GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Golden Potpourri
* Passive Global Currency War
* Reaction to a Dying USDollar
* Early Stage of Gold Breakout
* Europe in Disarray


HAT TRICK LETTER
Issue #79
Jim Willie CB,
�the Golden Jackass�
24 October 2010

"Obama, the Congressional Democrats, and their Keynesian Friedmanite mentors should face up to the fact that they have overstayed their welcome as financial managers of the United States and the world. Pseudo-theorizing on the non-existent benefits of currency devaluation has grown threadbare. Blackmailing surplus countries and slapping the losses on them, while the orgy continues in the deficit country, is a counter-productive strategy. It is bound to fail, as it already has. It may force China to fix [anchor] the value of the Yuan, not in US dollars but in Gold ounces. That will be the last nail in the coffin of the once mighty US dollar, to make it ready to join the Continental, the Assignat, the Reichsmark, and the Zimbabwe dollar in the cemetery of worthless fiat currencies." ~ Antal Fekete


"China holds all the cards here. If it decides the United States needs to be taught a lesson, it will just sell of some of its vast holding of Treasurys and force the United States into hyper-inflation. The final days of the US hegemonic empire are at last coming to a close." ~ James West (editor of the Midas Letter)

"Inflation is running at rates that are too low relative to the levels that the Committee judges to be most consistent with the Fed's dual mandate in the longer run. There would appear, all things being equal, to be a case for further quantitative easing." ~ USFed Chairman Bernanke (fool #1)

"Dollar debasement s not going to happen in this country. It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity and competitiveness." ~ USTreasury Secy Tim Geithner (counter-fool #2)

"We are in the midst of an international currency war, a general weakening of currency. A currency war threatens us because it takes away our competitiveness. Advanced countries are seeking to devalue their currencies. A series of recent interventions by central banks in Japan, South Korea, and Taiwan in an effort to make their currencies cheaper, have recently occurred." ~ Guido Mantega (Brazil Finance Minister)

"America is being brainwashed by the mainstream media into believing there is a gold bubble. The truth is, the public in 2010 has purchased $2.7 billion worth of gold and $155 billion worth of bonds. Which one do you think is a bubble?" ~ National Inflation Institute

"With the inevitable collapse of the financial system just being right around the corner, it is not the lid that comes off the top but the bottom that is being pushed out." ~ Anonymous (gold trader who describes a system unable to push funds toward demand for price support, so that during the deterioration, the gold price skyrockets, while important financial markets teeter)

GOLDEN POTPOURRI

◄$$$ RESEARCH ARTICLES AND IDEAS $$$

Shortages are cropping up. Higher gold prices have not led to greater mine production. From 1999 through 2009, the average annual gold price rose 248%, but gold production fell 6.6%. That is evidence of the gold supply inelasticity, a concept raised in the Hat Trick Letter four years ago, repeated at times, and now acutely true. Mining output is down, despite scrap contributions. Coin demand remains stodgy, certain to pick up when the mania develops. See the article by Jeff Clark entitled "Gold, Get it While You Can" on GoldSeek (CLICK HERE).

In early 2009, the European central banks stopped the insane gold sales, as they lost their appetite to unload true wealth in exchange for tainted paper. Central bankers implicitly affirmed the value of gold by the cessation of gold sales. Then came in early 2010 the sovereign debt crisis, which exposed the lunacy of past official gold sales of collateral. Government promises are proving inadequate to maintain global financial obligations. Central banks have lost control over the gold price. Asian central banks will not cooperate in holding down the gold price, because they need gold in reserves to stabilize their financial systems. They also discern how the gold price serves as a device to de-throne the Anglo bankers from an abusive position of dominance, hegemony. See the article by Julian Phillips entitled "Have Central Banksters Lost Control Of Gold Market?" on Kitco (CLICK HERE).

The London metal exchange, for which the LBMA bankers act as suppliers, makes massive pooled reservoir conduits from the Unallocated accounts. Economist and former banker Alasdair Macleod examined the fractional reserve nature of the London gold market. He arrived at an estimate that the major bullion banks have sold about 20,000 tonnes more gold than they have in possession or collateral. That amount has value almost $900 billion. They depend upon the imaginary metal residing in Unallocated accounts, which serve as an available abusable Pooled account reservoir. See the article by Macleod entitled "Where Can We Find 20,000 Tonnes of Gold?" on the Finance & Economics website (CLICK HERE).

The silver market has undergone important changes, deadly to the big Anglo banks. The rising silver price has coincided with atypical activity. The banks that once controlled the silver price are closing positions at a loss, bleeding heavily. During a recent two week period ending in early October, the big commercial players actually closed out 2300 contracts, during a rising market. See the article by Chris Mack entitled "The Long and Short of What's Happening With Silver These Days" on Kitco (CLICK HERE).

Silver market manipulation will be addressed, one way or another. If not from enforcement of regulations and prosecution, than it will occur through price pressures, ruin of trading departments involved in the illicit naked shorting, and protests over USGovt bailout for criminal activity. Expect the latter with disorder, not the former. So the public deserves some answers, claims Bart Chilton, the stooge commissioner at the US Commodities Futures Trading Commission. They claim to be investigating the claims. He will receive phone calls and marching orders. Follow the bizarre circus that surrounds the marionette sessions. See the CityWire article (CLICK HERE).

The US silver eagle price premium just rose by 50 cents. In late September, the USMint announced a hefty price increase on its coin premiums. The event comes only two days after the USMint announced it had sold out of 2010 gold American Buffaloes and would cease their production for the remainder of the year. See the Trusted Bullion article (CLICK HERE). A squeeze is underway, as coin supplies are inadequate. The Gold & Silver coin shortage is becoming acute worldwide. The premium paid is rising. See the Coin Update article (CLICK HERE).

The Silver Enthusiast has taken it upon themselves to grade the miserable track record of Jon Nadler. His work is permitted on Kitco as propaganda, since he knows the website owners. His record receives high grades for consistency, but the lowest grades for accuracy. The gold locomotive has truly run roughshod over his reputation. He will remain arrogant to the end. See the Silver Enthusiast article (CLICK HERE).

The beacon of bright light and consistent wisdom in Jim Rogers can be seen in an interview. He expounds on the future bullish prospects of gold and the commodities. See the Stock Market Advantage interview of Rogers (CLICK HERE).

Capital controls are coming to the United States. The QE2 program has frightened a wide spectrum of investors and businesses. Speculative money is leaving the US, not only avoid implosion and currency debasement, but to go where trade friction and hostile policy play less. The USGovt must slow the tide of money exiting. See the article by Michael Hudson entitled "Why the IMF Meetings Failed" on Lew Rockwell (CLICK HERE).

Dubai real estate is crashing in the United Arab Emirates, as property prices have fallen by 50% and rents by 40% across the board. Over the past decade, Dubai amassed $109 billion in debt, with about $15.5 billion more due this year. Vast restructure plans are in progress, like with Dubai World, one of the three main holding companies. The emirate has built the infrastructure for a much larger economy than it now needs or can attract. Several half-built projects will remain incomplete, a certain eyesore. A glut in commercial property has forced landlords to offer tremendous unusual incentives. The Dubai Economy must still digest a flood of housing units coming online soon, which will further depress prices. The Real Estate Regulatory Agency recently said it was canceling about half of all projects registered with the authority. See the Yahoo article (CLICK HERE).

◄$$$ THE JUDGES WHO RULED OVER THE COMMODITY FUTURE TRADING COMMISSION RIGGED THE MARKETS AGAINST COMPLAINTS. A RETIRING JUDGE HAS COME CLEAN. THEY COLLUDED 20 YEARS AGO NEVER TO MAKE A DECISION ON THE BENCH IN FAVOR OF COMPLAINTS, AGAINST MARKET MANIPULATION. CALL IT A SMOKING GUN. $$$

The shot came from a most unlikely source. A retiring judge handed over ammunition to the sound money advocates and those fighting the corrupt gold & silver markets. The CFTC administrative law Judge George H Painter went out in style. He issued a Notice & Order announcing he would step down from his position on the bench. In the notice Judge Painter made direct reference to a conspiracy at the highest levels of the CFTC, within the Enforcement Division. For 20 years, the ruling bench has been colluding with the CFTC chairman to block enforcement of the law by not finding anyone guilty of market manipulation. They stall opposing efforts and motions. In his own words, Judge Painter wrote, "There are two administrative law judges at the Commodity Futures Trading Commission: myself and the Honorable Bruce Levine. On Judge Levine's first week on the job, nearly twenty years ago, he came into my office and stated that he had promised Wendy Gramm, then Chairwoman of the Commission, that we would never rule in a complainant's favor. A review of his rulings will confirm that he has fulfilled his vow. Judge Levine, in the cynical guise of enforcing the rules, forces pro se complaints to run a hostile procedural gauntlet until they lose hope, and either withdraw their complaint or settle for a pittance, regardless of the merits of the case."

The United States is gradually being recognized as the world's most powerful and corrupt regulatory democracy. Laws are written to exempt the powerful and thwart those who seek justice. The path of mercantilism for the most powerful is made smooth. Agencies such as the subservient SEC and CFTC are effective gatekeepers to the power fortress. They operate to give the public the sense that big financial players and banks are being watched, when they are in fact overseeing legal violations and undermined markets. The letter written by Judge Painter regarding the CFTC shows that watchdogs are created to protect the system for the benefit of the Elite, in facilitating the control over wealth and power. The system's dysfunction is coming under direct scrutiny. The economic, political, and judicial practices are part of the larger disintegration. Pull on a single thread to unravel the entire wicked sweater. See the Daily Bell article (CLICK HERE) or the Washington Post article (CLICK HERE). Let's see if the Painter letter is used in future court cases. Since a Notice & Order, it is a legal document. The process must move one level higher to the Appellate Court. The GATA group is certain to latch onto this jewel of an item.

Wendy Gramm has a speckled past, with a scummy resume. She is listed as a distinguished senior scholar at the George Mason University Mercatus Center, but a spokeswoman for the center claimed Gramm is not active there. Her husband is former Senator Phil Gramm from Texas. Wendy Gramm was head of the CFTC just before president Bill Clinton took office, whose finance henchmen ransacked the USTreasury gold. She has been criticized for opening the door to firms such as Goldman Sachs and Enron as they gain influenced over the commodity markets. After leaving the CFTC, she joined the Enron's Board. One must wonder if she is active on the British Petroleum Board currently.

◄$$$� THE GROUNDWORK HAS BEEN LAID FOR T.A.R.P.2. IT WILL BE MOTIVATED BY THE NEED TO RESCUE AT LEAST $1 TRILLION IN CREDIT LOSSES, PERHAPS $2 TRILLION. THE FOCAL POINTS OF THE NEXT BANK BAILOUT WILL BE BANK OF AMERICA AND WELLS FARGO. THE EFFECT ON THE USDOLLAR WILL BE STAGGERING HUGE. BANKS ARE FIGHTING A LOSING BATTLE IN A TWO-FRONT WAR OVER FLAWED MORTGAGES WITH INVESTORS AND HOMEOWNERS. WHEN SQUEEZED, THEY WILL DEMAND USGOVT BAILOUTS AGAIN. THE QE2 MIGHT BLUR WITH TARP-2, AS MONETIZED DEBT COULD INCLUDE MAMMOTH MORTGAGE SECURITIES FROM PUT-BACKS!! $$$

As preface, premier bank expert Chris Whalen anticipates the mortgage fiasco will take down both Bank of America (BOA) and Wells Fargo, as the losses will be too great. Citigroup is at risk of huge additional losses as well. The legal process of so-called Put-Backs has begun, where fraudulent and reckless underwriting of home loans are being challenged, with the objective to send them back to the banks that approved them. Recall that banks originated loans, only to securitize them, earn profits from both processes, and walk away from their toxic elements. The legal process is attempting to right the wrongs. Over $47 billion in residential mortgage backed securities (MBS) issued by Countrywide are in the process of being declared in default. BOA owns Countrywide and their suitcase of putrefaction. Next comes the legal challenge for remedy and recovery of losses. The declarations have come from the pooled interests, which emphasized their intention to invoke all contractual remedies available to them to recover their losses and to protect their rights. The group of pooled holders has expanded since the original August 20th instruction letter. A lawyer clarified by saying, "Ours is a large, determined, and cohesive group of bondholders. We have a clearly defined strategy. We plan to vigorously pursue this initiative to enforce Holders rights." See the PRNewswire article (CLICK HERE). Christopher Whalen of Institutional Risk Analytics stated it succinctly, when he said "It is going to be trench warfare with years of lawyering. The banks cannot afford to lose." But lose they will, and that is when the USGovt will step in with the second giant bank bailout. All hell will break loose in the US political arena at that time.

The problem is so pervasive, that Citigroup was warned by its own chief underwriter that some types of loans in securities did not conform to representations and warranties in 2006 and 2007. Richard Bowen testified on April 7th before the Financial Crisis Inquiry Commission that, "In mid-2006, I discovered that over 60% of these mortgages purchased and sold were defective. Defective mortgages increased during 2007 to over 80% of production." Citigroup will someday find themselves in possession of these same defective loans. See the Bloomberg article (CLICK HERE).

A estimated total of $739 billion in toxic private label (non-Fannie guaranteed) home loans threaten the entire banking system. Bank of America has reportedly entered secret discussions with the USCongress for a banking industry bailout. BOA is so large that its failure would indeed cause ripple effects. If joined by another giant bank failure, the entire system would move toward collapse. The immediate cause of sudden death for BOA, even Wells Fargo too, is the prospect of enormous swaths of mortgage put-backs, the return of tainted loan portfolios to the originating banks. Investors seek original bank repurchases by bypassing the trustee in legal procedures. The list of financial firms seeking massive put-backs to the big banks is formidable. Last week, PIMCO, Blackrock, and the New York Fed began motions to seek reversals to Bank Of America on home loans and MBS bonds. MetLife has joined. TCW Group, the manager of $110 billion in assets, expects to join also. This is a giant wagon train forming with hopes of justice. Bank of New York Mellon might change their mind and join if prospects brighten. The outsized 3Q2010 loss by BOA of $7.65 billion will prompt many more private talks.

