The recent decision by the US Federal Reserve to contaminate the financial body until it responds favorably was the last straw in my book.
Witness a declaration of permanent
QE and hyper monetary inflation of the most virulent strain, unsterilized. The
USFed is essentially admitting failure.
The signal serves as the loudest death knell for the USDollar among many in a sequence. On a similar parallel note, lighter and more humorous, one might be reminded of the pirate swash buckling style of yelling at the swabbies that the beatings will continue until morale improves. The QE bond monetization of USGovt debt has turned viral and entrenched. It is sold as stimulus, when in fact it acts like a giant wet blanket on the USEconomy. It is intended as stimulus to businesses, but the effect is felt on the financial speculation and on Asian direct business investment. In the past the emergency lever device had been successful only because it was used on a temporary basis. But now the USFed high priest assures it is a permanent fixture, a sign of their failure. The public is too ignorant to comprehend the ruin. They can only see the threat to their personal ruin.
The signal serves as the loudest death knell for the USDollar among many in a sequence. On a similar parallel note, lighter and more humorous, one might be reminded of the pirate swash buckling style of yelling at the swabbies that the beatings will continue until morale improves. The QE bond monetization of USGovt debt has turned viral and entrenched. It is sold as stimulus, when in fact it acts like a giant wet blanket on the USEconomy. It is intended as stimulus to businesses, but the effect is felt on the financial speculation and on Asian direct business investment. In the past the emergency lever device had been successful only because it was used on a temporary basis. But now the USFed high priest assures it is a permanent fixture, a sign of their failure. The public is too ignorant to comprehend the ruin. They can only see the threat to their personal ruin.
The bankers are
determined to ruin the entire system in order to retain power, all while
dispensing increasingly nonsensical dogma like from heretical high priests about
the effectiveness of their solutions. Theirs is heresy built upon alchemy laced
with arrogance, with no precedent of success in past history. A definition of
insanity comes to mind, offered by a psychologist who works in a clinical
practice. Let's stick with the layman translation. Insanity is defined as
repeating the same action but expecting a different result.
So the USFed conducted QE, then QE2, then Operation Twist (a deceptive QE), now is set for QE3. It expects a different result from the rising costs and debasement of the currencies. Somehow by enlisting the cooperation of the Euro Central Bank, the Bank of England, the Bank of Japan, and the Swiss National Bank, together they can pull off QE3 in a veritable ongoing QE to Infinity when all previous efforts have failed to produce a solution or economic recovery. The high priests from the central bank altars do admit that liquidity does not address the insolvency ills, yet they hit the monetary levers and accelerators more quickly. The central bankers are in a panic, and it is beginning to show clearly. Their solutions solve nothing. They will next attempt to rule more formally over the ruins.
So the USFed conducted QE, then QE2, then Operation Twist (a deceptive QE), now is set for QE3. It expects a different result from the rising costs and debasement of the currencies. Somehow by enlisting the cooperation of the Euro Central Bank, the Bank of England, the Bank of Japan, and the Swiss National Bank, together they can pull off QE3 in a veritable ongoing QE to Infinity when all previous efforts have failed to produce a solution or economic recovery. The high priests from the central bank altars do admit that liquidity does not address the insolvency ills, yet they hit the monetary levers and accelerators more quickly. The central bankers are in a panic, and it is beginning to show clearly. Their solutions solve nothing. They will next attempt to rule more formally over the ruins.
MONEY VELOCITY
Money velocity is going
down as quickly as money supply is going up. This report card is a grand
contradiction of the USFed actions for a generation. The American Weimar
experiment is turning into a tornado of financial ruin with inadequate
recognition. As industry was dispatched and forfeited to Asia, the USEconomy
lost its base for traction. New money has lost its effect in producing economic
activity following a series of asset bubble busts, a spinning of capitalist
gears, now stripped gears. New money is devoted to the financial sector in
perverse fashion, as a reward for the past destruction of capital itself.
