Raging Gold Bull & Disputed Propaganda

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Jim Willie CB is the editor of the "HAT TRICK LETTER"

Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

The propaganda has turned openly laughable. On the popular major financial news networks, the recent decline in the so-called Gold price has prompted quite the parade of clowns on the ship of fools to trumpet nonsense. The widely published and posted Gold price is dominated by futures contracts, which means it is as corrupted as meaningless. The entire global financial structure is crumbling before our eyes. The gang of central bankers has applied their monetary policy for four and a half years since the implosion of Lehman, Fannie Mae, and AIG. The first is dead, while the second has transformed into a sanctioned subprime lender again, and the latter is a sinkhole. The deceptive messages are shrill, acute, and motivated from desperation. The West cannot solve its problems, hardly properly described as a financial crisis anymore, under the current framework bound to the fiat paper currencies. The global monetary war is heating up notably. The heavy liquidity has caused unfixable distortions in every conceivable bond market niche. The new and better debt devices have been exposed for their shams. The leading central bankers lost their credibility long ago. The reliance upon paper wealth and paper structures and paper contracts is enormous, during a time of zero bound interest rates and unfettered hyper monetary inflation to cover the debts. Almost no foreign USTreasury Bond buyers exist anymore. The US has become Weimar Amerika, a fascist enclave.

More than a crisis, it is more accurately described as a collapse of a corrupt inequitable monetary system, and a desperate defense by the major Western bankers to preserve their power over nations and their governments, alongside a vile vicious violent attempt by the United States to maintain its privilege as owner of the vast USDollar counterfeit machinery, as controller of vast banking pillars of paper columns, and as commander of a vast military. Leave as a footnote the massive blossom of financial crime, well known to students of fascist business models, but not to the financial reporting staffs. The list of US leaders with Vatican slush fund bank accounts is long. The list of big US banks under lawsuit or investigation is long. The prosecution cases against big US banks tossed under the rug for past multi-$billion frauds is long. The list of big US banks caught in narcotics money laundering is long, each having settled for fractions of a penny per dollar processed. The list of regulator cases that run interminably against big US banks without any action for chronic commodity violations is long. The list of defense contractor fraud and appropriation violations is long, none even prosecuted. The United States has earned a reputation as a lawless land in the eyes of a great many nations and corporations with multi-national reach.

The global shun has begun, with certain identifiable checkpoints. Case in point. In Tokyo, Ireland, and Toronto, the US$100 bill is routinely rejected by banks for deposits under the pretext of broad counterfeit. The USGovt intelligence agency stole plates from the USDept Treasury back in 2007. Also, Amazon checks are rejected in Italy and Germany for deposits. The irony is thick, since the vast endless Quantitative Easing programs to monetize US bonds is counterfeit by any other name. The foreign banks might use the counterfeit pretext in a widening wall to block the USDollar in bank conversions, when they actually object fiercely to the USFed activity. The hyper monetary inflation by the Weimar Fed is the cancer source.

TWIN TOWERS BUILT OF BUBBLES

The asset bubbles that require better focus are the US stock market and the USTreasury Bond market. Each has run close to its limit on bubble power, no longer operating as buoyant or of reliable viscosity. The stock and bond markets suffer from a Weimar dependence, as Reich Finance has quietly woven into the entire US bond and monetary fabric. In numerous previous articles bearing the Hat Trick Letter brand, discussions and evidence have been produced that demonstrate a heavy dependence upon the Interest Rate Swap derivative contract for keeping the long-term USTBond yields low. There is no conceivable flight to safety, a fascist battle cry ripe with propaganda and disinformation, intended to support the US$-based financial structures. With new supply from USGovt debt pouring onto the table, with rollover of matured USGovt debt pouring on the table, with absent foreign buyers of USTBonds exiting the same table, with unresolved $1 trillion debt festering without political solution sitting on the table, the long-term USTBond yields should be over 7% and truly near 10%, since the United States is Greece times one hundred. So naturally the Interest Rate Swap derivative must be relied upon to keep US interest rates low. The USTBond asset bubble is the final bubble before the USGovt debt default and the global rejection of the USDollar itself. Gold serves as a strong viable reliable protection against the USTBond asset bubble. Hence the propaganda directed against Gold by the official media. The powers that be are scared, since the system is collapsing beneath their feet. Or as my great gold trader source likes to say, they are shoveling feces from under their feet.

