GOLD INVESTMENT REPORT
PRECIOUS METAL & ENERGY
CURRENCIES & STOCK INDEXES


* Intro Golden Nuggets
* USDollar Isolation & Decay
* Rise of USDollar Alternative
* Gold Story MegaPicture
* Gold Story Physical
* Gold Price Ready to Surge
* USEconomy, Decay & Stench



HAT TRICK LETTER
Issue #102
Jim Willie CB, 
“the Golden Jackass”
19 September 2012

"If we act now to replace the fiat system with a stable Dollar backed by precious metals or commodities, the Dollar can regain its status as the safest store of value among all government currencies. If not, the rest of the world will abandon the Dollar as the global reserve currency." ~ Ron Paul (neglects to mention the Third World destination as consequence)

"A grand hyper inflation of prices is now directly ahead on the trail. It should be ushered in with a large crackup in the currency derivatives market. Once this event is in process, the paper gold markets will quickly rush to discount against physical gold. The discount will break our gold market pricing and physical allocation system." ~ FOFOA

"The benefits of Quantitative Easing (aka bond monetization) on stock prices is artificial, manufactured, and fake. The effect of same on the metals is permanent, genuine, and real." ~ unknown

"In short, we understand our risks, and we believe that they are acceptable in view of the prospective returns that we associate with them at present. My concern is that in the face of very widespread complacency about global economic recession, and the nearly infinite faith in the redemptive capacity of monetary policy, investors have neither taken an inventory of their risks, nor have any sense of the low prospective long-term returns (and potentially awful intermediate-term returns) that are presently associated with those risks." ~ John Hussman

"Andy Xie of Caixin he says the United States is low taxed, with government at all levels at 24.5% of GDP, but then points out that in the US, health care is 18% of GDP. He ignores the fact that in most other countries, health care is included in the government portion. Therefore in the US the comparable figure for government plus health care burden is 42.5%. One could also add in a number of other private sector services in the US that are actually more or less mandatory and also are cartelized, therefore not free market. So to say we are small government is meaningless in any real terms." ~ Aaron Krowne (editor of Implode-Explode)

"There is a limited amount of gold and there has been an unlimited amount of paper money over the past 20 to 30 years. Gold has a considerable store of value that paper money does not.  Gold will be higher than it is today and certainly a better investment than a bond or a stock, which probably will return only 3% to 4% over the next five to 10 years." ~ Bill Gross (PIMCO)

"There is no more powerful bull rally breakout than one that emerges from a long boring consolidation, to be realized soon with Gold." ~ the Jackass (a technical chart axiom)

"The latest reports I have received is that there is basically no physical Silver available for immediate delivery in London. In fact, the estimated time for delivery is further into the future than some traders have ever experienced." ~ Patrick Heller (with eyes in London)

"The dichotomy between weakening economic activity and rising stock prices becomes ever more pronounced. Over the past few days the final August PMI data for all the major economic regions in the world have been released and they continue to paint a picture of a synchronized global contraction. Clearly the stock market is focused on one thing only: the promise of more money printing by the major central banks. This remains a potential set-up for disappointment if they fail to deliver to the extent that is now widely expected." ~ Pater Tenebrarum (Acting Man)

"In the end game, Gold is the ultimate hedge as Gold is a hedge against both deflation and inflation. Deflation, characterized by a collapse in demand, is now in motion. Inflation, perhaps accompanied by its virulent stepsister hyperinflation, is coming." ~ (the AU Report)

"The response in the precious metal prices after the Bernanke and Draghi desperate QE decisions serve as the tip of the iceberg or the first crack in the snow wall before the avalanche races down the hill. I am of the opinion that we see Ag at $400/oz in the foreseeable future. That will put Au at $10,000/oz with a 1:25 Ratio. I could be wrong, but doubt I am. It is a question of time, like 24, 36, 48 months. Who knows and who really cares? As long as you hold physical precisous metal, you can go to the beach and ignore the weekly gyrations, deceptions, and Kabuki theater. You will always come out as the winner." ~ my veteran gold trader source

## INTRO GOLDEN NUGGETS

◄$$$ FACEBOOK FELL HARD AFTER ITS VERY ORDINARY EARNINGS WITH UNSPECTACULAR FORWARD GUIDANCE. AS CITED TWO MONTHS AGO, THIS IS A $10 STOCK, THAT POSSIBLY A GENEROUS VIEW. $$$

The Facebook (symbol: FB) stock was under 19 per share a couple weeks ago. Enough said. In August, a techical violation rarely seen took place. The price did not bounce off the 26 level, where it once enjoyed a brief recovery in June. Instead, it gapped down hard from the 28 level to the 21 level, bounced around some, then fell under 20. Its earnings outlook appears questionable, as cited from the start. The lawsuits have yet to register, which should take the stock to my target of $10 per share. The rally last week was prompted by a change in propsective earnings growth, which should be interpreted as Wall Street covering its short positions and applying the public address systems. Do not expect to hear of the Facebook involvement as a USGovt security agency device. One can only hope that Goldman Sachs still sits on this rotten paper from their investment stake. As further evidence of Facebook marrying Big Brother, promotional deals are offered immediately to people whose faces are recognized within the Facebook database when they enter a variety of stores. Some might regard the technique as clever. The Jackass regards it as sinister. If a person is wanted for trumped up charges of whatever fabricated nature, he can be arrested while ordering blue jeans, a CD, or coffee. That is not the kind of world that teems with liberty. See the UK Daily Mail article (CLICK HERE).

◄$$$ THE CITY OF STOCKTON IN CALIFORNIA WENT BANKRUPT. WALL STREET HELPED THE PROCESS ALONG, THEIR SPECIALTY, IN A DESTRUCTIVE VEIN. THE STOCKTON BONDS FAILED, AFTER SOLD BY LEHMAN. RISING PENSION BENEFITS, FALLING ASSET FUND RETURNS, AND DECEPTION HAVE CREATED QUICKSAND FOR SEVERAL STATES. CURIOUSLY OREGON IS THE WORST OFF AMONG STATES. $$$

Jeffrey Michael is a finance professor in Stockton California. He analyzed in detail the city's bankruptcy, and found an ugly piece to the puzzle, a veritable smoking gun. It was a dubious bond deal that bankers had given the hard sell to Stockton, exactly when the local economy was starting to tank in the spring of 2007. The city council clearly was not loaded with Hat Trick Letter subscribers for forewarning. Stockton sold the bonds, valued at $125 million, so as to obtain cash to close a shortfall in its pension plans for current and retired city workers. Thus the name pension bonds. The strategy backfired, which sent the city into Chapter 9 bankruptcy. The city is attempting to abandon the so-called pension obligation bonds as well as to renegotiate other debts. After reviewing an analysis of the bond deal, underwritten by the dead investment bank Lehman Brothers, and watching a video recording of the Stockton City Council meeting where Lehman bankers pitche d the deal, Michael concluded that "Stockton is entitled to some relief, due to deceptive and misleading sales practices that understated the risk. Lehman Brothers just did not disclose all the risks of the transaction. Their product did not work, in the same way as if they had built a marina for the city and then the marina collapsed." The Stockton marina collapsed right away.

The standard Wall Street pitch involved an attractive feature. The claim was that the next batch of pension obligation bonds would have an investment grade rating, because they would be backed by property taxes instead of investment returns like from a particular pension fund reliant upon a strategy. Stockton received the pitch that it could issue municipal bonds with a lower interest rate than the California state pension system, known as CalPERS. The city council members struggled to comprehend how the bonds would ever be repaid, and wondered about the unrealistic projections on the fund growth. The case sounds like a smaller scale disaster suffered by Jefferson County in Alabama, made victim by the venerable destroyer JPMorgan. The year that Lehman Brothers made the deal with Stockton, the city had a shortfall of $152 million with CalPERS, which administers benefits for the city's retirees. The gap appeared because in 1999, Stockton increased the value of the pension benefits for its workers, without making a corresponding increase in the yearly prepayments it sent Calpers to cover the cost. The plan was unsuccessful. The accounting recklessness was blatant, but is extremely common across the US states. The CalPERS investments lost about 25% of their value during the financial turmoil that began in 2008. As a result, the city had a separate new debt owed to CalPERS, compounding at 7.75% per annum, on top of its debt to the bondholders. Stockton found itself in an intractable bind, with 29 more years remaining.

Financial analysts and actuarial experts claim essentially the same pitch that swayed Stockton has been made thousands of times to local governments all over the country, most of which went bad, costing the cities and agencies heavily. Since the majority of pension obligation bonds stand on the same basic strategy that Stockton followed, the analysis and research by Michael could serve as a roadmap for avoiding such Wall Street mine fields or perhaps for seeking court remedy. His analysis was part of a regional August economic forecast, which he provided as director of the Business Forecasting Center at the University of the Pacific. He has identified $64 billion in pension obligation bonds outstanding. The flow of these risk filled bonds continues, although more slowly than a year ago.

The basic foundation of pension obligation bonds is that a city or municipality can borrow at a lower rate of interest than the assumed growth rate for its pension fund assets over the long term. The strategy is a form of carry trade or arbitrage on the USEconomy in effect. Often the funds are placed in the stock market. Therefore the interest on pension obligation bonds, unlike muni bonds, is not tax-exempt. The risk spreads like a cancer. Officials in Fort Lauderdale in Florida were scheduled to vote on a $300 million pension obligation bond. Hamden Connecticut had amended its charter to allow for the bonds to rescue a city pension fund that has been drained dry. Oakland California recently issued $211 million of these bonds, following the leaders into the pit with stakes (not steaks) awaiting their fall. Alicia Munnell, director of the Center for Retirement Research at Boston College, examined the outcomes for nearly 3000 pension obligation bonds issued between 1986 and 2009. Most were not successful, stuck in the red with net losses. The only successful pension bonds were issued a few decades ago or in the wake of dramatic stock downturns. See the tally of losses that threatens numerous other states.

◄$$$ THE STATE OF ILLINOIS SUFFERED A CREDIT RATING DOWNGRADE, AS PROBLEMS ARE STUCK AND NOT RESOLVABLE. THEIR PENSION SHORTFALL IS GARGANTUAN, CITED IN THE DOWNGRADE. PENSION FUNDS AROUND THE NATION AND AROUND THE WORLD MUST INCREASE THEIR GOLD ALLOCATION. $$$

Pension problems and government gridlock led to a debt downgrade for Illinois as another reduction in its credit rating was handed down in late August. Standard & Poors attributed the rating downgrade by one notch to what they described as weak pension funding levels and lack of action on reform measures. The firm also said the financial outlook for Illinois is negative, citing the temporary income tax scheduled to expire in 2015. Lower ratings tend to increase the interest rate a state must pay to borrow money and raise funds from bonds. The downgrade (from A+ to A) leaves Illinois with the second worst rating from S&P. California is rated A-, but for some cockeyed reason it has listed with a positive outlook from the agency. Governor Pat Quinn acknowledges severe public pension problems in Illinois. The state retirement systems have a $85 billion gap between money available and what they will eventually pay out in pensions. The shortfall is the largest in the country. See the New York Times article (CLICK HERE). The Chicago teacher strike adds emphasis to the state's problems. The problem is much worse. Pension funds around the world are in huge trouble. The major bond yields are grossly inadequate, and supposedly secure sovereign bonds are big money losers. The best investment is Gold & Silver, but the majority of global pension funds invest a trivial amount if any in precious metals. Most have bylaws that prevent it.

◄$$$ CITIGROUP FORECASTS THAT SAUDI ARABIA WILL CEASE TO BE AN OIL EXPORTER BY YEAR 2030. DOMESTIC DEMAND IS FAST RISING, WHEN OUTPUT IS IN DECLINE. THE REPORT SEEMS GENEROUS IN THE NEARLY 20 YEARS BEFORE AN IMPORTANT CRISIS. THEY ASSUME THE HOUSE OF SAUD WILL BE IN POWER AT THAT TIME. REGARDLESS, EXTREME INTERNAL PROBLEMS WILL ARISE FROM THE ECONOMICS OF RELENTLESS DECLINE IN FOREIGN REVENUE INFLOWS. $$$

Ambrose Evans-Pritchard reports that not only are the Saudi oil wells gradually turning dry, but urban energy consumption is fast on the rise. A recent research report released by Citigroup cites Saudi Arabia will cease to be an oil exporter by 2030, far sooner than previously thought. The 150-page report by Heidy Rehman on the Saudi petro-chemical industry should be sober reading for those who regard MidEast oil supply as endless, or believe that shale oil & gas will come to the rescue. The basic point common to other Gulf oil producers is that Saudi local consumption is rocketing. Residential usage makes up 50% of demand, almost two thirds of which derives from the widespread air conditioning. The Saudi population wants some creature comforts. The Citigroup report ignores a glaring factor. The Saudi minister of security Prince Bandar was assassinated in August, according to my sources. The hit was done in retaliation for Saudi involvement in killings of Syrian regime leaders. The Saudi regime is precarious and suddenly unstable, with threats from the east in Iran via HezBollah and threats from the south via war-torn Yemen. Oil sales and petro-chemical deals with China will not prevent the fall of the House of Saud. The world is starting to awaken to the last chapter of the Saudi ruling regime, whose end will be the result of dwindling oil revenue, weakened security, internal dissension, active neglect by leaders, pressure on its Middle Class, hoarding of $billions in wealth, and outright moral rot. The more palpable immediate destabilizing factor might come from a steady decline in external flow of funds, as less crude oil is exported every year, resulting in lower revenues and higher federal deficits. Saudi Arabia already has a staggering national debt burden. They built up their military, the US only too eager to sell hardware, as the Saudi Royals have regarded their enemies to be external and internal, a natural byproduct of hoarding national wealth and religious extremism.

◄$$$ SOME VERY STRANGE SIGNALS ARE FLASHING FROM BRITISH PETROLEUM. THEY ARE PURCHASING GASOLINE FROM THE INDIAN REFINER MANGALORE. BANKER WARS MIGHT BE YIELDING TO GIANT SKIRMISHES CENTERED ON OIL SUPPLY. THE UNITED KINGDOM IS IN A PICKLE. BP NEEDS HIGH OIL PRICES TO KEEP THE DERIVATIVE WORLD ALIVE. HOWEVER, IT IS KILLING THE UKECONOMY. THE BRITISH MIGHT BE WORKING ON THEIR OWN BYPASS OF THE IRAN SANCTIONS IN SECURING CRUDE OIL SUPPLY, IN RESPONSE TO THEIR OWN POWERFUL DECLINE IN NORTH SEA OIL OUTPUT. BRITAIN MIGHT BE COURTING BETTER ARAB RELATIONS OUT OF NEED. $$$

An unusual series of events is occurring beneath the surface in the petroleum industry generally. Keep firmly in mind that the USDollar is underpinned by the defacto Petro-Dollar standard. The Western banks are in trouble, their basis of reserves being US$-denominated Treasury Bonds. The many rumblings over Iranian sanctions cut away one or two pillars of the USDollar standard platform. The numerous Chinese Yuan swap facilities create the basis for barter with several nations, conducted outside the King Dollar realm as well. In the midst of all this cauldron stir, British Petroleum is in trouble. Like the criminal enterprise Enron, BP is a major derivative player. By some obscene miracle, BP enjoys a single-A rating bestowed with mercy by all three rating agencies, despite their multi-$billion exposure and ongoing obligations related to the Gulf of Mexico wreckage ruin and subterfuge. It is my firm opinion that both Halliburton and British Petroleum committed grand sabotage, with collusion from the USGovt, protected by the Dept of Energy (inspections not done) and the Environmental Protection Agency (water samples doctored), even the Coast Guard (public eye kept at a distance, without fines levied over dead fish and whales).

For British Petroleum to possess an 'A' rating of any kind is a farce, an injustice to its bond holders. One notch downgrade would likely increase the pressure to post more collateral and cause more selling of assets. A two notch downgrade to high BBB would possibly be fatal. The BP operators caused untold damage in the Gulf of Mexico. Only now for some unexplained reason, the USDept Justice is now going after them. One is left to wonder if the some powerful players behind the USGovt have decided to try to shake down BP after shaking down the UK banks. The banker wars extending from LIBOR might be branching out to attack BP, establishing a second front in the crude oil industry. It is integrally linked to the financial sector by means of futures and derivative contracts. That would represent a brush fire jump not anticipated by the Jackass last month.

