GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES

* Golden Potpourri
* European Emergency Meeting
* Big Bank Run in Europe
* Currency War Battlegrounds
* Gold Recognized as Safe Haven
* Gold Price Consolidates


HAT TRICK LETTER
Issue #90
Jim Willie CB, 
“the Golden Jackass”
21 September 2011

"We do not think that real economic and social problems can be solved by means of monetary policy. That has never been the European model and it will not be." ~ Wolfgang Schaeuble (German Finance Minister)

"People are losing confidence in monetary management. Gold has been a form of currency for the last 3000 years and will continue to be so. In the event of a fire [monetary system], do you want a fire extinguisher or a picture of a fire extinguisher [like the GLD exchange traded fund]?" ~ Nick Barisheff (from Bullion Mgmt Group)

"This [Bernanke] is someone who clearly sees the stock market as a transmission mechanism from Fed policy to the rest of the economy. In other words, if Bernanke wants to juice the stock market, then he must do something to surprise the market. Operation Twist is already baked in, which means he has to do that and a lot more to generate the positive surprise he clearly desires. Bernanke announced at Jackson Hole that this coming meeting was going to be a two-day affair, not one day. The last time he did this was back in December 2008 and that was when he invoked QE1." ~ David Rosenberg (economist at Gluskin Sheff & Assoc)

"The Federal Reserve has really caused many of these problems by raising expectations that it could solve them." ~ Mickey Levy (nitwit economist at Bank of America)

"Silver will outperform Gold in the next decade. If Silver should trade at a 16:1 ratio (to Gold), it will probably trade at 10:1 because things tend to overshoot. The biggest reason Silver should [thrive] is people should fear bank deposits. An that is what I think they should fear." ~ Eric Sprott

"On a side note, I had a chilling conversation with my local coin dealer yesterday. He commented that he has noticed an unusual increase in Silver bullion coin purchases from many local police officers in recent weeks. I have talked with this same dealer on lots of occasions. This is a first!!" ~ DaveR (subscriber in Northern Illinois)

"I do not see gold as the solution to any intelligent investment program. I do not pay attention to assets that do not earn a yield." ~ Sam Zell (real estate master, but hard money dolt)

"There is no chance that the major countries of Europe will let their institutions be at risk in the eyes of the market." ~ Treasury Secy Timothy Geithner (translation: Not only are the European banks at risk of grand failure, but the highest priority is to do whatever is necessary to mask that stark reality from the market, which would deliver a harsh reaction, as in punishment.)

"The American citizenry has no concept of Fascism, as it is embraced. Devotion to war is killing the United States as a nation. Therefore it must be glorified. Half the USGovt debt is tied to a generation of war, and half the total debt is held by foreigners. Violence done to the homeland, aggression overseas, and financial crime are the keys to Fascism, which have gutted and impoverished the nation in irretrievable fashion. See the Wikipedia definition of FASCISM, which fits well the US practices, trends, and direction." ~ Jackass (respect to soldiers who sacrificed, sympathy for those who did so for the syndicate)

GOLD POTPOURRI

◄$$$ NOTE A BRILLIANT INSIGHTFUL DIATRIBE ON THE USDOLLAR, ITS OLD MAID STATUS FROM LOST CONFIDENCE, THE ACCELERATION OF DEFICITS, ITS INEVITABLE DESTRUCTION, THE FUTILITY OF GOVERNMENT, AND THE COMING GOLD MANIA. DOUG CASEY HIT EVERY MAJOR PRESSURE POINT, INCLUDING THE USMILITARY. NEW MONEY HAS RAISED THE COST STRUCTURE AND USHERED IN SYSTEMIC FAILURE. THE USDOLLAR HAS TURNED TOXIC. PREPARE FOR AN ANNUAL $2 TRILLION DEFICIT. A CATASTROPHE AWAITS, A GOLD STANDARD URGENTLY NEEDED. THE ERRANT OBJECTIVE NEXT WILL BE TO DESTROY THE USDOLLAR, TO BOOST DEBTORS AND TO WIPE OUT SAVERS. THE USGOVT WILL BE SAVED BY DESTROYING THE PRODUCTIVE ELEMENTS. DEMOCRACY IS MOB RULE DRESSED UP, A FAILURE. GOLD WILL RISE TO GREAT HEIGHTS ON FEAR, GREED, AND PRUDENCE. $$$

"Governments all over the world have created trillions of currency units since 2007 in the mistaken idea that it would create prosperity. The Americans, but also the Europeans, the Chinese and others, have papered things over for the short run mainly by inflating the stock markets, artificially depressing interest rates, and slowing the fall of the real estate market. All that extra currency has made people think they are richer than they are, and has encouraged extra consumption, which is a large part of the problem. Now they [central bankers] are out of bullets. We are coming out of the eye of the hurricane and it is going to be much more serious than it was in 2007, 2008, and 2009. That is because all those currency units they created are causing tremendous price rises on the retail level. It is going to be devastating for the average guy. A complete breakdown in confidence is happening right now in the US dollar. The Chinese, or at least their central bank, have more US dollars than anybody else, and they want to get rid of them. They are trying to offload those dollars, for instance in Africa, to get rid of them for real wealth. Nearly everybody in the world feels this way. The new deals that they cut, with the Iranians and the Argentines for instance, are almost like barter deals. Nobody wants to use the paper currency of an unreliable third party.

The US dollar is like an Old Maid card. Nobody wants to get stuck holding it. In five years the dollar will have lost its reserve status completely. It may be more like two or three years. To put such a near-term time frame on something is hard that is so momentous in size. There is no way out. It gets vastly worse from here. As unemployment and business failures start going up, the government deficit will rise to $2 trillion per year. They talked about cutting $2 or $3 or $4 trillion, but that is over 10 years. It is loaded towards the end of the 10 years. Their supposed cuts are inconsequential, trivial, and meaningless. In addition, there is no reason to believe that spending will not skyrocket from here, because Congress is going to change next year, and again two years after that. They will all have new cockamamie spending ideas. So this is all a complete charade.

The only ultimate cure for this is that interest rates go back up to the 12 or 14% level, which would reward prudent savers and punish borrowers. But that is just a start. Military spending should be cut 90%, with the closure of all foreign bases, covert operations, and aid. Regulatory agencies like the SEC, the FDA, HUD, USDA, DOE, OHSA, FAA, and EPA should be abolished. [Elsewhere, he called these groups the new evil Praetorian Guard.] The Fed should be abolished and Gold reinstituted as money. The national debt should be overtly defaulted on for numerous reasons, but certainly because it acts as a mortgage on future generations. But none of that is going to happen, rather the opposite will happen. These prescriptions, while economically and morally correct, are a complete political pipedream. They have actually gone beyond the point of no return. There is no way to avoid a genuine catastrophe, much worse than what happened in the 1930s. There are several ways this could end, but the government will probably choose the worst alternative. The destruction of the US dollar is in their minds.

Destroying the US dollar is the only way to get rid of all this debt. Their first priority is saving the US Government. But they are not considering that the people who will be hurt the worst are the prudent people, people who have saved dollars. They will destroy the prudent parts of society that actually try to produce more than they consume and save the difference. Prudent middle class workers are going to be wiped out, and the people who borrow and are deeply in debt are going to be rewarded by having their debt wiped out. That is perverse. It is going to wipe out the middle class in the US and all over the world. Everywhere in the world, people have preferred to save in US dollars where they can, and those people are going to be wiped out. Perhaps even worse, it is going to put the US Government temporarily back on a manageable financial basis. That means they will not have to fire all their employees or disband all these agencies and get rid of the military, which is what should be done. They will wind up destroying the productive parts of the economy to save the government. The parasite will kill the host. It is a total disaster, with wide-ranging consequences, and it is going to happen in this decade.

Over the next year or so Gold & Silver are going much higher. Gold is the only financial asset that is not simultaneously somebody else's liability. Nobody is going to want to hold dollars or any other currency. Gold is going to be driven much higher by fear, greed and prudence, a deadly combination. Gold will turn into a mania. The stock market is not a bargain by any known parameter. Real estate has not reached a bottom in the US, and it is just started collapsing in places like Australia, Canada, and the UK. The bond market is a terminal short sale. There is virtually nothing you can buy other than some commodities and gold at this point. So, gold is going higher, if only for a lack of reasonable alternatives.

Democracy is just mob rule, dressed up in a coat and tie. It is too bad people confuse democracy, which is mob rule, with liberty and freedom. Democracy in most of the world is everybody voting for the person that promises him or her the most stolen goods from other people. Democracy is a political system, and all political systems rest on institutionalized coercion. Whether it is a king, a president, a congress, or a mob of chimpanzees, they dictate having to pay 50% of my income over to them so they can fund wars, welfare programs, the police state, oligarchic corporations, or whatever. That is what democracy is today. Regrettably, the average person has been programmed to think democracy is a high moral good, much as his ancestors were programmed to believe that monarchy was the way. The only kind of democracy that can be supported is the democracy of the free market. Vote with the dollars. Anything that wanted or needed can be gained by production and trade. The democracy we currently know is a fraud and a delusion."

◄$$$ A U.B.S. ROGUE TRADER SUPPOSEDLY LOST OVER $2 BILLION. THE FANTASY STORY HAS ZERO BASIS. A TRAP WAS LAID TO RENDER GREAT HARM TO THE SWISS BANK IN RETALIATION. IT HAS EARNED BIG ENEMIES. THE LOSS WAS BY THEIR EXPERIENCED TRADING TEAM, AS PART OF AN ORCHESTRATED STING, A PLAN TO RUIN THE BANK. ALL IN TIME, SINCE THE BANK IS A STANDING SHELL LACED BY CORRUPTION. $$$

Union Bank of Switzerland has been targeted for a takedown. The public story is not the real story. Recall that two years ago UBS was involved in its US subsidiaries with private hidden bank accounts that were not secure at all, since opened on US soil. The UBS officials supposedly cooperated by revealing the identities of 5000 secret bank accounts, a lie, a fabricated story to flush out Americans with foreign hidden accounts. It worked, but began a drain from the tide of closed accounts. The USGovt offered amnesty to Americans, and many signed up. By revealing identities on some (not all) important accounts, UBS made big enemies. UBS is involved in a few hundred lawsuits over undelivered gold from supposedly allocated accounts. The once venerable bank leased the gold, and dragged its feet in long delays when the clients demanded their gold in delivery. Thus lawsuits ensued. More wealthy enemies made. In my view, nourished by a source of information, UBS had been a principal player in the gold leasing game with cohorts in London and New York. In all, the system has sold 40 to 60 thousand tons of gold it no longer owns, and UBS was a prime player along with Credit Suisse. The game has not only backfired, causing ruin for the bank, but events of the last couple years have earned UBS some extremely powerful enemies with motive for vengeance. Now comes the $2 billion loss from a rogue trader. The story is a farce, a bad joke, a thin cover to conceal the reality. The American press has turned into a comedy routine, but the dumbstruck American public is not laughing. The phony IMF story on Strauss-Kahn is still warm. They still believe too much of the news, even while maintaining suspicions. CEO Oswald Gruebel wrote in a memo to employees last week, "While the news is distressing, it will not change the fundamental strength of our firm." The fundamentals of the firm are ruined. Their gold ledger alone wrecks the bank.

Their casino business unit, called investment banking, has recorded SWFranc 57.1 billion (=US$65 billion) in cumulative pretax losses in three years through 2009. The firm UBS was forced to raise more than $46 billion in capital from investors, including the Swiss state, to compensate for the record losses during the credit crisis, in a movement to rebuild. Put the $2 billion publicized loss into perspective. The investment banking unit had pretax earnings of SWF 1.21 billion in the first half of 2011. Their Tier 1 capital at the end of 2Q2011 was SWF 37.39 billion, enough for a capital ratio of 18.1%, higher than many rival banks. So a London employee was arrested on suspicion of fraud by abuse of position, and remains in custody. The investigation has begun supposedly. Thankfully, and with great relief, no client positions were affected, the company claimed. More fiction to the theater. News story color has come how difficult the management job is to watch adrenaline driven traders. At the center of the losses, we are told, were Exchange Trade Funds, those easy to use, cost-effective, and simple devices that have enabled control of numerous markets with single keystrokes. The ETF angle is a false story also in my view intended to deflect attention away from the Swiss Franc and Euro contracts that resulted in huge losses. See the Financial Time article (CLICK HERE) for its gross misdirection. The huge UBS loss was not unauthorized. It was a trap. UBS was shot down.

UBS is not alone in suffering huge trading losses, of course as always from rogue traders acting alone. Recall that all assassinations, bomb events, mass hostage grabs, and terrorist activities of importance always involve a disturbed man acting alone, never with security agency coaching or training. The other Swiss giant bank also found itself on the wrong end of losing trades in casino style. The nation's second largest bank Credit Suisse had a major loss in the 2008, partly as a result of credit asset writedowns intentionally mispriced by a group of traders. Harken back to January 2008 when Societe Generale of Paris reported a loss of EUR 4.9 billion (=US$6.7 billion) after trader Jerome Kerviel took unauthorized positions on European stock index futures. His managers disavowed any knowledge, a lie. Years back Morgan Stanley suffered a $9 billion loss in a series of ill-fated trades, again without any management supervisor knowledge or oversight, a lie. Amazing the lack of oversight when events turn sour. Way back in 1995, following the Kobe earthquake in Japan and volatile Yen currency times, Nick Leeson piled up $1.4 billion of losses that brought down Barings and killed the venerable bank. He probably acted more alone than any of his infamous peers, from an unguarded Singapore outpost. See the Bloomberg article (CLICK HERE) for much of a fairy tale that adequately served as distraction.

Another perspective arrived from a German banker source familiar with the bank and its scummy activity, its many newly acquired enemies, and many developments that include the UBS involvement in failures to deliver upon demand from allocated gold accounts. He informed about the lawsuits that are not in the news, kept out with coercion. He provided a juicy perspective on the supposed rogue trader given blame. The loss was recorded by veteran UBS traders, who with management collusion painted a scapegoat to distract the attention. It was a calculated trap laid for UBS to work toward bringing them down, as in ruin. They have made too many enemies. He wrote, "The way they screwed UBS was just brilliant. They pick one target enemy bank after the other now. It psychological war at its best. Everybody is a target but none of them knows who is next. UBS was so cock sure they were not any longer in the crosshairs for attack. Big mistake. UBS just found out how it feels taking it in the hind end with a telephone pole wrapped in razor blade wire. This was brilliantly planned and executed. They were baited and UBS swallowed the bait with the hook. These arrogant UBS traders thought they could make a quick $4 to 6 billion on the Swiss Franc volatility, but instead they were drained by nearly $3 billion instead. If the counter-party has $100 billion in cash in chips on the table, you can rest assured there is a lot more where that came from. They just crushed the UBS guys. This is almost hilarious. More to come, as the victims from the evil camp are being lined up, opportunities seized as they arise. The Swiss Franc has been unstable lately, with many machinations. The trap was laid after decisions were already made on monetary actions." The loss occurred after the Swiss Franc currency took a sudden oversized decline, like 700 to 900 basis points, as part of a stated plan to peg it more closely to the Euro. The SWF exchange rate has falling extremely in the last two months. In August, it fell from 138 to 122. After a short cover rally, a trap was laid, and the SWF fell again in September, from 128 to 113. The moves have been more than several standard deviations from the norm, very consistent with systemic breakdown. Once again, the US press is following the fabricated story, not investigating the actual story.

◄$$$ ENTER THE CANNIBALS AMONG THE BIG US-BANKS. THE EXECUTION OF BEAR STEARNS WAS THE FIRST KILL. PERMITTING LEHMAN BROTHERS TO BE KILLED WAS AN EXPLOITED MERCY KILL, DECIDED AMONG THE BRETHREN IN CONSENSUS. NEXT WILL BE A KILLJOB OF A WEAK BROTHER, SINCE IT OFFERS PROFIT POTENTIAL. A GANG ALWAYS TURNS ON ITS WEAK LINKS. THE GROUP'S LOSSES ARE MONSTROUS. THEIR SURVIVAL IS AT RISK. TURNING ON WEAKLINGS ASSURES MORE TIME AND GREATER CHANCE TO RESIST THE COLLAPSE. WATCH THE LAWSUITS. THE ENTIRE BANKING PLATFORM WILL COLLAPSE IN MY VIEW, LEADING TO A BANK HOLIDAY CLIMAX, WHERE MASSIVE THEFTS CAN BE FACILITATED. THE COMMON TARGET APPEARS TO BE JPMORGAN, THE OBJECT OF A CLASS ACTION SILVER INVESTMENT LAWSUIT. $$$

The AIG $10 billion lawsuit against Bank of America is just an opening salvo, many more to follow. The Federal Housing Finance Agency lawsuit against 17 global banks is a major escalation. The digestion of Countrywide Mortgage by BOA and of Washington Mutual by JPMorgan seemed like opportunities to exploit some profit at the time, deals made with expedience and greed in mind. The colossal losses have been estimated by numerous entities. Bloomberg tallied $66 billion in losses from the five biggest US home lenders. Analyst Paul Miller of FBR Capital Markets has credibility. Miller expects costs for all banks to surpass $121 billion as the dust begins to clear on lax lending practices. Under his new estimate, which covers only repurchase costs, Bank of America, Wells Fargo, JPMorgan, and Ally Financial will bear 60% of the burden, with Bank of America alone paying 33% of it. Neil Barofsky served as special inspector general for the Troubled Asset Relief Program (TARP). He succinctly said, "You are not talking about improperly stapling together two documents. You are talking about systematic fraud in the system. What this shows is that before the financial crisis, the banks were essentially lying to the purchasers of the mortgages about the quality." Nice summary, no nonsense or murky language. Diverse profound systemic fraud.