The
central bankers cannot dictate the speed at which money moves. They can only
create it and drop it in the mix, speak their incantations, sprinkle pixie
dust, offer some loony fiat prayer to the duped public, and continue with the
next paper dump. The Untied States will gradually achieve systemic failure from
redoubled efforts, suffer debt default from inability to manage the debt
structure, and fall into the Third World. The nation will experience the
monsters of high prices and acute shortage without comprehension of its source.
It is toxic money.
The growth of the
monetary base has been staggering high since the financial crisis broke in
September 2008 with the collapse of Lehman Brothers. Since the end of August
2008, the monetary base has risen from $877 billion to $2,651 billion as of
September 2012. That is a giant 3-fold rise. Witness the American Weimar
era, its final chapter. The massive increase in new money has done nothing to
foster growth in the USEconomy. The main reason is that fiat paper money
destroys capital, a concept the hapless corrupted US economists cannot
comprehend, either from compromise to their masters or lack of intellect due to
years of exposure to the ass backwards preachings. The USEconomy is stuck in a
powerful recession based in grotesque insolvency and bond fraud.
As the USFed
is poised to kick in another round of QE bond monetization, the money supply
will ramp sharply up again. Do not expect much of any economic benefit,
since the cost structure will rise again, then shrink profit margins. This
capital destruction factor is a great blind spot to the hack economists who
operate more as marketing harlots for Wall Street and the USGovt than analysts
and advisors. The Ponzi Scheme theory dictates that an acceleration in new money
is required to keep a constant speed. Expect more wreckage from the stripped
gears of the USEconomic engine.
The money velocity
chart shows a deadly decline since 1980, and a powerful decline since the 2007
outbreak of the absolute bond crisis. The new money is going to the big banks in
bond redemption, derivative coverage, and Black Hole (Fannie Mae, AIG) fills
under the USGovt supervision.
The money is not finding its way into the
USEconomy for further circulation. The plague is insolvency, soaked by endless
applications of tainted money from central bank fire hoses.
The velocity of
money has been falling for years, in reflection of an economy that is not
turning over much at all. Think of a car missing its cylinders, spinning its
gears, burning itself out, going nowhere. The above chart serves as pictorial
evidence that the root cause of ruined money was the war. In the current decade,
the wars are endless. America chose war over industry. A fuller explanation is
offered in the September Hat Trick Letter.
Three eras are worth
identifying in my view. The Vietnam War era and its aftermath saw huge expansion
in money supply, huge nominal income growth, and huge increases in price
inflation. The USFed did not interrupt the expanded USGovt debt from reaching
Main Street, simply put. For consecutive years, the Consumer Price Index rose
over 10%, which led to big worker pay hikes.
The result was that US corporations
began to send industry overseas. It started with Intel going to the Pacific Rim.
The money velocity fell, as income fell on a real basis. The climax event was
China being given the Most Favored Nation status in 1999, which released the
gates for foreign direct investment. China made a deal with the Wall Street
devils that has yet to gain publicity.
The hidden motive was for Wall Street
firms to borrow the Chinese gold hoard from the Chairman Mao era, so as to
continue the great gold suppression game that has bankrupted the Untied States
and betrayed the nation. US and London bankers skimmed and stole the gold.
HOUSE OF SAUD STARTS
TO UNRAVEL
More loyal Jackass
wannabee followers will recall a story (repeated
often) that on the Easter Sunday weekend of April 2010, a secret gathering of
over 200 Arab billionaires convened in Abu Dhabi. They arrived in unmarked jets.
My source was one of only two or three white faces in the crowd, invited by his
clients. One result of the meeting was an accord struck between the Persian Gulf
oil producers, led by the Saudis, to work toward a pact with Russia and China as protector of the gulf in return for
financial cooperation, economic construction, and forward progress.
The implicit
message was that the Untied States would be phased out
in the protectorate. In the balance would lie the Petro-Dollar defacto standard as victim. Events continue to this day in
movement toward that end.
However, since the
Syrian uprising, a new lethal element has entered the mix. Account will be kept
brief, since so volatile and controversial. Just some bare notes. The Assad
family in Syria has suffered some assassinations. Apparently, the Saudis had a
hand in the killings.