The US stock market is more an open sore with pus, since the USEconomy is plagued by a powerful recession better described as a deepening depression in its middle stages. The Dow and S&P500 stock indexes are pushing record highs at a time when the many sectors of the USEconomy all uniformly in reverse, all suffering, all cutting jobs, all experiencing distress to profit margins. No better evidence exists of Weimar dependence than an economy in depression while major stock indexes register record highs. Roll out the electronic wheel barrows. The dissonance is loud and clear. Even the public is displaying signs of cognitive dissonance, a remarkable and new phenomenon. They smell a rotten market held up by false pillars. The Working Group for Financial Markets operates under the cover of the Exchange Stabilization Fund, run by the vast expanse of the USDept Treasury. The primary activities of a department named with treasury in the title are to manage multi-$trillion debt and to rig the financial markets. Witness Reich Finance. In 2010 and 2011, the big factor exposed was flash trading, the hyper-active algorithms that comprised over 80% of NYSE stock volume in trades. The private retail investor has largely vanished. In 2012 and 2013, the big factor to be exposed has been USGovt secretive support for stocks, with direct lines from the US Federal Reserve. If and when, unless and until the US stock market falters badly, the US population will be stirred and motivated for action, as the people object to lost wealth, phony wealth, and newfound poverty. They will pursue Gold & Silver in new regiments and armies.

REICH CLAIM OF GOLD BULL MARKET END

A few years ago, the personal response was often anger at deceptive stories promulgated on the mainstream financial news networks. They are less news nowadays, more Wall Street and USGovt promotional platforms with a public address speaker system. No longer is the reaction laced with anger and outbursts at the television set. Instead, the personal response has turned into laughter and amusement. This week, after profound declines in the corrupted paper Gold & Silver prices, the Bloomberg and CNBC paid shills have actually stated that the gold market has suffered a tarnish, that the gold bull is likely dead. They state their three well researched reasons, which deepened the laughter and heightened the amusement. They repeated their segments with shill message. Their harlots spoke without breaking a smile or revealing their obvious compromise in integrity. At least the morons on the public address systems known as the US financial press do not call Gold an asset bubble. Money is never a bubble. The widely accepted forms of money are the bubble, since they qualify as printed and produced without work, research, investment, toil, and sweat. The same can be argued for stocks and bonds, the object of dilution and props.

The Reich Finance motivated media maven talking heads stated that 1) other asset classes are better performing than Gold. What plain rubbish! This might be true for COMEX gold and for mining stocks. Obviously, if the USDept Treasury with the ESFund and the USFed with its channels through JPMorgan offices support the stocks and bonds, then all other asset classes not Reich sanctioned will appear to be worth less. However, the truly worthless assets are those stocks and bonds supported by the printing press with Weimar nameplate. Remove the props for stocks and bonds, and remove the suppression for Gold & Silver, and the major stocks would drop 30% in 30 days, and major bond yields would rise to 5% in 30 days, and the Gold price would rise 30% in 30 days, and the Silver price would rise 50% in 30 days. Reich Finance sponsors major Dow stocks and USTreasury Bonds with corrupted money and unending propaganda messages. Both are at nosebleed levels, far in excess of true value.

The Reich Finance motivated media maven talking heads stated that 2) improved economic data divert investments away from Gold. What plain rubbish! The national Gross Domestic Product flirted with 0% in Q4, even after lifted by the typical routine 5% to 6% adjustment lie. The USEconomy has been stuck in a powerful recession of at least 4% to 5% decline each year since 2008, with no sign of escape. Each 1% lie on price inflation translates to a 1% lie on growth. Americans have been so bombarded by economic mumbo jumbo garbage, that they no longer know what inflation is anymore. Numerous measures reflect distress and backsliding in the national economy, from the broad ISM indexes (manufacturing, service) to the numerous Fed business indexes (like Philly Fed, Empire Fed, Richmond Fed, etc) to the sector indexes (like retail, banking, home sales, etc). For several years the aggregate data pushed out by the USGovt office elves has been in conflict with the components that comprise the aggregate. In other words, the majority of retailers publish distress signals, while the USGovt stat rat clowns post national retail growth figures. The whole does not equate to the sum of the parts. Even the supply chain shows direct signs of interruption, long a Jackass forecast which has finally begun to show itself. See the Wal-Mart shelves, and the Apple inventory. It could be China at work.

The Reich Finance motivated media maven talking heads stated that 3) lower consumer price inflation has undercut the Gold demand as a hedge. What plain rubbish! My focus has been directed to Shadow Govt Statistics to note the very consistent CPI rate between 8% and 11% for each of the last several years. They produce defensible reliable factual estimates on a variety of economic statistics, free from bias, which for a trained statistical analyst is very easy to identify. With the nonsensical CPI claimed at 2% to 3% in managed style by the USGovt clowns, the inflation lie has been a steady 5% to 6%, in conservative terms. Ironically, of the many people contacted over the years who invest in the acceptable US stock sectors like technology or media or retail or banking, they tell me that they do not believe the USGovt published statistics on CPI (inflation) or GDP (economic growth). When pressed on their justification for stock investments therefore, they all say the same thing. These statistics are all they have to work with, everybody reacts to the same statistics, and it is all ok. When informed about Shadow Govt Statistics, many enlightened have heard of them but do not act on their information.

