Epic Money Battle Between U.S. Dollar and Gold
Currencies / Fiat Currency Apr 26, 2012 - 02:15 AM GMTBy: Jim_Willie_CB
The so-called Global Financial Crisis is a term so widely used that it has earned its own acronym of GFC. When first seen, it seemed like girl friend club or some such, since many friends use GF loosely to refer to sweethearts. The GFC is falsely named, since it is more accurately described as a global monetary war with the USGovt vigorously defending its franchise in the USDollar for crude oil and trade settlement, and for bank reserves management. Take either away, and the other departs quickly, leaving the United States vulnerable to a quick ticket to the Third World marred by price inflation and supply shortage, even isolation in ring fences. On its own devices, the US is in as bad shape as the worst of the PIGS nations. The USGovt debt is above 100% of GDP finally. The annual deficit of $1.5 trillion could not be financed in normal methods. So the USFed is the adopted buyer of last resort, purchasing over 80% of new and recycled US debt issuance. The Interest Rate Swap tool acts like a hydraulic howitzer, in pushing down the long-term interest rates by creating false artificial demand. Without the IRSwap contract, a Morgan Stanley specialty, the US interest rates would be 6% to 7% just like Spain and Italy. The USTreasury Bond is not a safe haven, but rather a place where Weimar printing press operations persist, where decisions like SWIFT code rules are enforced like a illicit weapon, where billboards are painted to attract embattled investors of impaired toxic sovereign bonds from Southern Europe to retreat to the supposed safe haven of USTBonds.
WEAPON FOR INFLICTION
The USDollar has become the Weapon of Mass Self-Destruction. Three years ago, the Jackass made a statement frequently, that the first nations to depart from usage of the USDollar for exclusive trade and reserve bank operations will be the leaders in the next chapter. That list of insurgent nations is being defined right here and now. Those who remain committed to the US$ in trade and banking will put themselves at risk of systemic collapse and on a direct path on a slippery slope to the Third World. As the pace of capital destruction continues from the US$ conduit, lifting the cost structure as the debt monetization continues, the global economy will continue to falter. In the West witness the economic recession. As the USGovt raises the pressure on rebels on the world stage that refuse to comply with the USDollar Club, supported by the USMilitary that seems never to question the wisdom of directives from on high, the stress level to the entire global financial and monetary system is shaken severely. In the East witness the stall from the Western drag. The biggest blind spot among economists, whom the Jackass has unabashed bold disdain toward, has been that the ultra-low near 0% official rate has been the steady persistent cause of capital destruction and a guarantee for recession.
How tragic that economists cannot comprehend either capital formation or capital destruction under their arrogant noses! They talk of tax tweaks, of currency manipulation charges, of stimulus packages that lack effective elements, of focus on the wrong sides like consumption and retail spending. They focus on soft fluff such as inflation expectations, when the Treasury Investment Protection Securities are actually monetized by fresh money output in QE sidebar programs. No protection there! They focus on a CPI distorted to the extreme, as though it contained a shred or legitimacy. The frequent calls for more USFed bond purchases is heard, as if it is the core cure for financial market stupor. The QE bond purchases are the cancer in the body financial. The US economists are a lost bunch. The USEconomy is not the site of capitalism and economic development. It is the site of the Fascist Business Model put to practice, where preservation of large corrupted insolvent banks is given a national priority, where liquidation of insolvent broken systems such as certain financial markets and big banks is avoided at all costs. The US is the site of chronic asset collateralization and credit extension in order to support consumption to the point of systemic breakdown. Home equity raids were followed by home foreclosures, a shock to the clueless economist crew. Economists have litlte comprehension of economics, as seen by the clown hack Paul Krugman receiving a Nobel Prize. He is the absurd foppish captain of a doomed ship, elevated before its sinking. The USGovt debt, like most US State debt, like most big US bank balance sheets, like Fannie Mae debt, like AIG debt, is unsustainable, broken, in a process of collapse, all supported by the constant and high volume output of the monetary press managed by the US Federal Reserve.
Gold is becoming the Device of Financial Self-Determination, since it is free from debt and counter-party risk. The value and role of Gold has become well recognized in the last few years, especially since the financial crisis broke wide open in the summer 2007. It seems strangely obvious that Gold is money and the USDollar is not. As money flees for safety in Europe, England, and the United States, the story not told is that the monetary system is crumbling. The process has been underway since Greece broke down in December 2009, following the Dubai World debt bust. For two years, the Hat Trick Letter has been warning that Greece was simply the much smaller opening act. The real climax events in Europe would be Italy and Spain, whose government bonds are also captive wards of the Euro Central Bank state. The EuroCB acts more and more like an elite independent state, even with occasional defiance to the Germans and their Bundesbank stellar central bank, chock full of integrity, expertise, and tradition. Unfortunately, the Bundesbank signed on with the European Monetary Union as the Clydesdale horse without a side horse partner of equal strength and durability to pull the Euro stagecoach. Therefore, the ill-designed team in front steered left into the ravine. Next comes the abyss without the horse of Teutonic breed at all.
