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Tail Events, Isolation, New Normal

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by Jim Willie

The year 2012 has started out in strange ways. While celestial forces augur for rare tail events, the assurance of man-made events that stretch far into the extreme tail of probability are not only very likely but will be of a type to reflect the change in the global balance of financial power. The Paradigm Shift mentioned over the course of the last two to three years is at work, having moved into a higher gear. The gold is moving from the West to the East, along with the power. We will not see the process reverse in our lifetime. The sanctions set against Iran have been devised by a former global leader nation that is beset by insolvency, fraud, and lost integrity. The backfire has consolidated forces into a more fortified position against the USDollar. Trade increasingly is not being settled in US$ terms. The icons of the day are mere apologist public address systems attempting to rationalize and justify the deep insolvency and wrecked systems. The new normal is of a caravan file of broken cars and trucks sputtering down the road, using the false fuel of hyper monetary inflation and the offensive paint of phony financial accounting, the tell-tale sign being the ugly rancid smoke out of their tailpipes. The last insult is of the US Presidential election process, which is badly marred by obvious inconsistencies and anomalies. The vote count for the candidate that attracts the biggest crowds, attracts the biggest donations from corporations, and defies the financially teetering system does not match the final official tallies.

PREPARE FOR RARE DAMAGE OF TAIL EVENTS
In the probability world, a tail event is described as an occurrence far out in the small numbers of probability, extended on the tail of the curve of likelihood. In the quality control domain, the battle cry used to be Six Sigma, meaning the tolerated defect rate goal would be six standard errors, a rate in no way achievable. A quick check of the probability tables unmasks the lofty goal as one defect part off the assembly line in every 1.013 billion items. That is Six Sigma on the normal bell-shaped curve. However, in the world of phony finagled finance, such rare events are indeed occurring. The modern world has never seen such grotesque charred ramparts posing as financial structures, badly beset by the insolvency caused by the natural sequence of broken asset bubbles, aggravated by absent industry. In fact, the entire fiat currency system, where money is nothing but redefined debt, is an abomination destined for the ruin we see on such a tragic widespread level. The modern world has never seen such grotesque housing disasters, the dream of home ownership turned upside down, one quarter of American households owing more than the value of their homes. In fact, the entire housing dependence devised by Greenspan, where the USEconomy would lean not on industry but on rising home equity, serves as the calling card of central bank heresy. The heresy continues with the high priest ZIRP and bishop QE. Of course it ended in tears. The modern world has never seen such grotesque quicksand in sovereign debt for so many major nations. This goes far beyond Greece, Ireland, and Portugal, the symbols of small fry nations that few nations will make deep sacrifice for. In fact, as the sovereign debt spreads, it has become clear that Italy, Spain, France, and many other nations suffer from the sinking pressures that national securitized debt brings. As the sovereign debt loses value, the banking system sheds reserves valuation and goes insolvent, the credit engines stall, the economy falls into recession, the labor force loses jobs, the spending patterns falter, and the nation goes into a failure mode. See the Cauchy distribution in the graphic, which when the degrees of freedom grow unbounded, approaches the Gaussian normal.

Some important tail events of rare type are coming. Any attempts to control a Greek Govt Bond default will be fraught with high risk and deep peril. The equal necessity to control a default for Ireland and Portugal will be made obvious. The extension to Italian and Spanish Govt Bond losses in collateral damage will be obvious. The implications to Credit Default Swaps must also be handled, not possible in the same fraudulent manner as before with redefinitions and denied insurance awards. The contagion of vanished equity in the banking system will spread to London, New York, and Germany, in whose nations numerous banks will fail. It will be extremely difficult for the USDollar to ward off such powerful storm damage, and remain as the global reserve currency. Some distant maritime voices might regard my claims as premature and far-fetched, but their preoccupation with gold basis has left their voices mere reverberant richochets in the hinterland. The academic voices seem out of touch with trends, the loud laps on the rocks from waves of inflation hardly recognized for their damage from the remote seacoast. They seem unable to foresee the new found land that is forming in the East, divorced from the USDollar.

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The Silver Platter Opportunity

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by Jim Willie

Every few years, a tremendous opportunity arises. The autumn months of 2007 and the autumn months of 2008 offered such an opportunity to buy silver. That $11 silver price is long gone. Many smart folks seized it. Whatever can be said on such silver platters applies almost equally to gold. The silver sprint gains are typically much larger than the gold steady gains. The coming autumn months will feature a gaggle of supposed financial analyst experts backpeddling in their hasty damage control. They have been broadcasting a wide assortment of low level propaganda posing as competent analysis, as they attempt to make the point that the anti-USDollar trade is done, the gold trade is over, the silver trade is spent. They are so wrong. A comedy of clumsy oafs and dolts on the Wall Street payroll awaits the public in a grand chapter on stage. They will struggle to explain the move in silver over $50 on its way to $80 per ounce. They will struggle to explain the move in gold over $1600 and then $1700 per ounce. The mainstream news has been deeply involved in a delicate balancing act. They must report the news, but it is almost all very bullish for the precious metals. A new financial mini-disaster unfolds almost every week. Last two weeks were Greece. The next week might be Portugal. They must report the news, but it paints a picture of a broken monetary system with debased currencies. They must report the news, but it openly provides the gory blow by blow details of ruined sovereign debt. The United States debt situation is Greece times one hundred.

This week, the loquacious jackass will permit some lovely pictures to tell the story. Three graphs adequately tell of a grand opportunity to latch onto the powerful Gold Train with a super-charged Silver Scout. Who were the smart buyers back in September of 2007? The false phony deceptive mainstream message then was that the subprime mortgage problem was contained. That was the first major stumbling block by the hapless witless clueless USFed Chairman Bernanke. He has made not a single correct economic or financial system analytic call. Who were the smart buyers back in October of 2008? The false phony deceptive mainstream message then was that a TARP solution was being put in place to save the US banking system. The solution turned out to be basic largesse to the big US banks, enabling purchase of preferred shares, enabling outsized executive bonuses, and enabling secretive bailouts of banks across the globe. Without the Financial Accounting Standards Board allowance for insolvent banks to continue to dictate the value of their own balance sheets, otherwise known as systemic accounting fraud, the big US banks would have been liquidated. The entire Too Big To Fail principle is actually a battle cry to avoid solutions, to protect the banking elite that was mostly responsible for multiple $trillion bond fraud and mortgage fraud. Without any reservation, it can be said that TBTF means No Solution, no remedy, no recovery, and no attempt at anything remotely resembling a road to economic recovery. In my view, TBTF is the epitaph on the USEconomy and the nameplate on the USTreasury Bond default. So who were the dummies who ignored the opportunity to buy gold and especially silver in September 2007 and October 2008? The majority of them listened and trusted the mainstream news, the Wall Street misdirection, and all their fallacious messages.

