Monday, May 24, 2010

The Non-Sustainability Of The European Welfare States.

I always wondered when and how this would come to an end: a breakdown of a non-sustainable society. From the 1960's, Europe, but especially their individual countries, subsidised their societies into one big Gargantuan knot. The thinking of the financial "experts", assisted by politicians and bankers, is based on a golden future, so everything will be paid back later. Just shift the debt repayment from "next year" to "the next generation" and the debt problem is gone. I already blogged about the Dutch who subsidise every problem away, only to find unintended consequences, which they then also subsidise into oblivion, only to find unintended....etc.

Granted, our Leaders are creative and the fact is that there is still a relative calmness in main-stream media about the financial crisis. This will change once they understand that our financial system is a Ponzi or Pyramid scheme: you pay the interest promised to the old investors with capital injections of the new investor. It works when there is growth, just ask Bernie Madoff.

The waiting is now for the money of the new investor: the famous green shoots! Just listen to the news: "All will be better next week, latest next month" and look at the headlines: Davos, G7, G20, Reform, ...all leaders lined up again for a photo shoot. "Do not worry anymore!" so say our Leaders.

How long will it take before people just do not believe "the green shoot-spin" anymore? The system is doomed, it is too late. Pension funds will go bankrupt, people will revolt. The politician and bankers f#cked it up, they know and of course they know where this ends.

Update: A Death Blow to Europe's Welfare State - Wow! Look at this chart: ZeroHedge

Fiscal crises threaten Europe's generous benefits

My Way; Michael Weissenstein

LONDON (AP) - Six weeks of vacation a year. Retirement at 60. Thousands of euros for having a baby. A good university education for less than the cost of a laptop.

The system known as the European welfare state was built after World War II as the keystone of a shared prosperity meant to prevent future conflict. Generous lifelong benefits have since become a defining feature of modern Europe.

Now the welfare state - cherished by many Europeans as an alternative to what they see as dog-eat-dog American capitalism - is coming under its most serious threat in decades: Europe's sovereign debt crisis.

Deep budget cuts are under way across Europe. Although the first round is focused mostly on government payrolls - the least politically explosive target - welfare benefits are looking increasingly vulnerable.

"The current welfare state is unaffordable," said Uri Dadush, director of the Carnegie Endowment's International Economics Program. "The crisis has made the day of reckoning closer by several years in virtually all the industrial countries."

Germany will decide next month just how to cut at least 3 billion euros ($3.75 billion) from the budget. The government is suggesting for the first time that it could make fresh cuts to unemployment benefits that include giving Germans under 50 about 60 percent of their last salary before taxes for up to a year. That benefit itself emerged after cuts to an even more generous package about five years ago.

"We have to adjust our social security systems in a way that they motivate people to accept regular work and do not give counterproductive incentives," German Finance Minister Wolfgang Schaeuble told news weekly Frankfurter Allgemeine Sonntagszeitung on Saturday.

The uncertainty over the future of the welfare state is undermining the continent's self-image at a time when other key elements of post-war European identity are fraying.

Large-scale immigration from outside Europe is challenging the continent's assumptions about its dedication to tolerance and liberty as countries move to control individual clothing - the Islamic veil - in the name of freedom and equality.

Deeply wary of military conflict, many nations now find themselves nonetheless mired in Afghanistan on behalf of what was supposed to be a North Atlantic alliance, shying away from wholesale pullout while doing their utmost to keep troops from actual combat.

Demographers and economists began warning decades ago that social welfare was doomed by the aging of Europe's baby boomers. Some governments had been trimming and reforming, but now almost all are scrambling to close deficits in order to prevent a wider collapse of confidence in the euro.

"We need to change, to adapt ... for the sake of the protection of our social model," European Union Commissioner Joaquin Almunia of Spain told reporters in Stockholm Thursday.

The move is risky: experts warn the cuts could undermine the growth needed to pull budgets back on a sustainable path.

On Monday, Britain unveils 6 billion pounds ($8.6 billion) in cuts - mostly to government payrolls and expenses. The government has promised to raise the age at which citizens receive a state pension - up from 60 to 65 for women, and from 65 to 66 for men. It also plans to toughen the welfare regime, requiring the unemployed to try to find jobs in order to collect benefits.

Britain says it will limit child tax credits and scrap a 250-pound ($360) payment to the families of every newborn. Ministers are reviewing the long-term affordability of the country's generous public sector pensions.

Funding for Britain's nationalized health care service will be protected under the new government, however, and should rise each year to 2015.

France's conservative government is focusing on raising the retirement age. Many workers can now retire at 60 with 50 percent of their average salary. Extra funds are available for retired civil servants, those with three or more children, military veterans and others.

A parliamentary debate is planned for September. Unions in France are organizing a national day of protest marches and strikes on Thursday to demand protection of wages and the retirement age.

In Spain, billions in cuts to state salaries go into effect next month, and the Socialist government has frozen increases in pensions meant to compensate for inflation for at least two years.

"They've hit us really hard," said Federico Carbonero, 92, a retired soldier. He said he was unlikely to live long enough to see the worst of the pension freeze, but had no doubts he would have to start relying on savings to maintain his lifestyle.

Spain is cutting assistance payments for disabled people by 300 million euros ($375 million) and did away with a three-year-old bonus of 2,500 euros ($3,124.25) per new baby. It also has proposed hiking the retirement age for men from 65 to 67.

Countries in northern Europe have done a far better of reforming social welfare and have unemployment systems that focus on re-employing people instead of making their unemployment comfortable, said Gayle Allard, a professor of economic environment and country analysis at the Instituto de Empresa in Madrid.

Denmark and other Nordic countries are known for the world's highest taxes and most generous cradle-to-grave benefits. Denmark has implemented a system known broadly as "flexicurity," which combines flexibility for employers to hire and fire workers with financial security and training to prepare for new jobs.

Denmark had a 7.5 percent unemployment rate in the first quarter of this year, well below the EU average of 9.6 percent. Swedish and Finnish unemployment stood at 8.9 percent. Norway, with some of the world's most generous unemployment benefits fully funded by oil for the forseeable future, has Europe's lowest jobless rate, just 3 percent in April.

