The Great Misdiagnosis

June 30, 2011 by goldguru · 4 Comments

By Jim Willie CB, Golden Jackass

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Imagine a doctor who administers an elaborate treatment for a man suffering from multiple broken bones, joint arthritis, and fallen foot arches. The quack doctor orders massive amounts of liquids as though he has a horrible case of dehydration. The inept doctor also permits unlimited freedom of movement around the hospital and its grounds to the patient, as part of the blunt treatment. The man still cannot walk right or breathe normally, has trouble lifting any significant weight with the arms, and stumbles around from shaky legs. But he has plenty of fluids and freedom to roam, urinating like a race horse. With the heavy mistreatment that is badly off the mark, he has a new problem, diarrhea and bloat together. His doctor is an idiot, incompetent, but still given respect. The doctor is the US Federal Reserve, led by the lousy economist who never ran a business, the mad professor from Princeton University. His claim to fame was revisionist history of the Great Depression. He was chosen to be the bagholder, to print money until no tomorrow. The USFed balance sheet is almost totally ruined, without hope of repair. The clumsy oaf professor posing as USFed Chairman actually admitted in public that he is confused why the USEconomy remains moribund, unresponsive to all the special treatment administered so thoroughly. Bernanke admits his incompetence. The national economy desperately requires a housing market revival that cannot come since banks are constipated with foreclosed homes in still rising inventory. The misguided licensed doctor continues to ply his trade, directing the wreckage, confused at the helm. Now the hospital is overrun by victims of the USEconomy, sinking under the weight of debt.

At least the health care sector is expanding as a business, the government sector too. Neither is productive. Meanwhile, the nation sinks into a depression, the debt approaches a default, and the USDollar faces extinction through revolt, rejection, and evasion. The nation suffers from lost direction, absent leadership, and unspeakable corruption from the climax of the Fascist Business Model introduced by the last administration with large doses of fear. The dominant themes in the USCongress and Executive branch are clearly paralyze, polarize, and partisan. Tainted money has been followed by tainted morality, policy, justice, and representation, enough to invite a public response. Let’s take a quick look at numerous pressure points, broken parts, and centers of ailment. The doctor is extremely busy in confusing both the patient and anxious family. They are repeatedly told the patient is on the mend, but he keeps falling down when attempting to move on his own power. The family has lost faith in the doctor, but no other medical professionals seem any more enlightened.

THE ULTIMATE PROBLEM OF INSOLVENCY

The national officials have grotesquely misdiagnosed the problem. It is not one of liquidity. Rather the problem is widespread systemic insolvency and absence of industry for legitimate income and high level bank corruption that has caused a national sclerosis. Inefficiency reigns supreme, like with any fascist business model climax. The corporate leaders and political leaders sold out two to three decades ago. As long as the national policy is off the mark on recognition of the ultimate problem, no solution will come. Jamming a solution after a wrong diagnosis leads to tragic results. All the problems in the USEconomy from summer 2008 are actually worse today. No solution is even attempted. Mountains of money have been wasted, undermining the USDollar. In my view, the diagnosis is intentionally made incorrect in order to continue the elite largesse. The blunt instruments of the USFed are obviously from the wrong toolbag.

TURNING POINT, NOT BROKEN BRETTON WOODS

The turning point was not breaking the Bretton Woods Accord in 1971, the movement off the gold standard. Obviously, that was an extremely significant event, but analysts miss the original wart that changed the financial complexion. My viewpoint is different from most within the gold community. The turning point was the Vietnam War, whose costs forced the federal deficits to an extreme, the first $1 trillion in the national debt. At the time, when the Jackass was in college chasing airborne frisbies and frolicking females, that first trillion was hugely important. The reaction was the broken Bretton Woods Accord in order to avoid a run on the national gold treasury held by the USGovt. The ultimate irony is that 20 years later, the Rubin Gang lowered the gold lease rate, enabled raids on Fort Knox for $trillion profit by the Wall Street gangsters in private gains. The USDollar has had no collateral ever since, the basis for a vaporous currency, and a grand setup for debt default. The emphasis on war remains a high priority, even a sacred topic not permitted in debate. The budget battle has effectively removed the military budget when making proposals for spending cuts, precisely as the Jackass forecasted two months ago.

GOLD READY TO RESUME

With all the lousy USEconomic news (no need to provide ample detail), the obvious nature of continued fiscal and monetary stimulus has permeated into the financial markets. The most direct beneficiary has been the S&P500 stock index. Stocks have jumped off the double bottom tested low. The entire stock and commodity market can be appropriately described as a risk trade, as in risk of paper securities. The silly empty bluff by the USFed has been called. The USGovt debt limit will be raised, even if on a temporary basis by a small amount. The absurd gesture to release US Strategic Petroleum Reserve crude oil, coupled with a similar release of IEA European oil, has seen an effect come and gone. It was not exactly minimal, but surely fleeting and meaningless. They will replace those reserves with more costly oil, no doubt. No solution has come for the global monetary mess with fracturing sovereign debt. No lasting solution has come to Greece, although the bandaids and chewing gun and bailing wire will assure that another month of tranquility will come, except for minor events like street riots. No lasting solution will ever come to the USGovt budget, where spending cuts are obstructed and tax hikes are obstructed, and war spending will continue into oblivion.

Gold has benefited from the lost credibility of the global monetary system, from the loss of unquestioned faith in the central bank franchise system. Gold represents the mirror image of the crumbling monetary system and its soured debt foundation, managed by dubious central bankers. The system will perpetuate its ruinous debasement of money itself, since the power structure will struggle to preserve itself. It is that simple. In no way will JPMorgan or Citigroup or Bank of America voluntarily commit to bankruptcy and debt restructure, accompanied by impaired asset liquidation. They are the insolvent pillars of the US financial syndicate, firmly in power, never to release that power unless from cold dead fingers. The Gold & Silver prices will continue to make new highs in the second half of the year. We should look forward with juicy anticipation to all the back-peddling by countless analysts who claimed the anti-USDollar trade was over. It was just resting in consolidation. The battle cry remains INFLATE OR DIE!! The system will continue to seek vast resuscitation via harmful inflation, or implode. The latest lousy USTreasury auctions should be viewed as having great importance. The USFed will continue its debt monetization or face failed auctions. Notice the strong signal for continued debt coverage in the S&P500 stock index itself. Crude oil has recovered. Gold & Silver have bottomed. Onward and upward. The great spring shock was administered in empty threats.

POLITICS & ILLUSION, NO SOLUTION

In the last three years, at least 100 direct questions have come to my INBOX or telephone, asking what solution might come. My answer has been consistent, that no solution is even pursued. The objective is not remedy, but rather retained power by the banksters. Any meaningful remedy must begin with a foundation of liquidated failed insolvent big US banks. That will never happen, since they hold the power over the USGovt and control the USDollar printing press. We are witnessing moral hazard over the top, the acceptance of the most dangerous risk. The entire concept of Too Big To Fail for banks ensures no serious attempt to deal with the problems, no meaningful policy to encourage recovery, and a sinking toward systemic failure. The business model leads always to a climax of ruin.

THE CAN HAS GONE NUCLEAR

The Rubin Doctrine has a more colloquial translation, of kicking the can down the road. Dullard Joe Kernan of CNBC fame coined the phrase of kicking the can into the cul-de-sac, a dead end. My preference is the jump shift in metaphor, where the can has gone nuclear. Those who kick it are infected. Whatever the can touches is infected. The air on the road is infected. The latest Greek example with austerity measures points out the futility. One year ago a bailout solution was handed to Greece. In no way did it resemble a solution It was a grand cover of big bank exposure, nothing more. The process will continue until the people interrupt the handouts to the bankers. If not added public debt, then added money supply has been abused to redeem Southern European debt held by the bankers. A great irony presents itself, since a Greek Govt debt default might trigger huge Credit Default Swap contract payouts by AIG, now obligated by the USGovt. Increasingly, but secretively, many deals have been cut to collateralize the Greek debt. In fact, a private source informs that in Greek dock warehouses, an estimated 200 to 400 billion Euros in shrink wrapped unopened cargo containers lies in limbo. The EuroNotes come in Greek denomination, but also German and other national markings. The pressure is strong to avoid a removal of the Euro currency, even though fully broken. The owners of the vast hoard of EuroNotes are scared witless and sweating profusely, fearful of loss from obsolescence or retirement. The funds were from secret payment to purchase stakes in major properties like telecom firms, shipping firms, media firms, commercial properties, and more. The owners struggle to put the funds into the system without detection.<

FAILED KEYNESIANISM TURNSTYLE

Despite the failure of the entire textbook theory of government stimulus through debt propagation, the policy continues without end. Extended to the Great American Politburo for administered price controls, it is failing in public view. It will continue until conclusion, a national debt default. The centers of cancerous thought continue to be the University Chicago, Harvard University, and lately Stanford University. The purveyors of failed economic and monetary policy typically come from these dens of heresy. They serve as Fed Governors and members of the White House Council of Economic Advisors. Hardly a one has any business experience, but they do have impressive credentials, complete with lofty theses about something equally abstruse as useless. Wall Street has colluded effectively with the titan schools, offering them decades of chaired posts, plenty of prestige, and recently some lush collusion like with the Enron project.

QE2 NOT AN ECONOMIC STIMULUS

What a laughable concept that the Quantitative Easing was to stimulate the USEconomy!! Not even close. In fact, the Stimulus Bill had only a trifle stimulus inherent either. It was primarily about plugging the vast state budget shortfalls, which have reappeared in full force. Even the name Quantitative Easing is an insult to human sensibilities. It is hyper monetary inflation, which would sound bad. Heck, Neo-Conservative was another euphemism, a label that sounded better than Neo-Nazi. It also fooled the public, an easy task since dominated by simpletons. The actual beneficiaries of QE and QE2 were the big banks. They were given freshly printed electronic funds for their toxic bonds in a vast redemption process. They have been given nearly infinite credit lines to speculate in the easy USTreasury carry trade. They borrow at near 0% and invest in long-term bonds. In the process, low rates enable the big US banks to play the carry trade while their balance sheets fall backwards from the crippled housing and property credit asset. The practice keeps long-term rates down. The USGovt is hard pressed to find willing investors in USTreasurys. So QE and QE2 really helped to compensate for those scarce investors.

THE MONETARY POLICY BLUFF

Anyone who truly believes that QE will stop is a verifiable moron. Already this week, three USTreasury auctions took place. All three were borderline dismal. The main advantage for the USGovt again was the slide deeper into recession for the USEconomy. The effect exposes the destructive inter-relationship, since the USGovt needs a miserable lifeless moribund USEconomy in order to sell its USTreasurys, the packaged USGovt debt. During the last several months, the USFed has been the buyer, directly or indirectly, for 70% of the USTreasury debt securities. Apply the indirect argument to include the inventory of bonds gobbled by obligation from Primary Bond Dealers. They typically have been recycling their USTBills and USTBonds back to the USFed during Permanent Open Market Operations in three weeks on average, an abomination. With foreign creditors backing away and the USFed supposedly buyers no more, a huge vacuum cometh. Again, anyone who truly believes that QE will stop is a verifiable moron.

USGOVT DEBT LIMIT STENCH

The power harlots in WashingtonDC are playing a dangerous game. They have been attempting, much like the Europeans, to redefine what debt default means. The debt rating agencies have been rushing on stage to clarify the matter. The one party refuses to budge on tax hikes. The other party refuses to budge on spending cuts. Both sides obediently leave alone the sacred war so as not to anger the narco barons and fear merchants. The sad fact of life is that Wall Street banks would sink into a failure pit in three months time without the money laundering from the narco operations bound within the smokescreen of a spurious war on terrorism. A glimpse of what might happen with a closer flirtation on debt default has been seen with a quick move in the 10-year USTNote yield from 2.86% low last week to the 3.18% Thursday. It rises to give a quiet alarm.

INTEREST COST WILL SOAR IF EXIT FROM ZIRP

The most basic reason why extreme monetary inflation will continue is the absent demand for USTreasurys. The most convincing practical argument down the road only a little in time is that the entire USGovt debt structure cannot afford higher borrowing costs. The Zero Interest Rate Policy has been blessed as near permanent. Debt Monetization as policy goes hand in hand with ZIRP. Since the US banking system died in September 2008, the USGovt deficits have exploded past $1.5 trillion annually. Most of the recently issued debt securities have been in the very short term maturities, a trend begun by the Clinton Admin. If QE is halted, then short-term yields would rise and long-term yields would rise. The result would be a doubled borrowing cost for the USGovt debt. Not gonna happen! Inflation as policy will rule!!

UNITED STATES IS GREECE TIMES HUNDRED

The national implosion, disintegration, and ruin of Greece is in full view. The plight of the United States debt situation is 100 times worse than Greece. The people of Athens are angry, with focus of their anger on the duplicitous and corrupted politicians who favor the bankers and yield to their demands. The people of the United States are angry but less perceptive. They still believe the mean nasty oil producers are lifting gasoline prices, still believe mean nasty speculators are lifting food prices, still believe mean nasty Chinese are lifting import prices, but have clearly come to believe that mean nasty bankers are illegally foreclosing on their homes. The intentional poor education on economic and financial matters has left the American public as mere cannon fodder on the financial battle field. The great advantage of the Printing Pre$$ has spared the American marketplace of much higher rates. Like Greece, the nation flirts with debt default. The artificially low interest rates, the result of dictated monetary policy with the fortification of Interest Rate Swaps, have conspired to avoid heavy borrowing costs for the USEconomy. The bond market gives a false signal. In Athens, the bond yields are out of sight high, from 20% to 30%, due to a broken insolvent wrecked system. In the United States, the bond yields are out of sight low, from 0% to 3%, due to a broken insolvent wrecked system. The paradox and irony are incredibly ugly, stark, and confusing. The US is Greece, and only the true experts are aware. Leaders in both nations are sweating profusely and quaking in their boots. They each march backwards into debt default.

EMPHASIS ON HOME PRICES

If one were to be told in 1960 that the USEconomy would turn up or down depending upon the housing market, the reaction would be a conclusion of stupidity and break from reality. In 2004, when the Hat Trick Letter was hatched, my belief was firm that the dependence upon a string of asset bubbles for wealth creation in the USEconomy would end in a national catastrophe. My forecast was for a chronic housing decline to begin around 2007 or 2008, one to thrust the nation into an endless recession and lethal insolvent condition. It is happening precisely as expected in broad strokes, and much as imagined in the details. The nation exchanged legitimate factory income for home equity sources of funds after the great Chinese industrial buildup. The corporate feudalists in the United States betrayed the American workers and invested in China. They began that process in the 1980 decade with the PacRim investment that was triggered by Intel, the semiconductor chip maker. So here we stand with housing firmly lodged in the septic field of lost dreams. The national USEconomy cannot recover unless the housing market rebounds and revives. It will not, at least it will not until home prices fall to 30% below construction costs. What a travesty awaits this market in climax!!

BLOAT OF BANK INVENTORY

Supposed experts actually discuss early signs of a housing market recovery, but they sound like idiots. They overlook the ugly shadow inventory held by banks. Almost never does the financial press touch the ugly factor of bank owned home inventory. Imagine over a million homes held on bank balance sheets, an extra inventory held in secondary fashion. It will be years before the inventory clears, and when it does, the home prices will be 20% lower. Analysts spout their nonsensical perspectives not worth squat. Even Shiller during interviews avoids the topic of the enormous bank inventory acquired from foreclosures, some perhaps illegally. Like with many other statistics, the analysts focus on the headline news and avoid the meat of the story. The meat is often rancid. The housing market cannot rebound. It cannot revive. It is a wrecked market. It is weighing down the already insolvent big US banks. It is dragging down the USEconomy. Housing is actually the key factor that will assure a USGovt debt default, since it replaced industry in function. The system has forfeited and abandoned its industrial base. The nation must be re-industrialized, a process not even begun.