BOA is at risk of sudden death from requirements for it to buy back hundreds of $billions in MBS put-backs priced at par (original value). They would go back at par value since tainted by fraud or other violations, like reckless underwriting. Sellers are obligated to repurchase some mortgages because of misrepresentations such as overstatements of borrowers income or inflated appraisals. As the firestorms advance in states from improper home seizures in the foreclosure process, the put-back cases are bolstered. Some speculate that PIMCO has been been gobbling up MBS on margin in the past month, so that the USGovt (or Fannie Mae) could buy them back at full value. They accurately tip off USGovt policy. It is just a matter of time before politicians, Treasury Secy Geithner, and USFed Chairman Bernanke all urge for passage of TARP-2 to save the big banks and the US banking system from collapse. Their urge will be real and valid, but the public will to cover for fraudulent and reckless loans will not be there, not at all. The newly cropped controversy of misrepresentation in mortgage related elements could potentially destroy the mortgage originators and servicers. See the Cryptogon article (CLICK HERE).

The total bank costs for repurchase of mortgages in securities without USGovt backing could total as much as $179 billion, Compass Point Research & Trading has estimated. That includes costs related to lawsuits against underwriters. JPMorgan Chase analysts estimate the costs could reach $80 billion, reduced by technical factors. See the Bloomberg article (CLICK HERE). Other challenges have arisen. Not only is civil disobedience on the rise in the form of intentional non-payment of mortgages (strategic default), along with non-payment until property title can be produced, but blocked legal enforcement of foreclosure eviction notices is on the rise. The sheriff for Cook County Illinois, which includes the city of Chicago, said last week he will not enforce foreclosure evictions for Bank of America, JPMorgan Chase, and GMAC Mortgage/Ally Financial until they prove those foreclosures contain some legal stamp of approval. See the CNBC article (CLICK HERE). �������� Watch for hints that the USFed program of QE2, with massive bond monetization, will include mammoth mortgage securities from put-backs to the big banks. What better way to force TARP-2 than to wrap it in QE2, a sleazy maneuver!!

◄$$$ A DEBT DOWNGRADE IS IMMINENT FOR BANK OF AMERICA WHICH FINDS ITSELF THE TARGET OF F.D.I.C. CALLS. A PROMINENT VETERAN FROM THE 1991 S&L CRISIS URGED THE F.D.I.C. TO PUT B.O.A. INTO RECEIVERSHIP. HE CHARGED THAT FORECLOSURE FRAUD IS BEING DONE BY THE SAME PEOPLE WHO COMMITTED SECURITIES FRAUD. THE DOWNWARD SPIRAL HAS BEGUN. $$$

Bank of America might suffer a debt downgrade very soon. Fitch warned on Friday of downgrade due to the recently passed bank reform legislation. See the MartketWatch article (CLICK HERE). A injurious and powerful call has come from two leading critics of the financial industry, a call for the Federal Deposit Insurance Corp to put some of the biggest US banks into receivership, starting with the Bank of America, and force them to clean house. William Black and Randall Wray urged the FDIC to put an end to the madness. They charged that the ongoing foreclosure fraud epidemic is the work of precisely the same unconscionable bank officers whose fraudulent mortgage schemes crashed the financial system in the first place. Black is a former regulator and white collar crime expert who led the prosecution of massive fraud during the 1991 Savings & Loan crisis. Wray is his fellow economics professor at the University of Missouri in Kansas City. They argue that it is time to foreclose on the foreclosure fraudsters, in their words. They wrote, "The lenders, officers, and professionals that directed, participated in, and profited from the fraudulent loans and securities should be prevented from causing further damage to the victims of their frauds, through fraudulent foreclosures. [The massive foreclosure fraud] is the necessary outcome of the epidemic of mortgage fraud that began early this decade. We should remove the senior leadership of the banks and replace them with experienced bankers with a reputation for integrity and competence, as in the honest officers that quit or were fired because they refused to engage in fraud. " They suggest starting the process with Bank of America, which they call "a Vector spreading the mortgage fraud epidemic throughout much of the Western world." The movement will grow into a loud vocal national referendum. See the Huffington Post article (CLICK HERE).

◄$$$ MY THEORY IS THAT WEAKLING TIM GEITHNER IS BEING SET UP AS THE FALL GUY. A STRING OF FALL GUYS SHOULD SOON COME, STARTING WITH THE TREASURY SECRETARY. MORE HEFTY FANNIE MAE COSTS, TOGETHER WITH FANNIE DEMANDS FOR MORTGAGE PUT-BACKS TO BIG BANKS COULD INVITE A TARP-2 POLITICAL BACKLASH. IT WILL DEMAND A FALL GUY. $$$

The TARP-2 will pass but not before at least three or four months of haggling. The focal point will be Bank of America and Wells Fargo, two important banks. The hidden pressure point is JPMorgan, too adept to be in the news dragnet. Part of the political cover extends from a past giant favor. Bank of America did the USGovt a favor by taking on the Merrill Lynch and Countrywide toxic load of debt, and is weighed down by its burden. Part of the political cover will be that JPMorgan Chase is weighed down by the burden of size and broken businesses. They control the USFed because they run it. The USFed will come out with research on why the TARP-2 is necessary and how the world will end without it, written by JPM analysts. So the USGovt will come to their rescue with TARP-2, perhaps a $1 trillion package of bank aid. If QE2 covers the mortgage security put-backs, then the next installment will total $2 trillion. Political protest will erupt in a major chaotic firestorm, complete with concessions and demands for heads on a platter.

One must wonder if Treasury Secy Geithner is being set up for a fall. The put-backs of large blocks of credit portfolios have been demanded by PIMCO, Blackrock, and the Federal Reserve of New York (the Wall Street front). Geithner led the FRB of New York during the entire mortgage bubble episode, the sumo regulator overseeing the bond fraud during several critical formative bubble years. The bank mostly on the damaged receiving end is Bank of America, the focal point of the next TARP-2 debate and firestorm backlash. Look for a possible deal cut where Geithner agrees to resign as part of the bank rescue package. Pushing the entire process over the edge might be Fannie Mae. The Federal Housing Finance Agency estimates the ultimate cost of rescuing Fannie Mae and Freddie Mac could increase to between $221 and $363 billion. The cost to date for the USGovt nationalization has been $148 billion in capital injections. Meanwhile, the FHFA has appointed a law firm to look at suing big US banks for over irregularities and defects in home loans taken by the agencies. They wish to recoup losses from the banks. See the British Broadcast article (CLICK HERE).

◄$$$ THE MORTGAGE & FORECLOSURE SCANDAL RUNS SO DEEP THAT ORDINARY OBSERVERS CAN CONCLUDE THE U.S. FINANCIAL FOUNDATION IS LACED WITH ANOTHER CLEAR CANCER. A PRIMARY FEATURE OF THE CANCEROUS BUILDING MATERIAL IS MORTGAGE BOND FRAUD, MAJOR SECURITIES VIOLATIONS, AND ABSENT LINKAGE TO PROPERTY TITLE. THE REACTION GLOBALLY WILL BE AMPLIFIED DEMAND FOR GOLD, FROM RECOGNITION THAT THE USDOLLAR & USECONOMY HAVE R.I.C.O. RACKETEERING COMPONENTS. THE SCANDAL COULD TURN OUT TO BE THE BIG USBANK TOMBSTONE EPITAPH. $$$

The image of the US financial system is near rock bottom, after a quantum decline, if that is possible. The Europeans have their damaged sovereign debt, but the Americans can boast twin beasts in the USTreasury Bond bubble and the USAgency Mortgage Bond scam. The scam involves mortgage bond fraud from improper perfection of property title that ensures revenue stream. The scam involves securities violations from usage of a title database (MERS), duplicate properties in multiple bonds, and forged documents The scam involves faulty finance vehicles (REMIC) with deep intractible flaws in the structure of funding the loans, whose remedy would come with a $1 trillion tax bill due. The fallout comes as shattered legitimacy of the USDollar after broken credibility of the USFed and ruined prestige of Wall Street, all while a sanctioned USTreasury Bond bubble puffs. The USDollar will suffer. Rather than fall versus other major currencies, the wrecked monetary system will take down all major currencies. All cost structures will rise, causing a worse global recession, a very heavy painful consequence.

The next QE2 is a done deal with details missing. The next TARP-2 is having its justification and foundation constructed. The two initiatives will likely meld paths. A disorder condition comes. An armada of lawyers is on the job ready to challenge mortgage securities. Class action lawsuits are on the docket. The US financial platforms are unraveling. The USDollar will follow a path to oblivion, locked in a destructive spiral. The Competing Currency War assures that other major nations will undermine, debase, and otherwise devalue their currencies rather than seek out, plan, and establish a new monetary system. Gold will therefore skyrocket in price, as the monetary system will be actively ruined. The silver price gains will be at least double the gold gains. Markets are beginning to take control, and kick aside the corrupt control levers. The horizon features a big US bank on death watch. The ripple effects will be shocking even to those who expect it. Other big banks will be dragged down in a chain reaction. Control will be lost. Confusion will rein. The bank stock index BKX signals an imminent breakdown. The pressured breakdown will be led by Bank of America, HSBC, and Wells Fargo. The comprehensive fraud from home loan origination to bond securitization to debt ratings to ultimate foreclosure reveals a corrupt protected broken bankrupt system. Their chronic insolvency permitted by accounting fraud sanctioned by the FASB has a date with destiny in failure. The dustbin awaits!!

◄$$$ RIOTS HAVE HIT FRANCE, A NATION WITH LITTLE TOLERANCE FOR CORRUPT OR HEAVY HANDED GOVERNMENT. MILLIONS ARE IN THE STREETS PROTESTING PENSION RULE CHANGES. OBSERVE A PREVIEW OF WHAT COMES TO THE UNITED STATES. $$$

Order is breaking apart in the United States in the financial arena, but in Europe order is breaking apart in the open on the streets. An estimated 3.5 million people have participated in public demonstrations that have turned violent. Property damage is widely reported. The national strike in France has spread. This is much more than truckloads of potatoes in the avenues. They protest austerity measures having begun, such as cutbacks in credit, budget reductions, and raising the retirement age for pensions. A few years ago, riots came to Paris over refusal by the government to guarantee jobs for university graduates. Even the Eiffel Tower was closed down. Strikes also have hit Germany, and are expected across almost all Europe. The austerity plans are wrecking balls to entire economies and societies. Critical disruptions have been suffered in France, most notably with fuel. Out of 12,500 fuel stations in all of France, 2000 were out of fuel October 19th, and 4000 were out of fuel on the 21st. In the West part of the country, many violent actions have nearly paralyzed economic activity. France is currently losing about 200 million Euros per day due to the strikes. In a strange intervention, 200 persons have blocked fiat paper from being loaded from the Bank of France, obstructing the passage. Strikers have still no intention of giving up, and the unemployed suburbians have nearly destroyed the centreville of several big cities. Thousands of factories have stopped all production. See the Zero Hedge article (CLICK HERE) and the personal blog account from the ground in France (CLICK HERE). What is seen in France will be seen in the United States by summer 2011. A keen observation was made in recollection. Most of the film clips coming from France, in particular from Paris, show many minority faces in the crowds involved with destruction, burning, and public damage. One must wonder if caucasian French make up the majority in the riots, a false depiction.

◄$$$ THE EURO IS RISING IN A FINAL CHAPTER BEFORE ITS BREAKUP. THE EASTERN ALLIANCE WILL CONTINUE TO COALESCE AND EXERT ITS POWER. THE ANGLO BANKING SYSTEM HAS A DATE WITH DESTINY, NAMELY IMPLOSION. THEN COMES THE REVERSION TO FORMER EUROPEAN CURRENCIES, A PROCESS AIDED BY MARKED EURO NOTES (BONDS). $$$

A well placed European banker & consultant explained the chessboard and its moving pieces, which address the Paradigm Shift at work. Ever several months, this man drops a pearl of valuable wisdom. He wrote, "Germany is being impoverished and bled to death by the Euro currency, and this finally dawns on Berlin. Germany, Holland, with Finland and Austria in tow, must form the core EU zone with a hard asset currency since they are the only ones running a surplus. Germany will link up with Russia and China. China and Germany are testing rail services from Beijing to Hamburg. They have run a couple of test trains and the results are very promising. There is a mega shift of power and emphasis to the East underway that cannot be stopped. The US has brought divisiveness to Europe in all its policy moves ever since WWII ended, how ill-conceived now apparent. After the Anglo American Elites have driven all and everything over the cliff, it is now time for the German-Russian-Chinese Axis to give it a try. These three nations have a very old culture and Germany links prominently into both of them [to form an Eastern Alliance.] The Euro currency will be segregated and re-calibrated by country, a process made easy since the Euro Notes are already clearly marked by country. The correction is coming and it will be brutal. It will happen after the mega meltdown of the Anglo American banking system, in an implosion. The currency realignment will then be introduced a an emergency measure to protect countries from the financial firestorm." Notice the alert for reverting to former currencies, like the Drachma, Peseta, Lira, and D-Mark. He called it segregation and realignment.

My view centers on the eventual awakening that Europe must undermine its Euro currency again. Its decline will make for a USDollar rally. In time Europe will realize they must join the dance to slam their currency. It is like a college fraternity party where all are invited to get drunk and bang heads against the wall until the entire group lands in the hospital. A higher Euro exchange rate has begun to cause problems already. European nations will likely soon put out daily news stories on how the sovereign debt problem never found a solution, and stories about the vapid meaningless Bank Stress Tests. Producing such stoires will be an easy task to fulfill. That should cause a Dollar rally. To be sure, Wall Street banks are putting their positions in place, and are not quite ready. Soon a 'surprising' Euro decline will occur, with Wall Street fingerprints all over it.

◄$$$ TRADE WAR WITH CHINA HAS EXPANDED, BUT A CONCESSION HAS BEEN GIVEN. THEY REVERSED A POSITION ON RARE EARTH METALS. HOWEVER, TRADE PROTECTIONISM STIRS WITH TARIFFS PLACED ON COPPER FROM CHINA AND MEXICO. THEN CHINA TARGETED THE UNITED STATES WITH A STEEP TARIFF ON POULTRY. $$$

The rare earth metal export shutdown has been reversed. It was a veiled threat or a false alarm. Perhaps Japan convinced them to back off. China pledged to maintain supplies of rare earths and signaled exports of the ingredients used in electronics, electric cars, wind turbines, and smart bombs should rise next year. Some confusion lingered after the Chinese Commerce Ministry denied reports in the New York Times and China Daily that the government plans an embargo with further export cuts of the unique metals. Their statement read, "China will continue to supply rare earth to the world." The niche is so important that the Chinese Govt is setting up the China Rare Earth Industry Assn with ministry affiliation. See the Bloomberg article (CLICK HERE).