Southern European countries that have not moved toward reforming welfare in the same ways are paying a steep price.

After sharp cutbacks imposed as the condition of an international bailout this month, Greeks must now contribute to pension funds for 40 instead of 37 years before retiring, and the age of early retirement is set to 60 at the earliest.

Civil servants with monthly salaries of above 3,000 euros ($3,750) will lose two extra months of salary - one paid at Christmas, the other split between Easter and summer vacation.

In Portugal, seen as another potential candidate for bailout, the government is focusing on hikes in income, corporate and sales taxes and has avoided drastic changes to welfare entitlements. Unemployment benefits will be cut somewhat and the out-of-work will have to accept any job paying more than 10 percent more than what they would receive in unemployment benefits.

The government is also stepping up checks on welfare claims, freezing public sector pay and slicing public investment.

"There's been a lack of willingness to shift away from welfare as purely social protection towards an approach which has been in much of northern Europe in recent years, which is welfare as social investment," said Iain Begg, a professor at the London School of Economics and Political Science's European Institute.

Otto Fricke, a budget expert for the Free Democrats, the coalition partner of German Chancellor Angela Merkel's Christian Democratic Union, told The Associated Press that no decisions on cuts have been made, but everything is on the table except education, pension funds and financial aid to developing countries. At least one high-ranking CDU member has called for the idea of protecting education to be re-examined, however.

German public education, which was virtually free until 2005, when some of Germany's 16 states started charging tuition fees of 1000 euros ($1,250) a year.

Virtually all Germany's students pay that much or less to attend state-funded universities, including elite institutions. Education isn't as cheap elsewhere in Europe but the 3,290 pounds ($4,720) per year paid by British students at Cambridge is still far less than Americans pay at comparable schools like Harvard, where annual tuition comes in just shy of $35,000.

The idea of cutting education is proving hard to swallow in the face of Germany's promise to contribute up to 147.6 billion euros ($184.5 billion) in loan guarantees to protect Greece and other countries that use the euro from bankruptcy.

"I am worried that this crisis will also affect me on a personal level, for example, that universities in Germany will raise the tuition in order to pay the loan they give to Greece," said Karoline Daederich, a 22-year-old university student from Berlin.


Associated Press writers Juergen Baetz and Kirsten Grieshaber in Berlin, Malin Rising and Karl Ritter in Stockholm, David Stringer in London, Veronika Oleksyn in Vienna, Harold Heckle in Madrid, Elaine Ganley in Paris, Elena Becatoros in Athens and Barry Hatton in Lisbon contributed to this report.

Friday, May 21, 2010

Top of the List of Emerging Fascist States: Australia

Fancy Australia? Like being plucked off the street by faceless men? Should, according to you, people with a different opinion, STFU and the State should sort them out? Are you in favour of "Das gesundes Volksemfinden" directed by Government and the corporate world?

Do not look any further: you found it!

Please go. Like a brand, it says a lot about you.

WikiLeaks founder has his passport confiscated

This is a reminder that one can't run around exposing the secrets of the most powerful governments, militaries and corporations in the world without consequences:

The Australian founder of the whistle blower website Wikileaks had his passport confiscated by police when he arrived in Melbourne last week.

Julian Assange, who does not have an official home base and travels every six weeks, told the Australian current affairs program Dateline that immigration officials had said his passport was going to be cancelled because it was looking worn.

However he then received a letter from the Australian Communication Minister Steven Conroy’s office stating that the recent disclosure on Wikileaks of a blacklist of websites the Australian government is preparing to ban had been referred to the Australian Federal Police (AFP).

Last year Wikileaks published a confidential list of websites that the Australian government is preparing to ban under a proposed internet filter -- which in turn caused the whistleblower site to be placed on that list.

The Australian document was so damaging because the Australian government claimed that the to-be-banned websites were all associated with child pornography, but the list of the targeted sites including many which had nothing to do with pornography. That WikiLeaks was then added to the list underscores the intended abuse.

Forcing Assange to remain in Australia would likely be crippling to WikiLeaks. One of the ways which WikiLeaks protects the confidentiality of its leakers and evades detection is by having Assange constantly move around, managing WikiLeaks from his laptop, backpack, and numerous countries around the world. Preventing him from leaving Australia would ensure that authorities around the world know where he is and would impede his ability to maintain the secrecy on which WikiLeaks relies.

Secrecy is the crux of institutional power -- the principal weapon for maintaining it -- and there are very few entities left which can truly threaten that secrecy. As the worldwide controversy over the Iraqi Apache helicopter attack compellingly demonstrated, WikiLeaks is one of the very few entitles capable of doing so and fearlessly devoted to that mission. It's hardly surprising that those responsible would be harassed and intimidated by governmental agencies -- it'd be far more surprising if they weren't -- but it's a testament to how truly threatening they perceive outlets like WikiLeaks to be. I hope to speak with Assange later today and will provide more details as I know them.

Tuesday, May 18, 2010

Sovereign Man: Operate Above Governments

For the restless souls among us: here is a very nice web site for the independent man, the eternal tourist; the man/woman who wants to operate above any government interference. You do not have to be rich to be sovereign, but certainly not poor. Subscribe to this newsletter if you want: full of tips, independent thinking, tax advices, etc, etc.

Sovereign Man

Notes from the Field

Date: May 18, 2010
Reporting From: Undisclosed location

You know by now that I generally don't spend very much time in the US.

I think there are more desirable places out there... and to me, the US is just like any other country in decline like Italy or Spain-- I really enjoy it as a tourist, I just don't care enough for the politics or media to stay for long periods of time.

That's one of the benefits of being a permanent traveler with no fixed home: I have the luxury of not being constantly force-fed propaganda that spreads fear and ignorance.

When I come back to the states, though, I feel like there's a political agenda being thrown in my face everywhere I look. One of the most pervasive, from my outlook, is this notion that the economy is rosy, and that the government has everything under control.

I think this is absolutely ludicrous. The government doesn't have anything under control, including themselves. Instead of putting the country on sound financial footing, they're doing the exact opposite-- spending without limit, borrowing without regard, and furthering a culture of entitlement.

Congressman Ron Paul was on CNBC yesterday talking about these same issues. He criticized the administration and Congress for their reckless spending, and he railed against the Federal Reserve for inflating away the currency and bailing out select banks.