TAXATION CHOKEHOLD ON JOB GROWTH

A little known fact by the investment community and public at large is that the USGovt taxes the business sector at a higher rate than any other of the top 18 industrial nations. Yet one corrupted administration after another talks about growing the USEconomy and enabling the creation of new jobs. They are hypocrites and fools. The tax policy along with oppressive regulations are the main problem, not even addressed. The recent folly of the Obama Health Care program has actually exacerbated the problem. The great economic policy failures of the last four decades feature one case after another of raising tax rates and realizing lower tax income. The economic corps has no brain in trust. They learn nothing. They push the nation into the abyss.

STATISTIC LIES & PAINTED BILLBOARDS

The Clinton Admin started the process, with sage counsel provided by Robert Rubin. They deceive with statistics. Substitution, hedonics on value, curious adjustments, bogus models, bias galore, they all contribute to corrupted statistics. Imagine a patient in a hospital whose temperature cannot be properly measured, whose blood pressure cannot be properly measured, whose blood sugar cannot be properly measured, whose heart rate cannot be properly measured, whose brain waves cannot be properly measured, whose blood gases cannot be properly measured, whose antigens cannot be properly measured, whose organ function cannot be properly measured. The patient surely could not be given proper treatment. The attendant staff would have no clue of what medication or therapy to offer. That is the USEconomy.

ENDLESS WAR, HEAVY COST, MAKING ENEMIES

A very heavy added burden has been put upon the USEconomy ever since March 2002 when the war machine was set into motion. It is above debate or dispute. Patriotism is questioned when objections are made. The budget battle has removed the wars from consideration in spending cuts. The American worker is asked to wear a mountain climber’s 50-lb pack when heading to the office. The USEconomy wagon train must tow a 2-ton set of bricks as it moves along the Valley of Tears. The USGovt must ingest a potion of toxin each month as it sells its debt in a beauty contest, often conducted with coercion. The war just happens to alienate our allies, enrage our enemies, and tip those on the fence away from us. See Pakistan, the latest nation to make distance from the United States. The drone aircraft are largely to blame, the newest video game.

DESTROY OIL PRODUCTION IN THE MENA REGION

The story of the Libyan War is typical. The American public is told of murder of US civilians by the hands of Qaddafi. Sure, he is a vile specimen. Whether or not he was in the midst of launching a Petro Dinar with gold backing is possible. Not in debate though is the $90 billion in Qaddafi funds located in European and US banks that have been frozen. The word frozen always sounds better than seized or stolen. It is motive for war. Wealth is transferred. The story of the Libyan War dominated the news in April. The heist is complete. Move on, nothing to see. The destabilization of the entire Middle East and North African theater is well along. Their oil production might be the secondary target. The oil barons might want a much higher crude oil price, and curtailment of global oil supply. Their sprawling corporations and vast properties might include numerous locations where development awaits, if only the crude oil price would climb above the $150 level. If it does, the blame can be put squarely on Libya. The shutdown of the Gulf of Mexico could have been part of the plan.

THE PEOPLE NOT PREPARED

After years of mis-education, the American people are not prepared to defend themselves. They have seen their home equity vanish. Over 28% of US households live under the oppressive stench of negative equity, which puts them in a consumer straitjacket. They have seen their pension funds damaged, if not from direct value then in purchase power value. They have been subjected to non-stop propaganda that gold offers no yield, is a dead asset, and cannot aid an economy. Yet gold was the best performing asset in the 2000 decade. Amazingly, after a near COMEX default event, amidst global sovereign debt crisis, as government debt threatens default in numerous trouble spots, at a time when all major currencies are being debased in unspeakable fashion, the US press media networks have succeeded in some part in convincing the US public even since May 1st that gold is not the place to find refuge and security. They sell the USTreasury bond as safe haven still. Less than 2% of the American public owns gold in any way. Less than 2% of US managed mutual funds or pension funds have any significant gold ownership. Yet the babbling US press talks about the gold market being a bubble. The actual asset bubble is the USTreasury Bond market. Unlike housing, the bond sucks capital out of the system as part of its Black Hole function. It slows the USEconomy from its small yield offered to savers and pensioners. The speculation it encourages does greater damage to the USEconomy, inducing investors to search for the next asset bubble instead of rebuilding the industrial base. Only those Americans who leave behind the financial markets dominated by paper values will survive to thrive in the next chapter.

Jim Willie CB

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U.S. Hurtles Toward System Failure

June 9, 2011 by goldguru · Leave a Comment

By Jim Willie CB,

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The combination of $trillion bond fraud, dependence on inflating home equity for economic development, oversized cars, oil dependence, constant market intervention, insolvent banks, insolvent homes, outsourced industry, endless war, budget deadlock amidst runaway deficits, raided US gold treasury, mammoth future benefit obligations, and handing over the keys at USDept Treasury to Goldman Sachs has left the United States to fend off systemic failure. The creeping price inflation that stems from USFed hyper monetary inflation and total ignorance on basics of capitalism like business formation have left the US vulnerable to disorder and chaos. The chaos in fact grows with the passage of time and the ruin of money, against a background of a cruel middle class squeeze. With one citizen in seven on food stamps and over 22% of the population jobless, the sunset of the American Empire is well along. The banker oligarchs are gradually killing the nation, its democracy, and its wealth engines during a sustained strangulation process.

UNDERWATER NATION THAT CANNOT SWIM

Comments by economists continue to center on consumer spending and desired job growth, without any mention of business investment and reduced regulatory impediments. The nation has no clue among leaders to engineer a recovery. Tragically, it is not possible unless the housing market rebounds convincingly, and unless the big US banks are liquidated. The negative momentum is so grotesque. It is like a man sliding backwards on a steep icy street with no objects nearby to grab.The remarkable fact in my view is that so many trained economists and market mavens are shocked that the USEconomy is entering another recession. They must have considered Clunker Car program, New Homebuyer Tax Credit initiative, and the General Motors bailout all to be genius concepts. They seem poorly trained in capitalism, and well trained in asset inflation management laced with public indoctrination. To the sound money crowd, the degradation was obvious. The landscape is taking on the same look at mid-2008 when all hell broke loose on the financial and economic fronts. It should not be so surprising, since nothing has been fixed.

Innovation remains prevalent among technology and telecommunication firms. Too bad so much of the product output is done by US subsidiaries in Asia. The USGovt leadership thought a green revolution would make for a solid initiative until it realized that most of the purchases would come from Asia. The high speed rail projects almost all involve Chinese equipment. The US is so badly on a slippery slope, that a simple debt default might be the best of outcomes to hope for, given the nasty added ramifications that could come from chaos. The main location for innovation within the USEconomy seems to be in financial fraud and military weapons. Former USFed Chairman Volcker once accused the financial industry of having only one productive innovation in three decades, the automatic teller machine (ATM), a scurrilous accusation indeed.

The American people, having been exposed to a powerful cost surge, futile compromises to address the USGovt budget deficits, profound mortgage fraud, a series of fixes without solution that are disguised elite banker redemptions, tremendous waste of over $2.5 trillion in various policy initiatives, exemption from Wall Street prosecution, chronic housing market decline, and phony economic statistics, are awakening to the reality of a systemic failure USEconomy, punctuated by a USTreasury Bond default. The preliminary signal is full isolation by the USFed as sole buyer of USTreasurys at USGovt debt auctions. They are currently buying about 80% of USGovt debt at official auctions. Many dopey analysts have put forth the notion, even within the gold community, that a debt default is impossible given the control of the global reserve currency to cover the debt. This is shallow thinking in my view. Once the USFed and its monetary engines are exposed on the world stage to rely upon hyper monetary inflation to sustain the broken USGovt financial contraption where fraud and war and insolvency are the three passengers without a driver, the USDollar will be punished, avoided, and become the object of even more profound revolt. The leaders can swim only if they push others in the pool underwater. Most debt default starts with a nasty run on the currency.

The underwater nation suffers from massive insolvency in the banking sector. Three bad jokes are played upon the US public. 1) They are told that the banks hold large Excess Reserve accounts at the USFed, earning interest income. Lie! The funds are Loan Loss Reserves moved from the banks to the USFed, where the central bank is hiding its own insolvency. The banks will need those funds to cover losses. The USFed by loose calculations is between $1.4 trillion and $1.8 trillion in the red, mainly from purchasing overpriced mortgage assets, some of whose leveraged items are totally worthless. The housing market is not coming back. The USFed itself is starging at the abyss, and might resign its commission. 2) The big US banks claim also that they have tightened their lending standards. Lie! They are insolvent and therefore must reduce their lending on a grand scale. The big US banks are in possession of far less capital than they claim, thanks to the FASB accounting rule change put into effect in April 2009. Their plight worsens. They cannot dump REO bank owned homes on a depressed market. The big US banks are trapped in an extreme and worsening condition, insolvent to the tune of $3 trillion.The FDIC pretends to have funds to support over $7 trillion in banking deposits, but their insurance fund has long been depleted. The MyBudget360 outfit does great work in analysis of the housing market and mortgage finance. See their chart below on bank balance sheet over-statement. 3) Lastly, US corporations we are told own huge cash balances. Lie! Their foreign subsidiaries command the cash, and it will not be put to work on US soil, even with handsome benefits to repatriate the funds. Business prospects look horrible in the United States, the land of fraud, insolvency, and war.

The underwater nation at the domicile level is tragic. Fully 28.4% of homeowners suffer from negative equity. They owe more on their home loans than the value of their homes. Some call it being underwater, others upside down. A second mortgage misery has taken root. Almost 40% of homeowners who took out second mortgages are underwater on their loans, more than twice the rate of owners who did not draw funds in such loans. Also 38% of borrowers who took home equity loans are underwater. By contrast, 18% of borrowers who do not have these loans are underwater. This data is according to CoreLogic. According to Federal Reserve Board data, homeowners took out a total of $2.69 trillion from their homes at the height of the housing boom between 2004 and 2006. A grand dependence was fostered, turned into a nightmare. That tally includes cash-out refinancings. Such sources of funds have vanished altogether. In fact, the trend has reversed, as homeowners are putting more money into their home equity in attempts to relieve their insolvent condition. The risks extend beyond the borrowers to banks, in a parade of insolvency and ruin for homeowners and big banks.

USGOVT DESPERATE GRABS

THE USGOVT IS DESPERATE FOR FUNDS. The unspoken message regarding the increase to 3% in US bank reserves requirements is that the USFed and USDept Treasury are seeking additional buyers of USTBonds when they attempt to draw QE2 to a close. This week, a controversial bank rule from Basel 3 was put into effect.US banks must put up more in reserves. They central bank has decided to eat their own banks. A banker civil war is at risk of being triggered. Stick with more basic desperation. The USGovt is making progress in raiding federal pension funds, so far snatching $79 billion. Some calling it accounting sleight of hand, but others call it confiscation much like the replacement of gold at the USTreasury with paper IOU certificates. It is worth the effort to quantify the USTreasury plunder of official retirement accounts, after the Social Security Trust Fund has been gutted. The USGovt debt limit must be raised, but compromise cannot be achieved. So the government raids public pensions with the same impunity that Wall Street commits bond fraud and deals with counterfeit. We are still looking for over $1 trillion in undelivered USTBonds, the infamous failure to deliver. The Wall Street firms found a clever method to feed their own liquidity by selling USTBonds they did not own. Of course, the regulators have a GSax pedigree. The Civil Service Retirement & Disability Fund (CSRDF), according to Stone Mountain, has been raided for $22 billion in recent weeks, with funds replaced by government IOUs. The funds have suffered a sizeable disinvestment, to be sure, to keep America strong.

The balance of securities held by the Thrift Savings Fund, aka the G-Fund, also according to Stone Mountain, has been raided for $57 billion in recent weeks, with funds replaced by government IOUs. The funds have suffered a sizeable disinvestment, to be sure, to keep America strong.

The retirement funds have seen a raid of nearly $80 billion in the past 3 weeks just to make space for further funding of bloated government, defense spending, and healthcare benefits. Under Treasury Secy Geithner, the USGovt has begun a Debt Issuance Suspension Period (DISP) for about 2-1/2 months, ending on August 2nd. The USCongress argues over small potatoes like $38 billion in spending. They argue over keeping certain spending intact, and keeping the war off limits to discussion entirely. They argue over imposing tax increases. They do not bother to pursue cuts to mindless programs of no value, like those suggested by Senator Coburn of Oklahoma. The nation of citizens is also prone to raids of pension funds, basic 401k pension fund loan grabs. Investors tap their inner bankers, even if with heavy tax penalties. In 2010, one in seven workers borrowed from a 401k plan, according to the consulting group AON Hewitt. Today, almost 30% of 401k savers have a loan outstanding against such funds, the highest in recent history.

So as Rome burns, the legislators fiddle and the generals wage war for private gain. The situation is best put into perspective by David Stockman, former Budget Director in the Reagan Admin. He said, “The real problem is the de-facto policy of both parties is default. When the Republicans say no tax increases, they are saying we want the US government to default. Because there is not enough political will in this country to solve the problem even halfway on spending cuts. When the Democrats say you cannot touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well.”

But the true insanity and unfixable nature are brought into proper perspective by John Williams, who heralds from the noble Shadow Government Statistics clan. He said, “[The USGovt deficit] cannot be covered by taxes. The government could take 100% of everyone’s income, corporate profits, and it would still be in deficit. [Conversely] they could also cut every penny in government spending except for Medicare and Social Security, and they would be in deficit.” The message by Williams is that the national government finances are not even remotely fixable, even with total income confiscation, even with almost full government shutdown!! GOLD & SILVER PRICES SHOULD ZOOM ON A BILLBOARD MESSAGE BY STOCKMAN AND WILLIAMS ALONE. My forecast made in September 2008 stands, that the USGovt debt default will occur in two to three years time. Time is up, and the threat of debt default looms large.

NOTHING FIXED, STILL INSOLVENT & FRAUD RIDDEN

The following paragraph should be read twice:

One should constantly remember that no solution to the financial crisis has been installed, nothing fixed, no big banks liquidated, no end to monetary inflation, no end to outsized USGovt deficits, no change of Goldman Sachs running the USGovt finance ministry, no discharge of big bank home inventory, no end to secretive subterranean support of stocks and bonds, no revival of the housing market, no return of US industry from Asia, no prosecution of Wall Street for multi-$trillion bond fraud, no end to money laundering of narco funds to Wall Street banks, no interruption to the endless costly wars, no end to the propaganda obediently pumped out by the US press & media networks. Nothing has changed except that some commodities are lower in price, including the queen Silver.

The steady stream of debt downgrades around the world curiously overlooks perhaps the worst offender of all, the United States. Refer to its horrendous PIIGS-like key ratios with much higher volume of debt. It seems good sport to nail Greece or Spain with a debt downgrade, when the US wrestles with a debt limit and chronic $1.5 trillion annual deficits, even costly endless wars. So Moodys is telling the USCongress that they better raise the debt ceiling or else. Or else what? Nothing!! The German debt rating agency Feri had the stones to downgrade the USGovt debt from AAA to AA. It is a significant slap in the face. They pointed to the fact that for the third consecutive year, the USGovt deficit is over 10% relative to gross domestic product (GDP). Its CEO Tobias Schmidt said, “The US government has fought the effects of the financial market crisis primarily by an increase in government debt. We do not see that here is sufficient alternative measures. Our rating system shows a deterioration, so the downgrading of the credit ratings of US is warranted. Deficits of such magnitude are not a sustainable fiscal policy. We would reconsider the rating when the US government creates a long-term sustainable budget.”

