-- Posted Thursday, 12 July 2012 | | Disqus
In recent public articles, the USTreasury Bond bubble was described, supported by Interest Rate Swaps to produce artificial demand and to create an illusion of a flight to safety in toxic USGovt Bonds. A Black Hole phenomenon was described, which will suck the capital life out of most assets, celebrate the USTBond rally, and accelerate the recession in the USEconomy. Numerous endgame signals were described, all alarming in their own right, not a single signal being from the realm of normalcy. Extreme danger is the warning. This week consider just a handful of danger signposts, all screaming loudly of systemic breakdown. They are all deeply disturbing signposts that complement the endgame signals with a scattered pox of symptoms on the landscape. The Jackass is firm and rigid in maintaining that ugly forecast made in late 2008, dismissed by many as foolish and off the mark. No longer. The USGovt debt default in the form of a massive forcible debt restructure is being considered by creditors in charge. The USEconomy is imploding, and Money Velocity is falling. The true protection in both an inflationary spiral and a deflationary spiral is GOLD. The current storm center has a mix of both, a fast rise in the monetary expansion coupled with a painful decline in the value of all things paper. Never overlook that home prices are a consequence of paper games, not the hard asset ploy. The USDollar is being pushed off its coveted throne as global reserve currency. A system based upon GOLD is coming, designed to manage trade settlement. The paper kings hope to impose a new and better paper bond vehicle, and a new and better paper banking depot, but they are failing miserably. They are on the extreme defensive. Their captains are cutting deals to stay out of prison. Justice might actually be served. Watch the LIBOR lawsuits, which will be a different kind of mushroom cloud.
USECONOMY IN GALLOPING RECESSION
Forget what the political leadership claims on a USEconomic recovery. Reality could not be farther from their claims, as their credibility is strained. Their deception and wishful thinking put to public speeches could not have been more incorrect. The domestic gasoline volume sales from refiners has fallen a ripe 50% since the 2007 peak. Notice that Quantitative Easing, the hyper monetary inflation designed to purchase USTreasury Bonds and USAgency Bonds that almost no global creditor wishes to buy, did not result in stimulus. Instead as my claim has been, it results in capital destruction from rising costs, vanishing profit margins, and retired equipment. Much more stimulus will have to come, much more bond purchase, much bigger federal deficits, much more currency debasement. The effect on the GOLD price will be huge, but only after the blockades are removed that interfere with free markets.
LABOR MARKET IN TATTERS
The USEconomy requires around 140 thousand jobs to stay neutral, as population growth is absorbed. This important point was often stated back in 2004 and 2005 and 2006. But it is not made any longer, since the goal is to achieve 100k to 200k jobs. The Non-Farm Jobs report is widely regarded to be a farce display, with a powerful fudge factor that can bring about almost any final figure desired. The Birth-Death Model is a travesty. Let this statistical analyst assure that an auto-regressive integrated moving average model of 11th order is nonsense in the Time Series arena of modeling artistry. The BDModel is designed to track small business job growth, since the NFPayroll survey does not. Instead the BDModel is used as a fudge factor with no bearing whatsoever on the reality of small business climate. The Natl Federal of Independent Businesses has its own measures, and in the last three years they have been uniformly negative. Yet the BDModel continues to add jobs to the official estimate.
The table displays the trend in revision downward, and removes the fallacious fabricated fiction that is the Birth-Death Model fudge factor. The USGovt Bureau of Labor Statistics could not tolerate posting a negative job growth number in consecutive months, to reflect the true condition of the reeling USEconomy. So the fudge factor enters the equation. Blatant deception, kind of like constantly updating the seasonal factor adjustments in monthly statistics, another common gimmick.
MONEY SUPPLY CORRELATION
The correlation between the Gold price and USGovt outstanding debt had been rather tight, like in a death match wrestling. Then in 2011, the masters of the banking universe decided to double down on their uneconomic naked short positions for Gold, and worse. When the USFed or Euro Central Bank have taken bold steps that show both desperation and a broken financial system, the hidden actions have been intense since late 2011 and into year 2012. The massive Dollar Swap Facility dispensed over $3 trillion over European banks. The entire QE dispensed more than $2.5 trillion over US banks. The Operation Twist embarked on a new approach that involved more secretive monetary expansion, but also simultaneous with much higher volume cartel short positions for Gold futures contracts. Correlation like what is shown between the Gold Price and outstanding debt at the USTreasury are rare indeed outside the scientific laboratory. Such is the power evident in hyper monetary inflation and the elicited response.
