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Gritty Questions On The Undeniable Collapse

February 28, 2013

A sudden urge has come to address an overwhelming list of critical gritty questions. They crop up with clients, colleagues, and friends. 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. The central banks are finally in crosshairs of focus, for not producing a solution, more recently for worsening the problem. They have destroyed the system as costs rise relentlessly. Perversely, their efforts to dampen demand so as to reduce price inflation has added to the economic destruction. The outcome will be shocking in its power shift to the East, shocking in its evaporation of paper wealth, and shocking in the simplicity of the new financial structure that rises from the ashes based in barter and gold payments. However, the United States will be left behind, due to its basic ownership of the global reserve currency being scrapped. Some effort is made for the topics to be presented in a logical flow of questions addressed, with answers not lengthy. For much more detailed analysis, look to the Hat Trick Letter paid reports with a subscription, offered each month.


To be sure, a collapse is not only coming. It is happening before our eyes in what used to be ultra-slow motion. Each year the pace quickens. Two years ago, the MFGlobal client account theft episode was preceded by another red-line event a few months before, and followed by another a few months after. But nowadays, the crisis events occur every month or every week. With $1.2 trillion doled out by the USFed to European banks in January, the Germans demanding repatriation of their official gold account, the Italians electing a comedian to halt the property tax hikes that bail out banks, the British sponsoring a Chinese Yuan Swap Facility, the attack on Mali to wrest its gold for German repayment, the move to shut down the Mongolian copper & gold mine by Rio Tinto, the raids larger and bolder of the GLD inventory, the USFed preparing for QE5 (or rather QE187), the US facing a fiscal cliff, the Japanese ratcheting up the competitive currency devaluations, the Swiss managing their Euro-Franc peg, the Russians hosting a G-20 Meeting of finance ministers to coordinate the alternative to US$-based trade, the Iranian sanctions coming to a conclusion in US acquiescence, and a gathering of five aircraft carriers in the Chesapeake (against all rules, angering the Pentagon), to be sure, the pace of extreme events is quickening. All these have occurred just since the new year began less than two months ago. Extreme events have become the norm. A series of climax events is coming very soon. The changes will be rapid and breath-taking.


The real objection to Iran is that they sharply increased their energy transactions over a year ago, paid outside the USDollar domain. That is regarded as financial terrorism, which entered the propaganda mill only to come out as some daft baseless story on nuclear development. Iran has thus followed the Iraq pathway to depart from the USDollar market, but Iran cannot be attacked like its neighbor since it has allies in China and Russia. They work to undermine the USDollar dominance. To brush the USDollar aside is to snuff the American Empire and to remove its full spectrum dominance by stripping the free money credit card. The significance of the Iranian sanctions by the USGovt can be described in chapters of volume, but described in simple terms. The sanctions have galvanized the efforts of Eastern nations to seek a non-US$ alternative in trade settlement that avoids the banks under Anglo-American control. By working to settle trade outside the reach of SWIFT bank rules, the Eastern nations led by China and the many Iranian trade partners have hastened their efforts to settle trade in unconventional ways that center on Gold as a means of payment, either directly or indirectly through hidden intermediaries. The United States did not shoot itself in the foot. The US shot itself in the face, acting to accelerate the rejection of the USDollar in global usage, and thus to quicken the pace of its lost global currency reserve status.


The creation of a three-way coalition of Berlusconi, Bersani, and comedian Grillo will shake Europe to its core. The Italians rejected the property tax hikes imposed by appointed leader Monti in very efficient timely grandiose style. The consequent risk is for the big banks to lose their guardian in Monti, the Goldman Sachs preppie. With attention and priority taken away from serving the needs of the big banks, complete with filling the channels to bigger European banks, the risk has risen ten-fold for an accident in Southern Europe. The insolvent (broke, illiquid, desperate) big Euro banks will be vulnerable to default events which could quickly spread across Europe to London and New York. The control room managed by Monti will be at great risk of being shut down. The risk of a great accident is acute. In fact, all three of Italy, Spain, and France are in horrendous condition, each in competition to serve as collapse trigger.