The oil front in the conflict has some billboard signals which are new and foreboding. The BP firm is buying gasoline from the Mangalore refinery, paying a premium. The refiner is located on the east coast of India, known formally as Mangalore Refinery & Petrochemicals Ltd. Surely BP has not exhausted its refinery capacity. The Mangalore firm receives the majority of its oil from Iran, who is selling it to BP at a premium. Something very strange is going on and must be dissected. The UK appears to be working to circumvent the Iran sanctions via this bypass route in order to build up winter supplies. Perhaps even they are taking measures in case of the outbreak of a war and supply cutoff. As intermediary, Mangalore earns a premium and India reduces its trade deficit. Perhaps something even more unusual is happening, like England trying to establish commitments for crude oil, with payments made largely in British Pounds. Gadzooks! Imagine the geopolitical impact if the United States and England suffered a split over Iran due to crude oil needs. Talk about isolation for the USGovt Helm! Sounds like potential strains on the nazi power centers. By the way, the stubborn rise in the crude oil price, which remains near the $100 mark, is to some extent a sign of Iran supply threats. It is more a sign of hedging against the USDollar, with the USGovt saber rattling against Iran done to deflect attention.

The Jackass forecast for four years running has been for the United States to become isolated to the extreme when it slides into the Third World. The nation of England will be fortunate not to join, having lost much of its industry, having endured an American-style housing market bust, and having committed itself to the narco wars in Iraq and Afghanistan. Perhaps the UK is making preparations to avoid the fate of the Third World dungeon. Queen Elizabeth would be shocked to see what has become of the British Empire, with MI6 joining the Langley Boyz in setting off terrorist fuses to keep the West on edge, committed countless murders of civilians in the name of liberty. See Operation Gladio in past decades or the 2011 Oslo incident, if lacking relevant information.

The theory goes that UK was a net exporter of crude oil until 2001. The nation is a net importer with North Sea output having fallen significantly. The resurgent need to import oil is a factor in the present stagflation in the UKEconomy. Hence the need to pursue better relations with some Arab hotspots such as Iraq, Libya, and Syria. A good gesture would be to return the Libyan 144 tons of gold bullion secured in London banks by deposed deceased and disemboweled dictator Muammar Qaddafi. Furthermore, the UK has grown in dependence upon Russian natural gas, a very strange twist. The Putin & Medvedev leadership team has smartly tied its crude oil prices to Gazprom dynamics, and not to the US-based natural gas price badly manipulated by the Wall Street criminal trading desks. To be sure, the Grand Master Putin is in the driver seat.

◄$$$ THE JAPANESE FINANCE MINISTER WAS KILLED. SPECULATION IS RIPE AS TO MOTIVE. MY BELIEF IS THAT JAPAN IS EMBRACING THE EURASIAN SPHERE LED BY CHINA & RUSSIA. THE ENTIRE EURASIAN TRADE ZONE IS BUILDING OUT. IT EXCLUDES THE UNITED STATES. THE RECENTLY SIGNED BILATERAL TRADE FACILITY (BARTER DEAL) REMOVED THE USDOLLAR AS THE TRADE VEHICLE BETWEEN JAPAN & CHINA. THE USGOVT IS ANGRY, AND MIGHT HAVE SET INTO MOTION SOME RETALIATION. $$$

Speculation rules, as no hard facts or hot source tips back up my view. However, the extremely important bilateral currency swap accord struck by Japan and China this summer could have shaken the USDept Treasury to its core. It probably sent numerous on staff into sudden analysis mode for damage impact and control. To be sure the USGovt security agency was pressed into action to seek out alternative solutions via vulnerable pressure points. One must regard the agency in Langley as a gang of mafiosi with no bounds on criminal actions, including murder, bombings, and false testimony on identity of those involved. Some heavy retaliation is an obvious motive for the Japan-China currency facility in bilateral trade. The two nations are the bulwark of Asia, with probably 75% to 80% of industrial output. To have the dynamic Asian duo discharge US$-based trade is a grand shot at the USS Weimar ship, not across its bow. It is a monumental threat to the entire USDollar regime. It means neither nation would have a trade-based need to accumulate USTreasury Bonds. Couple the bilateral trade deal with Japanese and Chinese purchases of crude oil from Iran in direct defiance as a kicker motive. Other smaller pieces to the same abandonment could be part of the motive also, like Japan buying natural gas from Russia. The United States is being isolated from Eurasia.

Perhaps Japan is walking a narrow road, agreeing to cooperate with the QE3 run amok by the USFed by supporting vast USTBond purchases, but with the understanding that they will make significant steps toward non-US$ trade alongside China. That would anger the USGovt security staff in charge of defending American honor, prestige, power, and control. What has begun to take root in a big way is Japan moving away from US and closer to China & Russia. The process is often referred to as the construction of Eurasia as a major dominant trade zone. It is not at all USDollar centric. In fact, the intelligent analysts believe it is extremely anti-USDollar in its entire threads, themes, and platforms. It is my contention that Japan sees its survival in Eurasia rather than with the fading US Empire dominated by bond fraud, monetary inflation, massive debts, and endless vile wars.

As footnote, Taiwan and China will settle trade payments in their own native currencies, no longer the USDollar. Taiwan announced that trade between the powerful island nation and Mainland China will be settled at the state-owned Bank of Taiwan in Shanghai. They signed a landmark currency clearing agreement in September. The Bank of China is expected to serve as the clearing bank for transactions on the Taiwan island, done in Yuan currency. There will not be any need to convert to USDollars any longer for the two nations that engage in extremely brisk trade. Taiwan is a high tech powerhouse. The next step will be to diversify away from USTBonds in the Taiwanese banking system.

◄$$$ THE EURASIA TRADE ZONE IS BUILDING OUT, COMING TOGETHER, AND HERALDING A NEW ERA. IT INCLUDES HALF THE WORLD'S PEOPLE AND ONE THIRD OF THE WORLD'S ECONOMY. CHINA HAS ALWAYS BEEN THE CORE, BUT JAPAN HAS BEEN THE SWING ELEMENT. THE UNITED STATES IS NOT ONBOARD, OUTSIDE LOOKING IN. $$$

A grand Asian accord to construct a mega Free Trade Agreement was reached as a beginning step. The conference included the trade ministers of the 10 ASEAN countries and six partners in Cambodia at the end of August. The six nations were China, Japan, South Korea, India, Australia, and New Zealand. The decisions made at the meeting at Siem Reap in Cambodia will lay more foundations for what will most certainly turn out to be a profound development in global economics. Refer to the next chapter of geopolitics that is intended to unite the fastest growing region in the world, the total grand continent of Europe and Asia. The belt of the Eurasian trade zone will be China, Japan, Russia, and Germany. The Jackass has previously made frequent reference to the Eastern Alliance, except with emphasis given to the currency alternative pursued to rival or replace the USDollar. The Eurasian trade zone is precisely the giant arena on which any new currency or alternative trade system will be launched. They are like the blood flow in the cross-continental trade zone. The rise of Eurasia has been discussed by the Hat Trick Letter in the past year, not a new concept. The trans-continental railroads and energy pipelines serve as infrastructure.

The Eurasian Conference decided that the 16 countries will begin negotiations at a regional summit in November to lead Asia toward a giant economic and free trade area. The Regional Comprehensive Economic Partnership (RCEP) proposal could phenomenally transform a region with a 3.5 billion population into an integrated market with a combined GDP of $23 trillion. That comprises half the world's people, and one third of the world's current annual GDP. It will NOT be spinning around the USDollar axle. The grand motive is to join together the five leading ASEAN nations and their current Free Trade Agreements into a single framework that includes India. A significant driver is Japan, which is the surprise, and the kick in the testicles given to the USGovt, which has pushed the weak-kneed plan called the Trans-Pacific Partnership. Thus the motive to attempt to bring Japan back in line, to pull the US rope, more like an American leash. Japan instead sees the Eurasian RCEP as a vital lifeline for the nation, since its US-centric trade policy has come to an impasse. Japan has not shown any predilection or partiality for the Trans-Pacific Partnership. That empty platform has been pushed by US envoys, suddenly run aground by removing the misfit pivot. For its part, China views the RCEP as a union of 16 nations that holds the potential to create a level of interdependence, if not mutual benefit, in the Asian region. Tensions have risen in the South China Sea in various squabbles.

The trend is for more significant nations to align with RCEP and the Eurasian trade zone concept, like India. The emerging nation has shown enthusiasm for the RCEP proposal. In the final tabulation, the Indian Free Trade Agreement with the ASEAN alliance has lifted trade by over 40%. Commerce Minister Anand Sharma has pressed for early conclusion of the negotiations to make concrete the services and investment agreements between India and ASEAN. The RCEP negotiations will be a long road to pave, but it will happen as the natural answer to the fading US empire turned toxic, corrupt, and aggressive. The conference outcome demonstrated that the extended ASEAN does not regard the US as pivotal at all. Alternatives are actively sought to US-centric arenas, market places, and systems as the global financial system continues to languish and collapse. The pull of greater trade and investment through economic partnership involving China is influencing the Asian perspectives. China is destined to be the dominant partner in the RCEP accord that shapes Eurasia. They have pulled in Japan. Despite some trade representation discussion between the WashingtonDC and Beijing, it is very clear that the United States is outside looking in. After over a decade of trade friction and protectionism between the US and China, the trade war is upon us very much as the Jackass painted between 2005 and 2009 in Hat Trick Letter reports. My forecast was called stupid by many dull bulbs, a source of my amusement. China is looking to Europe led by Germany for its trade future, no longer to the United States. See the Indian Punchline article (CLICK HERE).

A savvy contact from Europe concluded, "The integration all the way from Central Asia (possibly from Portugal at a later date) to South Asia via the ancient trade routes is the natural way things should progress. The mighty United States has nothing really to offer in terms of real products. Worse, it finds itself geographically isolated. It is slowly being left out. Everything is moving in the right direction as you [the Jackass] have said with the US trying to slow down the process or put obstacles in the way."

◄$$$ GLOBAL QUANTITATIVE EASING IS THE THEME OF 2011 THAT WILL RUN INTO 2012 AND BEYOND. CHINA ANNOUNCED A GIANT STIMULUS, BASED IN TANGIBLE PROJECTS RATHER THAN HYPER INFLATIONARY BOND INFLATION. CHINA PLANTS INFLATION SEEDS ON MAIN STREET, WHILE THE USFED PLANTS INFLATION SEEDS IN THE FINANCIAL SECTOR. IT IS ALL GLOBAL QE BY ANY OTHER NAME. THE CHINESE INDUSTRIAL MIRACLE HAS HIT A VERY SOFT PATCH. $$$

China announced in late August a stimulus package valued at CHY 8 trillion (=US$1.265 trillion) in order to stave off the Chinese Economic slowdown. It risks accelerating to the downside. Coupled with Japan, Asia has clearly joined the USFed and EuroCB and Bank of England in Global QE, better described as QE to Infinity. With Asia and Europe fully committed to bond monetization, hyper inflation, and currency debasement, the USFed is given the green light to proceed. The effect in damage will be kept comparatively guarded, if all major central banks simultaneously commit the same heretic cardinal sins of central banking, in debasement of currency. The winner will be Gold, which reacts to monetary excess and currency expansion. Do not expect any further Gold price declines and corrections, not with all central banks paddling in the same direction, not with unsterilized bond monetization in heavy volume on deck.

China will proceed with over $1 trillion in major projects of various size. Its economy is on the slow ramp. Exports are falling. Spending is down in retail. The Shanghai stock index is punky. Commodity imports are saggy. Workers are leaving the city centers. The Beijing leaders want to boost confidence in an economy that could be rolling over. Further export tax rebates could also be applied to bail out the raft of struggling manufacturers. Analysts believe the Chinese Govt plans to steer the Yuan lower, after a gain of 4.7% last year against the USDollar. That gain resulted in cheaper commodity supply via import, like metals and crude oil, but higher prices provide headwinds for exporters. China's export sector is suffering from feeble demand from Europe and the United States. In the first seven months of 2012, exports rose 7.8%, while imports rose 6.4%, which left the July export growth level at the lowest pace since 2009. For the first time since the deep seated crisis hit in 2008, reports circulate about factory workers leaving and returning to their home provinces.

◄$$$ THE JAPANESE CENTRAL BANK THIS WEEK ALSO CHIMED IN, WITH A NOTABLE RAMPUP IN THEIR QE BOND BUYING PROGRAM. THEY REACT TO THE SUDDEN RISE IN THE JAPANESE YEN, AS THEIR EXPORT TRADE IS AT RISK. THE GLOBAL QE IS WELL ALONG. $$$

The Bank of Japan unexpectedly expanded its asset purchase fund by 10 trillion Yen (=US$126 billion) this week. The BOJ project has run for twenty years, where it buys mainly Jap Govt Bonds. The project was enlarged to 55 trillion Yen in a unanimous decision by the board, in reaction to a rise in the nation's currency. In just a few days, the J-Yen exchange rate made a sudden rush to the 130 level, only to relax following the latest in endless such QE announcements back to 127.50 but still not a safe level. Like the US, the Japanese stocks jumped of joy, dependent upon monetary flooding. The major central banks of the world are all devoted to bond monetization, joined at the hip in currency debasement. Witness the Competing Currency War mentioned numerous times over several years in the Hat Trick Letter. It is intensifying. Attention on the coordinated ruin grows.

Izuru Kato, chief market economist in Tokyo at Totan Research, said "Whether central banks intend it or not, there is a competition for loosening monetary policy around the world." BOJ Governor Masaaki Shirakawa is stuck, forced to compete in a race to the bottom. The central bank removed minimum bidding yields for purchases of government and corporate bonds after they failed to secure targeted amounts at some of the buying operations. It pushed back the completion of purchases under the asset program to December 2013 from June 2013. Think QE to Infinity.

◄$$$ ASIAN EXPORT MACHINE SUFFERS THE ILL EFFECTS OF THE WESTERN ECONOMIC DEPRESSION. CHINA IS NOT ALONE IN THE EXPORT ENGINE SPUTTER THAT HAS AFFECTED ALMOST ASIAN CYLINDERS. $$$

Mike Shedlock assembled some good summary information with graphs. He focused on the Producer Mfg Index (PMI). The South Korean industrial index is pointing down, as is the Taiwan index. The Chinese export orders fell the most since March 2009. The Japanese PMI hit a 16-month low, as orders plunged. All major Asian centers are going slightly into reverse. See the Global Economic Analysis article (CLICK HERE).

◄$$$ THE UKECONOMY FAILED TO BENEFIT FROM THE OLYMPIC VENUES. RETAIL SALES FELL IN AUGUST. THE NET EFFECT OF THE GAMES WAS MINIMAL. THE COST WAS ENORMOUS. CONSUMER RETAIL SALES IS ON THE SKIDS, AS A GRIM OUTLOOK OVERTAKES BRITAIN. $$$

Retail sales in the United Kingdom declined in August despite the Olympics and the throngs of crowds in attendance. The event failed to spur spending, according to the British Retail Consortium. Their focus was on the non-food sector. Year-on-year, retail sales values fell 0.4% on a comparable basis in August. During the same period last year, sales were down 0.6%, making a trend. On a total basis with food and restaurants included, sales were up 1.6% in August. The net effect of the Olympic Games was minimal. The event affected online sales, which grew just 4.8% on an annual basis. That level seems strong, except that it is the lowest pace since the Retail Sales Monitor started collecting data in October 2008. Curiously and ominously, apart from the recent April distorted by Easter timings, August saw the worst sales growth this year. A grim economic outlook has swept Britain, the latest survey by GfK NOP showed last week. Perhaps the British tabloid sales can revive the UKEconomy, which features the princess frontispiece. Kate shares the wealth. Lovely gal!