The debt rating agencies are bound by extreme political pressure, and probably secretive pressures also, maybe even outright bribery or violent threats. The agencies can shoot at the scouts like Bank of America, Citigroup, and Wells Fargo, but few if any alarm bells are actually going off. The champion of all insider trading, of investing in opposition to clients, of front running USGovt policy, of deceptive collusion with foreign governments on currency swaps to hide debt, the venerable Goldman Sachs might be in some trouble. The Goldman Sachs credit default swap could serve as a predictor for USGovt debt default. It has begun to rise and cause concern.

It is almost funny, if not tragic, that despite deferred criminal prosecution on mortgage bond fraud, despite being banned in Europe for misrepresentation and collusion to conceal sovereign debt, Goldman Sachs still has total control of the USDept Treasury. If only the people were more aware that GSax under Robert Rubin leased, sold, and leveraged a few $trillion in profit from the gold bullion that used to reside in Fort Knox. A reliable source has a friend who manages a security group in Fort Knox, which is used today to store nerve gas, nothing more, certainly no gold. The Jackass fully expects a USGovt debt default will come in the form of a forced debt forgiveness, during a grand global conference, with a hidden military threat looming. Events in Libya are extremely telling on the threat of war and wealth confiscation. A total of $95 billion in frozen (later stolen) Qaddafi wealth is a strong banker motive to conduct a good war in Libya. In all, $32 billion in Libyan funds were frozen in major US banks, and 45 billion Euros were frozen in major European banks.

Two events occurred within 24 hours of big significance. 1) The USFed Chairman Bernanke spoke after the financial markets closed. He cited numerous singular events to blame for the rising price inflation that has plagued the USEconomy in recent months. He accepts no responsibility from the historically unprecedented release of the hyper monetary inflation spigot to cover the USGovt debts and purchase USTreasury Bonds that the world no longer wants. The USFed is currently purchasing between 75% and 80% of all USTreasury auction bonds, notes, and bills. They use a nifty quick turnaround with the obligated Primary Bond Dealers. What used to distributed to bond funds like PIMCO and pension funds across the US land are no more. The dedicated Primary Bond Dealers have resorted to shoving all theUSTreasury product back to the USFed inside one month in anything but routine FOMC operations, usually in two weeks time. The US financial press reports hardly a peep. In the last few months, every time Bernanke spoke, to discuss the weak prospects of the USEconomy, the high commodity price phenomenon, the putrid banking situation, the droopy housing market, the falling USDollar, and the ongoing activity of Quantitative Easing, the USDollar fell and the Gold price rose. Nothing has changed in that respect. Waiting until 5pm to speak only caused the response to occur in the next morning.

2) The OPEC nations met at their usual pow-wow in Vienna Austria, but they accomplished nothing. They split 6 in favor and 6 against on a crude oil production increase. The dirty little secret is that the Saudis no longer have ANY spare capacity. The world always counts on the Saudis to compensate for lost output like what has been felt from Libyan disruption. The crude oil price jumped $2 quickly on Wednesday morning. My view is that the OPEC nations no longer harbor any sympathy for Western nations, have no interest in relieving their cost problems from rising energy prices. They see their own food prices rising fast, when they are more vulnerable to food prices as a people. They observe the unrest in Egypt, the war in Libya, and can see the flight of gold from those countries, while assets are confiscated in Western banks. The OPEC nations see more opportunity to gather in greater petro income at a time of great strain for their own economies and banking systems.

A geopolitical impact is on the horizon. The Saudis cannot increase output. The Petro-Dollar defacto standard is built on Saudi oil, whose volume is far less than believed. They have a dead elephant oilfield in Ghawar, details in the private reports. The Bernanke speech that cited numerous exogenous factors, plus the OPEC stalemate, seems to provide the Gold & Silver price the lit fuse for rising.The Petro-Dollar requires USMilitary protection of the Saudi royal billionaires. They are busy cutting deals for Persian Gulf security from China and Russia. It requires control of oil supply by the Saudis. It requires a US$-based purchase & sale of crude. All three requirements are slowly vanishing. The Petro-Dollar is dying a slow death. With its disappearance will come the Third World to the United States.

Paul Craig Roberts served in Reagan Treasury Dept, and also worked as editor at the Wall Street Journal. He knows about what he speaks. He described the horrendous economic situation for the USEconomy. He puts blame on Wall Street and US Corporate executives who use Asian labor in outsourcing, rendering the US nation of workers poor. Even astute analysts like Roberts all avoid the 1970 Vietnam War effect and 1973 OPEC Embargo effect that produced big deficits and serious price inflation in the US, forced the break of the Bretton Woods gold standard, and lifted the entire wage scale to where it became uncompetitive and vulnerable to globalization. Roberts discussed the secondary inflation effect, a common Jackass theme. The bankers and political leaders do not wish to see wages rise, since it would complete the systemic price inflation effect. Instead, they watch the rising cost structure, led by food & gasoline most visibly, and attempt to obstruct wage gains. My analysis has pointed out that the leaders in preventing wage gains are advocating and promoting lost income, personal ruin, and deep poverty of the middle class. Roberts instead calls it the Graveyard Effect from a desire to install lower US labor rates in order to compete with the BRIC nations, the emerging market nations. He went so far as to accuse our leaders of trying to promote debt slavery managed within a growing police state.

QE3 A CERTAINTY

Ultimately, the wretched condition of the USEconomy, the US banks, the US households, and the USGovt guarantees continuation of Quantitative Easing. The USFed and USDept Treasury are actively pursuing a Scorched Earth program to send the financial markets downward, even as the laundry list of horrendous USEconomic statistics reads endlessly. Details on the degradation of the USEconomy can be found in the June Hat Trick Letter report. The next round might be renamed Global QE. Watch the Japanese Yen, whose exchange rate is back over 125 in a sudden upward thrust, fully forecasted by the Jackass in April. They are selling USTBond assets to raise cash for reconstruction and to cover trade deficits. If another G-7 Meeting is hastily convened, they will coordinate USTBond purchases again. Call it Global QE, a far more powerful Quantitative Easing initiative with greater commodity price impact on a global scale. Expect it.

Basically, QE2 was a failure, so it will be repeated.
The QE2 provided demand for USTreasury auctions, when most foreign creditors went on a buyer’s strike. So QE will be repeated.
The housing market has resumed its downward path, with frightening declines to the bank balance sheets. So QE will be repeated.
The big US banks remain insolvent, loaded down by a mountain of one million REO homes in inventory. Buyers of mortgage bonds have disappeared. So QE will be repeated.
The USGovt deficit picture is a full blown nightmare. Rather than see market mechanisms kick into gear, with higher interest rates imposed, the leaders will continue on the hyper monetary inflation path. So QE will be repeated.
Talk of the risk trade counter to the USDollar ending is nonsense. Weimar has met Wall Street, the syndicate handlers of the USGovt and US security agencies. The Printing Pre$$ with US nameplate cannot be stopped. So QE will be repeated.
The Gold & Silver prices will move up hard, as soon as the light bulb goes on that QE3 is imminent without interruption. One must be a total moron not to anticipate its immediate installation. To decide not to continue QE would force failures upon major US banks.
The USFed is all bluff with no good cards in their poker hand. They will wait for stocks to be a little cheaper and both sides of the USCongress to beg for QE3.

Inflation is all the US banking leadership knows. Left with poor or limited policy options, they will inflate more. Struggling with national insolvency, they will inflate more. Unable to load on vast stimulus packages, they will simply rely upon basic run-of-the-mill inflation. The USFed Chairman should be called the Secretary of Inflation, in a perfect world. Inflation is all they know. They will inflate until the USEconomy is a burned crisp and the US banking system is a charred ruin. The USDollar is halfway complete with a death spiral. GOLD & SILVER PRICES WILL RESPOND WITH A MOONSHOT. The FOREX market is not the domain of fools.

THE USDOLLAR DEATH SPIRAL

The big FX currency traders realize the USDollar is in a terminal decline. The big FX currency traders realize the USGovt and USFed are locked in a corner with no good policy alternatives. The rebound from May has ended. It relieved the oversold condition, and not much else. Crude oil is back over $100 per barrel. Gold is back pecking away at the $1550 level. Silver is set to challenge the $40 level again. Nothing has changed except the illusion of a tighter USFed policy, which is slowly fading away in a reality backdrop. Recall their nonsense propaganda in early 2010, about an Exit Strategy from the 0% corner. Instead, as the Jackass correctly forecasted, they went deeper with a QE card. Then amidst denials, another correct Jackass forecast, they went deeper with a QE2 card. They will go to a QE3 card next, since they are far more desperate with even more ruinous fundamentals than a year ago. It could go into a pre-emptive Global QE, thus relieving the USFed as the lone perpetrator, my forecast. The USDollar knows it. The investor community is awakening to it. The USEconomic statistics echo the QE sirens calling the corporate ships at sea to their deaths on the rocky shores. Gold & Silver will rise in the second half of the year. This time the Second Half Recovery will feature precious metals on an absolute tear!!

Jim Willie CB

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Green Shoots, Exit Strategy, No QE3

May 26, 2011 by goldguru · Leave a Comment

By Jim Willie CB,

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It is not clear whether the American financial community has the ability to observe and conclude that the US Federal Reserve is adrift and relies upon deception as policy in revealing its directions. Its position is to hold steady, inflate to oblivion, support financial markets in heavy volume secretly, and lie about leaving its trapped policy corner. The USFed is a propaganda machine that deals with ruses as a substitute for transparent policy discussion in the public forum. Two years ago the ruse disseminated widely was the Green Shoots of an economic recovery that had no basis at all. The scorched earth showed more evidence of ruin than fresh business creation, at a time when the grotesque insolvency was spreading like a disease throughout the entire US financial system. On one hand the USFed was busy operating numerous credit and liquidity facilities in order to prevent systemic seizure, busily redeeming the Wall Street toxic bonds at the highest possible prices. On the other hand they were talking about Green Shoots, as insolvency spread across the big banks to the household equity. They lost their credibility in the process. They have lost it completely after two full years of 0% rates, the ultimate in central bank shame. The Jackass dismissed the Green Shoots ploy quickly, regularly, and correctly, as whatever little shoots were present probably the handiwork of ant colonies or termite hills, mistaking green insect feces, or even some toxic green runoff from a nearby financial office of a corporation.

One year ago the ruse disseminated widely was the Exit Strategy from the 0% monetary corner that had no basis at all. The USFed was well aware that 0% as an official rate was untenable, dangerous, and would produce different maladies. They promoted a phony story of a Jobless Recovery, an utter contradiction and bad joke played upon the American workers. To make the cost of money free encourages speculation in the most general systemic sense. The primary gold market fuel is the price of money being far below the current price inflation rate.Anyone who believes the CPI is actually 2% to 3% is braindead. Even USGovtstatistics list the numerous categories with strong price increases, yet the overall CPI is lower than all components. Power to adjustments. My description has been that the USFed is stuck in the 0% policy corner. The corner has been described since the start of 2009 when it was instituted. If the USFed raises rates, they torpedo the housing market left as derelict adrift at sea, listing badly, taking on more water, weighed down by the inventory burden. Given that the USEconomy was so dependent upon housing for three or four years, and that dependence has turned to deep vulnerability, they cannot hike interest rates and exit the policy corner without sending home prices into a fast acceleration downward. They will bottom out 20% to 30% below construction costs.

Worse, a rate hike would trigger a credit derivative series of explosions from the Interest Rate Swaps. These queer devices hold down long-term rates far below the prevailing price inflation level. That is why the USFed Chairman Bernanke insists of an undying focus of the inflation expectations, the USTreasury Bond yields and TIPS yields (both of which they purchase in monetization operations). They control themusing IRSwaps. If the USFed holds steady, as they must, they generate significant rising costs for everything from food to energy to metals to cotton. Even scraps (paper, metal, plastics) are rising in price. Even the toys sector must contend with fast rising prices in time for the Christmas season. See the Li & Fund effect, also called Foxconn in China. They also make i-Pods. The current path lifts the cost structure to such a level that both businesses and households are experiencing a pinch. The fast collapse of the Philly Fed index is testament to the pinch. Shelves at major retail chains are experiencing a slow decline in volume. It is called the profit squeeze. Business profit margins are shrinking, even as household discretionary spending funds are shrinking. The Jackass dismissed the Exit Strategy ploy quickly, regularly, and correctly, as the monetary policy corner was described consistently and clearly. It was a bluff, but a very bad one. It served as a litmus test to divide the financial analysts into two camps, the dumkopfs and the sage. The dumb analysts fell for it, based upon an idealistic belief that the 0% policy should end and the recovery was happening slowly. The savvy analysts did not fall for it, since the consequences of ending the 0% rate would be like suffocating your children in the middle of the night.

THE BIG RUSE & THE BIG BIND

The USFed is caught in a gigantic bind, cannot raise rates, and must endure the global price inflation problem that festers on the cost side of the equation. They busily deny their role in producing price inflation from debt monetization coupled with 0% rates. They lost more credibility in the process. They are the object of global anger and ridicule. They must hope that the eventual rate hike will keep the speculative juices from overflowing. Gold & Silver do not rest, as they brush aside such a plain ruse of a threatened rate hike. The sovereign bond situation in the entire Western World (with Japan adopted into the fold) is horrendous and worsening. The government deficits are out of control. Few analysts prefer to point out how the foundation for the global monetary system is supported by the gaggle of crippled sovereign bonds. To be sure, the Southern Europe debt is in a ruined state. But the debt of the United States is no better and the same for England, when viewed as annual debt ratio to total budget, when viewed as cumulative debt ratio to GDP (economic size). The graph below shows those two dimensions, and how the United States and United Kingdom are positioned among Spain, Ireland, and Greece, apart from the mass of nations. In the full year since this graph was produced, the US debt situation has grown worse. The reckless socialistsseem prudent.

The extended PIIGS pen of nations, fully ruined and recognized widely as ruined, do not have the tools to prevent rising bond yields. They uniformly rise versus the German Bund benchmark. Their differentiation actually permits the Euro currency to trade more freely, even to rise. The Chinese were responsible for much of the Euro rise from 130 to 150, as they dumped USTBonds in favor of discounted PIGS debt, later to be converted into shopping malls, commercial buildings, and factories. Somehow, that factor did not appear on the US news networks. The USGovt has tools, wondrous electronic tools, which enable them at zero cost to fight off the barbarians at the gate. It is the Printing Pre$$. Unfortunately, its backfire is a powerful rising cost structure that has shown visibly in the high food & gasoline costs. So hardly at zero cost!! A year ago, theUSFed folded like a cheap lawn chair. Instead of exiting their 0% corner, and implementing the advertised Exit Strategy, they went one step deeper down therathole. That was exactly the Jackass forecast, QE to follow 0% stuck. They combined the ZIRP with the QE. They added the debt monetization scourge of Quantitative Easing to the already reckless no cost money of the Zero Interest Rate Policy. So they doused the national economy with gasoline only to see it lit into flames, while cutting the legs off the burning victim trying to escape.

PURE QE3 DECEPTION

The current ruse disseminated widely is the End of QE2 and no continuation of Quantitative Easing (aka debt monetization). The ruse has no basis at all in reality. The USFed would have to find buyers for the USTreasury Bonds. They have been buying 75% to 80% of USTBonds since the end of 2010. They have been supporting the US housing market by purchasing mortgage bonds. In other words, they have been preventing the more complete implosion of the mortgage market. It is one thing for the USTBond to go No Bid. The USFed has the direct responsibility to cover that up quickly and proclaim every USTreasury auction a rip-roaring success with great 2.3 bid to cover ratio. But it is another matter altogether to permit the mortgage rates to fly upward from lack of bids. If mortgage rates move to 7% or the adjustable ARM mortgages reset 3% to 4% higher suddenly, then housing prices will descend by another 10% to 15% quickly, as in with lightning speed.