The Bloomberg tally was compiled from regulatory filings, company statements, and financial presentations. The data covers provisions and expenses attributable to repurchases, foreclosure errors & abuses, payments to reimburse investors for lost value on faulty mortgages, legal settlements, and litigation expenses. The compilation also includes writedowns of assets, such as mortgage servicing rights, when a firm attributed the loss in value to problems in mortgage underwriting or foreclosures, and the costs of remedies. The figures are fluid, sure to increase as more details become available. While a comprehensive list of categories, in no way does it cover all the hidden toxic credit assets at the biggest banks. The trailing losses are staggering, only a portion made public. Previously known as GMAC, Ally has suffered $3.28 billion in costs. After the former car finance firm for sales & leases lost $10.3 billion in 2009, it required a USGovt bailout totaling more than $17 billion, largely due to losses from its Residential Capital mortgage unit. Ally is 74% owned by the USDept Treasury, the proud owner of toxic swill paper. Citigroup has racked up staggering losses, a record 2008 net loss of $27.7 billion that paved the road for a $45 billion bailout to cover subprime loans gone bad. At least the subprime loan crisis was contained, hardly!!

Wells Fargo has filed lawsuit against JPMorgan over 800 ruined home mortgage loans. They wish to force JPM to buy back the entire basket of toxic paper that it oversees as trustee. They accused the EMC Mortgage unit within the JPMorgan fortress of refusing its demands that EMC buy back the loans they originally acquired from the Bear Stearns Mortgage Funding Trust. The claim cites reckless home loan approval despite clear defects, including faulty appraisals and inflated borrower incomes. In a forensic sampled review, it was demonstrated that EMC breached warranties on 89% of 948 loans. Wells Fargo called the basket plagued by an alarming rate of defaults and foreclosures. The structure is complex. Trustees such as Wells Fargo act on behalf of investors in securities (mortgage bonds) backed by underlying loans. Aggrieved banks such as Wells Fargo and US Bancorp have taken their cases to the courts, where Wall Street influence is minimal. US Bankcorp sued Bank of America Corp last month, as part of the parade. Wells Fargo has size. By assets, it ranks fourth among US banks, but among mortgage lenders, it ranks first. See the Huffington Post article (CLICK HERE).

JPMorgan is the target of another lawsuit, a class action silver investor lawsuit that might actually gain traction. The case involves significant revelations and details of players involved and techniques used, even motive. The case was filed in the US District Court of New York against JPMorgan for Silver price manipulation. Insider perspectives are shown. The stage was perhaps set, or greatly enhanced, by the giant bank's acquisition of massive short silver position owned by Bear Sterns. Point #93 indentifies Robert Gottlieb as the person who developed that massive short silver position, along with assistance from HSBC silver trader Mike Connolly. Point #118 identifies Chris Jordan from JPMorgan selling huge amounts of Silver puts at enormous profits. Point #95 offers details on how JPMorgan profited by $150 million on each $1 decline in the silver price. See the Silver Doctors article (CLICK HERE).

◄$$$ GOLD PROTECTION DURING HURRICANES HAS BROUGHT UP SUSPICION OF DATA BEING DESTROYED IN CONVENIENT FASHION. WHEN DISCUSSING THE TOPIC, ONE SOURCE REVEALED DETAILS ON GOLD BULLION STORED IN NORTH AMERICA. SIGNIFICANT DRAINAGE HAS OCCURRED. $$$

Electrical power outages took place across most of the Atlantic seaboard during the Hurricane Irene storm in late August. Some conversations crossed my path that were full of intrigue. The topic was conveniently lost data. Recall Building #7 in the World Trade Center, not struck by any aircraft, but which fell to the ground along with its Enron records and USTBond counterfeit records owned by JPMorgan. During the hurricane and electricity problems, perhaps some data might have been lost pertaining to Wall Street mortgage bond fraud or Fannie Mae clearinghouse activity related to huge role programs. Many points were made back and forth among some parties experience in the world of USGovt accounting and Gold accounting. The best parts related to gold, the rest mere ruminations. One very reliable source wrote, "There is no gold in the Federal Reserve depository in New York City any longer. Whatever was there is left is located at the West Point depository [USArmy Academy]. In a recent transaction, three sovereigns [foreign billionaires] had decided to pull their gold bullion out of the United States. The actual metal was lifted from the West Point vaults, whereas the invoices all read FedRes/NY as the physical location. Also, the Royal Canadian Mint vaults in Winnipeg Manitoba have also been drained by sovereigns. They used to have up to 400 metric tons stored there." This fellow has been a valuable source of information for numerous stories, most eventually confirmed at later dates.

EUROPEAN EMERGENCY MEETING

◄$$$ THE EUROPEAN BANKING SYSTEM IS FREEZING UP. THE PROBLEM CENTERS ARE SPAIN, FRANCE, AND ITALY. THE EFFECT IS FELT ACROSS THE CONTINENT, EVEN TO LONDON. BIG US-BANKS HAVE ACTED LIKE CENTRAL BANK GUARANTORS OF RUINED EUROPEAN BANKS, AS SHARED RISK IS DEEP. A CRUCIAL TURN HAS OCCURRED. THE EMERGENCY MEETING IN POLAND IS CONFIRMATION OF THE NEW LEVEL OF CRISIS. WITNESS THE DOLLAR DEATH DANCE PART II, THE FIRST ACT OCCURRING IN LATE 2008. $$$

A very significant event occurred on Thursday, September 15th. In the second week of September, a systemic breakdown took place whose momentum continued to cause events seem in the open last week. The reaction was a coordinated response by the US Federal Reserve, the European Central Bank, the Swiss National Bank, and the Bank of England. They have been working jointly to make liquidity available to prevent the European banking system from collapsing, an echo event like in the autumn of 2008. The nub of the problem is that European banks have US$-based liabilities of a short-term nature, which have been abused to finance non-US$ income producing assets denominated mostly in Euros. Those assets are failing on a broad scale, not performing. Income from the Greek and Italian sovereign bonds in no way can support the cash flows required to fund the liabilities, like the infamous Repos. Therefore, the European banking system has begun to freeze, an early stage of actual collapse. The USFed response has made ample funds available through a Swap Facility funded by $500 billion. The facility has been in place for several months. To demonstrate the corrosive side, several big US banks have been engaging in private market Repo transactions with some big Euro banks, who have been using badly impaired collateral. The big US banks are following in the USFed footsteps, gathering in toxic bonds, probably because the USFed has had its fill and has asked for help in digesting toxic paper. It shows how desperate European banks have become for cash, and how constipated the USFed has become. Worse, it shows how the US giant banks are building channels of contagion to a Southern Europe sovereign debt default. See Citigroup, JPMorgan, and Goldman Sachs. The US banks are willing to take toxic paper to keep European banks solvent because the US players would collapse under the massive mudslide from extremely large volume of Credit Default derivatives and Interest Rate Swaps that require Euro bank counter-parties to pay out on failures. Witness an interwoven cancer.

Hence, conclude that the US banks and the USFed are equally desperate to keep the European banks afloat as are the ECB/SNB/BOE central bankers desperate to stay alive. The scale is actually Lehman times 50 to 100. The list of financial entities is almost all inclusive across the West, including governments, central banks, and the leading banks. The risk has finally become systemic for a collapse, in its entire structure. Some large anonymous banks and central banks are lending and swapping out their gold assets in order to obtain badly needed USDollars to meet liquidity needs. Regard their plight as the backside risk and revenge of three years duration of 0% money provided by the United States. My personal view is that we are seeing the second act of the Dollar Death Dance, as demand for the US$ generally is connected to failed assets and failed banks that take emergency activity, lifting the US DX exchange rate. It rises from the destruction of the Western monetary system. All major currencies, the US$, Euro, BPound, SWFranc, and Yen are ruined. Some motive also is present to take Gold down before massive recapitalization and monetary inflation. Dave in Denver summarized, saying "This hit on Gold, I believe, was nothing more than a coordinated Central Bank intervention in order to get the price lower ahead of all of the above massive fiat liquidity operations. This is what happened in the summer of 2008 as well. It also means that the global financial system is in far worse trouble than anyone not inside the Central Bank nerve centers realizes." See the Truth in Gold article (CLICK HERE) which also discusses the risk of a fast rising Gold price but fast falling GLD share price in the corrupt exchange traded fund.

◄$$$ THE EURO CENTRAL BANK HAS BEGUN EN MASSE TO DISPENSE USDOLLARS FROM THE SWAP FACILITY TO DISTRESSED EUROPEAN BANKS. DETAILS ARE KEPT HIDDEN BECAUSE THE RECIPIENTS THAT COME FORTH ARE DEAD INSTITUTIONS. ALL FINGERS POINT TO THE LARGE FRENCH BANKS. THEIR EXPOSURE TO GREEK GOVT DEBT IS CLEAR, THE DEBT DOWNGRADES COME AS CONFIRMATION. ATTENTION WILL TURN TO ITALY VERY QUICKLY. ITALY WAS DOWNGRADED BY STANDARD & POORS, DUE LARGELY TO ITALIAN GOVT DEFIANCE AND LACK OF POLITICAL RESOLVE, SINCE ARE DEFICITS UNLIKELY TO BE REDUCED. TO COMPOUND THE CHALLENGE, THE EURO TO DOLLAR SWAP JUST SNAPPED BACK UP IN PRICE. THE FOREX MARKET IS CALLING THE BLUFF OF CENTRAL BANKERS. THE MARKET BELIEVES THE VOLUME OF RESCUES IS MULTIPLES HIGHER FOR BANK RESCUES, BAILOUTS, AND RECAPITALIZATION. $$$

The European Central Bank revealed its lending plans in USDollars to two large Euro banks, an admission that US currency markets are closed to the ailing (better described as dead) banks. The EuroCB allotted US$575 million in a regular seven-day liquidity operation at a 1.1% fixed rate, a high premium actually. This is the first request since August 17th from a lender for requested US$-based loans. The non-performing assets of Greece and other peripheral nations have hit the crisis levels. The ECB declined to identify which banks borrowed the funds. A proximal funding roadblock has been the US money market funds, which have stopped rolling over US$-based loans to European banks. The niche market is experiencing the essence of a bank run, as US funds are cutting their holdings in European banks on concern over the survivability of the institutions. William Prophet at Deutsche Bank Securities reported that US money market fund managers led by Vanguard Group and Legg Mason Group have cut their lending to French banks at such a swift pace that the banks were forced to raise capital by selling assets.

On Tuesday last week, the Chinese also cut their lending to French banks, halting all transactions. They will conduct no more FOREX currency forwards and swaps. The debt ratings downgrade handed to Societe Generale and Credit Agricole gives some hint as to which banks made the formal loan request. The SocGen CEO Frederic Oudea has been active on television interviews, denying the impact of a dollar finance freeze. He claimed no problem at all, plenty of buffers, mere adjustments. He lies. The French bank is in the midst of failure, as seen in the next several months. SocGen is busy selling assets to raise cash. BNP Paribas is also in trouble, on debt review for downgrade. They plan to raise their common equity ratio (done by selling stock or liquidating assets) in order to comply with Basel III rules. See the Bloomberg article (CLICK HERE) and the Zero Hedge article (CLICK HERE).

These big French banks, or whichever are tapping the Dollar Swap Facility, will return to a crisis mode by the beginning of 2012. The new 90-day dollar liquidity facility is only meant to put them in good stead until the yearend. The comments and attitudes shown in implementing supposed solutions indicate that Euro banker leaders are content at minimal steps which will not halt the collapse. They prefer smaller patches that will not stop the entire platform from collapsing. The wholesale US bank lending to Euro banks assures the platforms will fall together. That is exactly what to expect to happen, a collapse. It is assured, but the timing is unknown. The contagion is clear. The mechanisms are in place. The next big Euro banks at the EuroCB window will be from Italy and Spain. The $575 billion will be deemed inadequate in the next round. Suddenly, Standard & Poors downgraded Italian Govt debt, which had not even been on credit review. Riots in Rome are a constant, joining those in Athens. Apparently, the defiant government attitudes were too much to tolerate. Weak growth, fragile political coalition, and risks to the consolidated spending plan were stated as reasons. See the Zero Hedge article (CLICK HERE). Events are happening so quickly in fluid fashion, that it is difficult to keep pace with all the developments.

Flash update along the same theme: Moodys delivered a double notch debt downgrade of Bank of America, a downgrade of Wells Fargo, and a downgrade of Citigroup. They cited lack of assured USGovt aid more than their insolvency or businesses being in ruins. So Warren Buffet is not looking so smart. One must wonder if they made the decisions only after they knocked Italy down, hoping the impact on the US banking sector might be lessened. The big Western banks are all interconnected.

Graham Summers from Gains Pains Capital summarized well. The European stock markets have reversed in the last week, to produce great danger signals, a message that measures taken are failing. Summers wrote, "If a coordinated intervention on the part of five central banks cannot even give us one week of gains in the European banks, nor lower the cost of Dollar swaps, then we are in the absolute End Game for central bank intervention. Remember, this was not just a single money pump from the Fed. This was five central banks working together. And they could not even paper over the European banking system's problems for one week. The mainstream financial media is out claiming that the reason we have already undone the gains produced by the intervention was that the central banks did not do enough. It is interesting that having spent more money than WWI, WWII, and the New Deal combined, central banks are still thought to not be doing enough. Never does anyone ask MAYBE THE CENTRAL BANKS CANNOT FIX THIS MESS? Let's be blunt here. The Fed and pals just pasted a huge $multi-trillion band-aid over the system in 2008. They did not fix anything. The fact they are now losing control of the system again and we are fast approaching the next Lehman event should be proof positive that central banks have no idea how to get us out of this mess. We could be on the verge of another 2008 episode." Once again we see ineffective medicine applied, which does not work, but officials mistakenly believe that amplifying the volume will produce effective results. It will produce even worse results instead. The system is broken. The policy is venomous. The officials are lost. The lesson is not that volumes are inadequate. It is that even infinite volumes are inadequate.

◄$$$ BANKS RUSH TO LEASE GOLD ASSET TO OBTAIN USDOLLAR FUNDING. THE LEASE RATE IS ACTUALLY NEGATIVE, A SIGNAL MUCH LIKE AN UPSIDE DOWN NATIONAL FLAG FLOWN ON THE MAST AT A FORT UNDER SIEGE. THE FACTOR IS SHORT-TERM NEGATIVE FOR GOLD, BUT LONG-TERM EXTREMELY POSITIVE FOR GOLD. RECALL THAT AFTER THE 2008 GOLD DECLINE, THE GOLD PRICE MORE THAN DOUBLED IN TWO YEARS TIME. $$$

The liquidity problems among European banks is heightened acute radical nasty. The distressed banks are rushing to use their gold assets in order to access desperately needed USDollar funding. Gold dealers and analysts report a strong increased move to lend gold in the past week, accelerating in recent days. The rush has pushed gold leasing rates to record lows, according to Thomson Reuters data. The murky market puts lease rates as the implied interest rate for lending gold for USDollar funds. The Jackass admits not to comprehend this fuzzy niche well. The one-month gold leasing rate has plunged to a historic low of minus 0.48%, which means a bank lending gold for one month would have to pay to do so. Therefore they hold their gold tightly. The latest move is dramatic and highlights the stresses in the USDollar funding market, according to bankers. Huge demand has come at the end of quarter in September for exchanging gold for USDollars. The cost for European banks to swap Euros into USDollars has jumped five-fold since June, hitting the highest levels since December 2008, essentially locking out the weaker players. Veteran traders explain that the large volume of gold leasing was one reason gold prices had struggled to achieve upward momentum, despite growing concerns over the EuroZone crisis, the teetering bank edifices, and the visible impact craters. The lower (even negative) lease rates are bearish for gold, since the asset is used to raise cash. However, it is also a long-term signal of profound distress which is tremendously supportive of gold from the next chapter assured to include bond bailouts, bank recapitalization, and monetized debt, even enormous economic stimulus in extremely motivated reaction. See the Financial Times article (CLICK HERE).