WORLDWIDE OBJECTION
The major players of the world have three major complaints on USDollar management:
- unilateral decisions to conduct debt monetization by the USFed (debased)
- bond fraud centered on mortgage securities, exported globally (cancer)
- endless war with ulterior motives too numerous to specify (aggression).
The USFed never consults with victims of its monetary policy. They are scolded by them instead, after reading of the next Quantitative Easing initiative. In the real world, QE never ended. It became Global QE, appeared as Operation Twist deviously, and lately in my opinion is basically QE to Infinity. When the Dollar Swap Facility unleashed $3 trillion in loans to rescue the many broken big European banks, the impact on Chinese reserves or Brazilian reserves or Russian reserves or Korean reserves seemed very secondary and unimportant in the large scheme to preserve the USDollar Franchise system. It is breaking apart. The USFed unleashed another $2.5 trillion onto the domestic banking system, mostly to Wall Street. The debasement effect has been staggering and deeply damaging.
When obvious bond fraud in the multiple $trillions occurred, some expected justice. Not the Jackass, who noted that all prosecutions were outside Manhattan, and that within Wall Street only patsies were selected for prosecution to make an example and to establish a facade for taking firm action. The credibility of legal remedy is absent. The greater hope has centered upon the many investor lawsuits against the Wall Street banks. They will continue forever. No justice will come to the US bankers for their unprecedented white collar crime that has contributed to the systemic failure of the nation. Only with tribunals after the default.
The war front is hardly defensive in nature. It is more offensive with hidden motives. This is a delicate topic. All too often a motive has to do with preserving the USDollar usage or to obtain gold in large volume. The Libyan liberation seemed to put Qaddafi away, but the national treasury in 144 tons of gold bullion still resides in London. The conditions for its return to Libya in my view will never be met. Call my cynical, when my preference is pragmatic realist. The Iran sanctions and saber rattling are 95% about protecting the USDollar, and 5% about their nuclear refinement development. A much bigger risk was the missing former Soviet warheads, but the USGovt made no rumblings about it on the global stage 10 to 15 years ago.
GRAND BACKFIRE
The Global QE (aka QE to Infinity) put into first gear the backfire against the US. Nations around the world resented higher food, commodity, and industry input costs. On June 28th, the SWIFT bank code law goes into force to obstruct transactions. The abuse of SWIFT codes against enemies and allies alike has taken the backfire into second gear. Big strategic mistakes are being made. The G20 nations have a brain trust in the BRICS core, which has decided to pursue an alternative method of trade settlement. They describe a method to satisfy trade obligations and payments. They describe a departure from exclusive US$ settlement. They actually are working on a rival SWIFT code system from Asia, without the name. It will soon match the Western SWIFT system stride for stride in rivalry. Bigger bank centers in Asia will arise, including perhaps maritime insurance, as crippled Lloyds pulls out. Soon expect to see an Eastern SWIFT system, that China hints might be gold-backed. The main body of trade to test the new system will be on crude oil sales. The entire trade settlement system on bank payments is on the verge of a major schism, a split away from the US-dominated methods.
The several bilateral Iranian oil deals pushed the movement toward a more organization system in a backfire against the United States. The USGovt has effectively accelerated the global response to replace the USDollar in trade settlement. The misguided SWIFT weapon usage encouraged several US allies to entertain the new Eastern alternative, so that at a later date it will be embraced and used more widely. The poor chess move by the USGovt on the table sacrifices the queen. It is unclear what the next move will be to put the USDollar in checkmate. It could be a Saudi announcement to accept non-US$ for oil payments, but alongside the continued US$ usage. After all, the sand empire sitting on crude oil has new protectors in China & Russia, rendering the US a marginalized bully. The end of the Petro-Dollar will be the coup de grace for the USDollar exclusivity. The writing is more clearly written on the container vessel walls crossing the oceans than ever in the last four decades.
SHOCK & AWE INSIDE CENTRAL EUROPE
HAT TRICK LETTER NEWS FLASH: a German banker contact informs that as a result of a high level meeting in Germany (not in the news), a decision has been made for France to exit the Euro currency first. They are ordered out. Regardless of whether Hollande displaces Sarkozy for the president post, the French have been instructed as to how business will be conducted. No other information, like whether France will revert to the Franc currency and not risk a severe Latin Euro devaluation after Germany and Netherlands depart. My impression is that Germany will launch a new currency very soon. Perhaps they wished for France to take some of the attention and to begin the chaotic process. The contact has consistently stated that France would not be included from the new Nordic Euro, an exlusive core group of Central European nations that qualify by having a current account surplus. French debt is too great, and likely to soon expand much worse. He said France would become a ward of the German state, with dictated policy and direction. Bear in mind that Germany owns of 90% of the French Govt debt. It remains to be seen whether France will assume the lead position among the PIGS, whose nations will all go adrift. Rumors of a Latin Euro Central Bank located in Marseilles were once spun.
