GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Miscellaneous Morsels
* Foreign Rumblings
* Walls Tighten on the USFed
* Bank Crisis Continues Without Remedy
* Gold Tremors Signal Paradigm Shift
* US Financial Isolation Intensifies
* USDollar Breakdown Gathers Speed
* Commodity Price Confusion


HAT TRICK LETTER
Issue #66
Jim Willie CB, 
“the Golden Jackass”
16 September 2009

EDITOR NOTE: The US financial system has entered the Twilight Zone. In response, conditions are very much in flux, nothing being certain. Forecasts are coming true, with enormous implications and consequences. Imagine a large white sheet in the back of your home near the basement or garage, with a long cut made by a hunting knife. Step through the sheet to enter a new place never seen. That is the world today. It will become soon a very dangerous place with tremendous forces unleashed. The US social fabric has been torn also, and the situation will worsen. Systems will break and platforms will collapse, causing massive global ripples that heap much destruction. Breakdowns have occurred in numerous critical areas, slowly to become visible. In response, the Hat Trick Letter will change the organization to focus more on the major structural relationships, the monetary system, and gold. Gold is the highest priority to report now, right now! All stories are gradually being woven together, as banking, derivatives, contract legitimacy, currencies, gold, and central bank policy are criss-crossing. The syndicate, cartel, and elite are losing their control in visible fashion, with wild claims of stability made over the past several months. Many maintain the wrong perception that the USGovt as coddling the big US banks. Rather, the USGovt is controlled by the US banks in a near complete degradation, with direct channels of official funds created, protected, and concealed. If you detect that a battle of titans, the United States versus China in numerous arenas, then you are observant. The focus of these reports will increasingly cover Chinese factors, since they are mushrooming. Section titles will continue to be given, since order is necessary. Report titles are now blurred.

MISCELLANEOUS MORSELS

$$$ CHINA MADE THREE MAJOR ANNOUNCEMENTS IN EARLY SEPTEMBER, EACH HIGHLY DISRUPTIVE, ENOUGH TO FURTHER ALONG THE PARADIGM SHIFT. THEIR ACTIONS WRECK THE US-UK SYSTEMS, AND BRING ABOUT A CHANGE IN GLOBAL LEADERSHIP. $$$ The timing of late August and early September for disruptions and onset of instability in a visible manner has not been a disappointment. See the Special Report entitled "China Declares Financial Trade War" for September for much more detail.

China has shaken the global system in three key ways, resulting in a grand challenge to the power structure. China announced

  1. permission to selectively dishonor OTC derivative contracts by mean of self-administered Stop-Losses imposed as reneges

  2. Hong Kong demands the return of its London gold bullion held in custodial accounts, as they build an airport vault center (modeled after Zurich)

  3. Mongolian rare earth metals will no longer be exported to the West.

Implications are enormous. Actions threaten Goldman Sachs and JPMorgan. Gold removal threatened the COMEX. Rare earth hoarding threatens military contractors. The Chinese actions are part of a grand mosaic of change, if not rebellion amidst a Paradigm Shift. Watch the silver market, as a savvy veteran gold banker foretells the COMEX to be driven over the cliff, by the SILVER GUYS!!! Rumors swirl with intensity that China holds significant silver short positions, and might default, a second giant F.U. to Wall Street, the first F.U. being the derivative contract renege. The silver price would double or triple rapidly. Others believe the greater risk lies with the bankers who long ago lost control of the Over The Counter Derivative market, an unregulated casino requiring no margin. It is ripe with corruption. Regard China as having declared financial war against the titans of Wall Street. Retaliation to seize Chinese assets like aircraft or shipping vessels after major reneges would touch off a different kind of war, not financial.

$$$ TO COMMEMORATE THE LEHMAN BROTHER DEATH ANNIVERSARY, SHINE SOME LIGHT ON THE EVENTS BEFIND THE SCENES. BARCLAYS AND F.S.A. PULLED THE PLUG ON LEHMAN BROTHERS IN LONDON, AFTER THE BRITISH DECIDED NOT TO BE DRAGGED DOWN BY IMPORTING THE U.S. CANCER, IN THE WORDS OF CHANCELLOR DARLING. MEANWHILE, THE CLEANUP OF LEHMAN DRAGS ON, AN UNDER-FUNDED EFFORT WITH INADEQUATE STAFF TO MANAGE THE UNWIND OF ITS DERIVATIVES PORTFOLIO. EXTEME RISK LINGERS. $$$

The central question is 'Who really pulled the plug on Lehman?' The world can take a closer look now, one year after the collapse of Lehman Brothers triggered financial turmoil around the world. Barclays attempted to acquire Lehman, with some arrangements to slice off some necrofied tissue damage. Some key Wall Street participation with funds or handoffs of toxic assets was expected or promised, actually unclear on details, but it did not materialize. The USFed was supposed to provide critical credit to enable the deal. It all fell apart. Many belief the critical break occurred when British Chancellor of the Exchequer Alistair Darling told Paulson regarding the proposed Lehman deal, "We are not going to import your cancer." That is clear enough, nothing vague there! The major sticking points were that the Barclays demanded a USGovt guarantee for the Lehman trading losses. They did not receive it. Also, The British Govt required a shareholder waiver to come from the Financial Services Authority (FSA) to approve the acquisition deal. They did not receive it. The true perspective is that this was just a pack of criminals operating in the open, but with the benefit of some curtains put in place by the respective governments to keep the public from observations. My belief is that Wall Street generally threw Lehman to the dumpster, so that JPMorgan could be reloaded by $138 billion for supposedly honoring private Lehman accounts, a big giant phony story. It was a slush fund refilled for JPMorgan to continue to support USTreasurys, to continue to support the USDollar, and to continue to suppress gold & silver. See the Real News article and video clip (CLICK HERE).

A year after the death of Lehman Brothers and the immediate rescue of AIG, repercussions continue to be felt. The $600 trillion privately traded derivatives markets continues to spiral out of control, home to contracts that tie the financial structures together with flimsy tape and old glue. The Lehman Brothers creditors still work to unwind the derivatives portfolio, a complex task. Lehman was one of the biggest dealers in some of the most complex derivatives markets, with a global derivatives book bearing a notional face value of $39 trillion and deals linked to 8000 different counter-parties. Its derivatives business was split into multiple strands, backed up by between 20 and 30 different systems. The defense of this pyramid suffers from systems that evaporated, according to Steven O'Hanlon, president of Numerix, a pricing and valuation company which is working with Lehman Brothers Holdings to unwind the derivatives portfolio. Finally to the surface has come information pointing to inadequate defense and underfunding on the Info Tech side of derivatives. The consequences of poor modeling, colossal counter-party risk, excessive leverage, and scant capital has made the ticking time bomb even bigger. The system is nowhere near stabilized except in propaganda chapters. See the Financial Times article (CLICK HERE).

$$$ CASH FOR CLUNKER PROGRAM IS USGOVT AT ITS MOST INEFFICIENT. $$$ Assume a clunker car runs at 15 miles per gallon, and a replacement car runs at 25 mpg. At 12 thousand miles driven per year, the reduction in gasoline usage is 320 gallons. The final tally for Cash for Clunkers transactions was around 700k cars, resulting in 5 million barrels of oil saved. At $70 per barrel, that costs $325 million. The Cash for Clunker program will cost a total of $3 billion, over a 9:1 loss in the investment. This is socialism on its stupid face, praised by the hapless public, hailed as success by idiotic leaders. They might extend their successful program to home appliances.

$$$ EXECUTIVE INSIDERS CONTINUE TO SELL AT ENORMOUS RATIOS. THE RATIO WAS 55:1 A COUPLE MONTHS AGO. IT IS STILL HIGH AT 31:1 IN AUGUST. THE INDICATOR OF OVERPRICED STOCKS IS LOUD & CLEAR. $$$ Those with the first glimpse on business details and trends do not believe current stock prices are justified by economic fundamentals. Charles Biderman runs the market research firm Trim Tabs. He said, "It is not a very complicated story. Insiders know better than you and me. If prices are too high, they sell." Their research measures $31 worth of insider stock sales in August for every $1 of insider buys. Ben Silverman is director of research at the InsiderScore.com web site, which tracks trading action also. His work indicates insiders are selling at their most aggressive clip since the summer of 2007. What he calls the 'orgy of selling' is important because corporate insiders were aggressive buyers in early March when the S&P500 rebounded from its lows. See the CNN Money article (CLICK HERE).

$$$ HIGH FREQUENCY TRADING GRADUALLY HAS DESTROYED THE U.S. FINANCIAL MARKETS. CONFLICT OF INTEREST IN WALL STREET FIRMS IS NOW ALMOST OBVIOUS, AS THEY TRADE PRIVATELY WHAT THEY SELL PUBLICLY. $$$ Paul Wilmot is a known expert in derivative contracts. He perceives little remedy in structural systems since the financial crisis of last year. Wilmot believes traders have tweaked their badly flawed models and jump from one trendy bandwagon to the next, and thus make no evolutionary progress. He believes their current gimmick of choice, High Frequency Trading) has destroyed the link between prices and value. In other words, the stock market cannot properly determine appropriate price. Wilmot believes the probability of a crash is 'enormous' as traders embrace larger risks without efforts to improve risk management. Wilmot is echoing the chorus of Mandelbrot, Taleb, and Das, other derivative and systemic experts, in warning investors about systemic risk. See the Zero Hedge article (CLICK HERE).

Karl Denninger identifies the Insider Trading in NYSE, with direct implications concerning conflict of interest. Not only are NYSE trades laced with front running public trades with peeks on orders ahead of time, they are loaded with conflict of interest. Wall Street firms trade for benefit in their corporate accounts exactly what they sell to clients in other accounts within their brokerage firm. This is both fraud and incest. Denninger writes, "These institutions have sold securities out the front door that they are shorting out the back (subprime mortgage bonds}. They are disseminating 'short-term opinions' that differ from their published research reports. Even better, their own proprietary trading desks are in on the latter. So if and when the move starts they can get in on the action with their 'High Frequency Trading' too!… Nor will you hear CNBC talk about their parent company [NBC] discuss their lobbying expenditures, the highest of any company in the first quarter at a mind-blowing $7.2 million dollars. Zero Hedge has provided a copy of the disclosure form, which reads like a Who's Who of 'How to Screw the Consumer,' including issues such as the Credit Card Bill of Rights, the disapproval resolution on the second half of TARP, proposed TARP reform and accountability, the mortgage reform, anti-predatory lending bill, and more."

What the public is dealing with is corruption of the media networks, and collusion with Wall Street firms who serve as advertising sponsors. The public is not told exactly what position has been taken by the media corporations or the Wall Street firms. The press & media networks were intended to serve as the spotlights for the nation. Unfortunately, in the age of conglomerates and corporate acquisitions, the information networks can be bought as a corporate strategy. This is an integral ugly piece to the Mussolini Fascist Model that has spread like a cancer across the United States in the last two decades. The conglomerates have become intertwined in the news system to the point that stories that would expose the corporation are suppressed by that very same media. Editorial independence has been lost. Denninger mentioned an interesting point about errors in the cover-up, which must be addressed in real time, as in immediately, an impossible task to achieve in perfection. These are people talking and thinking on the fly. He refers to CNBC as CNBS to display hostility, and to emphasize the Bull Shxx nature of their messages at times. He said, "I have (as have others) heard CNBS anchors 'slip' in the past and say things on the air that strongly hint (or outright state) that their producers do not want a certain slant covered. One wonders whether that producer just had their phone ring, and it was the executive offices of GE on the other end." The CNBC anchors and reporters are obviously aware of their own conflict of interest and censorship game afoot. They are protecting their own paychecks and careers. Their biased edited censored reporting is not only obvious, but anchors make it sound like a funny game. See the Market Ticker article (CLICK HERE).

$$$ THE PUSH TOWARD CONSOLIDATED BANK OVERSIGHT POWER CONTINUES FOR THE VERY INSTITUTIONS AND AGENCIES THAT FAILED TO FUNCTION, LEADING TO A US BANKING SYSTEM BREAKDOWN AND RUGGED INSOLVENCY. ONLY IN AMERICA CAN THE FAILED PARTIES BE REWARDED WITH FULL CONTROL. OBAMA PUSHES FOR IT, BUT RESISTANCE IS STRONG. ITS PROVISIONS ARE WAY OFF TARGET. $$$