◄$$$ GEITHNER WAS CRUCIFIED IN POLAND AT THE FINANCIAL CRISIS EMERGENCY SUMMIT MEETING. THE US-PRESS DESCRIBED THE MEETING AS AN OPPORTUNITY FOR EXPERINCED AMERICAN BANKERS TO OFFER GUIDANCE TO EMBATTLED BRETHREN OVERSEAS. THE EUROPEANS RIPPED GEITHNER AND INSULTED HIM OPENLY, EVEN DISMISSED HIM AS A HYPOCRITE AND TOOL. GEITHNER MISTAKES PRIVILEGE FROM A PRINTING PRESS AS EXPERTISE. INSTEAD OF TURNING WEST TO THE UNITED STATES FOR GUIDANCE, CENTRAL EUROPE WILL TURN EAST TO RUSSIA & CHINA FOR PARTNERSHIP. $$$

Basically summarized, the European bankers treated US Treasury Secy Geithner with openly insult and hostility. Two years ago, recall Chinese students laughed Geithner off the stage in Beijing when he claimed something stupid like US financial stability. Give him credit for composure during deep insult. The Europeans gathered in Wroclaw Poland were a tough hostile crowd in no mood for foolishness. The meeting between Geithner and the Euro Finance Ministers lasted only 30 minutes. But it united the Europeans, as they coordinated their ridicule and derision of the man who has become a global caricature of American bank failures, along with USFed Chairman Bernanke. But Geithner commands far less respect. Maria Fekter from Austria said, "I found it peculiar that even though the Americans have significantly worse fundamental data than the EuroZone, that they tell us what we should do. When we make a suggestion, that they say NO straight away." Geithner had an open difference of opinion with German Finance Minister Wolfgang Schaeuble on how to reinvigorate the EuroZone and to tax financial transactions. The next quote summarized the consensus among the group of host bankers. Belgian Finance Minister Didier Reynders said, "We can always discuss with our American colleagues. I would like to hear how the United States will reduce its deficits, and its debts." Tiny Tim has discovered that being one of the biggest offenders when it comes to debt explosion, monetary abuse, skewed bank bailouts, and collapsed economies, the rub is it does stamp out credibility. To be sure, they will draw upon the US experience from 2008 during a climax banking system heart attack event. Europe might reluctantly take similar action, but they have come to despise the American bankers, recognizing their hegemony, criminality, and arrogance. They bristle still over the Wall Street collusion with Southern European nations over the concealment of debt burden volumes by means of deceptive currency swaps. Europe has banned Wall Street firms from bond deals over the last 18 months, a fact not in the news.

The decision for Geithner to travel to Poland, and to make such a brief presence, to discuss the sovereign debt problems of Greece, Ireland, Italy and the wider EuroZone was the clearest indication yet of the severity and urgency of the expanding chronic financial crisis that has engulfed Europe. Officials from the United States claimed the hastily arranged Geithner trip was to make a proposal on a regional emergency bailout fund, with special leverage. The EUR 440 billion European Financial Stability Facility must be replenished, and its German main contributor has balked at chipping in. Germany has rejected using leverage as a solution to the official stability fund. They see too much leverage deployed already, and see current solutions are ineffective. See the Bloomberg article (CLICK HERE).

One should infer that the American Wall Street representative from Goldman Sachs was unwelcome, his appearance forced upon them. He arrived like royalty, while others did so like plebeians. Hostility was immediate. Jean-Claude Juncker, the chairman of the Eurogroup, was pointed with an abrupt tone. He said, "I do not think it would be wise for me to report from an informal meeting that we have with the Treasury Secretary. We are not discussing the expansion or increase of the EFSF with a non-member of the Euro area." Be sure that they shouted down any and all of what Geithner had to say, a captain from a larger sinking vessel himself. The hypocrisy perceived in his trip, his advice, and his perspective, must have been thick as mud. Geithner uttered the following words. He said, "One of the starkest ways to emphasize the importance of Europe getting on top of this is that you do not want the future of Europe to rest in the hands of those who provide financing to the IMF. There is no reason for Europe to be in that position and it would be very damaging to the credibility of the endeavor here in Europe. Of course your financial challenges in Europe are within your capacity to manage financially. You just have to choose to do it." The warning is clear, that the upstart nations of the G-20 Group, extension beyond the G-8 Group, would be more harsh on lending terms to Europe. He did not discuss method so much as motive and need. China would demand industry and vast commercial property as collateral. The BRIC nations would demand less Anglo banker controls. The Russians might demand less USDollar influence in global trade. To be sure, the G-20 strong fledglings would be aggressive in loan demands. One is left to wonder just exactly how Geithner managed to cope with the similar challenges in the United States, besides handing over $trillions to big banks in public and secret funds, then running the Printing Pre$$ to cover the USGovt debts, thereby averting debt auction failures. See the Zero Hedge article (CLICK HERE).

A very reliable European banker with experience in both gold trade and consulting offered a perspective, much like a cold splash of water in the face. He wrote, "Timmy got his balls handed to him in Warsaw a few hours ago. The US Boyz did not expect to be nailed to the planks that definitively. The Western leaders demonstrate an unmitigated arrogance and entitlement attitude that is stunning. For many of these corrupt syndicate players, the Poland meeting and Geithner's show performance was an eye-opener, since for the first time they all realized the horrific disconnect. The real stunner was that Geithner did not realize the message when asked by Junker to tone it down a bit. He instead got very aggressive and demonstrated extremely poor manners by doubling up, until finally Junker called him to order like a schoolboy. The Austrian minister of finance then nailed him to the cross in front of all around the table after he tried to oppose Junker. Berlin has a contingency plan in place with Moscow and Beijing. None of the three likes what is unfolding. But all three know if the power vacuum left by the collapsing United States is not filled somehow, disaster will strike in many corners of the globe. In this scenario there is unfortunately no room for France and for that matter the EU and its phony Euro currency. Nobody should be happy about the demise of the United States. However, it demonstrates you cannot breed and raise thoroughbred horses in slums, phony ivy league schools, or in suburban outhouses. It is a tragedy that the American experiment failed. Building a nation on fraud, deceit, and genocide is simply evil. These are not joyful times. Wartimes are never fun. It is not scary, but instead absolute madness."

One more insider reference to the Triumvirate of Germany & Russia & China, whose alliance will emerge when the Western Axis crumbles further and irreparably. Notice the comment about France, whose troubles expose it as similar to Mediterranean neighbors enough to warrant treatment like the Southern peripheral nations. France will be banished to the PIIGS pen. In my view, there is a reason the Boyz put a minor figure like the preppy Geithner in the Treasury Secy post, and not somebody strong like Hank Paulson. The diminutive Geithner was selected in order to be destroyed publicly, albeit it not intentionally, like a muppet doll and object for target practice. The syndicate knew whoever occupied the post would be relegated to a target for attack and laughing stock for ridicule. He most assuredly would be mocked and shunned in important world meetings. Geithner is portrayed in the US press as a guide to the troubled Europeans. The US press has an extreme disconnect and bias. The Treasury Secretary has far less credibility than Bernanke, as he is a spokesman from a sinking ship beset by grotesque insolvency, exploding deficits, even unprosecuted fraud.

◄$$$ EUROPEAN BANK LEADERS PLAN TO APPLY SMALLER PATCHES TO A SINKING VESSEL. THEY BUY TIME BUT CANNOT CHANGE THE OUTCOME, A FATE SHARED BY AMERICAN BANKERS. BY SHUNNING THE GEITHNER SUGGESTION OF A MUCH LARGER BAILOUT FUND, THEY INVITE A BANK SYSTEM COLLAPSE THROUGH SEIZURES. THE GEITHNER PERSONA HAS NO CREDIBILITY OR STANDING OR INTEGRITY. HE IS CONSIDERED OBNOXIOUS. HIS PROPOSALS, DESPITE ANY MERIT, COME FROM A NATION THAT IS THE GREATEST OFFENDER OF DEBT, THE CENTER OF FRAUD & COUNTERFEIT, THE HUB OF NARCOTICS. THE EUROPEANS SEEM TO BE WILLING TO ATTEMPT AN ORDERLY COLLAPSE IN ORDER TO AVOID THE RECOMMENDED AMERICAN SOLUTION. MEANWHILE, THE EURO-BANKERS WILL PRESIDE OVER RUIN, FROM DELAYS, INNER CONFLICT, AND LACK OF RECOGNITION OF BANK RUNS. THEY DO NOT PROPERLY GAUGE THE GROSS INSOLVENCY SPREADING LIKE WILDFIRE. $$$

Geithner offered assurance that should be regarded as a late warning of great risk. This is a Prince of Failure and Syndicate Lieutenant from the Realm of Darkness, a Goldman Preppy. The United States bankers have the privilege of covering debt with printed money, but offer urgent warnings for foreign bankers to fix their problems with extreme bailouts and grand leverage. The US bankers even can rely upon narcotics funds in a pinch snort. The hypocrisy is thick as grease. The term glass houses & throwing stones was heard in Poland. European finance ministers showed no signs of taking up a proposal by US Treasury Secretary Timothy Geithner to increase the gusto of the official rescue fund. The European finance dons see no wiggle room for tax cuts or late stage grand spending to provoke or goad a stagnant stuck economy. No new official stimulus packages will be fashioned. The primary objective of Geithner was to have the Europeans vastly increase the size of the EUR 440 billion rescue fund, known as the European Financial Stability Facility, by enabling it to tap the European Central Bank. Instead, the ministers repeated their commitment to a July 21st decision to apply band aids, tourniquets, and intravenous lines. They misjudge the urgency. They will empower the fund to buy bonds in the primary and secondary market, offer precautionary credit lines, and create a bank recapitalization facility. Be sure that these same leaders will either jack up the EFSF rescue fund by triple or more, or watch some big banks fail very quickly. The bank run has begun in earnest on the continent.

Some comments by Geithner made sense, but he as a messenger brings an odor too horrible to tolerate. They cannot hear his words because he is so insufferably revolting. He is correct that the official rescue fund is much too small. He is correct that ongoing conflict between national governments and the central bank hampers efforts. He is correct that refusal to take bold action will force outsiders to make difficult decisions as creditors. The European bankers are not as arrogant as the Wall Street and London bankers, but they misjudge badly the tight capital situation of the big European banks. Whatever they do, it is too little, too late, and misdirected. The bank recapitalization will come with a shocking price 5x to 10x bigger than expected. The EU Economy will plunge into recession from defect and neglect, like the USEconomy. The sanctions proposed will only amplify the deficits. They must be in total denial of a continental bank run in progress. They actually concluded at the meeting in Poland that commercial banks have enough capital to ride out the turbulence. They appear like men conducting business in suits on deck, unaware that the ship is sinking. They have the lifeboats tangled in thick ropes, as the Finnish collateral demand and the German funding reluctance has jammed all the gears for lifeboat usage. The delays on Greek action will permit more water to be taken on, as in a sinking process. See the Bloomberg article (CLICK HERE).

BIG BANK RUN IN EUROPE

◄$$$ A EUROPEAN BANK FREEZE HAS OCCURRED, LEADING TOWARD WIDESPREAD SEIZURES. THEY ARE VULNERABLE. MUCH OF THE WARNING CAME FROM THE INTL MONETARY FUND AND THE NEW CHIEF CHRISTINE LAGARDE. THEY POINTED BLAME ON THE EURO CENTRAL BANK FOR RATE HIKES AND THE FISCAL AUSTERITY DEMANDS. THE I.M.F. EXPECTS BANK FAILURES AND REGARDS THE EURO CURRENCY AS DOOMED. THE REAL PROBLEM IS GREEK BONDS THAT ARE NON-PERFORMING. $$$

The European Bank Stress Tests were as much a joke as those conducted in the United States. So much were they a farce that the IMF performed additional cash tests, which should be construed as bank run trials. After numerous big banks passed the tests, they are falling to their knees. The Intl Monetary Fund did a cash test and called for urgent action to shore up their defenses. They went so far as to urge state money infusions, even if under legal compulsion. The phony accounting has caught up to the banks, at least in Europe, later in the United States. The new IMF chief Christine Lagarde caused some shock at the Jackson Hole summit in late August when she warned that the global financial system is vulnerable to the slightest shock. She said, "We are in a dangerous new phase. The stakes are clear. We risk seeing the fragile recovery derailed, so we must act now. Banks need urgent recapitalization. If it is not addressed we could easily see the further spread of economic weakness to core countries, even a debilitating liquidity crisis. The most efficient solution would be mandatory substantial recapitalization." Her warning should serve as admission with marquee billboards of both fraudulent accounting of balance sheets and gross systemic insolvency. Bank runs are next.

Lagarde has been highly critical of the decision made by the EuroCB to raise interest rates several months ago, even the pan-European fiscal austerity drive. Higher interest rates and lower government spending act like a systemic poison pill to the system, or like a tourniquet around the neck. It raised mortgage costs. She senses deep risk of heightened return to crisis. She said, "Monetary policy should remain highly accommodative, as the risk of recession outweighs the risk of inflation. Fiscal policy must navigate between the twin perils of losing credibility and undercutting recovery." The IMF research team has warned that raising bank capital too quickly or writing down losses too abruptly could cause a monetary implosion and a repeat of the 2008 crisis. They anticipate some important bank failures. They sense doom for the Euro currency, very appropriately. The IMF seems very aware.

The combination of no follow-up QE3 by the USFed, another Greek bailout balked at by Germany, and the spread of contagion to France has rocked Europe. The official European bailout fund could be depleted before it is replenished, leaving banks exposed to sovereign defaults. Huge stock price declines has been registered for Unicredit and Intesa SanPaulo (Italy), Credit Agricole and Societe Generale (France), along with and DeutscheBank and Commerzbank (Germany), each well below the extremes seen during March 2009 lows. The crush comes from the inter-bank market almost totally frozen from distrust, in addition to EMU banks having lost access to the $7 trillion in US money markets from fear. Lenders have parked EUR 126 billion at the Euro Central Bank for safety rather than risk exposure to peers. The same effect was seen in the US with the Federal Reserve. Slowly but surely, Europe is setting up for 20 Lehman events, or more accurately its own 2008 breakdown event with 20 banks failing like Lehman did.

Most European banks refused the opportunity to shore up their capital base, as urged by the IMF over the last two years. Big US banks also passed on the opportunity. Those which failed to do so must face harsher terms, or possible failure. Some could move under state control, wiping out shareholders but preserving much bondholder value typically. The EU Economy has entered a recession, just like the US, but the Americans lie more effectively. See the UK Telegraph article (CLICK HERE).

◄$$$ EUROPEAN BANK DEPOSITS SHOW A BANK RUN HAS BEGUN. THE SURPRISES ARE THAT GERMANY IS SUFFERING A DRAIN OF FUNDS, BUT SO IS THE UNITED KINGDOM. A EUROPEAN CRISIS, WHEN IT ERUPTS, WILL TAKE DOWN SOME LONDON BANKS. THE GERMAN GIANT SIEMENS PULLED EUR 500 MILLION IN FUNDS FROM SOCIETE GENERALE, THE MAINLINE FRENCH BANK. THE BANK RUN IN EUROPE HAS IGNITED AND IS ACCELERATING, AND HAS BECOME FRONT PAGE NEWS. $$$

A European bank run in slow motion has been at work for a year and a half. It has gathered speed. The funding markets in Europe have suffered, as depositors have been removing money from banks. They put them in safe locations, like Swiss banks for instance. For a control group, match the nations from Southern Europe against Germany. The peripheral nations are unstable. The total level of deposits with monetary financial institutions, banks, and money market accounts are shown below to reveal the wild swings. Even the stable German banks have seen a slight reduction. Bear in mind that some sudden outflows from the rising crisis fever have taken place since August, not reflected in the graph. Ireland stands out as having endured a large net withdrawal of deposits over the past year. A little surprising, Greek bank deposits fell by only 2.9%, but perhaps the greater bulk of decline was early in 2009. A bigger factor to explain is that bank deposits in Greece grew in transitional movement of funds as part of the international support mechanisms, the inflow of funds into the Greek banking system resulting from bailouts. For the EuroZone in total, the deposits have been essentially flat, up 1.4% only. The glaring entry is the United Kingdom, in a crater mode but not much in the news. They are not a Euro-based system, but the UK has experienced a very significant fall in total Euro deposits with its financial institutions. Expect London banks in the news next month. (Red in parenthesis means negative)

Greek banks have seen significant capital flight, at a substantial rate over the past 18 months amounting to 15% withdrawals of their deposits. All of the major European economies have been harmed by the drain, including large international money centers such as Germany, the United Kingdom, and to a lesser degree Ireland. The world's big banks and other financial firms are moving their funds out of Europe at a significant rate, out of London also. The stage is set for a string of bank failures, with or without formal measures to prevent them. The alarm bells have not yet sounded and gone off. Nerve levels are acutely high on keeping money in European banks. The key to understanding the crisis at hand is to realize that the entire continent plus London banks will be affected. The UK does not use the Euro currency, but deposits are draining fast, very fast.