Back to the trade war and protectionist lobs. The USGovt imposed dumping duties of about 61% on copper pipes and tubes from China and Mexico. The USDept Commerce ruling was the latest sign of continued trade friction between China and the US. It came one day after China raised an anti-dumping duty on US chicken products. The US duties on copper will be as much 60.8% on $233 million of imports from China and as much as 31.4% on $130 million of imports from Mexico. More cost structure increases!! Subsidies of copper mills in the US would be cheaper, and create new jobs. See the New York Times article (CLICK HERE) which includes a fine historical narrative on the highly destructive Smoot-Hawley Bill. The two Congressmen were the morons responsible for the trade war that radically worsened the Great Depression of 1930. History is littered with examples of politicians and economic leaders learning nothing from past history, as their pontifications ignore important lessons from previous eras.


◄$$$ VENEZUELA MUST CONTEND WITH DECLINING OIL PRODUCTION AND LOWER BASIC METAL INDUSTRIAL OUTPUT. THEY, LIKE MEXICO,� RISK A FAILED STATE FROM OUTSIZED DECLINES IN NATIONALIZED INCOMES, LEADING TO LARGE BUDGET DEFICITS DIFFICULT TO FUND. $$$

Declining oil production will continue to harm PDVSA revenue. The Venezuelan Govt submitted to the US SEC agency a 2009 annual report that offered details concerning the state run oil company Petroleos de Venezuela and its declining production. Prepared by the Ministry of Planning & Finance, the report described falling revenues, lower earnings, and a growing debt. Lower production and higher expenditures will continue to hit the industry in the future. The annual reports admitted that PDVSA oil contractors have filed complaints against the oil company over late payments. Exports from Venezuelan state run steel and aluminum companies declined 45% last year, located in Guayana. Steel production fell 31% in 2009, whereas aluminum output decreased by 6% and alumina dropped 14%. See the El Universal article (CLICK HERE). In Mexico, where systemic failure, federal budget shortfalls, widespread violence, and civil disorder are advancing in big steps, a large oil refinery was attacked. The large gasoline refinery near Juarez shut down after an explosion struck the facility in September. The grand prize in Mexico for the drug cartel is the oil industry. They are targeting conquest of far more in the overall Mexican Economy. See the LA Times article (CLICK HERE).

PASSIVE GLOBAL CURRENCY WAR

◄See the Special Report entitled "Full Blown Currency War Erupts" for the October Hat Trick Letter. The G-20 ministers have come forth with a vacant pledge as a working theme. Regard it as the billboard message of crisis. Ignore the words, but take serious note of the theme. The competitive currency devaluations will be devastating, even as fast moving trade deficits will be the visible outcome. National trade gaps will go out of control. Talk of a new Plaza-2 Accord has begun, the motive being to stabilize currencies and give the USDollar an orderly devaluation. Unfortunately, any accord requires nations to take the lead in sacrificing their domestic economies and banking systems. Such nations would have to agree to higher currencies, which harm their economies. Not gonna happen!! Currency appreciation is a necessary tool to keep prices under control for foreign nations. Instead, expect disruption and chaos to grow. The present day environment has no maturity, no cooperation, and no order. It is loaded with resentment, animosity, and revolt. Currency war takes a twist in escalation, as Brazil snubs the G-20 meeting. Brazil is in full scale currency war. They wish to weaken their Real currency, since their economy has been harmed. China seems to be pulling strings, angry and frustrated with the current power structure. Nations in a financial war tend not to find time to meet over coffee to discuss platitudes. The smaller emerging nations feel betrayed by what they see as corrupt hegemony and tainted sovereign debt. Disgust is ripe over the US diatribes about Chinese currency manipulation, which come across as utterly ridiculous and deceitful, when the QE2 monetization initiatives by the USFed are the most grandiose flagrant manipulations of all.

China ramped up the currency war. China openly discusses the vulnerable USTreasurys of the USGovt in trans-Pacific saber rattling in the currency war. A prominent Chinese economist called the United States a tomb maker, in reference to monetary policy. He claimed the United States is committed to internationalize its national debt. China raised interest rate by 25 basis points, in a window dressing maneuver. It can claim to be averting a currency war, even though the Yuan is not a convertible currency. The USFed is openly printing money to purchase USTreasury debt, the worst type of monetary inflation. The burden for big bank bailouts falls on foreign creditors, the great bag holders. Foreign creditors must watch from afar aghast, as the USDollar is undermined severely by unilateral policy. Resentment in Europe over the USDollar devaluation ordered through monetary inflation by the USGovt and USFed. They accuse the United States of causing gross instability. Even the Russian finance minister Alexei Kudrin pitched in with critical remarks. More currency war backlash, with great volumes to follow. The reckless US monetary and fiscal policies have caused a severe backlash in Europe. The Bank of Japan injection of $20 billion was a trifle and accomplished very little. The effect wore off in 20 days. They are committed to futile intervention. In frustration, the Bank of Japan cut the official interest rate to zero effectively. They announced a small initial installment of debt monetization. Call it their own QE126, in an endless string of monetary inflation abuses. A jump in the gold price was immediate. The currency war ratched up a big notch.

Japan reveals a hidden pressure point. It is the unwind of the great Yen Carry Trade. It was the greatest financial engineering project in modern history. Its unwind is coming to an end finally with a climax upward thrust in the Yen, amidst clouding factors like the rise of China. The climax end of the USTreasury Bond bubble, with its benchmark 0% label, removes the carry trade dynamic engine since both sovereign bonds offer near 0% yield. The end of the great Yen Carry Trade signals a monetary system breakdown and finally an eventual USGovt debt default. The Yen is the quiet litmus index of the Competing Currency War, its turbo-charge for devastation!!

◄$$$ MAX KEISER DELIVERED A RANT & WARNING. THE CORRUPTION IN THE UNITED STATES WILL NOT BE TOLERATED ANYMORE. RETRIBUTION WILL BE CARRIED OUT IN THE FOREX MARKETS WITH A USDOLLAR DECLINE, BUT MORE IMPORTANTLY IN THE GOLD MARKET TO PUSH A POWERFUL BREAKOUT. HE OVERLOOKS HOW ALL MAJOR CURRENCIES ARE IN DEEP TROUBLE. $$$

Max Keiser delivered a tirade when he said, "First of all let's be clear about something. In a lot of scandals, you can point to one guy, Hank Paulson. When he was the CEO of Goldman Sacks, before he became the Treasury Secretary. As CEO of Goldman Sacks, he unwound many of these mortgage contracts from the Goldman banks. They were the only bank that did not get caught up in this scandal. Then as Treasury Secretary, he made sure that Goldman Sacks got bailed out from their positions through AIG and other foreign interests. So there is a clear oligarchy in America. Hank Paulson is from that oligarchy. They are working against the interests of the people of the United States. To reiterate my point, Americans at this point do not deserve to have their own country. A lot of big money around the world is going to drop the dollar and basically disenfranchise the US economy. This is not just a remark in passing, this means that the US economy goes belly up effectively and the dollar gets completely wiped out the face of the earth. Gold goes to 1400, 1500, 1600 dollars per ounce because the big money in the world is sick of the liars, Tim Geithner, Barack Obama, Ben Bernanke. They are sick of the financial terrorism. They are sick of the grandstanding. And they are going to drop kick them over the gold post into a sea of their own bad debts. So forget about the specifics here. We are talking about wholesale countrywide loss of their sovereign credit. The US government bond will be about as valuable as garbage." Harsh emotional words. He delineates motive for concerted efforts to unhinge the US financial fortress and its many tentacles. It will take time. In my view, the USDollar is not the key, but rather the Gold price. The major currencies are in a similar lousy position but without an endless war to fund. They are all being debased. They will all lose significant value. The meter of the simultaneous currency devaluations will be the Gold price.

◄$$$ U.S. TRADE GAP FOR AUGUST ROSE SHARPLY. IMPORTS HAVE RISEN STRONGLY BUT EXPORTS HAVE NOT. THE WORLD CONTINUES TO BE FLOODED WITH USDOLLARS, INDUCING FOREIGN NATIONS TO INVEST IN THE USTREASURY BUBBLE. THEY SEEK ALTERNATIVES EAGERLY. $$$

The US trade deficit increased sharply in August to of $46.3 billion. Total August exports of $153.9 billion and imports of $200.2 billion resulted in a goods & services deficit of $46.3 billion, up from a revised $42.6 billion in July. Notice the imports (in red) rising at a faster pace than the exports (in blue). The grotesque imbalance in the USEconomy has not been resolved one speck. The nation needs a revival in its industrial base, relocated to Asia long ago. Hardly any talk even arises about returning industry to US shores. So the nation imports in a greatly disproportionate man ner.

After all trade suffered a shock in the first half of 2009 in the wake of the US banking sector death, both imports and exports have increased significantly. However in 2010 export growth has slowed, even with a cheaper USDollar. Turmoil in Europe is a major reason. The imbalances have returned. The consequence is loud and stark, but not discussed in official circles. The foreign nations with surpluses must sterilize their surplus gains. The typical method is to purchase USTreasury Bonds. Surplus nations do not wish to invest in such manner, since the USTreasury yields are silly low and principal is absurdly high. They object to investing in an asset bubble. So pressures exist for permitting the USDollar to fall, from the sterilization maneuvers lacking gusto and vigor. The US implicitly induces the world to participate in bubble expansion in grand reckless style. The US has earned the anger, disgust, and impatience of the rest of the world. See the Calculated Risk article (CLICK HERE).

◄$$$ THE QE2 SOON TO BE LAUNCHED BY THE USFED IS THE DEATH KNELL FOR THE USDOLLAR. IT WILL INVITE A GLOBAL RESPONSE TO SEEK ALTERNATIVES. THE LIKELY BENEFICIARY WILL BE THE EURO, BUT ONLY TEMPORARILY. A MONETARY CANCER WILL BE UNLEASHED FOR THE SECOND ROUND. ECONOMIC DAMAGE WILL BE HUGE BUT DENIED. THE BIG WINNERS IN THE INVESTMENT AGAINST COMPETING CURRENCY WAR WILL BE THOSE WHO OWN NONE OF PAPER CURRENCIES. THE KEY TEST COMES FOR DEFENSE OF THE EURO. EUROPE MUST BRING IT DOWN. $$$

Some analysts call it the declared war by the US Federal Reserve against Bretton Woods II. Translated, the war against sound money and the insult to Gold. The response is a powerful rise in the Gold price, already in gear. Foreign governments are unwilling to bear ever increasing levels of currency and interest rate risk due to the collapse of good judgment in the US banks. The threat of asset deflation in the United States has prompted emergency action mentality, like a state of monetary war. Enter the Competing Currency Wars. The Strong Dollar Policy was real in the 1990 decade, but in the 2000 decade it was a sideshow paper tiger farce. Keen sharp analysts have declared the time has finally arrived when the imbalances created by abandoning Bretton Woods II have torn the system asunder. The explosive detonation is the Quantitative Easing #2, a blast of stimulus from the USFed. The pathogenesis for the monetary system appears to be turning disorderly quickly. The rest of the world cannot halt the excessive flow of USDollars thrust from the out of control US system. The cancer has metastasized inside the US core, and is in the process of spreading to the body global. No agreement is detectable on what follows. The situation will surely turn more ugly, with greater disorder, more disruption of supply chains, faster rising price inflation, absent wage gains, and more shutdowns in buinesses. See the Economists View (CLICK HERE).

Witness the death knell not only for the USDollar, but for the major currencies. They will be torn apart in the currency war. For a currency that rises, their economy will suffer damage. Resentment will feed the hostility. The QE is pure cancer!! Prepare for the Euro to reach 150, a very unwanted development. The rise will be aided by China, which is dumping the US$ in favor of Euros. Anything but USDollars, please! That is the universal clarion call. Soon, the Europeans will do whatever is necessary to undermine the Euro, like highlight the return of the sovereign debt crisis, like an admission of the Bank Stress Test as a fraud, like citing the feedback damage from a higher Euro exchange rate. Hidden damage and silent sound effects will come, as all currencies fall simultaneously, but Gold to rise powerfully. All currencies lose in a grand competing devaluation skirmish. The USDollar death is signaled by an unwanted extreme rise in the Euro. Watch for a resumption rise, even assisted by China, using its Greek proxy. A bullish moving average crossove would make a run to 150 a breeze, a cinch, a lock.

◄$$$ THE CHRONIC HOUSING DECLINE IS ASSURED FROM THE LACK OF CLEARANCE OF HOME INVENTORY. THE LOSER IN THE PATHOGENESIS OF THE BUSTED HOUSING BUBBLE WILL BE THE USDOLLAR. LATER COMES THE USTREASURY DEFAULT. $$$

Analysts from Moodys Analytics, Fannie Mae, Morgan Stanley, and Barclays produced joint analytic report on the fatal condition of the US housing market. They expect another three years of home price declines, due primarily to the chronic rise in home inventory. It is NOT being resolved or cleared, since price mechanisms are interfered, and banks hold gigantic foreclosure inventory that has not hit the market. Prices need to fall to levels where there is genuine demand, except that lenders are reluctant and income to drive demand is sorely lacking. The implications are enormous and deadly to the USEconomy, since another $400 to $500 billion in bank losses would occur in a quick timespan. The pathogenesis that began in 2006 (on cue with Hat Trick Letter forecasts) continues and will continue for another two more years (my continual perennial forecast) since inventory remains a huge bloat in stagnation. The USDollar will be victimized since the impact is to be felt on the USEconomy so deeply, resulting in chronic USGovt deficits. The USTreasury Bond bubble must be maintained, even while aggravated by the ongoing housing bear market. At great risk is the USDollar. A deficit and debt explosion is to come, matched by monetization explosion!!

Economists are only beginning to express sensible viewpoints that reflect comprehension of market dynamics. Market details are devastating still, even after three years of declines. Joshua Shapiro is chief economist of Maria Fiorini Ramirez, a New York economic forecasting firm. He predicts home prices may fall another 10% to 15% further. The current official inventory is four million homes listed with brokers for sale as of July, but that excludes the Shadow Inventory. Shapiro said, "The best thing that could happen is for prices to get to a level that clears the market. Right now, buyers know it has not hit bottom, so they are sitting on the sidelines." Clearing the market is a fundamental that must be pursued, not maintaining a desired price. Another two million houses will be seized by lenders by the end of next year, according to Mark Zandi, chief economist of Moodys Analytics. He pointed out that seven million US homes lie vacant or are in the foreclosure process.