The bank cartel has taken extraordinary measures to hold down the Gold price during its Weimar fire drills that scream of systemic failure. At every Bernanke speech, at every FOMC minutes release, at every QE recent release, at every huge Dollar Swap Facility tap (like Jack Daniels whisky), the naked short patrol comes out to ambush the Gold price in increasingly bold fashion without any concern of being noticed. It is all illegal, in a world of banker activity far removed from proper. Expect the correlation to pick up once again, in big jumps back over 70%. The Gold price will make huge strides before long, to reflect the growth in outstanding USGovt debt and the growth in the USDollar monetary base. The two are connected by a bond honored by Mother Nature of Economics.
The rebellion is based in barter, with the device the currency swap facility that enables trade. Another important China swap facility was put to contract in ink, a renewal with Brazil. These two large nations originally signed a swap deal in 2008, just renewed. Brazil is more than twice the size of any Latin American nation, only recently awakening. The USDollar epitaph is being etched within global trade circles on an imperial headstone. The trap is closing, as trade exclusive of the USDollar grows like a network, a veritable latticework that spans the globe. The USDollar is gradually being dethroned as the world's reserve currency, the push coming from a growing list of nations that hardly qualify as Lilliputians. No longer is the so-called Dollar Exclusion Zone confined to Asia. By signing a renewal deal on currency swap, Brazil has promoted the renminbi (people's money) as a reserve currency by becoming the biggest economy onboard with the barter swap table. Brazil and China announced the BRL 60 billion (=US$29B) local currency swap after a bilateral meeting between the two leaders. The Brazilian Real and the Chinese Yuan will enjoy a handshake to enable trade, all outside the fractured tainted US$ realm.
The message is clear. Trade dictates banking practices and reserves management, since the banks are lined up to make payment on vast trade contracts. China is not only fertilizing the global landscape for the Yuan to become a reserve currency, it is locking out the tired currency soon to be de-throned. The United States exports bonds (usually either fraudridden or bubbly), military hardware (full spectrum dominance, exhaustion, backfire), and food products (some genetically modified). While China dispatches trade representatives and dealmakers across the world, the USGovt dispatches tax collectors from the USDept Treasury, along with security agents whose mission is better understood by Al Capone in nefarious activity. Hint: it resembles talcum powder but has a very different effect on the human body. Without benefit of laundering facilities, the US banks would have collapsed a few years ago.
Consider the recent headlines just in the last few months:
- "World's Second (China) and Third Largest (Japan) Economies to Bypass Dollar, Engage in Direct Currency Trade"
- "China and Russia Drop Dollar in Bilateral Trade"
- "China and Iran to Bypass Dollar, Plan Oil Barter System"
- "India and Japan sign new $15 billion currency Swap Agreement"
- "Iran & Russia Replace Dollar with Rial & Ruble in Trade"
- "India Joins Asian Dollar Exclusion Zone, Will Transact with Iran in Rupees."
- "China and Chile to Establish Strategic Partnership, Launch Currency Swap and Settle in Renminbi"
CENTRAL BANK ZERO WALL OF SHAME
On July 5th, the Euro Central Bank showed both failure and desperation. They cut the official rate to 0.75% to join the other failures. The Bank of England stayed put at 0.50% and the USFed is stuck firmly at 0.25%, while the Bank of Japan has been at or near 0% for almost 20 years. The clowns sitting as central bank heads talk of Exit Strategy, when they should instead talk about resignation, post mortems on the dead economies and banking system they reign over with arrogance and rain over with toxic liquidity. They cannot pull back the reins on the powerful team of horses going down the hill. They have exhausted their entire arsenal of weapons, yet remain boastful about their vigor and strength. They are impotent. Their central bank franchise system is an utter failure. They have morphed into facilitators to the Weimar Engineering Corp, managing over the worthless paper Printing Pre$$ Publications, the toxic distribution Dollar Swap Facility Warehouse, the Budget Austerity poison pill medicine cabinet, and the Financial Engineering suicide toolkit. Their latest is complicity with the LIBOR price rigging fraud. The LIBOR field agents like Barclays and JPMorgan and Deutsche Bank are mere executors of the rigging, in order to maintain a matched rate with the artificial near 0% benchmark dictated by the central banks themselves. The Bank of England and USFed will be dragged into the lawsuits, where they will claim executive privilege.
