retrograde back to 1983 levels. These German contacts tell me that the Euro will be discarded by an evolving strategy. If a plan to split into a Core Nordic Euro and Latin Southern Euro fails, expect Germany to revert back to the D-Mark and go it alone. These are revolutionary times in the Competing Currency War.
◄$$$ RUSSIA HAS INFLUENCED THE UNITED STATES TO DISMANTLE THE EASTERN EUROPE DEFENSE SHIELD. BIG DEALS HAVE BEEN STRUCK. RUSSIA EXERTS ITS NEW POWER. THE USMILITARY IS IN RETREAT WITHOUT PUBLIC ACKNOWLEDGMENT. $$$ Only two days after announcing the Polish defense shield plans, President Obama has canceled it. Furthermore, the entire NATO defense shield is to be removed. To call it a defense shield is like calling a hold-up at gunpoint a harmless panhandle effort. Putin clearly threw his influence and earned a concession, a big one. Events are happening so fast. This all occurred after the secret Israeli meetings with Putin at the Kremlin. See the Reuters article (CLICK HERE).
A source with strong geopolitical and global consulting connections summarized the situation. He said, "The missile defense shield was never a viable and practical option anyhow. It was designed as a political bargaining chip. Putin has made it crystal clear that if the US consents to an Israeli attack on Iran, that the Russians and Chinese would attack Israel and the Americans in the Persian Gulf." He went on to describe high jinx games likely to be played out between the United States and Israel, on possibly pulling the nuclear card, and attempts to force the US into an unwanted war.
◄$$$ KING WORLD NEWS COMPLETED A STREAMLINED 4-PART SERIES WITH THE JACKASS ON SYSTEMIC FAILURE. A PRESCRIPTION FOR USDOLLAR COLLAPSE AND USTREASURY DEFAULT IS POWERFULLY AT WORK. $$$
Eric King had the Golden Jackass as guest on four successive weeks for a special series entitled "Systemic Failure." The First Part (CLICK HERE) focused on rampant insolvency in the United States at all levels, the albatross of declining housing and commercial property prices, the phony accounting rules that permit banks to operate and raise equity, and perpetuation of future bank losses pushed by further home foreclosures as property prices continue down. The Second Part (CLICK HERE) focused on the inadequate industrial base for income production or recovery potential, the hidden housing inventory from bank owned properties not put up for sale, the zero rate policy that smacks of failure and handcuffs monetary policy, and the total absence, of reform, restructure, and remedy in the past year that renders recovery an impossibility. The Third Part (CLICK HERE) focused on endless deficits to demonstrate the USGovt insolvent state, the hidden monetization that betrays foreign creditors and heightens USDollar risk, the Dollar Carry Trade acting as a powerful leveraged device to kill the US$, the lack of exit strategy for the USFed mired in insolvent recession mud and pressured by the carry trade players not to alter the course.
The Fourth Part (CLICK HERE) conclusion focused on the end of the Petro-Dollar & Dollar Carry Trade working together to assure a crisis in systemic failure, the USDollar Monetary Crisis that comes from the relentless decline as the US integrity is lost along with the US$ global reserve status, the US Bank System Seizure that comes from next round of losses compounding insolvency, the USEconomy Disintegration that continues from job loss and business decay marred by supply chain disruption, job loss, home loss, and higher cost structure, the USTreasury Default as the final climax from monetization backfire and outsized deficits, and the US Social Chaos & Martial Law that likely will cover the land from continued economic problems and heightened disrespect for leaders who turn against the citizens. The entire resolution phase has begun. The US will experience a systemic failure and debt default of some sort. The default is likely to come as a coerced debt writedown on a global scale. Propping the system only delays the inevitable. The more the Powerz resist, the higher the gold price goes since they waste money. The series is worth a listen on King World News. See the KingWorldNews home webpage also for more interviews with folks like Gerald Celente and Jim Sinclair (CLICK HERE).
◄$$$ See the article "End of US$ Global Reserve Currency" by the Jackass (CLICK HERE). It summarizes the individual power points in the deadly vicious cycle provided in graphic form, where the commercial and financial forces work to remove the USDollar from global reserve currency, then to force a global monetary crisis, and finally to explode into a USTreasury default, a systemic failure. The loop was begun with a 0% official US interest rate, in place for a full year now. The loop is completed with refusal of the US$ in crude oil sales by the OPEC leader Saudi Arabia. The feedback dynamics will be powerful, especially with leverage applied, as is the norm from still active financial engineers. The powerful top and bottom forces will work to create a Toilet Bowl effect that will flush the USDollar down the shoot. It will become an American Tragedy that few citizens have current awareness. Great wealth destruction and internal poverty will come. In what follows in the next two sections pertaining to the vicious cycle loop displayed, notice the slight repetition of points within the powerful dynamics for each item in the chart. The intertwined forces all contain enormous feedback loops that will change the face of the financial world.
END OF USDOLLAR IN TRANSACTION SETTLEMENT
◄$$$ THE END OF THE PETRO-DOLLAR DE-FACTOR STANDARD ASSURES A DESTRUCTION OF THE USDOLLAR INTEGRITY FROM THE COMMERCIAL SECTOR. DIVERSE FORCES WILL MAGNIFY THE STRESSES WITHIN THE GLOBAL COMMERCE FOUNDATION UNTIL IT WEAKENS ENOUGH TO STRIP THE GLOBAL RESERVE CURRENCY STATUS FROM THE USDOLLAR. RUSSIA IS IN THE PROCESS TO RATIFY THE PETRO-DOLLAR END, STARTING WITH OIL SALES TO CHINA. $$$
A grand pact was forged following the crisis that unfolded in 1973 when the Saudis led a global revolt against Western bankers generally and the United States in particular for their steadfast support of the Israeli state. The pact had two sides. The OPEC oil producers led by Saudi Arabia would sell crude oil only in US$ transactions, but at quadruple the price. Given that the semenal shock event occurred two years after a different financial shock event, significance can be connected firmly. In 1971 the United States broke the Bretton Woods gold standard, and thus denied foreign trade partners the right to redeem trade surplus accounts in gold from the USGovt. Lacking a formal standard for the USDollar, the US and Saudis forged a pact that formed a de-facto Petro-Dollar standard. The legitimacy, if not redemption value, of the USDollar was to be tied to petroleum. Thus the age of black gold was spawned. It actually permitted debt abuse by the US and national wealth confiscation by the Saudi Royals, as the rest of the world watched without power.
The practical effect was that entire array of national banking systems were forced to align themselves into a US$-based foundation globally. They made national payments for oil delivery in US$ terms. As a result, their banking structures eventually developed a USTreasury foundation. Nations around the world were bound to purchase the USTreasurys with trade surplus. Eventually, they found themselves stuck with an obligation to finance the USGovt debt, regardless of idiotic US domestic economic policy geared toward consumption and excess. A perverse additional resentment grew, as foreign nations found themselves financing an aggressive USMilitary, whose interests diverged. In the last decade, the US pursued goals to annex nations in order to secure oil supply as private syndicates mushroomed, as appendages to defense contractors. Also, the narcotics war to capture the heroin trade in Afghanistan brought sharp rebuke in private chambers.
Russia is ready to abandon dollar in oil & gas trade with China. Russia stands ready to use Russian and Chinese currencies in instead of the USDollar in large bilateral oil & gas transactions, but the final decision will be made after a thorough expert analysis. Prime Minister Vladimir Putin said, "Energy companies, in particular Gazprom, raised the question of using the national currency. We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans. There should be a balance here." Supply of the currency for trade is essential. The two nations need to establish their debt security and stock markets, open up their native successful competitive firms to foreign shared ownership, in order to promote the currencies in significantly greater volume. Russia and China agreed on terms for Russian gas deliveries at a level of up to 70 billion cubic meters a year. China also imports oil from Russia. Putin raised the issue for discussion at a meeting of Shanghai Cooperation Org (SCO) finance ministers, who are set to meet by December in Kazakhstan, south of Russia. The bilateral energy trade and price deal is an extremely important follow-up to the Saudi announcement intended to remove the US$ from crude oil sales. See the Ria Novosti article (CLICK HERE). The story appears on the Wall Street Journal also (CLICK HERE) but with restrictions.
◄$$$ ALSO, CHINA HAS MADE A LARGE INVESTMENT STAKE IN A RUSSIAN OIL COMPANY. THE CROSS POLLINATION PROCESS HAS BEGUN. $$$ The China Investment Corporation (CIC), one of it sovereign wealth funds, announced that it had closed the first phase settlement for the purchase of a 45% stake in Nobel Oil Group in a $300 million investment. In September, CIC paid $939 million for a stake in a Kazakhstan oil & gas company. Zhuang Jian, a senior economist with the Asian Development Bank, said that the CIC investment in oil & gas would be a better option to mitigate risks in huge Chinese foreign reserves. He cited the excessive deficits and devaluation of the USDollar. CIC had been criticized for suffering book value losses after it purchased stakes in Blackstone Group & Morgan Stanley in 2007. See the China Daily article (CLICK HERE).
◄$$$ CHANGES TO THE BANKING SYSTEMS IN NATIONS ACROSS THE WORLD WILL RESULT IN SHEDDING US$-BASED ASSETS IN GRAND DIVERSIFICATION SCHEMES. THE DEMAND FOR THE USDOLLAR AND THE VALUE OF THE USDOLLAR WILL DECLINE UNTIL A CRISIS UNFOLDS. NATIONS MUST DISMANTLE FINANCIAL STRUCTURES WHOSE PARTS ARE TOXIC. $$$
Many nations felt compelled to purchase USTreasurys with their trade surpluses. In fact, few markets exist with the size of the USTBonds that can handle such large flows. Other nations felt compelled to invest in USTreasury without benefit of national surpluses. One can conclude that the dominance of such a large market permitted and even encouraged the USGovt and USEconomy to work toward imbalance and to act with gross irresponsibility. No corrective cost was inherent to the system. One can go so far as to conclude that such deviant policy and direction was even part of a plan that included funds for a USMilitary strategy. The Vietnam War occurred as a lead chapter to important sequence, the 1971 Bretton Woods broken accord and the 1973 OPEC revolt and imposition of the Petro-Dollar compromise. That all changes in the next phase.
Both banking systems and Sovereign Wealth Fund management systems will adapt to the absent Petro-Dollar standard, in a long phase-out. The nations of the world will not be compelled to stack up USTBonds and construct entire financial structures in order to purchase their national supply of crude oil to run their economies. Besides, the very low interest yield offered on USTBonds has soured global sentiment toward these securities anyway. In the next phase, the vast financial structures will be gradually dismantled, as natural forces add to the erosion. The pace of the deconstruction will be dictated by the level of resentment toward the United States, by the prudence in financial management, by the pace of the naturally occurring structural degradation, and by the speed of the USDollar valuation decline. For over a year, my analysis has harped on a principle, that the first nations off the US$ lifeline will be the first survivor to achieve a notable degree of stability. The Saudis, Russians, Chinese, and Japanese apparently will take that road less traveled, but with a challenge to salvage value from their vast reserves. The Russians have the smallest stake, but being oil producers, they wish not to become more deeply embedded in a ruined currency. The key to the deal was the approval by creditor nations!