Multiple motives appear at work. The goal has been to loosen the grip of power by Moslem autocrats, which would permit the replacement of more suitable pro-West leaders (puppets). The goal has been to loosen the lines to official government accounts, like the 144 tons of Libyan gold that still sits in London banks, which is much more integrated into their bank management schemes. The goal has been to destabilize the national fabrics, an old favorite game of the USGovt security agencies, since it tends to permit a climate conducive to their ploys. The big impact crater is likely to be the House of Saud itself, which is in great danger of falling. King Abdullah is teetering in health, if not comatose. With the fall of the Saudi regime will come the fall of the Petro-Dollar, thus the USDollar itself as global reserve.


At least five times as much, and possibly ten times as much gold as reported, which would mean more than Fort Knox before it was pillaged in the 1990 decade. Both superpower nations purchase all their domestic gold mining output, with nothing exported. The Russians have gold accumulated over the centuries dating back to Peter the Great, Catherine the Great, and the Czars. (Tidbit: Russian word Czar is for Caesar, and German word Kaiser is for Caesar.) The Kremlin contains a vast system of tunnels under its main buildings, stretching for kilometers, filled with gold bars and gold artifacts (think chalices, necklaces, inlaid gemstones). The Kremlin is a veritable Eastern Orthodox version of the Vatican itself, in wealth under control, but surely not religious political power. Over the last decade or more, Russia has been converting its vast oil wealth into gold bars. Since the Soviet debt default, a new strategy has been put to work in the conversion. On the other hand, China has two gold accounts. Their official sovereign wealth accounts and central bank reserves have been accumulating gold at a much more rapid pace than revealed. They see no need to reveal any strategic plans. The fast accumulation of reserves from trade surplus has served as easy flow to gather gold, mostly through the Hong Kong window. The public statement of their Gold reserves data brought laughter to my best gold source of information, since he personally has brokered great volumes of Chinese gold purchases. In fact, no nation is honest about gold reserves.


The COMEX will be drained eventually of its Gold & Silver inventory. They had to resort to stealing 140 thousand accounts at MFGlobal in November 2011 in order to preserve its inventory. Do not be surprised if the Libyan 144 tons of liberated gold found its way to the LBMA and then COMEX. The two crime events should indicate the final stages of desperation. The COMEX has resorted to regular raids of the GLD & SLV exchange traded funds over the last two to three years, in greater recent volumes. They short the ETF shares, a privilege granted only to the big banks, then arrive to cart off bullion bars in overnight shipments. The COMEX will shut down from a vicious combination of absent inventory and thin ranks of brokerage accounts. The players have left the COMEX, after the MFGlobal thefts which were endorsed by the corrupted US court system beholden to Wall Street objectives. All across the United States, compliance departments have banned usage of the COMEX by futures risk management teams. Focus on empty shelves and no traffic.


The inelastic demand for Gold is well known. Demand rises with a rising Gold price, called Gold Fever. But inelastic supply is less understood and mentioned. As forward sales schemes unravel, they drain large mining firms of scarce cash. Operations suffer and big projects are not funded like in the past when a lower Gold price was the case. Two new ravaging effects have taken root. As the major central banks debase the currencies worldwide, they lift the cost structure for businesses and the cost of living for workers. So mining firm profit margins are reduced and worker household stress increases for feeding families. The pinch from reduced profitability combines with the nasty pinch of labor strikes to hinder mining output. Also, the new wave of resource nationalism has struck in several nations. The poorer nations that host mining projects have turned hostile. They are suffering from slower economies and wider deficits. The response has been for their governments to renegotiate royalty agreements, to confiscate properties, and to manage a much tougher line against the foreign mining firms. They have imposed harsher strictures on environmental contamination, often as a ploy to gain more revenue from royalty or penalties. The end result is lower mining output in association with a higher price for Gold & Silver, which defines inelasticity. It is the opposite of what clownish conventional economists predicted, and exactly what the Jackass predicted over the last seven years.