For whatever reason, his ideas don't seem to resonate with the public. Becky Quick even chided the Congressman for his bullishness on gold as a more effective store of value than paper dollars.

In fact, a bit of basic math shows us that, since the dollar became a worthless piece of paper in 1971 when Nixon left the gold standard, gold has generated a 9.2% annualized return in dollar terms, while stocks have only returned an annualized 6.6% and bonds about 8%.

Now, I'm not a gold bug, but I'd rather take my chances on this 'barbarous relic' than on a worthless piece of paper controlled by bureaucrats.

(Actually I prefer ammunition as a store of value, but I'll save that for another time...)

Think about it-- the entire modern financial system is based on a very small group of people having the power to create money out of thin air. It's obvious that this is corrupt and unsustainable.

So is borrowing trillions of dollars each year.

They (the government) think that we can simply grow our way out of debt... that if the economy has a big boost, the size of its debt won't matter very much in relation to the size of our economy and consequent tax revenue.

This is also completely ludicrous. If every single person in the US were to pay 100% of his/her salary for the next year to the federal government in taxes, it still wouldn't be enough to pay off the debt-- the US would still be a few trillion in the hole.

That's just a pipe dream anyhow. The government is going to give the largest voting blocs even more tax cuts and entitlement programs, then stick the bill to (1) future generations; (2) those who are unprepared to deal with inflation; (3) productive citizens who generate wealth and create jobs.

We can see this already happening around the world.

In Portugal, their government has even gone so far as to introduce a special 'crisis tax' to bring down that country's deficit... punishing the entire population for decades of politicians' mismanagement.

In Australia, that government is singling out the resource industry and charging them with a special tax to redistribute mining profits across the rest of the economy.

Sure, that sounds like a great idea, mate. Penalize your most profitable industry that provides ample jobs and wealth, then choke off the profits that they need to reinvest in exploration and extraction technology. That ought to be good for long-term growth.

Unfortunately, this is only the beginning. You can expect even more Draconian measures in the countries with the most desperate balance sheets-- that's the PIIGS, the US, and Japan.

Here's the good news: As an expat, all of these measures are largely meaningless. When you're a 'permanent tourist', governments compete for you rather than try to bleed you dry. They want you to spend your time and money in their country, and they'll do whatever it takes to attract you.

I think there's going to be a massive wave of expatriation over the next few years, and it's already begun. Everyone has a breaking point, and a lot of people are going to be reaching theirs very soon.

The solutions are already out there-- offshore bank accounts, foreign property, tax residency, second citizenship, etc. It's simply a question of will and mental attitude.

Are you seriously considering expatriating or at least planting flags internationally? What's your single biggest question about it? If not, what's holding you back? Let me know by leaving a comment.

Until tomorrow,
Simon Black

Simon Black
Senior Editor,

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Neither this email communication nor content posted to the website is intended to provide personal financial advice. Before undertaking any action described in this letter, financial or otherwise, you should discuss your options with a qualified advisor-- accountant, financial planner, attorney, priest, IRS auditor, Tim Geithner... Also, nothing published in this letter constitutes encouragement to avoid or evade tax obligations in your home country.

Monday, May 17, 2010

Eyjafjallajokull: The Power Of Nature (Video)

Remember the nearby Monster Vulcano Katla has a crater of 10 km!
UPDATE May 17, 2010: tremors near Katla:
UPDATE2 May 17, 2010: Katla is NOT erupting and there are no indications that Katla is about to erupt - Iceland Met Office
UPDATE3 May 17: Bernanke said in 2005: "There is no housing bubble".

In the meantime we put our faith in experts

Thursday, May 13, 2010

Gold Breakout: The System Fails!

Give me the name of one "gold bug" who has not been staring to the gold price for the last 2 years. Only an insider could have understood the vast paper gold market and the impact of promises on the physical market. Well, that's over now; however I still expect a big (paper) gold sell off during the coming market crash but after that the gold price will blast off to uncharted territory. We are only a short time away from a system breakdown and Jim Willie, one of the most colourful and gifted writers, will tell you why.

Gold cannot and will not do down and stay there as some commentators claim; impossible: first of all you have only so much gold in this world (160.000 tons) and only a little bit will be added each year; secondly the gold price is measured in US$ which the Americans are printing until there are no trees left.

My question is: what else can the American financial elite do to frustrate a gold breakout? We had (sorry, have) price manipulation, gold swaps with foreign bank, the paper gold market and the (ongoing) "pretend and extend" policy.

Confiscation of gold? What will the desperate financial elite do? Anyone? I like to hear from you.

UPDATE: First Gold, Now Europe Running out of silver - Zero Hedge
UPDATE1: Speculation of the IMF's SDR as a new world currency: Jesse
UPDATE2: Is there any gold in Fort Knox- Ron Paul (Audio)

Shock Events & Gold Breakout

Financial sense; Jim Willie

The events of the last 12 to 18 months have been as shocking as they have been instrumental in reshaping the global financial structures. In fact, the events have pointed out the fracture of the global monetary system and banking systems. The steady stream of events is accelerating in scope and intensity. The fractures are finally being recognized. The key to understanding the continuation of disruptive and chaotic events is the realization that nothing has been fixed, no remedy put in place, no reform agreed upon, no liquidation of impaired bank assets completed, and no work toward a more stable system. Instead, the old system has been subjected to a patchwork of futile efforts and initiatives that speak more of bilking the system, redeeming impaired assets, and channeling funds to those most responsible for the fractures. Instead of seeking solutions, the banking and political leaders revert to what has been their shelf of failed tools, since they know nothing else, stuck in the Keynesian box, painted into the 0% rate corner. The costs are horrific when solutions are not pursued. The beneficiary is gold, since all wayward policy costs money, which must be created, worsening the debasement. Gold rises with new money creation gone amok. $Trillion rescue packages have become the norm, in a cavalcade of debased currencies. Historical highs come for gold and silver, with gold fighting the political battles, but silver riding through the gates with high speed and raised dust. Central banks own no silver, and industry consumes silver.