◄$$$ AN IMPORTANT BENCHMARK FOR COMMODITY PRICING IS SOON TO BE LOST. THE CRUDE OIL PRICED IN USDOLLARS WILL DESTABILIZE THE ENTIRE COMMODITY PRICE SYSTEM. CRUDE OIL IS THE MOST IMPORTANT COMMODITY IN EXISTENCE. TRADE SETTLEMENTS WILL NOT REQUIRE THE USDOLLAR ANY LONGER. SYSTEMS DESIGNED TO SETTLE TRANSACTIONS WILL ADAPT OVER TIME IN A GRADUAL PROCESS. $$$
A grand commodity pricing effect follows directly from the crude oil price mechanism change. All other commodities, from corn to soybeans to sugar to coffee to lumber are priced in US$ terms, a condition soon to change. The process will take time, but could occur in stages quickly. The banking systems designed to complete crude oil transactions will no longer be needed to complete a variety of other transactions. So the speed of the transition will accelerate and broaden. To say that crude oil payment systems will be isolated is folly. It is universal within the entire commodity system. Oil is the lead commodity, and others will follow. The USDollar will be discarded, since its need will evaporate, and its value will be determined by its own fundamentals and interest yield incentive. Both are gone.
◄$$$ A COST SHOCK TO THE USECONOMY COMES. LOST PRICING OF CRUDE OIL AND OTHER COMMODITIES WILL ASSURE THEIR HIGHER PRICES. THIS WILL COME AS A SHOCK OF HIGHER COSTS IN A UNIVERSAL BLOW TO THE USECONOMY. SOME WILL CALL IT AN INFLATION EVENT, BUT IT IS NOT. IT WILL BE A MAJOR SQUEEZE FROM RISING COSTS WITHOUT BENEFIT FROM HIGHER WAGES OR STRONGER PRICING POWER FOR PRODUCTS AND SERVICES. CREDIT SUPPLY WILL DIMINISH FROM LOUSY CONDITIONS FOR CREDITORS GENERALLY. THE UNITED STATES WILL LAPSE INTO CHRONIC RECESSION. $$$
When a national currency suffers a serious decline in valuation, numerous shocks come. Few of them are favorable. Export business opportunity is a valid factor, if conditions are favorable. Attraction of new tourist trade is valid, if tourist safety is assured. Foreign direct investment in industry is valid, if the state and federal governments do not interfere with taxes and regulatory burden. Even foreign investment in property is valid, but that invites Carpet-bagging, the exploit toward colonization and lost control.
The most immediate effect of a serious and sudden decline in a national currency for the United States is fast rising costs for everything imaginable. Crude oil is the feedstock for a great many industrial processes. It is also produces fuel for the entire transportation industry, including personal travel and commercial shipping. Whether constructing an edifice, making a food supply, looming clothes, making industrial equipment, performing landscape duties, or building furniture, the costs will rise. Businesses will be forced to deal with higher costs and lower profits, unless they can raise their prices. The current economic climate is NOT favorable to general price increases. THE RESULT WILL BE A MASSIVE SQUEEZE ON PROFITS, resulting in further rounds of job cuts and business shutdowns.
The other side of the equation is less favorable conditions for creditors to supply credit. If the USDollar drops in value, then a bond instrument in creditor hands will fall in value. If the US$ declines, then the creditor faces a situation where money returned from loans comes back in lower valued payments. The borrower benefits from inflating the debt down, but the creditor loses from the same inflation, and is thus less willing to lend. The profit squeeze occurs at the same time that available credit shrinks. This is like removing the oxygen supply for a man while draining his blood at the same time. If people think that the Printing Pre$$ can save the day, just by printing money to handle bills and costs, then think again. The foreign world outside the US walls will soon not accept the USDollars in transactions, just like with crude oil. The domestic world inside the US wall will be forced to accept the freshly printed USDollars. THIS IS THE ESSENCE OF HYPER-INFLATION. Remember how many analysts dismissed this risk in the past two years. The Hat Trick Letter warned of upcoming hyper-inflation. My reasons were based upon excessive reliance upon monetary creation via the Privileged Printing Pre$$, and the global reaction to insolvency as the USDollar declined to dangerous levels. We are through its doorstep.
◄$$$ A MILITARY ANGLE CANNOT BE IGNORED. FOREIGNERS DO NOT WISH TO FINANCE THE USMILITARY ANY LONGER. IMPLICIT TO USTBOND SUPPORT IS FUNDING FOR THE INCREASINGLY AGGRESSIVE AND HOSTILE USMILITARY THAT HAS BEEN IN TREATY VIOLATIONS. THE PROLIFERATION OF SERVICE CONTRACTORS AND NARCOTICS TRAFFICKING HAS BROUGHT A QUIET REACTION BY CREDITOR NATIONS. PAST ACTIONS HAVE WROUGHT STRONG REACTIONS. $$$
The entire Bush Doctrine was arrogant and destructive. It stated loosely that the entire world be damned, as US dominance must be accepted, because the United States possesses a powerful military. That was the practical side of the doctrine, which angered friend & foe alike. Response includes diversification away from USTBonds and removal of the Petro-Dollar standard. Bear in mind that foreign nations were also shipped trillion$ in fraudulent toxic bonds that contributed to their own ruined banking systems. So resentment is high. Factor in the aggressive military positions in the MidEast, in Eastern Europe, and the lingering endless presence in Asia. The result is a global backlash. The collection of foreign nations who have served as creditors has tended to regard the USMilitary as aggressive and not acting in much of any protective security role anymore. In fact, it increasingly serves its own associated syndicates and defense conglomerates. So foreigner creditors are working to cut off funds for the oversized aggressive self-serving USMilitary machine. The removal of the Petro-Dollar has a military security angle to it, as Russia steps into the void to provide protection to the Persian Gulf. The insolvency of the US invites a retreat.
◄$$$ WHAT SPARKED THE GLOBAL BUZZ ABOUT THE ENDING PETRO-DOLLAR WAS A PAIR OF ROBERT FISK ARTICLES. HIS ESTABLISHED INTEGRITY HAS NOT BEEN ATTACKED. HIS REVELATION HAS BEEN DENIED BY THE SAUDIS AND FRENCH, WHICH SERVES AS CONFIRMATION. The Saudis, with Russians, Chinese, Japanese, and French at their sides, announced the eventual end of the Petro-Dollar. Germans were involved, but remained in the shadows of control. Sales of Persian Gulf crude oil will be consummated no longer in USDollars after a certain date. Payment for oil will be made with the IMF basket currency. The USDollar will be a component to that global basket. Implications to the United States are enormous, as for economics, banking, geopolitics, and leadership. The United States will step back from the front of the global stage of control, respect, and prestige, and face a path leading to the Third World. Clearly the Saudis reached a military protection accord with Russia. The new global cops are soon to be the Russians and Chinese, starting with the Persian Gulf. For your review, note the following articles by Fisk, a highly respected journalist who is fluent in Arabic and has earned respect from the Arab region over many years.
Fisk starts off by saying, "Nowhere has this more symbolic importance than in the Middle East, where the United Arab Emirates alone holds $900 billion (£566 billion) of dollar reserves and where Saudi Arabia has been quietly co-ordinating its defence, armaments, and oil policies with the Russians since 2007." Recall that for the last couple years, OPEC has had a new unofficial member for decisions and policies, although not in a formal sense, Russia. Behind the scenes, Russia has made pledges and been involved in key decisions, like with the development or interruption of the Gulf Coop Council (GCC) unified currency. The Saudis backed out of the unified dinar currency initiative last May, only to deliver a blockbuster announcement five months later. My belief is that the second event was in the works when the first even occurred. Lacking military protection, the Arabs will pursue an IMF global basket plan that is consistent with Russian and Chinese goals. This shakes the entire world, and introduces an interim period that dismisses the USDollar from its global reserve position, but tethers the major currencies toward more stability via a basket.
See the UK Independent article entitled "A Financial Revolution with Profound Political Implications" (CLICK HERE) by Robert Fisk, dated October 7th. This will become a famous piece. See the UK Independent followup article entitled "Demise of the Dollar" (CLICK HERE) by Robert Fisk, dated October 6th. This only starts the debate, analysis, and interpretation. See the analytic treatment of the blockbuster topic, entitled "Death of Petro-Dollar, Told Ya So" (CLICK HERE) by the Jackass, dated October 8th. Several mega-forecasts have come to pass, this the latest. The USDollar deathbed is being built, and its funeral planned. In its wake comes the Third World.
Some running comments are warranted that follow the Fisk articles, to touch upon his major themes. The Intl Monetary Fund will become the new custodian to the global basket of currencies. It could issue debt. It could build a central bank. If it does both, look for gold to be a mainstay in its structure. The accord to phase out the Petro-Dollar was hatched in secrecy, since the United States has a long pattern of undermining such processes with strongarm practices, like threatening boycott isolation, like reducing technology transfers, like reducing aid, even devious tactics like cutting communication lines. The tables will thus be turned. Gulf Arab states and Chinese banking sources confirm the accord. The Chinese anticipate a trade war with the US, with new center in the MidEast over energy supply and security. The transition will involve gold in some manner, but it is uncertain to what extent. The IMF currency basket is expected to include a gold component, but with uncertain weight. Great anger has grown at the US for its interference with the global financial system, and lately its contribution toward its destruction by means of toxic bond export, all without any scintilla of criminal prosecution. China has become the Spearhead in my words of a global initiative to unseat the USDollar specifically and the US-UK titans generally, whose hegemony and criminality is well understood. China and other nations want less control of the financial structures by the US-UK tagteam. China also resents the blocked energy contracts with Saddam Hussein in Iraq, all rendered null with the annexation by the USGovt in March 2003. China has a foot in the door with 10% of import trade in the Persian Gulf community of nations. Fisk believes the British are actually stuck in the middle, and will eventually turn to usage of the Euro as currency. A great closing quote came from an unidentified Chinese banker. He said, "These plans will change the face of international financial transactions. America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate." Right away, the Saudis and French denied the dismissal accord for the Petro-Dollar. The Chinese confirmed. More denials are sure to come. The louder they are, the more in confirmation.
Some comments of my own follow. When the Saudis backed out of GCC unified dinar movement, the currency shift initiative did not die. Their anti-US$ movement merely switched over to something the Russians backed, because Saudis need military protection to maintain their regime. Many call it a wretched thieving regime that plunders their national wealth. The new global cops are Russian and Chinese. One must pay keen attention to the theme of the Saudi Petro-Dollar message. The global USDollar revolt has one very big common theme. The United States is bankrupt from its many important pillars, and exported its toxic bonds. The US will be forced to take Third World medicine. The USMilitary will lose funding, and as one sharp colleague said, "The soldiers might have to walk home." The USMilitary angle is far more important than given credit, just as important as the financial foundation factor. The USMilitary is hostile to most US allies in addition to its enemies. From here onward, Russia protects both Iran and Saudis. Russia supplies energy to Europe, and controls a wide array of energy delivery pipelines. In fact, in my view RUSSIA IS NOT EVEN ON THE RADAR for most geopolitical analysts. The US control, aided by a UK tagteam partner, phases out from failure and is phased out by force from US$ rejection. Truly dangerous times come. Such risk and disruption are typical from Paradigm Shift, which turns entire systems upside down and invites new leadership.
DOLLAR CARRY TRADE DEADLY DYNAMICS
◄$$$ THE DOLLAR CARRY TRADE (DCT) ASSURES A DESTRUCTION OF THE USDOLLAR FROM THE FINANCIAL SECTOR. DIVERSE FORCES WILL MAGNIFY THE STRESSES WITHIN THE UNITED STATES AND THE GLOBAL FINANCIAL FOUNDATION UNTIL IT WEAKENS ENOUGH TO COLLAPSE. $$$
In the 1980 and 1990 decade, the cheap Japanese Yen at 0% enabled two decades of leveraged speculation safely in US financial markets. Big financial firms, including the Bank of Japan (their central bank), borrowed Yen money at 0% and invested it outside the Japanese Sphere to make money. With leverage some financial firms made amplified profits. The key object assets invested in were the US stocks and long-term USTreasury Bonds. The entire scheme kept the Yen currency down. The Yen Carry Trade served as a multi-Trillion$ engine to produce wealth, but of course, illegitimately. It fueled much of the entire Japanese export trade phenomenon. As the sun sets on the Yen Carry Trade, and China emerges in the Asian continent, we might be seeing the end of an era for Japan.