The Yuan Swap practice has created a broad platform and precedent for non-US$ trade. The list of nations with such swap deals include Brazil, Australia, Russia, Japan, South Korea, Belarus, Malaysia, and Indonesia. Add England to the long and growing list of nations making bilateral currency agreements with China, which should instill fear in New York. The swaps have established a virtual barter system that is divorced from the banking settlement for trade. Instead, a bilateral account is set up with credits and debits, depending upon delivery and receipt. Regard the swap system as a foundation for global trade settlement in Gold, as the Chinese Yuan makes the rough transition to a gold-backed currency. In the Jackass view, the shift to a gold trade settlement system will coincide with the gradual Yuan currency backed by gold. They will become interchangeable when procuring Gold Trade Notes, my theory, all in time. The Chinese Yuan Swap Facility has undermined the USDollar dominant role in trade. Following trade practices will come bank reserve management practices, which means the removal of the USTreasury Bond from global banking. The numerous Yuan Swap Facilities have essentially worked to dethrone the USDollar as global reserve currency.


Actually three pieces. The absent usage of the USDollar itself, and the bypass of the Western banking system with its community of SWIFT members, and the sidestepping of the FOREX currency market. If trade is to be settled in Gold, or using vehicles such as the Gold Trade Note, then the USDollar, the big Western banks, the SWIFT codes, and the FOREX are all rendered suddenly obsolete. The banks must adapt to become utility firms. A few gold-backed currencies might spring up with unique distinctions. The gold trade finance concept ushers in a new alternative system long sought in order to create a more viable equitable sustainable financial structure. The banking system should serve trade, not the reverse. Hence the USTBond will slowly vanish from the global banking system, and the USDollar will lose its global reserve status. The end result is a unavoidable slide by the United States into the Third World. Watch Turkey and India spring up as new financial centers that will operate as main locations for gold intermediary functions, critical in gold trade finance.


No, low interest rates smother the USEconomy for several reasons. They also create conditions for the banks to be converted into speculative houses even more than a decade ago. They are playing the USTBond carry trade, borrowing cheap short-term money and investing in long-term bonds. They cannot earn much profit with low rates in the commercial sector. But the important negatives for low rates work to dampen commercial activity. To begin with, the vast armada of savers, the retirees holding CDs from banks, and the big pension funds, all earn very little on their capital. It is unjust and a perversion. Twice as much savings earn interest as consumer loans pay interest, a net negative that Wall Street harlots prefer to ignore in their promotional harangues to shrinking audiences. As much as the mavens and official barkers recite the benefits of low rates and its stimulus, the exact opposite is the case. Worse, the low rates signify low value for capital, which results in distorted financial markets on valuation of a broad assortment of assets. But the worst effect that renders deep damage to the USEconomy from low interest rates is the encouraged diversion of assets toward investment in commodities in defense, as a hedge for inflation. The migration toward commodities lifts the entire cost structure, and reduces the profit margins for business. The effect is deadly as it forces capital in the form of equipment and machinery into retirement. Business segments shut down. The low rate environment kills capital, reduces the capital base, and smothers the USEconomy. Not one in ten economists comprehends this basic point.


The USDollar will not be reformed replaced or repaired by bankers, since they are too committed and entrenched in fraud and corruption. The USDollar will be eliminated in a series of steps that begins with its isolation. The movement toward trade settlement outside the USDollar, not necessarily in Gold, works to isolate the USDollar turned toxic. Once isolated, the many nations not so firmly aligned to the West will thrive, while the Western core nations continue to crumble and collapse. When the USDollar is no longer in favor in a majority of trade settlement, it will begin to see wholesale dumping of the USTBond as a reserve asset. Then the US-led axis of fascism will be revealed in the United Kingdom, Canada, and most of Western Europe. They will continue to use the USDollar in both trade and banking, but they will ingest toxic paper during their continued unabated collapse. As the stage shrinks and the lights dim, the USDollar will be dealt with by the USGovt itself in brutal fashion. The US will devalue its own currency to survive, just like Third World nations, while it inflates to the extreme.


Nations around the world are locked into policies to debase their currencies in a series of competitive devaluations in order to protect their export trades. A lower domestic currency exchange rate protects the trade by keeping the prices down for their exported products. Other nations are affected as they lose trade to the competitor which devalues. Actually all nations lose, since global trade shrinks in aggregate. The USDollar is artificially propped as a result. But pain comes from the devaluations since they increase import costs like crude oil, such as in the case in Japan. Also, nasty effects occur like with Switzerland, whose central bank collected a pile of Japanese Govt Bonds in a diversification program. In competing currency wars, everybody loses in a race to the bottom. Nations are slowly coming to the realization that if they simultaneously rid themselves of the entire batch of fiat paper currencies, and adopt a gold trade finance system, even if they suffer a writedown of USTBonds in the process, they will be better off with a future, after being freed from the toxic tentacles. The next stop is the Gold Standard, which the participants in the currency war are gradually moving to adopt, as they follow the Chinese lead.