The housing market urges a USGovt response by an insistent public, but their efforts stretch the crisis out for a decade. Nowhere is equilibrium sought, as everywhere it is avoided. Only when the market takes the entire inventory, clears it at much lower prices, can a recovery occur. More properties await the market for sale, thus lower prices are an immediate prospect. If the USEconomic recession worsens, then more home supply must be processed, and even lower home prices must come, in a vicious cycle. That is what capitalism and market equilibrium is all about. The main victims in the process at the national level are the USDollar and USTreasury Bond, the former to be trashed, the latter to default. The USEconomy is broken and in steady deterioration for the last four years. The USDollar will decline much more versus gold, since money is being debased. The USTreasury will eventually default, since debts will become unmanageable.

◄$$$ CHINA IS DUMPING USTREASURYS BY WAY OF EUROPE, USING A NEW GREEK DOLLAR SWAP WINDOW, A BACK DOOR. THEY HAVE SUPPORTED THE GREEK GOVT DEBT. THUS THE RISING EURO CURRENCY WITHOUT JUSTIFICATION, ONE OF A FEW FACTORS. THIS IS AN INDIRECT CHINESE FORCED DEVALUATION OF THE USDOLLAR, AN EXTREMELY CLEVER ACTION. $$$

China is dumping USTreasurys by way of the Europe, using a back door whose design was handed to them. Their support of the Greek Govt debt jammed that door wide open. Thus the rising Euro currency without justification, since the continent is weak and its banks are i nsolvent. Usage of the window has led to an indirect Chinese forced devaluation of the USDollar, an extremely clever action. China has never appreciated being improperly called a currency manipulator, and has been inventive in response. The Chinese Govt has accumulated $2.5 trillion in savings, held as USTreasurys to the tune of over $800 billion. Suddenly, China is a currency manipulator, when the vast monetization initiative enacted by the USGovt and its partner USFed is the ultimate in currency manipulation!! They have turned $1.5 trillion in freshly printed money to support the US$-based bonds. The Chinese apparently have a plan to swap their USDollars for Euros, using the Greek back door. The Greeks have always favored backdoors socially, whether for tax evasion or preservation of certain orientations.

Premier Wen Jiabao solidified plans to purchase Greek Govt debt during a recent visit to Greece. He stressed the desire to boost shipping and trade ties with Athens. He said, "With its foreign exchange reserve, China has already bought and is holding Greek bonds and will keep a positive stance in participating and buying bonds that Greece will issue." China has calculated its support of a struggling European country will help deflect international criticism of its trade policies and its reluctance to permit its Yuan currency to appreciate as much as trade partners wish. Wen did not specify how much Greek debt China would purchase or which Chinese funds would invest in the bonds. But they built a handy conversion window. See the Reuters article (CLICK HERE).

A well placed banker source in Europe passed an opinion along. The Jackass was aware of the Chinese nibbling with purchases of Greek debt, making friends. However, the initiative had a clever motive for an expanded role. The German Euro supporters have been caught flat-footed, inattentive to guard the door. By refusing to permit a default in Southern Europe of sovereign debt, the Euro Central Bank and EU leaders have exposed a vulnerable pathway soon possibly to turn into a highway. The Euro currency will rise unwanted. The banker source wrote, "After having de-facto bought Greece, the Chinese are now members of the Euro system or Greece is now a member of two currency systems, to be used at will. So China will now use its USTreasury Bonds to buy Euros, which will be used to buy Greek Govt bonds. These bonds will be guaranteed by Germany. This is very clever and no one saw the dual usage of the system, except a few very clever people. The politicians in Berlin and bankers in Frankfurt were sleeping at the wheel as usual and now will pay a heavy price. The death spiral is in full spin and the Euro will die a sudden but certain death. People might want to familiarize them selves what Paradigm Shift is all about. Hard assets and hard assets only will rule in royal fashion, precious metals and commodities. Natural resources, agro/food, and the secondary industries add value to these commodities. China will buy as much of Europe as they can using their worthless US$ that they launder via the European Central Bank." It goes deeper. Greece has agreed to support EU recognition of full market economy status for China, while China has agreed to support the call by Greece for UN mediation over Cyprus. A useful back scratching is in progress. The Greek narcotics routes to US-run NATO bases will continue.

The Chinese have essentially created a Dollar Swap Window, a small one admittedly. It will grow over time. The Europeans eagerly opened the window for China to invest money in Greek Govt debt, which European nations did not want to commit to. So China has a small pipeline in which to shove USTreasurys, to convert them to Euros will full blessing and approval of the Euro Central Bank, and to buy a stake in Greece. Beijing could not give a dragon's big toe of concern for Greece. They wanted a window to dump USDollars. Next, look forward. The Chinese might invest in Spanish Govt debt, some Portuguese Govt debt, and later some Italian Govt debt and even some French Govt debt. The Portuguese Economy is going bust rapidly (see Bloomberg article HERE). So far this clever back door Dollar Swap Window only has a Greek label on the glass counter with Chinese trucks on the dock. Soon the Latin debt will open up adjoining windows in an expanded Dollar Swap Window facility. The USFed and USDept Treasury was not invited to this planned project.

The key point upcoming is not the volume of European sovereign debt to be covered by China, even at discount in implied writedowns. The key point is other broader usage of the window. Watch and observe how the Chinese will eventually be accused of swapping far more USTreasurys through the window than purchased Greek Govt debt, or any other sovereign debt. The Chinese will jump to dump as much USTreasurys as they can to the Euro Central Bank, before the window closes and is shut by Goldman Sachs through pressure tactics. In the meantime, the Euro currency rose to touch 141 in the exchange rate two weeks ago. That is a rather impressive run from 127 in early September. The European fundamentals do not justify such a big 11% move. At 140 the exchange rate is still lofty. If the Chinese expand the usage of their clever new Dollar Swap Window, the Euro could rise to 150 before it begins a powerful reversal. Such is the heavy price paid by the EuroCB and EU leadership for refusing to permit a Greek Govt debt default. The Open Door Policy to China found a back door !!!

◄$$$ CHINA IS DUMPING USDOLLARS ON A RELATIVELY MINOR SCALE FOR RESOURCE PROPERTIES. THEY ARE BUYING HARD ASSET PIPELINES. THE DEALS IN BRAZIL MARCH ON. THE MAIN THEME IS TO PROVIDE ENERGY FOR A GROWING GIANT. THEY USE OVER-VALUED USTREASURYS TO SECURE ENERGY AND METALS. $$$

China is dumping USDollars on a relatively hefty scale. They are buying resource properties. The volume is large in absolute standards, but minor when considering the Chinese rack up monthly trade surpluses with the United States over $20 billion. China has agreed to pour another $7 billion into Brazil's oil industry. A recent deal with Repsol of Spain to buy a 40% of its Brazilian business gave China access to the estimated reserves of 1.2 billion barrels of oil & gas in Brazil. They will be first in line for exports out of Brazil, not the United States. The price premium paid to Repsol Brasil, which values the company at nearly twice previous estimates, is a sign of two factors. China is willing to pay up in order to lock in its future energy supplies. China might regard its USTreasurys as over-valued, and therefore discounts them in usage.

This year alone, Chinese companies have laid out $billions buying up stakes in Canadian oil sands, a Guinean iron ore mine, oil fields in Angola and Uganda, an Argentinian oil company, and a major Australian coal-bed methane gas company. To be sure, some bids have been interrupted, like with Canada's Potash Corp and Australian giant mining firms. The aluminium giant Chinalco failed in their attempt to buy Anglo-Australian Rio Tinto in 2009. China must keep itself supplied, and feed its growth. China has grown to become the second largest oil consumer in the world, far outstripping its domestic supplies. The Neptune consultancy estimates that it will need to buy two companies the size of British Petroleum each year for the next 12 years to meet its growing domestic energy demand. Furthermore, its demand for electricity is growing each year equivalent to Britain's entire consumption. The volumes in such deals seem big, but compared to USTreasury holdings and monthly trade surpluses, they are small. On the margin, China must find a destination for its new surplus while it dumps some of its bloated US$-based assets. See the UK Independent article (CLICK HERE).

◄$$$ CHINESE PREMIER WARNED OF DISRUPTION IF THE YUAN CURRENCY RISES TOO MUCH, LIKE SHUTDOWNS IN FACTORIES. THE SLOWER GLOBAL ECONOMY HAS ALREADY SHUT DOWN SEVERAL HUNDRED CHINESE FACTORIES. SMALL PROFIT MARGINS MEAN A YUAN APPRECIATION WOULD CLOSE YET MORE FACTORIES. $$$

Chinese Premier Wen Jiabao has given warning to the world. He said, "If the yuan is not stable, it will bring disaster to China and the world. If we increase the yuan by 20% to 40% as some people are calling for, many of our factories will shut down and society will be in turmoil. If China's economy goes down, it is not good for the world economy." In meetings with European Union officials, including European Commission President Jose Barroso, Wen urged Europe not to join the American-led choir to press China toward greater Yuan appreciation. Barroso told the conference that China needs an orderly and broad based appreciation of the currency. Wen rejected that call. See the Bloomberg article (CLICK HERE). As Greek Govt debt holder, China has a new voice to counter the European Commission.

◄$$$ PIERRE LASSONDE COMMENTED ON CHINA AND THE GOLD MARKET. HE BELIEVES THEY SHOULD PERMIT THE YUAN A MUCH HIGHER VALUE. EVEN AN IMMEDIATE 40% UPWARD REVALUATION MAKES SENSE. HE IGNORES VAST ADJUSTMENTS TO THE CHINESE EXPORT ECONOMY, AND A SHUTDOWN OF A LARGE PORTION OF THEIR FACTORIES. CHINA IS IN A BIND, SINCE THE RISING GOLD PRICE FORCES MORE WORK BY CHINA TO MAINTAIN THE TIGHT YUAN CURRENCY RANGE. $$$

Pierre Lassonde is a living legend in the mining industry. He currently holds the post of Chairman of the newly created Franco-Nevada Corp, a resource sector royalty and investment firm. He has put forth a shallow opinion on China, that it should take bitter medicine and revalue the Yuan currency upward to 40% to 50% quickly. He said, "They keep buying the US dollar, but they know it is not sustainable. The risk there is that they create significant inflation, thus destabilizing the country. High inflation inside of China would be extremely dangerous and could literally spark a revolution. They want the gold, but they have to balance that with stability. They should take their medicine now and let the Reminibi revalue 40 to 50% immediately. The Chinese central bank is using gold as one of their underlying assets, but the problem is that they should have a lot more gold then they currently possess. This is one of the major factors driving the gold market today." Although Lassonde might be a shining star in the mining sphere, he is unaware that China already has an endemic asset bubble problem. He seems ignorant of the entire Chinese factory phenomenon of operating profits resting on thin margins. Even a 20% Yuan rise would shut down half of Chinese factories, an utterly impractical policy outcome. However, he points out the extreme challenge in maintaining the Yuan right range, tying it to gold. That much is very true.

Lassonde provided interesting data on China and gold. Their jewelers are not able to secure gold from from suppliers. Thus they must purchase all of their gold on the open market. Domestic Chinese citizen demand is already 350 tonnes per year, growing by 15% per year in a powerful trend. Demand could reach 400 tonnes next year in 2011. He said, "If the Chinese central bank continues to consume internal production at the rate they are, it would be difficult for the gold market to experience a major correction. The Chinese central bank would have to back off purchases of internal production for three months or six months to get a major reaction in the gold market. The Chinese are worried that the world will discover that they are getting out of the dollar and buying gold. If they are seen as buying gold on the open market, their fear is that will be viewed as repudiating the US dollar. Then they have got a real Excedrin headache problem. That would create more competition for gold, driving the price of gold higher and the dollar lower. They would then have to buy even more dollars to keep the peg." In other words, a powerful gold bull market will put strong pressure on the Chinese Yuan managed range, the so-called peg. Lassonde makes a brilliant point. The gold rush strains the Chinese Yuan tight management. They must permit the Yuan to rise but maintain their internal cost structure. They want more gold but its purchase pressures their Yuan to rise.

◄$$$ FRANCE AND CHINA MIGHT BE INVOLVED IN SECRET PLANS TO SEEK AN ALTERNATIVE TO THE USDOLLAR. MANY MOTIVES MIGHT BE AT WORK. MORE IMPORTANTLY, THE CHINESE MIGHT BE EAGER TO GAIN CONCESSIONS THAT EUROPEAN NATIONS WILL NOT REVERT TO FORMER CURRENCIES YET. $$$

In a period with frantic central bank interventions and a heightened sense of currency war, reports have surfaced that France and China have been in in secret talks over greater coordination of exchange rates. Some speculate they seek alternatives to the broadly undermined USDollar. The Financial Times of London wrote, "The talks and their content have been kept secret, in an attempt to draw China into a discussion on global currency coordination, a subject that Beijing has been reluctant to countenance in the past. In an ambitious move reminiscent of the currency accords of the 1980s, President Nicolas Sarkozy hopes to open a debate on the subject when France takes over the presidency of the G-20 group of leading nations in November, according to people familiar with the matter." Beijing leaders have approached both Russia and Germany in the past about a USDollar substitute. Perhaps China has been waiting for the precise provocation to go public with its plans. The USCongress is dead set on retaliation against China, its largest creditor, a risk filled maneuver, a suicidal gesture. France immediately issued a denial of any secret talks. The FT author called the denial a confirmation that the Counter-US$ Axis will not hit the mainstream until it has the support and backing, perhaps even a commodity backstop.

The breakdown in currency decorum is vivid. Consider references to the April 2009 G-20 Meeting whose pledge has been sacked by all member countries. The official statement read, "The G-20 pledged in April 2009 in London to 'refrain from competitive devaluation' of their currencies, and the leaders said at their last gathering in Toronto in June that market oriented exchange rates that reflect underlying economic fundamentals contribute to global economic stability." These have turned into empty slogans chanted by embattled central bankers. The upcoming G-20 Meeting could be raucous or silently meaningless. Brazil will not be in attendance. Expect other nations to shun the gathering also. Not a week goes by with a fresh intervention by another central bank, indicative of competitive devaluation precisely. Witness a breakdown of the monetary system, the lack of order and decorum, the failure of the central bank franchise system. See the Zero Hedge article (CLICK HERE).

A secondary banker source has reported that China is making deals with both Germany and France. China wants the Euro currency to continue usage in Europe, and bargains toward continuation. China has an agenda at work, made clear in the Dollar Swap Window. They might wish to dump more USTreasurys in favor of discounted European sovereign debt. That plan requires continued usage of the Euro, as China adds to its significant EuroBond holdings. They wish to protect its second largest hoard of FX reserves. They want a delay in any plan for France to revert to the Franc and for Germany to revert to the D-Mark currencies. One must wonder if the Counter-US$ Axis, the Eastern Alliance, has a plan to convert Euros to Gold!!