Of course the USFed will have a QE3. Of course the USFed will continue QE programs. Of course the USFed will keep the funny money flowing into every type of bond market except the Municipal Bonds. The munis are not part of Wall Street and the syndicate that sprawls to cover the USGovt itself. So as the states and municipalities go further into a ruinous condition, events work within their grand plan to consolidate power in New York City, whose satellite in WashingtonDC was captured on a somber September day in 2001. The agenda for munis is so simple. They wish to kill the worker pensions, so that government workers have none, just like the general population. No home equity, no upward labor mobility, no union power, no pensions, a perfect world for the elite domination. Of course the USFed will keep pumping money into the stock market. With all the flash trading, still over 70% of all NYSE trade volume, with all the hardly hidden activity to support stocks by the Working Group for Financial Markets (aka Plunge Protection Team), the vulnerable stock market would dive like a cement rock. Perhaps the USFed wants to see the S&P500 and Dow Industrial stock indexes take a frightening dive. That would produce buyers of USTBonds, a point that the financial networks consistently fail to notice as motive for withdrawal of liquidity funds. The USFed can generate a USTBond rally easily, simply by stopping the stock support that so often lifts the stock indexes in the nick of time for late afternoon rallies, and johnny on the spot before early morning setbacks render too much damage.

Clearly, a sudden recognized slide in all things financial within the controlled US arenas would create perfect political cover for the USFed to announce QE3. The objections lodged from global creditors would be shouted down on the USCongressfloors, on the New York Stock Exchange floor, in the big US bank board rooms, and the mutual fund chart rooms. The households would be torn in two opposite directions. They citizens want support for their stock accounts that include pension funds. But they do not want even higher costs for food, energy, and everything they purchase in retail centers. Strangely, perversely, the US stock market indexes are inversely correlated to the USDollar. The currency must resume its decline in order to lift the US stock market. Obviously, the S&P500 index rise is offset by lower US$ purchasing power, but the dynamic is ignored as much as possible. The correlation seems about minus 60% to 65% in a rough eye view.

The USFed will next spread fear from financial market powerful downdrafts. They will assure stock market declines. They will invite public response to lost mutual fund and pension funds (both managed and personal). They will work to shake the masses down to the point that the USCongress begs them to return to a strong powerful QE3. They will urge the USFed to make the QE3 even broader, to include Municipal Bonds. The big US banks will push the USFed to cover their mortgage bonds that are exposed to Put-Backs. The defrauded bond investors have won a skein of court cases. The story is so old that the US press does not cover court rulings against the devious MERS device. So the banks are losing from the bond table and losing from the foreclosure table. The US Federal Court in Texas found that MERS failed to address the issue of the legal effect of an assignment executed by unauthorized signers. The court also rebuked MERS, noting that the signing officer had no such authority, something that MERS should know. The court pointed out far more than mere negligence by MERS. Over 20,000 robo-signers were busy in the foreclosure process. They were not properly authorized. See the Naked Capitalism article (CLICK HERE). Home foreclosures are being reversed by the courts. Bonds are being ordered for putback to the Wall Street issuers. Exposure to the big US banks is huge, like well over $1 trillion. The USFed will be asked to lap up the toxic swill on court room floors.
GLOBAL QE

The very same factors that forced the emergency G-7 meeting to cap the Japanese Yen currency rise have returned. A high Yen exchange rate renders their vast supply industry as unprofitable, imposing great strain. Expect another emergency meeting, which in my view should be described as a Global Quantitative Easing (Global QE) since the major central banks will coordinate their actions to buy the vast tranches of USTreasury Bonds that Japan needs to sell. The large Japanese financial institutions must close their finance gaps and avoid price inflation. Doing so without asset sales would cause a pure unfiltered inflationary effect. They do not want additional woes in addition to what grotesque strain has already come. The exercise will be repeated, as the Jackass forecasted a month ago. My forecast is for a secret G-7 Meeting to agree to USTBond purchases to push down the Yen currency, but without any publicity, zero press coverage, all in total secrecy. It is a development factor far bigger than any QE conducted solely by the USFed. Since coordinated the world over, call it Global QE. Look for some distortion of purpose for any suddenly convened meeting of finance ministers. They might call it coordinated global monetary planning, or cooperation with emerging economies, or adjustments to global trade settlements, or some such deception. It is just another side to the Competing Currency Wars. The underlying force behind the rising Yen is their industrial slowdown, the arrival of a trade deficit, and the urgent need to finance reconstruction costs by foreign asset sales without causing price inflation. My analysis has called it the Global QE initiative, a factor far bigger than any QE conducted by the USFed.

Insurance companies will play a surprisingly large role. They face mammoth claims from damaged buildings and stalled factories. The large Japanese financial institutions must close their finance gaps and avoid price inflation from pure monetary inflation. Foreign asset sale is the key. Their deficit is growing, industry faltering, electricity supply spotty, supply chain unreliable, and US bond sales rising. The reconstruction is underway. The financial markets still need help. Their economy faces an unprecedented slowdown more accurately called a general coordinated breakdown. As the nation must pay for its reconstruction, expect big waves of bond sales to match big stimulus and monetization. Foreign asset sales will be the compromise made politically. Although palatable, they will cause the JapYen currency to rise further, enough to sound alarms and cause even more profit squeeze.

The Japanese Economy is enduring the biggest collapse in modern history. Let’s see if its cities can avoid cracks and rising tides. Their trade deficits are assured, my forecast. However, this time around a paradox of trade deficits and reconstruction costs will conspire to LIFT the Japanese Yen currency. Their government wants to limit stimulus and associated deficits and bond issuance that would lift interest rates. Their ministry officials want more debt monetization to inflate the problem away. The Bank of Japan wants to hold the line with no more purchase of debt. The utilities are forcing rolling electrical blackouts in order to avoid higher prices for electricity. Their carmakers have registered staggering declines in output. Their industrial sector is reeling. The solution most politically appealing will turn out to be not the hyper inflation from debt monetization, BUT RATHER SALES OF FOREIGN ASSETS. The sale of USTreasury Bonds is most politically acceptable, with a national disaster offering strong cover for justification. Their sale will be brisk in heavy volume, all in time. The rising JapYen currency will force the Global QE, as purchase of USTBonds that Japan sells will join the USTBonds sold by the USDept Treasury. An extravaganza of debt monetization will go global. Why no analysts discuss this is beyond the reach of Jackass comprehension. Probably blind spots, corporate directives, preoccupation with the sovereign debts, attention to theUSGovt debt limit, and a new foreign war every few months. To be sure, plenty of distraction out there.

THREAT OF USGOVT DEBT DEFAULT

The cynic among us might have suspected that a mission directive for the Obama Admin was to force spending increases, to avoid entitlement benefit cuts, and to generally lead the nation into a worse insolvency condition so that the USDollardeclines dangerously and a USGovt debt default is assured. The nation could start over. The elite plans could be implemented on a global level. To be sure, the Republicans object and block any and all new tax increases that would supposedly raise revenues. They would be counter-productive anyway, since higher tax rates result in lower tax revenues, something the legislators and economists have failed to comprehend for four decades. To be sure, the Democrats object and block any and all limitations to entitlement spending like Social Security, Medicare, and USGovtpensions. Any reductions would close the deficit a little, but more like a pittance. To be sure, the security agencies and bankers object and block any and all attempts to curtail the wars to seize crude oil and establish the vertical integration of contraband. Their purpose is considered sacred, while their costs are covered by taxpayers, but their profits are solely for the syndicate. The defense contractors are exemplary employers too, with high paying jobs but no trickle down effect on the product side.

It seems all three camps are dedicated to a path that results in debt strain, creditor revolt, and eventual default. Recall the Jackass forecast in September 2008, of a USTreasury debt default in the next two to three years. The time has finally come to deal with such a threat. The argument that the USDept Treasury together with the US Federal Reserve could avoid such a default outcome is being tested. For almost a full year, the USFed has been monetizing mountains of USGovtdebt and much of the USAgency Mortgage debt. The effects have been noticed palpably at a global level. The blame has been attributed by nations across the world, and directed squarely at the USFed and USGovt for profligate spending, enormous deficits, and a hyper inflation reaction. All parties involved in the budget deliberations, the debt limit discussions, and the protection of interests are willing to test the default button option. The denials go so far as to describe a less than onerous outcome where much of the interest payments would continue, and much of the agency functions would continue. Strangely, the soldiers pay checks might be scrubbed. If a default occurs, traps doors and greased chutes would open to lead the nation on a fast track to the Third World. To begin with, liquidity would be harmed to such an extent that the Saudis would probably not acceptUSDollars for crude oil.

David Stockman served as the Budget Director in the Reagan Admin. He had some choice words in summary. He said, “The real problem is the de-facto policy of both parties is default. When the Republicans say no tax increases, they are saying we want the US government to default. Because there is not enough political will in this country to solve the problem even halfway on spending cuts. When the Democrats say you cannot touch Social Security, when you have Obama sponsoring a war budget for defense that is even bigger than Bush, then I say the policy of the White House is default as well. That is the question that really needs to be understood better and appraised by the bond market. Both parties are advocating default even as they point the finger at each other.”

NEW HAT TRICK LETTER REPORT

The Hat Trick Letter made a key change in the May reports. Since most every major systemic failure forecast recorded, explained, and repeated since 2004 has come true, and the USEconomy is in deterioration with a squeeze underway, and the US financial system is insolvent, and the US Housing market also suffers widespread negative equity (28.4% of homes), no great need or interest is served in delineating the home foreclosure statistics, the personal bankruptcies, bloated bank hidden inventory of unsold homes, the wrecked mortgage bond market, the jobless claims that cannot revive, or the banker games to conceal the reason why they lend little. Items do appear in the Introduction sections. Instead, the Macro Economic Report for the Hat Trick Letter has given way to the Global Money War Report for full discussion and analysis of the Competing Currency Wars, the debt soaked tattered sovereign bonds, the crumbling monetary system, the discredited central banks, and the acceptance of hyper monetary inflation as a solution. The Gold & Currency Report will continue, which covers the details at the ground level with many stories on investment demand, on exchange traded fund frauds (good and bad), on certain economic stories in beleaguered nations like Japan and Spain, like threats of default in nations like Greece, soon to be followed by other PIIGS nations, and details on the Chinese Economy.

So the Hat Trick Letter has adapted with a higher level gold report to cover the monetary war in progress, and a lower level gold report to cover the global reaction geared toward survival. That survival is assured by investment in Gold & Silver. The ugly irony is that the major financial news networks comprehend little if anything about the motives and principal factors behind the powerful precious metals bull market. They only focus on inflation (which they deny as part of the propaganda machine) and geopolitical tensions (which are valid but secondary). They overlook that the global monetary system is in ruins and the central banks have morphed into hyper inflation nuclear reactors, with the cost of money at zero acting like a foot stuck on the accelerator. They do not properly assess the monetary system ruin, nor the bank insolvency ruin.

GLOBAL FACTORS

The global monetary war has mushroomed. Greece is set to default on its debt, the signs all loud & clear. Spain is ready to be bailed out, its economy sliding backwards fast. The impact of a default in Europe is magnificent and all horrendous. Banks will fail. The motive for continued band-aid bailouts that only buy time and fix nothing have been to enable banks to redeem their debt, just like in the United States. Bond holders have been protected. Dominique Strauss-Kahn urged Irish Govt bond holders to take a significant haircut loss, his final sin. The first sin was the promotion of the SDR from the Intl Monetary Fund, whose basket of currencies would be used in global bank reserves. His second sin was the introductory concept of an SDR-based debt instrument, as in a global bond. To supplant the USDollar and USTBond is cause for removal, with bond holder losses the icing on the prison cake. The European kettle is ready to boil over again, with nothing fixed. The wild card is the Credit Default Swaps, those curious devices that lurk within hidden banking systems. A Greek Govt default would set events in motion, and likely reveal the profound fraud and insolvency of European banks. The kicker could be the contagion to the British and American banks. The Western banks are all interwoven in a grand incest.

A recent twist is the higher wages paid to Chinese workers almost uniformly. They will become stronger consumers, but their corporate exporters will pass along higher prices to the US retail chains. Finally, after thirty years, the USEconomy will import price inflation from Asia. The new Shanghai silver futures contracts are most likely not welcome to the COMEX and its Wall Street overseers. The common practice of ambushing the Gold & Silver prices overnight or immediately after hours in the late afternoon might soon come to an end. The Shanghai hours are 8pm to 11am eastern US time zone. Sense the opposition. Given the strong Chinese consumer price inflation and corresponding citizen response in coin and bar purchase, the opposition is gaining strength. The Asians love gold as much as the Americans are ignorant of it.

The population has reacted with continued Gold & Silver coin purchase. The central banks outside the Western sphere of influence have reacted with Gold bullion accumulation in reserves, far more than publicly announced. Mexico not only purchased almost 100 metric tons of gold recently, but their CB governors voted unanimously to install silver as money itself. The investment community has reacted with legitimate exchange traded funds like theSprott Fund. The contrast of a Sprott premium in price versus the negative premium in the GLD and SLV should highlight their absence of required metal in inventory in stark contrast to the ample inventory in the Sprott funds, but most analysts have yet to figure out the premium issue at all. The biggest and most tainted ETFunds are working toward their own climax, surely with cash redemption amidst lawsuits. They cannot offer their inventory and shares to the COMEX as part of the great game, without eventual consequence. When the premium on GLD and SLV hits minus 10%, perhaps some will awaken. Usually vault fees, insurance costs, security costs, transport costs, and management results in actual totals that must be covered within the price paid for the shares. But not with this pair of polluted funds joined to the cartel.

ONLY CHANGE WITH SILVER IS PRICE

The silver speculation is just another deceptive story. The Open Interest fell gradually all through the Silver price rise toward the $50 level. After such a bone crushing silver ambush, the net positions for non-commercials, substracting shorts from longs, showed relative tranquility with no big decline at all in their positions, thus still a bullish commitment. They have fewer positions, but the game is still very much on. Hedge funds do show the lowest net long silver position since February 2010, but still a solid position. Evidence lies inside the Commitment of Traders Report, discussed in more detail in the May Hat Trick Letter. The Managed Money (like hedge funds, commodity trading accounts) still have a strong bullish position. They profited from the rise as they reduced positions, and were not wounded by the rise!! Then take the little guys. The Small Trader ledger item recorded the largest pure short position since August, with 18,605 contracts short silver on 26 April 2011, when silver had a $45.45 price. The smaller players were actually net short, and collected a hefty profit, a story not told by the lapdog US press. Conclude that many of the small guys, the good guys, were correctly positioned for the harsh smackdown on silver in the first week of May. The small speculators profited from decline!! They and the fund managers will be back, bigger than before, bolder than ever, motivated with fervor, with their ears taped back ready for more blood. It seems abundantly clear that the major driving force behind this current silver market has been actual demand for physical silver metal.