In the 1990 decade, the cheap gold leasing rate at 0% enabled almost a full decade of leveraged speculation in US financial markets again. Big financial firms, including Wall Street aided by the US Federal Reserve, borrowed Gold at 0% lease rate and invested the money upon sale in the US Sphere to make money. With leverage they made amplified profits. They key object assets invested in were again the US stocks and long-term USTreasury Bonds. The entire scheme kept the Gold price down. The Clinton & Rubin gangsters called it the 'Decade of Prosperity' but it was based upon the ransacking of the USTreasury Gold supply. The people of the United States still have no idea that their National Gold Treasure was stolen by Wall Street firms. It was instead the 'Stolen Decade of Prosperity' that set up the failure of the US financial system (central bank, US bank system, USTreasury Bonds, and USDollar). Next is the final chapter of carry trades turning against the US homeland.
The Dollar Carry Trade guarantees the destruction of the USDollar itself, the removal of the US$ as global reserve currency, the climax being a USTreasury Default of its debt. The financial sector will work to keep the USDollar in a downward spiral, will work to keep the 0% interest rate firm, will work to squeeze the life out of the USEconomy, will work to magnify the USGovt deficits, and will work to increase the USTreasury Bond issuance. The great financial engineering experiment thus turns inward in destructive fashion. The DCT serves as a tightening noose around the global monetary system, adding strain progressively, assuring its breakdown. The pox of central banks and phony money is in the gradual inevitable process of achieving a climax. See "New Deadly Dollar Carry Trade" by the Jackass (CLICK HERE). Be sure to know that several extremely important dynamics and analytic points were intentionally omitted in the public article, saved for explanation and discussion in this report.
The lack of viable alternatives to the USDollar is not a reason for the continued life of the USDollar itself. To say that the Euro or Yen offer no workable alternative is not a reason for the USDollar to continue in its current status. The system is broken and will urgently demand a solution. The Competing Currency War will assure that all major currencies will be destroyed by their governments and central banks. The beneficiary will be Gold, and Silver too. The Dollar Carry Trade is a device by bring the destruction. Evolution like a gold basis to a new banking system is in the works, but the process is gnarly and requires an intermediate step. That step is in all likelihood to be the Intl Monetary Fund currency basket, which is a set of major currencies. Defense from the unstable USDollar first will come from tying all currencies together for crude oil purchase, the essence of the Saudi deal announced with Russia, China, Japan, France, and Germany with all deals struck in secrecy over several months. China has prepared the global seedbed for Yuan currency usage in diverse trade by a rollout of Swap Facilities for formal usage in many nations. Lastly, do not dismiss the evolution of barter system under current development. So to say the USDollar will continue because alternatives do not exist is stupid and shallow, since they are being actively developed even without press coverage by the incredibly corrupted, biased, controlled, and steered US press networks.
◄$$$ THE DOLLAR CARRY TRADE WORKS TO DRAIN THE VALUE OF THE USDOLLAR AND TO RUIN CONFIDENCE IN IT ON A GLOBAL SCALE. IMAGINE THE INCREDIBLE RISKS INHERENT TO OFFERING THE GLOBAL RESERVE CURRENCY AT 0%, NOW FUNDING A CARRY TRADE. IT IS A TERMINAL CONDITION THAT FORCES A DIRECTION TOWARD DESTRUCTION, MADE MORE POWERFUL BY LEVERAGE. $$$
No precedent in history exists for a global reserve currency to be offered at 0% at work. The Dollar Carry Trade (DCT) assures destruction of the USDollar. The DCT cuts the legs off the global reserve currency, from a global confidence standpoint. Such is the case for any currency offered on loan for 0%. Never in history has a reserve currency fed as the source of funds any carry trade! This is the grand climax of the fiat currency system, yet few seem to recognize it. They did not recognize the imminent destruction of US banks either, from a housing bubble ready to bust. Few appreciate the grave condition. Never in history has the global reserve currency had a 0% rate. IT ACTS AS AN EPITAPH OF DEATH. The 0% rate is a grand magnet to kill the USDollar, but first to remove its global reserve privilege status. In a bond driven world, they key nil rate has ultimate importance. A brief check of the last two decades reveals that the national interest rate is FAR MORE IMPORTANT than economic performance in interest rate determination and stability. We live in a bond driven world, where financial sectors are more powerful than the industrial plant or economic performance, by a long shot. See Japan, whose national trade surplus has vanished, but whose Yen currency continues to rise. The Yen rise signifies the handoff from the Yen Carry Trade to the Dollar Carry Trade. Again, bond factors dominate, and with the US$ drained, it will be destroyed. With the USTreasury Bond at absurdly low yields, and thus high prices, the end of the Yen Carry Trade can be seen. Its main object investment is at bubble highs.
The key financial alignment is important to note. The DCT puts the Wall Street firms and other speculative firms in direct conflict with the USFed. An armada of London, European, and Japanese firms join the Wall Street gangsters to add speculative pressures. Even the Chinese probably will participate, since they can directly accumulate Gold at no cost, or set up contracts for future accumulation. See their hedge fund gambit, announced this spring and summer. The speculators will possess deeply engrained motivation to oppose the USFed, to resist any change in the 0% offered rate, and to continue the carry trade until its conclusion. That end is the collapse of the USDollar and USTreasury Default. That explains the steady banter by the USFed about their Exit Plan. They can have none, since the 0% rate invites the Dollar Carry Trade. This vehicle is extraordinarily powerful, and it travels on a One-Way Dead-End Street. For three years, the Hat Trick Letter and other analysts have described the USFed as having painted itself in the corner. The deed is done. The Dollar Carry Trade cuts a hole in the floor for the US bankers, one to fall through into the Third World dungeon.
◄$$$ WALL STREET FIRMS AND OTHER LARGE SPECULATORS WILL NOT PERMIT AN EXIT TO THE 0% STATUS. IT REPRESENTS A POWERFUL CENTRAL BANK PRISON. THE USDOLLAR WILL BE ATTACKED UPON ANY RISE REBOUND, UNTIL IT COLLAPSES. $$$
The natural feedback mechanisms assure the continuation of the Dollar Carry Trade without interruption along the destructive path. Corrections in the USDollar decline will occur. False USDollar rallies will occur. Profit taking periods will occur. False beliefs that the USDollar decline has ended will occur. Phony rumors of an end to the 0% free money condition will occur. When such events come to pass, the DCT will kick in powerfully, with awesome results, in highly predictable fashion. Any potential rise in the USDollar will provide opportunity after opportunity to short the US$ again with the 0% rate, but at a more profitable higher level. The DCT serves as a powerful leverage accelerator with a built-in feedback mechanism. The USDollar has entered a Black Hole, whose power is derived from the DCTrade, with the endpoint being USTreasury default. The USFed cannot hike interest rates for many reasons. The leading reasons pertain to credit derivative implosion (see Interest Rate Swaps), damage done to the housing market, and wreckage to mortgage bonds. The USFed is stuck in the corner.
Wall Street firms can oppose any USFed attempt at an exit without a word spoken, simply by adding to their positions. The rest of the world is certain to join in added positions upon any lift to the USDollar. Wall Street will perversely profit more on their subsequent round of shorts from the global participation. The main effect of the Dollar Carry Trade is to weaken the USEconomy from elevated costs and continued big distortions. Notice the change in talk, change in objective. Wall Street through its powerful post of Treasury Secy has let it be known that they regard a devalued USDollar as beneficial. They promote reasons like making US exporters more competitive, and attracting foreign investment, but not yet have industry return to US shores. That comes later, after the collapse climax. The banter actually is in support of the Dollar Carry Trade, as Wall Street firms reveal their strategy. They are playing the DCTrade actively.
◄$$$ KEY FUNDAMENTAL ENGINES KEEP THE DOLLAR CARRY TRADE CHURNING. FOREIGN DIVERSIFICATION IS MOTIVATED BY 0% RETURNS AND LARGE SCALE MONETIZATION. THE LACK OF YIELD RETURN HARMS DEMAND IN THE USTBOND AS AN INVESTMENT. THE SELF-DEALING HARMS CONFIDENCE IN THE USDOLLAR AND TRUST IN IT. THE INABILITY OF THE USECONOMY TO RECOVER WILL ONLY ADD TO THE USGOVT DEFICITS, AT A TIME WHEN NATIONALIZATIONS BEAR HUGE HIDDEN COSTS.
Little explanation is needed to justify movement away from USTreasury Bonds when their offering is 0%. Even the long-term bond yield between 3.2% and 3.4% is puny. More importantly, the low bond yield is undercut by a falling USDollar. The downward US$ trend will continue to be down for some time, as long as staggering monetization of USGovt debt securities remains the norm, harming confidence deeply. Rumor is ripe that the USGovt and USFed desire a 30% to 50% US$ devaluation. Fiat currencies require confidence and trust. The United States is smothering and snuffing out trust by resorting to Weimar-type money printing to cover the unspeakable debt issuance. They must avoid a failed auction, thus purchase their own debt. This is eating your children, burning your furniture, devouring your vomit.
The persistence of the USEconomy to remain stuck in deep insolvent mud will work to keep the Dollar Carry Trade as a powerful engine. The stuck condition will keep the official rate at 0% and remove all possibility of an Exit Strategy for the USFed, except in political speeches. Those speeches will undercut confidence due to their comic tone, as the USFed loses more credibility. The lack of gains int the job front will keep the USFed in a straitjacket on policy. The degradation of the retail sector echoes the severe throes of the USEconomy. Astute analysts highlight the totally broken structure that is tilted to consumption and still has no emphasis in reform to return industry to the United States. The brokenness of the system will continue the pressures to maintain nationalizations. The tab for Fannie Mae and AIG cost will continue to be astronomical, even though much of the cost is hidden from public view. The new ridiculous national programs will continue to heap great deficits upon the USGovt budget. See the National Health Care program, another Black Hole of costs just like Medicare. The goal seems to be to destroy USGovt finances.
◄$$$ THE KEY OBJECT ASSET INVESTMENTS
IN THE DOLLAR CARRY TRADE WILL BE GOLD (SILVER & PLATINUM TOO),
CRUDE OIL, AND LONG-TERM GERMAN BUNDS. CORRECTIVE MECHANISMS WILL LIMIT
THE EFFECT ON CRUDE OIL AND GERMAN BUNDS. DYNAMICS WILL WORK POSITIVELY
FOR GOLD AND PRECIOUS METALS GENERALLY, SENDING THEIR PRICES INTO ORBIT.
The virtually free money cannot practically pursue only one asset class. Three destinations seem extremely suitable for exploited investments. Only the precious metals seem without limitations. Start with the German Bund, which itself is a paper security. As funds flow from the USDollar into the G-Bund, the long-term interest rate for the German Govt debt security will decline favorably, perhaps too favorably. They have their own bank problems, and must fund rescues, although nothing like the corrupt acidic monolith targets of US aid. The Germans operate under the Euro currency, for now. Much talk comes about a two-part Euro with the Germans in the Core Euro and the trashed Southern European (PIGS nations) stuck with the debilitated Latin Euro. Not only will the German long-term rates overshoot on the low side, but the Euro currency will rise dangerously high again. Early last year the Euro reached the exalted 160 level. It will likely reach the stratospheric 200 level when the full brunt of the USDollar decline develops into a global monetary crisis. As the Euro sells off later down the road, one chief losing vehicle will be the G-Bund. The Euro Central Bankers will actively pursue a corrective downleg in the Euro, just like they did in 2008. Their export business will be harmed once again, just like in 2008. Such a sequence will keep the EuroCB official interest rate low.