## DOLLAR ISOLATION & DECAY

◄$$$ A PERFECT STORM IS COMING WITH SOVEREIGN BOND CORROSION, BOND MONETIZATION, GLOBAL USDOLLAR REJECTION, UNBRIDLED USGOVT DEFICITS, AND INSOLVENT BROKEN BANKS. RECOGNITION OF ALL ARE HAPPENING SIMULTANEOUSLY. SO FAR THE INTEREST RATE SWAP DEPENDENCE AND FALSE FLIGHT TO USTBOND SAFETY HAS NOT BEEN DETECTED. THE NEXT QE3 ROUND WILL NOT BE STERILIZED, AS NEW MONEY WILL BE INFUSED INTO THE SYSTEM. THE ZERO INTEREST OFFICIAL RATE HAS BEEN DECLARED PERMANENT, IN AN OPEN ADMISSION OF CENTRAL BANK FAILURE. $$$

The USDollar technicals are ominous. The current price shows a dithering, a mere pit stop at 78-79 support. Watch for a decline below that critical support, pushed by a bearish moving average crossover that will attract many traders in a pig pile. The world is preparing for the end of the USDollar as global reserve currency. It is being destroyed by insolvency, bond fraud, endless war, and hyper monetary inflation, a truly lethal mix. The only hope for the USDollar to hold its value is if the other major currencies debase at an equal pace. All other major central banks are in trouble with their federal deficits and bond markets and economies. The only saving grace for the embattled USDollar greenback is the simultaneous debasement in hyper-drive for the Euro, the Yen, and the Pound Sterling. However, the mutual debasement will only slow the USDollar decline since it will lose its global reserve currency status. That path is well traveled with bond monetization, which will lead to an explosive move upward in the Gold price. Gold is the ultimate arbiter of tainted debased corrupted money, and always has been in the history of money.

◄$$$ MOODYS ISSUED A USGOVT DEBT OUTLOOK WARNING, WITH EMPHASIS GIVEN TO THE BUDGET GONE OUT OF CONTROL. THE FISCAL CLIFF HAS GAINED FOCUS AND ATTENTION, BUT NO REACTION IN REDUCTION IN SPENDING PATTERNS. NOTHING HAS BEEN ADDRESSED OR REMEDIED SINCE THE S&P DOWNGRADE OVER A YEAR AGO. TIME IS RUNNING OUT AS THE BANK PANDERERS IN WASHINGTON-DC RUN OUT OF CREDIBILITY AND ROPE. IN ITS NEXT MOVE, THE GOLD PRICE WILL MAKE ADVANCES IN RESPONSE TO UNADDRESSED USGOVT FISCAL RESOLVE AND BROKEN DYNAMICS THAT WILL ONLY GROW WORSE. $$$

Moodys appears ready to jump on the debt downgrade bandwagon that so far has only seen Standard & Poors drive down the credit highway. Other debt rating agencies are missing in action, derelict in duty except for Egan Jones. The alert little outfit Egan Jones last week downgraded the USGovt debt to AA- in a move hardly noticed by the madding crowds fixated on the QE rampup.  The issues update by Moodys on the outlook for the USGovt debt rating is loaded with warnings and strong language. To date, it has not been heeded in WashingtonDC. Moodys Investors Service anticipates that budget negotiations during the new 2013 Congressional legislative session should determine the direction of the Aaa rating and negative outlook. They issued a report entitled "Update of the Outlook for the US Government Debt Rating" that has not caused enough ripples. The Beltway Players still believe they have unlimited liberty in deficit spending. If suggested policies produce a stabilization and then a downward trend in the federal debt ratio to GDP with some quick results, the rating will likely be affirmed and the outlook returned to stable. If negotiations fail to produce constructive action, Moodys expects to lower the rating to Aa1. The agency dismisses the likelihood of maintenance of the Aaa rating with a negative outlook into 2014. Curiously, Moodys did not mention war spending and its deficit contributions.

The only scenario to retain temporary Aaa rating maintenance would be if debt stabilization is achieved through a large immediate fiscal shock that averted a fiscal cliff. A miracle is required for that to actual materialize. Moodys would then require evidence that the USEconomy could rebound from the shock before it would consider returning to a stable outlook. A red herring swims freely. The rating outlook assumes a relatively orderly process for the increase in the statutory USGovt debt limit, which will be reached around the end of the 2012 year. Dream on, as budget impasses are the norm. Witness the futility of the Super Committee in 2011. The ability to meet interest and other expenses out of available resources would be exhausted within a few months after the limit is reached. After the debt limit is reached, the debt rating would likely be placed under review, likely several weeks before the exhaustion of the Treasury's resources. See the Moodys report article (CLICK HERE).

The London Siren offered some excellent views on the USGovt fiscal quagmire, the debt downgrade, and the Gold reaction. He is well versed in US political economics and finance, having been educated in the US. Quotes are hard to come by from him, since he dispatches gem thoughts, not sentences. Here are his points. Expect only minimal implementation of fiscal cuts, enough to keep the wolves at bay. If a full boat of cuts is implemented, the fiscal drag could be 3.5% to 4.0% of US GDP. The assured deep recession is why the spending cuts will be on the low side, and therefore ineffective toward any remedy. The USCongress working with the Admin will probably implement a small group of spending cuts that result in a fiscal drag of 1% of GDP. This will definitely not please Standard & Poors, which will downgrade by one more notch to mid-AA, very likely in March. Expect Moodys to take their own time, with a downgrade handed down in June. It is difficult to say when the stock market will start to seriously show worry with big visible beads of sweat.

The London Siren guesses when the market realizes the new upcoming Congress in the USGovt with more Republicans but with more Tea Party folks are in charge. He does not foresee the minor lift in Republicans in the Senate will be sufficient to reach the 60 votes necessary to produce a filibuster majority. When the new makeup of the USGovt chambers is better laid out and understood, only then will Gold start rising very sharply. The Gold price could make strong preliminary moves if worry comes about the USGovt debt limit being breached in October or November. The smart money has probably been buying Gold since last year during the long consolidation, with months of easy accumulation at attractive prices, following the S&P downgrade, realizing that the fiscal dynamics will only get worse.

◄$$$ BASEL III CONSIDERS RAISING GOLD VALUE IN RESERVES CALCULUS. THE CHANGE BY BANKER MASTERS INDICATES THE URGENCY. THE TREND WILL BE TOWARD THE GOLD STANDARD, SINCE THE BANKS, THE BONDS, AND CURRENCIES ARE ALL RUINED. $$$

The story is not new to Hat Trick Letter readers. It reappears since so important a signal, that bank masters who dictate rules from castle perches are gradually imposing the Gold Standard in their reserves rules. A shift is happening in the Gold market, intentionally or unintentionally, to make gold a more credible currency alternative. The transition is slow and subtle, in an attempt not to cause attention. The Basel III changes have been talked about in gold arenas extensively for the last few months, since the US Federal Reserve published proposals in June 2012. The broad market finds the concept esoteric since they know little about money, even economics.

Basel III rule mavens are discussing a change that would lift the accepted value of Gold on commercial banks balance sheets from 50% to 100%. Basel III proposes that bank Tier-1 holdings must rise from 4% of assets to 6%. This means that banks may not only replace a portion of their existing paper with bullion, but may use it to meet some of the extra 2% as well. Consider the impact on Gold demand from the banks themselves, arch-enemies of real money, merchants of paper filth. For example, if 2% of total current Tier-1 capital held by commercial banks globally was converted into Gold, this would be the equivalent of $85 billion in new gold demand. That is calculated as 2% of $4.276 trillion. At a base price of $1700/oz, the 2% addition would mean 1417 tonnes of gold. To put that amount into perspective, that is equivalent to about 50% of total global mine output in 2012, estimated at 2848 tonnes forecast by GFMS. See the 24HR Gold article (CLICK HERE).

◄$$$ MONEY VELOCITY IS GOING DOWN AS QUICKLY AS MONEY SUPPLY IS GOING UP. THE AMERICAN WEIMAR EXPERIMENT IS TURNING INTO A TORNADO OF FINANCIAL RUIN WITH INADEQUATE RECOGNITION. AS INDUSTRY WAS DISPATCHED AND FORFEITED TO ASIA, THE USECONOMY LOST ITS BASE FOR TRACTION. NEW MONEY HAS LOST ITS EFFECT IN PRODUCING ECONOMIC ACTIVITY FOLLOWING A SERIES OF ASSET BUBBLE BUSTS. NEW MONEY IS DEVOTED TO THE FINANCIAL SECTOR IN PERVERSE FASHION. $$$

The central bankers cannot dictate the speed at which money moves. They can only create it and drop it in the mix. Imagine a car engine that is revved up to extremely high revolutions per minute, but the car cannot engage the crank shaft in the transmission. The car does not move very fast. The growth of the monetary base has been staggering high since the financial crisis broke in September 2008 with the collapse of Lehman Brothers. Since the end of August 2008, the monetary base has risen from $877 billion to $2,651 billion as of the report in September 2012. That is a giant 3-fold rise. The USEconomy is stuck in a gripping recession. A notable growth in the monetary aggregate took place from 1984 to 2008, a five-fold increase that marked a 15% annual growth rate over the 24 years. The growth rate in money supply in the past few years has been 50% per year, identifying the American Weimar era.

The massive increase in new money has done nothing to foster growth in the USEconomy. The credit engines are broken for business. The tax structure is ass backwards. The housing market is broken, leaving households insolvent. The industrial base has been largely shipped off to Asia, the climax occurring after 2000 to China. The endless wars fill the pockets of the fraud merchants known as military service contractors, the artistic work of ex-VP Cheney from Halliburton infamy. The USEconomy is stuck in a powerful recession based in grotesque insolvency and bond fraud. As the USFed is poised to kick in another round of QE led by bond monetization, the money supply will ramp sharply up again. Do not expect much of any economic benefit, since the cost structure will rise again, thus shrinking profit margins. This capital destruction factor is a great blind spot to the hack economists who operate more as marketing harlots than analysts and advisors. The Ponzi Scheme theory dictates that an acceleration in new money is required to keep a constant speed. Expect more wreckage from the stripped gears of the USEconomic engine.

The money velocity chart shows a deadly decline since 1980, and a powerful decline since the 2007 outbreak of the absolute bond crisis. The new money is going to the big banks in bond redemption, derivative coverage, and Black Hole (Fannie Mae, AIG) fills under the USGovt roof. The money is not finding its way into the USEconomy for further circulation. The plague is insolvency, marred by bond fraud. The MZM is a measure of the total amount of monetary assets available in the economy at any specific time. Generally this contains at least the money in circulation, demand deposits, plus money market funds. It is an expanded version of M2. The velocity of money is calculated as a ratio of nominal GDP to a measure of the money supply. It can be thought of as the rate of turnover in the money supply, for the purpose of purchasing final goods and services included in Gross Domestic Product. The velocity of money has been falling for years, in reflection of an economy that is not turning over much at all. Think of a car missing its cylinders, spinning its gears, burning itself out, going nowhere.

Three eras are worth identifying in my view. The Vietnam War era and its aftermath saw huge expansion in money supply, huge nominal income growth, and huge increases in price inflation. The USFed did not stop the expanded USGovt debt from reaching Main Street, simply put. For consecutive years, the Consumer Price Index rose over 10%, which led to big worker pay hikes. The result was that US corporations began to send industry overseas. It started with Intel going to the Pacific Rim. The money velocity fell, as income fell on a real basis. The climax event was China being given the Most Favored Nation status in 1999, which released the gates for foreign direct investment. China made a deal with the Wall Street devils that has yet to gain publicity. The hidden motive was for Wall Street firms to borrow the Chinese gold hoard from the Chairman Mao era, so as to continue the great gold suppression game that has bankrupted the United States and betrayed the nation. US and London bankers skimmed and stole the gold.

The money velocity has continued down, since industry is largely forfeited. The traction offered by industry is sorely lacking, as it is grossly inadequate to respond to the official Zero Percent Interest Rate policy. The US will gradually achieve systemic failure, suffer debt default from inability to manage the debt structure, and fall into the Third World. See the Safe Haven article (CLICK HERE). The refuge is Gold & Silver, which will survive the financial catastrophe, serving as the ultimate safe haven during the ruin of money itself.

◄$$$ OLD SILVER COINS DISPLAY THE DEBASEMENT OF THE USDOLLAR UNDER THE PEOPLE'S NOSES WITH LITTLE AWARENESS. THE PRE-1965 SILVER US-COINS HAVE ALL HELD VALUE EFFECTIVELY. THEIR CURRENT VALUE IS 20 TIMES FACE VALUE. THE USDOLLAR IS FAST BECOMING THE HARBINGER OF A FADED EMPIRE. OLD SILVER COINS ARE WORTH OVER 20X THEIR ORIGINAL FACE VALUE, SOMEDAY TO BE 50X. ADD PREMIUM TO THE PRICE IF PURCHASED, HEFTY PREMIUMS LIKE 10% TO 15% ON RECENT MINTED COINS, MORE FOR OLDER COINS. $$$

The United States continues down the path of an historical failure in parallel to the Roman Empire. On the financial side, it resembles emperor Nero on currency matters with coin debasement. On morals and ethics, it resembles the Roman Empire under Caligula. The ancient empire stole directly the gold from inside coins, the practice given a name of sovereignty, theft by leaders. The leaders in wartime prison camps routinely employed the same chicanery, changing the weights of measure to ensure more food for the captains. In time more and more gold was removed from coinage, leaving the coin of the realm a hollow piece of metal dung. In the modern era, the theft had been more subtle with government deficit spending and credit extension. When Quantitative Easing arrived, the theft came from more blatant egregious bond monetization. In school during the 1970 decade, we learned that only Banana Republics purchase their own federal debt with printed money. So nowadays, the theft is hidden by the fast Printing Pre$$ running overtime in the central bank basements. The leaders do worse than take bigger meals in the monetary prison camp. They dispensed $23 trillion in two tranches of low-cost loans across the globe to their banker cohorts, partners in monetary crime, never to be repaid. See the Wealth Wire article (CLICK HERE).

The USDollar is worth less than two cents compared to its 1915 value when the USFed began their handiwork. The evidence is more clear with the value of older coins. Determine the approximate silver content in each of the available denominations. By using the industry assumed standard that $100 face value of pre-1965 quarters, dimes and half dollars contains 71.2 ounces of silver, the following approximate silver contents can be extrapolated:

  • $100 face value of Half Dollars = 200 half dollars = 0.356 oz silver/half dollar
  • $100 face value of Quarters = 400 quarters = 0.178 oz silver/quarter
  • $100 face value of Dimes = 1000 dimes = 0.0712 oz silver/dime

Next determine the approximate value of the individual coins based on a sample silver spot price of $30.00:

  • Pre-1965 half dollar = 0.356 oz silver x $30.00 = $10.68
  • Pre-1965 quarter = 0.178 oz silver x $30.00 = $5.34
  • Pre-1965 dime = 0.0712 oz silver x $30.00 = $2.136

Junk Silver coins, comprised of 90% silver, serve as a testament to the steep USDollar devaluation in the modern era since the Vietnam War and the departure from the Bretton Wood Accord (the Gold Standard). When these coins were initially minted, they were produced in such a way as to ensure that any given fixed US$ face value in any combination of these coins would contain the exact same amount of silver and as such, represent the exact same value. After all, silver once represented real money in the United States, so $1.00 worth of silver dimes had to be worth the same as $1.00 worth of silver quarters. The coins have risen 21.36 times their original face value, over a 95% loss of value. The ratios are consistent in the debasement. Those people who cling to the notion that American homes offset the lost value of money are sadly mistaken. A home worth $50 thousand in 1965 is not worth over $1 million today. Maybe it is worth around $200k to $250k, give or take. The stock market used to preserve value. Expect the same silver coins to rise to 50x original face value. Sure glad the Jackass purchased a scad of rough junk silver coins in 1997 and 1998 when the Silver price was a mere $7 per ounce. They are not junk; the USDollar is junk. The central banks are junk alchemists.