THE COMMITMENT OF TRADERS SIGNAL

A big hat tip to internet contributor RG, whose message was relayed by the Midas Report. Consider verbatim his message, in which he gleefully proclaims to be calling all Rocketeers of the Happy Silver Ship. The goodfellow RG wrote, “The latest Commitment of Traders Report for silver is now screaming out at full volume BUY BUY BUY. In fact, the Commercial Short-Long Ratio that I have already bored you with at great length in recent correspondence is now down at a multi-year super extreme of 1.79. Below is an up-to-date chart of the COT picture. In summary there have only been four other weeks in this whole bull cycle where the ratio has dropped below 1.80, four weeks. The first two weeks of these was the 28th August 2007 and the following week of the 4th September 2007. The second tranche was the 21st October 2008 and the following week 28th October 2008. If you study below both the chart of silver over that period and also the HUI gold mining index, you can see how these extreme lows below 1.80 in the ratio coincided on both occasions very markedly with a bottom in both the silver price and the mining index. On each occasion this proved to be a multi-year opportunity to take positions in both the metal and the precious metal mining stocks. Each time the price of silver rose by some 60% to 90% within a six month period! And the HUI index rose some 90% to 160%. Folks, there is no such thing as a risk-free trade. There is no such thing as a free lunch. And there is no such thing as a one-way bet. However, there are certain times in an investment cycle when an outstanding opportunity presents itself and advantage should be taken. The evidence above shows very clearly the historic correlation between an extreme low below 1.80 on the Commercial Short-Long Ratio and a multi-month bottoming in the price of both silver and the precious metal mining stocks. I have been trading the precious metal sector since 2003 and I would consider this to be one of perhaps four of the most suitable buying opportunities within the last eight years! The man RG makes a compelling argument, without providing the background factors that push the gold & silver prices upward. He simply points out the COT signal and the resulting performance after two significant lows were registered in precious metals prices. Very convincing inded. Thanks to RG also for the fine chart.

Note the green arrow in September 2007, a strong signal when silver was at a $12/oz price. Note the green arrow in October 2008, a strong signal when silver was just above the $9/oz price. The same type of signal is identified with yet another strong signal here & now in July 2011 with silver price at $35-36/oz. It is ready for the next big upleg. This time gold might lead, but as usual silver will follow and run fast and hard making yet more breathtaking gains. The great springtime consolidation is over. The power merchants have spent their ammunition with no lasting reversals, only pause with consolidation. They must manage unending financial crisis without motive toward remedy or solution. The climb has begun. Eager investors have waited and will wait no longer. The Chinese have already begun to re-enter the gold & silver markets armed and loaded with a $3 trillion war chest. Hong Kong exchanges await the precious metals trade. Lawsuits against the tainted SLV and GLD funds are in progress. A little more backfilling might be required. The fundamentals are incredibly powerful and bullish for both precious metals. The global monetary and sovereign debt situation is in ruins, crumbling more with each passing month. If corrupt henchmen are not in charge, then clowns and charlatans are at the USGovt, its finance ministries, the USFed itself, the many regulatory bodies, and so much more.

PAST SIGNAL PERFORMANCE

Consider the silver price move from the two points in the past. The move up by 50% in six months to March 2008 was interrupted by the Wall Street meltdown, followed by the insolvent collapse of the US banking system. Those who bought all the way down from $20 to the bargain price of $9.5 were amply rewarded. The key was to avoid leverage, paper contracts, and the mainstream nonsense spouted daily with errant focus and deceptive view. The sudden banking system insolvency in 2008 was followed by grand orchestrated attacks on the entire anti-USDollar trade. Hardly a hedge fund was not attacked by their own creditors and brokers on Wall Street, incredibly desperate to stay afloat. They found relief in white pixie dust. The US banks collapsed but did not suffer failure. Instead, with FASB aid, coupled with TARP confiscated funds, they continue to limp along as Grand Zombies. The silver price gain since October 2008 has been on the order of 4-fold, almost 300%. This is a stunning gain. The same will be said when silver surpasses the $100 price level. The ruin of major currencies in falsely posed money forms, the parade of USGovt debt, the hapless unfixable condition of the USEconomy, the submerged US households, and the US banks suffering from shadow home inventory coupled with investor lawsuit marred by defiant default in legal challenge, these over-arching factors assure much greater ruin of money. They assure a march to $100 silver. Many naysayers will be silent a year from now.

Ditto for the gold price moves, but the size of the gains are much less. The shape of the chart is very similar though. The springtime correction was not as great, but the gold gain was only half the silver gain. The crumbling global monetary system is the primary push factor for gold, not price inflation. The quality and substance of money is under scrutiny and question. In the next year or more, the price inflation factor will be put more in the forefront. Investors and households will be forced to seek out true inflation hedges, if not hedges against personal ruin.

FACTORS IN VIEW & ON HORIZON

The future holds many crucial factors to be extremely important. The Greek Govt debt bandaid will prove again to be pathetic and useless, buying a little time, while it aids the big European banks in toxic asset redemption. The bag holder is the Euro Central Bank, going down the tubes with its outsized Southern European sovereign debt and deep losses. The debt contagion will spread to Portugal next, then Spain and Italy. Those two large nations, spared the shame and focus up until now, will deliver two lethal deadly blows in the near future. When these two large columns fall on the European bank offices, the Germans will finally announce their exit plan. The Euro Central Bank just hiked interest rates by 25 basis points to 1.5% in defiance of the USFed. My Jackass forecast made in early 2009 was that the USFed would be dead last in hiking rates, and that call seems correct. The big US banks have troubles in court. They actually believe a mere $8.5 billion can permit them to walk away from well over $1 trillion in bond fraud. They want bond fraud and mortgage contract fraud forgiveness with limits on restitution and penalties. Their executives in New York City and London still enjoy $200 lunches. Not a single settlement deal will stick, not when investors and individuals are winning every single court challenge against the banks. The municipal bond and auction bond fraud deals will follow. The budget battle within the chambers of the USGovt has exposed the polarization, corruption, ineptitude, lack of leadership, and inability to avoid the catastrophe. It is simply too broken to fix. Taxes cannot be raised due to economic fragility. Entitlements cannot be cut due to public outcry and dependence. War cannot end since too profitable to the syndicate. Deficits will pile up regardless of any accords. Whatever progress is made will serve as tiny down payment for a bigger problem just a few months ahead. The next news item to anticipate is flirtation with USTreasury auction failures, against a backdrop of absconded USGovt worker pension funds. It is no wonder Treasury Secy Geithner wants to leave town. The next QE initiative will come in response to an auction failure, as buyers have vanished and primary bond dealers are under extreme distress. The lousy auctions last week were the telling indicator, largely ignored by the blind in the madding crowds. The US states are falling like flies in the summer heat, trapped inside window frames. Their extraordinary measures to avoid default have become almost a tragic comedy. Talk has come of splitting California into two states, of silicon and latin stripes. Illinois and New Jersey are basket cases. Wisconsin is a war zone.