The system cannot repair itself because those in charge at the helm making decisions caused the fractures and protect their power base. They live and operate within a system that no longer functions effectively. Reform would involve bankruptcy for the elite in charge. Remedy would involve liquidation of the balance sheets for the elite in charge. True crackdown would involves prosecution and jail time for the elite in charge. Changing of the guard would involve lost power for the elite in charge. Independent audits would involve revelations and disclosures of criminal fraud on a widespread basis. So the system lumbers along, broken. Nowhere has the brokenness gone more unaddressed than under-water mortgages for 22% of the American public. True remedy and crackdown would involve a mushroom of criminal allegations from bond fraud, revelation of duplicate usage for mortgage payment revenue streams, lost property titles, and counterfeit fraud. That is a major reason why Fannie Mae was nationalized, to keep the fraud under the roof of the greatest criminal organization on earth, operating under the United States Government, where the corruption, theft, and fraud can be protected by the numerous agencies. The global response has been and will continue to be a flight into gold, finally recognized as a zero risk safe haven. The global decline in trust for government debt is the death knell for the major currencies, the monetary system, and the central bank franchise system. It is also the harbinger for $2000 gold and $50 silver.

Review briefly the scattering of powerful events in just the last 12 to 18 months. History is being made before our eyes. The franchise system of central banks and paper fiat currency has failed before our eyes, but with no specific recognition. The flood of new money creation testifies to both failure and desperation. New debt within the USEconomy no longer produces positive economic activity. The events are so diverse that any competent analyst must conclude that the global financial system has broken in irretrievable, irrevocable, irreversible manner. If the following diverse topics of disruption, breakdown, malfunction, denunciation, incompetence, compromise, corruption, and contagion do not wake people out of their slumber, nothing will. If investors do not take action amidst the plethora of warning signals, they deserve to be gobbled up and ruined. Before long, personal self-defense activity will be declared improper, illegal, and even possibly terrorist in nature. Please pardon the brevity of each topic, but too many exist, and building an argument for each would require at least 2 to 3 pages. These topics of breakdown, failure, corruption, and contagion are covered every month in the Hat Trick Letter. Skim to the end to review the gold market summary, where new highs are being registered in almost every single currency on earth. The topics covered in brevity are the same ones covered in careful treatment for the last 12 to 18 months. The array of topics arranged in sequence serves to highlight the shocking events and the historically unprecedented desperation in response, all of which has led to a powerful gold rally based on respect, integrity, and standalone value.


Last May 2009, the Saudis with Russians and Chinese at their sides announced the eventual end to payments for crude oil to be honored in USDollars. The concept was endorsed by Japan and Germany, whose counselors from Berlin might be far more integral in reshaping the global landscape than the US-UK aging power merchants are willing to concede. The disrespect shown the USDollar has turned to revolt, seen in G-7 Meetings. In fact, the G-7 has morphed into a country club meeting for former power brokers. The new G-20 Meeting is the forum of substance, where the Chinese, Russians, Indians, and Brazilians can have a voice and no longer sit in the hallways while decisions are made. The USDollar is on the butt end of a Global Paradigm Shift with extreme force. The beleaguered buck will limp along until alternatives in the planning stage are launched. That is soon, really soon, like before 2011 is too far along. Gold will compete well with both the USDollar and any newly launched currency alternative.


The absorption of Fannie Mae and American Intl Group into the USGovt conglomerate of bureaucracy, fraud, waste, confusion, protection, syndicate wings, off-shore accounts, and printing press operations was an urgent step. It placed the corrupted mortgage finance structures and credit derivative framework under the USGovt aegis, where the syndicate agencies can provide both proper attention and protection from prosecution. The Black Holes will cost the USGovt a few trillion$, my forecast made in 2007 and 2008. Shifting ownership of securities and putting them under official stewardship has effectively eliminated the potential for lawsuits by investors foreign and domestic. Fannie Mae is the nexus of numerous criminal fraud rings whose total value is north of $3 trillion. It is the vast sewage pit replete with slush funds, where obscure accounts reside never to face scrutiny, used to balance the accounting without prying eyes. Gold will be viewed as the clean alternative to paper, especially the toilet paper mixed in sewage treatment plant vats.


Nowhere is the brokenness more evident than in the insolvent big banks. Not a one is solvent, all vampires in search of tangible assets, willing to trade worthless stock shares for assets. Lending is a thing of the past. Their loan loss reserves have vanished, as reserves are tucked away from the lending circles in the US Federal Reserve. Insolvent banks engage in minimal lending, since approval is inhibited by the lack of working capital. The banks are loaded down by an endless raft of foreclosed properties, kept from the market, not on the market. Speaking of insolvent, the USFed itself is in wretched shape. A mere 5% decline in their mortgage assets translates to a negative balance sheet. A more likely 40% decline in mortgage assets, in closer tie to reality, translates to hundreds of billion$ in negative balance sheet. This agency, this august USFed is supposed to lift the US financial structure from its underwater grave? Methinks not!


On April 1st of 2009, the Financial Accounting Standards Board endorsed corrupt accounting of impaired assets. Banks were permitted to place any value they wanted, with clumsy laughable minimal justification. Enter the basis of the great US stock rally. What a joke! Shock waves like on May 6th will likely become the norm. Bond shock waves are in vogue. Without proper accounting, valuation exercises in US financial arenas becomes a farce, joke, travesty.


The QE1 was welcomed. Vast new money printing for the purpose of meeting federal deficits, rescuing big banks, and providing vast slush funds was deemed necessary. The end of QE1 was heralded but a lie. Perhaps it was proclaimed at an end so that QE2 can be launched amidst fresh needs. The QE2 seems to be launched in Europe with a grand US conduit. In March, USFed Chairman Bernanke lied through his teeth to the USCongress about how Quantitative Easing had come to an end, that USTreasurys were not being monetized. In late April, Bernanke admitted his lie to the same US Congressional committee. Remove QE and the entire system grinds to a halt, then collapses under the weight of debt. Claims of QE removal serve as deceptive political clapptrapp, pure diversion from the reality. The QE is as crucial as the right leg. Uncle Sam cannot negotiate the mine field while skipping and hopping on one leg.