Price is elusive, since obtaining through purchase involves payment of a premium. Click in matched links for prices quoted. The more recent coins can be had with a 10% premium, like $3.50 over silver spot for Washington quarters (HERE).  Or a $3.40 over spot for Franklin halves (HERE). Or $4.80 over spot for older Mercury dimes (HERE). Or $5.60 over spot for older Walking Liberty halves (HERE). The genuine article is the wildly popular standard Morgan dollar, which is set at $11.20 over spot (HERE) since a collector item. All the cited prices over spot are versus the silver metal price, the premium paid over the spot silver price when all coins are placed on the same footing for comparison, regardless of face value like 10 cents or 25 cents or 50 cents or 100 cents. Thanks to RobH in Washington state for this entire story, and his calculations.

## RISE OF USDOLLAR ALTERNATIVE

◄$$$ CHINA IS LAYING THE FOUNDATION FOR LAUNCHING A GOLD-BACKED GLOBAL CURRENCY. FOR THE CHINESE YUAN CURRENCY TO BECOME GOLD-BACKED, A TREMENDOUS GOLD RESERVE MUST BE IN PLACE. BUT FIRST IT MUST BE FULLY CONVERTIBLE IN THE FOREX MARKET. GLOBAL BANKING SYSTEMS MIGHT SOON LOSE MOTIVE FOR HOLDING USTBONDS, AND INSTEAD FAVOR CHINESE YUAN INSTRUMENTS. $$$

This is not a new story. It has been reported and analyzed in past Hat Trick Letters. However, it is of utmost importance. The Petro-Dollar remains the base foundation for the USDollar used as global reserve currency. In order to settle vast trade, starting with the core of oil sales, global banking systems in scores of countries are loaded with USTBonds as reserves across the entire array of banks. It appears that the entire system is in the process of change, without publicity. The transition goes far beyond bilateral currency swaps set up for trade facility in essentially barter systems. Some important preparations are being made. China is recasting all of their gold reserves into small 1-kg bars. China is taking newly shipped gold bars from Western Europe and recasting them. An ostensible motive could be to issue a new gold-backed Yuan currency, or to support a new trade settlement system. The disruption will be far more to the USDollar than to global trade, as many analysts have it backwards. Witness a strategic part of their recent initiative to sign new trade agreements with Russia, Japan, Chile, Brazil, India, and Iran. What incredible irony if a large slice of the raids on Allocated Gold accounts have resulted in a caravan of gold shipments to China, especially if later recast. One could regard the 1-kg form to be an attempt to remove the evidence of where the gold origin was located, exploiting its fungible nature. One could also regard the 1-kg form to be a loud statement that the British pound and ounce system is being scrapped in favor of the more universally accepted kilogram system.

The broad gold recast project indicates the Chinese are preparing for a new system of trade settlement, supported by a legitimate currency. They appear to be constructing a foundation for a possible new monetary system based in gold that supports the trade payments. One fits into the other, both calling for the other like a hand in glove. Initially used for trade, it will later be used in banking. The USTBond could soon be kicked aside from global bank electronic systems. Regard the Chinese project as preliminary event to a replacement of the debt-based US Dollar system. The Chinese are removing thousands of metric tons of gold bars from London, New York, and Switzerland. They are recasting the bars into kilogram format. The larger Good Delivery bars are being reduced into 1-kg bars and stored in China. It is not clear whether the recast project is being done entirely in China, as some indication has come that Swiss foundries might be involved. They have so much experience and capacity. See the India Vision article (CLICK HERE), the Economic Collapse article (CLICK HERE), and the Gold Silver World article (CLICK HERE).

◄$$$ REPORTS SWIRL THAT CHINA IS ATTEMPTING TO ACT AS INTERMEDIARY IN GLOBAL OIL TRANSACTIONS, FOR YUAN CURRENCY SETTLEMENT. THE REBELLION GLOBALLY IS PICKING UP MOMENTUM AGAINST THE USDOLLAR. THE PETRO-DOLLAR DEFACTO STANDARD IS SLOWLY UNRAVELING. THE DENIZENS OF THE UNITED STATES HAVE NO IDEA THE RAVAGING IMPACT OF A LOST GLOBAL RESERVE CURRENCY. IT WILL UNLEASH PRICE INFLATION WHEN THE USFED CENTRAL BANK IS LETTING LOOSE THE MONETARY FLOOD GATES. $$$

Crude oil payments are the critical core of global trade. The rest of global trade will follow in non-USDollar payments, all in time. Then the USEconomy will enter the Third World with a grand thud, with shock & awe. The US leaders will be unable to blame Moslems or Chinese or Rogue Traders or even 12 kids who could not fly a Cessna airplane. They might blame the hirsuit Sasquatch or unruly Vikings, when in reality the US is up against vengeful Cossacks and the angry Mongol Horde. No end to the boogeymen the USGovt clowns create. The Jackass view is plain. The Fall of the Fourth Reich is underway, 11 years after the takeover of the USGovt, which set into motion the $trillion bond frauds, and the launch of the endless narco wars. The full impact of the Iran sanction work-arounds is coming to pass, as the world is integrating its anti-SWIFT mechanisms. The loser will be the United States and its nazi banker handlers.

Gerald Celente reported last week, "On September the 6th of 2012, China officially announced that any country in the world that wishes to sell crude oil using its currency the Renminbi instead of the USDollar can do so. The following day September the 7th, Russia announced that the nation will sell China all the crude oil they need, no limitations whatsoever. They will not use the USDollar for their trade. While you were watching the Democratic Convention the Dollar died, says Lindsey Williams." The claim by Celente is far reaching.

What China is offering is an intermediary clearing house role to sidestep the Petro-Dollar, where crude oil payments can be made in the Chinese Yuan currency. This offer is a financial act of war against the United States currency, where China will backstop all transactions. It is a violent offer to disrupt the USDollar. Look to see if any Saudi oil sales are settled in Yuan currency as alternative. The superpowers are openly attempting to isolate the USDollar, the clear victim to be the USEconomy, the land of consumption excess. The move is a tacit push of the US into an isolated place where it can very easily slide into the Third World.

The world is on a very dangerous path, a road that leads straight to World War III. In order to see what is at stake, one must look at the big picture and connect the dots. Examine the history of the USDollar, its relation to oil, and the real motives behind the wars of the past two decades. See the YouTube video (CLICK HERE). A global consultant source who deals on at least four continents claims that the world is already are in the middle of WWIII. He said, "Trade could and should be conducted on a peaceful non-violent basis, all based on quality and free market competition. The video clip strings together the hard cold facts like pearls on a string. If people do not own and hold physical metal, then they are royally screwed."

My view is that gradually the gloves are coming off. Russia & China are staring into the USGovt eyes, after seeing economic weakness, financial insolvency, desperate banker response, and over-extended military. The two superpowers are squaring off against the United States, whom they perceive as vulnerable and in disarray. The writing is on the wall, that the USDollar is dead. The only remaining piece is the Saudis accepting non-US$ payment for oil, which would be followed by the entire set of Persian Gulf oil producing nations. Then the Petro-Dollar defacto standard will be gone, the practical foundation for the USDollar itself.

The world is left to wonder if China wishes to sell Russian crude oil as intermediary also. Or perhaps Russia will sell crude oil in Yuan terms, facilitated by a Chinese currency intermediary. Or perhaps China will sell refined energy products from Russian original supply, but in Yuan terms. The one certainty is of a USDollar bypass in construction, with crude oil being sold outside the USDollar sphere in a Petro-Dollar undercut. All cited prospective alternatives would involve non-US$ transactions. This announcement by China is one of the most significant sea changes in the global economic and monetary systems, but was barely reported in the United States where the global reserve currency status is taken for granted. To be sure, the Democratic convention eclipsed all, complete with 100 thousand balloons. The action could very well serve as the catalyst that brings down the USDollar as the global reserve currency, and change the entire dynamics of how the world purchases energy.

Lindsey Williams concluded, "This has never happened in the history of crude oil. Since crude oil became the motivating force behind the entire USEconomy, everything in our lives revolves around crude oil. And since crude oil became the motivating factor behind our economy, never, ever has crude oil been sold, bought, traded, in any country in the world, without using the American dollar. Crude oil is the standard currency of the world. Not the Yen, not the Pound, not the Dollar. More money is transferred around the world in crude oil than in any other product. On Friday September 7th, Russia announced that as of that day, it will supply China with all of the crude oil that they need, no matter how much they want. There is no limit. And Russia will not sell or trade this crude oil to China using the American dollar." He made this statement on the Just Measures Radio network on September 11th ironically.

These actions by the two US superpower adversaries represent a frontal assault attack on the Petro-Dollar highway on which the USDollar reigns supreme. The world will next begin to bypass the USDollar, a crowning blow to be the Saudis doing the same. In the future, no longer will US sanctions like against Iran have a perceptible affect. The nation all too eager to paint others as rogue nations will itself become grossly isolated. The whole world will be painted as rogue nations, the painters (USGovt officials) stared at as lunatic, devious, sinister, and criminal. Once the majority of the world begins to shun the USDollar, then the full weight of USGovt debt and diminished manufacturing structure will come crashing down on the American people and its fast deteriorating economy. The US supply chain must then be met with foreign currency bid up by a falling wounded USDollar. The price inflation and acute shortages will pave the way to the Third World. A major blow has been delivered to the American empire and to the King Dollar. The pair Russia & China are aiming to become the controllers of energy, and in turn controllers of a new petro-currency. See the Examiner article (CLICK HERE).

◄$$$ JAMES GRANT ARGUES THAT THE GOLD STANDARD SHOULD RETURN. HE HAS BEEN A HARSH CRITIC IN THE MAINSTREAM FINANCIAL CIRCLES, DOLING OUT INTENSE DIRECTED CRITICISM AGAINST THE USFED FOR THEIR FOLLY AND RUINOUS ALCHEMY. THE GOLD STANDARD WOULD BRING GROWTH AND STABILITY, REMOVING THE OPPORTUNITY FOR FRAUD, THEFT, AND COUNTERFEIT BY THE BANKER ELITE. $$$

Jim Grant calls the Gold Standard a force for growth and stability in contrast to the heretical central bank methods, which are best characterized as unproven and truly radical experiments. Bear in mind that only the Gold Standard can replace the current fiat paper currency regime, which is undergoing collapse and failure. In no way can a new and better paper currency replace the USDollar as global reserve currency. That is why the clumsy IMF efforts at a SDR basket all fail, and the clumsy Dollar Swap Facilities all fail, and clumsier EuroCB design of LTRO funds fails. The concept of Super Bonds flies in the face of this VonMises Sound Money Corrollary.

As preface, recall Grant's comments describing the stock market distortions, when he said "I think we live in a hall of mirrors in finance, thanks to the zero interest rate regime and the chronic non-stop interventions." He saved his most acerbic and directed criticism for the central bankers. Grant refers to the USFed as truly lost, having destroyed the field and killed the patient. He urges stronger rules to conduct central bank operations in order to provide discipline and protection. He said the following, an implicit reference to the Soviet Politburo planning council.

"The Federal Reserve needs to get out of the central planning business. The Fed was organized in 1914 and opened its doors to conduct a more or less traditional central banking business, meaning it would lend against good collateral to solvent institutions in times of cyclical or seasonal need. It would defend and protect the gold dollar. That was all that its original remit contained. Fast forward many decades, and we see the Fed in the business of steering, guiding, manipulating the economy, financial markets, even the yield curve. It manipulates and pegs interest rates. It is all over the joint doing what failed in the old Eastern Bloc [of Soviet Union]. What we need is a central bank that has the humility not to do what it cannot do. And the Fed cannot do what others have failed to do, namely to plan an economy from a central desk in the capital city." Hidden in this comment is a reference to what the Jackass has called the Politburo in the past, a combination of central bank and congressional board. By the way, the Russian word 'soviet' means council. The United States is increasingly ruled by councils as planning boards, a Soviet structure with Marxist directives.

The climax comments pertained to reviving the Gold Standard. Grant strongly prescribes the Gold Standard as the disciplinary formula to cure what ails the United States in its financial sector and economic streets. He does not address the abdication of power that is required by bankers in installing the prestigious Gold Standard. The United States will fall into the Third World due to its rejection of the Gold Standard and & interminable support of a dying financial structure. The degradation is well along, a consequence of the widespread bond fraud, unbridled hyper monetary inflation, unchecked welfare state spending, and embraced endless war complete with shri ll propaganda.

"Absolutely [prescribe the Gold Standard]. The unintended consequences of massive intervention, and this entails both 0% interest rates and the grotesque enlargement of the Fed balance sheet, mostly the risks that the Fed introduces, these are the risks of the suppression of the basic laws of Supply and Demand. The reason that the shelves of Wal-Mart are full rather than empty is that freely set prices balance supply and demand in this very complex thing called the economy. That is what prices do. Prices are discovered in the marketplace. From 100 years before and after the institution of the classical Gold Standard, the price level was the same, as in 100 years the same."

Grant preaches on the extreme benefits and deep-rooted virtue of the Gold Standard. In summary, it would lead to economic stability or instability. "The Gold Standard is a force for growth and stability. It never can be confused with heaven on earth. Paul Krugman ought to consult a book by Charles Goodhart, one of the great eminences of big monetary affairs. He wrote a book about the New York money market in 1900 and 1913, fourteen years before the institution of the Fed. Goodhart deemed that period to be the best period on record for New York City banking with regard to stability, solvency, and profits, notwithstanding the panic of 1907. What is important is the rules in which these banks operated. The important rule was the owners of the bank were responsible for the solvency. Not the government, the owners. It was a capitalist enterprise." Grant rightly considers Paul Krugman to be a buffoon in an economist clown suit, to which the Jackass concurs. His Nobel Economics Prize stands next to Obama's Nobel Peace Prize as a travesty. Both prizes were bought and paid for. See the Zero Hedge article (CLICK HERE).

## GOLD STORY MEGAPICTURE

◄$$$ BILL GROSS OF PIMCO LIKES GOLD MORE THAN STOCKS OR BONDS, FINALLY SEEING THE LIGHT. HE WAS DUPED TWO YEARS AGO, NOT SEEING THE INTEREST RATE SWAP MANEUVERS. HE FOCUSED TOO MUCH ON HONEST DYNAMICS, IGNORING THE CORRUPTED MARKET. HE HAS FINALLY REJECTED THE USFED AS A SANCTUARY. WATCH WHAT TYPE OF GOLD ASSET HE INVESTS IN. $$$

The Bond King Bill Gross from PIMCO declared in a Bloomberg interview that Gold is a better investment than stocks or his specialty, bonds. Wow! Step back and behold an important endorsement by a very respected investor with vast experience, and past access to insider information on USTBond and USAgency Bond information. Regard the call as perhaps stage #2 of the massive secular bull market for Gold. The smart money might be coming to a great awakening that stock paper assets are supported by endless USGovt propping, against a backdrop of constant high frequency aberrations conducted by Wall Street. The smart money is awakening to the fact that sovereign debt, even if blessed by governments, does not offer much safety after all. The smart money must finally realize that paper assets are under siege on a global basis, whatever the type, and that only Gold & Silver offer true value and strong defense against runaway monetary inflation and desperate discredited central banks. While credit must go to Gross for the epiphany, he is surely late to the party. He seems to have missed the Gold price move from the $300's and $500's, to register 3-fold and 6-fold gains. The GATA crowd, the Hat Trick Letter crowd, the Turdites, the Army of Goldbugs, the competent rational stable observers since 2004 have exploited the big easy gains. Yet more gains are to come, and his mainstream funds are welcome. See the Bloomberg article (CLICK HERE).