Details of the proposed regulatory reform will not be provided. Simply stated, they would permit absolute power to the US Federal Reserve and henchman authority to various regulatory bodies subservient to the USFed as central bank. The USFed would wield total rule over the financial kingdom, and be given the authority to kill any financial firm that it deemed at risk to harm the system. It could also kill any firm that threatened the financial syndicate, without any Checks & Balances. This is clearly draconian absolutism, much like Soviet Politburo rule. Obama claims US financial rules overhaul will happen this year. What utter rubbish!! How about re-instatement of Glass-Steagall Act (separation of financial segments), Securities & Exchange Commission (stocks) with teeth to halt Wall Street systemic insider trading, and Commodity Futures Trading Commission (futures contracts) enforcement of long-standing regulations, in addition to the recommendations on reducing systemic financial risk submitted by a host of astute analysts. That would be real change we the People could support. Reformers should consider meaningful reserve requirements for the big banks too. Capitalism cannot operate with banks lacking capital, a basic point. Not only to dead banks operate, but they go on acquisition shoppign tours. See the Bloomberg article (CLICK HERE).

$$$ STOCK CERTIFICATES ARE NOT INSURED IF HELD IN PERSONAL DESKS OUTSIDE A BROKERAGE ACCOUNT, IN A CLEAR BIASED MANEUVER THAT BEARS THE WHIFF OF CORRUPTION. $$$ If an investor takes possession of securities, then the Securities Investor Protection Corp (SIPC) will not cover against theft or loss from brokerage failure. Permitting stock shares sit in digital form within a brokerage account renders them insured, but also ripe for all sorts of institutional abuse. Simply stated, investors cannot take possession of securities in the United States, unless they are willing not being covered by the prevailing available USGovt insurance which are already subsidized. The systemic scam runs deep. Stories abound for Wall Street games and corruption with stock shares, lending them, shorting them, using them as collateral, as well as selling phantom securities possibly on the back end of naked short sales. SIPC President Stephen Harbeck reiterated their policy in an interview. Share insurance coverage is nullified in certain cases. The protection does not extend to investors who have taken their certificates, even if the securities have been rendered worthless by fraudulent conduct. He clarified the policy in light of the Madoff and Stanford frauds. See the Bloomberg article (CLICK HERE).

$$$ SEC REGULATORS STILL DO NOT LOOK FOR THE MISSING MONEY IN THE MADOFF PONZI SCHEME, AFTER THE SAME REGULATORS WERE EITHER BRIBED OR IMPRESSED ENOUGH NOT TO NOTICE THAT MADOFF NEVER ENTERED A SINGLE TRADE. $$$ Financier Bernard Madoff used tactics to bully and impress the federal examiners who supposedly examined his business, but very likely also used bribery and deep collusion at the top of the USGovt finance ministries. The official story is that investigators managed to botch the probes that enabled the Madoff Fund multi-billion$ fraud to continue for nearly two decades. A trove of revelations have come to light in the report by the SEC inspector general David Kotz. The 477-page document paints in excruciating detail how the SEC investigations of Madoff were bungled over 16 years, with disputes among agency inspection staffers over the findings, lack of communication among SEC offices in various cities, and repeated failures to act on credible complaints from outsiders. In short, they ignored a sea of red flags. See the Yahoo Finance article (CLICK HERE).

The regulators were bribed since far too much ineptitude is involved, an easy conclusion. The officially stated losses are $50 billion, but my sources indicate the loss is easily over $100 billion, a figure too large to report publicly without inciting even more outrage. This entire fraudulent structure is part of a much larger scheme involving USDept Treasury, Bank of England, and the banks operating in an allied MidEast nation that looks northwest to Italy. The 'Roll' schemes were smaller pieces in a larger scheme that my sources claim amount to ongoing $trillion fraud, probably the largest fraud and theft scheme in mankind's history. The Madoff hybrid accounts were set up duplicate accounts in certain foreign banks, designed for theft of victims and protection of partners in collusion.

$$$ UNIVERSITY ENDOWMENT FUNDS HAVE SUFFERED MAJOR LOSSES FOR THE LAST FEW YEARS. THEY ARE LOSING VALUE ON CURRENT INVESTMENTS AND FROM NEW DONATIONS. ALUMNI HAVE TAKEN MAJOR LOSSES THEMSELVES. CONSTRUCTION BUDGETS FOR UNIVERSITIES ARE DOWN. THE NEXT IMPACT WILL BE SOME SHUTDOWNS OF SCHOOLS. $$$ The Harvard Endowment Fund is down 27.3% in the latest fiscal year. It is down 30%, when donations and spending are counted. Its endowment has a current value of $26 billion, down a robust $10 billion in a single year. The Yale Endowment Fund is down 30% in the latest fiscal year. Its current value is $16 billion. Yale President Richard Levin announced reductions in broad spending and budgets. Hundreds of other schools have similar losses, sure to affect both operations and actual continued existence. Other Ivy League schools suffered declines, but smaller ones. The Univ Pennsylvania endowment fell by 15.7% in the last year. That aside, a survey of foundations and endowments with assets of more than $1 billion by Wilshire Trust Universe Comparison Service found an average 17% decline in fiscal 2009. The day comes for a shutdown of a recognized academic institution from depleted finances. A university might morph into a corporate office complex, with some paid research labs, whose financial arm becomes a hedge fund. See the New York Times article (CLICK HERE).

Harvard and Yale distinguished themselves by investing much more in toxic assets with leverage and in private equity firms, aided by Wall Street handlers. The process backfired. Recall that Harvard was a secret architect of the Enron firm creation, a big winner in its decline as it shorted Enron stock with advanced insider notice of its implosion. Harvard helped to create Enron with Citigroup funding and JPMorgan work to create Special Purpose Entities (secret Caribbean financial firms), putting into action a Harvard research application. Enron was a disaster with many illegal parts. The JPMorgan evidence of involvement and culpability in the Enron fraud was located in the World Trade Center Bldg#7, which was demolished amidst the chaos of the Twin Towers. That story was buried but not killed. See the Harvard research papers for evidence, written just a year or two before the Enron baby was born.

FOREIGN RUMBLINGS

$$$ A VENERABLE SWISS BANK BOOTS OUT AMERICANS, AS CONTINUED BUSINESS CARRIES TOO MANY PROBLEMS AND EXTERNAL PRESSURES. $$$ Wegelin is Switzerland's oldest bank. Two weeks ago, the venerable bank gave its wealthy clients two choices: sell their US assets or switch banks. Their decision was motivated by concerns that new rules will burden investors with USGovt tax obligations. US proposals to extend reporting requirements for banks whose clients buy American stocks and bonds coupled with estate tax liabilities. Konrad Hummler is a Wegelin Managing Partner and also president of the Swiss Private Bankers Assn. He said, "We came to the conclusion that it is a threat to our clients. It is also a threat to us as a bank, because as a custodian we are an executor to the estate. We find this aspect discomforting, so we recommend selling all American securities whatsoever. The good thing is that in today's world you can build up US exposure in equities and as well in bonds through derivatives and index funds and so on. So we are switching to a European-made American exposure." The consequence to finding alternative ways of investing in the United States is the absence of reporting requirements on the bank or tax liabilities on clients. See the Bloomberg article (CLICK HERE). Notice the thread, whereby Europeans will continue to invest, but not so much in US-made products. This trend will continue to build, further isolating the Wall Street syndicate.

The USGovt bank secrecy battles will be counter-productive. The end result will be maybe a few hundred $million in taxes paid. The cost will be the departure of at least one $trillion in US$-based investment directly or indirectly, under the Obama Admin. For every new US$ collected in taxes, a few thousand or tens of thousands of US$ will exit. But US power will be consolidated. No question exists in my mind that a powerful hidden motive is at work from a pitched hidden battle. It pertains to gold bullion management. The UBS haven bank account battle was waged initially after the Swiss demanded their 1000 tonnes of gold bullion to be returned from the US custodial accounts. That is the war! It continues. Swiss banks manage 27% of the world's privately held offshore wealth, totaling $2 trillion. The news networks take their information supply from the USGovt, since lapdogs under control. The official story is that the Swiss banks are struggling to protect bank secrecy after their government agreed to hand over the names of 4450 UBS AG commercial account clients to US tax authorities. The truth of this disclosure of names is in doubt. My belief is that the UBS account names are kept private, and the story is false in order to save USGovt face. The Chinese ordered the USGovt to return the $700 million UBS fine to the Swiss bank, as China will continue to protect its bank accounts in Switzerland.

◄$$$ AN OPPOSITION WINNER IN JAPAN COULD RESULT IN A SHIFT IN RELATIONS AND ATTITUDE TOWARD THE UNITED STATES. THE DEMOCRATIC PARTY OF JAPAN HAS PUSHED OUT THE LIBERAL DEMOCRATIC PARTY THAT HAS BEEN ENTRENCHED FOR TWO DECADES IN TOKYO. $$$

Shock waves have not yet been felt, but they will come. Yukio Hatoyama won the election for prime minister. The election of 2005 has been reversed with almost exactly the same vote counts, but in reverse, as the Liberal Democratic Party must step aside. Four years ago, the LDP won 296 seats against the 113 seats taken by the Democratic Party of Japan. But now, the DPJ won 308 seats against the 119 seats taken by the LDP. Hatoyama was elected on August 30th and will formally take office on September 14th. This could be important for US-Japanese relations, US influence in the East Pacific region, and for continued USDollar support. The central planks for the DPJ have called specifically for a less subordinate relationship with the United States. Allied military occupation of Japan was supposed to be terminated with the signing of the Treaty of San Francisco in 1952. It has not ended yet. The Bank of Japan has been a primary lackey for decades, taking direct orders by the US bank syndicate. The movement to shut down the USMilitary base in Okinawa will surely continue toward full closure. This has been an ongoing Chinese demand also. See the New York Times article (CLICK HERE).

Hatoyama is an advocate of creating a single regional currency in Asia, modeled after the European Union. He has portrayed himself as a firm opponent of American-style free market economics and of globalization, which he repeatedly labels as an American policy. Hatoyama attacks unrestrained market fundamentalism and financial capitalism, that are void of morals or moderation, contrasting such policies as akin to those of the French Revolution fraternites. Hatoyama calls for establishing an Asian regional currency on the model of the EU, which he believes can be acheived within ten years.

Hatoyama said, "This is a question of concern not only to Japan but also to the small and medium-sized nations in Asia. They want the military power of the US to function effectively for the stability of the region but want to restrain US political and economic excesses. They also want to reduce the military threat posed by our neighbour China, while ensuring that China's expanding economy develops in an orderly fashion. These are major factors accelerating regional integration… Unlike Europe, the countries of this region differ in size, development stage and political system, so economic integration cannot be achieved over the short term. However, we should nonetheless aspire to move toward regional currency integration as a natural extension of the rapid economic growth begun by Japan, followed by South Korea, Taiwan, Hong Kong, and then achieved by the Association of Southeast Asian Nations (ASEAN) and China… The experience of the European Union shows us how regional integration can defuse territorial disputes." He shows ignorance of the EU failure. By inviting the weakest links into the European Union, it became as weak as its weakest links. The EU leading nations must support the crippled nations in grand inequities. See Spain, Portugal, Italy, Greece, and Ireland. Hatoyama talks of 'utopian dreams' in history without recognition that they are unachievable. The more viable path is to endorse the Chinese Yuan currency as the Asian reserve for wider usage.

Hatoyama commented upon the US sphere of influence coming to an end. He said, "I also feel that as a result of the failure of the Iraq war and the financial crisis, the era of US-led globalism is coming to an end and that we are moving toward an era of multi-polarity. But at present no one country is ready to replace the United States as the dominant country. Nor is there a currency ready to replace the dollar as the world's key currency." See a second New York Times article (CLICK HERE).

Hatoyama is the very same member of the opposition party in May who was banging the table to denominate USTreasury Bond in yen currency, or not support it at all. He seems to advocate different paths that disrupt the US Engine of Fraud Growth and Global Hegemony. The Japanese are fast losing their trade surplus, down almost to zero. Actual USTBond support must next come from fresh capital tied to pension and other big funds, or to direct borrowing from the Dollar Swap Facility managed by the USFed. Clearly, Japan under the new Prime Minister will pursue a relationship more on an even keel with the United States, less the US lackey.