As funds flow from the USDollar into crude oil positions, two dynamics will contribute to its unfavorable continuation. First, the global economy and its energy demands will not justify the ultra-high crude oil price. Price should penetrate the $100 mark easily, from both the Dollar Carry Trade and plain anti-US$ hedging practices against huge US$-based bond positions. Second, as the price rises, tankers will be loaded with oil, sitting idle off numerous major ports. The over-supply will become painfully apparent. Further damage will come to important economies, in particular the USEconomy. A rising Euro will offset the rising crude oil price, soothing the damage economically to the entire EuroZone. Other regions like Australia and Canada and Brazil might not suffer extensive damage from energy price rises. The push up in crude oil price will drag upward the natural gas price. OPEC nations might not cut output, too busy gathering in wanted revenues. In time, the selloff in crude oil from its peak during crisis stage elevations will benefit the natural gas price. The conclusion is that crude oil will rise in price, but eventually correct itself from excess supply. Remember that crude oil is NOT a monetary instrument. It will however, remain high.
As funds flow from the USDollar into precious metals, the true nature of the global monetary breakdown will become increasingly apparent. The crisis will grab headlines. The best object assets will be gold, silver, and platinum, since they are monetary instruments in a pure sense. They are each in dire shortage. My personal belief is that silver will steal the show, by taking the most staggering price gains. When the crisis hits, and when precious metal prices rise, the practical effect will be to push the USDollar down below levels that will cause a global reserve disruption of historical proportions. The global management of USTreasury Bonds will reach tremendous magnitude of instability, fully recognized. The USDollar will lose its reserve currency status. Hundreds of billion$ of USTBonds will be shed in vast diversification initiatives, hell-bent on national survival for member nations. The effect will be to start an endless cycle of precious metal price rises, led by gold. Gold will fight the geopolitical battles, will be used by central banks to do battle against the USDollar, and will be the true safe haven. Silver will out-perform gold for basic price dynamics reasons. Central banks sell gold but own no silver. Industry demands vast amounts of silver, but demand very little gold. From a Supply & Demand standpoint, silver has advantages both. Platinum dynamics are more a mystery to me, but probably will enjoy huge lifts that exceed the gold gains, just like silver.
◄$$$ THE DOLLAR CARRY TRADE WILL ENTER THE NEXT GEAR WHEN FOREIGN CENTRAL BANKS RAISE THEIR OFFICIAL INTEREST RATES. THE UNITED STATES AND ENGLAND WILL NOT BE ABLE TO DO SO. THE COMPARISON WILL BE STARK AND WELL PUBLICIZED. THE CASE IN POINT THESE DAYS IS AUSTRALIA, WHICH RAISED ITS RATE IN OCTOBER. FINALLY THE TOPIC OF DOLLAR CARRY TRADE, FROM A YEN HANDOFF, IS IN THE NEWS. $$$
The United States will be the last to raise interest rates, but has been the first to discuss a hike of rates ironically. That point was highlighted on October 6th, when the Reserve Bank of Australia became the first G-20 central bank to raise rates. It lifted its cash rate 25 basis points to 3.25% and hinted that more hikes will follow. The US financial networks are wondering when the US will also hike rates, few realizing it will not happen at all. The US is the most crippled. The US had the worst housing bubble. The US banks are the most destroyed. The US households are the most under-water on home loans. The US industry is the most depleted. The US was most dependent on consumption, and the most dependent upon home equity raids. The US is the most dependent on borrowed funds. Even George Soros from Eastern Europe believes the United States will remain a serious drag on the global economy, which will at best see a flat recovery.
Let's peruse one article on the subject of the Aussies that mentions the Dollar Carry Trade, so as to critique its main points. The exercise highlights false notions. The Investors Business Daily entitled their news article with "Dollar Slides Again On Arabs, Aussies, Fueling Carry Trade" from 6 October 2009, to cover many topics. They wrote, "The dollar came under further pressure Tuesday following Australia's interest rate hike and a report (denied) that Arab states may dump the greenback. That is providing more momentum for the fast growing dollar carry trade." They touched on what the carry trade constitutes, how it works, but not much on what it means. They denigrated the players as 'Hot Money' types. But the list of players includes Wall Street firms and the Japanese central bank. The implication is that ultra-low US rates fuel speculation. They wrote, "The Federal Reserve's target rate is 0% to 0.25%, and New York Fed President William Dudley reiterated US policymaker determination to keep rates 'exceptionally low' for a long period. This strategy has helped revive banks and steady the economy. But artificially low rates, many feel, also contributed to the housing bubble. Now they are encouraging speculators to dump dollars for foreign currencies and assets. Hot money investors, who owe no allegiance to any nation or currency, can now borrow dollars for a fraction of 1%, then sell them and reinvest in higher return assets of other currencies. It is called the dollar carry trade. And it is simply an updated version of the yen carry trade. That trade enriched banks, hedge funds, currency traders, and even retail investors for years. It also weakened the yen, temporarily benefiting exports in Japan's export-led economy… And when traders borrow dollars and sell them to invest in assets of other currencies, they drive down the greenback and inflate the cost of commodities… Meanwhile, the [dollar carry] trade already has helped swell the value of assets and currencies in nations where rates are higher. The Aussie rate hike adds fuel to that fire. Traders have been locking in even higher rates in emerging markets like Brazil, which offers returns of 8%."
Some important points. This is not an updated version of the Yen Carry Trade. It is a deadly version that undermines the global reserve currency, probably to result in its death, the de-throne of the USDollar. The US is heavily dependent upon imports, both finished products and raw material commodities. The DCTrade will indeed cause COST INFLATION, and cause a spiral of US$ declines. An analyst in London from the IG Group noted the crude oil effect from a falling USDollar. Dan Cook said, "It has already put downwards pressure on the dollar. When we see the weaker dollar, we typically see oil gaining." This is a very basic point. Notice the point about the object asset investment being the Brazilian Govt bonds paying 8%, for a hefty gain on the carry. The disdain for US assets derives from both the poor USEconomic condition and the rock bottom USTreasury Bond yields.
Some wisdom came from Katherine Klingensmith, economic and policy analyst with UBS Wealth Management. She made numerous comments, which will be strung together. She pointed out that much of the tracking data is not reliable, since the bulk of trading is over-the-counter. Furthermore, a considerable part of the Dollar Carry Trade is certain to be obscured by the investor being resident to the US and owning US$-based accounts. The 'Dollar Bear Trade' and the 'Anti-Dollar Trade' involve significant investments in foreign assets, and if fueled by borrowed money or leveraged capital, that is essentially Dollar Carry Trade. But it will not be easily tracked and labeled as such. Several Exchange Traded Funds permit retail investors take positions in the Aussie Dollar, Brazilian Real, Euro, and other currencies. She explained that both interest rates differentials and national growth prospects can motivate types of Dollar Carry Trades. A profound lack of confidence in US future prospects, made worse by leverage abuse, lies at the core for the DCT itself. She sees the heightened risk but has faith in the ability of the US$ to withstand the assault.
Klingensmith said, "We think the dollar will get weaker. We think carry trading is part of that. It is truly impossible to know [how big the dollar carry trade is now]. The volume has been going up a lot… We see there is a growing interest in investing in currencies with superior long-term growth expectations. It is absolutely a bet against the US future… Our view is that the dollar will continue to weaken but that it will not collapse… There is overall a fear that the US dollar will lose its status as a reserve currency."
One important signal is the shape and steep nature of the Treasury Yield Curve. If long-term USTreasury yields rise in concert with the USDollar declines, the USFed will be forced to respond. My expectation is that they will respond with more monetization of USTreasurys rather than interest rate hikes. They will continue to transfer the risk to the USDollar, and not permit the risk to sit with USTBonds. A rate hike would probably trigger credit derivative explosion events that most analysts are totally blind ignorant about. A rate hike would cut the value of the USTBonds held in foreign hands, something to be avoided actively. The USFed will want to do everything possible to keep the USTreasury Bond bubble alive, since it is the central core of the entire system. An official rate hike would prick the biggest bubble in the world, the USTreasurys. That is not something the USFed will actively set out to do. They will risk foreigners doing that dastardly deed. In effect, some Financial Mother Nature justice is at work.
Leverage in the Dollar Carry Trade will be unleashed to render tremendous harm to the USDollar, to undermine the USEconomy, to wreck the USTreasurys more than already have been done. The DCT is actually an executioner's axe on a fatally flawed USDollar. Abuse of leverage to create bubbles caused much of the destruction in the entire US landscape. Used leverage in the DCTrade will guarantee considerable momentum in the USDollar death spiral. THIS IS IRONIC TRAGIC JUSTICE FROM LEVERAGE ABUSE, TURNED AGAINST ITS ARCHITECTS. The priority to save the USTBond complex will only add to the USDollar risk. Until a correlation is seen between a declining USDollar and rising USTreasury yields, the USFed and USDept Treasury will have little incentive to reverse course. See the US-Australian Yahoo Finance article (CLICK HERE).
◄$$$ THE DOLLAR CARRY TRADE IS CITED BY WILLIAM PESEK. EXPOSURE IS COMING. HE BELIEVES THE CURRENT CRISIS WILL HAVE A SECOND PHASE, PERHAPS FORCED BY THE DOLLAR CARRY TRADE ITSELF. EVEN CENTRAL BANKS ARE IN ON THE ACT WITH US$-BASED BOND ISSUANCE. A TRADE WAR MAKES MATTERS WORSE. $$$
Germany and Austria led governments and companies in Europe in selling $21.7 billion of bonds in US$-based bonds in September to take advantage of the reduced cost of exchanging the proceeds back into Euros. The list included Spain and Belgium in the attraction of a wider range of investors. For Europeans the cost of funds remains advantageous due to the cross-currency basis. Landwirtschaftliche Rentenbank issued $2.25 billion in US$-based bonds, and another US$ issuance was made by Export Development Canada. The cost of exchanging USDollar floating rate payments into the single European currency as measured by the three-year Euro basis swap is 24.3 basis points below the Euro Interbank Offered Rate, known as Euribor. See the Bloomberg article (CLICK HERE).
William Pesek penned an article with a catchy title "Hedge Funds ATM Moves From Tokyo to Washington" that further publicizes the new Dollar Carry Trade. He believes the USDollar is soon to receive the respect of the Peso. He describes the handoff from the Yen Carry Trade, that will fund new cost-free investments. He reiterated my warning on numerous important points, as he wrote "Now imagine what might happen if the world's reserve currency became its most shorted. Carry trades are, after all, bets that the funding currency will weaken further or stay down for an extended period of time. It is also a wager that a central bank is trapped into keeping borrowing costs low indefinitely… The dollar is under pressure for valid reasons. Deficits are widening faster than US officials can measure, and debt issuance plans are increasing. The US is in recession and the Federal Reserve is still shoveling liquidity into markets… And if Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke are not careful, the dollar will become the main trade dispute with China… The dollar carry trade says nothing good about confidence in the US economy. It is also a reminder that the side effects of this crisis may be setting us up for a bigger one." All his points are precise, powerful, and poignant. See the Bloomberg article (CLICK HERE).