Bill Gross probably feels betrayed by the USDept Treasury and USFed. The big PIMCO bet he made against the USTBonds in 2010 before the QE travesty began did not turn out to be successful. His inside information access before then had proved valuable, with vast USGovt mortgage bond purchases. He invested ahead of them. Gross was widely criticized for missing the bond rally that sent bond yields under 2%, but he made some wrong assumptions. He assumed that heavy USGovt debt supply would make an impact on bond yields, incorrectly. He assumed the USTBond market was run by honest brokers. He was very wrong. The USTreasury Bond market is controlled by Interest Rate Swaps and a maze of derivatives in a totally delusional artificial market. He might have inside information about the USTBond Tower and IRSwap Black Hole, how they are destined to fall and create the crater. Gross probably has strong suspicion that the USDollar system is imploding, with Gold the last asset standing alongside Silver. He must be aware of global developments, even though he seems never to leave the US Dome of Perception. He must observe the important rebellion against the USDollar, with Iran sanction workarounds, with Chinese bilateral swap facilities, and with Russian-Chinese oil deals. He might be very keen to the USFed desperation and lack of solutions. Bill Gross is turning his back on Chairman Bernanke. Let's watch the PIMCO fund investments in Gold, and see if he falls into the GLD Exchange Traded Fund trap like a gullible rookie fool.

◄$$$ BILL GROSS OF PIMCO COMPREHENDS THE DISTORTION OF THE ENTIRE FINANCIAL AND ECONOMIC SYSTEM WITH THE ARTIFICIALLY LOW 0% RATES. HE COMPREHENDS SLOW MONEY VELOCITY AND ECONOMIC DISTRESS AS THE RESULT. THEY ARE NOT STIMULUS. INSTEAD THEY ARE DESTRUCTIVE. THE CENTRAL BANK DEVICES ARE NOT WORKING. THEY ARE FRUSTRATED AT THEIR VISIBLE FAILURE. $$$

Bill Gross understands a root problem in the entire economy and asset markets, the 0% official rate that distorts all. The slow dance reference is the USEconomy suffering from the dampening effect during a recession. The overweight partner is a reference to a fat dancer, loaded down by heavy debt burden. He said, "If the dancing has slowed down, then the reason is not just an overweight partner. It is that the price of money (be it in the form of a real interest rate, a quality risk spread, or both) is too low. Our entire finance based monetary system, led by banks but typified by insurance companies, investment management firms, and hedge funds as well, is based on an acceptable level of carry and the expectation of earning it. When credit is priced such that carry is no longer as profitable at a customary amount of leverage and risk, then the system will stall, list, or perhaps even tip over."

Gross gives an important warning to the USFed itself, that the distortion effect and dampening effect are pervasive and dangerous from the ongoing 0% rate forever. The central banks have sown the seeds of the entire financial system's own destruction. The only remaining issue is the timing of the collapse. An entire economy requires credit responsibly managed and delivered for efficient operation and prosperity. The desperate central bankers are stuck at 0%, unable to find an Exit Strategy despite the desire and need. This was the 2009 forecast by the Jackass, made boldly and against the crowd, that the 0% rate would become a permanent fixture, with central bankers (in particular the USFed) unable to raise interest rates. It was a correct call. They cannot admit their failure, the billboard sign being the 0% stuck rate.

The central bankers have forced the individuals and private businesses to ramp up risk, searching for yield. When yields are too low, and acceptable risk spreads so narrow that interest revenue is increasingly marginalized, then institutional lending is stunted and obstructed. High overhead costs realized in rents, salaries, pension & health benefits, for instance, force financial and lending institutions to do one of two things. They increase leverage to cover those costs, or they curtail lending down to preserve equity and to protect the franchise. On the other side, the pension funds must ramp up risk by taking on ill-advised investments like mortgage bonds. They were hurt badly in 2007 and 2008. The paradox of fiat money and credit systems is coming to light.

Zero bound interest rates according to their historical models should inevitably and inexorably lead to dynamic real economic recovery. Central banks are bewildered in stunned disbelief that the endless stream of QEs and LTROs have not produced the desired result. Structural impediments placed in the way such as regulatory risk standards for banks only make the headwinds stronger. Bond monetization and loans against toxic bonds just do not have the magic pixie dust that the economists learned badly in graduate school. They should all have their PhD's revoked, since they cannot detect the capital destruction consequence from rising costs. The past dependence upon the housing market asset bubble for spendable income has ravaged the nation's banking system, again a 2006/2007 Jackass correct forecast. The dispatch of thousands of factories to Asia has removed the potential for traction. It is game over, except for Gold & Silver investments. Gross sees this opportunity finally. See the Zero Hedge article (CLICK HERE).

◄$$$ ROYAL BANK OF SCOTLAND IS OUT OF THE GOLD GAME. THIS IS PROBABLY NOT A CONSCIOUS PRO-ACTIVE DECISION. LIKE UNION BANK OF SWITZERLAND IN 2011, THEY WERE LIKELY DEPLETED OF THEIR GOLD IN DIRECT ATTACKS BY EASTERN ENTITIES. THEY HAVE BEEN GUTTED AND MUST NEXT SAVE FACE WITH LIES ABOUT RE-ORGANIZATION. $$$

Royal Bank of Scotland will officially shut down its gold trading desks. Curiously, two months after 5000 metric tons of gold bullion was reported forfeited by London and New York banks, shipped to points East under the duress of off-market trades with heavy margin call pressures, the RBS gold team folds its tent. The bank will also halt commodities research. The firm offered no further details, because it would be too embarrassing. Either they suffered dire consequences of big leveraged trades gone bad, or they were caught illegally using Allocated Gold in accounts as margin collateral and had to forfeit their own bank reserve gold in private treasury. My belief is both factors are at work. RBS is 82% owned by the UKGovt, which bought an empty bag next to a black hole. The bank is saddled with pre-tax losses and pending investigations related to LIBOR price rigging. See the UK Reuters article (CLICK HERE).

◄$$$ PUT 40 THOUSAND TONS INTO PERSPECTIVE. THAT IS THE MINIMUM VOLUME OF GOLD BULLION ILLEGALLY IMPROPERLY ACCESSED GOLD BARS FROM ALLOCATED GOLD ACCOUNTS OVER A FEW DECADES TIME. SOME PEOPLE QUESTION THE VALIDITY OF THE NUMBER. IT IS REAL AND WILL BE BORNE OUT. THE BANK CARTEL HAS A PROBLEM RESOLVED ONLY IN NEW REPLACEMENT DEMAND TO SEND THE GOLD PRICE PAST $10,000 PER OZ, OR TO FACE JAIL TIME (OR WORSE, HIT SQUADS). $$$

Some basic data. The lower figure of 40,000 metric tons turns out to be 1.28 billion ounces or a value of $2.1 trillion at an average price of $1600 per ounce. The total volume of gold mined up to year 2005 was 4.25 billion ounces, according to research by David Zurbuchen. Then add an additional 500 million ounces of gold mined since, to arrive at roughly 5 billion ounces. The amount is approximately 150,000 metric tons. Furthermore, the annual global demand is 84.3 tons for jewelry, while technology uses 33.0 tons, according to the World Gold Council at end 2011. On its face, the 40 thousand metric ton figure for ransacked gold seems staggering enormous huge. Such arguments are not impressive, nor complete. The argument seems far too rational against the 40k ton figure. To be sure, official gold held in known sources does not properly account Chinese, Russian, or Vatican hidden sources. Worse, it counts the USGovt hoard in Fort Knox which has been depleted by theft and Wall Street carry trade.

The conclusion given to me by The Voice (experienced savvy gold trader) is that the majority of vaulted gold has been grabbed, seized, sold into the market, and replaced by dodgy gold paper certificates. The owners are in revolt, demanding their gold and seeking justice. The majority of all secured Gold has been improperly used by the banker cartel, which has been finally cornered. It is almost amusing to defend the point and the 40k ton volume. Most gold events never make the news. The Qaddafi 144 tons of gold remain in London, a motive for war in Libya to depose the dictator and to steal his gold. Not in the news. The Swiss bankers are caught in a class action lawsuit with several $billion at stake in claims. The Swiss banking system is a wreck. Not in the news either. The US Fort Knox contains a large nerve gas depository, not gold bullion. Not in the news either. The Russians and Chinese are buying perhaps 10 times as much gold as they report to the official agencies supposedly given authority to monitor. Not in the news either. The southern region of Africa, centered in Congo, is the site of high pitched battles over gold in transport, in the largest smuggling projects in modern history. Not in the news either. No, much of the global gold is not visible in the light. It is owned by powerful entities, often hidden from the US and London centers. Much of it has been improperly used by the Wester bank cartel. They are on the defensive and will be fortunate to escape with their lives.

It seems the logical conclusion is that the news networks do not report much of any important news, having reverted to useful propaganda devices. So reliance upon news data to dispute the 40k ton illegal usage of gold, it just seems baseless and frivolous if not spotty and shallow. The Jackass will stick with The Voice as a great source of information, whose perception (not really a forecast) requires a few months for confirmed verification. He sees the gold in movement, the violated contracts, the scurrying to repair the damage, and knows many of the aggrieved clients. He has not been wrong about any gold story, only once made an error in timing. Having stopped giving timing calls, he has not been wrong any more. Smart guy. The Jackass similarly has avoided most forecast errors by no longer making any TNX bond yield forecasts on the long-term USTreasurys.

◄$$$ MAJOR WARNING WINDS ARE TOTAL OPPOSITE TO THE 1980 ERA. THE COMPARISON TO 1980 IS ABSURD ON TEN FACES. THE BIGGEST NEW FACTORS ARE THE ARRIVAL OF CHINA, THE ADVENT OF INTERNET, AND THE BROKEN MONETARY SYSTEM. BACK THEN IT WAS A TREND EASILY INTERFERED WITH. NOWADAYS IT IS A MATURE GLOBAL RATTLING TREND THAT WILL UNSEAT THE USDOLLAR AND REBUILD THE GOLD STANDARD ON A TRADE PLATFORM. $$$

The current disaster is not unfolding in any manner similar to 1980. Obviously it is not unfolding like 30 years ago in the Gold market. Back then, the Hunt Brothers tried in mindless idiotic ways to corner the paper silver market. They were overturned by mere rule changes. What morons! The current Gold market nowadays suffers from shortage of physical gold, improperly used vaulted gold, declining global mine output, monumental currency debasement, unspeakable government deficits, insolvent banking systems, outsized banker welfare in grants, and overused derivative devices to produce artificial bond demand during a time when foreign creditors have waged their own hidden wars against the USS Dollar ship of state, whose helm is occupied by a crime syndicate melded with a war machine. The age old nemesis to Gold is the USTreasury Bond, which suffers exposure of being propped by leveraged derivatives. The syndicate controls the big US banks, the US military establishment, the narco wars that redirect funds back to the giant banks. It also controls the big Pharma with their mysterious deadly vaccines, and the US news networks with their incessant propaganda. Thirty years ago, none of these major factors were in play. So the parallel argument is ignorant and vacant.

Today's events are more like the antithesis of 1980 events played out again. Some call the 1980 era the Kondratieff Autumn, and today the Kondratieff Winter, which makes more sense. Over 30 years ago, there was no industrial China, no internet, no PCs or mobile devices, no computer networks, no debt saturation, no lost US factories, no weakened unions, no pensions dying on vine from 0% starvation, no hedge funds, no great age of speculation, no flash trading in stocks, no Exchange Traded Funds, no discarded industrial base, no nazi war machine. The current situation is the precise opposite of 1980, and comparisons in my view are laughable, which expose a deep grotesque ignorance in the investment community and analytic brain trust. In the current situation, the corrupted paper Gold market operators have been cornered like rats with basement lights shined on them. By contrast, the physical Gold market is enjoying a renaissance in China and India with outsized demand. The physical Gold device is being used by Iran, never seen in the 1980 era. The majority of the US population falls victim once more to basic propaganda about Gold, repeated a second time in the same shrill frequency. Also the global population is 50% higher now than in 1980, a shocking factoid. That means a lot more Gold buyers and investors.

The Gold price responds to the shell games perpetrated ad nauseum in the paper Gold market. A grand gold market divergence is to become extremely clear, as the paper Gold price remains perhaps in a controlled upward movement, while the physical Gold market zooms with great breathtaking leaps upwards. Demand from numerous corners has come. A client informs that the jet set in Aspen Colorado is buying physical Gold hand over fist, under counsel from financial advisors. My reasoning is that if the resort crowd in the mountains is part of renewed ample Gold demand, then so is the constellation of Hollywood movie stars. One would not be wrong to conclude that wealthy corporate leaders are also buying physical Gold. Nobody trusts the big banks. After three full years of 0% and piddly CD offerings and deep losses in mortgage bonds from corruption and recent losses from European sovereign bonds, the wealthy are moving down the risk ladder and discovering physical Gold. The Exeter Gold pyramid makes more sense than at any time since 1971.

◄$$$ ULTRA-WEALTHY SOVEREIGNS ARE ACQUIRING GOLD DIRECTLY FROM MINERS, BYPASSING THE MIDDLEMEN AGENTS IN LONDON. THIS FACTOR EXPLAINS LOWER MINE OUTPUT DATA, YET GOOD REVENUE DATA. THE CORRUPTION OF THE GOLD MARKET HAS LED TO THE DIRECT STEPS. THE COMEX SHOULD BECOME AN EMPTY LOT BEFORE TOO MANY MORE MONTHS. $$$

The Slog blog is a reliable insider in the United Kingdom. He wrote recently, "Off the radar, it already has. I posted towards the end of last year about how lots of Gold trade middlemen are being cut out by wealthy investment combines and Arabian & Asian Sovereigns and their advisers, who are approaching the miners directly. They offer the producers mouth watering deals: have the cash now, set aside the Gold for us in perhaps six months time. They can hold the money interest free. Just sign here saying whatever might come, you will give us the Gold. Or at this guaranteed futures price way above the current level, we sign here to say we will buy whatever you can produce." Wow! A bypass of COMEX, sure to be left dry. The middlemen are being cut out. His speculation is that the same practice has begun to happen in Silver. It matters little whether the impact is felt on investors or industrial users. The bypass is done by the Sprott Funds for Gold & Silver also, sourced directly from the mining firms, and probably taken with a premium offered. The effect is to push the price divergence between the corrupt paper Gold market and the honest physical Gold market. This is a Jackass forecast, of a powerful price divergence.

The Slog further suggests that impaired production figures currently being released might be distorted due to these deals made under the radar. It is well known that ore grades are falling. The financial sector maven manipulators are extremely vulnerable to removal of large volumes of six months forward supply from any miner. If quietly sold ahead, it is thus made unavailable to meet present demand that grows markedly in the COMEX market. The corrupt COMEX market will become a vacant lot, occupied more by lawsuit papers than metal. See the Word Press article (CLICK HERE).

◄$$$ JEFFREY CHRISTIAN HAS LOST ANY SHRED OF CREDIBILITY. HIS STANDARD FARE OF PROPAGANDA, NADLER TOO AT KITCO, MAKE GOOD COMEDY. THEY ARE CONSISTENT IF NOTHING ELSE. REGARD THEM AS CONTRARY INDICATORS FOR PRECIOUS METAL PRICES. $$$

Jeff Christian suffered a weak moment and spouted truth in 2010, at his March testimony before the US Commodity Futures Trading Commission. At that time, he made headlines when he revealed that the so-called physical Gold & Silver markets in London are mainly just paper shorting operations. See the GATA article (CLICK HERE). Otherwise, he is a designed Wall Street gold harlot with no shame, an obnoxious mouthpiece. The other Bobsy twin has been Jon Nadler, who strangely is permitted to pollute the Kitco web journal with his endless wrong chatter that passes for analysis. Once in 2009, when the Kitco editors yanked a Jackass article for its virulent content, the editor was directly asked why the yank and why the free rein for idiots like Nadler. The response was so honest as to be surprising. The message came back that Nadler is a good friend of the Kitco board. A ripe response was given back that focused on journal integrity.

In early September he reverted to form. On the Business News Network in Canada, Christian pronounced that the US Federal Reserve would announce no substantial bond monetization, that the USFed inaction would smash commodity prices, and that CPM Group had advised its clients to go short gold and silver. See the BNN video clip (CLICK HERE). Those among the CPM Group clientele who heeded such sage advice here, or for that matter over the last decade, have taken huge losses in the shorts. Like the CNBC hack tools in the United States, BNN is a hack tool in Canada. They have banned GATA representatives from interviews on the network. Regard appearances on BNN by the grand cross-eyed oracle Christian as extreme bullish signals for the Gold & Silver prices. Jeff Christian and Jon Nadler are whores who make fat street hookers look cute and appealing.