You gotta love the denials that the USTreasury Bond complex is a bubble. Its needs have grown enough to demand a significant slice of the entire global savings. Actually, the global savers have lost their appetite for further USTBond buys. As a bubble, it is fed by accelerating sources of funds, mostly nowadays from printing press creation of money. The near 0% interest rate is a dead end with no reversal, since higher borrowing costs would bring about a cave-in for the USTBond bubble. The USTreasury Bond bubble is the sentinel signal for the gold market to release, find global acceptance as true safe haven, and find proper value over $2000 per ounce. A supposed safe haven can NEVER be a bubble. In fact, as the USGovt adopts one broken child after another like Fannie Mae and AIG, the US$-based obligations extend beyond federal debt to cover mortgage wreckage and credit derivative fires. To call USTreasurys a safe haven is like calling Al Capone a savior, calling Lloyd Blankfein a crusader for God, calling Alan Greenspan the architect of prosperity, or calling Franklin Roosevelt a friend to gold investors.


Banks are falling victim to death experiences at an accelerated rate. The bank failure rate grew in mid-2008. The rate grew again in mid-2009. In 2010, already the rate has accelerated again. Bank failures are picking up speed rapidly. The FDIC insurance fund is deep in the red. The bank fees were levied at 13-fold increases last year. Even advanced bank fees have been exhausted by the FDIC. Soon the FDIC will need more billion$ in funds. A new wrinkle is that commercial mortgages are killing banks, at a time when many assets are revealed as being held on balance sheets at double their true value. See the recent bank failures and consistent over-valued assets in liquidation. The problem is systematic and endemic.


Despite claims of a stabilizing housing market, the mortgage delinquencies and enormous inventory of bank owned homes is not being relieved. Fannie Mae reports still rising mortgage delinquencies. Prime Option ARMs are showing delinquency rates that rival the subprimes. Commercial mortgages are also showing delinquency rates that rival the subprimes. The newest wrinkle is Strategic Defaults, where people just stop paying their mortgages, an active decision, often by people with high RICO credit scores. Many are demanding the banks to produce their legitimate property title. Many are sick & tired of bank welfare, with Wall Street taking the lion's share of aid. Some suspect vast bond fraud. Civil disobedience a la Henry David Thoreau has entered the equation. With each new delinquency comes a default and more inventory. The entire USEconomic growth spurt in the 2002 to 2005 timeframe was founded on a housing bubble that was washed away. No new bubbles can be found of practical usage, only the USTreasury Bond bubble acting like a powerful black hole to inhibit capital formation.


In the last few weeks, the metals markets are abuzz over the revelations by Andrew Maguire that the London silver market is rigged from JPMorgan trading desks. Price suppression has come from naked shorting, otherwise known as selling silver contracts without collateral, without benefit of metal. The paper Ponzi scheme of the London Bullion Market Assn and the COMEX is slowly being unmasked. The concentrated short positions have no economic justification, and represent over a year of global mine output. The GATA organization is being vindicated, soon to be granted great respect. Without the outsized naked short position in silver, all completely illegal, all totally protected by the USGovt and its obedient regulators, the silver price would be north of $50 per ounce. The same rigged market exists in gold. Without the outsized naked short position in gold, the gold price would be north of $2000 per ounce. That is where both are heading.


The Big Four banks in the United States had better grow accustomed to legal charges and lawsuits. For several years, they sold toxic assets, misrepresented asset sales, have engaged in naked shorting of metals, have sold bogus derivative products, have laundered counterfeit bonds of various types, have paid in collusion for debt ratings, have engaged in insider trading schemes, and much more. My sources tell of powerful Chinese interests and indirect agents putting tremendous pressure on the USGovt to enforce the law and enforce the regulations, which would effectively release clogged markets and force prosecution. They are ultimately USTreasury Bond creditors and Gold investors. They are angry. Watch the prosecutions and civil lawsuits continue like an endless parade. Watch for exposés and sting operations also.


The common practice of off-balance sheet usage is rampant. Various devices for temporary account ledger items are under fire. Banks place unsold home foreclosure inventory often off the balance sheet. Bigger banks place wrecked mortgage assets off the balance sheet. Loser credit derivatives and other derivatives routinely are placed off the balance sheet. The USTreasury funds its own USTBond purchases from agencies in the Caribbean, again off the balance sheet. The entire Enron operation, from its Harvard hatchery, its Citigroup funding, and its JPMorgan special purpose vehicles, was an off-shore enterprise also. Proper disclosure involves proper valuation. False accounting prevents the disclosure process. The motive is simple. The big banks are insolvent and do not wish to disclose their insolvency. Lending as a result suffers.


Imagine a nation whose central bank is part of a foreign owned syndicate, with full control of the monetary management, full control of channels to their favorite bank entities, full control of destinations for funds. The USFed is a paid consultant for the USCongress which refuses to disclose its gold inventory, refuses to disclose its currency management, refuses to disclose its disbursement of TARP Funds, refuses to disclose its monetization of USTreasurys and USAgency Mortgage Bonds, refuses to disclose its Wall Street fund swaps, and desperately conceals its money laundering for CIA narcotics funds that enter the Wall Street system. Demands for a USFed audit coincided with a May 6th freakish stock plunge, resulting in watered down language for power to audit the USFed itself. The new bill at least is a foot in the door. Let's hope it is size 22 like Shaquille O'Neal.


After the 2008 fiscal year USGovt deficit was announced in the $1.5 trillion range, shock was felt. The American public was told of a lower $1.3 trillion estimated deficit for 2009. It also ended up in the $1.5 trillion range. Expect the 2010 deficit to again be at least $1.5 trillion. Federal revenue receipts are still trending down for both individual and corporate tax sources. Another stimulus bill is soon to be entered, unless the nonsensical story of a recovery is actually embraced and believed. Funding of the Fannie Mae and AIG black holes is costly. And never overlook the endless wars and defense (offense) programs. Their budgets are sacred, never debated, and always endorsed without delay. The end result is a continued flood of USTreasury creation, at a time when refunding rollovers are required. Gold competes with this travesty, competes successfully, seen as a carnival sideshow moved to center stage. Record debt issuance occurs each month.