The beauty of the silver decline is that when it reverses, there is no technical resistance of significance back to the $50 level. However, due to the shock effect, the climb will be slower than a sudden technical mirror image reversal. The precious metals investors should hope for a slow steady relentless painful nasty stubborn awesome devastating rise in price that doles out excruciating pain to the cartel, permits once again for the less enlightened doubters to cover their wrong short positions in a chronic manner. The story in the Silver chart has four weeks and four different stories. The first week of May had the powerful decline, the result of hitting the Hunt nominal target, Soros putting out his deceptive story of selling that which he called a bubble for a full year, the COMEX raising the margin requirement five times in quick succession, the USFed putting out its deceptive story about ending debt monetization and maybe hiking rates (gotta be dumb as a post to believe), theUSEconomy demanding less in commodities. The second week showed a strong clear Doji Star, which epitomizes a move to stability. The Silver price found its footing and stood still, encouraging many investors to re-enter the market. The third week was less clear except to technical chart readers. It featured a strong clear Bull Hammer identified by an open and close at the high for the week, with price movement lower during the week. The hint was given on Monday of this week for a rebound. The US$ DX index was rising a little, as the Euro currency was sliding lower, like over 100 basis points for the day. Gold & Silver ignored it. Gold rose a little, while Silver was even at $35. Today, Silver is pushing $38 per ounce, and Gold is rising too. No resistance ahead!!

Yet the Mississippi flood waters will crimp supply lines just when the US financial dons wish to push down the entire commodity price structure, including Gold & Silver. Neither precious metal is a commodity though, since they are money. Tell the central banks of the world and the major sovereign wealth funds that Gold & Silver are commodities when they are shifting reserve assets away from the US$-based bonds and toward Gold & Silver. They are money, and the USGovt with their Wall Street handlers wishes the world not to regard them as money. The experiment in paper fiat money since 1971 is coming to an end, a conclusion racked with toxic spew, great hardship, and threats to wealth.

One should constantly remember that no solution to the financial crisis has been installed, nothing fixed, no big banks liquidated, no end to monetary inflation, no end to outsized USGovt deficits, no end to secretive subterranean support of stocks and bonds, no revival of the housing market, no discharge of big bank home inventory, no return of US industry from Asia, no interruption to the endless costly wars, no end to money laundering of narco funds to Wall Street banks, no end to the propaganda obediently pumped out by the US press & media networks, and no change of Goldman Sachs running the USGovt finance ministry. Expect no change in anything that you believe in. Expect no change to the 0% policy (ZIRP) with no change to the heavy monetary inflation (QE), as the path to ruin is set, and the policy of Inflate to Infinity cannot be stopped. Gold will not stop until it surpasses at least $5000 to $7000 in price. Silver will not stop until it surpasses at least $150 to $200 in price. Such forecasts invite mockery, but in two years they will seem prescient.

The ruin of money is the momentum play. The elite are fully invested in the current system, and are fully willing to put more money into reinforcements to preserve their wealth, power, and position. The global financial system is coming apart at the seams, and the financial guardians in charge from the syndicate cannot any longer hold it together. The Gold & Silver prices are the hint of lost control. Expect breathtaking grand upward moves in price in the next several months. It will be fun to watch the dim bulbs explain their positions after their wrong viewpoints have been so well covered by the financial rags. They will surely squirm, guys like Soros. Some will gloat, guys like Sprott. Few are aware, but the events in the first week of May are what a COMEX default looks like, in its preliminary phase!!!JPMorgan could not meet the schedule of May silver deliveries, that simple. In time, the distance between paper Gold & Silver and physical Gold & Silver will be great. Then the COMEX shuts down, unless they act as a Cash & Carry exchange. Doubtful!

Jim Willie CB

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Filed under Gold Analyses · Tagged with QE3

Currency Dead End Paradoxes

April 28, 2011 by goldguru · Leave a Comment

By Jim Willie CB,

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Several very important currency effects are at work. Most economists are either silent on the factors or wrong footed on the dynamic. That is not surprising since they have been incorrectly analyzing, interpreting, and forecasting the financial crisis as it built up in 2005 and 2006, and as it exploded in 2007 and 2008 to surprise almost all of them, even as it has failed to recover in 2009 and 2010 in contrary fashion to their deceptive rosy positions. The major currencies must be examined for some key paradoxes. As the monetary system crumbles into its final phase, the foundation under which the major currencies stand, trade, and change is breaking down. Refer to the sovereign debt structure, overly burdened by runaway government debt. The focus here is on some important paradoxes that go directly against both common sense and traditional economic logic. The unusual under-currents have confused most economists to the point that the economist profession has become a laughingstock to the American households, a chain of promotional carnival barkers for Wall Street in pursuit of annual bonuses, a heretic priesthood to parade in front the media cameras, and a den of USGovt harlots in search for official gatekeeper posts. They understand pitifully little within the USEconomy, within the US banking industry, and within the fracturing latticework in global finance. My acrimony toward their profession has been the most consistent theme of the Hat Trick Letter for seven full years. The following paradoxes are powerful contradictions that fly in the face of standard economic theory.

During the deterioration and crack-up phase underway, the clueless cast of economists remains befuddled and confused. The imbalances are so great that almost none of their theory has merit. They know not how to stimulate anything but big US bank balance sheets with endless grants. They would do well to discard their advanced textbooks and adopt the Sound Money Theory of the Von Mises crowd, which has provided excellent expert guidance during every phase of the Western world financial system breakdown. Consider the paradoxes after an introduction to an important deception by the financial pharmacy that doles out poison pills under central bank sponsorship. Witness Greece and Ireland, which took the IMF poison pills under coercion, washed down the gullet by fiat credit based liquidity of the most toxic variety. If electronic engineers were as incompetent as economists, then cars would not work and computers would not work and communications devices would not work. If industrial engineers were as incompetent as economists, then retail chains would have empty shelves, and gasoline stations would have empty tanks. If the mathematics field were as corrupt as economists, they would redefine the multiplication tables. If the physics field were as corrupt as economists, they would still call the earth flat and the center of the solar system. If the professional athletes were as corrupt as economists, then baseball players would almost all have a hitting percentage under the Mendoza Line. But no! The economists are the squires to the ruling bankers, and serve to propagate the dogma of the high priests who sit in the central bank marble offices. The economists and bankers have destroyed the Western economic and financial system, exploiting it to the hilt, committing deep fraud and demanding redemption from the public till. They are never prosecuted for high financial crimes. They rule the land with privilege and impunity. They are not finished in their deceptions and wrongful forecasts. Almost all their constructs are incorrectly built. Despite a massive skein of horrendous professional performance, they continue to ply their trade and deceive the masses during the great meltdown and fracture.

IMF PRICE FIXING PLAN

The IMF plan to create a basket with inherent currency exchange rates is an attempt at price fixing, a blatant ploy to halt the USDollar decline. The once prestigious and respected global reserve currency is caught in a death spiral. The Special Drawing Rights (SDR) includes the USDollar, the Euro, the Japanese Yen, and the British Pound. Talks are brisk and intense to include the Chinese Yuan also.Within the SDR basket, if used as global reserve substitute, the major currencies will have an interwoven nest of fixed relative exchange rates.The idea is to have the major global banks use the SDR as their reserve currency like a block, a basket. But in order to work, any new reserve basket by definition will contain a rigid set of ratios. To begin with, the ratios are very likely not to favor the USDollar (with USTreasury Bonds) as much as the current makeup among the big banks. Therefore, the fixed ratios would be strained immediately at the imposed start of any new system. The initial startup alignment would alter exchange rates and force the IMF plan to change their fixed ratios. Great difficulty will come with the initial price fixing effort, whose challenge will continue with each passing week. Price fixing never works. This time is no different. The entire fiat platform is sinking.

The central banks hope to stop the USDollar decline. However, what they earn is a uniform decline in all currencies in terms of commodity prices. Rather than devise a new fundamentally sound platform, they rig the broken reeds, tie them together, and hope the failed system functions despite using broken components. The central bankers are desperate. While they appear to be organized, they are actually at war, among themselves and versus big creditor nations like China. They react with increasing desperation to the gradually recognized failure of the monetary system, sinking under the weight of the rapid and uncontrollable expansion of debt. What compounds the rising sovereign debt is the banker welfare which has backfired badly on the political stage. The people are given crumbs while the bankers are given $billions.

The Gold price, the Silver price, the Crude Oil price, even the Copper price and Cotton price and Coffee price and Soybean price and Corn price, will all rise in uniform fashion versus the ludicrous basket that might be forced upon the global banking system. They would solve nothing, but instead impose a socialist pain uniformly. Instead of the USDollar falling more versus other major currencies, it would pull down the others like a huge stone. The true money measures in Gold & Silver would rise in a powerful fashion much more, but in an equitable fashion. Consider the basket creation with Chinese Yuan inclusion out of respect. The ugly cost to Europe and China would be to lose their independence and opportunity to fight off the USDollar. The Europeans and Chinese would lose any discount on commodity prices extended from rising individual currencies. Imagine two good swimmers in a big swimming pool, tied to three or four very bad swimmers. The good would be dragged down by the bad since joined by a deadly rope line. The basket would not float, since its reeds are rotten from old and burdensome debt. Look for Europe and China to nix the stupid vapid SDR basket concept.

Conclusion: A paradox with backfire is at work. The IMF concept is badly flawed, operating as a veiled price fixing initiative. Its SDR basket would be equally toxic to the global banking system. Rather than Gold & Silver rising fast versus the USDollar, the precious metals complex would rise uniformly versus all major currencies. The Gold & Silver bull market would be much more plainly visible from all corners of the world. The currencies would fail together, yoked by the toxic USDollar.

ABSENT US EXPORTER ADVANTAGE

The US exporter advantage from a weaker USDollar will not materialize, contrary to the mainstream nonsense songs of deceit spiced with drivel. The economists have lost their credibility after crackpot notions like Green Shoots of economic recovery, like an Exit Strategy from the 0% corner of capital destruction, like the empty label of a Jobless Recovery. Now they have another rotten plank to stand upon with more demagoguery and false preaching. The central banks have resigned themselves to bring the UDollar down in an orderly manner. They mistakenly believe doing so will stimulate the USEconomy and revive the global economy. Instead, a lower USDollar will lift the entire global economy cost structure and serve to dampen all growth while it leads to starvation in poor nations. They expect the US export trade to pick up and lead the economic recovery. They are mistaken. First of all, the US industry lacks critical mass after decades of dispatch of factories to Asia. The start was the electronics departure to the Pacific Rim in the 1980 decade. The climax was the grand industrial buildup in China with Western investment funds, mostly American. The USEconomy lacks sufficient industry to take advantage of export growth. Secondly, many legitimate industrial advantages are in the possession of companies whose products are widely banned for export. See the advanced computer systems, the advanced telecommunications systems, even some advanced bioengineering systems. They have been captured by the USMilitary and its sprawling defense industry pillboxes. Lastly, a much more engrained cancer will affect the few American exporters that can attempt to exploit a lower USDollar exchange rate. It is the cancer of rising costs.

Most global currencies are rising versus the US$, so the USEconomy is actually hit much harder than other economies, and thus the domestic competitor firms. The lower USDollar will be offset by steadily rising costs, eliminating any exporter advantage. The cost squeeze is so profound in fact, that some of the US exporters will simply go out of business from vanished profit margins and a damaged customer base that is squeezed by global food & energy costs. The US export business costs will rise even more than the USDollar will fall, from rising input costs and even rising federal mandates like health care. Most other nations have less of a cost shock than the United States. The domestic US export industry cost shock eliminates the entire USDollar exchange rate advantage, something so basic that it cannot be seen, and surely not admitted for its heavy political effect. The higher cost of food & energy is painful enough. Americans who believe the export advantage will lead to new jobs are deaf dumb and blind, the sad result of years of propaganda and false teachings.

Conclusion: A paradox with backfire is at work. The US export industries will not be able to take advantage of a lower USDollar exchange rate, since their costs will be the fastest rising in the world. The commodity prices are rising faster versus the USDollar than almost all other currencies. No USEconomic recovery will occur, but instead a massive deterioration will unfold as it hits the wall from rising costs.

CHINESE YUAN UPWARD REVALUATION

Inside China, a monetary system shared with the United States for a long time has wrought similar problems. They have had a similar structure that funds the system from bank credit to stock market investment to construction. They have a housing bubble, insolvent banks, but also $3 trillion in savings. The currency peg has created common asset bubbles in a systemic manner, much like a three-legged race inflicts similar wounds from falls to the ground to the two people joined. The entire Chinese Economy has had to adapt to rising commodity input costs. Some expected them to revalue the Yuan upward by 10%, which would give all of China a discount on input costs. They would pass on the nearly 10% export price hike to customers, the trade partners. Something has happened in the last two to three years. The Chinese have expanded to the Persian Gulf after continued European expansion, and thus made bigger footprints in the malls to fill the stores. China is not as US-centric so much anymore. They are more willing to raise US export prices and lose a portion of market share in the US.

On the financial front, those who have not noticed the war waged by Beijing simply are asleep at the wheel, and far too devoted to suckle from the banker teat of illiteracy and deception. The Chinese have been busy building up their Yuan currency to be first a globally used vehicle in trade settlement and second a reserve currency held in the financial institutions. Success on both fronts have been realized with key bilateral swap facilities with Russia, Brazil, and pockets of the Persian Gulf. They have been diversifying out of US$-based assets for two years. Last week came a shocker. The Peoples Bank of China plans to shed $2 trillion of US$ assets, a tough task to implement. Even if it turns out to be a multi-year plan, it is significant. The effect is obvious on the USDollar, a downward force, a strong force. Any manifested action to dump US$ bonds will be followed by Japanese and Arabs and Koreans, who will follow the Chinese lead in shedding assets. Such is a topic of the expanded G-20 Meetings, whose initiatives are no longer led by Anglos. In the process, the USFed will be isolated as the global revolt continues. The fact of life extending from the financial crisis is that foreign creditors have abandoned the USTBonds.

The Chinese must contend with a vicious cycle. As they shed assets with US$ markings, the USDollar will fall further. It is inevitable that the USDollar will fall another 20% to 30%. Only Americans living under the US Dome of Deception believe otherwise, an echo of either arrogance or ignorance. Import prices will rise for Chinese goods sent to the USEconomy. Their asset dump will push up the Yuan, while official forceful action will attempt to formalize the structure behind the Yuan exchange rates. Watch Wal-Mart for clues, which has already warned of higher store prices. China will finally pass on higher costs, reluctant until in recent months. A small Yuan currency upward revaluation buys a commodity discount. But Chinese export trade is much more global and less US-centric than a few years ago. They will permit a US price rise, both from necessity in profit management and the desire to insult the Americans. They will gleefully flick the noses of the US leadership, and kick their shins, whose shallow leadership and corrupt management deserves response.

Conclusion: A paradox with backfire is at work. The desired goal is to mitigate higher input costs to the Chinese Economy, whether by edict of a higher Yuan value or by action from massive asset sales. It is coming. The process of disconnect from the US shared monetary policy started with several rate hikes and raised bank ratios. The rest of the process will be more painful in outright asset shedding and currency revaluation in the quest toward becoming a global reserve currency.

JAPANESE YEN WILL RISE

The disaster in Japan has many facets and channels of damage. The after effects in Japan will work in numerous hidden ways to lift their Yen currency. Its steady stubborn rise will confuse the constantly wrong-footed economists. Japan must liquidate assets to finance the broad cleanup, the painful displacement, the urgent market support, and the eventual reconstruction. Their entire array of supply industries is very disrupted. The Japanese financial structure has hit the saturation point in national debt at a 140% Debt/GDP ratio, the highest among all industrialized nations. This is the ugly consequence of endless recessions and being trapped in the corner at the 0% rate. The dull blades posing as economists in the United States fail to observe the Japanese lesson that a nation never emerges from the 0% corner. To admit this is to admit a failure of the monetary system and central bank franchise control tower.