The bank run in Europe is centered in France, the wrecked PIGS debt trough hub. The nation's banks are uniquely situated to suffer the greatest losses from Greek and Italian Govt debt distress and decline. The French bank run has begun, and it is happening almost exactly as Reggie Middleton laid out in his analysis in the last several weeks. He and the Jackass have been in total agreement that the supposed stronger position of Italy was nonsense. Their more favorable debt ratios were empty claims, since the debt burden to be financed is so great, in fact greater than Greece, Portugal, and Ireland combined. The system has teetered with Greece, but will topple with Italy, much as forecasted in the Hat Trick Letter. The bank run received some publicity last week when the German tech giant Siemens pulled EUR 550 billion out of Societe Generale, and parked over EUR 6 billion at the Euro Central Bank. They distrust the French banks that much. Even prominent European corporations refuse to work directly with the large insolvent banks. Just like the USFed becoming the virtual banking system in itself, the EuroCB has become a direct lender and cash holder of last resort to private non-financial institutions. See the Zero Hedge article, another great analysis by Middleton (CLICK HERE and HERE).

Flash update along the same theme: Lloyds of London is bailing out of Southern Europe. They are reported to have removed large sums of Euros from banks in France and other PIGS nations. They distrust the entire environment, and are alerted by the rushed demand for USDollars. Face it, France belongs in the PIGS pen. When cast into the pen, maybe Sarkozy will shut up.

◄$$$ FOREIGN FUNDS ARE FLOODING INTO THE US-BANK SYSTEM. THEY ARE ESCAPING THE IMPLOSION IN EUROPE. THE REVERSE FLOW OF MONEY MARKET FUNDS CHASING A TINY ADVANTAGE IN EUROPEAN INTEREST RATES IS IN PROGRESS. THE TIDE MOVED OUT AND HAS BEGUN TO EXPOSE THE BANKS IN EUROPE WITH SKINNY LEGS AND TINY TOOLBOXES. $$$

The Transatlantic cash flow has caught the attention of bank analysts. Even the Euro Central Bank has made bones about the monetary financial institutions in Europe moving deposits out of European banks. Much of it is being put in US banks instead, a return voyage. Check the total deposits at domestically chartered commercial banks in the United States, data courtesy of the USFed through mid-August. A big trend is occurring, damage to be wrought soon if not already. The recent rise in deposits with US banks has been dramatic, the finger pointed directly at foreign owned banks in the United States. The jump in deposits is about $500 billion over the past six months, the return of funds seeking a higher European yield, but sufficient to cause the sinkholes across the continent. Notice the comparison of domestically chartered banks alongside the cash assets of foreign banks.

The financial firms in Europe have drained their deposits at European banks by about EUR 700 billion over the past year and half. That amounts to US$1 trillion. Much of that money has found its way into the US-based bank accounts of similar European institutions. The large inflow of cash deposits held at US bank subsidiaries this year is largely from European banks. Thus the teetering situation in Europe. See the Street Light article (CLICK HERE).

◄$$$ FOCUS ON FRENCH BANKS TO DETECT A WHOLESALE FUNDING PROBLEM TURNING DANGEROUSLY DRY. THE UPCOMING SHOCKER EVENT IN EUROPE IS THE FRENCH BANKING SYSTEM COLLAPSE. THEY HAVE HEAVY OPEN RISK IN SOUTHERN EUROPE WITH THEIR WRECKED NEIGHBORS, NOT ONLY GREECE. COMMERCIAL PAPER IS VANISHING SLOWLY OUT OF DISTRUST, AND MATURITY LENGTHS ARE SHORTENING OUT OF CAUTION. $$$

The French banking system has turned illiquid. The European Central Bank has publicly led the financial markets to believe that only isolated instances of French bank problems are at work with lack of funds. Not true! It is the entire upper tier of French banks, suffering both insolvency and illiquidity, the prescription for failure. The USFed swap lines have aided several of their ailing banks, tapped twice this month. The rather small amounts borrowed do not adequately signal the wholesale funding stresses for some institutions. The French banks are properly called the fulcrum of the European banking system, vulnerable as the conduit to the wrecked PIGS nations. Their threat is far more prevalent than has been speculated. The short sale ban on bank stocks gave them a little time, but that maneuver acts as a weak bandage tourniquet. The Moodys debt downgrade of their banks is just the beginning. Too much attention has been given Societe Generale as a weak giant. Their entire upper tier is ready to seize and collapse. Joseph Abate of Barclays took a closer look at the transformation in funding patterns. His summary showed the following. See the Zero Hedge article (CLICK HERE).

  • Total financial outstanding commercial paper (intermediate level corporate bonds) is down 15%, by $90 billion since June. Foreign bank outstanding commercial paper (CP) is down nearly 20%, accounting for almost half of the decline in total financial CP over the period.
  • Weighted Average Maturities have shortened as issuance piles up in overnights and replaces longer tenor (3-month) paper. Average overall daily financial CP issuance has fallen to $3.5 billion since June, down more than 50% from the average pace between January and May.
  • The reduction in prime money fund holdings of French paper has been comparatively small, about $15 billion in July. However, the decline probably accelerated in August.
  • Given their confidence shock and the sensitivity to bank funding news, prime funds should not return quickly to unsecured lending markets. Repo and demand for bills (along with asset backed CP) should therefore remain robust through the autumn.

◄$$$ HOLDING THE EUROPEAN UNION TOGETHER REQUIRES A STEADY STREAM OF LIES AND COMMITMENTS FROM HIGH OFFICES. THE NEXT STAGE CALLS FOR RECAPITALIZATION OF THE BANKS, BUT THROUGH COMPULSION AND FORCED BORROWING. THE INSOLVENCY MUST BE ADDRESSED, WHILE BANKS PREFER THE CONTINUED PRETENSION. MUTUAL DESTRUCTION IS NEXT, BOTH BANKS AND SOVEREIGN DEBT. $$$

A theater of the absurd has hit the European stage. Nicolas Sarkozy of France, Angela Merkel of Germany, and George Papandreou of Greece emerged from meetings and concluded publicly that they are convinced the future of Greece lies in the EuroZone, and better still that Greece is absolutely committed to meeting its austerity targets in exchange for more bailout funds. Everyone is lying through their teeth. But financial markets respond with cheer and renewed enthusiasm. What a farce on stage! The solutions to date have been poorly crafted deals to provide Greece bundles of cash to hand over to the big Euro banks, in return for spending cuts their harm their ability to repay debt on the agreed upon terms. Although the EuroZone cannot print money to purchase its own debt, it can tap nearly unlimited swap lines from the USFed, always an eager merchant of paper money in production. Ironically, the demand for the USDollar from the disasters help hold the US$ value. Next comes an interwoven destruction of the sovereign debt with the banking system debt. They will go down together.

The biggest ugly realities are for debt repayment and bank impacts. The scale of austerity required to pay back the debts seems sure to cripple any economy imposing it, a lesson warned by the Jackass many months ago. Furthermore, writing off the Greek or other PIGS debts would not simply hurt the banks involved, it would kill them and seal their fates rapidly. The leaders wish to save the banks at all costs, but in doing so they risk a broader systemic implosion from insolvency if conditions turn illiquid. Conditions have turned illiquid in spots. Taxpayers can be forced to extend loans to the state, but what comes next is forced loans from the state to the insolvent banks. Their dishonest misleading deceptive illusory balance sheets have caught up to them. The concept of 'Forced Borrowing' is soon to hit, as big banks will be compelled to recapitalize against their will. Their continued pretensions to solvency by means of phony accounting has led to a submersion into the sea. A perverse new chapter comes next. The EuroZone governments are threatening to pull a weapon of mass destruction out of the bag to compel the borrowing so as to recapitalize the banks. The circular destruction calls for the sovereigns never to default because they can always force feed debt issues to their own residents. This is slavery and assured ruin.

◄$$$ ACKERMAN OF DEUTSCH-BANK ADMITTED THAT EUROPEAN BANKS ARE INSOLVENT AND DEAD IN THE WATER, BEING KEPT LIQUID ONLY BY THE CENTRAL BANKS. HE CITED COMPARISONS TO 2008 AND THE INTENSE CRISIS. HE IDENTIFIED THE HEAVY STRESS POINTS, THE WORSENING SITUATION, AND HOW IT HAS BEEN UNFIXABLE. HE HAS SOUNDED THE ALARM, AND IT WAS HEARD. $$$

At a conference in Frankfurt in the first week of September, DeutscheBank CEO Josef Ackermann gave a terrifying speech about the Euro banking sector being fragile and subject to tremendous pressures from numerous sides. The speech went viral globally, a stern wake-up call heard clearly in all corners of the world without any misunderstanding. Here is a summary of his main points, a few in quotation form, with mine in parentheses. They are his perceptions. See the Business Insider article (CLICK HERE) and Bloomberg article (CLICK HERE).

  • The main salvo: "It is an open secret that numerous European banks would not survive having to revalue sovereign debt held on the banking book at market levels. Prospects for the financial sector overall are rather limited. The financial industry is still not really providing convincing answers to questions."
  • Deep distrust has spread to the banks due to exposure to Greek bonds.
  • Three major stress factors are crushing Euro banks: the PIIGS debt crisis, structural factors, and financial regulation. With them together, the European banks cannot increase their revenues. (The Basel III rules implicitly are forcing big banks to come clean somewhat, a force that is revealing them as broken.)
  • Entire countries and households must reduce their debt and de-leverage.
  • Some hedge funds, like in 2007 and 2008, foresaw the enormity of the EuroZone debt crisis and began betting against European banks and other companies that have exposure to the crisis earlier this year. Their profits have paid off well.
  • High Frequency Trading should be investigated more, for its effects in the markets. (Surely D-Bank is a participant.)
  • He believes recapitalization is not the answer, in direct opposition to IMF head Christine Lagarde as stated at Jackson Hole. He called it counter-productive since a political admission of failed recovery policy. (Infer that recapitalization would have to be an order of magnitude greater than realized.)
  • He is a true union loyalist, devoted to bank aid. He said, "The costs of supporting weak EU member states, particularly from the German perspective, are less than the costs of disintegration. It is a dangerous illusion to believe that a country could do better, should it reclaim the sovereignty it has delegated to the EU."
  • The conditions in the stock and bond markets are reminiscent of the financial crisis of late 2008, where the new normal is characterized by volatility and uncertainty, including the viable future of the financial sector. (But the Gold & Silver prices will not come down much this time, since recognized as true safe havens.)
  • The European sovereign debt crisis is worsening and global economic growth has wiped about EUR 5 trillion (=US$7 trillion) from stock values since the end of July, with bank stocks leading the decline.
  • Aid of EUR 256 billion (=US$363 billion) for Greece, Ireland, and Portugal failed to halt the spread of the debt crisis, which now threatens Spain and Italy.
  • The cost of insuring against default on European financial debt rose to record.
  • Banks face rising costs when they cannot boost revenue. He implied the costs are from both writedowns (mortgage bonds) and court actions (bond investor lawsuits). So the banks are shedding workers and selling non-core assets in order to raise cash.

Credit must be given to Ackerman for his bold list in reality check, whose honesty took the US & Anglo bankers off balance. He did not overlook much, but gave no mention to bond fraud permitted and heavy doses of narcotics money laundering. Check another tour by Reggie Middleton on the European bank soap opera and the anatomy of a European bank run, whose work is always thorough, superb, and relevant. See the Zero Hedge articles (CLICK HERE and HERE).

◄$$$ GREECE MERGED ITS DEAD HOLLOW BANKS TOGETHER LIKE TIED VACANT REEDS. THEY FOLLOWED COUNSEL FROM BOTH THE EURO CENTRAL BANK AND THE GREEK GOVT. THEIR UNION IS INTENDED TO SELL SOME NEWFOUND STRENGTH, BUT UNITED THEY WILL FALL. THEIR STRONGEST EQUALS THEIR WEAKEST, AS SIZE DOES NOT DENOTE VIABILITY. A BIGGER HOLLOW TREE WILL FALL OR BE ASSUMED BY THE LENDER OF LAST RESORT, THE SHELL OF THE EURO-CB. $$$

Greek Alpha Bank and Eurobank have completed a merger, or at least committed toward a merger process. As a result, they created the largest Greek bank, their first Too Big To Fail candidate, and the largest insolvent bank in Southeast Europe. Raise the whisky glasses and cheer. What progress! What insanity! What desperation! Do not be fooled by a rising stock price, as short covering and transported vapor are the principal cause for the lift. Even shares in National Bank of Greece, the country's largest lender, were up big in price. Opportunities for the smart money to abandon have been given, and surely will be taken. This merger does nothing more than to pool deposit bases at these two very troubled institutions and thus delay a bank run. But the merger itself required a dumb patsy as a backstop to assure credibility. The Qatar Investment Authority (QIA), already an Alpha shareholder, is expected to take a bigger stake in the new bank. QIA holds 5% of Alpha and is expected to increase its stake to 15% of the merged entity. Perhaps QIA has gained a hold on collateral assets wisely. The boasted synergy in pooled assets and expanded branches is an empty claim. The claim of EUR 650 million in annual administrative savings is a deception, the constant synergy nonsensical claim that never anticipates culture clash. The coordinated attempt to create a Greek TBTF fortress will be interesting to watch. Either the merged firm will take on another equally crippled bank, or it will fail quickly anyway. The buying spree must resume to logical conclusion. Look for the pro-forma entity to eventually gobble all other Greek banks before finally it experiences a magical reverse merger with the Euro Central Bank, as Tyler Durden suggests (a brilliant thought). By that is meant the hollow EuroCB shell will purchase a significant stake in the broken larger conglomerate of Greek acidic paper. The TBTF conglomerate will be easier to absorb later on.

After two international bailouts over the past two years, worth a combined total of EUR 219 billion (=US$315 billion), nothing has stabilized and all is insolvent in Greece. Central bank and government officials have repeatedly urged bank consolidation, arguing it will afford them greater protection from the fallout of the crisis. What deception, since their goal is quicker bond redemption for banker colleagues! So Eurobank and Alpha went to merge, and could appeal for a capital boost in investment, a secondary stock issuance that only morons would buy into. Eurobank recently sold its Polish subsidiary to raise funds, and promised to raise its capital further after failing the EU-wide bank stress tests, even though a flimsy test. Imagine failing a flimsy test! Witness the pathogenesis to become visible on the open stage. If four men who cannot swim are tied together, they drown together with no greater likelihood of swimming to safety. See the Zero Hedge article (CLICK HERE).

CURRENCY WAR BATTLEGROUNDS

◄$$$ THE SHADOW BANKING SYSTEM NEEDS PERHAPS $1 TRILLION PER YEAR IN USFED SECRET MONETIZATION IN ORDER TO SUSTAIN THE AMERICAN WAY. THE USFED MUST RAMP UP SUPPORT OF NOT ONLY USGOVT DEBTS BUT THE STAGGERING DECLINE OF PAPER WEALTH GENERALLY. A HEAVILY LEVERAGED 1990 DECADE MUST BE UNWOUND AND COMPENSATED FOR, UNLESS AN IMPLOSION IS TO OCCUR. $$$

The traditional bank assets are declining, in a duet dance into oblivion. Recall in the 2000 decade, both housing and mortgage bond assets grew together in upward direction. The Shadow banking continues to implode, dragged down by the asset destruction that matches in lockstep the tremendous decline in wealth from the housing and mortgage bond markets. These assets must be replaced, even with phony money, so as to pick up the great slack. A free fall is in progress. USFed Chairman must pump reverses and keep the Printing Pre$$ working overtime. The US credit driven system has totally broken. Both assets are vanishing and credit is being denied. Bernanke must offset the relentless contraction in shadow liabilities, which have been collapsing at over $1 trillion on an annualized basis. The de-leverage process is part of a natural progression in reverse. Much of the growth in the 1990 decade was tied to illicit gold leasing and Shadow Banking practices, neither given publicity. The distorted growth and corrupted mechanisms must be undone in an orderly way, or else a natural pathogenesis will do the work in a chaotic frightening way. The ugly fact is that once a big contributor to American growth, the entire structure has become a big adverse factor. It is the financial mirror image of the housing market once being a positive impetus with home equity withdrawals, having turned into a bankruptcy and foreclosure weapon wielded without mercy on the nation. The extra monetization to juice the shadow bank declines will further debase the USDollar and add fuel to the Gold bull market. See the Zero Hedge article (CLICK HERE).