The details of USTreasury official auctions have become a subject of open debate. Irregularities among direct and indirect bidders has attracted attention, bad attention. Simple calculations reveal how USTBond purchases by known sources account for less than half of USTBonds auctioned off, the difference made up by pure monetization in the typical secretive centers like the Caribbean bank centers. The Treasury Investment Capital (TIC) Reports continue to reveal a decline in most nations for USTreasury holdings, yet even more USTBonds are sent into the market. The monetization is the only answer to explain vast anomalies.


A new phenomenon, documented, explained, even with visual aids, was given in the May Macro Economic Report out last week. The monetary base is accelerating upwards at a mindboggling rate. The broad money supply in usage is actually falling, due to reduced lending and loan approval. The money velocity has fallen dangerously low, like to levels seen in the teeth of vicious recessions. Thus the monetary inflation, Bernanke's reason for being, has not been successful. The relationship between broad money supply and declining labor market is well known, tracked expertly by John Williams and his Shadow Govt Statistics staff. The conclusion is to expect a nasty recession to continue, to reappear, depending on your perspective and level of denial. Money is being thrust into the system, but it is not being put to work, as capital formation is non-existent. Think of a big car burning its engine, revving up wildly, but going very slowly down the road. Blown pistons and gaskets litter the roadway.


The Exchange Traded Funds are a system for Wall Street to control prices for key items. The natural gas ETFund has had little bearing on the natural gas price. The silver ETFund (SLV) inventory has diverged from the silver metal price, the lost correlation as testimony to corrupted management. The lazy investors prefer to own an ETFund out of unwillingness to research or manage the asset, preferring to open the door to corrupt management by Wall Street firms, the same ones who corrupted the mortgage bond market, the muni bond market, the oil market, and the entire stock market. The most corrupt of all ETFunds are the Street Tracks SPDR (GLD) gold fund, the Barclays (SLV) silver fund, and the Goldman Sachs (GDX) gold mining fund. Each of these funds serves an important role in the price fixing, price manipulation, and heavy handed leveraged control of price suppression. If investors are loaded with such ETFunds, then someday they will realize a divergence between the share price and the underlying prices, probably some lawsuits for impropriety and malfeasance, and likely forced liquidations without participation in the rallies observed. As Stewart Dougherty put it, "Big Money is going to be way too smart to buy the Exchange Traded Funds that have been pimped to retail investors as a way to sterlize their money and keep it out of the metals market for which it was internded." The solution is to own a gold or silver bullion account. See the Sprott (PHYS) fund which is given a 30% price premium, due to integrity.


The public disgust and anger is growing fast. The Tea Party movement has gained acceptance and vigor at the grassroots level. Some like Bill Clinton attempt to associate the Tea Party participants with terrorists, which is ludicrous. George Washington, Patrick Henry, Thomas Jefferson, John Adams, James Madison, and especially the outspoken Benjamin Franklin might be maligned if alive today, or at least harassed with tax audits. At least one might sit in a secret prison without criminal charges filed. The USCongress is distrusted more than Wall Street. Bankers are despised and disrespected. The people did not want a national Health Care program, but their desires are secondary. The USGovt had better beware of a blossoming of civil disobedience in reaction. One form is not to make mortgage payments. Another form is to drain investment accounts and to purchase gold & silver, coins or bullion, either way.


International prestige has vanished for the United States. The revolt that started against the USDollar two years ago has branched in multiple directions. US bankers are on the extreme defensive, the former ambassadors to economic export. The narco war and oil war have tarnished the US reputation. The military services fraud has tarnished the US reputation. The abuse of NATO airbases has tarnished the US reputation. The Wall Street toxic bond export on a global scale has tarnished the US reputation. The interference with foreign sovereign debt by Wall Street and US-based hedge funds has tarnished the US reputation. The heavy hand of IMF and World Bank leverage, pressures, and poison pills has tarnished the US reputation. The ratcheting trade war and stream of tariffs and complaints by the USGovt have tarnished the US reputation. The Madoff Ponzi Scheme has tarnished the US reputation. The numerous nationalized companies has tarnished the US reputation. The new prosecutions against Wall Street fraud have tarnished the US reputation. The flood of new USTreasury Bond supply has tarnished the US reputation. The lack of leadership in times of crisis has tarnished the US reputation.


In the last two years, much attention has been given the Flash Trading, also called High Frequency Trading, even the basic name of Computer Program Trading. Estimates that 73% of the New York Stock Exchange trading volume is from program trading. So Wall Street is essentially deeply committed to circle jerk endeavors, or exercises to eat each other' lunch, certainly not producing anything. Paul Volcker accused the financial industry of one good innovation in 20 years, the automatic teller machine. He finds no value in either credit derivatives or computer program trading. In fact, much of the Flash Trading proprietary devices are elaborate insider trading mechanisms that view the order stream and front run. See the Goldman Sachs incident one year ago, when an employee stole the illegal software, but the FBI came to the rescue of GSax and kept the story and device under wraps. The Flash Trading was unleashed on May 6th again. A grand heist ensued, clearly motivated by insider information of a weekend European bank rescue and $1 trillion monetization package. Lack of liquidity is blamed, but so is lack of value. In today's world of high finance, a flash trade computer program device is a different form of pistol used in a holdup, gunning for the sell stops, filling them at absurdly low levels, mugged on the trading platforms. The Dark Pools in OTC trading account for $60 trillion in annual activity, versus a mere $5 trillion in monitored traffic. That translates to more back alleys for mugging than passageways well lit to prevent criminals at work.


Since late November when the Dubai debt went into default, the sovereign debt crisis has been unleashed like a relentless storm. Following Dubai was Greece, the common denominator being the London and West Europe banks. Denials are shallow minded and stupid when analysts claim that sovereign debt risk is fenced from one nation to another. Contagion will be the norm. Much of the Greek Govt debt is held by Swiss, London, and French banks. So a rescue of Greece is tantamount to a rescue of these big exposed banks. The rash of sovereign debts facing default, or pressure toward default, testifies to the failure of the monetary system. The usage of newly hatched money to fix problems from unbacked untethered unsecured money is lunacy. Eventually, a condition marred by debt constipation results. Uncle Sam needs to visit the toilet for relief but cannot, as his bowels are blocked by debt without benefit of healthy liquidity. His intestines are clogged with financial engineered vehicles, basic fur balls. The next nations to face the sovereign debt hammer of scrutiny and market retaliation are Italy, Spain, France, and then England. The fireworks are nowhere finished. With each new episode, the Gold price will rise further.