WALLS TIGHTEN ON THE USFED

$$$ USFED LOST THE FREEDOM OF INFORMATION ACT CASE, AND FACES ORDERS FOR DISCLOSURE. THE APPEAL PROCESS HAS BEGUN. THE USFED IS UNDER ANOTHER ASSAULT BY THE US CONGRESS. IT COULD BE FORCED TO ENDURE REGULAR ACCOUNTING AUDITS. $$$ A federal judge in late August ordered the Federal Reserve to make public reports about recipients of emergency loans from USCongressional funds under programs created to address the financial crisis. The judiciary branch, Constitutionally equal to the executive and legislative branches, has ordered transparency. The ruling shatters the privacy cloak used by the USFed. The judge criticized Chairman Bernanke for not producing or searching for requested documents, in a rare move citing bad faith. Chief District Judge Loretta Preska wrote, "The board (of the Fed) essentially speculates on how a borrower might enter a downward spiral of financial insatiability if its participation in the Federal Reserve lending programs were to be disclosed. Conjecture, without evidence of imminent harm, simply fails to meet the board's burden." The USFed finds itself without legs, but it does have a powerful syndicate behind it, useful for illegal pressures. This institution has become the center for financial sector corruption, the clearinghouse for bond fraud and narcotics money laundering. Its building no longer commands respect. The US Supreme Court (right side) challenge will be an important event, against the Federal Reserve (left side) to preserve the Republic or to usher in a Fascist Socialist state. It is very debatable how much integrity remains within the High Court anymore, after a string of decisions to enable searches, seizures, corporate powers, and the Florida 2000 vote. Its justices have less stature than ever before.

VERSUS

Executive Privilege is the tool seen to cover up criminal fraud and general syndicate behavior. Demands are loud for revealing how trillion$ of USGovt funds were used to bail out huge politically embedded financial organizations. In my view, these firms have taken the USGovt financial apparatus by a Coup d'Etat. This is to become a landmark case before the US Supreme Court, which will probably have to make a decision to restore the bankrupt Republic or to permit a Syndicate to continue as a gigantic parasite in defiance of the Constitution and the People. See the Reuters article (CLICK HERE). The appeal process has started. Almost immediately, the Second US US Circuit Court of Appeals gave the USFed a reprieve of time. A delay has come for the federal judge order to reveal the identities of banks benefiting from its emergency lending programs. See the other Reuters article (CLICK HERE).

The USDept Treasury believes that any attempt to remove mystery and reveal inner workings of the USFed will ultimately destroy the USDollar, ruin the US banks, and reduce the nation to poverty. Sadly and conversely, the path they wish to avoid is what the current USFed policy and track record has accomplished. They wish to prevent what they already wrought??? It sees its loophole in the process of closing. See the Zero Hedge article on the grilling of Treasury Secy Geithner in defense of the syndicate (CLICK HERE).

The other USGovt branch is also breathing down the USFed's neck. The US Senate has already passed the Ron Paul Bill to audit the USFed and its balance sheet. To become law, the bill must pass the House of Representatives. Herein lies the risk of a sinister deal that might be cut. House Financial Services Committee Chairman Barney Frank has assured the passage of the Ron Paul Bill provision, but only as part of a larger banking system regulatory package. A grant of total power to the USFed and its regulatory appendage henchmen could eclipse the Govt Accountability Office power to audit the USFed, and result in constant stalemates. Frank might be motivated to cut off Paul's knees in this manner. See the Washington Post article (CLICK HERE).

Other real reasons exist for the USFed not to want open transparency of its operations, apart from fraud, theft, and extortion. The USFed fears that the disclosure will trigger another run on some of those banks. Another phase of the bank crisis could unfold in the coming months, as insolvent banks that benefitted from slush funds could be exposed, and later isolated, even as they endure important selloffs in their stocks and corporate bonds. Such a response could render them vulnerable for bankruptcy and death. The USFed is suffering the nasty fallout from its own lost credibility. Its track record is discouraging, as it fixes the last crisis, but only to assure a bigger next crisis. With each decade crisis, the banking elite have fortified more power, infiltrated USGovt financial control rooms, but at the cost of making the USEconomy less secure and more vulnerable to price inflation and unemployment, if not gradual deterioration. The USFed is visible, its actions seen as enriching the banks at public expense, lying on fund usage, and inhibiting the lending functions. Never before has the USFed corruption activity been observed behind the curtains so much. Unfortunately, most of the USCongress acts as accomplice, serving up bland questions, ignoring criminal activity, accepting distortions as answers, taking no action when shown defiance, receiving orders from Goldman Sachs, and pushing GSax moles into committee leadership posts. Bribery and threats must be going on, like typically with other syndicates.

$$$ US FEDERAL RESERVE IS JAILER, PRISONER & HANDMAIDEN, CAUGHT IN ITS OWN WEB, UNLIKELY TO ENACT NEEDED REFORMS. $$$ The US Federal Reserve operates as a private consultant agency, to oversee the national money supply, to manage and interest rate policy, and to serve as primary bank regulator. While the corrupted institution has acted decades ago to enact true systemic reform, do not expect the same now. The USFed next will instead work to preserve power, even to extend banker power, and to conceal its operations steeped with fraud, collusion, narco money laundering, and likely extortion. In the words of The New Republic, "The Fed is partly a prisoner of the current system, but it is also partly a jailer. In the moments when the Fed is presented with a rescue-the-banks-or-the-economy-will-collapse scenario, it is a prisoner. But the Fed, and especially the chairman of the Fed's board, has plenty of power to shape the environment that produces this choice." The current risk is for the USFed to double down during the disaster, to increase its bank bailouts, to expand its balance sheet further, and to spread a cancer that cripples the nation. Watch the Bank Consolidation Plan possibly unfold, permitting acquisitions by failed large banks instead of their liquidation. Reform will be mentioned as a device to hold power and defend against attack. Continuation down the wrong direction sends the nation into a vast Rabbit Hole like described by Lewis Carroll. See the article by The New Republic (CLICK HERE).

$$$ BERNANKE REAPPOINTED AS USFED CHAIRMAN, NOT YET CONFIRMED BY THE U.S.SENATE. THE FINANCIAL SYNDICATE HAS SPOKEN (ORDER GIVEN TO PRESIDENT), IN DEFIANCE TO CHINESE WISHES. NO WONDER GOLD JUMPED OVER $1000 IN THE SUBSEQUENT TWO WEEKS. STEPHEN ROACH OF MORGAN STANLEY OFFERS A SOLID ARGUMENT WHY BERNANKE WAS REAPPOINTED, AND WHY HE SHOULD NOT HAVE BEEN. ROACHES LAYS OUT BLAME FOR THE CURRENT CRISIS. ROACH BELIEVES OBAMA HAS CREDITED BERNANKE FOR A SUCCESSFUL RECOVERY, ALTHOUGH VERY PREMATURELY. $$$

The public statement and justification do not qualify as news, as Obama is only following orders by his masters who enabled his election. The Bloomberg article covered it though (CLICK HERE). Meaning and interpretation are much more filled with intrigue from other sources, not the news networks. A reliable well connected global banker commented on the Bernanke reappointment decision over two weeks ago. The unfolding of events has indeed occurred, as China has come forth with some powerful new messages and policies. He anticipates the trade war with China to escalate dangerously. He said, "It is difficult to imagine Obama going up against a clear instruction [by China] to send Bernanke home at the end of his term. I am certain that unfolding events will be triggering the implementation of the agreements that have been struck. However, the president implementing them might be Joe Biden… This will all play out quite differently from people expect. The US is a dead man walking. Shortly after an important military defeat will be the total economic defeat. I have seen my share of delusional regimes, but the US tops them all. This Disney syndrome is absolutely astonishing. The gold price will break out powerful only when China orders it so, SPOT ON! Keep in mind that the Euro is not one iota better positioned than the US$."

My personal view has many sides. The Bernanke reappointment is confirmation that the Wall Street financial syndicate still controls the White House and post-Greenspan USFed. The defiant decision is another log on the fire that burns US-China relations. The USGovt has essentially given a gigantic defiant F.U. to the already angry Chinese creditors, daring a retaliatory response. China is increasingly furious with the tight control that Goldman Sachs wields, a comment made before the OTC Derivative dishonor policy change. China is well aware of the bond fraud in the trillion$ that the US finance syndicate must perpetuate with full coverup. My suspicion is that Beijing leaders are aware the struggles of American people, but do not care anymore about US problems. The policies put forth by the USGovt, USDept Treasury, and USFed go directly against Chinese short-term and long-term interests. The weak link for the US syndicate in power is the USDollar and USTreasury Bond, the US$ more so. The USTBond must be defended. The failing global US$ structure dictates the next sequence of events in my view. The pillars are being washed away by the markets, kicked away by angry creditors, and eaten away by economic Mother Nature. All that is needed next is for the LIGHTS to be turned by a competent uncompromised press network system, and the US Leadership would be exposed as MICKEY MOUSE with a cape.

The most lucid comprehensive assault on Bernanke, and basis for NOT reappointing him, is given by Stephen Roach. He lives outside the United States Dome of perceptions, working as head of Morgan Stanley Asia. Roach stands as an acknowledged expert on the USEconomy, and possesses deep insights into Asian thinking, where US creditors are located. Once again, President Obama has chosen NO CHANGE, his major billboard in contrast to words. Roach wrote an Op-Ed article in the Financial Times that highlights the case against Bernanke. Roach made three main points as indictments (his words with minor edits).

  1. Before the Lehman bankruptcy, Bernanke was an adherent of the Greenspan professed doctrine to clean up after bubbles. This is what others have called 'The Greenspan Put,' otherwise known as an asymmetric monetary policy response, what I would term lax during the bubble, and loose after it. Clearly, this doctrine was responsible for much of the carnage.

  2. Bernanke was also a proponent of the 'Asian Savings Glut' theory which puts much of the blame for global imbalances at Asia's doorstep and exonerates over-consumption by American citizens for a credit crisis which began in America. I have called this the Blame Asia theme. While there may be excess savings, it is disingenuous to blame Asia for problems created in the United States.

  3. Bernanke, like Greenspan, is an ultra-free market Libertarian who believes markets always are better informed than regulators. This takes libertarian views to an extreme which I have dubbed 'Deregulation as Crony Capitalism.' I see a more nuanced belief in free markets as more appropriate.

Roach puts forth the theory that the reappoinment decision by Obama is predicated upon the notion that Bernanke has successfully negotiated a solution (if not remedy) to the credit crisis. That it has ended is a calculation that Roach believes may be hasty and premature. Recall that the financial markets have built an entire rebound based upon fraudulent FASB accounting rule changes and rigged Stress Tests for the big insolvent US banks. This false market confirmation is totally contrived. Few remember the Victory Lap by Greenspan just three years before the US bank system collapsed. Roach wrote the following.

"Notwithstanding these mistakes, Mr Obama may be premature in giving Mr Bernanke credit for the great cure. No one knows for certain as to whether the Fed's strategy will ultimately be successful. The worst of the US recession appears to have been arrested for now, a fairly typical, but temporary, outgrowth of the time honored inventory cycle. But the sustainability of any post-bubble recovery is always dubious. Just ask Japan 20 years after the bursting of its bubbles. While financial markets are giddy with hopes of economic revival, in part inspired by Mr Bernanke's cheerleading at the Fed's annual Jackson Hole gathering, there is still good reason to believe that the US recovery will be anemic and fragile. US consumers are in the early stages of a multi-year retrenchment as they cut debt and rebuild retirement saving. The unusual breadth and synchronicity of the global recession will restrain US export demand from becoming a new growth engine. It would be the height of folly to reward Mr Bernanke for the recovery that never stuck. Yet Mr Bernanke's apparent reward is, unfortunately, typical of the snap judgments that guide Washington decision making. In this same vein, it is hard to forget Mr Greenspan's mission accomplished speech in 2004 that claimed 'our strategy of addressing the bubble's consequences rather than the bubble itself has been successful.' Eager to declare the crisis over, the Obama verdict may be equally premature." See the Credit Writedowns article (CLICK HERE).