Sorry, Bob Chapman. This is not simply from one of your subscribers. The subscriber took it from an unique sole news flash in the April Hat Trick Letter, taken and reported without attribution. It seems to be a common research and editor tool for the International Forecaster, and the main reason why we do not share newsletters anymore. This example is not the first, not the second, not the third, not the fourth, not the fifth time of occurrence. We analysts in the gold camp share, stick together, and form a team. Some are not team members when they consistently engage in the sleazy practice of intentionally avoiding attribution where due. The Jackass has been guilty of minor infractions like snagging a great graph and writing over a copyright or website URL address. But the Prudent Squirrel and others forgive me. When it comes to an analytic point of importance, never does the Jackass take it, claim it, or avoid attribution. Citations abound in my reports. Oftentimes, analytic points are shared as they come to the surface, and attribution is not required. It is a difficult task, a frequent challenge for the Jackass as editor, to give attribution and credit where due.
A major reliable long-standing source of information on Central Europe and gold trades has provided me with information on France. One is left with conjecture, speculative analysis, and deep challenge. My belief is that France has been offered something important, like financial support in return for leading the broken chaotic Southern European nations. France might start a Latin Euro Central Bank soon with some measure of German support. Ambrose Evans-Pritchard mentioned this concept a year ago. Its credible merit will be revealed soon. France resembles the nations of Italy and Spain far more than Germany. With the socialist Hollande taking over the reins of power, expect much larger deficit spending, higher bond yields, more strains on their economy, even the flight of capital, possibly bank runs. Then it will be obvious that France is the King of the PIGS. Germany might also have wanted to put France in the spotlight, while the German industrial leaders and bank leaders forge their next big accord and create an alliance more formally with Russia and China. An eastern-based barter system is in the works. The G20 non-US$ payment system will establish much of its manifested workings, with wiring and linkage to be made known as the months pass.
SHOCK WAVES IN FOREX
Enormous shock waves are coming to the Euro. More questions are raised than answers, many dealt with in the Hat Trick Letter. Will Spain and Italy revert to the Peseta and Lira former currencies, or stick together during assaults? Will Greece revert to the Drachma and defy the bankers who woud lose bigtime? Will the Germans unleash their bank bailout and invite the separation from the South, sure to topple numerous big European banks? What timing will come for the new Euro Mark currency to be launched by Germany? Will the new Euro Mark (or Nordic Euro) currency be a primary vehicle to settle trade with Russia? Will the Euro Mark have a gold component? How long before the Chinese Yuan is made fully convertible? Will the convertible Yuan be an advertised precursor for a gold-backed Yuan, used in G20 trade settlement? Will it be the basis of the new Eastern SWIFT bank system? Will the Yuan be the new basis for Eastern trade settlement? Will the Russians take advantage of the controlled storm surge and announce their own backed Ruble currency, perhaps backed by gold, silver, oil, and natural gas? Will the Arabs exploit the timing and announce their long desired Gold Dinar?
To be sure, a group of simultaneous new strong currency alternatives for trade settlement will ensure their survival and successful launch. They would benefit from critical mass and absent isolation. They do not wish to become victims of their own success, with rising exchange rates and consequent damage to export trade. The US relies upon renegade nations not going it alone, suffering the harmful effect of a better currency. If done together, the new launches would act like a strong broad well fortified craft and not a floating raft. The outsiders looking in will be the United States and England. Expect Australia to sign on with China, a major trade partner and owner of port infrastructure Down Under. Since heavy importers and exporters of toxic bonds, the US & UK will struggle to bid up the new Euro Mark, the new Chinese Yuan, and possibly the new Russian Ruble and new Gold Dinar. The certain death knell for the USDollar will be the acceptance on non-US$ payment for Saudi crude oil.
REBIRTH OF EURASIA
Germany has decided to look Eastward, and to cut some ties with the US & Anglo platforms that are unmistakenly breaking down. The Eastern Alliance has been cited in the Hat Trick Letter scribbles several times. The German engineering expertise, financial acumen, and organization skills have been put to work behind the curtains, free from US/British sabotage. They are working to create an alliance that brings to bear the profound Russian commodity, mineral, and energy resource wealth together with the vast Chinese wealth and factory persence. Many projects are in the works, but train lines from Russia to Germany. The oil pipelines are nearing completion, for energy delivery to Central Europe. The three nations will serve as the core to the alliance, which has been given assurance by the Persian Gulf nations to hitch their wagon at the appropriate moment. Recall the April 2000 conference where the Arab billionaires signed on to have Russia & China their regional protectors. It is all coming together. The USGovt sanctions against Iran have pushed the pace of the process. With the Eastern SWIFT payment system among banks, the foundation has become more concrete suddenly. As it slams into place on the global financial landscape, the shock waves should deliver tremor episodes to the USDollar and its corrupted custodians. Witness the early birth pangs of Eurasia, which has not been a cohesive force since the Ottoman Empire. History is coming full circle.