◄$$$ TURKEY AND CHINA SHUN THE USDOLLAR IN FAST GROWING MUTUAL TRADE. THE TWO NATIONS SIGNED EIGHT CONTRACTS FOR LARGE PROJECTS. THE GLOBAL REVOLT CONTINUES ON COURSE TO SETTLE TRADE IN NON-USDOLLAR TERMS. THE GLOBAL SHUN MOVEMENT WILL OCCUR IN A SEQUENCE OF BILATERAL DEALS. $$$

Turkey and China are working toward a plan to shun the USDollar in bilateral trade. Turkish Prime Minister Recep Tayyip Erdogan and China Premier Wen Jiabao agreed in the first week of October that their two countries would trade using their own currencies, effectively excluding the USDollar. The accord has been in the making for a year. The two leaders pledged to triple trade between China and Turkey to $50 billion within five years, and to $100 billion by 2020. China and Turkey were the fastest growing G-20 economies in 2Q2010, as each grew by 10.3% versus the previous year. The two countries saw their trade surge from a mere $1 billion in 2000 to $17.1 billion in 2008, only to slow to $12.6 billion in 2009, as a result of the global recession. In all trade settlement, usage of Turkish Lira and Chinese Yuan currency will be used. Erdogan focused on how the two countries signed eight trade agreements on energy and infrastructure, including Chinese investment in two high speed rail networks, one to run between the capital Ankara and Istanbul. The two leaders side-stepped matters pertaining to Iran. The Turkish leader made no comment on the growing American and European chorus against the Yuan. They have warned that the low Yuan boosts Chinese exports but hampers the fragile global economic recovery. Turkey runs an extremely large trade deficit with China that reached $11.1 billion in 2009. Its expanding current account deficit is the weakest aspect of Turkish attempt at recovery from the global financial crisis. The Turkish Lira has been rising strongly against the USDollar and the Yuan in FOREX trading, pushing down the cost of Chinese imports. See the Wall Street Journal article (CLICK HERE).

◄$$$ THE MOVEMENT TO ABANDON THE USDOLLAR IN OIL SALES CONTINUES, A WORK IN PROGRESS, BUT A CATASTROPHIC STEP. ANGER OVER THE DECLINING USDOLLAR HAS PROMPTED OPEN CALLS FOR A $100 CRUDE OIL PRICE GOAL IN COMPENSATION BY O.P.E.C. NATIONS. THE USECONOMY COST STRUCTURE IS SET FOR A BIG MOVE UP. $$$

The USGovt and USBanking leaders have other USDollar problems. Arab states have launched secret moves with China, Russia, and France to stop using the US currency for oil trading. The demise of the USDollar is clearly an exaggerated claim, but the path toward its long drawn out demise is fast becoming laid out. These nations are planning to move instead to a basket of currencies to settle crude oil sales. It might include the Japanese Yen and Chinese Yuan, the Euro, even Gold and possibly a future unified currency designed by the Persian Gulf states. If enacted, the United States would have to purchase the basket in order to buy oil, in effect a constant USDollar devaluation. Confirmation of the talks came to the UK Independent by both Gulf Arab and Chinese banking sources in Hong Kong.

Meanwhile, oil revenues to OPEC states have been reduced in value by the USDollar devaluation. OPEC members seek a $100 crude oil price in order to counter US$ exchange rate weakness. OUCH!! The US$ DX index has fallen 13% since June. OPEC member nations are paying little attention to compliance quotas, and much more attention to reduced purchase power of their income. The nominal value of OPEC oil export revenue will be $818 billion in 2011, a nice 10% rise from last year, according to USDept Energy forecasts. However, the entire rise will be eaten up by the US$ devaluation, which no OPEC nation agreed to. They do not vote at Fed Open Market Committee meetings on US monetary policy. That makes them angry, motivated, and defiant. The consensus is growing for a $100 crude oil price, which is considered a reasonable target. Witness the upcoming rise in the entire USEconomy cost structure, led by a rising crude oil price. The only potential detour on the path to $100 oil is the platforms for financial markets eroding, sinking, and possibly collapsing.

Last May 2009 the group said the OPEC oil sales would depart from US$ denomination by year 2016. My public view was that in 2 to 3 years, the movement would be far along. It is indeed making progress. The USDollar will gradually be shunned globally. It might even be regarded as a ROGUE NATION currency, if bond fraud and home foreclosure scandal reveal a criminal foundation to the entire mortgage finance and related bonds held in foreign portfolios!! See the Bloomberg article (CLICK HERE).

REACTION TO A DYING USDOLLAR

◄$$$ CHINA ANNOUNCED IN THE OPEN ITS PLANS TO ADD TO OFFICIAL GOLD RESERVES. REGARD THE TALK AS A FLICK OF THE USGOVT NOSE AND A RATCHET UP IN THE CURRENCY WAR. $$$

The Chinese realize where the extreme vulnerability lies of the US financial sphere. It is Gold that defends the fiat USDollar from its anti-anchor. The Chinese Govt announced two weeks ago a plan to put a lot more reserves into Gold. The reaction in financial markets was curious. The US$ DX index was stable, but the Gold price shot upward to reach a new high. Hence, gold rose uniformly against currencies. Anticipate the damage done to currencies to be broad, and relatively even. My forecast of eerie calm in the currencies is soon to begin, even while gold surges upward in price. See the Zero Hedge article (CLICK HERE).

◄$$$ KEISER SHARED INFORMATION THAT THREE IMPORTANT NATIONS WILL CONTINUE TO MAKE LARGE PURCHASES OF GOLD. THEY SENSE THE STRAINED USDOLLAR CANNOT CONTINUE ITS ROLE AS GLOBAL RESERVE CURRENCY. $$$

In an interview with Russia Today, independent financial analyst Max Keiser revealed that India, China, and Germany will soon announce the purchase of large quantities of gold bullion. Last month the central bank of India bought $7 billion worth of gold and earned an $800 million paper profit. India proceeded to announce a further tentative purchase of 203 tonnes gold from the Intl Monetary Fund. The irascible Keiser discussed how the USDollar no longer is a defensive currency as in the past. Foreign nations have either questioned the US$ value or acted in revolt against it. They increasingly suspect as the global crisis continues to erupt, that the global reserve currency is going to be replaced. Gold will be the likely core of any new recognized global currency, even a basket. Keiser correctly forecasted the Iceland and Dubai crises, credentials for credibility. He said, "India is going to announce another huge bullion purchase. China will announce another big bullion purchase. My contacts in Germany at the BundesBank tell me that Germany is going to announce big bullion purchase. So these central governments are buying gold after decades of selling gold. The Dollar is the currency that is going to suffer the most going forward. It may have little upticks here and there because there is still a legacy of it being a safe haven currency, but that status is being challenged with every month going by." See the Digital Journal article (CLICK HERE).

◄$$$ CHINESE SILVER EXPORTS DECLINED BY 40% THIS YEAR. IT IS KEPT FOR DOMESTIC INDUSTRY OR INVESTMENT. EITHER WAY, IT IS NOT AVAILABLE TO SATISFY THE RISING GLOBAL SILVER DEMAND. THE SILVER PRICE SHOULD RESPOND IN A STUBBORN UPWARD PATH. $$$

China is the world's largest silver exporting nation. It is the third largest producer after Peru and Mexico. China's silver production, including mined, by-product output, and recycled material, grew by an average 14.9% every year in the 20 years from 1990 to the present. Output stood at 10,348 tonnes in 2009, but silver output dropped 1.9% in the first eight months of this year to 7445 tonnes. Growth was mainly because of the fast growing production of lead, zinc, and copper, which generates silver as a by-product in the mine process. But that industrial activity has slowed down in recent months. Their silver exports are expected to decline by about 40% in the next twelve months as domestic demand from industry and investors climbs, according to Beijing Antaike Information Devmt. Silver shipments could decline from 3500 metric tonnes in 2009. Customs data shows exports have fallen sharply by almost 60% to 970 tonnes in the first eight months. Cancellation of an export incentive rebate in 2008 is also hurting shipments. The Chinese Govt revoked export rebates in August 2008 in order to curb usage of natural resources. The reduced exports will surely curtail global supply, necessary to bolster prices. During a period when governments are debasing currencies in order to support banking systems and to stimulate economies, an increased demand for hard assets is afoot that serve as a store of value. Chinese demand remains huge, further reducing exports. The demand is broad, including jewelry, investment, and fabrication. A physical market shortage is growing acute in the Far East. Much of the data was provided by Feng Juncong, chief analyst at the state-owned Antaike. She concluded, "There are Chinese investors now hoarding silver, along with other resources, amid anticipation of higher inflation. China is short of resources. So these investors believe the metals will be more valuable in the future." See the Washington Post article (CLICK HERE).


◄$$$ THE SUPER-RICH INVESTORS ARE BUYING GOLD, AND BY THE TON. THEY ARE WORRIED SICK ABOUT SOVEREIGN BONDS, THE CONDITION OF BIG BANKS, AND THE EROSION OF MONEY ITSELF. THEY ARE NOT FOOLS. THE RICH ARE WORRIED. THE ELITE ARE SCARED. $$$

The super-rich investors are buy gold bullion by the ton, not simple coins. In response to economic, monetary, and banking crises, the world's wealthiest people have been buying gold by the bar. They often purchase in quantitites in the tonnes. One ton of gold bullion, without the premium vig included, costs about $42 million. The super-rich have seen a growing appetite for physical bullion as well as for mining company shares and exchange traded funds, according to UBS executive Josef Stadler. He runs the Swiss bank's services for high net worth clients with assets of at least $50 million to invest. Portfolio managers like him are typically advising clients to hold 7% to 10% of their assets in precious metals like gold. The managers express concerns over poor USEconomic data, currency weakness, price inflation, and government bond instability. They regard gold as portfolio insurance. They have yet to factor into their planning the lost income from annuities tied to mortgage bonds. See the Reuters article (CLICK HERE).

◄$$$ PANIC SILVER BUYING IS REPORTED BY JAMES TURK, CHIEF OF GOLDMONEY. HE CALLS IT THE THIRD STAGE, AT THE CENTER OF A SHORT SQUEEZE. $$$

James Turk was interviewed by Eric King. He said, "The metals market was dominated by pervasive fear, when you and I first started to do this series of blog pieces back in the $18 to $19 price range for silver. From those levels in the high teens, the market headed higher as many people watched in disbelief. The lengthy three year consolidation pattern in silver had simply worn out the bulls. We are now into the third stage. We are starting to see the panic buying. As I mentioned previously, there was going to be a massive short squeeze the likes of which has not been seen since Cornelius Vanderbilt took on Daniel Drew. We are now witnessing the early stages of that short squeeze." See the King World News interview (CLICK HERE). Turk has not yet noticed the Eastern Alliance coordinated gold & silver purchases. They are on a mission. The great majority of Americans still do not own gold.

◄$$$ THE TOPIC OF GERMAN GOLD BULLION AT THE BUNDESBANK HAS SURFACED. WITH EUROPEAN SOVEREIGN DEBT WORRIES, THE ISSUE OF COLLATERAL HAS COME UP. THE MAINSTREAM PRESS SEEMS IGNORANT OR DECEPTIVE. INCORRECT INFORMATION HAS CIRCULATED. THE GERMAN GOLD TREASURE TOTALS AROUND 3800 TONNES, MOSTLY HELD IN GERMANY. $$$

A topic widely discussed among goldbugs in Germany is the size and location of Germany's gold reserves. The United States holds 1700 tons of their gold in the US bullion depositories under such terms like Custodial Gold and Deep Storage Gold. The former is legitimate gold bullion owned by foreign governments, held in custodial accounts. The latter is the sham accounting fraud that fools only bonafide morons, where gold is claimed in USGovt ownership in ore bodies yet unmined. Before the following interview, bear in mind that Turk is an expert at gold accounting, at establishment of gold repositories, and at forensic analysis. But in my view, he does not have the best high level contacts within the banking industry of Europe. He has strong contacts in Canada. So his information on sovereign gold for European nations might be lacking.

James Turk said, "I believe that the Bundesbank's vaults are empty or nearly so. When Germany accumulated its 3400 tonnes of gold reserves in the 1950s and 1960s, most of it was held abroad in the US and UK. This was standard procedure at the time, because it avoided the cost of shipping the gold to the Bundesbank. Also, back then gold stored in the Federal Reserve or the Bank of England was considered to be safe because central banks did not lend gold to bullion banks, which for the most part only began in the 1980s. Eventually, however, bullion lending became active central bank policy, and even the Bundesbank's balance sheet shows that it is now participating in this activity. When the Bundesbank lends gold, the gold is removed from the vault and given to a bullion bank, which then sells the gold, receiving dollars as proceeds from the sale. The bullion bank then invests these dollars in assets with yields higher than its cost of borrowing the gold in order to earn this spread, which is the so-called Carry Trade. Because of its misleading accounting as I explained earlier, we just do not know how much of Germany's gold the Bundesbank has loaned. My guess though is that they have loaned all of it, which is why I believe its vault is basically empty. One half or 1700 tonnes was loaned directly by the Bundesbank to the big bullion banks like JPMorgan Chase and DeutscheBank. And there is enough circumstantial evidence to suggest that the remaining 1700 tonnes was loaned to the US government, which in turn loaned this amount to various bullion banks. The record keeping for this transaction results in the change in accounting terms that you mention. This of course is a serious matter, and there is an important point here." Turk admits he is guessing about their leased volume.

The Jackass inquired with a highly reliable German source who works deep in the gold trade. He has numerous well placed corporate colleagues, business contacts, personal friends, and university chums. He wrote to me in response. Preface the comment by saying that he openly stated Turk did not have knowledgeable sources on matters pertaining to German or Swiss gold. Turk has admitted as much to me in personal conversations. We met at the Cambridge House conferences in Canada, and have kept contact over the last couple years. He is a fine gentleman with integrity. My German source said, "Most of the German gold is in Frankfurt. They repatriated vast amounts after the first Gulf War around 1991-1992. The total gold treasure of German is roughly 3800 tonnes. When they say in Frankfurt they mean under the control of the Bundesbank. The depositories are in well guarded German mountain vaults."