HezBollah has vowed retaliation.
Their ties to Iran might be longstanding, but perhaps are exaggerated. My view
is their home is in Lebanon. In August, Prince Bandar was assassinated. He was
the Saudi head of security, and long-time ally to the USGovt. The Saudi regime is concealing his death, with
outdated photos and false statements.
They are working toward a transition. The
House of Saud has been unstable from threats to the south in Yemen. It is
unstable from internal threats tied to the fundamentalists. Although cooperation
and respect has been shown between Riyadh and Tehran, the Bandar hit has created
an entirely new environment. The Saudi regime with high likelihood is in its
final months.
More importantly,
the Petro-Dollar is losing its all important Saudi
leg.
Implications are vast. The
US public takes the USDollar for granted, with almost
no concept of FOREX exchange rates. If the House of Saud falls, when it falls,
the impact crater will include the entire waistline of the USEconomy and its financial dog tail that wags it.
The USGovt and its banker handlers have relied heavily upon the
Petro-Dollar in general, and on the Saudis in particular, ever since Henry
Kissinger signed an accord that governs over the grand surplus recycling back in
the 1973-1974 era. Watch the Saudis convert USTBonds
to Gold, then bug out of the desert to their new
mansions in Southern Spain.
CHINA AS
INTERMEDIARY AGAINST PETRO-DOLLAR
Reports swirl that
China is attempting to act as intermediary in global oil transactions, for Yuan
currency settlement. The rebellion globally is picking up momentum against the
USDollar. The Petro-Dollar defacto standard is slowly unraveling. The denizens
of the Untied States have no idea the ravaging impact of a lost global reserve
currency. It will unleash price inflation when the USFed central bank is letting
loose the monetary flood gates.
This declaration is an act of financial war
directed at the US by China. To fortify the rear flank, Russia has promised to meet all requests for crude oil made by
China, with settlement in Yuan and Ruble currencies. Take the pledge as a
protection from any sudden USGovt threat or retaliation. The Russia-China Axis is forming more clearly in opposition to the
USDollar, the Syndicate behind it, the many Embassies that offer sanctuary for
espionage, and the global rules that enforce its hegemony.
Crude oil payments are
the critical core of global trade. The rest of global trade will follow in
non-USDollar payments, all in time. Entire banking systems will gradually make a
transition away from the USTreasury Bond in its reserves managements. The
banking practices will follow the trade payment structures, as it should be.
The
profound effect on the USEconomy will be clear, as blame is shifted as usual to
external factors, even to extremists. In reality the US is up against vengeful
Cossacks and the angry Mongol Horde. The entire world is moving against the
USDollar, seen increasingly as a toxic agent within their internal domestic
systems. They see the lack of solutions, the spreading bank insolvency, the
accelerated debasement of currency, and the corrupted grants of multi-$trillion
banker grants. They are taking action in response. They are following the
Chinese lead with the Russians acting as a quasi-Rasputin.
Gerald Celente reported
in early September, "On September the 6th of 2012, China officially
announced that any country in the world that wishes to sell crude oil using its
currency the Renminbi instead of the USDollar can do so. The following day
September the 7th, Russia announced that the nation will sell China all the crude
oil they need, no limitations whatsoever.
They will not use the USDollar for
their trade." The claim by Celente is far reaching. The USDollar is
dying a slow death. Its antagonists do not wish to speed the death process too
rapidly, for fear of quickening the ravage to their own nations. They also do
not wish to invoke the wrath of the USGovt, which since 2003 has enforced the
USDollar as global reserve currency via its war machinery.
What China is
offering is an intermediary clearing house role to sidestep the Petro-Dollar,
where crude oil payments can be made in the Chinese Yuan
currency.
This offer is a
financial act of war against the Untied States currency, where China will
backstop all transactions. It is a violent offer to disrupt the USDollar. Look
to see if any Saudi oil sales are settled in Yuan currency as alternative, even
the Euro currency as expedient. The superpowers are openly attempting to isolate
the USDollar, the clear victim to be the USEconomy, the land of consumption
excess. The move is a tacit push of the US into an isolated place where it can
very easily slide into the Third World.