◄$$$ MORE TUNGSTEN SALTED BULLION BARS WERE SPOTTED, THIS TIME IN MANHATTAN. THE FAITH IN GOLD BARS STAMPED WITH REPUTABLE REFINERY SEALS WORKS TO UNDERMINE FAITH IN THE ENTIRE BANKING SYSTEM RUN BY THE ELITE. THE FINGER OF BLAME IS POINTED AT THE SWISS GOLD BANKERS THIS TIME. $$$

The Syndicate has been busy to counterfeit and produce fake bars of a barbarous relic they do not respect. An easy explanation can be given. The Syndicate is accumulating the gold bars in mountains in massive volume, while they pour out propaganda to the public to show disdain for gold. My claim for two full years has been that the Swiss banking system is broken, that the Swiss bankers have been raiding Allocated Gold accounts, and they are part of a vast criminal Syndicate. The bar spotted was a 10-oz gold bar with a 999.9 grade, bearing the stamp of the reputable Swiss Produits Artistiques Metaux Precieux (PAMP) and a serial number (#038892). Tyler Durden suspects the bar has been re-hypothecated in at least 10 gold ETFunds across the world. His joking words should not be quickly dismissed. Gold bars in Allocated Accounts in Switzerland are missing, and multi-$billion lawsuits are in progress.

The salted gold bar mysteriously cropped up in the heart of the world's jewelry district located on 47th Street in Manhattan. The bar in question that cost nearly $18,000 turned out to be a counterfeit. The discovery was made by the dealer Ibrahim Fadl, who bought the PAMP bar from a merchant with known past integrity. As a new practice, he tested a few of his gold bars worth $100,000 with holes, and saw gray tungsten, not gold. The bar was filled with tungsten covered by a thin layer of gold. The link below shows various angles of the fake bar, which reveal how the majority of the metal is tungsten, with a thin gold outer layer. The tungsten bears the same density as gold, the perfect substitute by criminal organizations like those in the Swiss banking sy stem. See the Zero Hedge article (CLICK HERE). The tungsten can be detected without invasive drilled holes by mass spectrograph methods.

## GOLD STORY PHYSICAL

◄$$$ BITCOIN WAS HACKED AND LOOTED. THE DIGITAL CURRENCY SUBSTITUTE HAD BEEN GAINING WITH WIDER ACCEPTANCE. THE FINGER OF BLAME IS DIRECTED AT USGOVT SECURITY AGENCIES, WHO ARE ON A BIG ROLL WITH HACKING PROJECTS IN BANKING SYSTEMS. THE UPCOMING BANKING SYSTEM FAILURES MIGHT RESULT MORE FROM SECURITY AGENCY HACKING AND VIRUSES THAN INSOLVENCY. $$$

Hackers made off with $250,000 worth of Bitcoins from the Bitfloor currency exchange, leaving the site empty with its reserves tapped. Users are wondering how to be reimbursed for their money. The Bitcoin heist left the virtual currency exchange safe empty. The new online currency Bitcoin has always been proud of its lack of government oversight. That touted feature seems more like an invitation for attack, given that Bitfloor, the currency-trading environment for Bitcoin, has been robbed. Bitfloor founder Roman Shtylman posted an open letter on the Bitcoin forums admitting, "Last night, a few of our servers were compromised. As a result, the attacker gained accesses to an unencrypted backup of the wallet keys. This attack took the vast majority of the coins Bitfloor was holding on hand." A later update stated that the hackers transferred 24,000 Bitcoins valued around $250 thousand to an unknown location, clearing out all of Bitfloor's virtual cash reserves. One must wonder why the private virtual cash was left without the basic rudimentary protection of encryption for the wallet keys. What a serious blunder! See the Digital Trends article (CLICK HERE).

Steve Quayle's source named simply V has been on the campaign trail talking about financial false flags with USGovt intelligence agency agents looting bank accounts on a massive scale across the nation through hacking, even more so overseas. The entire Arab world is a playground with CIA thefts of bank accounts, causing havoc in foreign banking systems. The scoop is that the Langley wunderkind are testing a bank Stuxnet system for possible usage inside the US banking system, when they wish to shut it down and enjoy the fruits of account thefts under the cover of bank holiday. After the online hacking thefts, they later blame on whomever they wish, since they also control the news media networks. Hitting Bitcoin bears all the indication of a false flag operation by the Langley pros. The USGovt authorities want to stamp out all digital currency. In numerous past cases, the absurd rational has been the tiresome wornout basis that bad people will use the currency device to conduct terrorist activity. How silly! The US Constitution calls for Gold & Silver to be used to settle transactions and debts, public and private. That is what Bitcoin is based upon. The US Senate cited without any basis of proof that Bitcoin is used in drug trafficking sales. See the CNet article (CLICK HERE).

The Bitcoin used as a peer-to-peer digital currency, and appears to be respected. The company describes itself (CLICK HERE) as an experimental new digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority. Managing transactions and issuing money are carried out collectively by the network. Bitcoin is the name of the open source software which enables the use of this currency. In some limited respects it appears to have been used as an alternative currency. The trend has extended to Europeans, who also are turning to Bitcoin. In the last 18 months, a Bitcoin unit went from being worth $15 to $3, then to a few cents, back to $10 value in recent days.  See the Business Insider article (CLICK HERE).

It seems like the theft was a project taken on as sport more than necessity. The USGovt intelligence agencies launder hundreds of $billions of illegal drug profits every year through international banks, protected by total immunity and complete impunity. The $100 bill is used by the Langley Boyz in narco containers to store several hundred $100 million per container in Greek ports, according to my Central European banker source. Reportedly certain Greek ports have numerous such containers under guard as a cash hoard. Therefore by consistently applied USGovt logic, the $100 bill should be outlawed. Also, the Langley Boyz stole the templates for the Franklin $100 Bill back in 2005, well documented with some measure of proof coming from cotton fiber analysis of paper, after capture of some very high quality bills. Many more templates remained at large for usage. One could conclude the USDollar should be outlawed before it destroys wealth, savings, and freedom for all Americans and our way of life.

◄$$$ THE USGOVT STOLE PRIVATELY HELD ST-GAUDEN GOLD COINS WORTH $80 MILLION IN A PURE RAMROD OF JUSTICE. THE LANGBORD FAMILY LOST A LAWSUIT IN A BATTLE OVER THE RARE GOLD COINS. THE HOARD BELONGS TO UNCLE SAM. MORE FASCISM AT WORK WITH SECONDARY MOTIVE TO SQUELCH INTEREST IN GOLD. THE CAGEY SWITT TRIED TO HIDE THE COINS FROM THE ROOSEVELT CONFISCATION PROGRAM, BUT HIS DAUGHTER WAS A TRUSTING DIMWIT. $$$

Their stupidity was handing the rare coins to the Philadelphia Mint for authentication. The Switt family should have validated their quality using private honest independent brokers outside the United States where private property is respected. An incredible gaffe, not the least bit second guessing. Dumb move! The family of Philadelphia coin dealer Israel Switt hoped to celebrate the $80 million fortune they discovered when they drilled open a safety deposit box owned by their father. They uncovered 10 rare gold coins, St Gaudens double eagles. The 1933 dated coins are one of the most prized rarities in history, one of which was owned by King Farouk of Egypt and ultimately fetched some $7.5 million at a Sotheby's auction in 2002. Switt's daughter Joan Langbord handed over the coins to the Philadelphia Mint for authentification. She must not be aware that a crime Syndicate controls the USGovt. They were immediately seized by the USGovt without any compensation for the family. According to CoinWorld.com, "The Langbords asserted in the motion that the government's evidence was insufficient on two main issues. First, that there was not enough evidence to prove that the coins were stolen by Israel (Izzy) Switt, Joan Langbord's father, with criminal intent. Second, that the government failed to prove that the coins were the proceeds of a crime as required by statute."

In July of last year, a federal jury determined that the coins were forfeited to the government, a ruling that US District Judge Legrome Davis Jr refused to overturn in an appeal. "This is a case that raises many novel legal questions, including the limits on the government's power to confiscate property," the Langbord attorney Barry Berke said. A walk down memory lane exposes the motive for Switt to hide the coins almost 80 years ago. In 1933, President Franklin Roosevelt ordered the banks to abandon the Gold Standard, as the USGovt confiscated all gold in a gross violation of the Constitution and a flagrant trampling of property rights. Excesses on debt and leverage by the financial sector were thus followed by illegal confiscations of gold, in order to resuscitate the banking industry. See the Huffington Post article (CLICK HERE). The history of USGovt abuse of money is abysmal. The story of the gold booty from the Spanish shipwreck reported this past summer was very similar, using twisted arguments for the seizures by the government, in violation of maritime law.

◄$$$ THE SOUTH AFRICAN MINING FIRM GOLDFIELDS IS FROZEN SOLID FROM A WORKER STRIKE TURNED VIOLENT AND NASTY. IT IS THE NATION'S SECOND LARGEST MINING COMPANY. THE STRIKES ARE SPREADING, EVEN AS THE VIOLENCE IS FANNING ACROSS THE NATION, ONCE A LEADER IN GOLD MINE OUTPUT. NO MORE, NOT AFTER THE NITWIT MARXISTS TOOK CONTROL OF THE NATION AND DISORDER STRUCK. THE LEADER OF THE MINING WORKERS IS PITTED AS RIVAL AGAINST THE PRESIDENT. $$$

No end is seen in sight for striking miners at South Africa's second largest gold mining company. The labor strike has demands for higher salaries. Negotiations between KDC West miners and the company were taking place in Westonaria. The union leaders were subjected to nasty curses when they tried to persuade thousands of striking workers to discuss issues openly. Communication to the crowd was actually done at one point from the loudspeakers mounted on the mining company's armored security vehicles. Some clumsy comments came at a Denver Gold Forum in Colorado where CEO Nick Holland told the audience that gold miners do not really make that much money, in his words. He accuses the industry of digging its own grave by not fully disclosing the real cost story. Mining in South Africa accounts for 6% of the its Gross Domestic Product. However, in recent years and especially in recent months, the sector is becoming a symbol of the economic, social, and political differences that continue to polarize the country. See the Mining article (CLICK HERE).

Thousands of workers are on strike at the Marikana mine owned by Lonmin, as they plan to defy an extended deadline to return to work. Worker solidarity includes families, very vocal in the demonstrations. An effort supported by the South African Govt to negotiate a deal between management, unions, and miners has so far failed. The Lonmin wildcat strike is protracted, having turned to violence. The body of a man slashed to death with a machete was found last week at the Lonmin platinum mine in Marikana, located in the NorthWest province. In all to date, a total of 44 lives have been lost, according to AFP reports. The scene is macabre, as miners show hostility to the management while ignoring the dead body lying nearby. See the Mining article (CLICK HERE).

Protests have spread to more South African mines. Strikes for higher pay have rattled the platinum firm Amplats, as the violent strikes are slowly turning into a nationwide revolt. Over one thousand protesting South African miners have blocked access to Amplats mine shafts. Amplats said it had halted work at its four Rustenburg mines, which account for 17% of its output, due to fears for the safety of its 19,000 staff stationed there. An estimated 8000 striking miners and their followers, followed by police in armored cars and helicopters, conducted a march to a hospital to see some of the 190 miners whom say claim were beaten and tortured in police custody. Amplats is the world's leading platinum producer, located in the same region as the Lonmin plant. Analysts expect the Amplat mine projects to be targeted as restructuring candidates by parent company Anglo American. Al Jazeera's Tania Page reports that workers are demanding a pay raise to 12,500 Rand, equal to about $1500 per year. The protests in Marikana, 100km north of Johannesburg, were inspiring protests to spread further. Workers at the Beatrix gold mine run by Gold Fields located close to Johannesburg, were due to join the strike later last week, claims the National Union of Mineworkers (NUM). At Impala Platinum, workers are demanding a further 10% pay hike after they received a similar increase about a month ago. See the Al Jazeera article (CLICK HERE).

The worker strikes have intertwined with national politics. The worker leader Malema has urged a worker revolution, calling for rendering the mines ungovernable. He accused the NUM union of being aligned with the country's political elite. His angry rhetoric has inflamed the workers. He claims the companies are making $billions from the nation's mines. Malema was expelled earlier this year by the ruling ANC party for bad discipline. He has since been a vocal critic of President Jacob Zuma, who belongs to the ANC. Once a staunch supporter of Zuma before a falling out, Malema has stated he wants to see the head of state removed from the ANC leadership at upcoming party elections in December. The winner of the vote will automatically become the ANC candidate for the 2014 presidential elections and likely be South Africa's next president.

South Africa is turning into a total clusterfark. The mess started with the Marxist nitwit clowns taking over several years ago. The big clue of snafu was the electrical grid ruination in 2007 from mismanagement. They followed up their collosal blunder with a tax hike on the mining firms, a second blunder. The blame in my view for the current mess is the global effect from the USFed bond monetization, which has led to rising food and energy costs worldwide. The Arab spring has a similar revolt movement in both South Africa and South America, where the poor mine workers have reacted vehemently. By the way, some trivia. The word Rand means ridge in Afrikaner, the mountain ridges being the site of some of the richest gold mines in the world, tapped for four deca des.

◄$$$ TRANSPARENT HOLDINGS OF PRECIOUS METALS IN ACCOUNTABLE LOCATIONS ARE ON THE FAST RISE. NEW RECORDS ARE RECORDED EACH DAY. THE PHYSICAL ACCUMULATION HAS CONTINUED ALL THROUGH THE CONSOLIDATION OF 2011 TO 2012. THE COMEX ANTICS REDUCE THE PRICE, WHICH THE INVESTORS EXPLOIT IN ADDITIONS TO HOLDINGS. $$$

◄$$$ CHINESE & JAPANESE DEMAND FOR SILVER IS GROWING EXTREMELY RAPIDLY. THEY LEAD THE WORLD. THE DATA IS MIND-BOGGLING. THE JAPANESE GOVT SUBSIDIES FOR SOLAR POWER WILL GENERATE HUGE NEW SILVER DEMAND. IN EIGHT YEARS, CHINA TRANSFORMED FROM A MAJOR SILVER EXPORTER TO A MAJOR SILVER IMPORTER. EXPECT THE SAME IN JAPAN AS IMPACT FROM THE SOLAR ELECTRICITY INITIATIVE. $$$

Demand for silver bullion within Japan is set to rise significantly. Japanese Govt subsidies to utility companies producing solar energy will be triple the conventional electricity rate. The effect on their domestic demand will be enormous, since Japan does nothing in a small way. The generous tariff will generate an estimated $9.6 billion in new solar investments in Japan. Solar power equipment and solar panels are fabricated using a significant amount of silver bullion. Since the tariff is almost twice what Germany offers, it is possible that Japan will jump to second in the world when it comes to solar investments, only behind China. The demand for silver bullion within Japan will rise significantly in their marketplace, as companies build out solar infrastructure and manufacture solar panels, taking advantage of the tariff. This impact is very easy to foresee.

Consider the Chinese example for an enormous silver demand impact. Only eight years ago, China was mining silver bullion and exporting it worldwide. At that time, China exported roughly 200 million ounces per year of the precious metal. Since then, China's demand for silver bullion has increased by 400 million ounces, which represents 40% of the world's total annual silver production. Today, China has halted all silver exports, and soon will transform into a net silver importer to the tune of roughly 200 million ounces annually. In just eight short years, the net export has transformed into a net import of equal volume. This dramatic shift in demand for silver bullion in part reflects the fact that China is the largest producer of solar panels in the world. China has also instituted a policy to use solar energy throughout the country, which further increases the demand for the precious metal. Expect the Japanese demand to rise just like it did in China. The impact on the silver price is to be obvious. See the Penny Stock Detectives article (CLICK HERE).