Enrico Orlandini provides a well put opinion on retaining Bernanke as USFed Chairman. He said, "Personally I think Obama is smart to keep Bernanke on, because it gives him a scapegoat if and when things go wrong. Inversely, I think Bernanke is stupid for staying on. He should take a lesson from Greenspan, who knew when to head for the door. On a separate note it was announced that a Federal Court judge ordered the Federal Reserve to disclose who received what money and explain how funds were used. This is something that Bernanke refused to do, and I expect the Fed will appeal."

$$$ HATZIUS (NYFED) EXPECTS ANOTHER $2 TRILLION USFED BLOAT. HE ALSO CLAIMS THE USFED HAS THE TOOLS TO PREVENT AN OUTBREAK OF PRICE INFLATION. $$$ Jan Hatzius, formerly an economist at Goldman Sachs and currently head of the New York Fed, believes a rise in the USFed balance sheet to $4 trillion is a 'possibility' in his words. Note how he implicitly suggests that the asset purchase programs have not been successful, but they will be amplified anyway. This clearly shows the officials are well aware that the system is out of control. Hatzius said, "It is going to depend on not just what inflation does, but also whether the economy does move back to a slower growth pace. Rates need to stay low. [The Fed] could become more aggressive in purchasing assets. They have not gotten a lot of bang for the buck on that policy so far." The size of the USFed balance sheet has increased to $2.02 trillion as the central bank purchased assets aimed at lowering interest rates, as of the week ending August 12th. See the Bloomberg article (CLICK HERE).

BANK CRISIS CONTINUES WITHOUT REMEDY

$$$ DESPERATE CLAIMS OF USFED SUCCESS COME. THEY ARE MORE PROPAGANDA. A REBUTTAL COMES FROM A RELIABLE SOURCE, MATT TAIBBI. MEANWHILE, GEITHNER GRILLING EVENTS HAVE BECOME COMMON. $$$ Desperate claims have come. Matt Taibbi is known for ripping apart the unwarranted exalted image of Goldman Sachs. They did not put a single mark on him in counter-attacks. His criticism stuck hard. Taibbi rebutts the claims of success by the US Federal Reserve, which is on a public relations campaign to justify their 'Black Hole' investment record, stated in 'Jackson Hole' two weeks ago. The TARP fund is only one of many grand money losers, but it receives focus. The USFed losers outweigh their winners by over 11-fold in the TARP fund alone. Their other losers, totaling in the tens of $billions include the TALF, PPIP, AIG, Fannie Mae, and even Bear Stearns. Taibbi wrote the following. See the True Slant article (CLICK HERE).

"It was inevitable that the same people who pushed through the multi-trillion-dollar bailout of Wall Street would come out later on and tell us what a great idea theirs turned out to be, in retrospect and under the light of evidentiary examination. And we are getting that now, with a pair of reports, the above one in the New York Times and another in the Financial Times, telling us the bailout is working because the government has made some money on TARP. They came to this conclusion by quoting Fed officials, who apparently calculated how much interest the Fed earned on TARP investments above what it would have earned on T-Bills. The amount so far, according to these worthy gentlemen: $14 billion. This is sort of like calculating the returns on a mutual fund by only counting the stocks in the fund that have gone up. Forgetting for a moment that TARP is only slightly relevant in the entire bailout scheme, the TARP calculations are a joke, apparently leaving out huge future losses from AIG and Citigroup and others in the red. Since only a small portion of the debt has been put down by the best borrowers, and since the borrowers in the worst shape have not retired their obligations yet, it is crazy to make any conclusions about TARP, pure sophistry. Moreover, a think tank set up to analyze TARP, Ethisphere, calculated in June that TARP was still $148 billion down overall, a debt of over $1200 per American. To start talking about what a success TARP is now is beyond meaningless… In light of all this, the Fed's decision to brag publicly about a few loans that are actually performing is sort of scary. It speaks to a level of intellectual desperation and magical thinking unusual even for a banker in the subprime/MBS era. Do not be surprised if you hear more of this sort of thing in the coming years."

Take note that Treasury Secy Geithner does not win favor without pressures, criticisms, insults, challenges, and embarrassment. That never stops progress for a syndicate, always stubborn and defiant. Observe the harsh treatment of Geithner in US Senate meetings, which in my view have never been so contentious and filled with friction in modern history. The syndicate has been recognized, and is being challenged. Geithner claims to have organized the revival of the big US banks, demonstrating successful Stress Tests, enabling the raise of bank capital, and much more. The backlash is steady and ongoing. See the video clips (CLICK HERE and HERE).

$$$ STIGLITZ WARNS THAT THE UNITED STATES IS NOT BEYOND THE CREDIT CRISIS, IS DOING LITTLE TO ADDRESS STRUCTURAL PROBLEMS, IS UNDULY INFLUENCED BY BIG BANKS POLITICALLY, AND FOCUSES ON THE G.D.P. IMPROPERLY AS A MEASURE OF HEALTH. THE NATION IS WORSE OFF THAN BEFORE THE CRISIS HIT. $$$

Nobel Prize winning economist Joseph Stiglitz claims the United States has failed to fix the underlying problems of its banking system after the credit system collapse one year ago. Former USFed Chairman Paul Volcker has advised the Obama Admin to curtail the size of US banks. For instance, Bank of America has even greater assets and Citigroup remains intact. Both are teetering toward ruin from insolvency and a new wave of losses. The Columbia University professor and former member of the White House Council of Economic Advisers, Stiglitz acknowledges the political difficulty in challenging the large US banks. He omits mention how the large banks control the USGovt itself. Obama merely mentions stricter oversight and wider powers to the financial sector responsible for the banking system breakdown, which is obviously backwards. The bankrupted do not wrest control from the creditors, except in the United States. The USFed faces a dilemma, identified clearly in the Hat Trick Letter reports. Bringing an end to monetary stimulus programs would drive up the cost of borrowing for the USGovt, cut off credit to the USEconomy, and kill the housing market. They are stuck without an Exit Strategy, despite talk of fashioning one. Stiglitz gave the interview before presenting a report to French President Nicolas Sarkozy that urged world leaders to drop a mindless obsession on Gross Domestic Product in favor of broader measures of prosperity that reflect the integrity and health of banking and credit foundations. Sarkozy confirmed in Paris that focusing on GDP as the main measure of prosperity had helped to trigger the financial crisis. He ordered France's statistics agency to integrate the Stiglitz findings into its economic analysis. Stiglitz said many things, and his comments are the following.

"In the US and many other countries, the too-big-to-fail banks have become even bigger. The problems are worse than they were in 2007 before the crisis. We are not doing anything significant so far, and the banks are pushing back. The leaders of the G-20 will make some small steps forward, given the power of the banks [and] any step forward is a move in the right direction. It is an outrage … in the United States where we poured so much money into the banks. The administration seems very reluctant to do what is necessary. Yes they will do something, the question is: Will they do as much as required? [The world economy is] far from being out of the woods. We are going into an extended period of weak economy, of economic malaise. [The US will] grow but not enough to offset the increase in the population. If workers do not have income, it is very hard to see how the US will generate the demand that the world economy needs. The question then is who is going to finance the US government. GDP has increasingly become used as a measure of societal well being, and changes in the structure of the economy and our society have made it an increasingly poor one. Most governments make a fetish out of it. If you take one message out of our report, make it avoid GDP fetishism. The message is to encourage political leaders away from that." See the Bloomberg article (CLICK HERE).

$$$ THE BLOATED USGOVT IS AN EMBARRASSMENT. THE BEST DESCRIPTION IS RUIN. $$$ In the last 100 years, the USGovt has created a sprawling military industrial complex, a vast financial syndicate, a socialist network, and a bloated bureaucracy. It has committed itself to endless war. In 2009 the USGovt annual budget is $3.55 trillion, which comes to $10,750 per capita for its 330 million people. A century ago, the cost was a mere $9 per person. The USGovt official Office of Mgmt & Budget estimated in June the US federal budget deficit for the fiscal year ending on September 30th at $1.84 trillion, a four-fold increase over fiscal 2008. That is four times as big as the official fiscal 2008 deficit (the biggest in US history) of $US 459 billion. In the last week of August, some changes were made. The OMB has since revised their fiscal 2009 deficit estimate to $1.6 trillion. Funded federal debt as of August 31st was $11.813 trillion. The current debt ceiling stands at $12.1 trillion. Treasury Secy Geithner has formally requested the Congress for another lift in the debt ceiling. Let's put the estimated 2009 deficit of $1.8 trillion into perspective. It comes to $3.4 million per minute, $200 million per hour, $5 billion per day. That does not even address the $56 trillion in unfunded obligations (Social Security, Medicare, federal and military pensions, etc) which amount to $483k per household. The pressures on the USTreasury Bonds and the US Federal will be constant and will not abate. They will even worsen.

$$$ GREENSPAN WARNS ABOUT INADEQUATE BANK CAPITAL. $$$ Alan Greenspan seems to be one of his best historical critics, without recognition of his new role. He cannot help but offer criticism, a process that undermines his own legacy. He spoke via teleconference to the Antique India Markets Conference in Mumbai India. At this obscure forum, he said "Capital requirements even during non-crisis periods have to have a larger buffer. We do need significant changes. Financial intermediaries allowed institutions to go into default by taking this kind of risk. There is no substitute for capital. Do not think the crisis could have been prevented unless we can change human nature." See the Bloomberg article (CLICK HERE).

Meanwhile, closer to home, Greenspan admitted that the gold price gains are strictly a monetary phenomenon in his words, which should send shivers through central bankers spines. He believes that rising prices of precious metals and other commodities are "an indication of a very early stage of an endeavor to move away from paper currencies. What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment. China is turning out to be the 900-pound gorilla in the energy and commodity market. The increase in oil consumption in China has been quite extraordinary." He expects China will continue to be a large consumer of commodities, including energy and metals. See the other Bloomberg article (CLICK HERE).

$$$ USTREASURY DEFAULT HAS BECOME AN OPEN TOPIC. ITS MERE MENTION IS CONFIRMATION OF POSSIBILITY. ITS STEADY DENIAL ADDS MORE CREDENCE OF LIKELIHOOD. MY THEORY IS IF USTREASURY YIELDS RISE RAPIDLY, THEN A DEFAULT WILL FOLLOW. MY THEORY IS THE USDOLLAR CAN BE SAVED ONLY WITH STEEP DEVALUATION. $$$ Jeffery Rogers Hummel is an Associate Professor of Economics at San Jose State University and the author of "Emancipating Slaves, Enslaving Free Men: A History of the American Civil War." He wrote an intruiging probing article on the Library of Economics & Liberty website. His main thesis is that the USFed is soon to be forced to make a very difficult excruciating decision, whether to inflate toward oblivion (with dire USDollar consequences) or to default on the USTreasury debt (with permanent credit consequences, as in Third World entry). Hummel believes that default on the USTreasurys will be chosen. This time around will be much more complicated, since gold is not part of the official USGovt finances. My belief is that a repudation default of USGovt debt would have important painful consequences for the USDollar, even though it might be saved. The US$ exchange rate would require a steep devaluation on the order of at least 30% to 50%, maybe greater. Repudiation of debt or currency must come, with the survivor to reduce in value. There is no way out, a bonafide Sophie's Choice! The main questions before the ultimate decision is made focus attention on the bond yield for USTreasurys, and how much foreign creditors demand to maintain the US debt machine with a lent Weimar name plate attached. See Russia for precedent, as the United States tragically follows the Soviet Union's path. See the Library of Economics & Liberty essay (CLICK HERE). Hummel wrote the following.

"Predicting an ultimate Treasury default is somewhat empty unless I can also say something about its timing. The financial structure of the US government currently has two NOMINAL FIREWALLS. The first, between Treasury debt and unfunded liabilities, is provided by the trust funds of Social Security, Medicare, and other, smaller federal insurance programs. These [trust funds] give investors the illusion that the shaky fiscal status of social insurance has no direct effect on the government's formal debt. But according to the latest intermediate projections of the trustees, the Hospital Insurance (HI-Medicare Part A) trust fund will be out of money in 2017, whereas the Social Security (OASDI) trust funds will be empty by 2037. Although other parts of Medicare are already funded from general revenues, when HI and OASDI need to dip into general revenues, the first firewall is gone. If investors respond by requiring a risk premium on Treasuries, the unwinding could move very fast, much like the sudden collapse of the Soviet Union. Politicians will be unable to react. Obviously, this scenario is pure speculation, but I believe it offers some insight into the potential time frame.