GOLD CONSOLIDATION ENDING AGAIN
Like a tired saw, the gold price is consolidating after several weeks of price firming, having adjusted to yet more shocks of naked short ambushes. The after effects of MFGlobal linger, rendering great harm to the integrity and function of the COMEX. Many firms are legally prohibited from participating in risk hedge management at the COMEX, since accounts were stolen by JPMorgan and no hint of either prosecution or remedy is apparent or likely. The after effects of the huge February 29th naked short ambush also linger. Over 630 million ounces of paper silver were dumped on the COMEX in a single hour on that day, which will go down in history, under COMEX corruption as a chapter. The volume of silver exceeds global mine output in a full year. So a message to those hare brained analysts who claim (earth to Bob Moriarty at 321GOLD) that the precious metals market can never be corrupted or manipulated or intervened to the point of chronic distortion, the message is to wake the hell up.
The new paradigm shift is very much at work in the gold market, silver too. The gold cartel pushes down the PM prices with naked short ambushes, no collateral posted, grossly out of proportion with economic need or mining firm hedge practices, enough to engineer a 8% to 12% price decline. Limits are enforced of 1% gains but 10% swoons. But the Eastern Coalition, not to be confused with the Eastern Alliance, continues to push down the gold price in order to execute some important very high volume purchases. The coalition is comprised of a handful of extraordinarily wealthy Eastern families with heavy motive to disrupt the balance of banking power dominated by the New York and London crowd to the point of chronic hegemony and abuse. They had a $50 billion infusion last November to move the bullion metal out of cartel banks methodically. The coalition pushes down the gold price in order to conduct raids on the gold cartel member banks, exploiting their vulnerability with respect to margin calls on sovereign bond positions and currency positions. The UBS example several months ago was a textbook raid that has been repeated. My open guess is that the next victims are Royal Bank of Scotland, Barclays, JPMorgan Chase, Bank of America, and Citigroup. Keep in mind that UBS is not a minor player, but one of the two giant Swiss banks which sold out to the Wall Street and London banksters long ago. The Swiss banking system is far weaker than is widely known, the object of major lawsuits.
Unique retaliatory treatment is reserved for Citigroup, as a result of special thefts committed against a certain family behind the coalition. This story will develop over time. Information sources are less generous on details, an indication of the gravity of the situation and imminent important events to come. The gold wars are central to the global financial war in progress, with a great many sides and numerous arenas. Stratajema, you can crawl back into your hole, or else share your rich sources.
Gold & Silver are each in a long-term consolidation. The gold pennant pattern is more intermediate. The silver pennant pattern is more long-term. Great metal shortage, huge investment demand, and pursuit of safe haven will drive prices much higher. The epic battle between paper gold and physical gold never results in paper victory in the final battles. This chapter of history will be no exception. Resolution will be an upward move in price. Remember the primary engine for the Gold Bull market is the negative real interest rates. The true inflation adjusted rate of interest (whether FedFunds or USTB 10-year yield) are running in the minus 8% to minus 11% range, since price inflation is in the 9% to 11% range and the USEconomy is stuck in a recession of minus 2% to minus 4% steadily, like in quicksand. It foretells of tremendous price gains for gold. The mainstream financial press is desperate to sell a wrong-footed story, for the sixth year in a row.
The USDollar appears to be topped out. As it falls, the global cost structure will be lifted again. Most commodities are priced on a US$ basis. Big challenges are in force against the global reserve currency. Aggravating the effect is the chronic high oil price. The Iran effect is felt, not going away, only to grow worse as the backfire backlash develops into new platform systems. See the Hat Trick Letter in the April edition for much greater details on all these critical matters as history is being made. Sadly, the history is the final chapter of the USDollar and its written epitaph. Americans appear to be the least informed on current events and risk levels. Many will see their life savings, their pension plans, and other valued assets suffer great loss since they have not put in place protection from the imploding beleaguered USDollar. The lost value of their homes is but the beginning of their great loss. That warning has not been heeded effectively by the majority of the masses, who qualify as sheep. Steps are difficult to make, but they must be made. Gold & Silver offer the best such protection in the form of bars and coins, kept outside the US and UK, the axis of fascism.
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by Jim Willie CB
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