◄$$$ CASH FOR GOLD OUTLETS IN ITALY ARE BUSTLING, AS THE PEOPLE STRUGGLE TO SURVIVE. THE MELTED JEWELRY AND TEETH MAKE BULLION BARS SHIPPED TO SWITZERLAND. MANY END UP IN CHINA. WITNESS A PERVERSE NEW ITALIAN EXPORT, BUT IT COMPRISES CAPITAL OUTFLOW. $$$

Italy is seeing a strange run on capital, effectively a capital flight. Spanning across the Italian cities and towns are 28,000 outlets marked Cash For Gold on signs. Buying gold off desperate people has become one of the new boom industries. The people of Italy have joined those of Portugal in being forced to sell its gold in order to eat, or make ends meet at the month end. Expect no less when the nation allowed Goldman Sachs to impose technocrat dictator Mario Monti as political leader without elections. Regard the practice as a kinder gentler nazi extraction of citizen teeth via plunder in a voluntary program. The Italians used to be a loud angry lot, but seem tame compared to Greece and Spain. Ivana Ciabatti represents goldsmiths and silversmiths at the lobby group Confindustria. She said, "Since I was a child, I remember that gold was given as a gift on various occasions for putting it aside. We used to laugh at it, but they turned out to be right. Many families are surviving thanks to this gold."

The individual accounts are touching. Valerio Novelli, a ticket inspector for the Roman bus system, is planning to sell his old gold teeth to avoid running up debts. He must support an ex-wife and daughter. The people are barely surviving based on the gold passed down from generation to generation, yet the American mainstream media continues to mock gold constantly. The Americans will not have it next year to shore up survival means. The aggregate data is alarming. The pawnbrokers that accept the supply can hardly keep up with business. They typically have the gold quickly melted down and sent abroad, making it one of Italy's fastest growing exports. Official gold sales to Switzerland leaped 65% last year to 120 tons, up from 73 tons in 2010 and 64 tons in 2009. Think of it as wealth exported, a capital outflow. It is the blood of the nation being slowly drained. Thanks to Mike Krieger of Liberty Blitzkrieg blog. See the Zero Hedge article (CLICK HERE).

◄$$$ GOLD SMUGGLERS IN THE PHILIPPINES HAVE LOOTED GOLD MINE OUTPUT. THE GOLD OUTPUT BYPASSES THE OFFICIAL CHANNELS. THE REPORTED 63% DECLINE IN THE NATION'S GOLD OUTPUT IS DECEPTIVE. IT GOES INTO BLACK MARKET HANDS, THEN TO MARKET. $$$

Philippine authorities claim that smuggling activities account for the 63% decline in their gold production in the first half of 2012. Gold smugglers grabbed most of Philippines mine output. The Philippines as a nation is ranked #18 as a gold producer. Officials offered data. The Dept of Environment & Natural Resources reported a gold production decline to 8382 kilograms, due largely to the 95% reduction in gold sold to the Bangko Sentral ng Pilipinas (BSP) in the first 6 months of the year. Due to the continuing high price of gold and the increasing number of small scale mining areas, the decrease in gold purchases by the BSP clearly indicates that gold output is going to the black market and smuggling activities, according to the agency. The armada of smaller gold miners want to take advantage of the higher price of gold in the international market. Apparently the BSP offers a lesser price, and sales to the BSP are subject to taxes.

The small scale gold mines, accounting for over two thirds of the Philippine total output, are the main source of replenishing the central bank gold reserves. Their level hit a record high of $10.4 billion early this year. By taxing profits, the government is encouraging the bypass. Most of the small mine output illegally exits the country, seeking alternative routes to the market out of view. Hence the Philippine central bank is losing its cheapest source of gold reserves. The national gold data is impressive. Using 2011 world market prices, the Philippine gold reserves amount to 76% of their Gross Domestic Product (GDP) in 2011, the economy size valued at 9.73 trillion Pesos (=US$233 bn). See the Bullion Street article (CLICK HERE).

## GOLD PRICE READY TO SURGE

◄$$$ LONDON TRADER ENTERED SILVER WHEN IT REACHED THE $30/OZ MARK, AS FORETOLD. HE IS A BIG PLAYER, WITH A FOLLOWING. $$$

The LeMetropole Cafe has a diligent observer who goes by the name of Stalker. He reported in early September that the famed London trader enter into silver trades in heavy volume, just like he said he would if the price broke $30/oz to the upside. His buy entry was around the $30.50 point. It is known that he has no plans to sell anytime soon. He is still very long gold, and still loves palladium.

Dave in Denver added his perspective. The Jackass has had respect for his views since 2005. He wrote, "The gold & silver story is starting to seep into the masses. It will happen slowly. If just 5% of the masses start to buy real gold and silver, then eschew the fraudulent ETFunds, there will be a serious price explosion. Imagine what will happen if 15 to 20% of the public start buying. It will be interesting to watch the gold/silver ratio, because as both metals get more expensive, there will be a serious display of the economic law of income and substitution effect. We will see the 'Silver is poor man Gold' axiom on display in a major way."

◄$$$ WYNTER BENTON CLAIMS SILVER IS HEADING PAST $50/OZ BY YEAR END. THE EX-JPMORGAN CLAN MIGHT KNOW PLENTY ABOUT HOW THE MONSTER WORKS IN THE SILVER MARKET. THEY ARE MOTIVATED TO INFLICT GREAT HARM ON THEIR FORMER FIRM. THEY PAINT A PICTURE THAT DESCRIBES A MOTIVE FOR THE MFGLOBAL CRIME SCENE. THE EX-JPM CLAN WAS PREPARED TO WRECK THE OLD BOSS AT JPMORGAN AND TAKE A HUGE DELIVERY IN SILVER. INSTEAD, JPM SUNK MFGLOBAL AND STOLE THEIR ENTIRE ACCOUNTS. $$$

The Silver Doctor has a continuing story line from a Wynter Benton, the anonymous blogger on JPM weblog on Yahoo Finance. He claims to represent a group of former JPMorgan commodities traders under Blythe Masters. Silver Doc tells how he accurately forecast numerous silver moves in early 2011. He re-emerged suddenly in early September after an 11-month hiatus. He offered an intriguing perspective on the MFGlobal criminal assault and rifled thefts of private accounts, a story that has some credibility. Benton claims the October 31st take-down in 2011 of MF Global was specifically designed to prevent the group of former JPM traders from taking delivery of a massive amount of physical silver and breaking JPMorgan's big naked short silver position. The story sounds credible. The old JPM group knew too much about JPM, and bore a deep grudge and against their old boss Blythe Masters. Benton also claims that JPMorgan's $36 critical price level in silver derivatives is still in effect. He calls it a time bomb, one that JPM cannot permit to be exceeded without colossal damage. More specifically, he stated that the ex-JPM traders have re-grouped, and that silver will trade above $50 before December 31st of 2012. The universal problem with JPMorgan is that they make big enemies everywhere they roam. When they inflict damage on groups, using criminal deeds, those groups invariably return in a better fortified (sometimes better hidden) position with revenge in their hearts and deep determination in their eyes.

Upon my request, the Silver Doc provided some background on Wynter Benton, so as to judge their authenticity and reliability. He wrote, "Early in 2011 during silver's run, they posted numerous times forcasting impending raids or spikes in silver, and were accurate nearly to the minute. In the fall of 2011 they posted that they were planning on taking delivery of a massive amount of physical silver to crush JPM's short positions, and that would take silver to $45 or something like that by the end of November. That was about the first week of October. They had gone missing until this week, in which they stated that MFGlobal was taken down to prevent them from taking delivery of the silver. They have now regrouped, and are ready to take on Blythe again. No one knows if they are legit. They claim to be JPM's former commodities traders whom Blythe Masters fired around July of 2010, that they know the inner workings of JPM's silver shorts, and they are hotly motivated to take down Blythe and JPM. They have also stated that JPM has massive silver derivatives losses that are triggered if silver trades above $36/oz for sixty (60) consecutive trading days. The May 2011 silver massacre sent silver back under $36 only for one or two days, sufficient for the 60 day period not to be completed." Very interesting, full of intrigue. It paints a picture of extreme risk for JPMorgan, to play out in perhaps mortal damage to their precious metals desk in the next strong leg up in the Silver price. One might wonder how the US Intelligence agencies might factor into any concerted effort by Wynter Benton to give JPMorgan a mortal blow in the strategically important silver metal market. Langley made its presence known last month with a statement.

◄$$$ JPMORGAN NEARLY DOUBLED ITS SHORT SILVER POSITION SINCE JULY TO PREVENT A RALLY PAST THE $50/OZ MARK. THE BANK IS DESPERATE AND VULNERABLE. $$$

Ted Butler is a loyal dedicated soldier. The Jackass learned several years ago to listen closely to his factual work, and ignore his analytic forecasts. The former are excellent, the latter not. Butler offered a September report update. "According to government data for positions held as of September 4th 2012, I calculate JPM to be short 130 million ounces, equal to 26,000 COMEX futures contracts. That is up from the 70 million ounces JPMorgan held two months ago. The 130 million ounces is more than any country produces for an entire year and four times what the United States mines annually. It is such a large amount of silver, that the silver price would have traded above $50 recently, had not JPMorgan sold short an additional 60 million ounces since July. There can be no argument that the short sale of 60 million ounces in less than two months by one entity would exert significant downward pressure on the price." The giant criminal bank conglomerate has turned desperate, thus rendering itself highly vulnerable.

◄$$$ GOLD MARKET INSTABILITY COULD BE A TREMOR BEFORE A BURST UPWARD. THE SAME APPEARS TRUE FOR THE SILVER MARKET. THE CURRENT PAUSE COULD BE INTERRUPTED VERY QUICKLY WITH A STRONG UPWARD LEG IN BOTH PRECIOUS METALS. THE ANNOUNCED QE3 BOND MONETIZATION PROGRAM CANNOT BE STERILIZED ANY LONGER. A POWERFUL USDOLLAR DECLINE IS IMMINENT. AS THE USDOLLAR RESERVE STATUS IS THREATENED, THE GOLD PRICE WILL ZOOM UPWARD. $$$

The USFed mandate on inflation moves next to an absurd mandate on jobs. They will fail on both. Inflation will be permitted by the USFed central bank in order to produce jobs, in the most heretic and misguided folly ever seen in modern times. The 0% rate will stick until economic growth arrives, but it will never arrive, due to the damaging effect from the 0% rate itself. This dog is chasing its tail, with interruptions only to devour its vomit. In the 1990 and 2000 decades, the United States consumed its way to prosperity. Next the errant nation with egregiously corrupted leadership will print its way to prosperity while doctoring the indexes that measure what prosperity is. The USFed ignores all Weimar chapters, after having rewritten the Great Depression chapter. The nation emerged from the depression only due to the Gold Standard and ample industry. The nation has neither today, and will therefore plunge into a systemic failure.

The bottom line is the ruin of money, leading with the USDollar and Euro currencies. Time appears to be running out for the Syndicate titans and their grip on the precious metals price. They have too many enemies. The entire global financial structure, and trade payment system, are steering clearly away from the USDollar. The instability in the Gold & Silver markets is vivid, a reverberation from the unstable FOREX market. The precious metals market required some time outs to prevent an unstable rocket upward. The JPMorgan machine needed a respite, to enable a reload of massive naked shorts to prevent the upward price movement. JPM bought a few days or weeks. May they meet Faustus in hell. See the Nasdaq article (CLICK HERE).

The response in the Gold price has smelled a QE3 in bond monetization since the summer months. The difference is that this time, unlike the deceptive Operation Twist, the bond purchases will be unsterilized with new money infused into the system. That is a Golden supercharge. A major intermediate reversal is underway, with a 1570 base, a 1780 top, which indicates a 1990 Gold price target. The kicker in the market is the broad mining industry strike, which extends not only from South Africa but to South America, in particular Bolivia. Gold supply will be inhibited. Expect some regrouping with a pause at the 1720-1770 area, before a breakout that captures the world's attention. Once over 1800, the 1900 price resistance will be overrun like a paper fortress by angry mobs bearing torches and sticks.

◄$$$ EVIDENCE OF THE IMPORTANT 36 LEVEL CITED BY THE EX-JPMORGAN CLAN IS VERY CLEAR (NOT PROOF, ONLY SHED LIGHT). CONSOLIDATION TIME IS OVER. NEW MOMENTUM IS GATHERED. A BULLISH CROSSOVER WILL ADD TO ITS POWER TO SLAM THE 43 RESISTANCE AND WORK TOWARD NEW HIGHS. THE DYNAMICS FOR SILVER ARE EXCELLENT, WITH SHORTAGES IN SUPPLY AND HEIGHTENED DEMAND. $$$

◄$$$ SOME BIG FACTORS ARE ALIGNING WELL FOR GOLD. STRONG RUSSIAN DEMAND, BURGEONING CHINESE DEMAND, AND HAGGLES OVER THE USGOVT DEBT CEILING, PRECISELY WHEN QE3 BOND MONETIZATION WILL DAMAGE THE USDOLLAR. $$$

Consider several factors, all disjointed. A) Vladimir Putin is frantically stockpiling gold as fast as he can. The Russian Govt has more than doubled its official gold reserves in the past five years, according to the World Gold Council. The real story is they have increased their gold reserves more than 10-fold, according to my source who has first-hand knowledge of vast tunnel vault systems under the Kremlin from consulting work in the 1990 decade. He has Russian two-fisted clients B) Gold shipments from Hong Kong to China surged to 458.63 metric tons in the first seven months of 2012, up from 103.09 metric tons in all of 2011. We have also seen outsized sequential monthly increases for China as recently as June to July. On a year over year basis the data is even more shocking. China in July for example purchased 75.84 metric tons of gold, double the volume compared to July 2011. C) Political factors are aligning with the demand season that builds toward the December holidays. The USGovt debt ceiling will be breached either November or December 2012, leading to enormous uncertainty exactly when the QE3 impact on the USDollar will be felt. A lame duck President might be negotiating a debt ceiling hike, while the USFed goes crazy debasing the USDollar currency. D) China has declared war on the USDollar, simply stated, no exaggeration, the gloves off.

◄$$$ SILVER MINE OUTPUT IS IN GREAT TROUBLE FROM A YIELD FACTOR. SILVER DEPENDS INCREASINGLY UPON BASE METAL PRODUCTION PROJECTS, WHILE THE SILVER YIELD AT PRIMARY MINES IS IN SHARP DECLINE. THIS BODES WELL FOR THE SILVER PRICE AND BADLY FOR THE MINING STOCKS. $$$

A unique but strange phenomenon affects the silver price. When the global economy is sluggish, demand for industrial base metals is reduced. That in turn shuts down some mine production, where silver is a by-product. So in slow times, silver output falls even if physical investment demand is fast on the rise. Like now! Worse, ore grades are on the decline for both primary silver and base metal mine projects. Deposits are old and thin and deep, thus challenging. As far as silver output goes, a nice breakdown is provided by the World Silver Survey. The primary silver mine production fell from 30% in 2010 to only 29% in 2011. The reason attributed was that a few big primary silver mines saw ore grades fall substantially. According to survey, among the larger mines, grades fell at Arcata (-29%), Alamo Dorado (-29%), Fresnillo (-16%), and Pallancata (-13%). The four mines are run by Hochschild Mining in Peru, Pan American Silver, and Fresnillo. These are significant declines that contribute to the global silver output decline. In past Hat Trick Letter reports, the silver market supply deficit has been a topic, which has lasted for almost a full decade.

Hardly anyone in the mining community or investment community is paying much attention to this trend. These physical forces hampering the future silver supply will affect the price dynamics in such a way as to force the silver price up to nosebleed levels. The supposed industry analysts forecast much higher silver production in the next 10 years. They might be delusional, since silver ore grades are falling quickly. At the same time, mine worker strikes are cropping up on all poorer continents. The mine industry spokesmen actually claim that silver mine operators are mining different ore grades for profitability. The claim is easily dismissed. The Silver Doctor argues to the contrary, effectively so. For mining firms to change mining ore grades in pursuit of higher profitability, they must mine HIGH ORE GRADES when the price of silver is low, and mine LOW ORE GRADES when the price of silver is high. This is not happening, rather the opposite. Lastly, 71% of silver came to market as a by-product of base metal and gold mining in 2011. If the market is going to rely upon future base metal production for the lion share of silver production, then big trouble lies ahead. Base metal mines are seeing a decline in ore grades as well. These physical forces bearing down on the market are going to send the Gold & Silver prices skyward, precisely when major currencies are being debased in accelerated manner.