The second financial firewall is between US currency and government debt. It is not literally impossible that the Federal Reserve could unleash the Zimbabwe option and repudiate the national debt indirectly through hyper-inflation, rather than have the Treasury repudiate it directly. But my guess is that, faced with the alternatives of seeing both the dollar and the debt become worthless or defaulting on the debt while saving the dollar, the US government will choose the latter. Treasury securities are second-order claims to central-bank-issued dollars. Although both may be ultimately backed by the power of taxation, that in no way prevents government from discriminating between the priority of the claims. After the American Revolution, the United States repudiated its paper money and yet successfully honored its debt (in gold). It is true that fiat money, as opposed to a gold standard, makes it harder to separate the fate of a government's money from that of its debt. But Russia in 1998 is just one recent example of a government choosing partial debt repudiation over a complete collapse of its fiat currency."

$$$ SAUDI BANKS BEGIN TO TOPPLE, SOON TO RIPPLE ACROSS THE GLOBE WHEN RAMADAN ENDS. MEANWHILE, SAUDI ROYALS ARE UNDER THREAT OF ASSASSINATION. $$$ The Saudi Arabian central bank announced it will not purchase the debts from two family businesses after a major default. The Saudi Arabian Monetary Agency will not accept the debt from Ahmad Hamad Algosaibi & Brothers and Maan al-Sanea's Saad Group. The debt is owed to local banks. Units of the two groups have borrowed at least $15.7 billion from more than 80 regional and international banks, including Paris-based BNP Paribas, New York-based Citigroup, and Arab Bank in Amman Jordan, according to submitted documents. About $5 billion of the debt is owed to Saudi banks, Standard Chartered reported in an August 26th report. See the Bloomberg article (CLICK HERE).

In a Jackass public article entitled "US Bank Enemies at the Gates" from late August (CLICK HERE), the risk was cited. The message went, "But the Persian Gulf bank failures represent the clear and present threat… A bank panic in the Persian Gulf could ensue very soon, a back door threat. It would clearly have origins in the United Arab Emirates, spread to the entire Persian Gulf like to Saudi Arabia, Kuwait, and elsewhere. From this global toehold, the bank panic could then spread to London, New York, and points in Europe. The UAE bankers must manage their situation. They are loaded to the gills with USTreasurys, the main currency used in the liquidations and rescues local to the UAE. They also have pet stock accounts in big US banks. As further liquidations occur, avoidance of bank failures seems a remote prospect. Watch the enemies at the gates, outside looking in, in urgent need of dumping USTreasury Bonds and other US$-denominated securities." It has begun. A contact with Persian Gulf clients reports that Saudi sheiks with outsized US bank stock positions are furious, feel betrayed, and are soon to take action after enormous losses. Their insolvency adds to motive.

On August 30th, a suicide bomber injured Saudi Prince Mohammed bin Nayef, son of the interior minister and nephew of King Abdullah. The incident took place in Jeddah Saudi Arabia. Reports indicate the motive might be tied to Saudi involvement in the civil war in Yemen. The Saudi Air Force bombers have attack rebel al-Houthi strongholds in northern Yemen. The targeted Saudi prince has been coordinating military operations. The House of Saud appears vulnerable, since double agents appear to be deeply imbedded.

A different banker contact with global ties, including to the Persian Gulf, commented. He said, "Just wait once Ramadan is over. The full extent will become visible within the next eight weeks when we shall be witnessing a mega Gulf State banking meltdown that will take some big western banks down with it. With the demise of the US and UK, the House of Saud will also be done. They are already making their new home in the south of Spain." A check reveals that Ramadan ends on September 19th. Chaos could come to Persian Gulf bankers soon afterwards. Some lunacy has sprung up. The European company European Aeronautic Defense & Space Company (EADS) has been hired to complete a large MidEast security project, setting up a perimeter fence which will encircle Saudi Arabia at a cost of $3.5 billion. They are the same geniuses who created the Airbus flying tomb. Can anyone remember the worthless Maginot Line in France? My sources in Los Angeles report that the Saudi royals have been settling in Southern California in the last few years, with several dozen of them erecting palaces.

GOLD TREMORS SIGNAL PARADIGM SHIFT

$$$ AN ACUTE LACK OF GOLD COMPREHENSION IS EVIDENT ALMOST ON A GLOBAL BASIS. FOR THE MOST PART, SO-CALLED EXPERTS, INDUSTRY ANALYSTS, AND NETWORK ANCHORS HAVE ABSOLUTELY NO IDEA WHY GOLD HAS RISEN ABOVE THE $1000 LEVEL. THEY ARE BLIND TO THE PARADIGM SHIFT AWAY FROM THE USDOLLAR BASIS AND THE BREAKDOWN OF THE GLOBAL MONETARY SYSTEM. $$$

It will be interesting to observe how long the 'SYSTEM' remains ignorant of the massive changes taking place. THEY have absolutely no idea why gold is rising. Their claims to justify price movement are vacant shallow factors. THEY miss the major factors. They do notice a staggering amount of fiat money being created without basis, visible to a blind man. The actual reasons are:

  1. the PARADIGM SHIFT away from a USDollar centric world manifested as the global revolt against the USDollar in reserves management and transaction settlement

  2. the colossal irresponsibility of major central banks with expanded balance sheets, money creation, and credit growth

  3. the failure of the central bank model, evidence the bank credit crisis itself

  4. the ruined global monetary system from the complete debauchery of money itself

  5. the perversion of the USDollar from required USMilitary subsidy (via USTreasury Bond support) and from tacit acceptance of Wall Street corruption (past bond fraud and current undermine of most financial markets)

  6. the proliferation of OTC derivatives over $592 trillion in notional value with no prospect of resolution and absent any regulatory oversight

  7. the gradual recognition of a financial crime syndicate having taken control of the USGovt finance ministry

  8. the dishonor of financial contract law and chronic lapses in market integrity

  9. expectation of mammoth price inflation just over the approaching horizon

  10. anticipation of banking system meltdown in at least the United States and United Kingdom

  11. observation of gradual economic disintegration and the decline of global trade

  12. the trend toward commodity stockpile of which gold is the financial commodity core elements

  13. the specter of numerous pockets of armed conflict, war, and possible limited scale nuclear events.

This process would be almost amusing if not so tragic. Some respected pundits will soon make fools of themselves. THEY do comprehend item #2, but nothing more. Many keen analysts in the mainstream fail to see how gold serves as a bank system foundation in an age where none is evident. Before 1971, few financial crises occurred during an era with gold as the foundational anchor. As the tide turns, THEY will expound on the virtues of gold, without benefit of comprehension. Many will jump on the golden bandwagon, people who know little about gold, but who will claim to have advocated gold in portfolios all along.

Ron Insana of CNBC states he does not understand why gold is rising. He had no idea that structured financial assets would implode in 2006 when he left the network. He must not have received word that even Goldman Sachs was shorting mortgage bond heavily. This is typical of bright people who have no insight into the current Paradigm Shift. We are witnessing the demise of the US-UK empire, an era of power abused in the last decade, as the US$-based structures vanish, a gradual process to date. As times passes, more sudden shocks are sure to arrive, and very soon on the calendar of events. Some technical analysts, the eerie bunch that follows price patterns, volume trends, and cyclical measures, care little about reasons. They notice extremely positive patterns in the gold stock index and gold futures prices. Such analysts expect much higher prices ahead. See the Bloomberg article (CLICK HERE).

$$$ THE GOLD PRICE BREAKOUT IS VERY EARLY, EXTREMELY EARLY. IT HAS BEEN ONE WEEK PASSED IN A 2-YEAR TO 4-YEAR PROCESS. POWERFUL ENERGY WAS BUILT AND WILL NEXT BE RELEASED. FULL RECOGNITION OF A MONETARY CRISIS IS NOWHERE EVIDENT. AS THE MANY REASONS FOR THE GOLD BREAKOUT ARE NOTICED, RECOGNIZED, AND TRUMPETED, THE GOLD PRICE WILL AT LEAST DOUBLE. DITTO FOR SILVER, EXCEPT THAT ITS PERCENTAGE GAINS WILL BE TWICE THAT OF GOLD. A $1300 GOLD PRICE WOULD EQUATE TO APPROXIMATELY A $30-35 SILVER PRICE. $$$

Watch a possible massive magnificent short squeeze take gold to $1100 soon. After several unsuccessful attempts to rise about the $1000 level, a tremendous amount of short positions accumulated directly at 1000 on futures contracts. They are being busted, a gradual process, that will result in a climax of buying on wrecked accounts. A savvy gold banker wrote a note this week to gloat, saying "The COMEX boys are getting root canal treatment without anesthesia as they are strapped into their chairs." The stories will be told later. The initial target from the bullish triangle on the right side of the Bullish Head & Shoulders pattern has 130 points of potential, to be realized above the 1000 resistance level just overcome this past week. The target to be pursued in the next several weeks to few months is 1300, the full potential of the reversal from the November 2008 lows. Huge energy has been accumulating, with energy to be unleashed. The gold breakout is the leading indicator for massive currency declines, ushering in a monetary crisis in which the USDollar is the center. Everything possible has been done in the last several years to destroy the USDollar.

Silver is a smaller but faster horse to ride. It benefits as 'Poor Man Gold' since its value per unit is considerably lower than gold. Anticipate that the Gold/Silver Ratio will quickly change in a way to favor silver significantly. The ratio might be cut in half within two years. Silver has a different chart pattern, one resembling a Sling Shot from the heavy downward price pressure felt last year. Its recovery will enable a very fast price apprecation, with price targets 19 then 21. The Point & Figure Chart technique indicates a 26 price target for silver. A reversal from 19 to 9 and upward indicates a price target of 30 in the next year, maybe with public attention 30 by year end. My belief is strong on the relative advantages of silver over gold. No central bank sells silver, and many industries demand silver. So silver has advantages in both Supply and Demand.

$$$ PRITCHARD IDENTIFIES THE 'BEIJING PUT' ON GOLD, A VERY IMPORTANT CONCEPT REVEALED. TRANSLATED INTO SIMPLE TERMS, IT MEANS CHINA WILL SUPPORT ANY DROP IN THE GOLD PRICE TO PREVENT A BIG DECLINE, AS THE EMERGING GIANT GRADUALLY ACCUMULATES A GIGANTIC HOARD OF GOLD. A KEY CHINESE OFFICIAL REVEALS THE STRATEGY. THEY HAVE OFFICIALLY LOST CONFIDENCE IN BOTH THE USDOLLAR AND USGOVT POLICIES, BUT WILL NOT PUBLICIZE THIS REJECTION. THEY WILL JUST BUY GOLD CONSTANTLY. CLIMBING ABOARD THE CHINESE GOLD TRAIN IS A NO-LOSE TRADE. IT IS WELL BEYOND THE STATION, ONLY NOW BEING RECOGNIZED. $$$

Ambrose Evans-Pritchard has identified openly what the Hat Trick Letter has been screaming for a full year. China is buying gold in large quantities, actively supporting its price. They will continue to exploit price drops with huge purchases. They will continue to buy and buy and buy gold, with some care given to avoid a single source price runup effect. They are patient people. They want a gold movement to take root globally. They encourage their own citizens to buy gold. Their motive is not only to hedge against the corrosive USDollar, but also to construct a new financial structure that places China at the forefront of global banking. They recognize the fractured USDollar foundation in the global monetary system. They disrespect, decry, and discard the USGovt policies, which they clearly see as syndicate support for Wall Street at the expense of the entire USEconomy. They abhor and openly criticize the futile stimulus plans, the deep investment in Black Holes (see AIG, Fannie Mae). They object to continued USMilitary tacit support by means of USTreasury Bond purchases. They have embarked on a very coordinated impressive plan, fully described and outlined in the Hat Trick Letter for several months. Details of what is being called the 'Beijing Put' on gold are taking shape. It supports the gold price with strong hands. This label contrasts with the 'Greenspan Put' which supported the US stock prices for years by means of his action to lower interest rates or call in the Plunge Protection Team cavalry at the sign of trouble.