The sovereign debt crisis is actually a symptom of the failed central bank franchise system. The central bank had better hurry to produce new global reserve currencies backed and fortified by gold, also possibly by crude oil, or else the fires in the government debt will continue to burn. The end result will be ruined currencies, broken national banking systems, national budgets in tatters beyond remedy, economies ground to a halt, and eventually civil strife. We are witnessing the end convulsions of the fiat paper monetary system. The central banks are powerless to stop the crisis. The $1 trillion European bank bailout plan gave lift to the Euro currency for less than 24 hours. The USDollar is viewed as likewise wrecked and undermined as the Euro. In my view, the simple perspective is that their near 0% interest rates are like a minimal pulse on the banking system, a depleted body lying in the Intensive Care ward. The currencies are all dying. Gold will rise until given proper recognition, then it will rise even more.


No charts are necessary. A thousand words might suffice, rather than six charts showing Gold breaking out to new highs across the world. Some major points scream to be told. Here is a list:

  • Gold is rising in every single major currency
  • Gold is not a hedge against price inflation, but rather against ruined monetary system
  • Gold is making new highs in almost every single major currency
  • Gold had consolidated in price for four months, the base for breakout
  • Gold will reach $2000 in price within the next two years time
  • Gold is desperately needed to anchor the failed fiat paper currency system
  • Gold is planned for a component role in the new Northern Euro currency
  • The sovereign debt crisis has fueled demand for Gold without the full realization that the central bank franchise system has failed along with the fiat currencies
  • Quantitative Easing is monetary hyper-inflation, the fuel of the Gold rally
  • Gold is urgently needed as a bank reserve to ensure proper function
  • Gold contains no inherent counter-party risk
  • Gold is in the midst of vast supply shortages
  • The Gold Cartel is seeing defections among its allies, who are buying gold bullion after the cartel knocks down the price
  • Nations are hoarding their gold mining output, the latest possibly Venezuela
  • Gold is seeing panic buying in parts of Europe, like Austria
  • Gold mining output is trending down for the past few years
  • Gold was by far the #1 investment asset in the entire 2000-2009 decade
  • The US Dow Jones Industrial Average is in multi-year decline, in Gold terms
  • Gold is protected from human corruption, except in its theft and hollow replacement
  • Gold market is receiving heavy scrutiny for corrupt metal exchanges
  • The London Bullion Market Assn has been in default since December, bribing on delivery demands to receive cash settlement with a 25% premium paid
  • The GLD gold exchange traded fund is a corrupt diversion from metal ownership
  • Hong Kong is soon to offer several exchange traded funds for Gold
  • Gold can and does rise in price concurrently with the USDollar
  • Future payment for oil shipments will require a gold-backed currency
  • New barter systems of trade will contain a gold core component
  • Gold is the ultimate safe haven asset
  • The USTreasury has no gold reserves, as Fort Knox is empty, since the Clinton-Rubin gang leased it and sold it all
  • PIGS nations have more gold reserves than the United States
  • Switzerland and Canada have almost zero gold in national reserves
  • The IMF gold sales are lies, actually closed out USGovt gold short transactions from past years when the Clinton-Rubin gang leased gold for sale
  • Gold leased from the Italian central bank was lost by LongTerm Capital Mgmt
  • Bear Stearns was targeted for a kill, since it was long in gold, defying Wall Street
  • China participates with the IMF sideshow game in order to buy its gold pledges
  • If Gold were revalued at 3x to 5x the price, many national banking systems would be restored to health and solvency
  • Price hyper-inflation is the likely next blemish on the US landscape, which will fuel broad public gold demand
  • Any attempt by the USGovt to confiscate gold would result in a gigantic backfire, with the gold price doubling in price, and US foreign assets subjected to freezes
  • Gold will reach its high range when US bankers along with London bankers face a Nuremberg style criminal trial on the global stage
  • Prepare for the arrival of a small group of new Gold-backed currencies, the USDollar death knell
  • As John Pierpont Morgan once stated under oath before the USCongress and the Pujo Commission in 1913, "Gold is money, and nothing else"

Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a Ph.D. 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.

Jim Willie CB is the editor of the "HAT TRICK LETTER" Use the below link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise like a cantilever 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 heretical central bankers and charlatan economic advisors, whose interference has irreversibly altered and damaged the world financial system. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy. A tad of relevant geopolitics is covered as well. Articles in this series are promotional, an unabashed gesture to induce readers to subscribe.

Sunday, May 9, 2010

Sunday: Waiting For "Something Big" From EU Finance Ministers

And in the meantime: Guillermo Portabeles!

Saturday, May 8, 2010

BREAKING: Feds Probe JP Morgan’s Silver Trades

Keeping the silver price down is one thing, but getting away with it is another. Will justice prevail?
J. P. Morgan has a strategically huge short position in silver (app. 75% of total world mine production), and is using it to 'manage' the price of the market at will.

Years of nagging and perseverance by
GATA and especially Theodore Butler, David Morgan and Jason Hommel seems to be paying off.

Thank you also to the whistle blower Andrew Maguire

Why silver? Read
here a "thought" experiment by Jesse.

Manipulation of gold and silver prices has been US government policy for 20 years now. Keeping the gold and silver price down supports the "strong dollar policy". Gold and silver price manipulation will dwarf the crimes committed by Bernie Madoff, it is a crime, a fraud.

The US$ is toast and the manipulators are going to burn in hell. J.P. Morgan first,

UPDATE: The article in the New York Post, Business Section of May 09, 2010.

By Michael Gray, New York Post Reporter, in his blog

Federal regulators have launched both a criminal and civil investigation against JPMorgan Chase for its trading activity in precious metals market.
The Commodities Futures Trade Commission is looking into civil charges and the Department of Justice’s Antitrust Division are handling the criminal probe, according to sources who did not wish to be identified due to the sensitive nature of the information.