MOTIVE FOR GOLD INVESTMENT

The motives for buying Gold are growing with each turn of the season, and each crumbling platform. The reasons are many and should be listed in outline form for emphasis. Most motives actually operate as part of vicious cycles, whose actions cause damage, which prompts evermore destructive activity. Think toilet bowl and its powerful swirl, flushing paper money and paper wealth (in)securities. The most important motives are:

1)    The negative real rate of interest continues to serve as the primary cylinder to the Gold Bull Express Locomotive. The standard 2% and 3% paid to savers is overwhelmed by price inflation that has been over 7% each year for several years.

2)    The major central banks are printing new money with utter abandon. The volume is in the multiple $trillions. The locations are numerous.

3)    The major central banks are engaged in Competing Currency War in open style, with major nations acting to preserve their export trades. The damage is broad to managed reserves and to global trade itself.

4)    The major banks in the United States, England, and Western Europe are insolvent, almost without exception. False accounting enables their continuation as zombies.

5)    All sovereign bonds are in effect supported by the Weimar engines of phony money directly from central bank initiatives. Not just Southern Europe, but USTBonds and UKGilts. The Swiss and Japanese do the reverse, shunning their own bonds.

6)    The minted coin demand is setting records, for USMint output, for Royal Canadian Mint output, for Austrian Philharmonics, and Chinese Pandas.

7)    Demand from China is astounding through the Hong Kong window. The growth rates continues to be brisk, at 94% annual (2012 versus 2011) and 12.6% sequentially (Dec2012 vs Nov2012). The gold market for high volume in several parts of the world is extremely tight with low inventory supply. My best source reports that in certain world market centers, for authenticated large volume sales in the multi-$millions, the Gold price is near $2000 per oz and the Silver price is near $40 per oz. The divergence between real physical markets and the COMEX corrupted market is growing.

8)    All paper wealth is crumbling and eroding in value. As paper wealth continues to crumble and vanish, the tangible assets like crude oil, farmland, and Gold rise in demand.

9)    Absence of reliable inventory in the COMEX. The shuffling games have reached extreme levels from the old vaults in Basel, London, and the Roman Catacombs. The COMEX will someday shut down, from lack of inventory and lack of clients. The true Gold price will be revealed when the giant crime scene is shut down.

10)    Neither Russia nor China sells any of its gold output on the global market, each leaders in gold output. Meanwhile the largest mining firms in South Africa are in decline, the victims of marxist nitwits neglecting and devouring their cash cow.

11)    The large New York and London banks are being gradually drained of their gold bullion. From March to August, an astonishing 6000 metric tons were removed from London alone by large powerful Eastern entities.

12)    The gold accounting practices are steeped with fraud. The central banks lease out gold, but the party leasing the gold reports it in accounting, and the central banks report it in accounting. The Gold supply is far lower than reported in the West, and much higher in the East.

13)    The Allocated Gold Account scandal is fast gaining attention. It will see a climax in the German official account demand for repatriation. Libya was liberated last year (of its 144 tons in London, that is) to compensate for London bank shortages in gold.

14)    The new Gold Trade Finance system is coming into view. The Iran sanctions galvanized the development of alternative methods for non-USDollar trade settlement among Eastern nations. As Turkey and India continue to step forward as gold intermediary agents, with banks and commercial entities providing the service, watch the Gold Trade flourish. Their channels could very likely converge with the numerous Chinese Yuan Swap facilities in place, which started the non-US$ trade practice years ago. Gold will sit at the core (along with Silver and Platinum) in the gold trade notes and settlement system. The prices have already been agreed upon at multiples higher than the currently posted silly prices.

Furthermore, a very odd red herring appeared in the Q4 trade deficit report issued by the USGovt. It appeared as a bulging line item, with industrial supplies as the heading, which showed a big jump. It is led by non-monetary gold being exported, mostly to Hong Kong. The Hat Trick Letter reveals more information on the odd story, within the Gold & Currency Report. On its face, it looks like the Chinese might be demanding gold bullion to finance the US trade gap, and the USGovt is concealing this fact. Some gold refiners might be involved, which would account for the category of non-monetary gold being listed.