◄$$$ THE NEW DOLLAR CARRY TRADE HAS INVITED COMPARISONS TO JAPAN. IN ALMOST NO RESPECT DOES THE UNITED STATES HAVE AN ADVANTAGE OVER JAPAN IN THIS DANGEROUS CARRY TRADE GAME. THE D.C.T. WILL BE DEVASTATING TO THE UNITED STATES, BUT IT ONLY PUT JAPAN IN A STATE OF STAGNATION FOR OVER A DECADE. $$$
The United States has been compared often in recent months to Japan, which suffered a lost decade from bank insolvency. It too was mired with a 0% rate policy, their own badge of shame, worn after its banking system collapsed and went insolvent, along with a property collapse. That free money license spawned a powerful Yen Carry Trade, which in my view is nearly dissipated. The US is incorrectly judged as having great advantages over Japan. Not so! The only advantage the US has it military might, and considering the weighty cost of its military budget, the US turns that into a deep disadvantage, especially since the military is mainly supporting the US military service contractors and a private narcotics enterprise within the US security agencies, with no public benefit. No! In the 1990 decade, Japan had advantages with a strong industrial base. US has a gutted industrial base. Japan had a trade surplus. US has a chronic deficit. The Japanese industrial might with trade surplus enabled it to absorb ailing (if not dead) firms into the keiretsu conglomerates for hibernation and nurturing.
The US industries are being destroyed, shipped to Asia, and liquidated. Some are being nationalized, if deemed strategic, but with huge Black Hole costs absorbed. See the car industry with General Motors, the mortgage industry with Fannie Mae, and the insurance industry with AIG. Japan had a strong savings rate, with $1.5 trillion in savings accounts. US had a savings rate that only recently turned positive, with horrendous widespread debt burden and diverse home insolvency. Japan was able to crawl out of its national insolvency phase. The emergence of China as an Asian industrial fledgling power enabled Japan to exit its constipation phase. The United States will have to face a terminal enema administered by creditor doctors, with complete bowel eruptions and disembowlment. The patient will die a horrible death. Favorable comparisons to Japan might constitute the most absurd of analytic arguments, with almost no factual basis. The only advantage of the US over Japan is the height of its people. But the Americans manage to add 100 extra pounds to the taller frames, and sport new problems in obesity and diabetes.
◄$$$ THE END OF THE YEN CARRY TRADE HAS BEEN A GRADUAL PROCESS. IT REQUIRES THE UNWIND OF AN ESTIMATED $2 TRILLION IN SPECULATIVE POSITIONS. ITS UNWIND REVERSAL LIFTS THE JAPANESE YEN CURRENCY. THE LAUNCH OF THE DOLLAR CARRY TRADE CREATES A PERFECT HANDOFF FOR SPECULATORS INTO THE NEXT CARRY TRADE ENGINE, AND GIVES THE DOLLAR CARRY TRADE A POWERFUL INITIAL GEAR. $$$
The key signal is the rise in the Japanese Yen currency. Two decades of free speculative Yen borrowing must be dismantled, unwound, and removed. Such a process requires a long time, several years. The process in my view began sometime around the 2001 heights for the USDollar when it reached a DX=121 peak value. One might be correct in assuming the Yen Carry Trade is almost totally unwound. Perhaps the end is marked by the current peak bubble value of the USTreasury Bond itself. That after all, was a key important object asset investment for the Yen Carry Trade. The old players are selling their USTBond positions at bubbly high values with no prospect of further gains. In my view, the USTreasury Bond complex will serve as a gigantic feeder system for the Gold market, the Silver market, and the Euro in the next phase. As the Yen Carry Trade goes through a final stage, the end proces will push the Yen up and consequently the USDollar down. So the Dollar Carry Trade has a huge slingshot positive boost effect at its inception, one to give it a sudden transition from first gear to a strong second gear. That will make the DCT powerful right away, giving it momentum. Such power will not be stoppable. Its strength is in no way recognized!
ON CURRENCY WAR & US$ BOND SUPPORT
◄$$$ END OF DOLLAR SUPREMACY, UNIFORM DEGRADATION, SO SAYS H.S.B.C. IN ENGLAND. PARALLELS ARE MADE TO HISTORY AND THIRD WORLD. $$$ The HSBC bids farewell to USDollar supremacy. David Bloom is their currency chief. He said, "The dollar looks awfully like [Great Britain Pound] sterling after the First World War. The whole picture of risk reward for emerging market currencies has changed. It is not so much that they have risen to our standards. It is that we have fallen to theirs. It used to be that sovereign risk was mainly an emerging market issue. But the events of the last year have shown that this is no longer the case. Look at the UK. Debt is racing up to 100% of GDP." See the UK Telegraph article (CLICK HERE). He implicitly acknowledges that both the USDollar and British Pound are trashed, soon to resemble Third World currencies.
◄$$$ SUMITOMO WARNS OF SEVERE USDOLLAR DECLINES VERSUS THE JAPANESE YEN, DEAD AHEAD. THEY DO NOT EXPECT CURRENCY INTERVENTION TO SUCCEED IN HALTING A SUDDEN USDOLLAR DECLINE. $$$
The chief strategist at a major Japanese bank Sumitomo last week warned that the US$ might fall to 50 yen this year. That would be a 45% decline. Daisuke Uno at Sumitomo expects the USEconomy to suffer a second sudden recession. Uno impressed many by correctly predicting the USDollar would fall under 100 yen and the Dow Jones Industrial Average would sink below 7000 after the bankruptcy of Lehman Brothers a year ago. He said, "The US economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger. The dollar's fall will not stop until there is change to the global currency system. We can no longer stop the big wave of dollar weakness. [If the US$ breaks down below critical support,] there will be no downside limit, and even coordinated intervention will not work." The strong warnings reflect the harsh reality of a broken global reserve currency, as well as the growing rift between Japan and the USA. The outcome of recent elections in Japan changed the entire bilateral landscape. The pro-American LDP party was ousted, a major new piece to the ongoing Paradigm Shift. See the Bloomberg article (CLICK HERE).
Tokyo is openly worried about the Yen currency rise. They are extremely aware of the reversal of the Yen after years of being held down by the Yen Carry Trade, and its engine, the official 0% rate offered by the Bank of Japan. Belief is prevalent among financial professionals that if the Yen breaks through the ¥90 level, it could surge higher. Traders are worried that a complacent market may be caught off balance and add strong fuel to a sharp upward move. A confluence of factors, a new government stepping in with a hands-off view on currency intervention, and a new US$-based carry trade taking root, leaves the USDollar prone to a deeper drop, possibly even below the 14-year low near ¥87.10 seen earlier in the year. The Yen has pushed higher in the last two weeks after incoming Finance Minister Hirohisa Fujii stressed unwillingness to step into the market, as he expressed opposition to intervention unless instability occurs. See the MoneyCNN article (CLICK HERE). Watch for the Yen to rise to extreme heights despite all economic fundamentals. The reversal of the Yen Carry Trade forces buyback of borrowed Yen funds. In the next phase, the USDollar will fall against all currencies except the British Pound Sterling.
◄$$$ ANALYST DAVID MALPASS GIVES WARNING ABOUT THE DREADED EFFECTS OF A FALLING USDOLLAR. THE USGOVT POLICY HAS NOTHING IN COMMON WITH ANY OF THE MALPASS SUGGESTIONS FOR REMEDY. $$$
The following are important points made by David Malpass. A weak USDollar threatens prosperity but gives Wall Street another chance to speculate. Their next gambit is to exploit its decline in bond arbitrage. A US labor market in decline drives down the USDollar, not a positive. The USGovt secretly wants a lower USDollar in order to devalue its debt burden. US Stocks across the spectrum tend to rise with a falling USDollar. Combined with diversion of funds into foreign currencies and foreign stock markets, the US enjoys a Third World type of asset allocation. Capital allocation will depart the US shores more than already, a stronger factor than reduced wage attractions. Capital from nations with weak currencies usually feeds foreign value added industry. The United States is on a course that will ruin industy and render labor unused, until interest rates must rise in a full blown crisis, which is precisely Third World Economics!!
Malpass of Encima Global concluded simply, "No countries have devalued their way into prosperity, while many (Hong Kong, China, Australia today) have used stable money to invite capital and jobs…. Measured in Euros, a more stable ruler than the ever-weakening dollar, US real per capita GDP is down 25% since 2000, while Germany's is up 4% and tops ours. The solution is a strong US jobs and wealth program. It has to include stable money, a flatter, more competitive tax structure, spending restraint, and common sense bank regulation so small business lending can restart. Treasury has to rapidly lengthen the maturity of the national debt and take steps to protect the Fed from market losses on its long-term debt holdings." It is safe to say that none of his recommendations are being followed. Malpass saved his harshest criticism for last, where he emphasized a Third World practice of deep commitment to short-term debt. The United States has embarked on that same deadly path. He wrote the following, a stern warning.
"Instead, Washington's current economic program pushes capital away by weakening the dollar, threatening higher tax rates, borrowing short (the Fed's near trillion-dollar overnight debt, Treasury's mounds of bill and note issuance) to lend long (mortgages, student loans, entitlements), doubling down on government subsidies, and rechanneling bank loans to governments and big businesses instead of the small business job growth engine. It is possible that global bond vigilantes will call Washington's bluff, reducing their bond purchases, until we stop devaluing and restart job growth, which is the ultimate source of tax revenues to repay our bond debt. This would create a Volcker moment when the US might tighten even as the economy slowed (as then Fed Chairman Paul Volcker did back in 1979). But the accepted outlook is the almost-as-gloomy new norm… A better approach would start with President Obama rejecting the Bush Admin's weak dollar policy. This would invite capital and jobs to come back before interest rates have to rise." See the Wall Street Journal article (CLICK HERE). He must not be aware of the credit derivative threat overhang from rising rates.
◄$$$ THE BEST LOCATION TO SPOT THE COMPETING CURRENCY WAR IS SWITZERLAND. THE SWISS INTEND TO DESTROY THE FRANC CURRENCY. IN THE LAST DAYS OF SEPTEMBER, IT IS RUMORED A PRIVATE BILLIONAIRE AIDED THE SWISS BY SELLING A HUGE SWISS FRANC CURRENCY POSITION. THEY DO NOT WANT A VERY STRONG FRANC. $$$
The Swiss National Bank has accelerated its downside currency intervention initiative. The USFed under Bernanke is being challenged in basic currency war. The sensible bankers are awakening. The lackey bankers might permit the USGovt & USFed tagteam to send the USDollar down to competitive levels on a steep downgrade devaluation, but not without a fight by the Swiss. The latest on the currency intervention front comes the marble offices in Switzerland, where the Swiss National Bank has again sold a raft of Swiss Francs in the final days of September, so as to prevent the United States from being the only nation to work toward the destruction of its own national currency. The Swiss Franc declined against the Euro obediently. They curbed its advance. "There is a very strong suspicion that they are intervening via a Swiss supra-national," said Sebastien Galy, a senior currency strategist at BNP Paribas in New York. Translated, that means some independent multi-billionaire aided the process with a private sale of Swiss Francs.
A strategic challenge has come to USFed Chairman Bernanke, to convince the other major central bankers to comply with destructive US monetary policy that benefits financial firms and harms economies. They under-estimate the powerful incentives to debase currencies and engage in a global Competing Currency War. It is a race to the bottom, sequentially ruining currencies in order to salvage export trade. We saw an episode in summer 2008 when the EuroCB cut interest rates reluctantly in spite of a desire not to follow the US destructive monetary lead. They wanted to lower the Euro currency and aid exports. Many more examples will be seen. The Japanese will soon embark on a policy destructive to the Yen. They will want to lower the Yen currency and aid exports, the same dynamic. The gold & silver prices will benefit, since all fiat currencies are being debased during the accelerating currency wars. See the Zero Hedge article (CLICK HERE).