Consider the home equity losses and the matched leveraged mortgage asset losses. Then magnify that amount many times. The capital was created with the typical great leverage within the US banking system, part of the fractional mechanisms. The losses must be calculated not so much on the assumption of capital invested but on the intense debt that amplified the volumes with leverage. Think inverted pyramid. The losses off balance sheet and hidden via fraudulent accounting have rendered most US banks insolvent, especially the large ones. The job of the USFed has been to push $trillions into the banks continuously, thus masking those losses and negative cash flow. The big US banks are trapped in highly levered positions. The two categories in the above graph that stick out are the falling Agency Mortgage Bonds (purple) and the falling Asset Backed Securities (olive green), with offsets in rising GSE (red, next to bottom). The Govt Sponsored Enterprise item is Fannie Mae & Freddie Mac etc. The former are basic toxic mortgage bonds acquired taken down in writeoff losses. The latter are the worthless Collateralized Debt Obligation, a fancy name for the leveraged mortgage bond garbage sold by Wall Street. Leveraged typically 6:1, they went to a zero value long ago. The conclusion is that the USFed must inject at least $1 trillion per year into the US banking system in order to prevent an implosion from the leveraged effects of the housing and mortgage bond crash, apart from USTBond monetization. The effect on the Gold price will continue to be huge. None of this wreckage is in the news, or discussed as part of the Quantitative Easing by the USFed, just the extra acidic icing.

◄$$$ US CURRENT ACCOUNT DEFICIT NARROWED SLIGHTLY. IT HAS BECOME A CONSTANT MAJOR THORN SINCE CHRONIC AND LARGE, UNFIXABLE AND RUINOUS. CELEBRATION IS OVER MINUTIA IS BACKWARDS. THE C/A DEFICIT IS A REVERSE INDICATOR OF RUIN, SINCE INDUSTRY HAS BEEN SHIPPED TO ASIA FOR FULL GENERATION. $$$

When the United States Current Account deficit rises, it is due to big increases in foreign imports like electronics, cars, and crude oil. These are signs of economic expansion. When the Current Account deficit falls, it is due to big decreases in foreign imports accompanied by small increases in exports. The usual deceptive reporting is that the export growth is good for the USEconomy, but the export industry base is very small for a gigantic economy such as the US. The commonly told false story is that a falling C/A deficit means the nation is on the mend, imbalances corrected, the lower USDollar exchange rate doing what it is supposed to do. All are deceptions. The imbalances are not being fixed as long as the industrial base remains in Asia, a trend starting in the 1980 decade with Intel, continued with the Pacific Rim in the 1990 decade with universal offshore manufacturing, and a climax of capital flight (not destruction, since relocated) to China. The falling USDollar encourages export trade, but the critical mass is missing. The result of a lower US$ is massive cost inflation, its valuation 4.7% lower level in the past year, a deadly ingredient to the USEconomy. It results in profit squeeze to businesses, and reduced discretionary spending for households. Worse, a falling USDollar means foreign investment shrinks on financial assets, but is offset by additional purchases of property. The income ledger item tallies income payments and government transfers like for the ultra-low yielding USTreasury Bonds, offset by USFed debt monetization. So foreigners buy less US debt securities and grab more buildings, otherwise known as carpetbagging, while the central bank hyper-inflates. Hence the Current Account deficit is a reverse indicator, which tells a backward story, easily preyed upon by a deceptive financial press. A falling C/A deficit goes hand in hand with systemic failure.

The Current Account deficit in the United States unexpectedly narrowed in 2Q2011, reflecting an increase in exports and a record income surplus. This broadest measure of international trade declined by 1.3% to $118 billion from a revised $119.6 billion shortfall in the prior quarter, as reported by the USDept Commerce. A typical distorted theme echoed by Wall Street is given by Omair Sharif, an economist at RBS Securities (not the famed actor). He said, "With the rise in exports, our trade position has improved, which is helping to lower the Current Account gap. There is no doubt we will continue to need financing from overseas, and we will continue to get that financing. US assets are still one of the safest in the world." This guy earns a moron award stuck to his forehead. The crude oil price for the second quarter averaged $102.3 per barrel, and has fallen since. The income surplus for Q2 was $61.1 billion, as paltry USTBond yields were paid out. Notice that the income surplus occurs alongside exploding USGovt deficits and falling long-term bond yields to accommodate them. The export industry at $178.0 billion is 20% smaller than the import flow at $222.8 billion. The trend remains in the wrong direction of this imbalance. Domestic electronics (Japan & China) have disappeared, big steel factories are long gone, machine tools are dominated by Japan and Germany, and foreign carmakers have a commanding market share. See the Bloomberg article (CLICK HERE). Look for more of the same empty clangs from the USGovt and presidential candidates, as the same tired criticisms are made against China for their trade protection and rigid currency policies. The US has ten times as many problems that are not addressed, actively avoided, and aggravated by its own policies.

◄$$$ CENTRAL EUROPE PREPARES TO DEPART FROM THE EURO CURRENCY. IF THE PIIGS REFUSE TO LEAVE THE EURO PEN, THEN THE HEALTHY CORE SHEPHERDS WITHIN IT WILL ABANDON THE PEN THEMSELVES. PLANS ARE WELL ALONG, NEVER MENTIONED IN THE PRESS. THE SYSTEM WILL BE DEFENDED UNTIL THE ENTIRE SET OF PLATFORMS COLLAPSES. THE SEIZURES HAVE BEGUN. $$$

Tyler Durden, the intrepid bold and reliable source of information, has very impressive credentials and insider access to information. He has reported that, "A steady stream of rumors whose reliability is difficult to estimate tells this blogger that Austria, Finland, Germany, and the Netherlands have already printed local currencies and could exit the EuroZone within the remainder of September, leaving the mess created by profligate southern EuroZone members behind them." Demonstrations in Germany are more common. They dislike the Euro currency and what it means, huge welfare support to the South. The end of the Euro means the end of the union, since the common currency is the glue. See the Zero Hedge article (CLICK HERE).

Confirmation came from a reliable source, a banker from Europe who has been a conduit of excellent timely information for three years. When asked if true on the printing of local currencies in preparation for a reversion to former pre-Euro denominations, he said "YES" simply. He went on to mention that D-Mark printing would be done by Giesecke & Devrient. Furthermore, he reminded that so-called replacement currencies are stored in every country in case of system failure. The message is clear though. The banks dictate that the system be saved, that bonds held by banks be redeemed, that bailouts continue ad infinitum, that Southern European nations remain within the fold. The invited response is for the core nations to leave the Euro instead. A high pitched battle goes on between German interests and European interests, the bankers divided. Behold the motive for a new Nordic Euro, whose time has come, whose planned introduction was June 2011, but due to politics, pressures, and implementation challenges has been delayed. Its launch will plunge numerous European banks into failure. The resistance to any new currency launch is fierce.

◄$$$ THE SWISS FRANC REBOUNDED AS THE CENTRAL BANK REJECTED ADDITIONAL INTERVENTION. THEN THEY ANNOUNCED A 120 LIMIT TO ENFORCE AGAINST THE EURO CURRENCY. TREMENDOUS LOSSES TO SPECULATORS HAVE RESULTED. INSIDERS PROFITED HUGE. VICTIMS WERE TARGETED. THE NEW LIMIT WILL BE DIFFICULT TO ENFORCE, SINCE UNLIMITED EURO PURCHASES WILL BE REQUIRED. THE BATTLE HAS BEGUN TO PREPARE FOR THE END OF THE USDOLLAR AS GLOBAL RESERVE. A SCRAMBLE IS IN FULL SWING, THE EURO OUT, THE YEN AND YUAN IN. $$$

Plans and goals are well and good, but enforcement of a Swiss Franc versus Euro currency peg will be extremely difficult. The Swiss National Bank must purchase Euros and debt securities in Euro terms regularly and in heavy volume. The SNB is setting itself up for ruin. The USFed, the Euro Central Bank, and the Bank of England all have gobbled up toxic assets in extraordinary volume, enough to challenge their solvency and future viability. The Swiss National Bank is next, as they will take pressure off the EuroCB by official purchase of EuroBonds. But the Euro cannot stand. They will surely decide on the German marked variety, thus adding to the German Bund rally. The Swiss influence should send the long-term Bund yield down far below the sickening low USTBond yield. Curiously, Bund default insurance rates are rising.

The Swiss Franc initially jumped as the nation's Economy Minister Johann Schneider-Ammann dismissed intervention. What a bold maneuver, a grand deception. The Swiss Franc currency rose in rebound from 122 to the 128 level as speculators rushed in for easy profit. The UBS team was among the victims. The official statement was like a professional movie production. A top Swiss Govt official said the nation would adapt to live with a strong currency as the central bank stayed away from intervention. Then came the shocker, as a formal 120 SWF-Euro peg was announced. The gap down was one of the largest in modern history, roughly 1000 basis points. See the Reuters article (CLICK HERE).

Switzerland entered the new currency war on September 6th after the announced Euro peg, in an attempt to protect its economy from ruin to its export trade. The Swiss National Bank devalued the Franc by pledging to buy unlimited quantities of foreign currencies to force down its value. The SNB warned that one Swiss franc will not be permitted to be worth more than 0.83 Euros, equivalent to SWF 1.20 to the Euro. The start of yet another front in the Competing Currency War has been engaged. Jeremy Cook is chief economist at currency brokers World First. He said, "That was the single largest foreign exchange move I have ever seen. The Swiss Franc has lost close on 9% in the past 15 minutes. This dwarfs moves seen post-Lehman brothers, and other major geo-political events in the past decade." The SNB public statement was forceful, pledging "substantial and sustained weakening of the Swiss Franc. The current massive overvaluation of the Swiss Franc poses an acute threat to the Swiss Economy and carries the risk of a deflationary development." They threatened further moves to an even lower exchange rate against the Euro if needed.

The Swiss Franc is still valued higher than the 100 to 110 range seen for late 2010 and early 2011. The damage to their export firms is harsh, and difficult to reverse. A currency battle is assured, with the SNB on a side difficult to defend the Euro as the pan-European financial crisis intensifies. Damage to the core Euro participants will worsen if the French banks falter in noticeable fashion, a guaranteed event already commenced. Most interventions in the currency markets produce short-term success at best. The resolve of the SNB to hold the cross rate above the 1.20 level will be tested. The gap between 118 and 122 begs for a test. Any solid recovery would cause the Swiss banks to be losers from the intervention and associated bond purchase. Recall that the SNB monetary policy statement in August, to keep the official interest rate near 0%, and to increase the supply of Swiss Francs available, did absolutely nothing to weaken the currency. Expect the 1.20 line to be attacked and overrun, since the FOREX market has never permitted declared valuations. History is littered with examples from England to Japan. See the UK Guardian article (CLICK HERE).

The USDollar as global reserve has a finite remaining lifespan. In Europe and the Middle East, even in China, the Euro had been used in the last decade as an alternative reserve currency. That practice is being unwound globally, due to the ruin of Southern European sovereign debt. The Swiss Franc has absorbed much of that money. Note the extreme disruption and unwanted rise. The Competing Currency War makes losers out of winners. The Swiss action puts pressure on the Euro Monetary Union to break up. In Asia, the Japanese Yen has been widely used in the last year as an alternative reserve currency in that region, more so in the last few months since the earthquake and tsunami ironically. The Yen has been rising. The US$-Euro-Yen core has been altered and challenged. The Chinese Yuan will be the new kid on the block, fully in synch with their will. The SWFranc will be the old kid on the block, but against their will. A grand scramble is underway, as the stability of the USDollar has been at best disrupted, at worst wrecked. The Asian currencies will grow in popularity, even the Hong Kong Dollar.

◄$$$ THE NORWEGIAN KRONE IS DUE TO RISE AS A VALID SAFE HAVEN. THE COMPETING CURRENCY WAR HAS ENTERED A HIGHER GEAR. THE IMMEDIATE RESPONSE WILL BE A LOWER INTEREST RATE IN NORWAY. THE CURRENCY LACKS LIQUIDITY. EXPECT INTERNAL PROBLEMS, FROM THE INCENTIVE TO SPECULATE AND THE DAMPENING EFFECT OF LOWER SAVINGS YIELDS. $$$

The Krone currency from Norway will gain attention. The Oslo bombing incident in August should be regarded as a birth pang of recognition. Norway is an abundantly rich nation, from prudent North Sea oil operations without the concurrent socialist drag like England attached to its share to the same operations. The US-UK security agencies, together with a small ally that looks northwest across the Mediterranean Sea to Italy, have preyed on the vast $1.5 trillion sovereign wealth fund. They want the vast fund to be integrated into the Anglo banking sphere, but Oslo officials resist. Thus the pressure, no different from Al Capone breaking storefront windows to secure protection racket income. The flip side to the story is the strong financial foundation of Norway, which is not part of the Euro Monetary Union. Their Krone currency is due to rise, not just from tremendous surplus income and sturdy FX reserves, but from the influx of hot money in Europe seeking sanctuary. Investors are desperate for protection against a deepening European debt crisis. They will turn to one of the few haven markets that is not yet overvalued. The Krone rose substantially versus the SWFranc on September 6th, more than any other major currency. The Swiss bank center is determined to discourage investors. As they turn elsewhere, they will find Norway in the storm. Henrik Gullberg from Deutsche Bank in London expects the Krone to appreciate and to fill the vacuum. He said, "There is a desperate need for safe havens and the Krone is an obvious candidate. The Krone is not significantly overvalued, which is another thing that is attractive."

The fundamentals in Norway are wildly positive. The nation has a 10.5% budget surplus compared to GDP in year 2010. It is rated AAA for its sovereign debt, perhaps the only one to deserve it. Its debt default insurance has the lowest cost in the world. Norway has the lowest unemployment rate in all Europe. Their central bank warned it would act to limit any currency strength, not wanting either inflation or weak growth. That will not be possible, since all nations lose in the Competing Currency War led by the United States. All reactive measures to the USDollar result in economic damage, either from artificially low cost of money and the related distortion to asset prices, or from a steadily rising exchange rate from high interest rates in the speculative arenas that damage export trade. No nation can stand aside. Norway might plan to protect itself, but such protection does not exist. Think universal damage to capital from one side or the other of the equation, either from asset speculation or retired assets. The Krone has been the best performing major currency against the USDollar, the Euro, and the Yen since the USGovt debt downgrade by Standard & Poors on August 5th. The currency scramble ensued. Safe haven is sought.

Norway senses it must react, the 10-year government bond sitting at all-time low yields. They wish to prevent currency gains that damage the export trade. The Norges Bank, their central bank, stayed put on August 10th, not following through on a planned rate hike. They left the benchmark at 2.25% rate, citing a flare-up in global market turmoil and weaker recovery outlook. The Norway Economy grows at a robust pace, unlike the rest of Europe. The mainland economy, which excludes oil and shipping output, will expand 3.0% this year and 3.75% next year, according to the central bank forecasts. The Euro/Krone cross rate critical level is understood to be the 7.5 line. They have so far steered clear of drastic measures like what Switzerland and Japan have done. The obvious policy response is to lower the interest rate, but that proved useless in Switzerland. The only other way to prevent currency rise is to buy truckloads of impaired foreign bonds or to push the official interest rate lower. Brazil even imposed a tax on foreign funds seeking their high yielding bonds. The Australian Dollar rise, which had gone too far and rendered the OZ$ overvalued, was actually halted by Mother Nature, whose storms put a crimp on the entire economy and might have tipped the housing market into decline.

The Norway Krone lacks liquidity to withstand the inflows, and surely is not large enough to serve as an alternative currency reserve. Its liquidity is small, much like an emerging market nation. Ironically, a huge debt is required to serve as global reserve since the monetary system is debt-based, an upside down phenomenon. Trading in the Krone accounted for 0.7% of global FOREX market trading in 2010, compared with 3.2% for the Swiss Franc, according to Danske Bank. The tiny Krone is a healthy backwater soon to be infested. Analysts Kirkegaard and Tuxen at the bank believe that investors and analysts might underestimate the flood of funds into Norway if the European sovereign debt crisis deteriorates further. See the Bloomberg article (CLICK HERE).