The USEconomy sputters down the hill over the cliff with lost brake systems and no functioning engine. The industrial base has been forfeited in its core. Legitimate income was replaced by debt which defaulted. Then lastly consider the assault on global crude oil supply, the silly futile release from strategic petroleum reserves, following the Gulf of Mexico shutdown. The elite want $150 crude oil. The oil release effect has been forgotten already in just two weeks. With all the positive factors toward gold & silver, by the middle of next year in 2012, one must wonder what motivated people not to invest in precious metals after seeing the strong COT signal once more. The smart ones among us have learned long ago to ignore the Wall Street sell side artisans, to ignore the USGovt wrecking ball managers, to ignore the equity stock analysts whose paper game has turned into a leveraged valuation bonfire. Money faces ruin, as Gold & Silver offer preservation and growth during the greatest transfer of wealth in over a century. Recall the barons who exploited the Great Depression, whose names are part of the elite landscape of banking and politics and philanthropy.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

From subscribers and readers:

At least 30 recently on correct forecasts regarding the bailout parade, numerous nationalization deals such as for Fannie Mae and the grand Mortgage Rescue.

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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  JimWillieCB@aol.com

THE SILVER PLATTER OPPORTUNITY

[Contrary Investors Cafe]

Black Swans From New Normal

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by Jim Willie CB
June 22, 2011

Mohammed El-Erian is given credit for the phrase ‘The New Normal’ to mean an altered state of perceived instability within the normalcy realm, as in crisis being called normal, like endless crisis. As buddy Jim Mess in Europe says, just like trying to redefine what debt default is, it sounds like high octane prevarication. El-Erian is considered one of the good guys. He managed to slip away from Harvard University without much smear, where he served on the management team of the giant multi-$billion endowment fund. If truth be told, Harvard hatched the Enron monster from its Business School as a project, funded by Citigroup, where JPMorgan created all the off-shore companies to hide their dealings. Building #7 in Lower Manhattan contained the records until it fell from structural sympathy. Harvard successfully made money all the way on the Enron runup, but also successfully shorted Enron all the way down. So El-Erian is hardly squeaky clean. He does give a good interview though, does not deal much in varnished truths, and is an avid NYMets baseball fan. At PIMCO, he worked on the team to direct the biggest bond fund in the world to turn its back on the entire USTreasury Bond complex. In fact, their Total Return Fund, its flagship bond fund, is net short on USTreasurys as a group. That means they own a raft of Credit Default Swaps for USGovt debt default and an assortment of other vehicles like the TNX and TYX that track the 10-year and 30-year bond yield. They recognize an asset bubble when they see one, and even invest in Gold.

The other person relevant to the article title is Nassim Taleb, who coined the term Black Swan. Generally it refers to the extreme oddity that passes through view, shows up on the radar, the extreme warning signal being dire, but is largely ignored by the masses, regarded as the exception or outlier event. THE BLACK SWAN HAS BECOME THE NATIONAL BIRD!! When a few black swans appear, the alert analysts pay heed and express their warnings. When an armada of black swans appear, the message is clear. A systemic failure is in progress, and the important foundations are crumbling. In 2009 and 2010, it was clear that numerous black swans were sighted and identified. In 2011, something highly unusual and extraordinary has occurred.

The black swans can be organized into groups. They are numerous within each important economic and financial camp. The Armada of Black Swans, well organized into regiments, has become dominant enough to be considered the New Normal.

During the global financial crisis (which has earned a widely used GFC acronym), tragically the state of crisis has become an engrained latticework on the reality mosaic. A quick review at a high level should cause alarm, except for the gradual pathogenesis that dictates the pace of systemic failure in progress. If the list below were presented as a Wall Street Journal forecast in 2006, the author would have been subjected to laughter, derision, and mockery. Yet here and now, the organized groups of black swans are visible everywhere one looks. Worse, they are carrying nuclear slingshots, and defecate highly toxic green blobs into the liquidity streams that we have grown so dependent upon.

QE TO INFINITY

Quantitative Easing will continue for obvious reasons. Many were outlined in the last two articles. The QE2 will continue seamlessly, extending beyond the June 30th deadline. It will change in complexion slightly to become QE3, with some added twists like to include some municipal bonds.

Later the entire financial initiatives will morph into a Global QE, since all major central banks will face the same plight. They will all purchase USTreasury Bonds or face extinction, in order to support their own balance sheets.

The credibility of the US Federal Reserve has undergone major damage. In the next year, it will be totally destroyed. The factor ignored by many analysts is that the USFed balance sheet has expanded recklessly, and insolvency is its unavoidable condition. If the US housing market does not revive, then the US banks will go deeper into insolvency, carrying perhaps two million homes on their books at some point in the future. The resulting effect on the USFed balance sheet is permanent ruin.

The USTreasury Bond default might possibly come, as warned by a great reliable inside source in 2008, from the USFed resignation as central bank for the USGovt. They are not subject to bank regulations, to reserves ratios, to collateral requirements on loans, or to anything for that matter. They managed the secret handouts of $12 trillion under the cover of TARP Fund dispensation. They rescued foreign banks even though that is not under their charter. They orchestrate the narcotics money laundering effectively, certainly not in their charter either. The USFed does have owners, and they cannot be pleased. The turnaround in the housing market never occurred. Its prospects look worse with each passing month. If the USGovt or the Elite operating as handlers for the captive USGovt decide to convert private property into collectivized syndicate ownership, and use their Fannie Mae device as agent for the process, then perhaps the USFed might serve as a facilitator to the vast Collectivism project. The United States Government might someday own the majority of homes in the nation, maybe even commercial buildings and shopping malls too. The disenfranchised can always go camping, as in the Favored Environmental Managerie Amorphous camps.

ARMADA OF BLACK SWANS

Consider the following black swan specimens, each of which is astounding, each alarming, each serving as one more added element to the ruined situation. The swan organization is admittedly rough, but the regiments are put in sensible order. Any small handful of these signals would qualify as forewarning a profound crisis. Not anymore, since crisis is the new normal. Not anymore, since black swans adorn the entire landscape. A healthy white swan gradually suffers from toxic exposure, quickly to turn black from a putrefaction process. Apologies for overlooking at least a dozen other important other black swans, as time and space did not permit the exhaustive catalogue process. Emphasis was given to the United States ponds and its migratory bird population.