See More information in New York Post Sunday Business section:

Friday, May 7, 2010

Jim Cramer of CNBC Explains How He Manipulates The Stockmarket

To all of you who are investing in the stockmarket. There is always a Winner and that is certainly not you.

Sunday, May 2, 2010

Saturday, May 1, 2010

Let The Reign Of Terror Begin

Yes, Wall street is rotten to the core, but rotten only with the grand assistance of the politician. After all, Wall street pays 4,5 Billion US$ per year to Congress for massaging points of view of the honorable members of Congress. And 44% of members of Congress are Millionaire, so it is difficult to say Congress represents the American society as far a wealth is concerned.

Money (Banks) and Power (Congress) are so intertwined and their incestuous relationship so strong that it looks at the moment we have to live with this as a matter of fact.

Can you imagine the Power these people have? The power to manipulate everything? Interest rates, commodity -, especially precious metal, prices, stock exchange, statistics, even the consumer confidence index cannot be trusted. The sad thing is also that there is nothing that stops them as the (financial) media is stone dead with Zombie journalists, too afraid to betray their Masters, the financial institutions with their adverts.

The arrogance of Keynesian. Luckily there is a natural law in this world called "the law of unintended consequences". You can try to manipulate, but you will never get what you want. And after 50 years of subsidies, import duties, media releases, manipulated statistics, -shares, - prices, everything "pops" to a standstill. We're now waiting for the "hard pop", the second leg down, no escape possible.

Expect mass demonstrations and people demanding change. No, not that change: real change.

So, it will not be long before the politician will bite the head off of the banker. He/she has to, not out of moral reasoning but because he/she wants to get re-elected as his constituency is getting angrier by the day. And with that comes the dirt.

Can't wait.

Let the Reign of Terror Begin

The Daily Capitalist

Congress has been looking for a scapegoat for the crash. It appears that Goldman Sachs is it. Let the show trials begin.

The government always finds someone who did something rotten, blames them for everything, they are tried and convicted with proper bloodletting, the public is satisfied, and everyone forgets about it. This is what happens after every economic crisis yet the cycles keep coming and no one seems to know why other than the usual answer that “greed” caused it.

Greed has nothing to do with the crises, boom or bust.

Greed is a human trait and as such it always exists. This trait is magnified on Wall Street where legions of young MBAs are turned loose, striving to become another Paulson, Soros, or Buffet. Nothing wrong with making money. Greed is moral issue not a legal one. Yet if greed is always there, why aren’t business cycles perpetual?

If you are a follower of J. M. Keynes, then the reason we have business cycles is “animal spirits.” Not a very satisfactory answer from such a lauded economist. All of a sudden, for no apparent reason, our animal spirits, greed or whatever, turn loose and we create booms and busts. Keynes just couldn’t think it through very well.

Fortunately, Ludwig von Mises did. In 1912 he wrote his famous The Theory of Money and Credit which is a groundbreaking study of money in the Austrian tradition. It looks at individual action rather than “national” economic quantities. Begun by Carl Menger, this Austrian School created what is now known as the Marginal Revolution. It rejects the aggregate approach of looking at the economy such as espoused by Keynes. Keynes was an arrogant technician and liked the idea of manipulating things like national money supply, national demand, national wages, and like. Austrians view the economy as the behavior of billions of individuals (Mises referred to this as “human action” or by the Greek name he invented, “praxeology”). Good luck, the Austrians say, trying to figure out what the multitudes are all up to at any given time.

What creates the business cycle, says Mises, is the inflation of money and credit. Only the Fed can do that. This is the key ingredient that Keynes and many Classical economists missed. Turn lose the money spigot and it will flow where opportunity exists. Flood the economy with money and of course greed will occur. So will a boom and bust.

Yes, I know this is quite technical. But the point is that Mises and the Austrians have discovered something quite extraordinary and it was rejected by Keynesian technocrats, now called econometricians, who like national aggregate concepts because they want to control the economy. The only problem is that they don’t know how to do this and their nostrums have never worked in real life. They think that we humans are just some dumb tool to manipulate, sort of a mechanistic, Newtonian view of human behavior. I think we all know that we aren’t “units.” If there ever was a maxim to capture this it would be “I think therefore I am … going to do what I damn well please, so piss off!”

Which gets back to the cause of our crisis. Most Congressmen are Keynesians, whether they know it or not. They believe companies like Goldman caused the crisis by their egregious behavior. All members of Congress want to be re-elected and greedy business people are always good vote getters. They are looking for heads to chop.

This is what is called a “show trial” in less free economies. Stalin loved them because no one knew who would be next and the terror it caused was delicious for a dictator. Chávez is doing the same thing now: Let’s create new laws today and then arrest people for what they did yesterday even though it wasn’t illegal then.

So here is the first trial in a reign of terror on Wall Street:

Federal prosecutors are conducting a criminal investigation into whether Goldman Sachs Group Inc. or its employees committed securities fraud in connection with its mortgage trading, people familiar with the probe say.

The investigation from the Manhattan U.S. Attorney’s Office, which is at a preliminary stage, stemmed from a referral from the Securities and Exchange Commission, these people say. The SEC recently filed civil securities-fraud charges against the big Wall Street firm and a trader in its mortgage group. Goldman and the trader say they have done nothing wrong and are fighting the civil charges. …

Prosecutors haven’t determined whether they will bring charges in the case, say the people familiar with the matter. Many criminal investigations are launched that never result in any charges.

The criminal probe raises the stakes for Goldman, Wall Street’s most powerful firm. The investigation is centered on different evidence than the SEC’s civil case, the people say. It couldn’t be determined which Goldman deals are being scrutinized in the criminal investigation.

Here it comes:

The development comes amid public calls for more Wall Street accountability for the industry’s role in the financial crisis. Though there are multiple ongoing criminal and civil investigations, no Wall Street executives connected with the meltdown have been convicted of criminal charges. …

[I]n the more than two-century history of the U.S. financial markets, no major financial firm has survived criminal charges. Securities firms E.F. Hutton & Co. and Drexel Burnham Lambert Inc. crumbled after being indicted in the 1980s. In 2002 Arthur Andersen LLP went bankrupt after it was convicted of obstruction of justice for its role in covering up an investigation into Enron Corp. The conviction was later overturned by the Supreme Court.