Ambrose E-P attended the Ambrosetti Workshop in Lombardy Italy, a gathering of politicians and global strategists at Lake Como. He spent much time with Cheng Siwei, a unique person in China. Until recently he was the Vice Chairman of the Communist Party Standing Committee, but now serves as a sort of economic ambassador for China around the world, a freelance consultant. He is more a political official, not a monetary policy official, but he influences important policy. Cheng was one of the original party officials to recommend that China should diversify almost two years ago some of its trillion$ of currency reserves into stronger currencies. Cheng is now head of China's Green Energy drive. He claims that Beijing is dismayed by the USFed's recourse to monetary and credit easing. He suggested shifts into the Euro, to offset weak currencies like the USDollar. His words move the financial markets often, making him like a Greenspan iconic figure. At the workshop, Cheng Siwei listened attentively as several American guests harshly condemned President Obama's economic and health policy.

Cheng's comments about US monetary policy and gold seems clearly to validate the firm belief held by gold bugs that China has fundamentally lost confidence in the USDollar and has begun to aggressively shift to a partial gold standard through reserve accumulation. He minimized the importance of industrial metals like copper, since they could not adequately serve a double role as a proxy currency or store of wealth. He said, "Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not stimulate the market." There you have it. Perhaps the most important financial mind in China laying it out. China is buying the dips, and will continue to do so as a systematic policy. His comment explains well the gold price action seen for months. Every time it looks as if the bullion market is going to weaken in a significant manner, some big force steps in. It is like the Hidden Hand in pursuit of a gold market efficiency objective, ensuring proper value. The Chinese Hand undoubtedly stands in direct opposition to the Corrupt US Hand that suppresses the gold price. This entire story validates the claim that the United States and China are at financial war over Gold and the USDollar.

Cheng harbors little respect for the monetary experiments of USFed Chairman Bernanke or the slush fund largesse by Treasury Secy Geithner. He elaborated on the dilemma often pointed out in the Hat Trick Letter, that China is bound by US monetary policy, and has been trapped by it since 2001 in clear fashion. They pegged the Yuan currency to the US$, and have managed it closely since July 2005. The Chinese is in effect a prisoner of the US from a monetary standpoint, destined to suffer bubbles, required to match policy step by step. Since 2001, they made a deal with the American Devil, and are deeply wedded, the proof being their US$-based bank dependence and outsized US$-based reserve accounts. These are difficult to shed. The USFed's Quantitative Ease policies are causing great trouble in China itself, where asset bubbles have formed beyond control. Refer to the vicarious speculative boom on the Shanghai exchange and in property, as Ambrose E-P calls it. Cheng reported mid-level Chinese house prices to be at ten times their income. Nowhere is the monetary policy vise tighter than for the Chinese export industries. They could permit the Yuan currency to rise 40% to 50%, where it belongs, for starters. Small profit margins on exports mean that a large slice of Chinese industry would crumble if the Yuan rose enough to effect the trade surplus. The Chinese exports were down 23% annually in July. Their export trade comprises almost 40% of GDP. This straitjacket has already squeezed out millions of jobs, far more than in the USEconomy. Ambrose E-P wrote, "China too is trapped… China's mercantilist export strategy has led the country into a cul-de-sac. China must continue to run its trade surplus. It must accumulate hundreds of billions more in reserves. Ergo, it must buy a great deal more gold. Where is the gold going to come from?" The answer is the Intl Monetary Fund, their Chinese gold mining output, and the open market.

Cheng made many comments. They can be summarized on the consequences to reserves management and the economy. He acknowledges that China is trapped. He said, "We hope there will be a change in monetary policy as soon as they have positive growth again. If they [United States] keep printing money to buy bonds, it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds, and this is very difficult to change. So we will diversify incremental reserves into euros, yen, and other currencies. If we raise interest rates, we will be flooded with hot money. We have to wait for them. If they raise, we raise. Credit in China is too loose. We have a bubble in the housing market and in stocks. So we have to be very careful, because this could fall down… We have lost 20 million jobs in this crisis." See the UK Telegraph article (CLICK HERE).

◄$$$ AN OVERLOOKED FACTOR MIGHT BE IMPORTANT IN THE GOLD BREAKOUT OVER THE 1000 LEVEL. THE I.M.F. ROLE IN THE RISE IN GOLD & SILVER PRICES COULD BE ITS CREATION OF $250 BILLION IN ADDITIONAL FOREIGN EXCHANGE RESERVES OUT OF THIN AIR. THE GLOBE HAS A NEW MONEY PRINTING SOURCE. AN EXTRA PUSH MIGHT HAVE COME FROM THE G-20 MEETING, AS THEY STATED A FUTURE AGENDA. $$$

At the close of August, the Intl Monetary Fund announced that it pumped about $250 billion into FOREX reserves worldwide, in follow-up action from an April decision by leaders of the Group of 20 nations. They wanted to boost global liquidity. Countries will be able to convert the money from Special Drawing Rights to hard currencies through 'voluntary trading arrangements' with other members. The SDRs are the institution's unit of account based on a basket of currencies. The allocation, approved by the IMF's board of governors earlier this month, will not increase the fund's pool of money available for lending, the IMF said. "It will, however, provide members with an additional method to obtain hard currencies." IT APPEARS THE PARTICIPANTS CONSIDER GOLD & SILVER CURRENCIES TOO!!! About $110 billion of the total allocation will go to emerging market and developing countries, along with $20 billion to low income nations. Welcome the new world central bank with capability to create money out of thin air. No longer does the IMF need to borrow money after vote approval of all members plus the consent of the USCongress. The SDR has quietly mutated to an appendage of a printing press, except it does not have a US$ nameplate!

The world found itself suddenly $250 billion richer, without benefit of any new production or raised taxes or new credit extended. Now nations can utilize the freshly created SDRs, and make direct claims to hard currency, including gold. The hard currency will be provided by those with 'sufficiently strong external positions,' which means surplus nations. Paul Nathan wrote, "There is no reason for surplus nations to part with hard currency, save two, that I can think of: Altruism or Power. And in my opinion they are having a go at the latter. My read on this is that the surplus nations have just made an end run around the United States and the USCongress who have veto power over IMF decisions. Surplus nations can now provide 'voluntary trading arrangements' with non-surplus (importing) nations with the IMF as broker. This sounds like a mechanism for the surplus nations to provide buying power to importing nations at the expense of us all. The ability to inflate has now been augmented. It has transcended national boundaries from national central banks to a world central bank. This 'new bank' now has the power to create money. Inflation is no longer limited to one currency but will affect all paper currencies in the world. We now have the prospect of a synchronized international inflation. It is not enough that citizens throughout the world had to keep a keen eye on their nations central bank, now we all need to keep an eye on the IMF." In my view, the less industrialized nations, led by the BRIC nations, have executed a Power Play. They have a new monetary printing press engine to compete with the USGovt and USFed in the Intl Monetary Fund. But this is early. Response by the US-UK Sphere must be monitored. See the Kitco article entitled "The New Inflation Threat" by Paul Nathan (CLICK HERE).

The G-20 Meeting in London concluded little except an urge for future action to replace the USDollar. The G-20 meeting, an expanded group of finance ministers that includes creditor nations in addition to basically bankrupted industrialized nations, will hold a third summit this September in New York. An agenda will center upon the Chinese proposal to create a new currency that eventually replaces the USDollar as the global benchmark. The Russian President Dimitry Medvedev has agreed to the initiative, adding that the IMF unit of SDRs is a feasible choice. China has pushed hard for this highly disruptive initiative. See the China Org article (CLICK HERE).

$$$ CHINA CONVERSION OF I.M.F. BONDS TO GOLD IS IN THE OPEN FOR FULL VIEW. $$$ China is slated to buy bonds from the Intl Monetary Fund using the Yuan. The IMF announced two weeks ago that China has agreed to purchase approximately $50 billion worth of bonds denominated in Special Drawing Rights, a fundraising effort that is part of a broader push to bolster the IMF resources. Brazil and Russia have also said they each intend to buy as much as $10 billion of bonds from the IMF. In my view, China is positioning itself in a clever manner to obtain a giant supply of gold to augment their current reserves. Doing so would provide powerful added motive to lift the gold price. See the Wall Street Journal article (CLICK HERE).

US FINANCIAL ISOLATION INTENSIFIES

$$$ CHINA WAS A NET SELLER OF USTREASURY BONDS IN JUNE. THIS IS A MAJOR TURNING POINT. FRICTION HAS GROWN ALL SPRING. THE USTREASURY IS ISOLATED ON ITS MONETIZATION SCHEME FOR DEBT ISSUANCE. CHINA WILL BEGIN ITS OWN BOND ISSUANCE OUT OF HONG KONG, HELPING TO ESTABLISH THE YUAN AS A GLOBAL CURRENCY. IT WILL SUCCEED EASILY. $$$

China is now a net SELLER of USTreasury, as the Trade War gathers momentum. The combination of USGovt wild spending with ineffective stimulus marred by Wall Street control of funds, and Chinese disgust amplified by ongoing reserve asset losses has created a growing firestorm. The Chinese have embarked clearly on a two-tier strategy, to protect their current reserves in US$-based bonds, but to shun new US$-based investments. One can witness the latter with a retreat from USTreasury purchases. The June data shows the trend change clearly.

In early September, the USTreasury Dept revealed that China actually REDUCED its USTBond and USTNote holdings by $25 billion in June. China did NOT reduce its shorter-term USTreasury Bills, and still holds a record amount of USTreasurys. A progression downhill is clear.

  • In 2006, China and Hong Kong accounted for more than 50% of the increase in the amount of Treasury debt sold at large

  • In 2008, their share had fallen to 22% as the USGovt increased its public debt by a record $1.2 trillion

  • In the first half of 2009, China and Hong Kong acquired only 9% of the $800 billion worth of Treasury Bonds that were sold

  • In June 2009, China became a net SELLER of USTreasurys!

Chinese leaders are well aware that shedding their core reserve holdings would crush the value of the USTreasurys they own, resulting well over $100 billion in losses. A dependable source of credit to finance the runaway USGovt deficits is disappearing. Greenspan hailed Chinese credit recycle as a US advantage, all absurd nonsense. The absent demand for longer-term USTreasurys is softening. Some expect much higher interest rates in 2010 and beyond. Instead, the rampant monetization will continue to support the USTreasurys, the Hidden Hand on the bid. The risk is thus to be transferred to the USDollar, already seen in obvious ways. The long-term USTreasury Bond yields remain tame, nowhere near 4.0% even. The harm to the USEconomic recovery comes from the USDollar on the tangible cost side, not from higher interest rates on the money cost side. It will be impossible for the USEconomy to truly recover during a breakdown of the monetary structure based in the USDollar.

China will continue to embark on a new path, away from USTreasurys and toward its own bond issuance. China will issue sovereign bonds denominated in Yuan currency to offshore investors for the first time, a crucial step towards making the Yuan a global currency. The Chinese finance ministry said it would issue 6 billion Yuan (=US$880 million) of bonds in Hong Kong on September 28th, in order to begin establishment of its international status. Economist Wensheng Peng of Barclays Capital said, "While the amount is not large, this is a significant development for the internationalization of the renminbi and for the development of the Hong Kong bond market." Finally, acknowledgement comes for the many steps taken by Beijing to encourage greater use of the Yuan currency in international transactions, in a process to decrease its tight historical connection to the USDollar.