USTREASURY BOND SWANS

  • USGovt debt ceiling standoff, with actual violations

  • Over 75% of USTreasurys auctioned bought by the USFed in debt monetization

  • Turnaround from primary bond dealers to POMO repurchase by the USFed is 3 weeks

  • Foreign banks form 12 of 21 primary bond dealers

  • PIMCO owns no USTreasury Bonds, even short

  • Global boycott of USTBond by creditors, some net sellers

  • Foreign creditors owns the majority of USGovt debt

  • A fixture of $1.5 trillion annual USGovt deficits

  • Greenspan and David Stockman warn of USGovt debt catastrophe

  • USMint officers admit Fort Knox has been shut down for 30 years, as in zero gold

USFED SWANS

  • QE permanence, otherwise called QE to Infinity, worked into standard policy

  • Bank of England urges more bond buying

  • Cost of money 0% for two full years, implication being destroyed capital

  • Chairman regards monetary hyper-inflation as being zero cost

  • Ron Paul pushes for a USFed audit, an end run to pay down USGovt debt

  • USFed owns more USTBonds than any other creditor

  • Competing Currency War has Euro weakness mean USDollar as all circle the toilet

USGOVT SWANS

  • USGovt could shut all operations but still be have a budget deficit

  • USGovt could confiscate all income but still have a budget deficit

  • USGovt must cover AIG payouts on Greek Govt debt default from CDSwaps

  • US Postal Service stops all payments into their pension system

  • New York Fed refuses to disclose the destination of $6.6 billion stolen from Iraqi Reconstruction Fund

  • Federal Worker Pension Funds and G-Funds confiscated (called borrowed)

  • USMint runs out of gold & silver metal to make coins

  • Endless war accepted as sacred, whose costs are crippling

  • Council on Foreign Relations enables a foreign nation to control US foreign policy

  • Breaches to USGovt communications via WikiLeaks

COMEX SWANS

  • GATA Gold Rush 2011 in London Savoy Hotel on August 4th will feature the COMEX whisteblower Andrew Maguire

  • Silver futures contracts settled almost exclusively in cash, often with 25% vig bonus

  • Gold & silver futures contracts often settled with GLD & SLV shares

  • Umpteen margin increases for gold & silver futures contracts, but reductions in USTBond futures contract margin requirements

  • Brent versus West Texas crude oil price has a $20 spread

  • Every time Bernanke assures US financial markets, gold & silver rise in price

  • Elimination of Over The Counter gold & silver contracts due in mid-July

BANK SWANS

  • Chronically insolvent USFed and EuroCB, balance sheets ruined

  • FASB accounting rules permit banks to grade their own test exams

  • Stress Test for banks had almost no stress, a sham

  • Dependence by Wall Street banks on naked shorting USTBonds and narco funds, the former called Failures to Deliver, the latter recognized by the United Nations

  • Shadow housing inventory held by banks over one million homes

  • Wall Street firms in court on the defensive, JPMorgan foreclosed soldiers

  • Wall Street firms banned in Europe on bond securitization and issuance

  • Strategic mortgage defaults by homeowners on the fast rise

  • Gold holdings by tyrant Arab rulers targeted by New York & London banks

  • War over Libya grabbed $90 billion in Qaddafi money by New York & London

  • PIGS sovereign debt default in Europe to have impact ripples that reach US banks

  • Standard & Poors reminds the players what constitutes a debt default

  • No liquidation of big US or London or European banks since Lehman Brothers

  • Much of dimwitted US population believes the propaganda that Gold is a bubble

USECONOMY SWANS

  • USEconomic indexes fall off the cliff, see Philly Fed, Empire State, ISMs

  • Rampant systemic insolvency in banks, homes, federal government

  • US housing resumes its powerful bear market

  • US land title system in the disintegration process, see MERS on mortgage titles

  • Unemployment at 20% across the Western world, economic misery index hit 30%

  • USGovt economic stimulus never contains stimulus

  • Main non-military innovation in the United States is bond fraud

  • Shrinking US trucker industry from $4 gasoline and diesel

  • China begins to export price inflation to the United States

  • Killing state worker union pensions as part of the state budget shortfalls

  • Gulf of Mexico off limits for oil drilling

  • 1 in 7 Americans is on Food Stamps, whose debit cards are good JPMorgan business

  • media blackout on the Fort Calhoun near nuclear plant meltdown in Nebraska

FOOD & WEATHER SWANS

  • Food price inflation is staggering but denied

  • Floods across Midwest & Plains states to interrupt with planting & harvest

  • Australian floods have interfered with coal industry and agriculture

  • Fukushima and Northwest US infant mortality, with vulnerable milk next

  • Big volcanoes like in Chile and Iceland disrupt weather and air travel

EUROPEAN SWANS

  • German bankers at war with Euro Central Bank

  • Germans abandon the EuroCB, leaving it to Goldman Sachs, see Draghi

  • Spanish banking system has yet to write down squat on housing credit assets

  • Portugal, Italy, and Spain sure to follow Greece into a debt default

  • Belgium has had no government for a full year

  • Ireland prints more money per capita than the USFed

  • US & NATO to part ways

CHINESE SWANS

  • G-8 Meeting is pushed aside, as the Anglos deal with broad insolvency

  • G-20 Meeting takes center stage in a power play, led by China and the BRICs

  • China buys discounted PIGS sovereign debt, to redeem later in central bank gold

  • Chinese FX reserves exceed $3 trillion held in sovereign wealth funds

  • China owns most world major ports, as part of a strangulation process

  • China conducts the great Idaho experiment, toward re-industrialization of America

HIDDEN SWANS

  • Swiss faces hundreds of $million lawsuits, for refusal to deliver Allocated gold

  • Saudi Arabia cuts new deal for Persian Gulf security protection, see Petro-Dollar

  • Citigroup has high hidden exposure to Greek Govt debt default

  • Chinese vengeance over reneged USGovt gold & silver lease, as part of the Most Favored Nation granted status, has motivated its extreme pursuit of precious metals

  • Containers hold $300 to $500 billion in EuroNotes at Greek port warehouses

  • Internet strides light years ahead of USGovt regulatory hounds at syndicate offices

  • Chemtrails, storm steering, lingering droughts, fallout falling, haarps a playing

GOLD & SILVER BREAKOUT IN ALL CURRENCIES

The great spring 2011 precious metals consolidation is coming to an end. In no way is the Quantitative Easing program coming to an end, otherwise known as hyper monetary inflation. Printed money is being abused to cover bank insolvency and to redeem toxic bank assets. The central banks are taking down the QE billboards.