◄$$$ AN ASININE PLOT HAS BEEN PUT FORTH BY RICKARDS FOR THE UNITED STATES TO CONFISCATE (STEAL) GERMANY'S GOLD HELD IN NEW YORK CUSTODIAL ACCOUNTS. DUMB IDEA, NOT EVEN POSSIBLE. GERMANY IS NOT A NATION TO STAB IN THE BACK. ANOTHER BASELESS PLOT HAS BEEN PUT FORTH FOR THE USGOVT TO SELL ALL ITS GOLD, THUS AIDING THE BIG BANKS. THE USGOVT HAS NO GOLD, PERIOD. $$$

The idea of stealing German gold at the New York Fed should be dismissed summarily as stupid and impossible. The circulated story is that the NYFed holds 66% of the gold reserves from Germany. Jim Rickards laid out a plan to commandeer all German and all foreign depositors of sovereign gold at the New York Fed as currency wars heats up. The theft would be part of a Nuclear Option of hoarding the bullion and raising the gold price of Gold as a beleaguered USFed attempted to force down the exchange value of the USDollar. The plan of such a gold heist, and the concept of devaluing the USDollar in this way are both asinine and impractical, surely ineffective. The story contains massive distractions in my view. One rule of wealth is never to permit enemies to know where the money is stored. Peter Boehringer, head of Germany's precious metal society, confirmed (falsely) that the bulk ok German national gold is not located in Germany. As a result of trade surpluses in the last few decades, Boehringer stated, the gold has been stored in custodial accounts in New York, London, and even Paris. The Bundesbank has verified the foreign location, defending a storage policy with reasons of trading convenience and historical storage custom. Boehringer corrected the data on the outlandish story, saying Germany owned close to 3400 tonnes, not 6000 tonnes.

Noise came from the Obama camp, which has argued the benefits of an official sale of the US gold (261 moz / 8100 tons), which contradicts the speculation. Rickards thought JPMorgan's desperate need to cover their short positions would lead them to welcome a massive bullion sale. The USGovt abhors the idea of being forcibly drawn to a gold standard again when it suffers lack of material. The last thing the United States would choose to do is create a gold currency global war, a war it would lose badly. It has no golden bullets, at least none forged of metal. With China and Russia, even Arab nations setting up gold-backed currencies, the US would be a grand loser. It has leased and sold not only its own gold but the gold from other nations as well. IMF supposed sales cover up the repayment of shorted gold from the Clinton-Rubin years. If executed, Switzerland, Italy, and France would leap overnight to superpower status, due to their high gold per capita ratios. Rickards has been caught with coffee table talk in public, pure wishful thinking by a goldbug, or a purported gold bug. My view is that Rickards is something of gold afficionado planted by the gold cartel to dominate the analytic thought. In no way, not in this world, will the USGovt push for an upward revaluation of double the current gold price in order to supposedly solve their broken crushed financial standing. Doing so would kill the big US banks. To begin with, the USGovt has no gold, period!! Rickards appears to be working an agenda to lay the impression publicly that the US owns gold. It does not!!

◄$$$ FOR AMUSEMENT, CONSIDER THE FABLE THAT THE USGOVT IS BEING URGED TO SELL MOST OF ITS GOLD RESERVES. IMPRESSIVE PHOTOS ARE CIRCULATED TO LEAD THE WORLD TO BELIEVE IT OWNS SOME. REFERENCES ARE MADE TO FORT KNOX AND THE MANHATTAN VAULTS SHOWN BELOW. THE USGOVT IS ATTEMPTING TO DEMONSTRATE LIKE A SCRAWNY ROOSTER THAT ITS USDOLLAR AND USTREASURYS CONTAIN VALUE, A SHAM. $$$

The propaganda cannot hide the fact that the USGovt owns almost zero gold, long gone, leased and sold by the Clinton-Rubin gang. The USGovt wishes to prop the confidence in the embattled USDollar. The vaults shown below in all likelihood contain private elite gold and bullion in foreign custodial accounts, the very supply that foreigners are outraged over since illicit leased. They are protected Allocated accounts. That is why foreigners have repatriated this gold for the last three years. The Federal Reserve Bank of New York, a neo-Florentine fortress in Lower Manhattan, covers a full square city block. A battery of structural and technological defenses makes it perhaps the world's most secure bank, but it was no match for Robert Rubin of Goldman Sachs when he served as Treasury Secy. He just walked in andt took it, carrying a valid employee badge. Official fairy tales cite the shown gold as the possession of the USGovt. Nearly 40 years after President Nixon suspended the USDollar link to gold, the United States still maintains the sham story of possessing far more gold than any other nation. Official holdings total 8965 tons, or roughly 260 million troy ounces, according to the USDept Treasury. Most of it, they say, is stored in Fort Knox Kentucky.

They are liars. Fort Knox is empty. Foreign central banks are the primary owners of what is shown in photos. Most gold in the official accounting is listed as Deep Storage Gold in precise terms, an accounting sham. They refer to the unmined ore lying deep in ore deposits out West somewhere. Do not be impressed, as the gold is all gone. Fort Knox is the object of current controversy. Opponents to monetary policy, Wall Street looting, and treasonous acts of larceny are demanding an independent audit, not done since the 1950 decade. Recent presidents have pilfered the national gold treasure. Chalk it up to the syndicate in power, their fee. Never remove from the frontal lobe that the New York Fed is a private institution. What gold bullion is shown has claims by private hands. Perhaps far more private gold is held by USGovt masters in personal accounts, who short the gold for official accounts with full USGovt risk. The public finances will be wrecked as the elite walk away after the chaos with the national treasury. They have plundered the nation and left it in ruins.

◄$$$ INVESTOR EXPOSURE TO GOLD AND GOLD MINING STOCKS IS EXTREMELY LOW. REGARD CALLS OF A GOLD BUBBLE TO BE AN ABSURD AND DESPERATE ATTEMPT TO HALT A GOLD RUSH AS THE USTREASURY DEBT BUBBLE CONTINUES TO BLOAT. AS PERCENTAGE OF GLOBAL ASSETS, THE MINING STOCK EQUITY REMAINS UNDER 1%, CERTAIN TO RISE TO A GREAT EXTENT. CLAIMS OF A GOLD BUBBLE WHEN A TINY ROLE IS PLAYED BY THE LONG ESTABLISHED DISTRIBUTION TARGET (THE PUBLIC), ARE UTTERLY ABSURD. $$$

◄$$$ THE S.L.V. INVENTORY RESERVES DATA WERE RECENTLY RELEASED. THEIR SILVER BULLION HOLDINGS ARE RISING FAST. INVESTMENT DEMAND IS SOARING. REMAIN SKEPTICAL ON THE LEGITIMACY OF THEIR INVENTORY, WHICH IS MADE AVAILABLE TO THE GOLD CARTEL FOR LEASING. $$$

Anyone who invests in the SLV exchange traded fund is a total idiot and blind moron. The iShares Silver Trust (symbol: SLV) has custodian JPMorgan, the pre-eminent gold cartel leading firm. They are short almost a full year of global silver output, and post no collateral, otherwise known as naked short. The SLV fund has reported holdings of 10,125 tonnes of allocated silver bars in London vaults. The gain was 39.55 tonnes in one week. SLV now holds about 325,531 bars averaging 1000 ounces each. In future months, like with the gold GLD fund, investors will be very likely shut out of their deserved gains, as they are given certificates in lieu of metal in mandatory redemptions. Some cockeyed force majeure will be announced, and investors will be stuck with redemptions forced upon them at much lower prices. Their final paper price upon exit will be pitifully low, when the great paper shuffling game ends.

◄$$$ JPMORGAN REVIVED ITS BULLION BANKING BUSINESS IN ASIA, READY TO EXPLOIT IGNORANT DEPOSITORS AND PILFER THEIR GOLD. JPMORGAN IS OBVIOUSLY LOOKING FOR FRESH METAL TO OFFSET ITS SHORT POSITION. NOTE THE TIMING NEXT TO THE SEQUENCE OF EVENTS BEHIND H.S.B.C. CONCERNING BULLION VAULT SERVICE AND BANK SECRECY. $$$

Bloodsuckers move to where the flow is. The JPMorgan bullion bank facilities re-opened in Manhattan to exploit New York customers, and opened a new Singapore facility that will exploit their Asian customers. They plan to target corporate, institutional, and retail clients in the Asia Pacific region. The JPMorgan vault accompanies others in Manhattan, including those owned by HSBC and the Bank of Nova Scotia. By far the largest gold depository is the Federal Reserve Bank of New York, which holds reserves from 36 countries in custodial accounts. They are under scrutiny for improper leasing of Allocated accounts. DeutscheBank and Barclays Capital are considering opening new vaults in London. These are the key actors in the LBMA precious metal price suppression scheme. The giant JPMorgan underground gold vault in New York was mothballed in the 1990 decade. The Asian facility launch was just ten days earlier. JPMorgan has long been alleged to be the biggest shorter of the precious metal in the world via synthetic positions to the tune of 100x leverage. JPM also acts as gold custodian for Blackrock's IAU exchange traded fund, which only contains 4 tonnes. Transfers to Asia seem a clear motive. JPM might suddenly find itself in dire need of actual physical since the gold price is at all time highs, and clients are demanding delivery. Ponzi Schemes would dictate that facilities must enable transfer from one physical storage client that deposits gold to another that demands it. Perhaps the firm could be merely preparing the biggest mouse trap ever for when Executive Order number 6102.5 comes into force.

Investors are surely going for the gold in record quantities. The vaulting business is highly lucrative, and fees rise in proportion to the gold price since a percentage fee structure. The controversy around sovereign bonds, mortgage bonds, and even the bubbly USTreasury Bonds has spawned much greater gold bullion demand, the physical king, not the paper variety. All paper financial products have been drawn under greater scrutiny and skepticism in recent months. Even the High Frequency Trading controversy surrounding the stock market has led investors away from gold mining stocks. The new wave is toward gold bullion. Private investors hold about 30,000 tonnes of gold, according to the consultancy GFMS. At more than one sixth of the world's gold, private gold bullion holders own for the first time in modern history more than central banks. My belief is that whoever vaults with JPM will probably receive a paper certificate later. The JPM vaults will likely contain GLD shares after the depositor swaps. Let's hope they are friends and family of Wall Street firms, dumbass uncles and brothers-in-law. Lawsuits will be ignored and will go nowhere. Imagine a slew of new bullion depositors unwittingly helping out JPMorgan, believing their lies, and perhaps even selecting Unallocated accounts under the pernicious JPM guidance.

◄$$$ USFED ISSUED A CEASE & DESIST ORDER AGAINST H.S.B.C. BANK, THE TYPE USUALLY DESIGNED FOR SMALL REGIONAL BANKS. THE HINT OF GOLD BREEZE OVER THE ORDER CAN BE DETECTED. THE GOLD GAME IS BREAKING APART. $$$

HSBC, the global conglomerate bank, was cited by the USFed. The restraint order against HSBC North America Holdings (HNAH) is a highly curious and obscure event. The case appeared to be for violation of the Bank Secrecy Act and Anti-Money Laundering. The order requires HNAH to take corrective action to improve its corporate-wide compliance risk management program, including its anti-money laundering compliance risk management. The focus must be on protecting flows of secrets and cash. All major US banks are involved in drug money laundering. Perhaps the secret flow of cash has been exposed as supporting the gold suppression efforts, and risk was detected. The case smells of something much deeper. First of all, HSBC issued an order last November 2009 for its bullion bank clients with smaller accounts to seek other facilities before July 2010. They stated plans to focus on their institutional client base. HSBC has giant New York City facilities in the Bryant Park area. See the UK Telegraph article (CLICK HERE). That alone was highly unusual. Bear in mind that HSBC manages as custodian the highly corrupt and deeply flawed GLD exchange traded fund. Perhaps the insolvency of HSBC from wrecked credit portfolios has interfered with their role in illicit gold price suppression. They might be having trouble holding their positions. Second, HSBC has original roots in Hong Kong. Perhaps too much information has flowed regarding the illicit gold price suppression mechanisms to China from its backdoor in Hong Kong. The Chinese might be given too many peeks at Western vulnerability. Third, with JPMorgan reopening its vaulting facilities in New York City, one might wonder if JPM is being positioned to take over HSBC custodial role for the GLD fund. Perhaps it has become too difficult to manage the interlaced conduits to the London Metals Exchange, the GLD fund, and the USDept Treasury. Step aside, little man, and let the more muscular JPM take control of the helm with its broad shoulders!! See the USFed official published statement (CLICK HERE).

◄$$$ BEHOLD THE MESSAGE OF GOLD. INVESTORS SHOULD BE AWARE OF WHY THEY INVEST IN GOLD. ITS HEDGE AGAINST PRICE INFLATION IS OVERSHADOWED BY THE PROTECTION AGAINST THE EROSION AND RUIN OF MONEY. IT IS FOR WEALTH PRESERVATION. $$$

Gold & Silver are not simply hedges against current and future price inflation. That is the most shallow and pathetic argument used by antagonists, the empty blather of propaganda, the stuff of vacant compromised mental cavities. Gold & Silver are investments in legitimate money. Gold & Silver are investments in bullion whose price in no way properly reflects the obscene shortages and contract naked shorting by official chambers. Gold & Silver are investments in grossly under-priced bullion whose move toward equilibrium will bring about price advances to multiples higher, not just hefty percentages higher. Gold & Gold & Silver are defiant gestures against diverse bond fraud. Gold & Silver are votes of NO against fraudulent money that permits big banks to execute their printed profit schedules. Silver are votes of NO against financial criminal syndicates. The Competing Currency War assures the continued profound systemic debasement of money in a grand race to ruin each major currency in order to preserve export industries, in a merry-go-round of destruction. Witness the gradual breakdown and the revelation of tainted money, along with its lost store of value.

◄$$$ THE NEXT PHASE OF GOLD'S METEORIC RISE WILL CONTINUE UNTIL A CAPITULATION OF GOVERNMENTS AND NATIONS. THE GOLD PRICE WILL RISE UNTIL CONSTRUCTIVE AGREEMENT IS FORGED, WITH THE PRINTED MONEY PRIVILEGE TAKEN AWAY. SELF-SUFFICIENT NATIONS WILL FARE BETTER, AS PER FOOD SUPPLY. GOLD WILL BE THE CENTER OF ANY NEW MONETARY ORDER, IN A REMONETIZATION MOVEMENT OF GOLD. $$$

James West of the Midas Letter has a flair. He urges to ignore the clueless commentators who attempt to undermine gold investors. Those who lay good money down for gold properly comprehend the risks of today. West wrote, "Accumulators are genuinely frightened about the purchasing power of their dollars, as their government quantitatively eases the economy back onto its feet. By continuously counterfeiting fiat currencies and flooding the markets with such ersatz lucre, the final rush towards economic collapse is momentarily cushioned. But make no mistake. The acceleration of the rate at which gold is increasing, the average has been $87 per year since 2000." He lays out a pathogenesis sequence, with details of what happens next. His view is very consistent with the Jackass.