## USECONOMY, DECAY & STENCH

◄$$$ THE LABOR MARKET REMAINS A WRECKING ZONE, STUCK IN A RUT. TO CLAIM THAT JOBS HAVE BEEN CREATED AND THE USECONOMY IS ON THE MEND IS THE STUFF OF FOOLS AND POLITICIANS SEEKING FOUR MORE YEARS. THE CONTRADICTION IS EASY, SEEN IN LENGTH OF TIME OUT OF WORK. $$$

The Lehman Brothers failure & bust marked the beginning of a long drawn out path that will inevitablely result in systemic failure of the USEconomy, yet to be recognized by the highly paid paper merchants. Gold is the surviver, the arch-enemy of paper assets. When the nation took the bait and bit hard on the lunatic notion of basing economic sustenance and growth upon the home equity bubble, it guaranteed the death of the banking system and household wealth. Later comes the systemic failure, with Gold the lone survivor, along with select hard assets like energy deposits and ripe farmland.

◄$$$ AUGUST JOBS GROWTH WAS AGAIN PATHETIC, WITH ALL THE GAINS COMING FROM THE FICTIONAL BIRTH-DEATH MODEL. REVISIONS WERE DOWNWARD FOR JULY AND JUNE, A HARSH SIGNAL. JOBS DECEPTION IS LONGSTANDING AND ENTRENCHED. $$$

Jobs growth slowed more than expected in August, which provided a big green light for the USFed to pump up the volume and paper party on. The sluggish USEconomy demands action, drastic action. The August Non-Farm Payroll data came in at a 96 thousand job gain, complete with the usual distortions. The jobless rate reported by the USDept Labor was 8.1%, down from 8.3% in July. But the benefit was the result of more people falling off the state jobless insurance rolls. The labor participation rate fell to 63.5%, the lowest rate since September 1981, and rarely mentioned in the press since it contradicts the improvement presented. No cause for celebration here. Two important notes. The recent monthly revisions were both downward by 41 thousand in total. The July figure was moved from 163k to 141k. The June figure was moved from 64k to 45k. When revisions are downward, it means their assumptions are contradicted, the usual fare. The second note is that almost the entire +96k gain was due to the fictional Birth-Death Model, which posted a bonus of 87k jobs from fiction. Small business is not ramping up. See the Yahoo Finance article (CLICK HERE).

◄$$$ THE HOUSE BUST DATA UPDATE FEATURES THE SAME OLD STORY. BANKS KEEP THEIR SHORT SALES OFF THE HOME PRICE METER FOR THE NATIONAL PICTURE. HOME FORECLOSURE STUFFING CONTINUES IN A BIG WAY, AS THE FEBRUARY MAJOR BANK ACCORD SOLVED NOTHING. NEW JERSEY STEPPED FORWARD PAST NEVADA AS A WRECKED MARKET. $$$

Doctor Housing Bubble reports that the Case Shiller home price index saw its first rise in eons, but it is a distortion. He claims the mix of sold homes has changed. My view is that short sales by the big banks are not counted. So distortion is huge, permitted, even desired. Tragically, 48% of young people under 40 years of age who hold a mortgage are sitting in homes with negative equity. Banks are dumping homes on the market. The practice of enabling low down payments has come back again to bite the banks. They are defaulting en masse. The reduced offerings of homes by the public reflects the distress and discouragement, many stuck without ability to take action. It is not a healthy vibrant market. The pace of home sales remains at rock bottom. See The Dr Housing Bubble article (CLICK HERE and HERE).

Back in November 2010, a collapse in the foreclosure process occurred as banks no longer had leverage to evict homeowners who refused to pay their monthly mortgage bills. The banks could not confirm they actually had rights to the underlying mortgage. The home foreclosure process slowed with ferocity, from around 330,000 homes per month to roughly 250,000 per month. The February RoboSigning Mortgage Settlement did not resolve anything, since the supply lines continued to fill. The foreclosure pipeline was never unclogged. RealtyTrac reports in August the FC pace fell to a level of 193,508 total. Ever since the advent of fraud-closure, the average monthly foreclosure total has dropped from a 330k per month average to just 219k per month, and still is declining. The market is not clearing inventory.

The answer to the puzzle is what Tyler Durden calls basic foreclosure stuffing. Properties are not entering the foreclosure pipeline since they are effectively kept out of inventory, even shadow inventory, and thus the distressed end market. Durden calls the practice a form of subsidy to the housing market, as month after month less inventory enters the market than otherwise should. Currently a 2.5 million backlog of properties sit in abeyance, waiting to be foreclosed upon, which are being completely ignored by banks. A stuffed foreclosure channel is obvious. The upshot to the homeowners is that they live mortgage-free, while the banks refuse to begin the foreclosure process. Feel free to believe the housing market has improved because some oddball Case Shiller home price index can be doctored higher by ignoring short sales by banks, and realizing the benefits of a couple million homes where tenants live for free. Well that is typical of US economic accounting and statistical abuse. The Jackass aint stupid. The housing market is still wrecked. The confusion is growing. See the Zero Hedge article (CLICK HERE), which shows a fine chart.

New Jersey has surpassed Nevada in 2Q2012 in the percentage of homeowners with seriously delinquent loans, those 90 days late or in foreclosure, according to the Mortgage Bankers Assn. Only Florida had a higher rate of serious delinquencies, which fell 1.2 percentage points from a year earlier to 17.5% of mortgages. The rate in New Jersey rose 1.3 percentage points to 12.7%, by comparison. New Jersey is a judicial review state. To conduct a foreclosure, a process must be followed which delays seizures and thus helps borrowers. It keeps down home prices for years as properties remain subject to repossession and then may be sold at a discount. While home values increased in July from a year earlier in 42 states, to be sure with plenty of CS distortions (cited above), home prices in New Jersey fell 0.8%, according to CoreLogic. See the Bloomberg article (CLICK HERE).

◄$$$ USECONOMY HAS MOMENTUM IN REELING AND KEELING, INDICATED BY THE CAPEX. NO RECOVERY OCCURRED AFTER THE 2008 EXTREME SHOCK, WHEN THE FINANCIAL PLATFORMS BROKE. BUSINESS INVESTMENT PRECEDES ACTIVITY IF NOT EXPANSION. IT IS NOWHERE. $$$

The durable good orders can be confusing, given the sporadic huge aircraft orders that skew the data. Also the endless war has consistent order flow devoted to destructive purposes, considered positive by hack economists. The data series to watch is the non-defense business investment excluding transportation. It is often called CAPEX, for baseline capital expenditures. The business sector alone minus aircraft provides an excellent large core for the USEconomy. It has been in decline for a full twelve months, having turned negative for the last few months in succession, with no solid recovery following the 2009 impact at the bottom of the cliff. A grand misconception is engrained in economic thought for the US, where capitalism is a lost concept. Income enables consumer spending, but more importantly business investment leads to income. The nation has no cohesive concept of what legitimate income means. Experts constantly clamor for putting money in consumer hands, regardless if it is from tainted sources. It must come from business formation, a system which collectively applied over an economy is known as capitalism.

As of July data reported in late August, the year over year change in capital goods orders has sunk into negative territory. The recent contraction since February has been steep, a big danger signal. The important quarterly sequential change rate shows contraction. The morass in Europe and the disconnect in China will serve up strong headwinds. The US has suffered a grand blow to investment, after so much occurred in China in the last decade. The US fiscal cliff looms as the initiative will be to cut spending. The level of political brinkmanship has turned lethal.

◄$$$ US-FIRMS CONTINUE TO MOVE OVERSEAS, DUE TO TAXES. DESPITE SEVERAL AWKWARD REFORM ATTEMPTS, THE UNITED STATES REMAINS THE HIGHEST TAXED NATION IN THE WORLD. THE POLITICIANS SEEM IGNORANT OF THE DISCOURAGEMENT, AS THEIR BUSINESS SKILLS ARE NOWHERE. EXPECT TAX REFORM TO RAISE TAXES IN HIDDEN WAYS, NOT REDUCE THEM SINCE THE MANDATE WILL BE TO REDUCE THE FEDERAL DEFICIT AND THUS AVOID THE FISCAL CLIFF. $$$

The national leadership talks about job creation, while they step on the necks of the business sector. The business level stupidity is universal, as law degrees needed to fashion legislation has little extended value to aid in shaping bills that result in economic growth. Rebellion among US corporations is reaching a fever pitch. Large US firms are moving their headquarters and central offices to foreign soil, as a direct response to punitive taxes and USGovt hypocrisy. A 2004 federal law was passed with a motive to halt the practice of companies moving overseas. The heavy tax burden remains a primary concern. Some corporations anticipate worse tax rates as the USGovt spins out of control in absent leadership and escalating debts. The USCongress might revamp its tax code next year, with a plan to reduce the budget deficit. They cling to the notion that higher tax rates bring greater tax revenue, when the exact opposite is the case. They are plain stupid on matters of economics.

Some big firms claim that growth prospects lie abroad, and they want to be closer to the where their clients are, to exploit geographic reach. Take as example the risk management firm Aon PLC, which relocated to the United Kingdom in April. The relocation will result in Aon reducing its tax rate, which averaged 28% over the past five years, to 23% over time. The bottom line is about $100 million in annual savings, enough to justify the decision. Since 2009 alone, at least ten US-based public companies have relocated their incorporation address abroad or announced plans to do so, according to the Wall Street Journal. That is an increase from just a few from 2004 through 2008. The companies that have moved recently include manufacturer Eaton Corp, oil firms Ensco International and Rowan, as well as DE Master Blenders, a spinoff of Sara Lee. Witness a rebellion. It is amazing that the departing companies do not cite the poorly educated worker base, the knucklehead welfare state, or the endless wars. They simply cite the obvious high US tax rates.

Eaton is a 101-year old maker of components and electrical equipment based in Cleveland Ohio. In the midst of an acquisition of Cooper Industries in May, the Eaton executives announced plans to maintain factories, offices, and other operations in the United States, but the official place of incorporation would be relocated to Dublin Ireland. When the deal was announced, they cited tax benefits would save the company about $160 million annually, beginning next year. The Eaton CEO Alexander Cutler has been an outspoken critic of the US corporate tax code. He said, "We have too high a domestic rate and we have a thoroughly uncompetitive international tax regime." Without remedy, US corporations simply leave and reap big benefits.

The moves by offshore oil rig operating firms Ensco and Rowan followed rivals, in order to remain competitive. In moving from Dallas to the UK in 2009, Ensco followed rivals such as Transocean, Noble, and Weatherford Intl which each had abandoned the highly taxed US shores. The Ensco executives openly stated the need to achieve a tax rate comparable to that of its global competitors. Their effective tax rate has declined from 19% in 2009 down to 10.5% in 2Q2012. The savings will total over $100 million per year. After nearly 70 years since the end of World War II, the USGovt cannot seem to find its ass with either hand, which usually are in Wall Street pockets. Lawmakers of both political parties have said the US corporate tax code needs a revision, expected to come next year. Expect them to raise taxes in hidden ways, not reduce them. They are desperate, corrupt, and stupid, a lethal combination. One common source of concern is the top corporate tax rate of 35%, the highest among developed economies. By comparison, Ireland's rate is 12.5%.

The Obama Admin has proposed lowering the rate to 28%, while Republican rival Mitt Romney has proposed 25%. In my view, unless the corporate tax rate is substantially reduced, like to the 20% to 25% range, businesses will not pay attention. A big unspoken problem is distrust of the USGovt for its fickle manner, its hypocrisy, its block headed decisions, and its instability. The United States is unique in another highly destructive manner pertaining to taxes. US corporations are put at a huge disadvantage because their profits earned abroad are taxed. Most developed countries tax only domestic earnings. However, loopholes exist. US multinational firms often pay far less than 35% as they utilize the option of deferring the payment of US taxes on foreign earnings until they are brought back to the US. This phenomenon explains why US firms hold $trillions in overseas subsidiary banks, away from the grubby USGovt hands. Look for the Obama Admin to limit the benefits of tax deferral, seen to be a tax enhancement technique. The Obama speeches like the State of the Union (lousy) are loaded with rhetoric, promises, and smiles, with talk of creating US jobs but without the slightest scintilla of comprehension of either capitalism or tax incentive. Marxists never understand and always wonder why the dance floor is empty. Witness an empty chair. See the Yahoo Finance article (CLICK HERE).

◄$$$ FOOD STAMP USAGE CONTINUES TO RISE IN DEFIANCE OF ANY CLAIMED USECONOMIC RECOVERY. THE THIRD WORLD TRAITS ARE BECOMING DEEPLY ENGRAINED, IN A LAND OF UNDERCLASS. IN A FEW YEARS, PERHAPS 20% OF THE AMERICAN POPULATION WILL BE GIVEN RICE & BEANS LIKE PEOPLE IN BANANA REPUBLICS. $$$

The USDept Agriculture changed the Food Stamp program to some vapid name SNAP (Supplemental Nutrition Assistance Program) that sounds great. Wrong footed management prevails. Unfortunately, its enrollment is rocketing upward even as the nitwit USGovt administrators are eager to offer it to undocumented Mexicans. The facts and figures are cited every few months in the Hat Trick Letter as a reminder of passing through the gates to the Third World. The number of Americans on Food Stamps has grown from about 17 million in 2000 to 31.9 million when Obama took office in January 2009 to 46.4 million today. The USGovt spent a whopping $71.8 billion on the food stamp program in 2011. In the last four years the number of participants in the SNAP program with the snappy name and open doors increased by 64.7%, while a 114% rise in program cost has been realized over that time period. Since 2000, the program cost is up by 395%. As for participation, it too has grown wonderfully. Since 2000, the number of participants is up 170%. It is an American success story which adds notably and nobly to the USGovt debt.

◄$$$ THE EXPANDED USGOVT DOLE ASSURES OUTSIZED FEDERAL DEFICITS AS FAR AS THE EYE CAN SEE. OVER 100 MILLION AMERICANS ARE ENROLLED IN AT LEAST ONE WELFARE PROGRAM RUN BY THE FEDERAL GOVERNMENT. THE MEDICARE ROLLS RECEIVE PROPER ATTENTION AS PART OF A BACK-BREAKER PROGRAM. THE WELFARE STATE IS OUT OF CONTROL. THE USGOVT DEFICITS ARE INSTITUTIONALIZED AND WELL ENGRAINED, TO CONTINUE UNTIL THE DEBT DEFAULT. $$$

The entitlement and aid programs have grown extraordinarily large. Their size indicates extreme distress within the USEconomy. The number on USGovt aid programs eclipsed an important mark recently. The Food Stamp program has gathered attention, with its ranks having reached shocking levels. The benefits of Medicaid are also out of control, with rapid growth entrenched. This is not the routine mainstream Medicare, but the aid to those too poor to manage medical costs. It is a medical welfare program. More Americans are dependent upon the federal government than ever before in US history. According to the Survey of Income & Program Participation conducted by the US Census, well over 100 million Americans are enrolled in at least one aid program run by the federal government, which constitutes about one third of the entire population of the country. The Social Security and Medicare recipients are not even included. The safety net has become a quasi foundation. The socialist nation is extremely well rooted.

Focus on other areas of the welfare state. Medicaid is growing without reins. The number of Americans on Medicaid grew from 34 million in 2000 to 54 million in 2011, almost a 60% rise. Back in 1965 only about one out of every 50 Americans was on Medicaid. But now one person in six in the entire country is on Medicaid. Analysts project that ObamaCare will add 16 million more Americans to the Medicaid rolls. Expect such an estimate to be low when reality strikes. Other federal welfare programs are exploding in size as well. For example, federal housing assistance increased by 42% between 2006 and 2010. The chart posted was prepared by a Senate Budget group. The growth is startling. Be assured that USGovt deficits, even apart from the endless sacred narco wars, will be well over $1 trillion every year until the debt default that shakes the world to its core. The debt is long past unmanageable.

## THANKS

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.