Smoke & Mirrors

By Aubie Baltin CFA, CTA, CFP, PhD.

"The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. If 'Thou shalt not covet' and 'Thou shalt not steal' were not commandments of Heaven, they must be made inviolable precepts in every society before it can be civilized or made free." -- John Adams, A Defense of the American Constitutions, 1787

We are quickly catching up to that infamous "can" that keeps getting kicked down the road when it comes to the QE'S. Whether or not the Fed was successful in creating any growth or stimulating any amount of pent-up demand is debatable, but what it has been successful in, is provoking a great deal of speculative activity, pushing both the Bond and Stock markets up to widely overbought ranges. However, there was never any realistic prospect of creating a beneficial "wealth effect" for the economy as a whole; since none of the $800 billion QE1 or the $600 billion QE2 found its way to Main Street. The historical evidence is clear: The public only increases spending and their debt levels if the perceived increases are of "permanent income" -- not the one shot welfare type gifts. Wealth is driven by the creation of long-term cash flows through permanent jobs and productive investment, not by boosting the valuation of existing paper assets by the FED lowering interest rates, encouraging speculation. There was no reason for people to take much of a permanent signal from fluctuations in a stock market that has lost more than half of its value twice in a decade (and is likely to lose a good chunk of its value again, in the near future; if history is any guide).

IS ANOTHER CRISIS ON THE HORIZON?

If the economy starts to falter, as it seems to now be doing, the great expectations for another QE have become less likely, given the mood of today's Congress; hence the necessity for the government to create another crisis in a hurry. But the reality of seeing QE3 any time soon is far from assured.

Back in the 1930's it was the Keynesian argument that each $1 of government infusion would create $3 to $4 of new private Investment. However, there is overwhelming evidence that the reverse is true. Throughout the 1930's and WW2's massive government spending, it was not until 1947 that we got the 1st dollar of new private investment. We now know that it takes $2.5 to $3 of government spending to generate only $1 of new investment. TARP (QE1) and QE2 did NOT work - unless you call bidding up paper assets working -- which will make the Fed's political opponents object all the more strenuously to approving a new QE3.

"If QE1 and 2 were both dumb and costly, why would any sane person demand more of the same?"

The Fed is running out of ammunition and more importantly credibility. What we are seeing is the gradual abandonment of the Keynesian theory of "print money to save-the-economy" strategy, that never had a lot of logic behind it and has been proven to be wrong time and again (even some in high liberal academic circles have since come to the conclusion that the Keynesian "Create Demand Strategy" never worked).

In propping up both the stock and bond markets (by driving down interest rates to unsustainable low levels) the FED has only succeeded in making the average American's life worse (through a hike in the cost of real goods and services, especially food and energy prices). Does anyone really believe that the CPI is only 1.5%?

As a life long diabetic I know that, both the stock markets and the economy's sugar highs are due for the natural crash that always follows "Sugar Highs".

The risks are now extreme; not only because of psychological and sentiment risk, but the environment of the past few years has been one of massive government and Wall Street propaganda generated euphoria. Any return of fear and uncertainty, in conjunction with the US's weakened overall financial condition now being highlighted in the media all around the world, could bring about the Depression that I have been warning about: Unless there is a complete about face away from Socialism back to our Constitutional Capitalism.

It is too late?

Probably, unless a new dynamic leader emerges who understands Free Market Capitalism and is swept into power with clear, filibuster proof, majorities in both houses of Congress; a perquisite to implementing the sweeping changes that would be required to turn around the direction that the US has been going in ever since 1929. This is not a Democrat vs. Republican tirade: Both parties have been equally guilty. Even Nixon in 1971 stated that "We are all Keynesians Now" as he destroyed the last vestiges of the Gold Standard. The result Prices have been exploding and the US Dollar has been depreciating ever since.

In a solidly trending bull market, an investor can make any number of risk management mistakes and still pull through ok. In a climate like this one however, the same litany of once-forgiving mistakes can spell disaster although risk management is always important but at times like we are now in, it is a matter of life and death (in financial terms at least). Now is not the time to go it alone.

Lately the word, "crisis" can feel like an overused term. But the simple fact is that crisis is everywhere: There is a financial crisis in almost every economy around the world, a crisis in leadership and a crisis of faith in our government. War and terrorism is spreading across the entire Middle East and North Africa, and and.