◄$$$ GOLD IS THE ULTIMATE CURRENCY, ONE CURRENTLY DISRUPTING THE MONETARY SYSTEM. GOLD WILL RISE NOT SO MUCH FROM THE PRICE INFLATION FACTOR, AS IT WILL FROM THE MONETARY SYSTEM BREAKDOWN FACTOR. CURRENCIES ARE WIDELY BEING RUINED, TO A DEGREE NEVER SEEN BEFORE. GOLD WILL RISE FROM THE GLOBAL PARADIGM SHIFT. $$$
The gold & silver prices will not rise in the initial stages of the current breakout due to price inflation, although that is the popular belief. The inflation hedge role for gold is so passé, and not highly relevant. Gold serves a bigger role to protect from financial systemic meltdown, wrecked monetary system, disruption from global reserve currency transition, and government debt default. Gold & Silver will suddenly find their true unrevealed prices after corrupt mechanisms are removed. They are selling at deep discount. The newly enlisted IMF currency basket will contain a non-trivial weight of gold. Also, the global barter systems will demand gold in their core asset bases, again sending gold & silver higher. Gold is rising because of Paradigm Shift, the end to US$ Dominance, the beginning of a New China Age, along with the stated destroyed global Monetary System, and broken USTreasury Bond complex suffering a bubble.
The manifestation of gold resurgence will involve three rotations. The first stage will be the USDollar steep fall and the rise in the Euro along with the Commodity currencies. The second stage will be the Euro fall and the rise of Commodity currencies, with minimal USDollar benefit. See the Australian Dollar, the Canadian Dollar, and the Brazilian Real for those currencies buttressed by national commodity wealth. The third stage will be the Commodity currencies fall and the rise of Gold in supremacy. Actually, Gold will rise in all stages. The Euro is the sole high volume alternative to the USDollar. The Commodity currencies offer strong tangible hard asset basis, capable of running alongside the leader in Gold. The debt drag built into all currencies and their absent hard asset basis will kill them, one and all, all in time.
◄$$$ THE PRINTING PRESS ASSURES DESTRUCTION OF THE USDOLLAR AND THE BRITISH POUND STERLING. $$$ Zero Hedge makes a great point, harkening back to history. The US repeats UK empire history. Tyler Durden wrote, "There is, perhaps, no greater symbol of the slow decline of the United States, than the money we carry in our wallets. Of course, the United States is not the first nation to suffer similar currency problems. The parallels between the modern day United States and 19th century Britain are striking. Great Britain suffered from a similar currency decline as the world's most powerful economy began to decay." He might mean 18th century England. See the Zero Hedge article (CLICK HERE). Of course, Tyler Durden is a fictional name of the character in the counter-culture movie "Fight Club" played by Brad Pitt.
UK Chancellor Alistair Darling said Britain has no policy in place to control the level of the Pound Sterling currency. He implied envy of the American ability to toss the US$ currency risk on the laps of foreign creditors, whose banking systems are deeply committed to the USDollar. Wall Street has the White House under its tight thumb of control. So the USGovt generally and unwisely takes for granted its control over the rest of the world. Currency markets smell blood. Ironically, the USDollar could find some support if the British Pound is trashed and sold down hard. This is another plank in the Competing Currency War, as the USDollar will in all likelihood be hoisted on its own petard. That phrase comes from a colonial naval warfare term where cannon backfire kills those in charge of lighting and firing cannon balls at enemy ships. The Bank of England news on a day last week was comical. The central bank is the most disrespected on the planet, for inconsistency, wavering, desperation, and cluelessness. Their table pounding in heightened confusion caused a big 200-point rally in the Pound Sterling versus the Euro. They actually stated that limits existed for their rescues, relief, and bank support. The reality is that Pound printing has limits, given the ruinous demands and lack of a global reserve Printing Pre$$ Privilege. Britain will NOT be able to stop their largesse in aid. The chief loser currencies in the current phase will be the USDollar and British Pound Sterling. They are both used toilet paper, long spent in wiping an empire's hind quarters.
◄$$$ CAPITAL OUTFLOWS CONTINUE THE HEMORRHAGE OUT OF THE UNITED STATES. STABILITY IS NOT REMOTELY BEING ACHIEVED IN CAPITAL FLOWS. THE CURRENCY INDEX USED FOR THE USDOLLAR DOES NOT PROPERLY REFLECT THE ABANDONMENT. PRESSURES RAMP UP TOWARD FORMAL CAPITAL CONTROLS TO LIMIT OUTFLOW.$$$
The shortfall from the net capital outflows increased to $97.5 billion for the month of July, according to the USDept Treasury. That amounts to 10% of the US Gross Domestic Product, the measured size of the USEconomy. Meanwhile, net long-term capital inflows fell to a paltry $15.3 billion in July, an 80% decline from June level of $90.2 billion capital inflow. Foreigners feel more comfortable when avoiding the long-term commitment, as they smell systemic strain if not failure. The Chinese, for instance, have been moving out of long-term USTreasurys and into short-term USTBills for a full year. They feel greater security in waiting out a few months or a few years until full maturity, thus greatly reducing risk, but still harboring US$ currency risk. Foreigners add to the USGovt debt risk, by moving to short-term debt. The USGovt oftentimes merely accommodates the demand wishes by creditors. The outflow pace is accelerating dangerously. The revised outflow in June was $56.8 billion. All data was according to the TIC Report, the Treasury Investment Capital report. The Business Network News of Canada claims the large capital movement is not by major central banks, but by smaller financial institutions and individuals. See the Shocked Investor article (CLICK HERE).
Foreigners continue to lose confidence in both the USGovt finances and the USEconomy. The diversification process is well along. The dramatic fall out of favor in the USDollar is not adequately reflected in the DX index, which did fall substantially by 3.5% decline in July. The DX dollar index is weighted by 57% in the Euro, about 14% in the Yen, even though Japanese trade is not in such proportion. This US$ index relates exchange rates to a small basket of currencies, in particular the Euro (57%), Yen (14%), Pound (12%), Canadian Dollar (9%), Swedish Koruna (4%), and Swiss Franc (4%). Asian currencies from important nations like China, Singapore, South Korea, Taiwan, even the Persian Gulf, are conspicuously missing. The July DX currency index decline might have been double if the critical currencies from nations holding huge reserves were included, since they are diversifying OUT of the USDollar in big volume. For more information on the skewed DX makeup, see the ICE reference document (CLICK HERE).
Simon Black (The Sovereign Man) wrote, "Telling you that the dollar will be continually worth less, until it is ultimately worthless is nothing new. So if you would indulge me a moment, I would like to prognosticate on the greater implications. As the pace of these outflows picks up steam, you can be sure that a group of out-of-touch politicians are monitoring the data and thinking to themselves, 'We need to regulate this before it gets out of hand!' And this sentiment is exactly what spawns capital controls. Capital controls by design are intended to regulate the flow of capital in and out of a currency. In times of uncertainty, shaken politicians always pull this oldie-but-goody out of the playbook. It happened in Iceland, and it has been discussed around the world recently, like in Russia, India, Brazil, the Baltics, Poland, Czech Republic, Kazakhstan, etc. Not to mention, a world largely free of capital controls is a relatively new phenomenon."
DEBT DROWNS THE GLOBAL ECONOMY
◄$$$ UKGOVT DEBT REACHES HEIGHTS. $$$ The UKGovt borrowing hit the highest level on record. The ugly stark details of British public finances were laid bare as new figures were released recently that showed public sector net borrowing swelled by a record £16.1 billion in August. It was the largest monthly increase in newly hatched debt issued by the UKGovt since records began. One can conclude that any decision to withdraw additional stimulus, formal aid, or targeted rescue might be motivated simply by excessive usage of Gilt bonded credit line. Restraint might be more a function of extreme indebtedness, rather than good judgment. Britain has no printing press advantage like the United States, which can print with abandon in secret chambers and shadowy basements, simplified by electronic means. See the Financial Times Online article (CLICK HERE).
◄$$$ DEPRESSION HITS PAINFULLY IN SPAIN WITHOUT POSSIBLE DEFENSIVE MEASURES. $$$ Spain is sliding into a stubborn economic depression with unemployment approaching levels not seen since the Second Republic of the 1930 decade. Strict jobless benefit rules end up forcing government deficits much higher. Premier Jose Luis Zapatero is delusional, telling the people the Spanish recession will be less than elsewhere on the Continent, when it will be devastating. UBS forecasts the unemployment level will reach 4.8 million, possibly higher if the job purge in the service sector gathers pace. Risk grows of a 'Lost Decade' much like Japan's stagnation after the Nikkei and property bust. Combined private and corporate debt has reached 230% of GDP, funded by French and German savings, but not without resentment. Spain no longer has the escape valve of currency devaluation to claw back market share. It uses the Euro currency, even proudly clings to it, with little inclination to discard it. Spain cannot resort to emergency monetary stimulus, since it is forbidden by the European Union. The nations of Great Britain, the United States, Switzerland, and Japan can lean on stimulus so as to prevent the grip of debt deflation. Prices in Spain are already in a rate of 1.2% decline. Jamie Dannhauser from Lombard Street Research believes Spain is bearing the full brunt of the Euro Central Bank's restrictive monetary policy. Spain is the full-blown victim of its own avalanche of debt, offered with cheap rates. It cannot flood their system with credit a second time. Across the entire EuroZone, private sector credit has shrink over the last six months. See the UK Telegraph article (CLICK HERE).
◄$$$ GERMAN BANKS NEED MAJOR WRITEDOWNS. $$$ The German journal Der Spiegel reports that German banks are still burdened by a mountain of impaired US bonds and leveraged derivatives, only a fraction of which have been written down. The entire German banking sector remains undercapitalized and vulnerable to further writedowns in the natural cleansing process. However, German Finance Minister Peer Steinbrueck refuses to set up a state-controlled 'bad bank' for treatment of toxic assets. Such assets remain in the bank balance sheets, and continue to fester, even to interfere with normal bank function. The concept of a bad bank repository has been applied in the United Kingdom and Sweden in the past. See the Credit Writedown article (CLICK HERE). When Germany finally deals with their toxic bank assets, a new wave of debt will be ordered. This story could serve as a preface for a Deutsche Bank bankruptcy restructure. With German national elections completed, the time might soon be ripe for liquidation and resolution with some major banks. One intrepid contact wrote a follow-up. Craig McC said, "As part of any bailout ,will Germany follow China in renouncing Credit Default Swaps and other OTC derivatives, claiming their bankers had be hoodwinked by Wall Street and London? Instead of a trade war ala the Smoot-Hawley Act of the 1930's, is the modern version fought over dodgy derivatives?" Probably YES and YES. My guess is the Chinese followed German counsel on dishonoring the OTC derivatives, just as Dubai followed their counsel with demands for gold return from London custodial accounts.
◄$$$ A SUNSET COMES TO JAPAN WITH DEBT DEFAULT INCREASINGLY LIKELY. THE LAND OF THE RISING SUN MUST MANAGE A TRANSITION CAREFULLY, WITH LESS U.S. INFLUENCE AND MORE CHINESE INFLUENCE. A FRESH DANGER SIGNAL IS THE CONFRONTATION BETWEEN TOKYO LEADERS AND THE USMILITARY, INVITED TO LEAVE AFTER 60 YEARS. $$$
Jonathan Laing has written an intriguing essay about Japan in transition. Its past bank failure, combined with decades of US banker servitude, have left the industrious nation will a colossal debt load. Japan will face strong internal pressure to liquidate its $1 trillion in FOREX reserves (75% in USDollars) in order to plug gaps, buy stimulus, or subsidize Asian trade. Meanwhile, Japan must contend with its government indebtedness. The nation is chockfull of savings, but the waste basket of abuse has been the govt coffers. A Japanese debt default is not only possible but increasingly likely, some experts say. The nation is in transition, and might order a deep cleansing.