MEXICO CUTS A DEAL
WITH CHINA FOR OIL
Mexico is in the
process to make concrete a major deal to sell crude oil to China, but not in
USDollar terms. The Chinese declaration of financial
war against the Untied States has reached both the
northern border in Canada and the southern border in Mexico. To be sure, the
Canadian oil is not sold outside the USDollar. But
other factors are hard at work.
The bulk of Athabasca oil produced from the oil
sands in Western Canada (Alberta) output is directed to China, by way of the
Vancouver ports owned 100% by China. In fact, the Chinese influence is so strong
in the beautiful city on the Pacific coast that it has earned the nickname of
Hongkouver. Some shallow analysts attribute a wayward
motive to the decision by the USGovt to abandon the
Keystone Oil Pipeline several months ago. The more realistic hidden motive was
to assure the Western Canada oil output would be sent to China. The cutoff to
the pipeline came with spurious official accounts, all quite humorous to the
informed.
The pipeline was abandoned to accommodate China, owner of significant
USTBond holdings. They are the largest USGovt creditor. The tipping point was passed many years ago
when the majority of USGovt debt was held by foreign
creditors. Its consequence is vivid and unmistakable. The Untied States is converted into a colony, a killing field,
as pathways are fashioned for entry into the Third World.
China through closed
door negotiations is sealing deals to purchase Mexican crude oil without using
USDollars as its trading currency.
The Yuan is slowly moving toward global reserve
status, not by a summit meeting and signed accord, but rather by numerous
bilateral deals. Consider the bilateral swap accords signed by China with
partners in Brazil, Japan, and elsewhere. The list grows, and beyond oil trade.
As it does, the net is cast over the USDollar in
isolation. Officials claim meetings were held with the Mexican Govt and PEMEX, the state owned oil giant. They are in
progress with a brokered secret deal to purchase crude oil using currency means
other than the USDollar.
Expect a public announcement
soon by Chinese Govt and PEMEX firms. In the past
decade, China has planted seeds in trade while ignoring politics with numerous
major players in global trade. The USGovt prefers the
heavy handed financial banking games, backed by the heavy handed military
maneuvers, all part of the sickening Full Spectrum Dominance that has blossomed
in ruin. The Chinese have responded with an archipelago of trade pacts, best
viewed as a Full Spectrum Encirclement of the USDollar. It cannot be conquered. So their plan apparently
is to isolate it, to starve it, to let it suffer the Weimar consequences of its
own high pitched debasement, and to permit it to become a Third World currency
by default.
Over the past ten years
with new trade agreements China has invested $billions inside Mexico. China has
helped the Mexican Govt create jobs and has
financially supported investments in the privatization of ports and
infrastructure throughout Mexico. As the movement toward privatization of large
sectors of its economy continues, China is in line to benefit from additional
investments inside Mexico. Since the 2009 global economic crisis, Mexico's
central bank has been quietly purchasing large quantities of gold.
In fact,
some of the recent boost in May for Mexico Central Bank gold holdings was gold
purchased from Chinese sources. The gold sales belie a closer relationship
building with Mexico on the southern US border.
While the USGovt is occupied with the Mexican Govt on matters pertaining to gun running, to handling
illegal immigrants, and to shielding vast narcotics sales, the Chinese are
busily working on trade, with a gold foundation and crude oil blood system.
Those are the stuff of a stable currency. Perhaps Mexican leaders are preparing
for the imminent and unavoidable devaluation of the USDollar. In more practical terms, regard the movement as
the collapse of the USDollar in a vast sea of
liquidity, better identified as toxic fiat paper currency.
STRIKES HINDER GOLD
OUTPUT
Not in sufficient focus
is the radical impact on gold supply. The gold investment demand has been on a
tear in recent months. A sinister effect has been realized from the vast QE bond
monetization conducted by the USFed and its partners
at the Euro Central Bank and the Bank of Japan. The effect is of rising food and
energy costs. The impact is particularly hard felt in poorer areas of the world.
The great majority of major gold and silver mines are located in the poorer
nations.