◄$$$ THE HONG KONG DOLLAR WILL EVENTUALLY REMOVE ITS PEG TO THE USDOLLAR. CONTINGENCY PLANS ARE SURELY IN PLACE. HK-BANKS ENJOY AN INFLUX FROM FLIGHT OF CASH OUT OF NEIGHBORING CHINA. THE BENEFIT TO BANK INFLOWS IS OFFSET BY HIGHER COSTS ACROSS THE ECONOMY. A DEPEG EVENT WOULD CAUSE PRICE STABILITY, BUT WITH SOME POTENTIAL UNKNOWN SHOCK. ANY SUDDEN BEIJING DECISIONS WOULD HAVE IMMEDIATE IMPACT. $$$

The Hong Kong region has long pegged its HKDollar to the USDollar for stability purposes. In recent years, the 28-year peg has brought instability from the shared yoke to the tattered American oxcart. Their bank leaders are under pressure to end the USDollar peg, the decision to uncouple remaining controversial. In August, the city finance minister repeated assurance of having no plans to de-link. Hong Kong Financial Secretary John Tsang said, "We have no plan or intention to change the system." Analysts believe otherwise, as the decision is a matter of time. Contingency plans are in place. The link is outdated.

The declining USDollar has ushered in high inflation, broadly resented. Tsang replied in a public forum after HSBC CEO Stuart Gulliver suggested shifting the official peg to a basket of currencies. He said, "If Hong Kong was to review the Hong Kong dollar peg, it would be better to revise to some kind of managed float with a basket of currencies that reflect the trading partners of Hong Kong, rather than choosing either a complete free float or to peg it to another currency." In support, Peter Lai at DBS Vickers believes unshackling the HKDollar from the greenback would deliver a necessary shock impact to the USEconomy. Lai said, "Hong Kong's major trade partner has changed from the United States to mainland China, all the imports from China have increased, and this is not good for the normal life of the Hong Kong citizen. Nations have begun to shift foreign reserve currencies from the USDollar, including China, Singapore, India, and most Asian nations. Many nations have already considered to shift the currency from the sole USDollar to other currencies. The proportion of the currencies in the basket should be in line with Hong Kong's trade partners. It may have a high [weighting] of Renminbi, and the USDollar, Euro, and others."

Some corners indeed benefit. An influx of money into Hong Kong has come for a couple years from the mainland, in response to an unstable USDollar. However, the inflow is driving price inflation higher. The main reason that the peg has remained firmly in place is it attracts big money to banks. Many on the island province expect the HK unit will break away from the USDollar before long. Tom Kaan at Louis Capital Markets expects the inevitable, as elections scheduled next year could raise the issue in a prominent manner. But the final decision could take at least another two years, unless a crisis explodes on the scene. Analysts push for a currency basket link, with at least a 50% weight to the Chinese Yuan. That would bring regional price stability. Other warn of uncertain outcomes, like sharing any new disturbance that originates from Beijing. See the MarketWatch article (CLICK HERE). The entire cost structure of the HK Economy has risen almost in lockstep with the USEconomy. If the USDollar has a serious episode of rejection, harsh devaluation, or isolation, the HK officials have a plan in place to prevent the HK$ from suffering a major decline and causing severe disruption. Just as a currency can be pegged, it can be unpegged, but with collateral damage and some impact. My source with Chinese contacts among sovereign wealth fund managers assures of readiness in the wings. He said, "Contingency plans are in place, since the Chinese are not idiots. By the end of the day they control the US$ and therefore they control the United States. The same will be true for the Euro currency not before long."

◄$$$ NIGERIA WILL DIVERSIFY AWAY FROM USTBONDS IN ITS RESERVES. THEY WILL FAVOR THE CHINESE YUAN. THE DECISION IS NATURAL, AFTER SUBSTANTIAL CHINESE INFRASTRUCTURE INVESTMENT. NIGERIA IS BUILDING ITS TIES TO CHINA, WITH PLANS OF BOND INVESTMENT. THEY ALSO SEEK PRICE STABILITY AT HOME. THE GLOBAL REVOLT CONTINUES AGAINST THE USDOLLAR, DESPITE WHAT AMERICAN BANKERS PROCLAIM OF A SECURE GLOBAL RESERVE. $$$

The Nigerian central bank governor Lamido Sanusi said his country will invest 5% to 10% of its FOREX reserves in the Chinese Yuan. He cited the USGovt debt downgrade and chronic European Union debt crisis, which have added to urgency of diversification. Nigeria will no  longer defend its USDollar peg to the Nigerian Naira at all costs. He openly referred to the inevitable transition for the Yuan currency to become an international currency, meaning fully convertible and highly liquid. The governor mentioned how the decision is intended be a boost to China as it works to promote the Yuan as an international currency. Sanusi was in Beijing to meet officials at the Peoples Bank of China for discussions of potential cooperation on monetary policy. The Nigerian FX reserves total between $32 billion and $36 billion, with 79% currently invested in USDollars, as Sanusi cited details. Nigeria has been negotiating with the PBOC to allow it to invest its reserves in China's interbank bond market, as well as in the offshore Yuan market in Hong Kong. He expected a continued gradual appreciation of the Yuan exchange rate, but one which would be slow if Western economies remain weak. He cited concerns over price stability in his home country. In a recent report, the Renaissance Group forecasted a 40% probability that the Naira would be devalued in 2012 because of weakening oil prices. The BRIC nations must keep global crude oil demand high for the Naira exchange rate to remain firm, as trade surplus is derived mostly from crude oil. See the Wall Street Journal article (CLICK HERE).

◄$$$ LONDON IS BEING PREPARED AS THE CHINESE YUAN TRADE HUB, THE YUAN MADE FULLY CONVERTIBLE BY 2015. THE KEY IS DEVELOPING OFF-SHORE YUAN TRADING HUBS, WHICH LONDON BANKS ARE ASSISTING IN CREATION. ALL PROCESSES ARE BLESSED BY BRITISH AND CHINESE BANKING OFFICIALS, ALONG WITH THE CHINESE VICE PREMIER. THE TRANSITION TO A COMPETITIVE CONVERTIBLE CHINESE CURRENCY IS MAKING SLOW BUT GOOD PROGRESS. $$$

Plans are being furthered to make the Chinese Yuan fully convertible by the year 2015, so claims Chinese officials before the EU Chamber of Commerce and its business executives. No timetable is formally adhered to, but the Chinese officials report the overseas Yuan market and flows are developing faster than imagined, a main requirement. The other is a brisk Yuan-based bond market trade. The usage of Yuan has been promoted in bilateral trade with several nations as a means to limit reliance and risk from the USDollar. The concept has been reported regularly within the Hat Trick Letter for four years, aware of its importance. Full convertible currency is a criterion the United States and Europe demand from China as a condition entry in the Intl Monetary Fund currency basket. Inclusion is the positive, but opening vulnerability to the standard Anglo criminal mechanisms in FOREX markets is the negative side. The Peoples Bank of China Governor Zhou Xiaochuan reminded that his nation aims at "gradually realizing the renminbi convertibility under the capital account. [But the nation] has no defined timetable for the Yuan to be fully convertible. It will be a gradual process."

Zhou was in London for an official visit with bankers. An upward rise in Yuan currency valuation is assured. The central bank disclosed on August 1st an intention to manage the Yuan more actively against a basket of currencies, instead of just the USDollar, which would permit market forces to play a greater role. The current management entails limiting daily movements, and limiting conversion for investment purposes. Their FX reserves grow by $40 to $50 billion per month. Chinese Vice Premier Wang Qishan met with UK Chancellor of the Exchequer George Osborne in Britain. The UK banks are busy establishing a Yuan-based offshore trading center in London. The Vice Premier will support such efforts. Zhou confirmed the development, saying "The City of London has expressed its interest to help develop Yuan offshore business. We are very encouraged." The downside is that a higher Yuan valuation will harm Chinese exports, which leads their officials to move with caution.

Sacha Tihanyi of Scotia Capital in Hong Kong said, "Making the Yuan fully convertible will lead to foreign inflows into China and a stronger Yuan. Making the Yuan fully convertible is also the key step in pushing it as a reserve currency and enhancing its use in global trade." The timetable might not be practical. Neither Taiwan (Dollar) nor South Korea (Won) have full convertibility yet either for their currencies. Global market instability might render the target date as difficult or impractical. The clownish US politicians wish to see a higher Yuan exchange rate and removal of import barriers in order to spur trade. But a higher Yuan would mean higher import prices across the board, at Wal-Mart, Target, Best Buy, and Home Depot. Removal of barriers would not mean much more US trade to China, since the same USGovt officials block computer and telecommunication export. Apart from these items, the Chinese desire little if anything. Export from the United States of its main technical expertise, namely bond fraud, is no longer wanted. The Chinese Govt is clever. They are formulating plans to introduce Foreign Direct Investment in the country using funds denominated in Yuan, but raised offshore. Doing so would not push the Yuan higher from fresh demand. They plan to permit qualified fund managers to invest such funds in Chinese stocks and bonds. A similar program already allows licensed companies to convert a quota of foreign exchange funds. See the Bloomberg article (CLICK HERE). This is a currency bombshell. Considering the eventual demise of the USDollar and the Euro, the entire plan is quite realistic.

◄$$$ THE AFRICAN REGION HAS ARRANGED FOR YUAN-BASED TRADE WITH CHINA. THE VAST COMMODITY SUPPLY WITH STRATEGIC RESOURCES IS BEING LOCKED UP IN EXCLUSIVE TRADE PACTS. THE UNION OF SOUTH AFRICA IS THE LATEST NATION TO MAKE COMMITMENTS WITH THE CHINESE. THE YUAN-BASED TRADE WILL TRIPLE IN THE NEXT FOUR YEARS. THE DAYS OF THE USDOLLAR AS EXCLUSIVE TRADE VEHICLE ARE COMING TO AN END. $$$

In a year or more, the Chinese Yuan might completely replace the USDollar in Sino-African trade on a continental basis. Africa is a very big continent, disorganized to be sure, but with vast resources. The Americans continue to boast of a global reserve that is untouchable and secure, but the reality is far different. The Chinese have been quietly setting up international trade agreements with nations which have crucial supplies for a wide range of minerals and resources as part of strategic plans. From Brazil to Venezuela, and lately Nigeria and South Africa, the Chinese have been setting up exclusive agreements with these nations to secure large portions of their output. However, the twist is that trade is no longer denominated in USDollars, but instead in the Chinese Yuan. The reputable Standard Bank from Hong Kong expects the Chinese Yuan to replace the USDollar as the main currency to finance trade between Chinese and African countries. They estimated that up to 40% of Chinese global trade would be denominated in Yuan by 2015, a sum of $100 billion. Jeremy Stevens from Standard wrote, "In addition, at least $10 billion of Chinese investment in Africa will be denominated in renminbi over the same period." The current portion of their Chinese trade in Yuan terms is 13%, rising quickly. So the tripling of such trade will surely set off alarms in New York and London. To date, the Western elite powers seem oblivious or arrogantly dismissive of the threat to the US$ for its global reserve status, overly concerned by bond market considerations. The USDollar and its flagship USTBond vehicle are fast becoming pariahs in global finance. Observe the shun of USTreasury auctions and the dominance of the USFed as the primary bidder. The end days of the USDollar are easily foreseen, if eyes are opened. See the South African Business Day article (CLICK HERE).

◄$$$ DUTCH GOLD MANAGEMENT HAS BEEN BROUGHT INTO QUESTION. THE FEISTY SOCIALISTS WANT TO KNOW WHERE THE NATIONAL GOLD TREASURE IS, WHY GOLD ACCOUNTING IS SCREWY, WHO LEASED THE GOLD, HOW MUCH NATIONAL DEBT HAS BEEN PAID OFF, AND MORE. FRAUDULENT ACCOUNTING COULD BE REVEALED, THE MASK OF THE GAME RIPPED AWAY. $$$

After Chavez of Venezuela demanded his nation's gold in return, after Mubarek of Egypt sequestered gold in London, after the Tunisian president heisted some gold en route to Cyprus, national treasures are under scrutiny. Leave aside the freeze (heist) of $90 billion in Libyan funds. Newly pointed fingers are directed at London and New York for gold crimes. In the past decade, the Swiss and Germans demanded return of their national gold held by the US Federal Reserve in New York. Vast distrust has blossomed like a venomous tree. Enron style accounting could possible soon be revealed, hitting the Gold market. Central banks have grown nervous about their gold reserves. The events in the Netherland could soon gather global attention. The Socialist Party has formally asked the Dutch Treasury Secretary the location and status of the central bank gold assets. The query arrived as ten formal questions that demonstrated keen knowledge of gold management, if not fraud. For instance, they wish to know why are gold and gold receivables are accounted for as one line item. They wish to know how much gold is leased. This petition could act as a breakthrough event for global awareness on how central banks conceal crucial data from the public. Slowly the harmful effects that central banks have on society could be revealed. See the translated Vrij Spreker article (CLICK HERE). The following are the very probing and detailed questions:

1)      Did the Dutch Central Bank (DNB) loan part of their gold? If yes, how much and to whom? (implied: without permission or approval)

2)      Why are gold and gold loans stated as one line item in the annual report 2010 instead of mentioned as two separate items? (implied: concealed leases and certificates)

3)      Can you give an overview of the yearly yields of the gold loans during the past years?

4)      Where is the physical gold of DNB? At which locations and how much is where? What is the reason that the gold is still at these locations? (implied: perhaps missing)

5)      What was the most important reason for sales of gold in the past? Are the storage costs a reason? What are the actual costs to store the gold? (implied: phony reasons)

6)      Can you confirm that since 1991, of the 1700 tons of gold, that about 1100 tons have been sold? Is the remark of journalist Peter de Waard correct that because of these historic sales, there is a loss of about 30 billion Euros? If not correct, what is the right amount? (implied: resentment over mismanagement)

7)      How much of the National Debt during the past 20 years has been paid off with the proceeds of the gold sales? Are you of opinion that the sustainability of the national debt will be improved by paying off the debt and at the same time selling the gold? (implied: payoff of debt is the only legitimate reason for gold sale)

8)      What is in your opinion the present function of the gold stock? (implied: motives to support a broken fiat paper system)

9)      What is the relation between the size of the market of the gold stock and the size of the market of gold derivates? What are the possible consequences of this? (implied: fraud motives)

10)  Can you confirm that recently a number of countries have even enlarged their physical gold stock? Do you have an explanation for this development? (implied: need for gold)

GOLD RECOGNIZED AS SAFE HAVEN

◄$$$ THE H.S.B.C. VAULT FOR THE G.L.D. EXCHANGE TRADED FUND WAS REVIEWED BY A DUMB SLEEPY REPORTER. ONE PROMINENTLY DISPLAYED GOLD BAR SHOWN DID NOT APPEAR ON THE OFFICIAL BAR LIST. IT HAD BEEN PROBABLY LEASED AND SOLD TO COVER A COMEX DELIVERY. THE FINANCIAL PRESS IS BUT KEYSTONE COPS ON A DETAIL. THE CONSPIRACY WAS NOT OVERRUN BY BRIGHT LIGHT, BUT RATHER ENHANCED BY DEMONSTRATED INCONSISTENCY IN UGLY REFLECTION. $$$

The intrepid blind bat reporter Bob Pisani from CNBC paid a visit to the HSBC vault where they store the gold bullion for the corrupt GLD exchange traded fund. His mission was obviously to dispel rumors of corruption, to demonstrate that gold bars were indeed being stored in volume. The SPDR gold fund (symbol GLD) acquiesced in a public relations campaign, with the collusion of the mouthpiece CNBC. The HSBC directors invited Pisani in its secret warehouse which allegedly contains 40 million ounces of gold, of which HSBC is custodian, but both the Bank of England and London Bullion Market Assn are sub-custodians. The entire gesture backfired on the host, who unwittingly opened himself to ridicule. Pisani did not do his homework. The same gold bar that Pisani put so eagerly before the camera, Rand Refineries ZJ6752, was missing from the full Bar List as posted daily by the GLD. He did not even check, big oops! Perhaps the Bar List is corrupted, not showing the inventoried bars. Perhaps the bar shown is actually not owned by the GLD fund, instead by some investor. Perhaps the bar had already been leased and sold, the Bar List not closely matched in the activity. Perhaps the tour was actually filmed months ago. Inquiring minds want to know. Bear in mind that the same Bank of England had been rendered 99 tons lighter in gold content after satisfying the Hugo Chavez physical delivery request for Venezuela, the event nearby.

As the table below shows, the list of ZJ serial numbers in sequence started with ZJ6700, went forward in sequence, never to reach ZJ6752. Shown are the last several with ZJ South Africa markings, in order. The list ended at ZJ6734. Pisani looked dopey and flat footed.