  • The next phase is hyper-inflation, where money cannot be printed fast enough to keep up with its devaluation, including debt decay. Governments will stop accepting USDollars for the settlement of international trade, which will paralyze the global flow of commodities. National economies will in turn suffer some paralysis, which will be met with printing yet more money. A vicious spiral ensues.
  • The gradual collapse of the economic system will lead to civil disorder. Crimes against property will skyrocket. The supply chain will be disrupted. Shortages will dictate stealing in order to survive.
  • Finally governments desperate to restore order will negotiate the establishment of a new form of global currency. Within the guidelines will be allowance for nations to print an amount of money tied to the value of the country's economic size. Growth begets growth. Gold will be embraced as the de-facto standard by which currencies are valued.
  • The climax declarations of new monetary order will bring about an end to the meteoric rise of gold, whose price will flatten out. That time is far into the future.

The timetable is very uncertain, and depend upon willingness to subvert the system by those in control, and tolerance by the public whose wealth evaporates. The amounts of money issued will be huge but uncertain. An economic capitulation will surely come. Certain food producing countries will stop accepting currency from its trading partners. In this scenario, less developed and less populated countries that are agriculturally self-sufficient will fare much better than over-populated, over-industrialized, agriculturally import dependent nations. West believes countries like Peru, Argentina, and Vietnam will continue to supply food for themselves. Europe, China and most fittingly, the United States, will suffer most. He believes the conflict between China and the United States, whose blossomed trade war was forecasted by the Jackass in 2005 and 2006, will dominate the maintsream financial media. West said, "China holds all the cards here. If it decides the United States needs to be taught a lesson, it will just sell of some of its vast holding of Treasurys and force the United States into hyper-inflation. The final days of the US hegemonic empire are at last coming to a close, and the world, including clear minded Americans, should sigh in relief when that day finally comes. Then we can get to work, as a unified world, to build a more realistic and equitable global economy." See the Seeking Alpha article (CLICK HERE).

◄$$$ GOLD & SILVER MARKETS ARE TARGETED BY THE EASTERN ALLIANCE, IN AN INITIATIVE TO DISPLACE THE ANGLO BANKERS. SUCH IS THE REACTIVE RESPONSE. NATURAL MARKET FORCES ARE ALSO AT WORK, SEEKING OUT THE CORRECT VALUE OF MONEY. THE DETERIORATION OF ECONOMIES AND FINANCIAL STRUCTURES IS PART & PARCEL OF THE NATURAL RESPONSE. $$$

It is time to toss aside the many devices, past patterns, and to some extent the technical charts. One must recognize the change in the current reality. The Eastern Alliance has targeted the Boyz of Wall Street and London for a kill in the gold & silver markets, the recognized point of extreme vulnerability. The alliance reacts to the criminal dominance of the Anglo financial fortress. Their activity is evident in the stairstep relentless rise of the Gold & Silver price. The last week finally saw a respite for consolidation before the attack continues. The purpose of the Alliance in the last two months has been to force a breakout in the precious metals price, and to force the Gold Cartel into a ruinous position where they are stuck on the defensive. Their purpose was to wrest control from the Gold Cartel. MISSION ACCOMPLISHED!! They do not like much attention, and prefer to wreck the evil fortress using available tools, focusing attention not on USTreasury Bonds, and not even on the fiat currencies led by the USDollar. They use a coordinated attack by bidding up the Gold & Silver price, and demanding delivery of physical metal from the biggest metals exchanges every ten days to two weeks since August. They use several players, a few continents, billion$ in funds, and stern determination. They demand physical delivery and apply paper price pressure as reinforcement. They are willing to pay a gradually higher price with each raid. Anyone with a pair of open eyes can notice their fingerprints and activity.

Consider the natural forces, which at times can be called Economic Mother Nature. The fascinating aspect of gold is that even if authorities, bank officials, and governments do not recognize gold as money, the Mother Nature factor seeks out the correct value of money anyway. So hedges against false money arise, like crude oil or property or commodity baskets. Eventually Mother Nature wins from sheer pendulum swings toward normalcy, force, pressure, and time. The pattern established has been a huge correction after a generation of suppression. It is akin to holding a basketball underwater, but inflating it year after year. As they attempt to bury the ball deeper underwater with each passing year, in order to conceal the entire exercise, the pressures build. Pardon me, but it is utterly fascinating to observe the natural forces exert themselves. To be sure, debt default, crumbled industry, lost home equity, stagnant clogged credit engines, price increases to feeder systems, and contaminated financial instruments all address the natural response to fraudulent money and illicit market control. In time, the same devices and tactics fail to maintain order and power. In time, those in power fall on their own swords as the system turns against them.

◄$$$ HARVEY ORGAN REPORTED ON SEPT 27TH. IN HIS DAILY ACCOUNT, HE DESCRIBED THE BLOWUP OF BOTH THE S.L.V. AND THE G.L.D. EXCHANGE TRADED FUNDS FROM AN INVENTORY STANDPOINT. PAPER SHARES ARE USED TO SETTLE SHORT CONTRACTS. ALSO, THE BANK OF ENGLAND WILL SOON DEMAND THE RETURN OF ITS GOLD BULLION, LONG AGO REPLACED BY PAPER. LAWSUITS ARE JUST A MATTER OF TIME. LONDON BANKERS HAVE DUG A HOLE WAY TOO DEEP TO EMERGE FROM, ESPECIALLY WITH A RISING GOLD PRICE. $$$

Harvey Organ made the case of severe damage done to the gold cartel, which busily suppressed the Gold & Silver price by means of naked shorting in the futures contract arena. The exact details will be left out, since they contain a barrage of data, some of it complicated and confusing. Organ cited huge leasing of silver, an unusual level of activity. Almost a million ounces silver left the COMEX, whether for a customer delivery or dealer requirement. A single lease of over half a million ounces silver was deposited to a dealer. On a single week in late September, the COMEX gave notices to deliver on 167 contracts equal to 835,000 oz silver. A strange sequence occurred that close to one million oz silver entered the COMEX that was lost in the previous week. Huge volatility of silver and gold movement has been seen into and out of the vaults. Organ wrote, "The huge number of silver movements seem to suggest that COMEX is being settled with paper SLV. The SLV will have documents stating bar numbers and weights. However it is our bet that this silver is encumbered elsewhere. There is no question that GLD is also entering the settling process. We have witnessed GLD inventory leave London and land in many places such as their ETF, and IAU which is a strict allocated account. We suspect that GLD paper is also settling upon our patient longs at the COMEX."

Organ concludes that the GLD gold inventory, largely supplied by the Bank of England, must someday in the future be demanded for return. It was leased in a huge Gold Swap contract to provide inventory at the fund's inception. More sinister shenanigans have taken place. Organ claims that the GLD folks sent COMEX delivery slips to settle upon unsuspecting long contract holders who think that they have metal at the COMEX. They cannot legally do so, but given how much of the GLD inventory is leased gold, the management wants to reduce the interference by legitimate investors. This action is likely to blow up the GLD shareholders, who will then launch multiple lawsuits against the regulators over at London and the NYSE. He expects the Bank of England will also have problems, when all the gold that they swapped will not be returned. Complexity turns ugly, since the majority of the gold at the Bank of England was not England's. It was Arab gold held as foreign depository, with London serving as custodian. Only a short leap is needed to conclude that London has created a new formidable enemy in the Arabs. Furthermore, the Arab billionaires are highly motivated to use other wealth to secure other gold bullion, firstly to feel secure in their riches, secondary to bust, wreck, and destroy the criminal Anglo bankers. Vengeance is a main feature of Arab culture. Organ concludes that massive problems face these banking institutions. My view is that the crimes are international and touch on new ground, the kind that Nuremberg banker trials settle on an international stage.

◄$$$ BIG BANK SHORT GOLD POSITIONS ARE VERY CONCENTRATED. THEY TAKE EXTRAORDINARY MEASURES TO DEFEND A BROKEN FIAT SYSTEM. THE MOST CONCENTRATED POSITIONS ARE FOR SILVER, THEN GOLD. $$$

A gold futures contract is merely a paper promise to deliver a quantity of bullion for a pre-determined price at some future date. The scam can continue in perpetuity as long as dim buyers appear on the back end to the cartel gamesters who sell naked contracts. The COMEX allowable position limits in Gold & Silver are completely out of whack, even before the special limit exemptions extended to the Big 8 bullion banks. The scale of fraud committed in order to preserve faith in paper money system is unspeakable. As the players Double Down and their Open Interest has increased ever higher toward infinity, the recklessness has grown out of control. The bullion bank traders have become more bold and more deeply entrenched in the fraud.

Observe the graph that shows the extent of forward selling, in days of production, by the largest traders. The level of forward selling that Gold & Silver are subjected to by the big commercials is beyond out of control. So much forward sold silver and gold is necessary to fortify a monetary system long past functional. The contradiction evident is that despite so much (paper) gold and silver really changing hands, the eligible COMEX inventories sit at 20 year lows. The same so-called hedging strategy is not deployed for crude oil, or soybeans, or wheat, or cotton. Attention is drawn to the extreme concentration by a few gigantic banks on the short side in precisely the two elements that have served as the most viable forms of money for longer than any other medium in human history, GOLD & SILVER. They have corrupted money and thus are approaching infinite pressure to maintain their fraudulent system.�

EARLY STAGE OF GOLD BREAKOUT

◄$$$ THE GOLD RISE IS STUBBORN IN A TIGHT STAIRCASE PATTERN, TELLING OF AN EXECUTION BY USDOLLAR ENEMIES OF THE BIG USBANK CARTEL. THE RUIN OF THE USDOLLAR IS ASSURED. AN INFINITE COMMITMENT OF PHONY FUNDS WILL SUPPORT THE USTREASURY BOND BUBBLE. THE GOLD PRICE IS THE METER TO MEASURE THE MONETARY RUIN AND ENDLESS PRINTING PRESS SUPPLY, AS WELL AS GLOBAL REVOLT. $$$

Insistence to perceive the Gold price in a conventional manner might lead even smart people to fail to comprehend what is happening. Many smart people find themselves struggling to let sink what they see as profoundly different. Try to find a staircase bullish price pattern anywhere in any market in the last 30 years like what is seen in Gold & Silver lately. Notice the tight uptrend band that screams of Machine Guns pointed at the Big Four Banks, the primary Gold & Silver price suppressors in the cartel. No relief was given, no back door, no end to the painful short squeeze. They are trapped in gigantic short positions, gauged to be over 95% underwater. The cartel has shown for six weeks that they CANNOT push down prices with additional naked gold futures short contracts. A natural process had to take place with too many bulls on the bus and too much profit awaiting an easy pluck, as in last week. The bull will resume its upward path after nothing comes from the G-20 Meeting in South Korea. Gold might endure a consolidation if and when Europe decides to undercut the Euro currency. The event is certain but the timing is not.

The cartel game has been exposed, as they have lost control. Huge Gold & Silver deliveries continue on a regular weekly basis from the metals exchanges. A climax awaits. A great big rubber band is being stretched by Anti-Anglos, the opposition knowing they have the resources, knowing the big US banks are vulnerable, knowing the Gold suppressors have a finite amount of time left. The enemies to Anglo Bankers have found a battleground to focus the war, and it is Gold & Silver, the great Anti-US$ Anchor. After two years since the Lehman Brothers, AIG, and Fannie Mae events, the Anti-Anglos have organized their coordination and execution, and have taken serious action.

The Competing Currency War is in full bloom, with Japan the hidden key. The US financial train has all its locomotives long ago over the cliff, pulling hundreds of cars down hard and fast. The commitment to save a broken corrupt and inequitable monetary system will be evident with the next QE2 program to monetize debt, along with the next TARP-2 program to bail out the big banks from mortgage losses. The two programs will likely meld and join together, certain to cause a firestorm of protest. That controversy will push the Gold price higher, due to votes of no confidence, recognition of futile USDollar support, and objections to profound protected pervasive fraud. Regard it as a commitment to ruin money itself in order to preserve the banker power structure. De-centralization will identify the next chapter, with a uniform gold benefit from localized currency devaluation. The cost of the US$ commitment will be nearly infinite, since the USTreasury Bond bubble will require an infinite source of funds. The confiscation of private American funds (see 401k & IRA pensions, and bank CDs savings) is on course. Gold will serve as the real reflection meter of the phony USDollar capital, and the wrecked global monetary system. Wealth is seeking a bonafide safe haven, and that is Gold. The USTreasury Bond is more of the same deception.

◄$$$ A BREATHTAKING LEAP IN THE GOLD & SILVER PRICE IS COMING SOMEDAY IN THE NOT TOO DISTANT FUTURE. THE RELEASE MOVE WILL BE THE RESULT OF THE FIRST BIG BANK GOING BUST IN A GLOBAL SPECTACLE OF FAILURE. THE PRIME CANDIDATE IS NOT BANK OF AMERICA, BUT RATHER H.S.B.C. OUT OF LONDON AND HONGKONG. IT IS THE BRITISH GLOBAL CONGLOMERATE BANK. A CHAIN REACTION IS SOON TO STRIKE THE BIG VILE CARTEL BANKS, AS THE BREAKDOWN BLOWS UP IN THEIR FACES. MULTIPLE FACTORS ARE CONVERGING ON THEM. A BIG HIDDEN FACTOR IS THE INTEREST RATE SWAP, WHICH IS LADEN WITH STRAINS. $$$

A veteran gold banker contact provided some perspective, when recently asked to tie the condition of the big Anglo banks to the rising Gold & Silver price. Their massive short position is causing major losses, great pain, and gradually lost control. The Jackass offered up Bank of America and HSBC as the main candidates for a death spiral. A different local contact here in Costa Rica, connected to the USGovt agencies, tipped off the HSBC status as near death. The veteran with over two years of personal contact confirmed. He wrote, "You will see Silver go to $200/oz in today's US$ not before long. Don't ask me why and don't ask exactly when. Just be happy to know that it is going to happen. Once you see the first big bank go down (most likely HSBC), �you will then see things come apart very quickly from obvious lost control. The entire pricing structures are breaking apart rapidly, as the Boyz cannot possibly continue their game. They are under assault that will not end until their paper fortress collapses around them." He knows my preference for Silver, thus his focus on the metal. Expect the Gold price in such a scenario to easily reach $5000 per ounce, complete with silly constructed obstacles in the media. This contact is involved in numerous aspects of the gold business. He offers counsel to sovereign entities in four important global corners. He even had a hand in the Chinese pursuit of Greek Govt bonds. He has close contacts with a few of the Dirty Dozen who have targeted London, in their own coordinated efforts to empty the LBMA of its gold bullion. Watch for signals of gradual breakdown in the complex interwoven system.