The labor strikes at mining facilities are as much based upon unsafe
worker conditions as they are based upon a higher cost of living, centered on
food costs. The workers need more to survive at home, as they provide more
precious metal output that satisfies mining company production targets. The end
result is lower output in pockets of South America such as Bolivia, but more
importantly in South Africa. A whopping 39% of South African Gold production has
been taken offline. The impact on global output will be seen in the next few
quarters.
The fast rising investment Gold demand will be met by a significant
decline in Gold supply.
Price pressures will force a much higher Gold price.
But first comes the depletion of the COMEX, as its
paper contract merchants continue to ply their trade. Their new specialty is
stealing client accounts that stand ready for contract delivery. See MFGlobal and the JPMorgan thefts, all fully blessed by the
tainted US Court system.
THIRD WORLD
THREAT
The implications are
vast. A lost Petro-Dollar standard would mean a grand shift in payment for oil
transactions, the most important of all global trade. In the last 20 years, all
has been turned upside down. A global phenomenon of a powerful nature has been
at work since the Lehman Brother failure, the Fannie Mae adoption, and the AIG
redemption in 2008. The entire world is losing trust in the USGovt and its financial institutions.
Personal email
exchanges cite a regular occurrence of US corporations not receiving return
phone calls, and of open disrespect in Europe for American businesses. The debt
rating agencies do their part in upholding the paper fortress walls, but they
must over time deliver the downgrades. An important catalyst took place when the
USGovt imposed trade sanctions against Iran. The
result was angering US trade partners more than anything else, well, except for
causing severe price inflation on the Iranian Economy.
The movement in reaction
has been swift by global trade partners, in establishing bypass routes for
payment systems between nations. The workarounds against the SWIFT bank payment
system have been remarkable. The climax will be the non-US$ payment system to
emerge, with no centralization, complete independence, relying upon non-bank
devices like mobile communications.
Another bypass event
just hit the news wires.
The Swiss-based Vitol is the latest oil firm
bypassing the USGovt sanctions against Iran.
They
exploit a legal loophole in Swiss law, since the nation did not abide by the
US-led sanctions, a notable resistance. Vitol boasts being the largest oil
trader in the world. It buys and sells Iranian fuel oil, undermining Western
efforts to choke the flow of flow of money to Tehran. In August alone, Vitol
purchased two million barrels of fuel oil, used for power generation, from Iran
and offered it to Chinese traders. The Vitol firm is not obliged to comply with
a ban imposed in July by the European Union on trading oil.
The tale of the
cargo for Iranian fuel oil involves tanker tracking systems being switched off,
frequent ship-to-ship transfers, and the blending of the oil with fuel from
another source to alter the physical specification of the cargo.
How
crafty.
Global finical markets
are acutely aware that oil trade outside the USDollar
will rapidly destabilize the USDollar even further.
With Russia and China having entered into an agreement to trade
crude oil using their own currencies, the Mexican news of a Chinese oil deal has
potentially devastating consequences. The eventual effect is that the USDollar will lose its prestigious reserve currency status.
In the process, it will lose value gradually.
My view is that the defense of
the USDollar will lead to all major fiat paper
currencies to implode, step by step, taking down the banking systems and
economies of major nations.
The prevailing currency will be what is used in
global trade. All signposts point to Gold. A new global trade system is ready to
be installed, based upon gold in special notes. The transition awaits further
collapse of the current currency regimes, the further collapse of the sovereign
bonds, and the further collapse of the banking systems, which all assures the
collapse of the global economy.
The QE fallout by the
desperate central bankers has been seen in fast rising demand for gold bars and
gold coins. The phenomenon is primarily in the Eastern world but also in Europe.
The American crowds remain transfixed on their dwindling paper assets locked in
stock accounts, many not easily altered due to tax rules. They remain transfixed
on home equity losses, in a mindnumbing effect that
the Jackass described in years 2005 and 2006 and 2007.