            ZJ6721 RAND REFINERY 405.225 404.779 9989

            ZJ6723 RAND REFINERY 407 406.552 9989

            ZJ6726 RAND REFINERY 407.7 407.251 9989

            ZJ6727 RAND REFINERY 404.075 403.63 9989

            ZJ6732 RAND REFINERY 407.45 407.001 9989

            ZJ6734 RAND REFINERY 404.275 403.83 9989

The date to catch the gaffe was September 1st. Assume CNBC shot the segment some time in the previous week, between August 23 and August 30. Over that period the actual GLD tonnage as disclosed by GLD custodians remained flat. It only fluctuated by 1.51 tons from 1232.31 to 1230.8 tons. So conclude that almost no gold bars actually departed the warehouse. Or is it a whorehouse? Pisani dated his tour by mention of an inventory total of 1200 tons, consistent with the last week of August. Three week prior, its gold held topped at 1310 tons, which identifies the timing well. Is the bar currently on its way to Chavez? Or worse yet, did GLD actually lease it to someone? Pisani might have harbored some suspicion on the murky shadowy criminal dungeons, these secret bank vaults. He surely had to succumb to clearance, driven blindfold through London streets, having to relinquish his cell phone and GPS devices. But the laughable display backfired. The conspiracy only was enhanced, not dispelled. See the Zero Hedge article (CLICK HERE).

◄$$$ A GREAT VIEWPOINT WAS OFFERED ON CHAVEZ AND FRACTIONAL GOLD BANKING, WITH AN ANGLE ON S.C.O. COMING OF AGE. THE DISTRUST OF THE ANGLO BANKERS HAS GROWN SEVERE AND AGGRAVATED. THE COMPETING CURRENCY WAR HAD A SKIRMISH ON THE GOLD FRONT. IF THE FRACTIONAL GOLD BANKING PRACTICES ARE NOT ENOUGH TO CAUSE UNEASE BY DEPOSITORS, THEN THE ABSENT MOVEMENT OF GOLD AFTER PURCHASE AGREEMENT SHOULD CAUSE EXTREME JITTERS. THE S.C.O. ORGANIZATION APPEARS TO HAVE BEEN MOBILIZED, VENEZUELA BEING A MEMBER. INFER THAT CHINA & RUSSIA HAVE URGED MEMBER NATIONS TO DEMAND GOLD REPATRIATION. THE SCREWS ARE TIGHTENING ON THE INSOLVENT WESTERN BANKS. $$$

The impact from the Chavez recall of Venezuelan gold reserves held in the Anglo centers will not be fully calculated for some time. Gold bulls have been energized by the notion of at least a 150 ton withdrawal from the Bank of England to meet the well publicized Venezuelan demand. Some reports mention 99 tons, but it was much more, as the controlled press was not in any mood to light a fire on the story. The bullion banks forced a bear squeeze on the LBMA in London, which made urgent calls to Switzerland for quick deliveries in multiple armored cars in a caravan. The gearing in the paper gold market that links to the physical market is roughly 100:1, meaning big delivery demands cause 100 times as much stress on the backend where tangible resides. The relationship has become badly stretched. The excitement in the sound money gold crowd owed also to the assumption (or hope) that other nations might follow Venezuela's example. Widespread growing distrust is anathema to the gold bankers.

Take the bigger picture. Global politics is in play, as Chavez is not merely calling into question the integrity of his national gold holdings. He could have suffered the same fate as the Qaddafi wealth seized in London and New York, with writing on the wall. Chavez waged an idealist war against the capitalist system and the United States in particular. He moved gold bullion and several $billion in foreign reserves to the countries worthy of his trust, principally Russia and China. He chose the corrupted capital system's weak link, Gold. He was told by his central bank that the USFed, the Bank of England, and the Bank for Intl Settlements hold gold bullion in a bogus system where much of this gold exists only as a ledger entry in certificate form, not backed by physical metal. It was unclear whether the Venezuelan gold is held in these fractional sight accounts, or in allocated accounts where the gold is held separately. Regardless, the demand for the gold in huge quantity had to be honored and met, otherwise big exposure of the corrupted system would have occurred. The harsh light on scummy gold banking would invite other nations to demand their gold, resulting in a gold bank run that might happen anyway.

One can be quite certain that in 2009, the Intl Monetary Fund sales of 212 tons of gold to other central banks were conducted on the firm condition that the purchased bullion would be held in sight accounts, and not moved. The absent movement was a condition of sale. The buyers, India, Mauritius, and Sri Lanka must be very nervous about whether they bought pieces of certificate that indicate gold claims. Interestingly, India and Sri Lanka together with Venezuela are associated with the Shanghai Cooperation Organization (SCO), which was originally designed by China and Russia for security and cultural exchange in mind. The reality was to create a group with the eventual goal of establishing a cohesive Asian region that could oppose the US-UK-West Europe core.

What has not been stressed adequately in the last few years is the SCO activity. They might not meet as often as they did in 2004 through 2006, but they have one important connection in common. The central banks of SCO member states, observer states, and dialogue partners are almost all purchasing gold, overtly or covertly. Gold investors should regard their activity to be a coordinated economic attack on the West, rather than just a coincidental sequence of events. The nations of China and Russia run the SCO and must put out directives to follow, gentle nudges with strong suggestion. The two global giants have in recent years been turning the screws on the gold market. Russia has announced regular official purchases, halting all exports from mining output. China has encouraged its citizens to buy buy buy, loosening the laws. Without much doubt, they have urged member nations through SCO that gold will have an important role in the next chapter, and nations can fortify their future position with more gold assets in their reserves portfolio. Venezuela is a member of SCO. By removing his country's gold from capitalist markets, Chavez is declaring his credentials. See the excellent article on GoldMoney by Alasdair Macleod (CLICK HERE).

◄$$$ THE SWISS NATION WILL CONDUCT A REFERENDUM ON GOLD MANAGEMENT. A MOVEMENT IS AFOOT TO PRESERVE ITS GOLD ASSETS HELD IN RESERVE, AND TO PREVENT FURTHER SQUANDER IN DEFENSE OF THE BANKSTER FORTRESS. MEANWHILE, THE ADOPTED SWISS USAGE OF GOLD GROWS, SEEN IN SECURITIES PAYMENTS. $$$

The people of Switzerland wish to put a halt to the lunatic practices of the Swiss National Bank, and to save what gold reserves remain. Two to three centuries of wisdom have yielded to corruption. They must do battle with the banker elite in control. The Swiss Peoples Party has launched a referendum to protect the 1000 tons of gold owned by the Swiss National Bank. The stated goals are: 1) to make unconstitutional the sale of gold reserves, and 2) to force the central bank to hold 20% of its assets in gold. The current ratio of gold assets in reserve is 16%. The proponents declare the sale in recent years of 1500 tons of their total 2500 tons to be regrettable, especially given the Swiss population had no word on the decision. The inference of a syndicate action is clear, but the people might soon learn they do not own the central bank assets at all. The referendum requires 100,000 signatures from supporters in order to be launched into action before 20 March 2013. The nation of Switzerland has a long history with the referendum process, called direct democracy, a tool that American citizens need to deploy urgently. US States have used the referendum process well, like in California, Massachusetts, and elsewhere to limit property tax. Memorable past votes include the decision to stay out of the European Union (1992), and the defeated referendum to abolish the Swiss Army (1989, 2001). The policies underway carry big implications, and the limits imposed by a referendum would be very restrictive. For instance, consider the plan to intervene on the Euro/SWFranc exchange rate. As FX interventions expand its balance sheet, the SNB would be forced to purchase large quantities of Gold bullion so as to conform to any 20% gold ratio rule. The 100,000 signatures should be easily achieved, seen by veterans as an easy hurdle. See the Zero Hedge article (CLICK HERE).

The Swiss are the first to use gold in securities payments. It will be accepted in payments against the delivery of securities on the Swiss stock exchange. SIX Securities Services announced the plan after the successful settlement of transactions involving gold with a test group of customers. The Swiss stock exchange and the specialized market for structured products, Scoach Switzerland, plan to enable trading of products in XAU gold units in October. The unit equals one troy ounce of gold. The motive for the change was explained by SIX Securities Services, which it said was in response to the high interest among gold investors, and the disturbing rise of market uncertainty, confusion, and swift declines. The SIXSS actually said "Gold is the new currency." Usage in transactions will require an XAU gold unit account with the company.

◄$$$ THE COIN MARKET HAS BEEN DISRUPTED, BUT IT CHUGS ALONG LIKE A LOCOMOTIVE TRAIN. CHINA RAIDED THE PERTH MINT AND DRAINED IT DRY OF SILVER COINS. THE GLOBAL METAL SHORTAGE CONTINUES. IN EUROPE THE OPPOSITE EFFECT IS AT WORK. THE MANY BANKS ACROSS EUROPE ARE RESTRICTING GOLD COIN PURCHASES. THIS IS A REVERSAL OF POLICY FROM JUST A FEW MONTHS AGO. CONSIDER THE RESTRICTIONS AS A CONFIRMATION THAT THE WESTERN BANKING SYSTEM IS ON THE VERGE OF COLLAPSE. AMAZINGLY, GOLD COIN SALES ARE BEING LIMITED BY ANTI-MONEY LAUNDERING LAWS. $$$

The Perth Mint in Australia has suspended mint operations on the Silver Dragons. Their press release was brief and to the point. "With immediate effect we are temporarily suspending orders for 1/2-oz, 2-oz and 5-oz 2012 Year of the Dragon silver bullion coins. This decision has been taken in response to unprecedented levels of demand for these three sizes, which is stretching production capacity to the limit. A temporary suspension in order taking is therefore required to enable us to re-stock these product lines and focus on fulfilling all existing orders as quickly as possible." This announcement screams metal shortage. See the SilverGoldSilver article (CLICK HERE and HERE). Also, a tidbit with meat from a Hat Trick Letter subscriber. "My dealer said there is an 80% chance that China just cleared out the Perth Mint for all of the 2011 one-ounce supply, especially the Dragons." A big hat tip to King World News, which anticipated the drainage and broadcasted the warning.

Banks and governments are moving to restrict personal gold bullion purchases. They are protecting their insolvent franchises. Mac Slavo provided an eye-opening account. Here are excerpts. The shocking element to the story is the system standing on Anti-Money Laundering principles in audacity. US banks rely on narcotics money, but claim money laundering as the reason for limiting gold coin sales!! A deep thread of desperation has gripped the Western nations, plainly evident by government policies. The Western banking system is on the verge of collapse. So restrictions against assets of real tangible value are being tightened further. Mac Slavo wrote the following.

"Europe is on the brink, though as is generally the case, the average European has no clue what is coming their way. The most alarming situation we identified is one relating to the purchase of gold coins and bullion, specifically in the country of Austria, but one that will likely make its way across the EU if it has not already. Unlike the United States, where gold and silver can be purchased through traditional methods like visiting a local dealer directly, or even placing an order on the internet, it is much more difficult to find a gold/silver dealer outside of Germany or Switzerland. As a result, those individuals interested in acquiring gold are left with purchasing directly from local bank branches. Had you visited an Austrian bank three months ago, you would have had absolutely no problem purchasing a large quantity of gold/silver from the bank. You would simply call the bank about 24 to 48 hours in advance, let them know you are coming and how much you needed, and you would personally pick up your order within a couple days. A new trend in Austrian (and perhaps the rest of Europe's) banking policies suggests that certain interested parties are attempting to control the sale and personal acquisition of gold/silver as safe haven assets. According to the bank representatives and manager we spoke with, Austrian banks have now been ordered to restrict the sale of gold and silver bullion purchases and are limiting personal acquisitions of precious metals to EUR 15,000 (approximately $20,700 USD) at a time, or 11 ounces of gold at today's prices. Upon further discussion we learned that these policies were implemented over the course of the last 30 days, and they are now standard operating procedure.

The reason given was the banks had come under pressure from European Union, Austrian, and US officials, with this particular manager specifically citing US money laundering initiatives and the third EU Money Laundering Directive which was implemented across the zone in December of 2007. The idea that these restrictions have been put in place as anti-money laundering measures is laughable. As Austria is one of the more developed nations in the EuroZone, there is a strong likelihood that they are not the sole country implementing these new policies, and that this has been, or soon will be, implemented across the entirety of EU nations.

It is becoming clear that the economies of the EU and US are under threat of a significant and potentially permanent financial collapse. While central banks, large institutional funds, and wealthy private investors across the world continue to buy up gold, governments seem to be moving quickly to restrict the ability of average people to do the same. They are rapidly implementing policies to either restrict or track these types of transactions. Many cities around the country, such as Houston TX, have passed identification requirements that force sellers of precious metals to present a valid form of ID at the time of sale. Like Europe, the United States is expeditiously implementing direct methods of tracking these transactions, as well as indirect methods that target those who may be engaging in suspicious activities, namely using cash, as per FBI and Homeland Security bulletins issued last month. The noose is tightening. Governments, large financial institutions, and political chess players know exactly where real value exists. And it is certainly not in the currencies that are being printed with reckless abandon."

For some solid background reading, check out the Dan Norcini article entitled "Central Banks Waging War On Gold" (CLICK HERE). Also the venerable warrior Jim Sinclair discusses recent driving factors behind the gold market (CLICK HERE) with accompanying YouTube videos (CLICK HERE and HERE).

◄$$$ DONALD TRUMP HAS ACCEPTED GOLD IN A PROPERTY DEAL, BETTER THAN MONEY. BEING NO FOOL, HE INSTITUTES THE TRUMP GOLD STANDARD. HE OPENLY REPUDIATES THE OBAMA ADMIN ECONOMIC STRATEGY. WISELY TRUMP EXITED THE PRESIDENTIAL RACE, WHICH MIGHT HAVE ENDED BADLY. $$$

The new 70-story skyscraper in Manhattan's Financial District boasts the prestigious label 40 Wall Street, an address signifying bond fraud. On September 15th, the newest tenant handed over to Trump a security deposit worth $176,000. No money was exchanged, just three 32-ounce bars of gold. The occasion marked the first event the Trump Organization accepted 99.9% pure gold bullion rather than cash, as a deposit on a commercial lease. The tenant was precious metals dealer Apmex, which closed on a 10-year lease for the 50th floor at $50 per square foot. The Apmex CEO Michael Haynes wished to promote the use of gold as a replacement for cash. Trump accepted the money instead of fraudulent cash, and even made a public remark that the deal served as a repudiation of the Obama Admin economic policies, against which he has been a vocal critic. He holds some gold in his personal portfolio, but declined to reveal the amount.

Once a presidential candidate with more an economic message and laced spear directed at the White House, The Donald (Trump) removed himself from the campaign. Reports leaked out across the West that he received death threats after attempting to prove that Obama was not an American citizen, and worse. Private investigators dragged up information that Obama from his younger days of adventure in Manhattan, something that a few reporters have been murdered over (story confirmation). So Trump ended his run for the presidency, choosing not to follow Ross Perot's path of running despite the death threats. Just the usual US presidential politics.

GOLD PRICE CONSOLIDATES

◄$$$ PANIC AND CRISIS ELEMENTS WILL CONTINUE TO FUEL THE GOLD MARKET. THE FACTORS ARE BECOMING WELL RECOGNIZED, ENOUGH TO PUSH GOLD TO THE FOREFRONT AMONG SAFE HAVENS. EVENTUALLY, IT WILL BE THE LEADER, ALONG WITH ENERGY & METAL DEPOSITS, AND FARMLAND. $$$

The greatest impetus behind the Gold bull market is the permanent 0% rate and the ruin of sovereign debt. No longer is government debt safe. Economic recession has been accepted as the next immediate crisis, as almost $3 trillion of money did nothing to remedy grotesque economic imbalances. No big dead banks have been liquidated. An exhausted US Federal Reserve is perceived as being without tools, credibility, or prestige. A USGovt debt limit will always be at the doorstep, in fact in violation currently. The watchwords are political strangle and useless fiscal policy. Debt applied as solution to a system saturated in debt is being understood as a policy of futility, but that will not stop its practice. An insolvent system is unable to respond to amplified liquidity. The Western banking system is ready for 20 Lehman episodes, the concentration being in European banks. The ruin of money is accelerating among all major currencies, as the Competing Currency Wars ratchet upward. The USTreasury Bond bubble has almost run its course, with a 1.5% yield perhaps seen as the limit. As the prospect of principal gains diminish for USTBonds, watch Gold move to center stage.

Panic is slowly setting in across the society, marked by worry, anger, and despair. Lost trust of public officials has grown, whose talk about job creation and homeowner aid is empty. The housing market is in permanent decline, a tragic signpost for the American systemic failure. The powerful grip of hyper-inflationary recession is an imminent reality. The decline in the crude oil price is a signal of the deep recession and lost demand. The rise in the Gold price is a signal of inflation and systemic ruin of money. Gold seen is the only asset without debt risk, the only bonafide safe haven. Watch the divergence grow between the COMEX price and premium paid for physical buyers. Without the regular permitted raids by COMEX of the GLD & SLV inventories, the prominent metals exchange would have shut down its gold & silver business.