ZERO BOUND RATES & LETHAL SOLUTIONS

It bears repeating, that the US Federal Reserve is stuck in the zero bound corner. Raising interest rates would cause severe problems, if not systemic breakdown, and rapidly. The USFed under Chairman Bernanke is bluffing with an empty hand, in almost a laughable pathetic way. They are out of options, out of alternatives, and out of weapons, reliant totally upon Weimar printing press devices that assure a tragic outcome. They have lost all credibility and have forfeited their prestige. Worse, by guaranteeing ultra-low interest rates until the labor market improves through yearend 2015, the hapless USFed assures a systemic failure for the United States. They assure the breakdown because low rates near 0% raise the cost structure, reduce profit margins, shut down business segments, and actually result in widespread job cuts. The Zero Bound kills capital, in a land that has forgotten what capitalism is. Again, this critical point is missed by the uneducated American PhD Economists. Their own impressive traits are the sartorial attire and neat coiffure.

The consequences of rate hike in any exit strategy would be felt in the following ways:

a)    Raise borrowing costs to finance the USGovt deficit, and possibly force those costs to rival the bulging endless war costs. A $700 to $800 billion borrowing cost line item might be considered low. Rate hikes are totally out of the question.

b)    The USFed would torpedo their best clients that accepted low-cost loans according to the Dollar Swap Facility. The total bestowed upon European banks alone is well over $3 trillion from the ample supply in 2011, plus the recent huge round. The biggest Western banks would be ruined in a matter of a couple months. Rate hikes are absurd on their face.

c)    The USEconomy would be forced to contend with higher consumer borrowing costs for cars, homes, boats, and more, while businesses would be dealing with higher borrowing costs for trucks, communications equipment, and machinery. Rate hikes are not even remotely likely.

d)    The US Housing market would be forced to enter a recognized depression, instead of the false recovery. This market cannot recover effectively with sub-4% mortgage rates and subprime lending, courtesy of the USGovt agencies like the FHA. Rate hikes are not going to happen, period.

e)    The big US banks would see their USTBond carry trade ruined. It is their primary source of profit, certainly not commercial lending or investment banking. The big US banks borrow at near 0% and invest in 2% or 3% long-dated USTBonds. Higher rates would force them to sell the long-term USTreasury Bonds, and thus exacerbate any exit strategy by the cornered USFed. Rate hikes would be blocked before they happen.

f)    The interest rate derivatives would cause a nuclear event. The JPMorgan interest rate derivative collection is over $72 trillion in notional value. If Interest Rate Swap contracts have been keeping the long-term rates under 3% for two years in steroid driven activity in hidden rooms, then their unwind would cause the long-term USTBond yields to rise toward Greek levels, and far past Spanish and Italian levels. Thus the label of a nuclear event. Rate hikes would cause a decade of darkness.

The other solutions like the numerous liquidity facilities by the USFed, the Dollar Swap Facility for the benefit of European banks, the vacant Long-Term Refinance Operation bonds by the Draghi Euro Central Bank, the toxic bond redemptions, the deliveries of toxic paper onto the Fannie Mae doorstep, these are all pathetic central bank exercises that solve nothing. They fail to address the grotesque insolvency of the big Western banks, the rampant deficits of the Western governments, and the internal insolvencies within the many Western economies.

NEW GOLD TRADE SYSTEM

A new trade settlement system is coming, which works around the toxic USDollar. While the United States slips inexorably into the Third World, with several key traits already showing in glaring style, the rest of the world will follow the Eastern lead. The Chinese and Russians will show the way, with a hidden German hand, as the trade settlement is to be conducted with Gold Trade Notes based upon a core of gold, silver, and platinum. If nations wish to be benefit from supply routes, they must acquire the Gold Trade Notes. The entire system is ready for implementation, sure to shock the New York and London paper traders in the empty temples. The paper IOU rubbish will no longer be accepted. Great changes cometh, in a grand Paradigm Shift.

For over two decades, trade has been dominated by the USDollar in settlement, led by the crude oil sales by OPEC. It defined the Petro-Dollar and the Grand Surplus Recycle. Those ways are being gradually pushed aside. As trade is settled increasingly outside the USDollar, led by Eastern nations, the entire global banking structures will shed their USTreasury Bonds no longer required. Once again, in a more natural order, the trade will dictate the banking reserve practices. The banks will accumulate Gold bullion, diversify out of USTBonds (even USAgency Mortgage Bonds), and begin to act like real banks again instead of toxic paper factories and obscene derivative casinos. The Jackass does not discuss the corrupted COMEX paper gold price any longer. It does not deserve the attention, nor the respect, nor a capital "G" in the name. Shocking events are coming, like earthquakes and tsunamis to foster change. The United States will be largely left behind as valid physical Gold takes center stage in the global financial system, the trade settlement system, and the banking system. The next important new bankers will be those in physical possession of Gold bullion without encumbrance of counter-party, like the Sprott Fund, like bullion banks that do not cooperate with the diabolical New York and London banks.

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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 www.GoldenJackass.com . For personal questions about subscriptions, contact him at [email protected]