They will continue with their debt monetization in order to manage the financial system collapse in an orderly manner. As David Malpass adroitly said on Bloomberg Financial News, the debt monetization known as quantitative easing will quietly become an integral but hidden part of the USFed monetary policy.

The central bank must find a way to cover the $200 billion in monthly USTreasury auctions, to roll over the obligated primary bond dealer inventory, and to lap up the mountain of toxic mortgage bonds that prevent an all-out cave-in of the bank balance sheets. The reality is that nothing has been fixed, nor attempted in solution. The grotesque insolvency of banks, households, and government is the marquee message. Without continued monetization, the system would collapse rapidly and disorderly. However, with continued monetization, with a QE chapter by another name or conducted behind the same curtains, the system will collapse in a gradual and orderly manner. The USFed has no more credibility. The announcement on Wednesday that the New York Fed refused to provide details on stolen Iraqi Reconstruction Funds is the latest blatant syndicate action that screams criminality. Witness the early stage of another uniformly applied global Gold bull market breakout.

The Gold price has hit record highs in the British Pound Sterling, where their banks are insolvent, their economy is in reverse, price inflation is ramping up, and their currency is facing grandiose debasement. The SterlingGold price smells monetary ruin. The global breakout is manifested first in the most broken non-American locations, since the spring ambush orchestrated in the COMEX has put huge pressure on foreign currencies. The Competing Currency War still leads the desperate USFed officials to slam foreign currencies and to place financial press attention on their declines.

The EuroGold price smells monetary ruin. The attention has been squarely on the Greek battle to avoid debt default. Every news story about the USEconomy faltering is following immediately by a story of Greek bailout impasse or Athens challenge to ingest suicidal austerity pills or riots on the Athens streets. The differentiation of EuroBonds with greatly varying bond yields has permitted the Euro to trade on speculative merit. The Greek default threat surely pushes down the Euro. But the prospect of a higher Euro Central Bank interest rate leaves speculators to buy the Euro, since proper pricing mechanisms are in place on the sovereign bond yields. The European investors are clearly flocking to Swiss banks on the paper investment side, but their pursuit of Gold is enormous. The Euro Monetary Union is running on fumes. The pain in Spain is hardly on the wane. The Gold price will rise and break out soon enough.

The YenGold price smells monetary ruin. The situation in Japan is terrible, complicated, and tragic. The advent of trade deficits will aggravate the outsized cumulative debt burden on the nation. The paradox is starting to show itself. Their trade deficits will force the national insurance firms and banks, even the Bank of Japan, to sell existing US$-based assets in a political compromise. They do not want to monetize more debts. They do not want to create worse federal budget deficits. They will compromise by selling foreign assets to finance the reconstruction and dislocation costs. The paradox will manifest itself with a rising Yen currency in the face of worsening deficits in every conceivable crevice. As their nation slides into the sea, both literally and with red ink, and the salt on the wounds coming in the form of price inflation, the Gold price will rise and break out soon enough.

Last to break out will be Gold in US$ terms. The Gold price smells monetary ruin on home turf, not to be deceived by any USFed head fakes. Perhaps a sudden awakening to the obvious continuation of QE2 and merge into QE3 could enable a Gold breakout in double quick fashion, ahead of other currencies. Much more stability is seen in the Gold price rise in US$ terms, as the destruction is more stable, the monetary ruin more understood, the federal budget debate more openly futile, and the national insolvency more publicized. The early May high of 1563 will easily be surpassed, all in time. The impetus might be QE163 or a liberated USGovt deficit from a raised debt limit or a failed USTreasury auction or a big US bank failure or a spike in mortgage rates or a plummet in housing prices or a longer parade than the current stream of miserable USEconomic data. The Gold price rose toward $1550 following the vacant FOMC meeting on Wednesday, where the main purpose was to put us to sleep.

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Black Swans From New Normal

[Gold Speculator]

The Real Housewives of The Federal Reserve

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Matt Taibbi has resurfaced with another stunner of Wall Street impropriety which will lead to merely more silence, even more unanswered questions and be quickly buried by the kleptocratic oligarchy.

The Real Housewives of Wall Street: Look Who’s Cashing In On the Bailout

Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?

From Rolling Stone Magazine

In August 2009, John Mack,
at the time still the CEO of Morgan Stanley, made an interesting life decision. Despite the fact that he was earning the comparatively low salary of just $800,000, and had refused to give himself a bonus in the midst of the financial crisis, Mack decided to buy himself a gorgeous piece of property — a 107-year-old limestone carriage house on the Upper BeerEast Side of New York, complete with an indoor 12-car garage, that had just been sold by the prestigious Mellon family for $13.5 million. Either Mack had plenty of cash on hand to close the deal, or he got some help from his wife, Christy, who apparently bought the house with him.

The Macks make for an interesting couple. John, a Lebanese-American nicknamed “Mack the Knife” for his legendary passion for firing people, has one of the most recognizable faces on Wall Street, physically resembling a crumpled, half-burned baked potato with a pair of overturned furry horseshoes for eyebrows. Christy is thin, blond and rich — a sort of still-awake Sunny von Bulow with hobbies. Her major philanthropic passion is endowments for alternative medicine, and she has attained the level of master at Reiki, the Japanese practice of “palm healing.” The only other notable fact on her public résumé is that her sister was married to Charlie Rose.

It’s hard to imagine a pair of people you would less want to hand a giant welfare check to — yet that’s exactly what the Fed did. Just two months before the Macks bought their fancy carriage house in Manhattan, Christy and her pal Susan launched their investment initiative called Waterfall TALF. Neither seems to have any experience whatsoever in finance, beyond Susan’s penchant for dabbling in thoroughbred racehorses. But with an upfront investment of $15 million, they quickly received $220 million in cash from the Fed, most of which they used to purchase student loans and commercial mortgages. The loans were set up so that Christy and Susan would keep 100 percent of any gains on the deals, while the Fed and the Treasury (read: the taxpayer) would eat 90 percent of the losses. Given out as part of a bailout program ostensibly designed to help ordinary people by kick-starting consumer lending, the deals were a classic heads-I-win, tails-you-lose investment.