The next phase inside Japan will include an unspoken emphasis of foreign asset sales in order to fund the staggering costs and to avert price inflation. Additional debt with Yen markings risks a surge in domestic price inflation. They are at a tipping point. Their supply industry will suffer from capital destruction as the profit squeeze hits Japan. It will compound the displacement problem encountered by worker homes being destroyed or declared in an uninhabitable area. It will compound the disruption problem seen in interrupted plant operations from power supply cutbacks and input material shipment reductions. The supply industry will shrink somewhat, but it is unclear how much due to government subsidies that could be raised in a big way. The effect on the global economy has only begun to be felt with the supply chain disruptions. Since the Chinese industrial expansion, a victim has been Japan. They lost their trade surplus, recently turned flat. In the next year, the Japanese trade balance will turn into an outright deficit. The effect of the rising Yen will work in a nasty mix with the disruptions from the earthquake and tsunami to bring about a sizeable trade deficit. This is basic, but still missed by the American economists.

Here is the paradox. The trade deficit will not keep down the Yen exchange rate down. The deficit will send into reverse the process of suppressing the Yen currency for 20 to 30 years.

The key to understanding is to recognize the Bank of Japan (BOJ) for its past role. It has served as a loyal (if not controlled) financial colony outpost for the US, dutifully keeping the Yen down and the USDollar up despite the chronic US deficits, both fiscal (government) and trade (gaps from imports over exports). The final phase of Yen Carry Trade unwind has begun. Their 0% corner is permanent. Japan has been stuck in the corner after 20 years, despite strong trade surplus and significant industry, a point that economists never bothered to explain. No longer will the Japanese financial institutions, led by the BOJ, purchase the USTBonds. Next is the flip into reverse of the Yen Carry Trade. Since 1990 incredibly easy money was made in the biggest financial turnstyle of illicit profit, a veritable factory of turnstyles. They used to borrow 0% Yen, with no risk of a rising currency, and invest in high yielding USTreasury Bonds and briskly rising US stocks even if bound in S&P500 baskets. Next Japan will sell assets and send the process into reverse. The YCTrade is never discussed in the US press. Even the venerable Kurt Richebacher never heard of it. Imagine him being instructed on the carry trade dynamics in 2003, a point of embarrassment for him and awkward role reversal for the younger Jackass.

The critical point was reached three weeks ago when an emergency G-7 Meeting was convened. Its purpose was coordination to buy USTBonds and keep the Yen down, ergo Global QE. The Yen Sale Pact was never called Global QE but that is the proper interpretation, since all major central banks became USTBond buyers of last resort. The Gold & Silver market properly interpreted the event, and surged to breakout levels. The effect of the G-7 desperate clumsy pact was temporary. The Yen has climbed back, now at the belt-line level of 121 to 123, the level often seen in a long string of weeks in 2011. Turn to the object of the YCTrade. The USTreasury Bonds have reached an elevated nosebleed bubble level of prices, as a result of the asset bubble promoted and fed with full broad support. Recall the primary vulnerability of asset bubbles, that they require an acceleration in funds to maintain a constant price level. The USTBonds have lost their buyers, as foreign creditors abandoned them long ago. They acted upon the disgust by installing broad diversification schemes. The Japanese natural crisis has mushroomed into an economic and financial crisis. They have responded by selling rafts of USTBonds, which is their right. The G-7 Accord is a stopgap, nothing more. They cannot divert their attention, but they already have. The USGovt budget disaster is just that distraction. In rising from 117 to 122, the Yen demonstrates the slipped attention span. The Yen is back above both 50-day and 200-day moving averages, recovering from the natural process that cannot be halted by bumbling central bankers under siege. Their system is failing on the global stage, with the whole world watching, yet comprehending little except the obvious chaos.

The trade deficit will not keep down the Yen exchange rate down.Contrary to standard economic theory, their trade gap will push up the Yen currency. Such a Jackass forecast goes directly contrary to their broken standard theoretical concepts, few if any have shown to contain much validity or sinew to hold together the broken planks of their financial theory. The Japanese Yen currency will continue to rise even though a trade deficit comes. Their trade surplus used to enable vast funds to suppress the Yen, now gone. The Japanese will sell foreign assets to cover the deficits. They will have to avoid price inflation by selling available foreign assets, in particular the plentiful US$-based assets. Banks will lead the final phase of the Yen Carry Trade unwinding process. Insurance companies will unload US$-based assets in order to finance claims. The financial firms will unload US$-based assets so as to protect Japanese stock values. Asset sales will cover deficits, simply stated, a basic fact of finance. The Bank of Japan will not be able to anticipate or keep up with the pace of asset sales. The overall national costs will be a multiple of current estimates. Already this week the estimates were raised on ultimate costs. Ripple effects will be vast in the supply chain for the electronics and car industries. The Yen will be out of the news until it rises past the 123 level, at which time it will be blow away the veil and reveal the crisis.

Conclusion: A paradox with backfire is at work. The Yen currency will continue to rise, despite a growing trade deficit. Standard theory will not explain the phenomenon, which is that the funds usually devoted to suppress the Yen exchange rate and defend the export industries will be sold in order to fund the cleanup, the support, the displacements, and the reconstruction. The primary assets sold will be US$-based assets, since they are held in high volume and whose sale works to prevent the price inflation backfire.

THE BESIEGED USDOLLAR

The USDollar DX index is flirting with a breakdown. Many analysts, the Jackass included, believe the DX index will eventually break below support lines and emergency tethers, seek its true value, and plunge the financial arena into a full blown global financial crisis. The crisis has not ended, and soon will intensify. Rather than embark on debt restructure and systemic reform, the national leaders dominated by the banker syndicate chose to dole of multi-$trillion welfare for the big US banks, redemption at nearly full value of their toxic bonds, coverage of the endless bills at the black holes in Fannie Mae and AIG, and blind approval of executive bonuses for those largely responsible for the national collapse. The global reaction is to abandon the USDollar and seek an alternative, a monstrous challenge. If foreign nations cannot control decisions or influence them in the USGovt, they can surely discard the USDollar and work to sink the corrupt raft afloat posing as a helm of control. US stewardship has morphed into crime syndicate operation, following a shrouded coup d’etat.

If the Gold & Silver price correction this week was the beginning of a greater correction, or a signal of end of the great bull run, then the USDollar would not display such extreme and vivid weakness. The rise through December and the January resumed decline cleared out the oversold condition, thus permitting further declines. The global monetary system is crumbling. The sovereign debt foundation for that monetary system is suffering from toxemia, a septic flow in circulation within the blood system. The US$ DX index cannot rise above the critical 75 level. The next test is of the 72 level, the generational low that must be defended. If overrun, then the global financial crisis will be squarely focused on the failing USDollar. That is precisely what to expect, as Gold & Silver resume their upward powerful march undeterred by paper hangers. The best propulsion for the precious metals is USFed Chairman Bernanke speaking. He reveals the desperation, the failure, the futility. Let him speak.

MANDATORY WAGE INCREASE

The Jackass will go out on the limb. A public distress signal has come from cost shock. The effect is lower retail spending, lower discretionary spending, lower business spending. The topline growth is in sales, which enables accounting games and claims of expansion. However, higher gasoline sales is not indicative of USEconomic growth, since less volume. It is evidence of price inflation. My forecast is that a nationwide movement by the autumn months will form. The movement will demand mandatory wage increases at a national level.The objective will be to help households squeezed by higher costs, and to avert an explosion of personal bankruptcies and business shutdowns. In time, look for (maybe hope for) two parts of wage and salary increases, merit raise and cost of living raise. The public demand will be for a grand socialist directive to legislate Cost Of Living raises to all Americans. The tremendous squeeze of business profits and household discretionary spending must invite a reaction, a national movement. Either people take to the streets or they win an income hike, even if legislated. Without it the system known as the USEconomy will collapse. Notice the Philly Fed in April plunged down to 18.5 from 43.4 in March, a decline without precedent. It is difficult to hide the breakdown and collapse. If and when a national wage increase to offset the higher cost structure occurs, it will open the floodgate for price inflation. The cost squeeze has ravaged the middle class, and it is severe. The main shelves of food & energy are just the visible tips of the iceberg.

The leaders must throw the restless natives a bone. But here is the battle. The banking and political leaders have made a national objective to prevent the ‘Secondary Inflation Effects’ from occurring, namely rising wages.They observe the rising cost structure with all its consequent distress. The clownish USFed Chairman will conduct public meetings and press conferences. His mission is to explain the urgent need not to prevent wage and salary increases. HE WILL MEET A FIRESTORM OF PROTEST, HOSTILITY, AND ANGER. His mission in plain terms is to save the system by letting the public succumb to cost pressures.He will explain the need for the people to die an economic death so that the banker assets do not collapse, so that the hidden banking system laden with corrupt credit derivatives does not collapse, so that the scourge of systemic hyper-inflation does not ravage and destroy the US financial system. The people probably do not care about such arguments. They will instead demand supplemental wage increases.

SIGNAL TEST FOR END OF GOLD & SILVER BULL

It is not complicated. Have they liquidated any big US banks?? Has any reform come for encouraging the return of US industry?? Has any regulatory reform been pursued for expanding business?? Have they stopped printing money to cover debt?? Has any reduction in USGovt deficits been realized?? The answer is a loud NO on all counts, which signals a continued bull market in precious metals. They print money to cover bonds which raises the cost structure and thus works to remove active capital through the natural process of business shutdowns due to vanished profitability. Watch for job cuts from the pervasive cost shock and its powerful squeeze. Watch for even greater propaganda of economic recovery in supposed business growth, which is almost all price inflation relabeled as growth, fully forewarned by the Jackass over the past three or four months. The Gold bull market will continue for at least a couple more years, as nothing is fixed and the major currencies continue their extreme debasement and ruin. Gold & Silver are currencies of last resort hated by central bankers, more widely embraced in the last year or more. The Silver bull market will continue for even longer, as nothing is fixed and the major currencies continue their extreme debasement and ruin, while industry must contend with widespread chronic shortages.

Bear in mind that the USFed is actively buying the TIPS, icing down the thermometer. They are doctoring the Treasury Inflation Protection Securities meter itself, done openly, without apology, without critical response by the bank analysts, asleep at the wheel. The upcoming wild card: foreign trade will no longer want the USDollar for crude oil or Chinese products. These two arenas are snake pits where the King Dollar will be bitten and delivered venom. So much intellectual inbreeding has taken place among bankers and economists. The jig is up and the game is over. Next comes the collapse, in progress but not yet widely recognized. Take your pick on imagery. The USDollar will face a shut door, as the welcome matt is removed, as foreigners pull the rug out. They are disgusted with unspeakable bond fraud. They are disgusted with endless banker welfare at global expense. They are disgusted with unbridled monetary inflation in the form of accelerating debt monetization. They are disgusted with runaway USGovt budget deficits. They are disgusted with fast rising food & energy prices, attributed directly to the USFed. They are disgusted with lost value of their reserve assets, attributed directly to the USFed. The USEconomy is in the process of collapse. CNN has yet to announce the collapse, so it is not widely perceived. They seem incapable even to report on a basic fact, that the USGovt has already exceeded the legal debt limit.

Just a final footnote on the Libya front. A quote from Manlio Dinucci. He wrote (in translation from Italian), “US and European ruling circles focused on these funds, so that before carrying out a military attack on Libya to get their hands on its energy wealth, they took over the Libyan sovereign wealth funds. Facilitating this operation is the representative of the Libyan Investment Authority, Mohamed Layas himself, as revealed in a cable published by WikiLeaks. On January 20th, Layas informed the US ambassador in Tripoli that LIA had deposited $32 billion in US banks. Five weeks later, on February 28th, the USTreasury froze these accounts. According to official statements, this is ‘the largest sum ever blocked in the United States,’ which Washington held ‘in trust for the future of Libya.’ It will in fact serve as an injection of capital into the US economy, which is more and more in debt. A few days later, the European Union froze around 45 billion Euros of Libyan funds.” So not only debt monetization and hyper inflation keep the US and Western system going, but basic theft of tyrant’s funds. One must wonder if destabilization of tyrant rule has a hidden ulterior motive of confiscation. The news media carefully avoids this confiscation topic and the central bank role in the heated war. Somehow, the Egyptian funds pilfered by Hosni Mubarak have escaped confiscation. My howls of laughter were heard 100 yards (meters) away when Bloomberg News reported that Mubarak had accumulated almost $60 billion over 30 years of dictatorial rule from prudent savings. The legal stealing rights among national leaders is epidemic, and includes the United States and England, the center of the Global Axis of Fascism.

Jim Willie CB

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Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at . For personal questions about subscriptions, contact him at [email protected]

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50 Factors Launching Gold

April 22, 2011 by goldguru · Leave a Comment

By Jim Willie CB,

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Edification is not the word that comes to mind when observing an interview with Larry Fink of Blackstone this morning on network financial news. It was inspirational if not humorous, and somewhat pathetic. Of course the interviewer treated him like royalty, when just a syndicate captain, a Made Man. As a cog within the US financial hierarchy, he was asked why Gold is approaching record price levels near $1500 per ounce. He gave his best 10-second answer, showing no depth of comprehension but an excellent grip of propaganda laced with simplistic distortion. He said, “GOLD IS RISING FROM ALL THE GLOBAL INSTABILITY, AND NOT FROM INFLATION AT ALL.” Sounds good, but it lacks much reflection of the world of reality burdened by complexity and interconnectivity that the enlightened perceive. At least he did not babble about Gold being in an asset bubble. It cannot, since Gold is money. It is curious that all the analysts, bankers, fund managers, corporate chieftains who did not advise on Gold investment over the last ten years are precisely whom the financial network news appeals to for guidance in the current monster Gold bull run. They knew nothing before, and they know nothing now. The major US news networks carry the Obama water while the USCongressional members carry theUSBanker robes and show respect with genuflection before the priests. But guys like Fink are their harlot squires. Poor Ben Bernanke, despite his high priest position, does not gather a fraction of respect that Alan Greenspan did even though Alan presided over the collapse. The wild card possibly later this year or 2012 will be a national movement to force mandatory wage gains, and thus avert a national economic collapse. The squeeze is on in a powerful manner to both businesses and households.

ANOTHER STRONG GOLD BREAKOUT

As long as Quantitative Easing programs are in place and actively pursued, Gold & Silver prices will soar. The programs are urged by exploding budget deficits and absent USTBond demand. That translates to a ruined USDollar currency. Gold & Silver respond to the debasement and ruin. Efforts will become ridiculously stretched to save the USDollar, but will fail. QE will go global and secretive, assuring tremendous additional gains in the Gold & Silver price. No effort to liquidate the big USbanks will occur, thus assuring the process will continue until systemic breakdown then failure. The more extraordinary the measures to save the embattled insolvent fraudulent USDollar, the more the Gold & Silver price will soar. It is that simple.Gold & Silver will soar as long as central banks continue to put monetary inflation machinery to work. They are attempting to provide artificial but coordinated USTreasury Bond demand. In the process their efforts will continue to push the cost structure up further. In my view, since the Japan natural disaster hit with financial fallout, the Global QE is very much in effect, but not recognized as a global phenomenon. It pushes up Gold in uniform fashion worldwide.

50 FACTORS POWERING THE GOLD BULL

1) USFed is stuck at 0% for over two years and printing $1.7 trillion in Quantitative Easing, otherwise called monetary hyper inflation. They are not finished destroying both money and capital.

2) USFed tripled its balance sheet, with over half of it bonds of exaggerated value, while it gobbled up toxic mortgage bonds as buyer of last resort. The mortgage bonds have turned worthless. The USFed waits for a housing revival to bail itself out, but it will not arrive.

3) Debt monetization has gone haywire, as over 70% of USTBond sales from the USFed printing press. The QE was urgently needed, since legitimate buyers vanished. Even the primary dealers have been reimbursed in open market operations within a few weeks.