Japan has a debt/GDP ratio in the 100% vicinity. However, nearly 95% of that debt is financed internally by its huge residual savings, and much of that debt is double counted because quasi-government entities hold Japanee Govt Bonds in their portfolios. The situation in the United States has a similarity and difference. The Social Security Admin Trust Fund owns a ream of USTreasury debt, double counted. But the US has had to appeal to foreign industrial powers large and small to finance almost half of its debt. Lately, foreigners are boycotting the USTreasury auctions, except China. The US relies upon the monetization vehicle, the Printing Pre$$ in dangerous style. The newly elected Democratic Party of Japan has some reforms in mind, but plenty of costly new initiatives without any sense of where funds will come from. Bigger budget deficits are to be expected at a time when trade surpluses have totally vanished.
Laing makes crystal arguments for continued fiscal problems without resolution. He wrote, "The Democratic Party of Japan platform promises to rectify some of these imbalances, by reducing outlays for unneeded construction projects, by reining in the central government bureaucracy that exerts such suffocating control over the economy, and by boosting household incomes, via measures such as $280-a-month per-child family allowances, eliminating hefty highway tolls, ending fees at public high schools, enriching university aid programs, and providing free health care for children up to 15 years old. The DPJ wants to raise the minimum wage and curb the use of temporary workers to enhance wage and benefit levels. However, the DPJ has been somewhat vague on where it will find the money for its programs, which when fully in place by fiscal 2013 would cost 16.8 trillion yen, about $185 billion, a year. Party functionaries argue the program will pay for itself by giving the economy a powerful and sustained boost. Yet many economists see only bigger structural deficits ahead." One must conclude that unpaid socialism is soon to strike Japan, at a time when its Yen currency is rising from an end to the Yen Carry Trade. See the Barrons article (CLICK HERE).
Press reports concerning the new Japanese Govt states that the 400 thousand US troops placement must depart and go home. Confusion comes. The US State Dept claims that comprehensive new treaties were forged recently with the exiting LDP leadership (past govt). The new DPJ government administration basically rescinded the deal, requesting that US Troops leave Okinawa. The USGovt might soon attempt a fresh round of negotiations.
◄$$$ REDUCED CREDIT FLOW THREATENS THE GLOBAL ECONOMY. $$$ Money figures indicate trouble ahead. Private credit is contracting on both sides of the Atlantic. The M3 money data is flashing early warning signals of a deflation crisis next year in nearly half the world economy. New money creation plus debt extension provides the lifeblood money flow in the tangible economy, apart from the parasitic financial sector. Emergency schemes that have propped up spending are being withdrawn, gently or otherwise. Close examination of the sheer scale of global stimulus this year reveals how remarkably little has been achieved. Take a turn around the globe. Chinese exports were down 23% in August. Japanese exports were down 36%. Industrial production has dropped by 23% in Japan, 18% in Italy, 17% in Germany, 13% in France, 13% in Russia, and 11% in the US. Stock markets are pricing in economic growth that is nowhere evident, more like money creation has found stock markets as an easy location. The overwhelming fact is that private spending has slumped in the deficit countries of the Anglosphere, Latin Southern Europe, and East Europe, but has risen only slightly in the surplus countries of East Asia and Germany to compensate. Excess industrial capacity remains near post-war highs across the world, although some of it is not excess but rather dead. Economists tend not to distinguish.
The Intl Monetary Research says that US bank loans have been falling at an annual pace of almost 14% since June. Damage to credit flows is the worst in 70 years, while US money supply figures point to another crisis soon. The US$-based M3 money has been falling at a 5% rate. The US$ M2 fell by 12% in August. The Commercial Paper market in the US has shrunk from $1.6 trillion to $1.2 trillion since late May. In Europe, the M3 money has been contracting at a 1% rate since April. Bundesbank head Axel Weber sees no credit crisis at present, but suspects a second round of the crisis this winter. Weber points to the rise in the insolvency of firms and households as his telling signal. See the UK Telegraph article (CLICK HERE).
◄$$$ THE U.S. TRADE GAP NARROWS, AS EXPORTS ROSE BUT IMPORTS FELL. NO SIGN OF RECOVERY IS REMOTELY EVIDENT. THE DATA DEMONSTRATES THAT FOREIGN ECONOMIES ARE RECOVERING MORE THAN THE AMERICAN. $$$ The US trade deficit declined slightly by 3.5% to $30.7 billion in August. Through the first eight months of this year, the trade deficit is running at an annual rate of $357 billion, half of last year's $695.9 billion gap. The bilateral deficit with China fell slightly to $20.2 billion, down 0.9% from July. Through August, the deficit with China totaled $143.7 billion, a hefty 15.1% below the record pace last year. Exports rose as imports fell on lower oil demand. Oil prices did jump higher, but the volume of shipments dropped sharply in the month from lower domestic demand. The ongoing rise in exports is an encouraging sign that the global economy is starting to recover, but the falling imports means the United States is lagging behind the world, as my forecast has stated. For August, exports of goods and services edged up 0.2% to $28.2 billion, the fourth straight gain. Imports dropped 0.6% to $158.9 billion, reflecting a 5.7% fall in petroleum imports to $21 billion. The USEconomy cannot recover without vast restructure. The recession is evident in the falling imports, from serious reduction in consumer activity. See the Yahoo Finance article (CLICK HERE).
TRUE VALUE OF GOLD PRICE DISCOVERY
◄$$$ GOLD SURGE COMETH FROM PHYSICAL SHORTAGES. THE LONDON METAL EXCHANGE IS OFFERING A CASH 25% DIVIDEND FOR GOLD SETTLEMENT OF FUTURES CONTRACTS IN LIEU OF LARGE VOLUME DELIVERY. THAT MEANS DEFAULT, AND AN ACTUAL CURRENT GOLD PRICE OF $1300 PER OUNCE. $$$
A surge in the gold price cometh, perhaps imminently. In the next several weeks, the gold price might jump quickly to the $1500 level. A contact with excellent access to gold transaction information and developments has shared that the sharp price rise could come very soon "due to certain transactions that are being consummated at this very moment. Even if the Boyz try to hold own or depress the price, it will do them no good. The pressure that has been built up is uncontrollable. We shall see some big banks hit the wall very soon (weeks/months). The market will take over in very short order from here on forward." He has been consistently right about many events, but the timing is always a grand challenge. A phase has begun to remove illicit corrupt controls on the gold & silver market, from demand of physical bullion.
The gold market could soon explode and possibly work toward a convergent fair market. My hint is that it is Germans and Swiss with other Europeans are working diligently and pointedly to kill off the US-UK bank nazis. A LBMA and COMEX bust and default is visible on the horizon. See the Jackass article entitled "Hitman Contracts to Bust Comex" (CLICK HERE) dated on May 27th. It would include a big bank ruin and legal prosecution. Events are falling into place, slowly but surely. The same source hinted that the ruin of commodity exchanges could coincide with the bust of JPMorgan. So, based upon the London incident, gold has a real price of near $1300. GOLD IS WORTH $1300 PER OUNCE!!
The owners to the LBMA will likely pressure the contract holders. Maybe some threats will be personal as usual, like we will kill you or your children. If you think such threats are silly to cite, then consider this. Precisely such threats were given to presidential candidate Ross Perot by the Clinton gang during the election process in 1992. This is typical syndicate behavior that goes hand in hand with bond fraud and narcotics trafficking. Maybe the LBMA owners will cut loose the commodity exchange members and let them face ruin. Maybe they will see the pattern and cut their losses. My belief is that the syndicate heads will try to influence the politicians and regulators in order to corrupt the exchange further, like change contract and delivery rules, weaken contract holder rights, and impose limits if not members of the inner sanctum. Maybe they will permit delivery of Exchange Traded Fund gold and silver shares from the cartel syndicate chambers. It will certainly be interesting and intriguing.
◄$$$ ROB KIRBY EXPLAINS THE FRAUDULENT GAMES
PLAYED IN THE GOLD MARKET. LIKELY ACCOUNTING FRAUD ACCOMPANIES OTHER
EFFORTS TO CONFISCATE THE STREET TRACKS G.L.D. BACKING HELD IN GOLD.
IN TIME THE G.L.D. WILL BE EXPOSED AS HAVING NO GOLD!! $$$
The counter-parties in deep trouble are JPMorgan and Deutsche Bank, each heavily short gold and unable to produce it in the face of delivery demands. Central banks are aiding the plunder of private gold accounts. All integrity is being lost. Simultaneous irregularities have taken place during the LBMA 'gold delivery incidents' and official Gold Bar Lists maintained by the Street Tracks GLD exchange traded fund. Evidence points to the GLD gold bullion inventory taken to satisfy the London demand for gold delivery. Independent audits have begun in earnest by large private interests (mostly Arabs).
A great fraud theft is in progress, which in time will reveal the naked short position of the ETFunds for gold, and probably silver. Recall that COMEX gold short futures positions have been satisfied with GLD shares by the Gold Cartel. So from a shares side and a deposit side, the GLD is being ruined. Lastly, an Asian Depository has found 'Good Delivery' gold bricks to be gutted and filled with tungsten, another heavy metal. See Rob Kirby's article entitled "Central Banking: A Blight on Humanity" (CLICK HERE) and also "Blight on Humanity Addendum" (CLICK HERE).
GET OUT OF THE 'GLD' AND 'SLV' FUNDS, WHICH ARE DEEP FRAUDS THAT HOLD SHRINKING BULLION IN DEPOSITS. On the stock side of the grand fraud, take Goldman Sachs. They manage the corrupted 'GDX' exchange traded fund on the wide assortment of gold & silver mining stocks. GSax sells (as in naked shorts) them routinely with a single control lever, the GDX, in collusion with the USDept Treasury, to keep the USDollar propped and keep American strong.
◄$$$ THE PARADIGM SHIFT ASSURES GOLD & SILVER PRICES TO REACH UNHEARD-OF PRICES. THE GOLD TARGET IS 1300, AND SILVER 30. THE USDOLLAR IS BEING REJECTED AS THE GLOBAL RESERVE CURRENCY. THE I.M.F. CURRENCY BASKET REPLACEMENT AND END TO PETRO-DOLLAR SALES ASSURE A RETURN TO GOLD PRE-EMINENCE AFTER A DISASTROUS 40-YEAR EXPERIMENT WITH FIAT PAPER MONEY. THE CENTRAL BANKS HAVE FAILED. CENTRAL BANKS OWN NO SILVER TO SELL, WHILE INDUSTRY DEMANDS SILVER IN HEAVY VOLUME. GOLD LEADS, BUT SILVER RULES. $$$
◄$$$ THE LONDON METALS EXCHANGE CONFIRMED A MEETING TOOK PLACE AMONG HIGHEST LEVEL MEMBERS OF THE L.B.M.A. TWO WEEKS AGO. THEY PROBABLY DISCUSSED THE DEATHS OF SOME MEMBERS. THEIR NEWS RELEASE MENTIONED EFFICIENT REFORMS. $$$
The London Metals Exchange CEO Martin Abbott confirmed a meeting with high profile London bullion market members. The meeting is believed to have taken place on September 24th, with at least five elite members of the bullion market engaged in administrative meetings with officials of the exchange. The intrepid reporting agency for this story was FastMarkets, founded in 1999 by Ross Norman and Dominic Hall, both ex-traders from the LBMA itself. Representatives of large bullion banks, including HSBC, Goldman Sachs, JPMorgan, ScotiaMocatta, and Deutsche Bank were in attendance, the news & research outfit reported. Among these firms, all except ScotiaMocatta are LME members. Although the official meetings topic is not disclosed, the London Bullion Market has been considering a new model for their over-the-counter (OTC) gold forward contracts to reduce counter-party risks, credit costs, and compliance. The LBMA is working to keep pace with competitor CME Group in Chicago. Discussions may also have touched on other services, even developments with the freight industry.