So how did the government come to address a financial crisis caused by the collapse of a residential-mortgage bubble by giving the wives of a couple of Morgan Stanley bigwigs free money to make essentially risk-free investments in student loans and commercial real estate? The answer is: by degrees. The history of the bailout era reads like one of those awful stories about what happens when a long-dormant criminal compulsion goes unchecked. The Peeping Tom next door stares through a few bathroom windows, doesn’t get caught, and decides to break in and steal a pair of panties. Next thing you know, he’s upgraded to homemade dungeons, tri-state serial rampages and throwing cheerleaders into a panel truck.

The impetus for this sudden manic expansion of the bailouts was a masterful bluff by Wall Street executives. Once the money started flowing from the Federal Reserve, the executives began moaning to their buddies at the Fed, claiming that they were suddenly afraid of investing in anything — student loans, car notes, you name it — unless their profits were guaranteed by the state. “You ever watch soccer, where the guy rolls six times to get a yellow card?” says William Black, a former federal bank regulator who teaches economics and law at the University of Missouri. “That’s what this is. If you have power and connections, they will give you a freebie deal — if you’re good at whining.”

This is where TALF fits into the bailout picture. Created just after Barack Obama’s election in November 2008, the program’s ostensible justification was to spur more consumer lending, which had dried up in the midst of the financial crisis. But instead of lending directly to car buyers and credit-card holders and students — that would have been socialism! — the Fed handed out a trillion dollars to banks and hedge funds, almost interest-free. In other words, the government lent taxpayer money to the same assholes who caused the crisis, so that they could then lend that money back out on the market virtually risk-free, at an enormous profit.

Cue your Billy Mays voice, because wait, there’s more! A key aspect of TALF is that the Fed doles out the money through what are known as non-recourse loans. Essentially, this means that if you don’t pay the Fed back, it’s no big deal. The mechanism works like this: Hedge Fund Goon borrows, say, $100 million from the Fed to buy crappy loans, which are then transferred to the Fed as collateral. If Hedge Fund Goon decides not to repay that $100 million, the Fed simply keeps its pile of crappy securities and calls everything even.

This is the deal of a lifetime. Think about it: You borrow millions, buy a bunch of crap securities and stash them on the Fed’s books. If the securities lose money, you leave them on the Fed’s lap and the public eats the loss. But if they make money, you take them back, cash them in and repay the funds you borrowed from the Fed. “Remember that crazy guy in the commercials who ran around covered in dollar bills shouting, ‘The government is giving out free money!’ ” says Black. “As crazy as he was, this is making it real.”

read the full article here

Matt Taibbi Asks Why The Fed Gave $220 Million In Bailout Money To The Wives Of Two Morgan Stanley “Bigwigs”

[zero hedge]

Written by testudoetlepus

April 13th, 2011 at 1:16 am

More Journalists Dignifying “TARP Was a Success” Propaganda

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I hope NC readers don’t mind my belaboring the issue of the TARP’s phony success, but every time I see the Administration’s propaganda parroted I feel compelled to weigh in.

The trigger was an effort at a balanced assessment by Annie Lowrey at Slate, to which I have some objections, followed by some shameless and misguided cheerleading by Andrew Sullivan:

But two years ago, I sure didn’t expect the government to make a profit from TARP. And I sure didn’t expect the auto bailouts to become such huge successes.

What’s surprising to me is how pallid is the Obama administration’s spin has been on this. I never hear them bragging about how they managed to pull us out of the economic nose-dive we were facing. I know why: the recession isn’t over, even if TARP was a success, no one wants to hear about it, etc. But it’s one of the strongest and least valued part of Obama’s record – along with the cost control innovations in health insurance reform.

At some point, you have to stand up and defend your record. No doubt Obama is biding his time on this. But count me as surprised as I am impressed.

Any effort to look at the performance of the TARP in isolation is pure three card monte, and accepting that framing plays into the Administration’s hands. You can’t look at its “success” of a program when its results are dependent on other operations, such as continued regulatory forbearance (aka extend and pretend), the Fed’s super low interest rates (a massive tax on savers), the continuing use of Fannie and Freddie to prop up the housing market, the train wreck hitting state and municipal budgets (the collapse in their revenues is a result of devoting fiscal firepower to the banks rather than the real economy; the experience of other severe banking crisis suggests that a short term fall in economic activity was inescapable, but less bank-coddling approaches would have led to a bona fide recovery).

If someone was flattened in a car wreck, taken to a hospital, put on life support, and then subjected to all sorts of operations and medical procedures, how would you judge the result? If the doctor told you, “His broken legs have healed, the internal bleeding has stopped, we are no longer giving him IVs” would you consider any of that germane if he was brain dead and still hospitalized, with no immediate prospect of functioning independently?

The banks’ denials to the contrary, if their second liens and commercial real estate exposures were valued at realistic levels, the four biggest banks would all need major equity injections. They should not have been permitted to pay back the TARP, nor should they be paying dividends or “Mission Accomplished” level bonuses. And if the biggest depositary banks were revealed to be in as bad shape as they really are, do you think Morgan Stanley and Goldman would be unaffected? They might not go into crisis mode, but they would not have smooth sailing either.

But there is a way in which the TARP was a complete success. It was a de facto financial coup. The regulations put the Secretary of the Treasury outside the law. The Fed has run quasi fiscal operations outside normal budgetary processes with hardly a peep from Congress (the Audit the Fed was a helpful effort to increase transparency but still fell well short of dealing with the usurping of Constitutionally mandated approvals). And this isn’t our view; Simon Johnson was early to see what was really at stake in his May 2009 Atlantic article, “The Quiet Coup“.

And we see an continuation of government dominated by financial interests in the passivity of the Obama administration at continued high levels of unemployment, when Reagan went into aggressive action at lower trigger points. Instead, we have bond vigilantes driving policy when the lessons of Latvia, Ireland, and Greece are again proving that austerity only makes debt hangovers worse.

What we need is debt reduction via restructuring and offsetting stimulus, but that means imposing losses on banks. So no matter how you try to cook the books, the political “success” of TARP is an economic disaster for everyone except its immediate beneficiaries, which include writers who have made themselves scribes to the oligarchs.

More Journalists Dignifying “TARP Was a Success” Propaganda

[naked capitalism]

Written by testudoetlepus

April 5th, 2011 at 3:56 pm

Did Bernanke Permanently Cripple the Butterfly That Is US Housing?

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by Reggie Middleton

Note: Tune into Bloomberg TV at 1:12 pm EST to see me discuss the ins and outs of real estate Hopium on the “Fast Forward With Lisa Murphy” segment.

Struggle is not only Good it is necessary for a healthy, functional market! The Market Wants to Fly on its own!

Let’s start this post off with a popular parable.