HOW NOW DOW

Grave macroeconomic policy mistakes have been made by the Central Planners (government) and we are all going to pay the price. A massive decline is coming, shortly or starting later in 2011, or perhaps delayed into early 2012 if Bernanke can manage to get a large enough QE3. But the QE tactics are disastrous for our economy in the long run. They are doing nothing for households, small businesses or small banks, which are the backbone of our historically strong capitalist economy. Fifty three percent of all people either are receiving government assistance in America or are employed by the government. This is Socialism folks, not Capitalism and that is the problem. Socialist policies are coupled with an obsession to pump up a few large, mega banks and Wall Street to the tune of trillions of fiat dollars that do not find their way to Main Street but go directly to paying billions in bonuses, some of which is returned as political contributions.

In my constant search for reliable information, I was having lunch (my treat) with a real estate developer friend of mine and he related some startling facts. He told me of several successful housing construction companies, who like him, were large enough to have employed hundreds of people, maybe thousands if all aspects of construction industry are considered. On average, they used to build 200 - 500 homes a year, but are now down to less than 50 and are having trouble selling those 50, so they are buying the homes themselves and renting them out to try and keep their few remaining key employees and recoup some of their costs. That's a 90% drop in new home building, a far greater number than the lying government statistics that we are getting fed by the mainstream media and Wall Street.

Furthermore, he and these developers if they improve their land, with roads, water, and sewers, with the intent of selling lots and then building on those lots, since you can't build if you do not have the land and infrastructure - they get penalized for those improved lots by being reassessed for property tax purposes. In other words, he cannot move forward because the increased cost of property taxes makes his speculation on finding a buyer cost prohibitive. You can't rent improved building lots out, and in this ragged economy there are few buyers interested in building, so there is no cash flow possibility in land development.

During that same lunch, I also discovered that several high up individuals who work for the Federal Banking Regulators have chosen to take early retirement. They did so just to get away from the terrible environment they have been working in due to all the 1000's of idiotic new regulations being passed by an ignorant U.S. Congress who have no understanding whatsoever of the true causes of the meltdown. Congress simply threw in1000's of pages of senseless new regulations, of course never examining themselves as to their culpability in creating the problems in the first place. These laws are so bad that the regulators are getting out before they get blamed for the coming disaster.

The down payment and repayment cash flow requirements, as well as other increased underwriting requirements, make it almost impossible to get or give a loan. Small town bankers, the backbone to America's community economic growth, are scared and intimidated by senseless Congressional Laws that are virtually shutting down our economy. You won't hear this in the media, nevertheless it is happening. This is just one of the many reasons why I have been calling for history's biggest BEAR TRAP preceding a multi-century crash starting in the not too distant future.

It has been the large, too big to fail bankers, Wall Street corporations and politicians who think that they are above the law that are responsible for the dire situation our country is now in. So Congress has decided to throw new laws and regulations at anyone and everyone to cover up their own misguided, greedy mistakes. Then, in order to both cover it up and assure their own re-election, the Central Planners have the audacity to give trillions of dollars to those same firms in QE1 and QE2 while providing nothing but scraps for households, small businesses or the 5000 small community banks.

The DOW has been down for six weeks in a row. Apparently most money managers feel that the end of QE2 is going to kill the market/economy. So they are selling and asking questions later. BUT, this week is options expiration and in my opinion, we can expect a 200-300 point intraday Dow rally going into the expiration. IF IT DOES NOT HAPPEN, THEN CONSIDER HOW WEAK THE MARKET REALLY IS.

Like it or not, the slowing down of the economy will translate into reduced earnings, regardless of the majority of analysts glowing up beat earnings projections: Which according to Kudlow is the mother's milk of rising stock markets.

LINKEDIN was probably the one and only IPO to have doubled in price on its 1st day since 2007 and has probably signaled the end of what everybody has been calling a Bull Market. At the Last peak in 2007 117 IPO doubled in price on their 1st day.

WATCH OUT FOR THE BULL TRAP; that it does not trap you.

GOLD

Gold/Silver stock investors are panicky!!! BUT, should they be???? Parabolas by definition must sell off sharply, but from which point. Silver first reached the beginning of a parabolic move at $30 or $35 - should you have sold out then? In hindsight you should have sold out at $49, but hindsight also has told us that timers are never the big winners (witness 2006 and 2008). Then like now, not knowing the exact highs or lows, In my missive "Sell In May & Go Away" I also recommended selling 3 or 6 month call options against your long Gold and Silver positions. All those who have listened are laughing all the way to the bank. Now may be the time to be looking to buy back any of your short options that are in danger of being exercised and/or take profits on your long Puts on Silver and/or Gold.