The attorneys and aggrieved victims are lined up, as perhaps over 900 thousand lawsuits will come. That is how many adjustable rate mortgages were arranged from 2005 to 2009, with underwriting banks serving the complaints. The army of US legal beagles is on the job. The lost income to the victims is obvious. The lawsuits will eventually target the central banks. The fraud reaches into the $trillions easily, when all the derivatives are factored in. Think many $trillions in volume times small percentages skimmed illegally. The mainstream press carefully avoids such topics. Do a GOOGLE search of "municipal lawsuits LIBOR" to produce 21.1 million hits. This story will be gathering momentum for several months, and be in the headlines a year from now.
ALLOCATED GOLD ACCOUNTS
The sequence of financial scandals must be noted. It is difficult to discern exactly the forces behind the sequence of cases, but the chain of dominos on effects is intense and blatant. This chain will continue until a systemic collapse is visible to expert and commoner alike. The LIBOR scandal is the latest link in the chain. The corruption channel is full. The exposure is glaring. The fan to distribute shame is revved up. The scandal is widening. The pressure is mounting. The bankers have never been on the defensive this much for alleged corruption, accused corruption, and admitted corruption. Their most vulnerable points are under attack. Big damage is done in recent months. Event #1 was MFGlobal. Event #2 was JPMorgue losses tied to IRSwaps. Event #3 is LIBOR price rigging. They are all related, from vast insolvency and illiquidity that built over three years time. Other events will come, only later to discern their connection to the sequence. My firm belief is for event #6 to be Gold Allocated Account raid scandal. The bankers have improperly accessed at least 20 thousand tons of allocated gold, replacing them with gold certificates without permission or knowledge of by the account holder. The volume of raids could be as much as 40 thousand tons. My gold trader source is adamant about the level of raids, and expects a scandal to shake the Western world banking system to the core, resulting in massive prosecution. This deadly chain all began with Lehman Brothers, whose killjob involved a pure skate on the deeply corrupt and mischievous activity that should have resulted in a gigantic scandal in 2009 and 2010. Yet US regulators ignored the produced criminal fraud evidence, and the clock moves on. In truth, event #0 was the TARP Fund and the $700 billion gift never fully scrutinized or prosecuted for its fiduciary violations and extortion angles.
WHEN THE ALLOCATED GOLD SCANDAL HITS, THE GOLD PRICE WILL RISE TO MULTIPLES OF THE CURRENT PRICE. IT WILL BREAK RANKS FROM THE PAPER CLUTCHES AND PHONY PRICE DISCOVERY METHODS. THE GOLD PRICE WILL EASE PAST THE $5000 PER OUNCE MARK, AND TAKE SILVER ON A GREAT UPWARD RIDE. YOU SEE: THE BANKERS WILL HAVE TO REPLACE THE GOLD BY OPEN MARKET PURCHASES AS RESTITUTION!!
The events will continue to occur in a sequence, probably managed much more than we are told. My suspicion is a new sheriff is in town, who stepped off a jetplane a few months ago from an Eastern location. Some suspect the Western castle dwellers are staging a systemic collapse in order to impose a new centralized government. It would not be pretty, nor permit rights or liberty, and be described as a debt slavery serfdom. My belief is that the Western strategy is backfiring, as de-centralization is occurring, the exact opposite. The primary secure safe haven is Gold, always has been Gold, and always will be Gold. The experiment since 1971 when the Gold Standard was unilaterally broken by the United States is coming to a conclusion. The wreckage is complete and a great tragedy. A new system will emerge, but only when the current system is in a shambles and the main captains in the banking sector have found other employment, perhaps making license plates and presiding over a system where cigarettes serve as legal tender in a closed system. My suggestion is for human teeth to be a better medium of exchange. Let's hope they are kept deep underwater, where in time they can sleep with the fishes.
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-- Posted Thursday, 12 July 2012 | Digg This Article | Source: GoldSeek.com