Once an academic and self proclaimed (albeit not necessarily mistaken) intellectual was playing outdoors and found a most exquisite caterpillar whose colors and patterns gave it a most fantastic presence. He carefully picked it up and took it home to show his colleagues and peers. Together, they studied this caterpillar and wrote papers and hyper-intellectual dissertations on it. They even went so far as to name it. They called it, “Keynesian!” and vowed to each other that they would take great care of it.

The intellectual spent the considerable resources available to him as the chairman of the most powerful hedge fund cum central bank in the world to cater to, and study this Creature called Keynesian. Every day he watched the caterpillar and brought it new plants to eat. One day the caterpillar climbed up the stick and started acting strangely. The academic worriedly called international colleagues and together they came to the understanding that the caterpillar was creating a cocoon. The academic explained to his colleagues how the caterpillar was going to go through a metamorphosis and to become a butterfly.

The cadre of central banking colleagues were thrilled to hear about the changes this caterpillar known as Keynesian would go through. They watched every day, waiting for the butterfly to emerge. One day it happened, a small hole appeared in the cocoon and the butterfly started to struggle to come out [for those who are not following, thing bubble bust at this point]. At first the academic was excited, but soon he became quite concerned. “Keynesian” was struggling so very hard to get out! It looked like it couldn’t break free for its chrysalis! It looked desperate! It looked like it was making no progress whatsoever! As a matter of fact, to many academics, it looked as if it may actually fail.

The academic was so concerned he decided to help. He ran to his lab and pulled out (with assistant from his colleagues in the Treasury) an alphabet soup tools (see 10 Ways to say No, the Banks Have Not Paid Back Their Bailout and Buried Deep Within The Files That The Federal Reserve Released On Thier MBS Purchase Program, We Found TARP 2.0!!! More Taxpayer Money To The Banks!) to cut the cocoon to make the hole bigger and the butterfly quickly emerged! As a matter of fact, it emerged 100% quicker than any other butterfly that has been observed. As the butterfly came out the academic was shocked at the result. “Keynesian” had a swollen body and small, shriveled, non-functional wings. The academic continued to watch the butterfly, theorizing and expecting that, at any moment, the wings would dry out, enlarge and expand to support the swollen body. He just knew that in time the body would shrink and the butterfly’s wings would expand.

Well, guess what? Neither hypothetical actually occurred! “Keynesian” the hobbled butterfly, spent the rest of its life crawling around with a swollen body and shriveled wings. It never was able to fly on its own…

As the academic tried to figure out what had gone wrong, Reggie Middleton suggested he consult with the owners of a healthy adroit butterfly named “Austrian”. That butterfly’s caretakers, with the assistance of Reggie, explained that the butterfly was SUPPOSED to struggle. In fact, the butterfly’s struggle to push its way through the tiny opening of the cocoon pushes the fluid out of its body and into its wings. Without the struggle, the butterfly was doomed to never, ever fly. The academic’s good intentions severely, and most likely permanently, damaged the butterfly called “Keynesian”.

Remember, in the Circle of Economic Life, struggling is an important part of any growth experience. In fact, it is the struggle that causes you to develop your ability to fly.

As excerpted from Do Black Swans Really Matter? Not As Much as the Circle of Life, The Circle Purposely Disrupted By Multiple Central Banks Worldwide!!!, Bernanke et. al. have snipped the chrysalis of the US markets and economy one too many times. He has interrupted the circle of life…

I have always been of the contention that the 2008 market crash was cut short by the global machinations of a cadre of central bankers intent on somehow rewriting the rules of economics, investment physics and global finance. They became the buyers of last resort, then consequently the buyers of only resort while at the same time flooding the world with liquidity and guarantees. These central bankers and the countries they allegedly strive to serve took on the debt and nigh worthless assets of the private sector who threw prudence through the window during the “Peak” phase of the circle of economic life, and engaged in rampant speculation. Click to enlarge to print quality…

The result of this “Great Global Macro Experiment” is a market crash that never completed. BoomBustBlog subscribers should reference

The Inevitability of Another Bank Crisis

while non-subscribers should see Is Another Banking Crisis Inevitable? as well as The True Cause Of The 2008 Market Crash Looks Like Its About To Rear Its Ugly Head Again, With A Vengeance. All four corners of the globe are currently “hobbling along on one leg”, under the pretense of a “global recovery”.

A snapshot of the housing picture as of now, before the release of the latest Case Shiller numbers

The latest shadow inventory calculations are now available to subscribers online. Here are a few observations that we have made regarding the March data. The last quarter of 2010 and portions of the first quarter of 2011 have seen a significant drop in foreclosure activity due to allegations and blatant discoveries of fraudulent practices in the mortgage industry.

Reference:

  • A Glimpse of the Wikileaks’ Smoking Gun Emails Show Bank of America Falsifying Loan Information Monday, March 14th, 2011
  • Re: B of A – With Banks Being Forced To Admit The Inevitable Truth, How Long Will It Be Before Fundamentals Rule The Day Again? Friday, January 21st, 2011
  • JP Morgan Purposely Downplayed Litigation Risk That Spiked 5,000% Last Year & Is Still Severely Under Reserved By Over $4 Billion!!! Shareholder Lawyers Should Be Scrambling Now Wednesday, March 2nd, 2011

This near cessation of foreclosure activity has materially dropped the shadow inventory numbers, but has done so in a way that is quite misleading. Those foreclosures either will happen and become REOs or distressed property sales that are currently averaging a discount of ~25% to conventional retail sales (thus further pressuring sales prices), or will result in the properties being put directly on the market at steep discount (again, further pressuring sale prices). Basically, the foreclosure backlog is simply accumulating in the background and will print a very sharp spike upwards one way or another once the foreclosure and fraud issues of the banks are sorted out – even if they are sorted out to the detriment of the banks. Despite this reprieve in foreclosures, the ratio of shadow inventory to home sales is not decreasing. This is a double negative, for shadow inventory is decreasing (albeit for very artificial and temporary reasons). The reason for the lack of movement in this very key figure is that housing sales are actually declining both on a seasonally adjusted and non-adjusted basis – and if these figures were to be adjusted for “true” inflation, would look much worse. This leaves the ratio of delinquent and foreclosure activity to sales relatively static. One can surmise what happens when the foreclosure backlog that was caused by the bank’s myriad legal issues clear up.

The most valuable chart in the study just released to subscribers,

Shadow Inventory Update — March 2011 shows how quickly one can expect the shadow inventory to be consumed by the sale of homes. To make a long story short, we still have quite a ways to go before we reach the pre-bubble levels, and that is without taking into consideration the foreclosure moratoriums. Keep in mind that these numbers do not include the pent up shadow inventory that is being hidden by the foreclosure crisis. That additional inventory on top of a slowing housing sales metric can easily tack one to 4 years onto the inventory numbers.