HSBC is a principal gold cartel member with large gold short position. More importantly, it manages the GLD fund inventory of gold bullion, the SPDR gold exchange traded fund. It is a total fraud, but an extremely clever fraud that will blow up their crooked faces. It will die hard, with massive explosions, major news headlines, and investor lawsuits. The groundwork is being laid for the lawsuits, as data is being gathered on GLD shares used to satisfy COMEX cartel gold short futures contracts. That means COMEX has essentially seized the GLD gold supply to a significant degree, replacing the GLD investor shares with paper certificates. That is a major SEC securities violation. Data is also being gathered that LBMA gold futures deliveries are drawing upon GLD gold inventories, a major violation. If and when HSBC suffers a bank failure, the gold price will be released. The other cartel banks will do their best to contain the damage, but it will be like herding cats. The news itself will spawn fresh investment demand to feed the Golden Bonfire that will torch paper wealth. At greatest risk is the money parked and tossed irresponsibly into USTreasury Bonds by myriad US fund managers. It is not safe, but its big losses will not come until after the 2% target is reached in the 10-year USTreasury Note.

The cartel losses are mounting. The HSBC bust will amplify their losses on paper positions that must be covered or grow to the sky, a red sky denoting loss. A chain reaction is coming, that will involve Bank of America, Citigroup, Barclays, and JPMorgan. The other minor big bank death watch corporation is Wells Fargo. Stresses put upon BOA and Wells Fargo will actually transfer to more added stress to HSBC. They are tightly interconnected from mortgage assets to credit cards to precious metals to credit derivatives. A grand hidden source of strain is the Interest Rate Swap, which causes losses over the passage of time to enforce the 0% environment. After the Gold price runs up to $1450 or $1500 quickly, the losses will be utterly staggering as they try to cover and exit. The exit process requires covering shorts. They will not be able to produce sufficient timely downdrafts in the Gold price that stick. More than one source has mentioned the imminent death of HSBC. Narcotics money is probably also keeping it afloat.

Regard a news item as a tangent in confirmation, a clue from a failed deal. HSBC is reported to be close to walking away from a 5 billion Pound (=US$8B) deal to acquire Nedbank in South Africa. A two-month period of exclusive talks with majority owner Old Mutual has expired. HSBC is no longer in an exclusive position to make an offer for Nedbank. Word has come from parties close to the UK group, according to the Financial Times. The other bank waiting in the wings is UK rival Standard Chartered, which will move to gain the upper hand in bidding to acquire Nedbank. Their interest is well known. If HSBC were healthy and able, such an event from a dissolved deal would not occur. Something is brewing, steeped in insolvency on the edge of failure.

◄$$$ THE GOLD CARTEL IS SITTING ON $2.6 TRILLION IN T.N.T. STICKS OF DYNAMITE, IN THE PROCESS OF BLOWING UP UNDER THEIR NOSES. THE SHORT SQUEEZE SOON TO BECOME APPARENT WILL BE ONE FOR THE HISTORY BOOKS, ONE FOR THE ANNALS, ONE FOR THE AGES. IT IS NOT STOPPABLE. IN FACT, ALL EFFORTS TO HALT THE SQUEEZE WILL RESULT IN THE SQUEEZE TURNING OUT MUCH WORSE THAN EVER THOUGHT POSSIBLE, JUST LATER ON. $$$

Some well informed estimates have calculated the total amount of gold cartel short position at 60,000 tonnes. That is tonnage that don't exist. Witness the historically unprecedented short squeeze underway. The estimate is not so much from the public data sources like from Open Interest in the metals exchanges. It is from inside the gold trading industry. That amount times 32,150 ounces per kilogram produces an estimated $2.6 trillion at a round number $1300 per ounce gold price. When questioned, the source offering the estimate assured me that the number might be high. Perhaps the Big Four banks are short only 50,000 tonnes, worth only $2.16 trillion. An indescribable short squeeze is only beginning. The failure of a major bank will accelerate the squeeze process in full view. It will shock most people.

◄$$$ CHARGES OF GOLD BEING A BUBBLE DESERVE COMPARISONS TO SOME HISTORICAL EXAMPLES. THE GOLD ACCUSATION IS BASELESS. GOLD REFLECTS THE USTREASURY BUBBLE AND USGOVT DEBT EXPLOSION OF SUPPLY. IN FACT, THE GOLD PRICE RISE IS RATHER MILD COMPARED TO WELL-KNOWN ACTUAL BUBBLES. $$$

First of all, never the rise in price of true money an asset bubble. GOLD IS TRUE MONEY. To claim that true money has taken bubble proportions contradicts what money means. The more accurate interpretation is that the bubble of phony money is rapidly feeding the true money destination of gold!! Some remarkable price appreciation stories can be identified, like Microsoft, like Cisco Systems, like Fannie Mae, like Amazon, even home builders and some Wall Street firms. In contrast, the rise in the Gold price and the Silver price is very mild indeed. What is actually happening is the rush to create the final asset bubble in USTreasury Bonds has triggered a gold rush, but gold is real money. Funds are fleeing the false fortresses of phony fiat money!! Gold is attracting wealth locked in fiat money, wanting escape, seeking security. Gold offers it, just like it has for over 5000 years. The Anglo treachery written into banker policy with the abrogation of the Bretton Woods II accord has come full circle. The USDollar system is breaking down in broad visible fashion. Compare the other significant gainers in the last few decades to conclude that the precious metals are Also-Rans lagging behind bigger gainers. The Cisco story in my view is the quintessential success story of capitalism in a legitimate growth from innovation and solid leadership. Microsoft is a monopoly story of deep perversion and theft without hint of innovation. By the time the breakdown is complete, the repairs are recognized as frauds just like the expansion itself, and the precious metals prices finally stabilize with a global monetary solution in place, near the top of the graph will be Gold & Silver. See the Share Lynx article (CLICK HERE) and observe a great large graph.

◄$$$ GOLD HAS RISEN TREMENDOUSLY VERSUS ALL MAJOR CURRENCIES IN THE LAST TWO YEARS, WHEN THE USBANKING SYSTEM DIED. ATTEMPTS TO REVIVE DEAD ENTITIES AND MORIBUND ECONOMIES WILL CONTINUE THE TREND. AS THE CREDIT ENGINES ARE CLOGGED OR BROKEN, THE ECONOMIES WILL REMAIN STIFLED. MONETIZATION PROGRAMS AND THE CURRENCY WARS ENSURE HUGE UPSIDE POTENTIAL FOR GOLD, TO BE REALIZED EASILY. $$$

The below percentages are the percentages each major currency has dropped versus Gold since October 2008 highs. Gold has risen against all major currencies in unison since the crisis peak, when the US banking system died. The event was marred by the failure of Lehman Brothers, and the nationalization of both American Intl Group and Fannie Mae in order to conceal their failure and colossal fraud. Changes to FASB accounting rules continue to permit the dead giant US banks to operate, and perpetuate narcotics money laundering and large executive bonuses, despite the collapse of their normal operations. Curiously, the controlled Chinese Yuan has actually kept its value versus Gold better than against the totally debauched USDollar and the wrecked British Pound during this same time period. The Euro was hardly stronger than the Yuan during the last two years. Therefore, why does the USGovt not make corresponding accusations against the European Union for currency manipulation. The United States needs a string of enemies to exist and to maintain the corrupt games at the USDept Treasury and USFed. The chart exposes the fact that no major fiat currency can successfully compete against the powerful Gold. See the Zero Hedge article (CLICK HERE).

◄$$$ THE $5000 ANALYST GOLD BANDWAGON INCLUDES A LONG AND GROWING LIST OF COMPETENT NAMES WITH STRONG TRACK RECORDS. $$$

Recall that a few years ago, forecasts of $1000 Gold were considered irresponsible and nutty. My Hat Trick Letter started in mid-2004, with a stated forecast of $1000 gold before the end of the decade. Close enough! An unbelievable 108 analysts have stated with sound reasons in their opinions, why Gold could quite possibly reach a price of at least $2500 per ounce. In all, 65 analysts maintain that a $5000 target is likely. Some project in a parabolic move, Gold could reach a lofty $15,000 price level. The world financial system and global economy would surely be a wreck if it happens. An article was put together about the analyst bandwagon. It contains the identities of economists, academics, analysts, and financial writers who expound on the exalted prospects for Gold, along with the website links (URL) of their articles. Investigate for yourself their logic for such powerful moves in the years to come. Keep in mind that the major currencies are falling, which is over 80% of the factor. Reduced gold mine output accounts for the other 20% factor. Ignore for here the factor of a market return to normalcy, seeking equilibrium. See the 24 Hour Gold article (CLICK HERE).

EUROPE IN DISARRAY

◄$$$ THE EURO CENTRAL BANK IS FORCING THE IRISH GOVT TO PROTECT GERMAN FINANCIAL INVESTMENTS. BAILOUT REPERCUSSIONS RATTLED THE EMERALD ISLE, AS IRISH NATIONWIDE BONDHOLDERS WERE THROWN UNDER THE BUS, AN INCONSISTENCY. FITCH CUT THE IRELAND DEBT RATING, AS BOND YIELDS RISE TO A LEVEL TRIPLE THE GERMAN BUND. THE IRISH PRIME MINISTER DELIVERED A DRUNKEN INTERVIEW, AS IRISH BONDS HIT THE 6.7% LEVEL. $$$

Complaints have arisen that Anglo-Irish Bank should have been permitted to fail, since it represented no systemic risk to the Irish Economy. Its rescue is largely a bailout for its shareholders and bondholders. The Irish people are taking losses that should rightly have been borne by bondholders, most of whom are German. Europeans hold over 4 billion Euros in Anglo-Irish bonds. The burden to the Irish Govt debt structure is horrendous and crippling. See the Order article (CLICK HERE). Keep in mind that Irish fund managers lost a huge portion of the German civil service pension funds in 2006 and 2007. So think payback. Irish Nationwide Building Society saw a different outcome, as finance minister Brian Lenihan made sure that INBS bondholders suffered significant losses. That included Roman Abramovich, the billionaire owner of Chelsea football club, who warned of legal action. Welcome to EU politics. See the UK Telegraph article (CLICK HERE).

Fitch Ratings cut Ireland's credit rating in the first week of October, citing the huge cost of cleaning up its banks, greater than expected. The action pushed bond yields higher, making worse the economic slowdown in progress with a headwind. The interest yield that investors are paid on Irish 10-year bonds rose to 6.4% in response, triple the German benchmark. See the ABC News article (CLICK HERE). The backlash extends to public ridicule of Prime Minister Brian Cowan, who delivered a drunken interview on Irish television. Even Jay Leno of the US night talk show mocked him. The nation is going down the toilet, after horrible decisions following horrible decisions, the latest being acceptance of the IMF austerity suicide plan. See the Irish Independent article (CLICK HERE) and the Irish Times article (CLICK HERE). It is amazing how failure at a finance post has become a resume requirement for prime minister posts, just like in England with Gordon Brown who sold half the nation's gold at the low in 2001. See the Irish Times article intended as a chronicle of the Irish banking problems, an excellent recounted story of the turmoil (CLICK HERE). Special thanks to my Irish friend JohnM for his shared stories.

◄$$$ BRITISH DEBT CONTINUES TO SPIRAL UPWARD. THE BEST LAID PLANS ARE JUST TALK. HIGHER INTEREST ON THE NATIONAL DEBT HAS BEGUN TO BE FELT. $$$

Despite bluster and promises about plains to reduce spending, UKGovt borrowing hit record high levels in September. Interest payments on the national debt more than doubled, adding huge political pressure to agree upon spending cutbacks. Public sector net borrowing came in at 15.6 billion Pounds last month, up from 14.8 billion Pounds a year ago. By the end of September, total net debt stood at 952 billion Pounds, equivalent to 64.6% of GDP. That is the highest monthly figure since records began in 1993. The net debt compares to 822 billion Pounds a year ago. Tax revenues grew, offset by a sharp rise in interest payments to 2.3 billion Pounds in September, from 912 million Pounds a year ago. Deficits force a vicious cycle. See the UK Telegraph article (CLICK HERE).

◄$$$ EUROPE SUFFERS FROM A HIDDEN LOCAL GOVT DEBT PROBLEM, ONE THAT EVEN INCLUDES GERMANY. FEDERAL AID TO RELIEVE IT IS CERTAIN. THE LOCAL DEBT DISTRESS PROBLEM HAS A PARALLEL WITH THE FIFTY US STATES. $$$

While most of the attention in Europe has focused on the sovereign debt issue, not enough has been paid to local government debt. Daniele Antonucci of Morgan Stanley posted a new report that highlights the two countries with the biggest local debt predicaments are Spain and Germany. In fact, Germany has the largest local debt. It is almost double the nearest neighbor Spain. Curiously, Greece has virtually none, and except for Spain, the PIIGS are immune from such local distress. Odds are that the central banks will ultimately fund this lower tier debt and relieve the burden, further debasing the Euro currency. See the Business Insider article (CLICK HERE).

◄$$$ THE EURO CENTRAL BANK HAS BEGUN TO WASH ITS HANDS OF THE EXTREME AND INTRACTIBLE P.I.G.S. FISCAL AND BANKING PROBLEMS. $$$

Given the risks from member nation budget cuts, one would expect the Euro Central Bank to stand by with monetary stimulus. Central Europe and the US-UK are moving in opposite directions. The Anglos have loaded the toxic tanks at the central banks for a fresh blast of tainted money, the euphemistic cancer of Quantitative Easing. In contrast, Frankfurt is preparing an exit strategy. The EuroCB is winding down its lending facilities for EuroZone banks, despite the palpable risk for Spanish, Portuguese, Irish, and Greek banks that have borrowed 362 billion Euros to date. Some analysts criticize abuses, as these central banks have devoted the funds to purchase state bonds, playing the internal carry trade for extra yield. By turning off the monetary spigot, the EuroCB clearly is washing its hands of the PIGS, dumping the problem onto the fiscal authorities through the European Union rescue fund. They court fate and a continental breakdown, but that might be the plan. See the UK Telegraph article (CLICK HERE).

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