The only ones who make money by consistently trading are the brokers.

Should you panic and dump now: Only if you have a financial death wish. Now is the time to make your buy list and accumulate your favorite stocks into any further individual weakness. That is what I am doing now and will send out my list to subscribers with the July 1st letter. Remember, we are only 2/3 through the Golden Bull Market with the most explosive 1/3 (5th Elliott Wave) still to come. Stay with Aubie!

ELLIOTT WAVE

It never ceases to amaze me how everyone who can say 3 waves up interspersed by 2 waves down call themselves Elliot wave experts and then promptly apply other technical analysis to their EW readings to make them say what they want. They don't realize that Elliott Wave must stand by itself since it is the only system that is NOT a trend following Technical forecasting system.

Just look at the weekly $HUI $GOLD Charts. Gold stocks are more oversold than at any time during the last 24 months. Either Gold collapses or the stocks rally and are now giving you the best buying opportunity since 2008. How many times do I have to remind you that Gold is a market unto itself and is not correlated to any other market; except for short periods of time.

Similar to 2008, we see that the Gold stocks are falling against Gold, yet Gold is quietly strengthening against Oil, Industrial Metals and the S&P 500. The real price of Gold began to strengthen across the board in September 2008 and it was only a month later that the sector bottomed.

Gold and Gold stocks are starting to move in the right direction. As the economy stalls and the equity market peaks, more money will move out of risk assets and into Gold and then the Gold shares. We are already seeing the start as Gold is firming in relative terms. There may be a bit more weakness in the Gold stocks, but ultimately this summer should post a major low and the Gold stocks will be in a fantastic position heading into 2012.

According to the 'real' Fed Funds Rate from data supplied by the Federal Reserve, it shows 'real rates' to be negative (-3%), and heading lower. According to the Gibson Paradox, whenever 'real rates' are negative, Gold is accumulated by those who are interested in wealth preservation. It should be noted that the data supplied by the Federal Reserve is 'massaged' to suit their own best possible outcomes. If we were to use data supplied by John Williams of Shadowstats.com the 'real rate' would be negative -8%. This means that anyone with money in the bank at 1% is losing 7% while paying income tax on the 1%!

SILVER: Shadowstats.com uses a formula that was used by the government up to 1980 and his calculation shows Silver would need to be priced at nearly $400 to match the purchasing power of $50 in 1980.

The mismanagement of economies by Keynesians, guarantees that the monetary inflation that is now above 10% per year will continue to provide the liquidity for Gold and Silver prices to continue to rise.

Harry Truman once said, "I never give them hell. I just tell the truth and they think its hell."

"I always tell the truth and only the ones who refuse to listen think its hell" Aubie

How Bankers Own the Earth And Then Some...

image: Bank of England

By Chris Duane:

"Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take away from them the power to create money and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money." -Josiah Stamp

It is just another fancy academic phrase to mask the true horror of what is happening to Greece. (And what will soon happen here.) This is like how "quantitative easing”is another name for forgery. You know, the act of counterfeiting a currency that was once punishable by death. Financial austerity is simply, more for the bankers and less for everyone else. Portfolios of the Elite must perform over all other human need. These bailouts come at a heavy price for the states that succumb to this financial rape. Real state assets and lands are sold at fire sale prices for to pay for debts created out of thin air. Real people’s lives will be destroyed to pay for debts created out of thin air. This of course is the true harvest time for the criminal bankers and their political enablers make it happen, by selling out their fellow citizens.

Many think that the bankers make money by lending money, but the real objective is the control they gain when when they confiscate Real assets with money that they never had

In our debt based monetary system, our money IS debt. When debt is created, money is created. When debt is paid off, money is destroyed. If you have ever wondered how everyone is in debt, look no further than this. Bankers gain power every time a debt is created, because it is their asset. Bankers don’t necessarily do this to make money, after all they freely give away all the money you want. What the bankers really want is control. Control over governments, businesses, states, towns, and ultimately you. They want everyone on a treadmill to work and produce real assets and labor so that their portfolio performs. The trick of this game is that there is no way out. We are on a treadmill that is going faster and faster because of one simple fact that is missing from everyone’s mind. Money/debt needs to be created every year in excess of the debt AND interest that was accrued the year before. In our debt based monetary system, our money is debt. Every dollar that comes into existence has a dollar of debt attached to it but NOT the money to pay for the interest attached on to it. This is the big trick, if only the principle is ever created, the only way for society to pay the interest due is to take more debt the next year.