The global isolation and rejection of the USDollar will force the USEconomic participants to bid up the currency required for the many supply routes leading into the nation's factories, offices, stores, and homes. The USDollar will be forced to bid up Chinese Yuan and Gold ultimately. They will be forced to bid for whatever currency is required for the assorted supplies like crude oil, metals, and foodstuffs, as well as for finished products like cars, hardware, home electronics, and clothing. The process will see some shocking events like 30% devaluations, just like seen in Venezuela. My estimate is that the USDollar will eventually see a 50% to 60% devaluation in total over the next few years, after its global rejection as reserve currency. That will cut US personal wealth in half. That will open the door to 25% to 30% price inflation suddenly. The process will cause grand shortages, civil disorder, and perhaps chaos. Violence will erupt at the gasoline stations and food supermarkets. The USEconomy will lose its credit line, and become a credit risk. For decades, the USEconomy has been running up deficits, with no enforcement or discipline or controls, in essence shoving the debt paper on foreign nations in lieu of legitimate savings. They resent it. A sense of retribution will emerge. As the gold trade finance chapter opens, the USDollar severe devaluation will coincide. As footnote, the USDollar (usually $100 bill) is being rejected in Tokyo Japan and Dublin Ireland right here today, as subscribers report directly to me. The banks cite widespread forgeries as the reason, ironic since QE bond monetization is essentially counterfeit.


The only exit ramp that might be seen is with the USGovt and its deficit finance. The likelihood grows every month for a major oppressive event, where private US pension funds (IRA, 401k, Keough, managed pension, etc) are forced to cover the USGovt deficit in the form of special USTreasury Bonds which also cover a portion of the USAgency Mortgage Bonds. The US citizenry is captive to the desperate whims of the USGovt and its bankrupt condition, sure to dole out desperate policy actions.


This is difficult to answer with any measure of certainty. But indications have been made by credible parties that the Vatican is soon to be exposed for some truly devious pernicious scummy banking relationships that involve big banks like JPMorgan and various central banks. The big corrupt US bank has managed the Vatican gold account for decades. Imagine the cross traffic from the brisk Afghan narcotics money laundering activity. More clearly, the Vatican is embroiled in narcotics money laundering at its primary bank. The Vatican apparently is soon to be subjected to a new financial audit. The recently appointed German lawyer Ernst von Freyberg will be the new president of its bank, filling a post left vacant since May when a financial scandal involving narcotics money laundering with Roman banks tainted the institution for the umpteenth time. The appointment was made by a commission of Cardinals and approved by Pope Benedict before his departure was announced, now final. The bank's formal name is a total joke, the Institute for Works of Religion. Plenty of other reports swirl about an intolerance for certain sexual rituals by the Vatican bankers that the current pope has no more patience for. Benedict has laid a trap. There are two chambers to the Vatican, the College of Cardinals and the Jesuit Bankers. The former pledges fealty and devotion to the Prince of Light with active ceremonies. The latter pledges fealty and devotion to the Prince of Darkness with active rituals.

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Jim Willie

Jim Willie

Jim Willie CB, also known as the “Golden Jackass”, is an insightful and forward-thinking writer and analyst of today's events, the economy and markets. In 2004 he launched the popular website that offers his articles of original “out of the box” thinking as well as content from top analysts and authors. He also has a popular and affordable subscription-based newsletter service, The Hat Trick Letter, which you can learn more about here.  

Jim Willie Background

Jim Willie has experience in three fields of statistical practice during 23 industry years after earning a Statistics PhD at Carnegie Mellon University. The career began at Digital Equipment Corp in Metro Boston, where two positions involved quality control procedures used worldwide and marketing research for the computer industry. An engineering spec was authored, and my group worked through a transition with UNIX. The next post was at Staples HQ in Metro Boston, where work focused on forecasting and sales analysis for their retail business amidst tremendous growth.

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