The elite group might even have brought up the topic of defaults on delivery in the gold market, the ruin of members, how to defraud contract holders, and how to obstruct independent audits. Reactions might include rules changes to defraud parties seeking gold delivery, delaying and restricting delivery, forcing substandard products to be accepted, and substitutes for delivery.
THE FRENZY OF GOLD PURCHASES
◄$$$ CHINA STILL BUYS GOLD DESPITE A
RISING PRICE. THE NATION DISTRUSTS WESTERN BONDS, THE SUBJECT OF CONTROVERSY.
THEIR PEOPLE ACT WITH HERD MENTALITY, AND LOVE A WINNING ASSET IN UPTREND.
THE INVESTMENT DEMAND FOR GOLD IS HUGE AND GROWING. $$$
Chinese gold investors are undeterred by high prices. With all the volatility in their stock market, and the general distaste for foreign bonds after the climax of the bank crisis, citizens in China still turn attention to gold. The Chinese Govt avidly seeks a true safe haven for its foreign currency reserves, while it pursues a strategic goal to unseat the USDollar. It is most assuredly going to increase its gold assets, which stand at 1054 metric tonnes. If you believe that low number, then you believe in the Easter Bunny and Santa Claus. The actual gold holdings is much higher, just like in Russia. At a trifling 1.6% share of Chinese FOREX reserves held, their gold purchases are certain to rise dramatically. China has one of the lowest gold ratios within reserves among nations with moderate size. Jewelry sales are falling off in both China and India, but investment demand is strong, given more people are using gold as a hedging tool. Albert Cheng, Far East managing director at the World Gold Council, measured Chinese gold purchases for investment at a record high of 70 metric tonnes in 2008.
Like all past upcycles, investment demand overwhelms jewelry demand, but the press stresses the jewelry factor with tremendous bias and ignorance. They provide wrongful analysis in reporting. The Chinese public has an establishment pattern of behavior. They pursue assets in a rising long-term trend with resolute fundamentals and remain in those assets, especially when reliable alternatives are lacking. They operate with a well-known herd mentality. Further price support, in addition to public motivation of the public, is likely to come from Chinese Govt officials as well. They are expected to increase gold reserves in the near future, seeing it as a strategic weapon against the United States during both a trade war and battle for global banking dominance. Currency devaluations, deep cuts in interest rates, outsized government deficits, reports of hidden monetization, and the threat of price inflation have made gold one of the few attractions remaining in China. Following the embattled rhetoric of their leaders, they distrust bonds from the West.
◄$$$ CHINA BUYS GOLD PRECISELY AT WEAK TECHNICAL POINTS, THUS MAXIMIZING ACCUMULATION AT OPTIMAL PRICE. THEY BUY GRADUALLY, THUS PERMITTING THE MARKET TO BRING MORE SUPPLY AT PRICES AS THEY RATCHET HIGHER.
The Chinese Govt has become entrenched in an accumulation program of gold. The Beijing leaders envision gold & silver becoming part of the new reserve currency, whatever final form it ultimately takes. But as they buy in quantity, the price goes up in direct response, frustrating their intention to collect as much as possible, before any collapse of the USDollar. The Chinese are reportedly amplifying their purchases at points of weakness, dictated by technical analysis. In effect, the Chinese could be using a reverse strategy from technical analysis methods, dictated by chart patterns, by hitting the bid harder with more purchase when the technical indicators say they should be selling. They would thus position themselves opposite to the USGovt, which routinely smacks gold down prior to USTreasury auctions, or when the USDollar threatens to break below support. They would also position themselves opposite to professional traders, who tend to follow the technicals and USGovt official control banter.
Another Chinese market factor will work to put more money in gold investors hands. Their A-shares for mining firms have jumped 150% to 200% in recent months. So investors in certain stocks can redeem some profits to accumulate the real thing, gold bars. Qin Weihuan is a researcher at China Gold Assn. He told China Daily, "In the past, gold prices dropped back after it hit over $1000 per ounce. But I believe this time the price has really breached the $1000 ceiling and will stay at these levels for some time." Qin believe gold has entered a new 'Era' as inflation fears and uncertainly over the world financial system will prompt investors to look for safe havens in bullion. See the China Daily article (CLICK HERE).
◄$$$ CANADA FACILITATES CHINESE GOLD BUYING. THE CHINESE CAN BUY GOLD AT ALMOST ANY BANK. THE BANK OF NOVA SCOTIA HAS BEGUN TO SELL GOLD AT THE RETAIL LEVEL, EVEN DELIVER TO HOMES AND OFFICES. THEIR PRECIOUS METALS BUSINESS UNIT SCOTIA MOCATTA WILL JOIN THE SHANGHAI GOLD EXCHANGE, FURTHER BROADENING THEIR SALES. EVEN HARRODS OF LONDON HAS BEGUN TO SELL GOLD BARS. $$$
The Bank of Nova Scotia is the first Canadian bank to deliver gold to the door, with a new marketing plan. They are mimicking China, where people can go to just about any bank and purchase physical gold. Scotia recently launched a new website that will permit customers to purchase gold online and have it delivered to their home. Other merchants offer such a service, but Scotia is the first major Canadian bank to do so. They have extended their reach from being a major player in physical precious metal sales. In response to the financial crisis, gold sales from investor demand have caught fire, contributing to higher prices as investors seek protection from the storm. See the Financial Post article (CLICK HERE). One can safely conclude the COMEX gold is flowing into the public hands through Canada.
ScotiaMocatta is the precious metals business unit for Scotiabank. They announced plans to join the Shanghai Gold Exchange. Their global head of foreign exchange Barry Wainstein said, "This membership will allow us to trade gold, silver, and platinum on behalf of customers having precious metals requirements in China as well as on our own account. China has a natural market with a vibrant exchange that presents a lot of opportunity for ScotiaMocatta." See the Mining Weekly article (CLICK HERE). Huge channels are being constructed for significant flow of gold. One can safely conclude the COMEX gold is flowing West to East through Canada.
Harrods of London has begun to sell gold bullion for first time. Known for its high end clientele, often described as glitzy, Harrods will sell from well guarded showcases of gold bars. Shoppers at the luxury department store will be able to buy the ultimate luxury accessory, gold bars. They are hard to wear, but certainly nice to show. It is one of the finest large department store in the world. See the UK Telegraph article (CLICK HERE).
◄$$$ THE BUNDESBANK AGREES TO SELL GOLD, BUT ONLY A TRIFLING TINY AMOUNT. THE GERMANS STAND AS THE ARCH-ENEMIES TO THE US & UK TAGTEAM OF BANK NAZIS. THEY PLAY A KEY ROLE BEHIND THE SCENES. $$$
The German Bundesbank has announced it will sell no more than 6.5 tonnes of gold bullion in the current fiscal year. They are signatories under the Central Bank Gold Sales Agreement, the updated Washington Accord. The Germany hoard holds in possession 3408 tonnes of gold, the second largest gold stash behind the United States. That depends upon official statistics, for which the US is a degenerate liar. Most official US gold is 'Deep Storage Gold' that is not yet mined in mountain deposits, if one checks the fine print. The US sold its gold under the Rubin watchful eye in the 1990 decade. The Bundesbank has a history of fierce rejections for all attempts by politicians to close budget gaps through selling gold. It is akin to selling furniture to pay the household bills. Being the first to announce among members of the Accord, the German miniscule sale of 6.5 tonnes is to be exclusively devoted to the German mint to produce collector grade gold coins. In September, some controversy was stirred when the German Govt admitted that part of their national gold reserve was located on US soil. Debate continues in Germany on this matter, since in all likelihood, much of the German gold account has been leased and sold by the Americans illegally.
Recall some history. The French President Charles de Gaulle sent a warship to New York in 1971 to recover the entire gold holdings owned by France to to repatriate them to France. Gold is serious business, tied to entire bank system strength, and national vitality. Persian Gulf nations have continued the process of recovering their gold. Dubai started repatriating its 114 tonnes of gold in May from London to Dubai. According to German gold website Goldseiten.de, Germany will offer its sales rights to other member nations or the Intl Monetary Fund. In other words, German will permit other members to sell gold against their account. The newest global banker IMF wants to sell 403 tonnes of gold in the next few years. The IMF is not a part of the Gold Sales Agreement. Both China and Russia announced earlier this year that gold will play a vital part in its foreign currency reserves, fundamentally thrusting forward the strategic importance of gold. Take another chapter from history. During World War II, the nation of Germany was only able to fund its international purchases with gold. The Reichsmark was not honored by any other government. If the United States loses the US$ as global reserve currency, suffers a USDollar crisis with plummeting value, faces USTreasury default, it might be forced to find gold to make foreign trade settlements. See the Seeking Alpha article (CLICK HERE).
Germany is playing a vital lead but hidden role in opposition to the United States and the United Kingdom in the gold wars. Their role is not well known or understood. Notice for instance that with the Saudi announcement, only France from Europe was mentioned in the secret accord that would abandon US$-based crude oil sales. Asia was represented by China, Japan, and Russia. No mention of Germany, but in private reports, a clear role by German representatives was deeply involved. They prefer no limelight. Early in 2009, reports came from the banker circles that Germany had requested its portion of the gold reserves held in US custodial accounts to be returned. No follow-up reports came to confirm that return, which aroused suspicion that the Americans had illegally leased it and sold it. If that news hits the streets, a big fire would have been lit under the gold price. Controversy remains like a cloud, as resolution has not been forthcoming, at least not in reports. Another report came that Dubai had demanded over 100 tonnes of gold from London custodial accounts. When my queries were sent to a couple German banker contacts, they said "Who do you think advised the Dubai bankers to pull their gold out of London, but the Germans, who are counseling them?"
This is a dangerous game, and the Germans are not only experts but very bold. However, it should be noted that Germany is divided. There is a sizeable camp that cooperates fully with the US & UK on capping the gold price, supporting the USDollar, and even lending gold bullion. The same camp works with the Euro Central Bank to coordinate monetary policy with the United States and England. From further word by the German contacts, their flagship bank Deutsche Bank is dead, from a combination of backfired gold suppression, US$ support, toxic US bond purchases, failed Euro Bonds in Southern Europe, and failed mortgages in Eastern Europe. They continue to send notes to the effect that D-Bank will soon regrettably announce their ruin.
◄$$$ SUPERSTAR HOWARD RUFF PITCHES IN WITH AN OPINION ON GOLD & SILVER WITH PROSPECT OF PRICE INFLATION. $$$ Howard Ruff of The Ruff Times wrote, "Sooner or later, the trillions of dollars created by government and given to the banks will be loaned out, as the banks will realize they cannot make enough money just depositing all their money with the Federal Reserve while repairing their balance sheets. Sooner or later they will start lending the money into circulation. The velocity of money, combined with the huge quantities of money, will create monster inflation, but first, we have to wait out the present deflation. Perhaps it should tell us something that despite the deflation, gold and silver are still rising. So what do you expect when the deflation is over and the velocity of money increases? I believe there will be a veritable explosion of monetary inflation, and gold and silver will respond. In the meantime, they are not doing badly."
Great points, made efficiently. Gold & silver are rising when assets and wages are falling. Banks will turn away from extreme safety and resume banking operations. The resulting money velocity and expanded monetary aggregate from fractional banking will result in powerful monetary inflation (even greater money growth) in addition to price inflation. What will the money mountains chase? Stocks, property again eventually, but definitely gold. Those are easy answers. The tougher question is whether the money will create new industries and jobs. My guess is not much in the United States.
Thanks to the following for charts StockCharts, Financial Times, Wall Street Journal, Northern Trust, Business Week, CIBC Bank, Merrill Lynch, Shadow Govt Statistics.