◄$$$ THE EURO CURRENCY HAS COME DOWN AFTER CERTAIN INTEREST RATE CUTS HAVE BEEN TELEGRAPHED. BOTH THE EURO AND USDOLLAR CURRENCIES ARE DOOMED. EACH LOOKS COMPARATIVELY BETTER AS THE OTHER STINKS WORSE. THE BULLDOG VERSUS THE SWINEHOUND, REJECT BOTH AND CHOOSE GOLD & SILVER INSTEAD. $$$

The Euro currency has been trading higher for several months almost exclusively because of the rate hike given by the Euro Central Bank. The change has nothing to do with USDollar strength. Take it away, and the exchange rate comes down. The various sovereign bonds of Southern Europe had offered wild yields, without altering the Euro. But if the European Union breaks apart, or some nation is expelled from the monetary union with common Euro usage, then the Euro will experience extreme changes. It is not clear whether it would move up or down, depending upon the details behind the event. If all PIGS nations were expelled, the Euro would become the strongest currency in the world rapidly. As long as the PIGS are embraced and fed with an endless supply of bailout funds, both currencies (the Euro and USDollar) are doomed. Gold rises every time either currency has trouble. They are the two biggest turds circling the toilet bowl in the fiat currency flush. They are a bulldog pointing to a schweinhund, claiming to be prettier than the other indescribably ugly dog. The past trading pattern of a falling Euro and rising USDollar pulling down Gold no longer applies. The Gold price is trading on uncertainty, fear, monetary system ruin, sovereign bond distress, USTBond lack of bond yield, return of USEconomic recession, wrecked USGovt debt limits, runaway USGovt deficits, and human blight. Gold has disconnected from any one currency, and moves with the major currencies as a group.

◄$$$ UPTREND IN THE GOLD CHART IS INTACT. A MASSIVE BREAKOUT IS IN A PERIOD OF CONSOLIDATION. EXPECT MORE USFED MONETIZATION PURCHASE OF USTREASURY BONDS. EXPECT MORE USGOVT STIMULUS. EXPECT $2 TRILLION IN USGOVT DEFICITS NEXT YEAR. GOLD RISES FROM THE RUIN OF THE MONETARY SYSTEM AND ELIMINATION OF ALL SAFE HAVENS. $$$

◄$$$ THE SILVER MARKET IS CONSOLIDATING. IGNORE THE APPARENT PENNANT PAUSE PATTERN MADE OBVIOUS BY A SPRINGTIME JETTISON IN PRICE. INSTEAD FOCUS ON THE STRONG UPTREND CHANNEL EVIDENT OVER THE LAST YEAR. SILVER SHORTAGE REMAINS EXTREME. COIN MINTAGE IS STALLED. USAGE AS A RESERVE ASSET IS ON THE RISE. THE GOLD/SILVER RATIO IS ASSURED TO COME DOWN, FAVORING SILVER. $$$

◄$$$ GOLD VERSUS THE MONEY SUPPLY PROVIDES AN ARGUMENT FOR A $10 THOUSAND GOLD PRICE. ALL IN TIME. LIKE WITH A YOKE, THE GOLD PRICE RISES CONSISTENTLY WITH THE AGGREGATE MONEY SUPPLY. HATHAWAY EXPECTS MASSIVE INFLOWS INTO GOLD FUNDS, AS PUBLIC PARTICIPATION WILL PICK UP. GOLD IS GREATLY UNDER-OWNED. THE EXTREME LOW INTEREST RATE PAID FOR SAVINGS WILL INDUCE INVESTORS TO BUY GOLD. $$$

During the 1980 peak event, the Gold price briefly reached a level at which it was 120% of the total money supply outstanding at that time. Noted veteran precious metals analyst and manager of the Tocqueville Gold Fund, John Hathaway makes the point as part of a compelling interview on King World News. Today the money supply is an order of magnitude greater. Therefore, in order to reach the 100% money supply level, the Gold price must fly upward to the $20 thousand price level per ounce. Next factor in the deflation element, as home equity has been ravaged, as business capital has retired from rising costs, as businesses are destroyed by cheaper Asian competition, as acidic sovereign debt amplifies the damage. So maybe the Gold price will reach only halfway to the $20k target, and work its way to the $10 thousand price level. Down the road, expect for money supply to grow radically again from both QE-type debt monetization and recession driven USGovt fiscal stimulus. My forecast is for a $2 trillion federal deficit next year. Money created in mass production must be compensated by a higher Gold price, since money is being quickly debased. The extreme forecasts do not sound so crazy after such arguments are integrated. Hathaway calls the current gold price the opportunity of a lifetime, as a mountain of new money is being planned for production. See the King World News article (CLICK HERE).

The following are Hathaway's thoughts on the Gold investment arena, always a savvy voice. "To me it is just standard operating procedure for how markets correct. It got a little scary when gold touched $1900 a couple of times, because it was so stretched out and normal market protocol calls for some backing and filling here. I think that is all it is, just static noise. But again, I would hasten to add for both silver and gold, we are in an environment where the conditions are very favorable for money to come into both metals. You just do not know what the next news development is going to be that will create the next wave of demand. I do not trade this stuff. I own it because it is a great asset to have that is not in the banking system. We have negative real interest rates. So people who save money are getting nothing for being in Treasurys. People who bought Swiss Francs have been hammered by the Swiss government's desire to perk up their economy. The European community has been unable to solve the sovereign debt issue. I do not think they will be able to with the tactics they are using. Consequently, maybe the Euro is threatened as a currency.

Gold is extremely under-owned. Most people have missed the whole play, particularly conventional institutions that need to show performance for their clients. The bottom line is that gold and gold shares are part of the answer. The gold mining shares are a huge opportunity for people who are sitting on the sidelines. Basically the stock markets are down, [led by] bank stocks or technology stocks or retail stocks. The gold stocks are an answer and maybe one of the few answers for that portfolio manager. So what we have seen over the last seven months is gold rising by something like 30% and during that time the XAU is down about 3% or 4%. The gold stocks represent extraordinary value and extraordinary opportunity right now. The Silver price had sort of a blowoff, and now Silver is in the middle of a range for the last three or four months. It is acting well to me and I am sure it will break out at some point. But it has quieted down and I would hope that is what gold is going to do."

◄$$$ GMUER FORECASTS OF $6200 GOLD AND POTENTIALLY $620 SILVER. PRECIOUS METALS ARE RESISTANT TO WHOLESALE PRODUCTION VIA MACHINES, LIKE DEBT SECURITIES WHICH HE EXPECTS TO FALTER BADLY. NO SAFE CURRENCIES REMAIN, THE RECOGNITION FOR WHICH WILL ENCOURAGE A STAMPEDE INTO GOLD & SILVER. CLAIM OF BUBBLE IS ABSURD, AND ONLY MEANS THE PUBLIC HAS DISPOSED OF GOLD. THE EMERGING MARKET ECONOMIES ARE AWAKENING, AND WITH THEM HUGE PENT-UP DEMAND FOR GOLD. $$$

Urs Gmuer is an asset manager at Dolefin in Switzerland. He expects to see a $6200 Gold price at the peak, after the bull run ends all major bull markets in this era. His prediction is based on analysis of the last major gold boom of the 1970s, during which gold prices rose from $35 per ounce to $850 per ounce. He sees similarities, except the current crisis appears worse. The Gold price would catapult upwards by a protracted period of global economic difficulty, during which investors would continue to search for valid safe havens. He believes no safe currencies remain, leading the cautious investors no choice but to pursue the precious metals. Gmuer regards the precious metal as having entered a Super-cycle, which he contrasted to the 1998-to-2000 boom in technology, media, and telecommunications. He identified debt assets as the class for which demand and prices would decline.

Gmuer said, "Gold prices have risen over the last few years, as the macroeconomic picture has become worse. The deterioration of the fundamental situation has now gone even further. Purchases by investors of gold will be based on fears of systemic risk or banking crashes. The ultimate currency, which has stood the test of time, which has no political support behind it, is gold. Nobody can print Gold out of a machine or a PC. What the Swiss National Bank did 2-1/2 weeks ago, increasing the supply of the Swiss Franc, means the safe currencies are all gone. That is why Gold will have a revival. This bull trend will end all the other major bull markets. If everybody is saying a particular asset is a bubble, that reflects the fact that most people have disposed of it." The contrary nature of the final point is brilliant. No bubble is given alert on a billboard. Think back to housing and nowadays the USTBond. An asset bubble takes the majority by surprise, by definition. Gmuer dismissed the gold price bubble claim. He referred to calculations that indicate Gold prices could peak at $3500 or $4000 per ounce, based upon historical data regarding the long-term ratio of gold prices to the global money supply.

Gmuer is even more optimistic about future Silver price, which he forecasts will rise 14-fold from here. Silver is set for an even greater runup than gold, as the market corrects a distortion in the silver price relationship to gold. The current Gold/Silver multiple is near the 45:1 ratio. However, Gmuer points to declining silver output over the last 60 years, as a result of mine reserves depletion and mine shutdowns. He estimates that global silver supplies currently outnumber gold by a ratio under a 10:1 ratio, which should force a significant re-pricing correction. Once this occurs, Gmuer expects the Silver price to settle between a 10:1 and 16:1 ratio. He cited an eventual $6200 gold price and potential $620 silver price. At the higher ratio, the silver potential would reach almost $400 per ounce. He lastly commented that markets for all precious metals were benefiting from the surge in demand for commodities, food, and energy from developing countries. He concluded, "Since World War II, the world population has almost quadrupled. However, most of the increase was in countries that had closed political systems, such as the Soviet Union, China, and India. When these countries started to open up in the 1990s, their people saw they could increase their level of well-being. It is pent-up demand." See the CNBC article (CLICK HERE).

◄$$$ THE GOLD SPREAD OF PHYSICAL OVER SPOT HAS NARROWED TO ALMOST NOTHING IN EARLY SEPTEMBER, SIGNALING EXTREME METAL SHORTAGES. THE TORONTO P.D.A.C. MINING CONFERENCE TOOK PLACE TWO WEEKS AGO, A CERTAIN MOTIVE FOR A GOLD AMBUSH. $$$

The Jackass has benefited from the observations of Mexico Mike for years. He is a bright alert Canadian investor with a knack of latching onto key information. His perceptions are never without value. He made some useful comments two weeks ago, when he said the following.

"I try to add more physical bullion during every sustained selloff, which means I am a buyer about every six weeks or so. Even if I can only afford another ounce of gold each time, or just a few extra ounces of silver, I figure it all adds up and the prices paid today will look cheap sometime in the future. Sure, we may be in the midst of yet another coordinated takedown that could drive the metals far lower, but I doubt it. The Open Interest for gold and silver are relatively low by historical standards and therefore this means there is not much juice to squeeze out of the lemon in terms of weak handed longs. So the selling this week does not have the look of a raid, but more likely an intervention was agreed to at the G-7 meeting last weekend as a means to take the heat off the stock market weakness. Rather than address the real issues during a crisis, the leaders of the free world prefer to just rig the markets and hope for the best. Like the government sponsored interventions in the currency markets, this round of metals bashing will have a limited effectiveness and can only buy time.

Today I checked the price spreads from my favorite bullion dealer and noticed the offered price to buy silver is exactly the market price. This tells me all I need to know. If the dealers are paying spot to buy bullion, then the inventory levels are running thin. It means that the price weakness is not related to smaller investors dumping bullion. The obvious is more likely the case as more and more people have come to behave as I do, and buy the dips. On the other side, the selling price today is at a hefty premium to the spot market.

There is a big mining conference underway this week in Toronto, that is largely marketed to retail investors. I noticed earlier this year when the PDAC was hosted in Toronto, both gold and silver were hammered hard during the show. Similarly, the big conference in Vancouver to start the year was also notable in that gold and silver suffered severe (and temporary) setbacks during the show. The metals are volatile, and other factors are at play that can be driving factors to contribute selling pressure. But I also do not believe in coincidences. These mining conferences attract many thousands of investors and most of the premier mining and exploration companies participate. We know the Cartel has an objective to keep interest in the sector at low levels. What better time to pick for a nasty selloff than when a conference is underway. Cheers, Mexico Mike." Ditto for a big gold takedown ambush during the early August GATA conference in London.

◄$$$ US-STOCKS ARE DIRECTLY DEPENDENT UPON A WEAKENED USDOLLAR. EITHER USTBOND MONETIZATION OR USGOVT STIMULUS IS COMING, PROBABLY BOTH, LIKELY IN GRAND VOLUME. THE US-STOCK MARKET IS SEEN AS A PRESSURE POINT FOR AMERICAN PUBLIC REACTION. OUTSIZED USGOVT DEFICITS AND AN ASSURED USECONOMIC RECESSION MAKE CERTAIN ACTION BY THE USFED OR INTERVENTION BY THE PLUNGE PROTECTION TEAM. GOLD WILL RESPOND VERY FAVORABLY BY REQUIRED USDOLLAR DEBASEMENT. OBSERVE THE STAGES OF BREAKDOWN IN THE S&P500 INDEX. $$$

◄$$$ MINING FIRMS HAVE BIG POSITIVES BUT ALSO NOTABLE NEGATIVES IN HIGH COSTS, HOSTILE JURISDICTIONS, AND DIFFICULT DEPOSITS. CONFISCATION IS FEARED. IN MY VIEW, CONFISCATION WOULD BE A GRAND ERROR. IT WOULD EXPOSE GOLD FOR ITS MUCH HIGHER VALUE, AND SHARPLY LIFT ITS PRICE. MINING FIRMS PLEDGE A STEADY RAMP IN DIVIDENDS, TO MATCH A RISING GOLD PRICE. $$$

My preface has applied for over three years, when disenchantment set in on my end. In addition to hostile jurisdictions and difficult deposits over two years ago, the threat to paper-based securities investment took root. Then came the higher costs of mining operations that made even more difficult the challenging mine deposits (deeper underground, smaller mineral yield). Gold miners are beginning to respond to weak stock price performance. In recent weeks, mining companies have begun to announce raised dividends, funded by ample cash in the coffers. The competition with (even corrupted) GLD & SLV exchange traded funds forced them to offer an advantage. They have offered something that ETFunds cannot, a dividend yield. Whereas the GLD & SLV frauds engage in shorting their own shares, delivering inventory bullion metal to the COMEX, kneeling before the syndicate, the mining firms can deliver a basic dividend yield.

Newmont (NEM) recently introduced a dividend structure that committed a 7.5 cent dividend per share when a gold price is realized for a full quarter over $1700 per ounce. They will raise the annual dividend by 20 cents for every $100 rise in the gold price. Then they pre-empted their own bid, announcing an additional 10 cent increase for every $100 rise above $2000. Barrick Gold (ABX) in April unveiled a plan to base its dividend payments on gold prices. The smaller mining firm Gold Resource said it might start paying dividends in physical gold. The industry has recognized the need to give shareholders more of a direct link to the gold price. The overall sector hands out only a 0.7% dividend, according to Bloomberg data. HSBC gold analyst Patrick Chidley claims the mining stocks are trading consistently with a $1400 gold price. He remains optimistic for a rebound. The Jackass is less sanguine.

The gold product is doubling in price every couple years. The profit margins are soaring for mining firms, many having $1000/oz profit margins. It is virtually the only sector going up in valuation while everything else goes down. Mining firms face huge challenges with higher costs, shortage of good engineers, shortage of capital, hostile jurisdictions, and difficult deeper deposits. They are routinely attacked by Wall Street and hedge fund clients in spread trades. Outside of Canada and Australia, one can expect that most mines will face the threat of nationalization, such as seen in Venezuela. The global financial crisis is turning into a global trade war with financial overtones. This war will involve natural resources and commodity control, with precious metals at the top of the target list, more so than energy deposits. Mining firms will be increasingly seen as Better Banks capable of producing real wealth, as opposed to the Paper Merchant Central Banks whose paper spew has contaminated the global landscape. The mining banks could become the object of confiscation on grounds of national security and survival. It is a sincere Jackass hope that Western nations make a horrible decision to attempt gold confiscation, whose effort will appear like herding cats and dogs or gathering ants & insects. As the targets scurry about, the global value of Gold & Silver would soar. Their draconian response to banking system and monetary system ruin would prove the value to be double in a single month. Widespread seizures would enable its flight to China, Russia, Singapore, Argentina, and Zimbabwe for security. The US & UK would become pariahs and seal their fate as Third World the newest members.

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