These steps have been regularly covered by the Hat Trick Letter, since significant. Beijing has signed deals since December with Malaysia, South Korea, Belarus, Indonesia, and Argentina that permit usage of Yuan instead of USDollars for its exports trade. In July, China began a pilot program that expanded Yuan settlement agreements between Hong Kong and five major trading cities on the mainland, including Guangzhou and Shanghai. Developing an offshore bond market is critical for the Yuan to become a legitimate global currency, as it would provide foreign institutions with an attractive means with which to hold the Yuan, bearing an interest yield in a bond security. The next step in development is corporate bond issuance by Chinese firms. Creating a market for Chinese Govt Bonds paves the way by creating a benchmark bond. Five state-owned Chinese banks, including Bank of China and China Construction Bank, have issued Yuan-based bonds in Hong Kong since 2007. Earlier this year, HSBC became the first foreign bank to issue Yuan-based bonds in the territory. See the Financial Times article (CLICK HERE).

$$$ USFED MONETIZATION OF USTREASURY BOND DEBT IS BEING REVEALED SLOWLY BUT SURELY. IT HAPPENS BOTH ON THE DOMESTIC FRONT VIA PERMANENT OPERATIONS BY THE USFED, AND ON THE FOREIGN FRONT VIA DIRECT SWAP FACILITIES ENABLED BY THE USFED. THE JIG IS UP, AND BEING RECOGNIZED. THE RISK TO THE USDOLLAR RISES TO CRITICAL LEVELS WITH THE PASSAGE OF TIME. $$$

The deception continues, worth mentioning each and every month, worth harping on. The removal of pillars from beneath the USDollar foundation continues, inviting a continued violent response by foreign creditors. The degree of monetization is staggering for USTreasurys. Issuance must be covered by the US$ Printing Press, increasingly in full view. Publicity for the practice has increased. The USGovt requires up to 7% of the entire global economy (its size, not its savings) to supply credit to cover that issuance. The USFed monetizes with Permanent Open Market Operations (POMO) in less than one week's time after auctions, hardly hiding their motive to monetize debt. Debt securities are taken by the primary bond dealers, only to find their way quickly to the USFed on their Permanent Portfolio. If the USFed bought them directly at auction, a firestorm of controversy would result immediately. Foreign demand for USTreasurys has slacked off badly, from smaller export surpluses, from lack of interest to support both military adventure and financial fraud. This has forced the USFed to accelerate its monetarization efforts. Contrary to Bernanke's public statements and promises given to the Chinese, the USFed will be compelled to maintain its monetarization, and even accelerate it. We are on the doorstep of direct confrontation with China and other creditor nations, in violation of their trust, and in betrayal of our word. Faith in all things US$-related is being shattered, thus inviting hidden attacks. Zero Hedge provides expert coverage. See their latest exposure data, the USFed's dirty little secret entitled "$270 Billion of POMOs To Date Running Ahead Of Schedule" (CLICK HERE).

The US Federal Reserve has been managing foreign custodial accounts. Lately their actions resemble a vast shell game. Foreigners are dumping USAgency Mortgage Bonds, which the USFed buys directly with money printed. Foreigners then turn right around and purchase USTreasurys at auctions with sold USAgency Bond proceeds, seen in the Indirect Bid. The sharp decline in USAgencys is evident, but the new revelation is the immediate switch into USTreasurys. So the USFed monetizes USTreasurys indirectly by monetizing the USAgencys directly and soliciting cooperation from foreign Custodial Accounts. Chris Martenson summarized the practice, when he wrote "The Federal Reserve does not want to be seen directly buying US government debt at auctions (and in fact is not permitted to, but many rules have been 'bent' worse during this crisis), because that could upset the whole illusion that there is unlimited demand for US government paper, but it also desperately wants to avoid a failed auction." NO UNLIMITED DEMAND FOR USTREASURYS EXISTS, ALL DECEPTION & PROPAGANDA. Great games are being played to avoid improper monetization and growing apparent desperation. When the full scope of this program is more widely recognized, greater pressure will be put squarely upon the USDollar. A global initiative will be undertaken to shun the USDollar and all US$-based instruments as stores wealth. Implications are enormous, to be seen in higher cost structure for the USEconomy.

As Zero Hedge reports, "As more and more people dig behind the Fed lustrous facade, increasingly more troubling discoveries are made. On one hand you see POMO auctions that repurchase recently auctioned off securities; on the other, potential capital rotation via custodial accounts of which there is no mention in mainstream media venues. If this analysis is in fact correct, the Fed is monetizing not only the Treasuries it purchases via POMO, but effectively also the indirect bidders' Treasury interest, which is represented by their rolling out of agencies purchased by the Fed, and the newly raised cash used for UST purchases. Has the Fed essentially monopolized the entire Treasury Auction process?" The answer is HELL YES! THE JIG IS UP! See the Zero Hedge article (CLICK HERE). The USDollar has been reduced to a digital entry, an electronic product, with unlimited supply. Our Founding Fathers would cringe, that the bankers have personified King George but 10 thousands larger in their hidden persecution!! The failure of the USFed is unspeakable. It has operated as a Wall Street pimp, whose offices are the unrecognized headquarters for the financial syndicate. The USDollar will erode much further.

◄$$$ THE USTREASURY AUCTIONS SCHEDULE IS LOADED, AS IN SATURATED, OR BETTER YET A VERY SOGGY BOG. THE USTREASURYS ARE DRAINING FUNDS, ENSURING A USECONOMIC RECESSION FROM LOST CREDIT CAPITAL. A 'BLACK HOLE' HAS FORMED AND IS VERY ACTIVELY AT WORK SUCKING THE UNITED STATES DRY IN A CAPITAL RUINATION. THE CONSEQUENCE IS STEADY RELENTLESS PRESSURE TO MONETIZE THE USGOVT DEBT. $$$

A total of $128 billion in USTreasuries were auctioned off last week. It consisted of $70 billion in 3-year, 10-year, and 30-year USTreasury securities, auctioned off on September 8th, 9th, and 10th. They went off without incident, the result of mammoth foreign monetization and domestic primary bond dealer collusion. The stated bid/cover ratios were all strong, over 3.0, but that is easy when it is monetized by back door methods. Foreigners use Dollar Swap Facility funds, and dealers use recycled funds from the previous auctions that were monetized within days in Permanent Open Market Operations. The remainder of the $128 billion will be handled by USFed buybacks. September will be chock-full of auctions to finance the outsized USGovt deficits. Without the (not so well) hidden monetization, auction failures would be daily headlines in financial journals. The pace has picked up. August saw $272 billion in new USTreasury issues, while the September runrate stands at $384 billion. Worse still, the pace is at a $4.6 trillion annual runrate. See the Zero Hedge article (CLICK HERE).

USDOLLAR BREAKDOWN GATHERS SPEED

$$$ THE IRON CROSS SIGNALS AN IMPORTANT USDOLLAR DECLINE TO COME, MARKING A CLIMAX EVENT FOR A MONETARY CRISIS. GOLD SCREAMS THE BILLBOARD MESSAGE, EVEN AS U.S. MAVENS IGNORE THE MESSAGE. A FEW WEEKS OR A COUPLE MONTHS REST AT 72-74 IS LIKELY, BUT THE CLIMAX WILL TAKE THE DX INDEX DOWN BELOW 70. A GLOBAL SHOCK WAVE COMES FROM THE EVENT. $$$

The gold price does not require the USDollar to decline. The gold rise signals the US$ decline, a big distinction. Gold leads the entire set of currencies, who flawed paper versions are impostors. Gold signals a major earthquake, like powerful initial tremors. The two key US$ technical signals are clear. A powerful major reversal is set to complete in the next several weeks or months. The bearish Head & Shoulder pattern was made possible by a totally unwarranted US$ rally one year ago, built upon the US bank system breakdown and credit contract redemptions in US$ terms. The perverse nature of the rally ensured a powerful reversal, now in full force. The US mavens and officials believe the rally was due to unshakable confidence in the USDollar, a totally wrong view. The other signal is loud, the bearish moving average crossover with the faster 50-week MA (in blue) penetrating below the slower 20-week MA (in red). Some analysts like Jesse of the Café Americain call it the IRON CROSS, an unmistakable signal.

Expect a bounce off the 2008 low near 72 on the DX index, called critical support. Tremendous short covering will result, lifting the index from that level up to near 76. However, the Chinese and Arabs will seize the opportunity to dump more USDollars and be grateful for the chance. The bounce will be halted without too much passage of time. The ultimate DX target is 67. Beware that a panic could send the US$ DX index much lower into a dungeon. Watch for evidence of panic in financial news headlines, statements by big bank CEOs, and statements by the president, along with the minions from the USCongress. The emotion will be clear. What comes next is the retirement of the USDollar or its replacement. My best guess is its replacement will be the same instrument, same fundamentals, but lower value and different colored bills for legal tender. The US finances are in free fall right of destruction, and will continue unless industry returns and bank liquidations occur. Neither is likely, but amplified Printing Press activity for USDollar creation is assured.

$$$ THE USDOLLAR DEVALUATION (FORMAL OR NOT) WILL INTRODUCE THE UNITED STATES TO THE THIRD WORLD. IT COMES VERY SOON, WITH THE FULL GLORY OF SHOCK. $$$ My best conjecture is that a plan is underway to introduce a new USDollar, same name, different look, but whose value will be 50% of the current USDollar. The Powerz will want to trick the public into not realizing the devaluation. The new dollar will build in a 2:1 writedown, a 50% devaluation felt suddenly. The trigger for the newly introduced currency will be a monetary crisis centered on a painful relentless powerful decline in the USDollar itself. That translates into a US$ DX decline below 70 that enters a free fall. To stem the bleeding, the Powerz will attempt to produce an explosion that halts the decline. Imagine a detonation of a natural gas wellhead fire, enough to blow it up and halt the flames by cutting off its oxygen. The US$ Event would be designed to shock the world into a halt of selling. They will declare the big devaluation, and hope that stability returns. It will not! The reduction in wealth will be sinister and somewhat hidden. The costs of commodities will rise proportionately inside the USEconomy. So wealth will be sharply reduced while costs will sharply rise. That is NOT a formula for achieving any stability.

The export trade will be mentioned frequently and emotionally for pulling the nation out the mire. But it cannot provide much support for the crippled USEconomy, for two reasons. 1) The United States has a shrinking manufacturing base with undesirable cars and restricted technology. 2) Foreign customers are themselves struggling to maintain stability in their own economies. The US industrial base itself was largely shipped off to Asia early in this decade, a disastrous decision, blessed by corporate and political heads, objected to by the entire labor front and astute analysts. Income was replaced by debt, as lower costs provided the smoke. The USGovt deficits, household bankruptcies, and corporate shutdowns will continue. The introduction of the new USDollar, or even a massive devaluation in the current currency regime, will serve as the event to send the United States into the THIRD WORLD with a tremendous shock. The US population will cry foul, but their only recourse will be to take to the streets. Capital controls have already begun, as limits are placed at some banks like Bank of America for money transfers to foreign destinations. Their anger might spill over into civil unrest, riots, and more. Their life savings will be worth much less, maybe both in nominal amount and purchase power. Declaration of states of emergency and martial law are extremely likely. Then there are those swine flu viruses, the forced vaccinations, and the genocide plan. Their goal seems to be to freeze the population from a class war against the elite.

$$$ BILL BUCKLER OF THE PRIVATEER NOTES THAT GOLD IS AN ACT ON STAGE ALL ALONE, A GREAT POINT. MY VIEW IS THAT GOLD IS THE LEADING INDICATOR OF SEVERE SHOCK WAVES FROM A MONETARY SYSTEM BREAKDOWN, CURRENCY RUIN, AND CENTRAL BANK FAILURE. $$$

The Privateer mentions gold from a couple perspectives. He wrote, "The significance of this latest attack on $US 1000 by Gold is that it has seemingly done it all by itself. It has not gone up in tandem with soaring oil prices. It has not gone up as a reaction to a plunging US Dollar. There is no obviously visible financial or economic crisis in the news. So far in this global financial crisis, in stark contrast to all its predecessors, there has as yet been little or no public debate about the NATURE of the money which underpins the system. A Gold price which goes over and stays over the $US 1000 level will HUGELY increase the pressure for such a debate to begin. The Pittsburgh G-20 meeting is just over two weeks away. The pressure is on to keep the Gold price in check. If Gold does break above $US 1000 before the meeting, and even worse (from the point of view of the participants) if it keeps on going up from there, the significance will be HUGE." It did!

$$$ THE COMPETING CURRENCY WAR IS IN FULL FORCE NOW. NATIONS ARE OPENLY WISHING FOR A WEAK CURRENCY, STATED BY BANKERS, POLITICIANS, AND INDUSTRY LEADERS, IN CONFIRMATION. THREE STAGE CURRENCY COLLAPSE SHOULD UNFOLD IN THE NEXT 2 TO 3 YEARS. GOLD WILL BENEFIT FROM HIGHER PRICE IN EACH STAGE. THE FIRST STAGE HAS THE USDOLLAR FALLING HARD, WITH THE EURO RISING TO MULTI-YEAR HIGHS. $$$

Recall the market TRUISM that the Powerz cannot control both the USTreasury Bonds and USDollar. They must let go of one or the other. We are seeing the USDollar fall with USTBond steady, precisely as expected in my analysis. The Powerz cannot afford to let interest rates rise, a certain detonation of the credit derivative monster they created. Ruining the market for money itself, i.e. the cost of money, carries systemic consequences. Do not assume the USTBond market goes lower just because it should, even with indescribably mammoth deficits and debt issuance. All the pressure will be put on the USDollar currency. The USTreasury complex contains the most controlled and ruined financial instruments in the entire world. The gold & silver market represent the flip side of controlled price. However, as the USTBond is defended, the USDollar will fall. The gold price will actually lead the US$ down, not vice versa. No longer! The USTBonds will fall in value only when they are set to experience the tragedy of default. The USDollar will fall much more.