The American Home was not
a hard asset at all. Since its value was largely determined by the mortgage
loans and mortgage bonds, together with the vast network of devices like MERS
among bankers and the hidden caches with slush funds at Fannie Mae. The entire
criminal history of Fannie Mae has been safely buried under the USGovt roof. Ten years ago, people would laugh at comments
that the largest and most powerful criminal syndicate was operating under the
USGovt label. They do not laugh anymore, including my
own family. They protect themselves with the real deal currency for storing life
savings, GOLD. They will soon enjoy the benefits, safety, and efficiency of
trade systems based upon GOLD also.
GOLD PRICE READY TO
EXPLODE UPWARD
Gold market instability
could be a tremor before a burst upward. The same appears true for the silver
market. On a single day last week, JPMorgan dumped two years
worth of US silver mine output in the form of paper silver supply on the
COMEX market. The corruption went largely unnoticed. They defend the important
$36 level. Volatility has returned to the Gold price.
The current pause could be
interrupted very quickly with a strong upward leg in both precious metals. The
announced QE3 bond monetization program cannot be sterilized any longer. A
powerful USDollar decline is imminent. As the USDollar reserve status is threatened, the gold price will
zoom upward. Notice the occasional propaganda and basic lies regarding
sterilization of new bond purchases. The USFed is fast
running out of short-term USTBills to fund long-term
USTBonds in the Quantitative Easing shell game that is
more reminiscent of the Weimar Republic.
Fortunately for the
USFed paper mache artisans,
the American public is a lousy student of history and especially the concept of
money, even the nature of economics and capitalism. The dumbing down of the
public has reached a critical mass, but hope lies in the Gold sanctuary if
people have any savings left after the busted bubbles and the parade of banners
to join. They joined asset bubble parades instead of lines to enter factories.
Across the world, an army of Gold soldiers is awakening after a 16-month
slumber. They react to the stark awareness that QE not only ruins money, but its
purpose is to redeem the toxic bonds owned by banks.
The QE programs are not
intended to bolster, stimulate, or fortify the economy. In fact, they render
the USEconomy incredibly deep harm by raising the cost
structure, reducing profit margins, wrecking business segments, and killing
jobs. But the hard sell sure is fun to watch, as the central bankers squirm. The
Jackson Hole conference was a gathering of buffoons without the clown suits. The
public must seek refuge in Gold & Silver or face personal
ruin.
The USFed mandate on inflation moves next to an absurd mandate
on jobs. They will fail on both. Inflation will be permitted by the USFed central bank in order to produce jobs, in the most
heretic and misguided folly ever seen in modern times. The 0% rate will
stick until economic growth arrives, but it will never arrive, due to the
damaging effect from the 0% rate itself.
The dog's tail is eating the entire dog
in a perverse reverse effect of modern alchemy. The USFed ignores all Weimar chapters, after having rewritten
the Great Depression chapter. The nation emerged from the
depression only due to the Gold Standard and ample industry. The nation has
neither today, and will therefore plunge into a systemic failure. The Third
World awaits. Watch for the pressure points of tens of
thousands of gasoline stations and food supermarkets, certain to erupt as the
frustration and disorder spread.
The response in the
Gold price has smelled a QE3 in bond monetization since the summer months.
The difference is that this time, unlike the deceptive Operation Twist, the
bond purchases will be unsterilized with new money injected into the system.
That is a Golden supercharge to recognizable inflation. A major intermediate
reversal is underway, with a 1570 base, a 1780 top, which indicates a 1990 Gold
price target. The kicker in the market is the broad mining industry strike,
which extends from South Africa to South America. Gold supply will be inhibited.
Expect some regrouping with a pause at the 1720-1770 area, as a critical
consolidation takes place before a breakout that captures the world's attention.
The right side handle is being formed, carved out. During this time, the
doubters are tossed off the train.
The new believers join. A recycle process is
underway, as the monetary dumb are unloaded and new intelligent soldiers join
the ranks. The renewal will permit a run over $2000. Once over 1800 price level,
the 1900 resistance will be overrun like a paper fortress by angry mobs bearing
torches and sticks. But in the meantime, a big battle is being waged at the
right side handle, a consolidation before breakout.
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