4) PIMCO has shed its entire USTreasury Bond holdings, seeing no value. They joined many foreign creditors in an unannounced buyer boycott in disgusted reaction to QE which is essentially a compulsory unilateral debt writedown.

5) Growing USGovt deficits have run over $1.5 trillion annually, with absent cuts, obscene entitlements, endless war. The prevailing short-term 0% interest rates are out of synch with exploding debt supply and rising price inflation.

5) Unfunded USGovt liabilities total nearly $100 trillion for medicare, social security, pensions, and more. The obligations are never included in the official debt. It represents insult to injury within insolvency.

6) Standard & Poors warned that USGovt could lose AAA rating in lousy credit outlook, one chance in three within the next two years. Ironically, the announcement came on the day when the USGovt exceeded its debt limit. The network news missed it.

7) State & Municipal debt have collapsed, as 41 states have huge shortfalls, and four large states are broken. They might receive a federal bailout. It could be called QE3, maybe QE4.

8) Coordinated USTBond purchases from Japanese sales have relieved theUSFed, as other major central banks act as global monetarist agents. The sales by Japan are vast and growing. Witness the last phase in unwind of Yen Carry Trade, where 0% borrowed Japanese money funded the USTreasuryBonds and US Stocks.

10) Quantitative Easing, a catch word for extreme monetary inflation and debt monetization, has become engrained into global central bank policy, soon hidden. It is so controversial and deadly to the global financial structures that it will go hidden, and attempt to avoid the furious anger in feedback by global leaders. This is the most important and powerful of all 50 factors in my view.

11) The FedFunds Rate is stuck near 0%, yet the actual CPI is near 10%, for a real rate of interest of minus 9%. Historically a negative real rate of interest has been the primary fuel for a Gold bull. This time the fuel has been applied for a longer period of time, and a bigger negative real rate than ever.

12) The USGovt claims to have 8000 tons of Gold in reserve, but it is all in Deep Storage, as in unmined ore bodies. The collateral for the USDollar andUSTreasury debt is vacant. It is in raw form like in the Rocky Mountain range or Sierra Nevada range.

13) Fast rising food prices, fast rising gasoline prices, and fast rising metals, coffee, sugar, and cotton serve as testament to broad price inflation. So far it has shown up on the cost structure. Either the business sector will vanish from a cost squeeze or pass on higher costs as end product and service price increases.

14) The entire world seeks to protect wealth from the ravages of inflation & the American sponsored QE by buying Gold & Silver. The rest of the world can spot price inflation more effectively than the US population. The United States is subjected to the world’s broadest and most pervasive propaganda in the industrialized world.

15) The European sovereign debt breakdown with high bond yields in PIIGS nations points out the broken debt foundation to the monetary system. The solutions like with Greece in May 2010 were a sham, nothing but a bandaidand cup of elixir. Spain is next to experience major shocks that destabilize all of Europe again, this time much bigger than Greece. The Portuguese Govtdebt rises toward 10% on the 10-year yield, while the Greek Govt debt has risen to reach 20% on the 2-year yield.

16) Germany is pushing for Southern Europe bank climax in their Euro Central Bank rate hike. Europe will be pushed to crisis this year, orchestrated by the impatient and angry Germans. They have no more appetitive for $300 to $400 billion in annual welfare to the broken nations in Southern Europe.

17) Isolation of the USFed and Bank of England and Bank of Japan has come. The small rate hike by the European Central Bank separated them finally. The Anglos with their Japanese lackeys are the only central banks not raising rates. With isolation comes all the earmarks on the path to the Third World.

18) The shortage of gold is acute, as 51 million gold bars have been sold forward versus the 11 million held by the COMEX in inventory. Be sure that hundreds of millions of nonexistent fractionalized gold ounces are polluting the system. Word is getting out that the COMEX is empty of precious metals.

19) Such extreme Silver shortage has befallen the COMEX that the corrupted metals exchange routinely offers cash settlement in silver with a 25% bonus if a non-disclosure agreement is signed. The practice cannot be kept under wraps, as some hedge funds push for fat returns in under two months holding positions with delivery demanded.

20) China has begun grand initiatives to replace its precious metal stockpiles. They are pursuing the Yuan currency to become a global reserve currency. As they build collateral for the Yuan, they are also elevating Silver as reserves asset.

21) A global shortage of Gold & Silver has been realized in national mint production. From the United States to Canada to Australia to Germany, shortages exist. Many interruptions will continue amidst the shortages, which feed the publicity.

22) The Teddy Roosevelt stockpile of 6 billion Silver ounces was depleted in 2003. He saw the strategic importance of Silver for industrial and military applications. The USEconomy and USMilitary will turn into importers on the global market.

23) The betrayal of China by USGovt in Gold & Silver leases is a story coming out slowly. The deal was cut in 1999, associated with Most Favored Nation granted to China. But the Wall Street firms broke the deal, betrayed the Chinese, and angered them into highly motivated action. No longer are the Chinese big steady USTBond buyers, part of the deal also.

24) Every single US financial market has been undermined and corrupted from grotesque intervention, constant props, and fraudulent activity. The degradation has occurred under the watchful eyes of compromised regulators. Fraud like the Flash Crash and NYSE front running by Goldman Sachs is protected by the FBI henchmen.

25) The USEconomy operates on a global credit card, enabling it to live beyond its means. The USGovt exploits the compulsory foreign extension of credit inUSTBonds, by virtue of the USDollar acting as global reserve currency. Foreign nations are compelled to participate but that is changing.

26) The USMilitary conducts endless war adventures for syndicate profits. They use the USTreasury Bond as a credit card. The wars cost of $1 billion per day is considered so sacred, that it is off the table in USGovt budget call negotiations, debates, and agreements.

27) Narcotics funds have proliferated under the USMilitary aegis. The vertically integrated narcotics industry is the primary plank of nation building in Afghanistan. The funds keep the big US banks alive from vast money laundering.

28) No big US bank liquidations have occurred, despite their deep insolvency. Any restructure toward recovery would have the liquidations are the first step. The USEconomy is stuck in a deteriorating swamp since the Too Big To Fail mantra prevents the urgent but missing step.

29) The unprosecuted multi-$trillion bond fraud over the last decade has harmed the US image, prestige, and leadership. The main perpetrators are the Wall Street bankers and their lieutenants appointed at Fannie Mae and elsewhere. They bankers most culpable remain in charge at the USDeptTreasury and other key supporting posts like the FDIC, SEC, and CFTC.

30) The ugly daughters Fannie Mae and AIG are forever entombed in theUSGovt. They operate as black hole expenses whose fraud must be contained. The costs involved are in the $trillions, all hidden from view like the fraud. Fannie Mae remains the main clearinghouse for several $trillion fraud programs still in operation.

31) The US banking system cannot serve as an effective credit engine dispenser, an important function within any modern economy. It is deeply insolvent, and growing more insolvent as the property market sinks lower in valuation. The banks lack reserves, and hide their condition by means of the FASB permission to use fraudulent accounting.

32) The big US banks are beneficiary of continuous secret slush fund support from the USGovt and USFed. Their sources and replenishments have been gradually revealed. The TARP Fund event will go down in modern history as the greatest theft the world has ever seen, easily eclipsing the biggest mortgage bond fraud in history.

33) The insolvent big US banks continue to sit at the USGovt teat. The vast umbilical cord of banker welfare has not gone away. Goldman Sachs still is in control of the funding machinery.

34) The shadow banking system based upon credit derivatives keeps interest rates near 0%. The usury cost of money is artificially low near nothing. As money costs nothing, capital is actively and rapidly destroyed.

35) A vast crime syndicate has taken control of the USGovt. A vast crime syndicate has taken control of the USMilitary. A vast crime syndicate has taken control of the USCongress. A vast crime syndicate has taken control of the US press networks.

36) A chronic decline of the US housing sector keeps the USEconomy in a grand decline with constant deterioration. With one million bank owned homes in inventory, a huge unsold overhang of supply prevents any recovery of housing prices. Home equity continues to drain, and bank balance sheets continue to erode.

37) Over 11 million US homes stand in negative equity. The sum equals to 23.1% of households. They will not participate much in the USEconomy, except when given handouts. They have become downtrodden.

38) The USEconomy will not benefit from a export surge. The US industrial base has no critical mass after 30 years of dispatch to the Pacific Rim & China. The industry must contend with rising costs in offset to the fallingUSDollar, which is cited as providing the mythical benefit. Then can export in droves if they do so at a loss.

39) A global revolt against the USDollar is in its third years. The global players work to avoid the US$ usage in trade settlement. Several bilateral swap facilities flourish, mostly with China. If China supplies products, then the Yuan currency will be elevated to global reserve currency.

40) Global anger and resentment over three decades has spilled over. The World Bank and IMF have been routinely used by the US bankers to safeguard the USDollar and Anglo banker hegemony. Neither financial agency commands the respect of yesteryear.

41) A middle phase has begun in a powerful Global Paradigm Shift. The transfer moves power East where the wealth engines of industry lie, far from the fraudulent banking centers. The next decade will feature the Chinese as bankers, since their war chest contains over $3 trillion.

42) The crumbling global monetary system was built on toxic sovereign debt. Legal tender has been nothing more than denominated debt posing as legitimate by legal decree. That is what word FIAT means. The system is gradually breaking in an irreversible manner.

43) The global central bank franchise system has been discredited. It is a failure, which is not recognized by the bank leaders still in charge. The stepwise process of ruin continues with a new sector falling every few months. Next might be municipal bonds.

44) Witness the final phase of a systemic cycle, as the monetary system has run its course. It is saturated with debt from faulty design. The deception cited in the mainstream media focuses upon the credit cycle which will renew. It will not. It will break of its own weight and lost confidence.

45) The recognition has grown substantially that suppression of the Gold price has been the anchor holding fiat system together. The Chinese realize that Gold, when removed, leads to the collapse of the US financial system. They realize it more than the US public. But the syndicate in control of the USGovtunderstands the concept very well, as they designed the system.

46) The institution of a high level global barter system might soon take root. Gold will sit at its central core, providing stability. No deadbeat nations will participate. That includes the United States and several European nations. The barter system will be as effective as elegant.

47) The movements spread like wildfire in several US states to reinstitute gold as money. In a few states, led by Utah and Virginia, progress has been made for Gold to satisfy debts, public & private. Consider the movement to be in parallel to the Tenth Amendment movements.

48) Anglo bankers have lost control in global banking politics. The phased out G-7 Meeting is evidence. China has wrested control of G-20 Meeting, and has dictated much of its agenda in the last few meetings. The US has been reduced to a diminutive Bernanke and Geithner being ignored in the corner.

49) New loud stirrings by Saudi Arabia seek a new security protector. If security is no longer provided by the USMilitary, then the entire defactoPetro-Dollar standard is put at risk. Remove the crude oil sales in USDollarsexclusively, and the US sinks into the Third World with a USDollar currency that cannot stand on its own wretched wrecked fundamentals.

50) The IMF solution to use SDR basket as global reserve is a final desperate ploy. By fashioning a basket of major currencies in a basket, they attempt to enforce a price fixing regime. It is a hidden FOREX currency exchange rate price fixing gambit that will invite a Gold price advance in uniform manner across the currencies bound together. This ploy is being planned in order to prevent the USDollar from dying a horrible death at the expense of the other major currencies. By that is meant at the expense of the other major economies which would otherwise have to operate at very high exchange rates.

THE BIGGEST UPCOMING NEW FACTORS

Introduction of a New Nordic Euro currency is near its introduction. The implementation with a Gold component will send Southern European banks into the abyss, marred by default. The new currency has the support from Russia and China, even the Persian Gulf. In my view, it is a USDollar killer. The first nations to institute a new monetary system for banks and commerce will be the survivors. The rest will slide into the darkness of the Third World.

Gold & Silver seem to be the only assets rising in price, an extension of a terrific 2010 decade. The exceptions are farmland and the US Stock market. However, stock valuations are propped by constant and admitted USGovt support. Their efforts are mere attempts to keep pace with the USDollar decline, as stocks merely maintain a constant purchase power.

A hidden overarching hand seeks the global Gold Standard as the bonafide solution. Darwin is at work, but Adam Smith turns a new chapter. The crumbling monetary solution demands a solution. Further investment in the current system assures a devastating decline into the abyss of insolvency and ruin.

Jim Willie CB

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(DanC in Washington)

(BobA in North Carolina)

“I think that your newsletter is brilliant. It will also be an excellent chronicle of these times for future researchers.”

(PeterC in England)

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China: Where Money Is Treated Best

April 19, 2011 by goldguru · Leave a Comment

By The Mogambo Guru

“9% Unemployment Rate is a Statistical Lie” is a pretty catchy title, and being the kind of vicious little rat that I am, and who suspects treachery and betrayal at every turn, I naturally take a look at it to confirm my worst suspicions.

The bad news is that it is, indeed, scary stuff! The article is by Greg Hunter of USAWatchdog.com, who writes that John Williams of ShadowStats.com has calculated that “If unemployment was computed the way BLS did it prior to 1994, the true unemployment rate would be 22.2%.”

And while the prospect of more than a fifth of the workforce being idle is scary enough, inflation in consumer prices is even scarier, particularly to the aforementioned 1-in-5 unemployed. And while Michael Pento at Euro Pacific Capital does not mention the unemployed or their plight as concerns dealing with inflation in prices, he says, “In current economic analysis, inflation is largely in the eye of the beholder, and depending on how you choose to look, very different stories emerge.”

This is where I thought he would mention the unemployed, or the poor, and their harrowing experiences in paying higher prices without any income, but he doesn’t.

He says, instead, that it is all worse than I think, thanks to the way the American government calculates inflation. “In the US,” he says, “food and beverages count for just 16.4% of the CPI calculation. The Chinese apparently believe that the basic necessities of life should count for more, assigning a 33% weight to the nutritional components. These differences in measurement are partially responsible for the divergent inflation climate in both countries, and make most people believe that inflation is fickle and localized.”

It is not, and Mr. Pento agrees, saying, almost poetically, “From my perspective, inflation is a global wave that will ultimately swamp all shores.”

I am sure that Mr. Pento is right because every country on the Face Of The Planet (FOTP) is desperately creating more and more money, and the money will eventually find its way to the place where it is treated best and/or has the best prospects, which is, in this case, Bob.

Oops! I meant “China.” Sorry! Bob is just a guy from my dim, dark past who treated my girlfriend better than I did, and she unexpectedly left me and went running off with him, sort of like how money goes to where it gets treated best, too, so you can see how I could get confused, and angry, and vow to track them both down to make them pay a terrible price for their treachery, a vow you’d almost forgotten about until just now.

And speaking of China, Terry Lawrence, newsletter writer, reminds us that Obama is our 44th president, and that in the Cantonese dialect, the number 4 sounds like the word for “death.”

Naturally, I look askance at people fearing the number 4, as they should instead fear the number 13, and especially Friday the 13th, like everybody else, and if not that, then at least fear the government creating so much excess money because it means so much inflation in the prices of food and energy that people will actually die!

In contrast, I never heard of anybody being killed by the number 4, unless it was because a metal numeral affixed to the side of a building suddenly broke free, falling down and down, gathering speed as gravity sucked it in towards the center of the earth until it hit somebody on the head who was walking by on the sidewalk below, not suspecting anything, killing them on the spot, blood everywhere, and it was, spookily, the number 4! Believe it or not!

Apparently, nobody appreciated my interruption, or how this shocking tale of superstitious strangeness that I just made up is just one of the many, many mysteries of the universe, including how “In the Cantonese dialect, 44 is double death.”

Again, I interrupt to note that this “double death” is already known by anybody who has two children! Hahaha!