As you can see, the credit (delinquency measures) metrics are actually moderating slightly over the last few quarters, but have increased over the last two. This is a negative sign considering all of the efforts that have been made by the government and the banks to reduce that figure. The foreclosure inventory, although lulled somewhat, is still slightly on the rise. This lull is synthetic and temporary, a by-product of congressional pressure and legal issues pressing the banks to undergo voluntary and involuntary moratoriums on foreclosure activity. The consequent movement to be expected as these moratoriums are lifted, the banks work out their legal issues, and the properties move one way or the other will cause a very dramatic spike in the shadow inventory numbers. This spike will occur on top of slowing housing sales, dramatically reduced housing prices metrics and potentially deteriorating credit metrics (if the most recent trend continues). If that is not enough good news for you, the Goldilocks scenario of the perfect interest rate environment for real estate needs to (and probably will in the near to medium term) come to an end. See The True Cause Of The 2008 Market Crash Looks Like It’s About To Rear Its Ugly Head Again, With A Vengeance Friday, March 11th, 2011. Our calculations available ot subscribers show a very bleak outlook for housing. It is not as if there is no precedence for such. Take a look at the Japanese situation, and this is not taking into consideration the recent issues of the earthquake, tsunami and radiation poisoning and nuclear meltdown. Few things are as detrimental to property values as radiation poisoning!

A lesson to be learned: Beware for when a true black swan event occurs…

Further reading:

  1. Reggie Middleton ON CNBC’s Fast Money Discussing Hopium in Real Estate Friday, February 25th, 2011
  2. In Case You Didn’t Get The Memo, The US Is In a Real Estate Depression That Is About To Get Much Worse Wednesday, February 23rd, 2011
  3. Further Proof Of The Worsening Of The Real Estate Depression Thursday, February 24th, 2011
  4. You’ve Been Had! You’ve Been Took! Hoodwinked! Bamboozled! Led Astray! Run Amok! This Is What They Do! Monday, February 28th, 2011
  5. FASB Appears to Have Bent Over For The Final Time & Accuracy In Financial Reporting Dies An Ignominious Death!!! Wednesday, February 9th, 2011
  6. As JP Morgan & Other Banks Legal Costs Spike, Many Should Ask If It Was Not Obvious Years Ago That This Industry May Become The “New” Tobacco Companies Thursday, January 6th, 2011
  7. The Latest Case Shiller Index – Housing Continues Freefall In Aggressive Search For Equilibrium Monday, February 7th, 2011
  8. As Clearly Forecasted On BoomBustBlog, Housing Prices Commence Their Downward Price Movement In Search Of Equilibrium Scraping Depression Levels Tuesday, December 28th, 2010

Did Bernanke Permanently Cripple the Butterfly That Is US Housing? The Answer Is More Obvious Than Many Want To Believe

[Reggie Middleton’s Boom Bust Blog]

Written by testudoetlepus

March 28th, 2011 at 2:55 pm

Another Economic ‘Martial Law in the Streets’ Moment Approaches

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by Eric Blair

Activist Post

In the fall of 2008, during the lead up to the TARP bailout of the financial industry, Treasury Secretary Henry Paulson warned members of Congress that there will be Martial Law in America should they fail to pass the multi-trillion dollar looting of the taxpayer.

Well, despite the American public being overwhelmingly against the bailout, the blackmail worked and the banks got their money. If it worked once, why not try it again?

With the economy no better off for having borrowed trillions to “stabilize” criminal financial institutions, the national debt ceiling is rapidly approaching.  As some Republicans begin to float the notion of blocking this extension of credit, the Treasury Department, Democrats in Congress, and Ben Bernanke issued apocalyptic warnings clearly showing how pathetically fragile the U.S. economy is.

These threats, reminiscent of Paulson’s 2008 ransom demands, once again appear to be offering two black-and-white choices: Armageddon or more debt.  The coordinated pitch for higher debt levels is echoing the same urgency as the TARP looting, as Treasury Secretary Geithner said the government is insolvent and will run out of money in about two months’ time unless Congress votes to raise the federal debt ceiling.

The AFP reported Thursday that Senate Democrats warned that the government would “shut down” if the debt ceiling was not raised.  Chuck Schumer (D-NY) explained what that would mean if a shutdown were to occur: “citizens couldn’t get their checks, veterans couldn’t get their benefits, military payments would stop.” Ben Bernanke doubled down on the debt-fear campaign in a rare press conference where he said, “Beyond a certain point . . . the United States would be forced into a position of defaulting on its debt. And the implications of that on our financial system, our fiscal policy and our economy would be catastrophic.” Fiscal conservatives who oppose raising the debt ceiling say it is just delaying necessary belt-tightening and massive spending cuts, and say that raising the debt ceiling further only forestalls needed austerity moves to avoid a more catastrophic collapse in the future. House Republicans presented a plan to cut $32 billion from the budget, which is laughable given the impossible-to-pay-off debt levels.

The U.S. national debt is approaching the ceiling of $14.29 trillion; unfunded liabilities like Social Security and Medicare are estimated to be around $100 trillion; and the total cost of stabilizing the financial industry is reportedly upwards of $23.7 trillion.  And these numbers say nothing of the fraudulent $600-trillion derivatives scam. No amount of tax increases, spending cuts, or economic growth will be sufficient to satisfy this equation. The notion that America can somehow pull itself out of this mess if average citizens, who had no part in creating the national debt, would only “tighten their belts,” seems preposterous.

None of the options are exactly attractive to the already over-burdened taxpayer. Indeed, the people are being given a lose-lose-lose scenario: 1) the status quo of slow economic demolition through raising the debt ceiling; 2) crippling austerity cuts and public asset looting; or, 3) catastrophic collapse.

Although the banks and their pocket-change politicians describe market conditions that would result in a collapse should the ceiling not be raised, it seems obvious that the only power capable of drastically changing economic conditions are the banks themselves.  Therefore, market conditions appear to be an increasingly insignificant part of a bigger illusion. As if the sun would not rise if a piece of legislation was not passed, the gun-to-the-head urgency will likely result in raising the debt ceiling.  If the level of resistance comes close to the near unanimous public disgust over the TARP bill, you can bet we’ll hear new warnings of “martial law in the streets” in order to keep the illusion in tact.  If for some reason collapse is unavoidable, the U.S. military is actively war gaming “large scale economic breakdown” and “civil unrest” should they choose otherwise.

Another Economic ‘Martial Law in the Streets’ Moment Approaches

[Global Political Awakening]

Written by testudoetlepus

March 2nd, 2011 at 5:28 pm