What follows is my forecast. So far it looks good. It has been stated in the July and August Gold reports, and will be stated again.
In Stage #1: US$ down hard, Euro up strong, and Commodity currencies do well. In Stage #2: Euro falls hard, but only a small benefit to the US$, as Commodity currencies do well again. In Stage #3: Commodity currencies fall hard, with small benefist to both the US$ and Euro. IN ALL THREE STAGES, GOLD RISES WITH STRENGTH. The key points to remember are that the Euro currency is just as fundamentally weak as the USDollar, but the US$ is the global reserve currency as must fall with the monetary system breakdown. The commodity currencies include the Canadian Dollar , the Australian Dollar, and the Brazilian Real. They benefit since they have consider hard asset backing from indigenous resource industries.

$$$ A CHINA MARSHALL PLAN INTENDS TO SUPPORT EXPORT TRADE. THE YUAN SWAP FACILITY HAS ALREADY BEGUN INSTALLATION. NEXT COMES A LENDING FACILITY TO EXPORT CUSTOMERS IN FOREIGN MARKETS. $$$ Whether to create more foreign demand or to make purchases easier to complete, the Chinese Govt is in the early phase of expanding their export strategy. The Chinese Ministry of Commerce (MOFCOM) is considering the extension of soft loans to developing countries in order to boost their capability to purchase Chinese exports. See the China Digital Times article (CLICK HERE). Some regard it a major shakeup, when it is actually evolution in development. However, trouble looms since the Chinese Economy is dominated by export industries. Supply chains are muddied, while export customers are struggling uniformly. China will increasingly find itself forced to spend valuable reserves to keep their system running. Their recent $565 billion stimulus plan has been exhausted. It is several times bigger a GDP ratio investment cost versus the tiny stimulus plan pushed through the USGovt. The end result for China was a stock market rebound that seems to have run its course. The Chinese leaders must continue with additional stimulus. It might be recognized soon as a futile endeavor, since the export customers are reeling in distress, suffering stagnation and decline.

$$$ THE UNITED NATIONS RECOMMENDS THE END OF THE USDOLLAR, AS ANGLO INFLUENCE OVER THIS ORGANIZATION SEEMS TO BE NEAR ZERO. THIS IS NOISE, BUT WORTHY OF LISTENING, MUCH LIKE GRAFFITI. $$$ Some surprisingly antagonistic commentary has emerged from the United Nations. It signifies harsh resentment by many nations less influencial than what are becoming Emerging Economies. It also signifies the numerous lesser Lilliputians sense the profound weakness of the giant lumbering Gulliver.

Jonathan Tirone in Vienna Austria wrote a harsh editorial article entitled "UN Says New Currency Is Needed to Fix Broken Confidence Game" that appeared on Bloomberg (CLICK HERE). He covered the new attitudes and positions of a great many countries sitting in the United Nations. He wrote, "The dollar's role in international trade should be reduced by establishing a new currency to protect emerging markets from the 'Confidence Game' of financial speculation, the United Nations said. The countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade & Development (UNCTAD) said today in a report."

Heiner Flassbeck is co-author of the report and a UNCTAD director. It gave pointed criticism of financial market control wizards, and made a recommendation. The report stated, "There is a much better chance of achieving a stable pattern of exchange rates in a multi-laterally agreed framework for exchange rate management. An initiative equivalent to Bretton Woods or the European Monetary System is needed. The most important lesson of the global crisis is that financial markets do not get prices right. Governments are being tempted by the resulting confidence game, catering to financial market participants who have shown they are inept at assessing risk." Regard this report and this opinion rendered as lightning rods for rejection of the USDollar and revolt against its custodians, who have greatly abused their power and responsibility to manage the USDollar, the bond markets, and more.

$$$ THE STEEPEST DECLINE IN CONSUMER CREDIT IN 18 YEARS WILL TRIGGER THE NEED FOR MORE STIMULUS, BUT IT IS FUTILE. THE INSOLVENCY OF THE NATION IS TOO WIDESPREAD. $$$ Remember that 70% of the US economy is derived from consumer spending, a deep structural flaw not remedied in any way during the last couple years. US consumer credit plunged more than five times as much as forecast in July, as banks restricted lending terms and job losses made Americans reluctant to borrow. People who can borrow choose not, while people who desperately must borrow cannot. Consumer credit fell by a record $21.6 billion, or 10% at an annual rate, to $2.5 trillion, according to a Federal Reserve report. Credit dropped by $15.5 billion in June. Credit fell for a sixth straight month, the longest series of declines since 1991. To call this an economic recovery is Orwellian, backwards, compromised, inaccurate, and moronic. A powerful torrent of new stimulus, new bank rescues, new mortgage aid, and much more come before long. The deficits will not reduce, but continue, maybe accelerate upwards. The effect will be to further the degradation of the USGovt finances and the USDollar integrity, with a positive rub to the gold price. See the Bloomberg article (CLICK HERE).

GOLD & SILVER AS INVESTMENTS

$$$ THE H.U.I. GOLD & SILVER MINING STOCK INDEX SHOULD BREAK OUT TO NEW HIGHS THIS AUTUMN, MAYBE BEFORE MID-OCTOBER. PENT-UP ENERGY MUST OVERCOME HESITATION. THE CAPITAL SHORTAGE CONTINUES TO HAMPER MINING FIRMS, QUICKLY BEING ADDRESSED. $$$

◄$$$ SILVER HAS SOME BIG ADVANTAGES ON LOWER PRICE RELATED TO TRANSACTION APPLICATIONS AND NEW BARTER STRUCTURES. $$$

In India, a large portion of the population can afford silver more easily than gold, as the yellow metal is perceived as more expensive above $1000 per ounce. A notable proportion of people in the middle layers have begun to rotate from gold to silver. Eugen Weinberg is an analyst at Commerzbank. A relative measure of value is the ratio of gold to silver prices, which for a few decades was between 15 and 20. That compares with levels around 60 now, suggesting silver is under-valued. He said, "Silver over the last 30 years has been the poor cousin. In the first half of the last century gold and silver were on a similar footing in terms of monetary value and their roles as safe havens. The ratio could drop to between 40 and 50 in the medium term. People who cannot afford to buy gold for jewellery will buy silver." A drop to 45 or 50 in the bimetallic ratio would mean a big improvement in the silver price versus gold. See the UK Telegraph article (CLICK HERE), dated last April and now more pertinent than ever. It claims silver is the new gold.

Word comes from the barter world, the same source as for the Access Capacity Barter Exchange that is soon to take form. He brings a special perspective related to commercial platforms being constructed to facilitate exchange and trades, even lower level transactions. He said, "Silver will appreciate more in purchasing power than gold over the next couple of months and years. We just bought an obscene volume of Canadian Maple Leaf 1-oz silver coins for a client. This decision was made in light of having to apply these coins to actual barter if and when the time comes. It is better to hand over a 1-oz silver coin instead of taking a 1-oz gold coin, convert it into silver coins, and then go shopping. The coins come in sealed tubes at 25 coins per tube directly from the Royal Canadian Mint in Winnipeg or Ottawa. We had to hire some soldiers from the military to safely transport them to a vault under our control. Smart people prepare. Precious metal is a very solid store, measure, and standard of value, come hell or high water."

$$$ SOUTH AFRICAN GOLD OUTPUT CONTINUES ITS DOWNWARD TREND, A SECOND YEAR RUNNING. $$$ South African gold production has fallen by 9.3% in 2Q2009. The decline measured year-over-year compares versus a basis with lower production in 2008 when electricity power cuts were ordered. The South African Chamber of Mines reported that production rose 0.4% to 51,634 kg in the second quarter compared to the first quarter of the year. The nation's overall gold output in 2008 fell to its lowest level in 86 years due to the power shortage and dwindling grades, which knocked down the #3 global producer in rank behind China and the United States. At a time when the gold price is rising, South Africa is not exploiting the market opportunity. Chalk the snafus to mismanagement of its electrical utility and years of production, a natural blameless consequence. See the Mineweb article (CLICK HERE).

$$$ CRIMINAL CARTEL PLAYER BARRICK PLANS TO COVER ALL OF ITS GOLD HEDGE (AGAIN). THEY WILL STILL BE LEFT WITH A GOLD HEDGE BOOK. BARRICK IS VULNERABLE TO TO HOSTILE ACQUISITION AFTER A BEAR SHORT RAID. $$$

The Barrick story is central to the corruption of both gold and some large mining firms. Barrick grew from the Wall Street cradles after being hatched in corruption. Barrick Gold (symbol: ABX) has announced a plan to eliminate all of its gold hedges, just like two years ago. One must ask how many decades of profits have been burned up by their hedge book strategy over the last several years??? Last time they closed gold hedges on 'all operating mines' to be exact. This time they plan to raise $3.5 billion in a secondary stock issuance, in a 10% dilution to their stock. They bemoan the adverse impact to the broader investment community from the persistent huge hedge book. After exhausting the $3.5 billion equity raised, they will be left with around 3.9 million ounces in floating contracts. To close out the entire Barrick hedge book would call for an additional $2.2 billion at least. The rising gold price will enable them to buy back fewer gold contracts. It is my fervent hope that Barrick Gold is pursued by expert short artists (sharks) and driven down brutally in its stock price, then acquired at a crazy low discount price. Its death would herald the upcoming $3000 gold price.

COMMODITY PRICE CONFUSION

$$$ A CONFUSING SEQUENCE COMES, PULLING DOWN COMMODITY PRICES. THE PRICE OF GOLD, SILVER, AND CRUDE OIL WILL CONTINUE UPWARD IN COUNTER FASHION. THEY ARE IN COMPETITION WITH THE USDOLLAR. $$$ The falling demand for products will push commodity prices down. The declining USDollar will lift all commodities priced in US$ terms. A crash is possible, or a steady continued decline, for most things paper based in price for the tangible economy. The exceptions will be the precious metals (gold, silver, and platinum) as well as crude oil. These markets are big, robust, and with sufficient liquidity. They distinguish themselves as being in direct competition with the USDollar. Hedges against the US$ are available in them along with the Euro currency. Economic deterioration will harm commodity prices.

$$$ PAY LITTLE ATTENTION TO THE BRITISH PETROLEUM OIL DISCOVERY IN THE GULF OF MEXICO. REMEMBER THE 'BIG JACK' DISCOVERY IN 2005, WHICH TURNED OUT TO BE A SHAM. $$$ British Petroleum, the second largest oil company in Europe, reported a giant discovery at the Tiber Prospect in the Gulf of Mexico off the US coast. It might contain more than 3 billion barrels, if it exists and it they can access it. The well located about 250 miles southeast of Houston. It lies approximately 35 thousand feet beneath the water surface, greater than the height of Mount Everest. Get back to me in a couple years on this ruse of a story, designed to halt the climb in the crude oil price and lift the BP stock. See the Bloomberg article (CLICK HERE).

$$$ PROOF OF THE CRUDE OIL HEDGE PHENOMENON COMES BY MAKING COMPARISON WITH NATURAL GAS. THE SURPLUS INVENTORIES ARE CLEAR IN BOTH ENERGY PRODUCTS. THE RATIO FAVORS OIL, USED TO HEDGE AGAINST THE USDOLLAR. NATURAL GAS IS NOT TRADED AS A HEDGE IN THIS WAY. $$$ See the ratio of the crude oil price to the natural gas price. Natgas trades on fundamentals of supply versus demand. Crude oil trades with strong investment demand, motivated by a desire to hedge against the falling USDollar, aided by Saudi moderation of supply. The crude oil market is big, robust, and with sufficient liquidity. This energy ratio chart serves as further proof of staggering investment hedging in progress against the USDollar.

◄$$$ INDUSTRIAL METAL PRICES HAVE RECOVERED SINCE THE BRUTAL DECLINE LAST YEAR. STABILITY COMES, FOLLOWED BY MINOR DECLINES AS THE GLOBAL RECESSION PROVES STUBBORN. $$$

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