Well, nobody laughed at my little joke, and so to add a little pizzazz, I decided to proceed Las Vegas style! I say, “And any long-shot Louie at a craps table on the glittering Vegas strip trying to impress a couple of beautiful showgirls with long, shapely legs down to here by ‘making 8 the hard way’ faces the Russian-roulette of death in the 1-in-36 odds of making two 4s, while risking the death of 1-in-6 odds of making craps, only to win a lousy 10-to-1 bet if he makes it! But even then, it is better than the odds of the Federal Reserve creating inflation in the money supply without creating inflation in prices, where the odds are literally infinity-to-zero!

“And even then, the odds of avoiding disaster are better than having kids and expecting not to be driven completely out of your freaking mind! Hahaha!”

Again, nobody laughed. I agree that this wasn’t my best material, but in my petulant mood, I unfairly decided to punish them all by not telling them to buy gold and silver as a defense against the horrific inflation that is guaranteed by the Federal Reserve creating So Freaking Much Money (SFFM).

That way, it will be me that has the last laugh! Me! Hahahaha! Me! Hahaha!

Suddenly, I realize, “Whee! This investing and revenge thing is easy!”

The Mogambo Guru
for The Daily Reckoning

China: Where Money Is Treated Best originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

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Buying Gold on the Price Inflation Guarantee

April 18, 2011 by goldguru · Leave a Comment

By The Mogambo Guru

At my age, I have pretty much figured out that people don’t like me because they fear me.

I don’t know why, exactly, but perhaps they fear me because I am a cynical, paranoid, gold-bug old man who thinks that the Federal Reserve has turned into an evil institution by creating So Freaking Much Money (SFMM), now so that it can commit the sin of monetizing new government debt by the truckload, increasing the money supply and guaranteeing a roaring inflation that hurts the poor, and hurts the almost-poor, and hurts the not-quite-poor, and (now that I think about it) it hurts everybody, which hurts me personally because they come whining to me to give them some of MY money!

The lesson is that everybody suffers from higher prices to one degree or another.

Or maybe people fear me because I know that The Only Thing To Do (TOTTD) when the money supply is being so seriously expanded is to buy silver and gold as a defense against the inflation that will result, and even though I have literally spent hours and hours with these people over the years, monopolizing every conversation to tell them to buy gold and silver, they don’t!

And then they turn around and get all upset with ME, like it’s my fault, when I politely inform them that I figure that not buying gold and silver, especially silver, despite the entire corpus of the last 4,500 years of economic history proving the wonders of doing so, and the idiocy of not doing so, over and over and over again, is, by sheer tonnage of evidence, completely stupid.

I mean, how stupid is it not to buy gold and silver when the Federal Reserve is creating so much money that it guarantees – guarantees! – inflation in prices.

The fact that most Earthlings do not buy them seems to indicate that most Earthlings are stupid creatures, and that maybe, just maybe, the whole planet should be “sterilized” by sending a couple of Zargmagarth battle-cruisers through hyperspace to deliver a couple jolts from their onboard Exterminator 3000 ray guns, sort of like how America goes swaggering around the world blowing up large pieces of the planet and killing people.

Relying solely on anecdotal information and stuff I just make up in my paranoid confusion, I figure that widespread gene malfunctions are causing this stupidity, and it also explains why terrified people do not recognize that (as is classically said in the movies) resistance is futile, both to Zargmagarth battle-cruisers and to the ruinous inflation in prices that is caused by the constant creation of too much money.

Normally, I would expect them to say, “Okay, strange visitor from another planet! You win! I’ll buy as much gold and silver as I can! Just don’t let the Zargmagarths or the Fed destroy us!”

It is, you may be happy to know, not too late to turn back the Zargmagarths, but it is, unfortunately, too late to prevent the Federal Reserve from destroying the planet with inflation in prices.

And with a dichotomy like that, the decision to buy gold and silver is so easy that you involuntarily giggle in delight, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

Buying Gold on the Price Inflation Guarantee originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

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Awaiting the “Zero Hour” of Available Credit

April 15, 2011 by goldguru · Leave a Comment

By The Mogambo Guru

I watch expectantly as the national debt again nears the debt limit, and Zero Hour is just a few weeks away, a term I cleverly used to indicate that available credit will be zero. Maxed out.

I let it go at that, as I am not inebriated enough to get up on my high horse to loudly and rudely note that nobody in the corrupt government (including the Federal Reserve) apparently needs any stinking permission from anybody to do anything anymore, including any number or frauds and corruptions, to keep the government wallowing in the oceans of cash it so desperately, desperately needs to keep, you know, wallowing.

Of course, my own Zero Hour is fast approaching, too, as the pitifully few dollars that I was able to extricate from my wife’s purse without her catching me are almost gone, which turned out to be too few to get me drunk enough to do any serious pontificating about the horrors of the Federal Reserve creating so much money, so that the government can spend so much money, that creates so much inflation in prices everywhere and so much corruption everywhere, too.

I have perhaps struck a chord in Peter Schiff of Euro Pacific Capital, who notes that “Very few people have either the time or patience to sift through the data released by the Treasury Department in the wake of its bond auctions. But the numbers do provide direct evidence of the country’s current financial condition that in many ways mirror a financial shell game that typifies our entire economy.”

And the reason is, I figure, because of the bloated, malignant nature of the economy itself, as Grandfather-Economic-Report.com notes, with ill-concealed horror, that “51% of the economy now depends on government spending,” while another chart, labeled, “Relative Share of Economy Prior to 1930,” shows the government’s share of the economy back then was only 12%. In 1947, a mere two years after the gigantic wartime command-economy of WWII, it was 22%.

Noticing that many of you are drifting off out of boredom, I decide to add a little drama to my presentation by using the eye-catching cinematic technique of dropping the pages of a calendar, one by one, letting them fall into a disgusting, dirty toilet, now stuffed to overflowing with old calendar pages, both as a way of indicating the passage of time and as a rude commentary on the stinking life that you have to lead, day after day, year after year, because you always need more and more money to always pay the higher and higher prices for the things you buy, thanks to the evil Federal Reserve creating so much money that price inflation is ever-present and ever-irksome, to say the least.

Fortunately, there is a point to this “falling of the calendar pages” thing other than, for some reason, a stinking, dirty toilet that is very childish of me. Then you realize that the last page of the calendar to fall was the page for yesterday, meaning that today is today, where the government’s share of the economy is a massive 51%!

And I don’t know if the Grandfather Report shows it somewhere on its massive site, but another Mogambo Economic Horror (MEH) is that 5 out of 10 – half! – of the employees in America work either for a local, state or federal government, or for the education system, or for a tax-supported private agency, or work for a non-profit organization. Half!

“So,” you may be asking yourself as I continually ask myself, “who in the hell is left to pay taxes to the government out of profits, when half of all employees in the Whole Freaking Country (WFC) make no profit at all, and who must get it from those who do earn a profit, and/or solicit charitable donations, which is, in essence, asking people to tax themselves?”

Unfortunately, I have no answer that does not involve screaming obscenities at the Federal Reserve and summarizing the horror as, “We’re Freaking Doomed (WFD)!”

Fortunately, there is an easy answer to the question, “What in the hell can we do to save our butts from the horrible inflation that is guaranteed by the massive over-creation of money by the evil Federal Reserve to feed a fat, bloated, corrupt Congress and their myriad social engineering programs that are half the economy?”

And the answer is, obviously, “Buy gold and silver under those circumstances,” as the entire history of mankind shows that they do Very, Very Well (VVW) when the morons in control of the government and/or the banks are creating excessive amounts of fiat money to attempt to bail themselves out of bankruptcy.

Since nothing can be easier than simply buying gold and silver when the money is being abused, perhaps that is why I say, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

Awaiting the “Zero Hour” of Available Credit originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

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The Long and Short of Spending More Than You Make

April 14, 2011 by goldguru · Leave a Comment

By The Mogambo Guru

Breakfast was a real drag, as the kids were whining more loudly than usual about money, and how they needed some money, and how they didn’t have any money, and how they were the only people they knew that were not dripping with cell phones and iPods and reader tablets and all that stuff, like this was supposed to make me rush out and buy them these things so that I don’t damage their fragile self-esteem and ability to make friends, so that they can call and text each other all day and night about how much they hate me, and hatch their little plans to put poison in my food or something; you never know with kids, you know what I mean?

Anyway, I said, my mouth full of fabulous fried eggs and crispy bacon (instead of the usual fruit and whole-grain cereals with no-fat milk crap I usually have to eat, because my wife was out of town), “You brats can have the biggest, baddest electronic gizmos made. You can have so many of the freaking things, in fact, that you will need a cart to carry them all around. Just get jobs and then use the money to buy them, like everybody else, ya little blood-sucking parasites!”

This is where my wife would usually intervene, chastising me for yelling at them and telling me to be quiet and consoling the kids. But (and this is the important point) she ain’t here now.

So, finally, I had the chance to, uninterruptedly, explain to what appear to be congenital idiots, for the thousandth time, how the horrible Federal Reserve creates excess money, see, which increases the money supply, which increases prices.

“This,” I explained, “is just the ‘prices side’ of the problem. Now let’s look at the ‘income side’ of the ledger. I don’t make any more money than I made three years ago. Something has got to give, and in this case, it is you. Simple as that!”

I naturally left out the ugly part about how I make the same money, and am lucky to get it, because I am lazy and incompetent, unless I want to pay attention to what I am doing, which I do in inverse relation to how well my golf game is going, like after that unexpected, beautiful, soaring 4-iron I hit last week!

Straight as an arrow flew the gleaming ball, shining in the sun, right at the flag, landing picturesquely perfectly on the green before rolling magnificently to 3 feet from the cup, which I then 3-putted for a bogie and happy to get it. But what a memory!

Back from my delightful reverie to the disagreeable pouting faces of the kids, they let me know that they still do not see the problem.

Suddenly, I hit upon the idea of explaining, “If I make $1,000 per day, but my expenses are $1,200 a day, and getting higher every day, where am I going to get money to buy you stuff?”

At this they started laughing at me, and mocking me, and saying, “You never made a thousand dollars a day in your life! And you never will, either, because you are stupid and mean and cheap and a terrible father who enjoys seeing his children suffer! Boo hoo hoo! Look at us suffer!”

The point was well taken, and I quickly rephrased that to “If I make $200 a day and my expenses are $220 a day, how long can I last?”

Again they started laughing in hooting derision, saying, “$200 a day? Don’t make us laugh, you liar!”

As a last resort, I resorted to the truth. I said, “Okay, if I make minimum wage of $7.25 an hour and I spend $8 an hour, how long can I continue before I am bankrupted and I have to send you kids to foster homes?” which thankfully diverted the conversation as to the pros and cons of that shocking happenstance, where I took the “pro” side.

I was happy not to have to explain it to them that I am using so much money to buy gold and silver as a desperate, frantic response to the price inflation that is guaranteed by the Federal Reserve creating such inflation in the money supply, especially by committing the Big Unholy Sin (BUS) of using freshly-created money to buy government debt.

Keeping from having to confront the kids about it is the hard part, because buying gold and silver is so easy that people say (fill in the blank).

If you answered, “Whee! This investing stuff is easy!” then congratulations! You are waaaAAAAaaaay ahead of the vast majority!

The Mogambo Guru
for The Daily Reckoning

The Long and Short of Spending More Than You Make originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

Filed under Gold Analyses · Tagged with

Living Well on Gold and Silver

April 13, 2011 by goldguru · Leave a Comment

By The Mogambo Guru

Naturally, I bristle at people ignoring me except to say hurtful things, like, “Eww! Gross! Eat with your mouth closed!” and who then turn right around and say, “Shut up about buying gold and silver!”

But how do I not eat and talk? Man, it has been said, cannot live on bread alone! Unless, of course, it is made into a nice, big sandwich with all the fixins, maybe with a tall, cool beverage and a fresh bag of potato chips, you’re bent over the plate like some kind of starving Neanderthal, noisily shoveling it in your mouth with both hands, perhaps while you are watching TV, necessitating changing channels by hitting the remote control with your elbow.

In polite deference to the easily offended, I swallow the last of a sandwich, whereupon I take up my one-sided conversation to say that buying gold and silver is the smartest thing you can do when the Federal Reserve is creating So Freaking Much Money (SFFM), as it creates horrific inflation in prices, with the historical evidence strongly indicating that the long-term percentage increase in prices matches the percentage increase in the money supply, which, if true, means that We’re Freaking Doomed (WFD)!

And since the Federal Reserve is creating more and more money with mindless abandon, you can see how the resultant inflation in prices rising with similar mindless abandon is enough to make one want to run, pell-mell, to one’s Mogambo Bunker Of Go Away (MBOGA) in a kind of nervous panic, seeking the security of locked doors, defense systems on “armed,” holding gold coins in one hand and the trigger of something large-caliber in the other.

I don’t personally know if Doug Noland, the author of the Credit Bubble Report at Prudent Bear.com, is in his bunker or not, or even has one or not, and if not, then I salute his courage, because he has the necessary facts to proclaim a Full-Alert Mogambo Response (FAMR) when reports that “Federal Reserve Credit jumped $13.9bn to a record $2.582 TN (19-wk gain of $301bn). Fed Credit was up $174bn y-t-d and $284bn from a year ago, or 12.4%”! Yikes! Big percentages!

And this Fed Credit is the “out of thin air” first step to making new money, and which is multiplied many, many times over by the fractional-reserve multiplier when this new Fed Credit hits the banks. Free money! Whee!

Of course, that “Whee!” at the end was intended as sarcasm, and I see that “Whee!” really “doesn’t work,” mostly because it is so far away from the origin of all the misery, which is the Federal Reserve in creating the new credit in the first place, and for whom I reserve a special, dark place in my heart where I put dreams of revenge.

And since “living well’ is, they say, the best revenge, I have now decided to live well! In this case, I will find out where a few of these Federal Reserve morons live, drive by their houses at 3:00 a.m., and honk my horn exactly 79 times to signify gold’s atomic number on the periodic table, so that they know it’s me – the guy who knows they are idiots for not insisting on a gold standard, which they would do if they were competent economists, instead of insisting on a fiat currency made of electronic digits, which is the Exact Wrong Thing To Do (EWTTD).

Then, after going out to a late dinner at a fabulous restaurant, I’ll have a wonderful time doing it again on the way home a few hours later! Hahaha!

“Ahh!” I sigh to myself as I think of it. “Sweet revenge!”

Before you get all agog that I remembered that the atomic number of gold is 79, I have to admit that a Google search took me to webelements.com to verify that the atomic number was, indeed, 79, as I had remembered, surprising nobody more than I, and which I hope to remember the next time anybody says, “Can’t you remember anything anymore, you worthless old fart?”

But I learned, as a result of the site, that the group of elements of the periodic table that contains silver and gold is named the “oinage metal” group and that the group also contains roentgenium, whatever in the hell that is.

But it sounds radioactive, and it is (in spades!), it doesn’t exist in nature, it has a half-life of around ten minutes, gives off no x-rays when it decays, and has the symbol Rg, which sounds like the sound you make (“Urgg!”) when you are so stinking drunk that you are puking up your guts in the restroom of some stupid bar where you suddenly realize that your boss already ate and left to go back to work, and you just want to die, die, die, but you don’t.

The point is that we know enough about roentgenium not to make coins of it, even though it is in the “coinage metal” group of elements. Oddly enough, there are not many people who know to buy gold and silver, which are also in the coinage metal group, when it seems obvious from the name “coinage group”!

I mean, how easy does this have to get before you say, “Whee! This investing stuff is easy!”?

The Mogambo Guru
for The Daily Reckoning

Living Well on Gold and Silver originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2