This game works well for many years as people are young enough and deluded enough to run faster and faster

Eventually, like the Boomers are finding out now, the system keeps growing more hungry for new debt and the people can no longer keep up. This leads to the end of consumerism, which slows corporate and business growth and need for debt. This leaves the spender of last resort, the government, to keep juicing the system. If the people will not spend the money, the state will. And the bankers LOVE state debt, because they can use the power of the state to enforce debt payments and seize once untouchable state assets. This has been the game all along for the bankers. Sure, they enjoyed their billions in bonuses and houses on the Hamptons, but now it is time to truly become masters of the universe.

During the collapse of the Soviet Union, a few Oligarchs seized more than half of ALL of the wealth in the former super power

They bought companies the size of Exxon Mobil for a few hundred million dollars. They bought huge tracts of land for nothing, to harvest incredible lumber and minerals. They bought media conglomerates and entire auto and aero industries for pennies on the dollar. The collapse of the Soviet Empire due to its inability to service the debts. This brought about the most amazing transfer of wealth the world has ever seen. Seeming overnight, former cab drivers and teachers became billionaires. Now before you think that these guys were self made men, they were not. They were front men for the Rothschilds and were given hard money and their own banks to go forth and buy assets for pennies on the dollars when there was no money. This is the same thing Greece is going through right now. Greece’s best lands and assets are being sold right now to Elitists for nothing. The Elite will then turn around and raise rates to the consumers and reap huge returns on investment. Again, all with money created out of thin air. What a sick system we have!

So here is how the bankers own the earth and then some

We already understand that debt is money and there is not enough money in existence to pay for the principle AND interest. (If all the debt in the world was paid off there would literally be NO money in the world. And we would still owe more for the interest due.) The key for the banker is that they get everyone in debt so that the can obtain title to all assets. Real assets assert real control, which is the ultimate end of the game. So how does one go about owning the earth and then some? The plan is quite simple, provided you have the right tools in place like fractional reserve banking, usury, and privately owned central banks.

• First, like a drug dealer, get the society you wish to control hooked on your drug debt. Make it really easy with credit cards and easy terms. This then warps society into a buy now pay later mentality. Soon they will no longer even think about real assets or real savings, then they are hooked.
• The real assets once owned outright by the people, become attached with debt and then the bankers own them.
• Once you have enough of the assets you seek to take, suddenly tighten the lending requirements and crash the bubble you just produced.
• Then use the government to guarantee the loans with public money. (Socialism for the rich, capitalism for the rest like in 2008.)
• The next step is to squeeze the market to produce the maximum amount of defaults, so that you can now foreclose and take real possession of the assets. (Have you heard about the millions of houses in shadow inventory the banks are hiding? Do you know how many people have yet to be foreclosed upon? At the end of this list you will know why they have not cleared this market.)
• Use public funds to cover your private losses. (TARP, TALF…)
• Keep the pressure up until the government defaults and then you can use your capital to buy up state assets during the hyper inflationary collapse.
• Once all assets are under control, reestablish a new monetary paradigm using the sale of the assets you now have, as the collateral.
• The new debt will be issued in a new currency creating another paradigm for the bankers to collapse later.

This is the future of the our world

Short of a revolution, there is no stopping this on a national level. I encourage you to join the Sons of Liberty Academy to understand the big picture. It will help you to become mentally, financially, physically, emotionally and even spiritually prepared for this mathematically inevitable collapse. If you are looking for the best way to quickly prepare financially for this collapse, read the Silver Bullet and the Silver Shield.

dont-tread-on.me

Webster Tarpley on the Alex Jones Show

Webster Tarpley on the Alex Jones show reporting from Tripoli, Libya.......listen here

Economic Crisis and “Social Explosion”

From GlobalResearch.ca:

The IMF recently warned that the United States must raise its $14.3 trillion debt ceiling or it would risk default on its debt. This type of news story was unimaginable just four years ago, but then, so was the idea that the United States Federal Reserve would be audited by the IMF, as the Fund does to poor Third World countries; but then, that happened back in 2008.

The sovereign debt crisis currently unfolding in Europe is the greatest current threat to global financial markets, according to the policy maker at the Bank of England. However, economists from the Bank of China have recently warned that, “the U.S. sovereign debt problem is more hazardous than the European debt crisis,” and that, “the U.S. sovereign debt risk will continue to intensify in the next few years.”

Josef Ackerman, CEO of Deutsche Bank and member of the Steering Committee of the Bilderberg Group recently stated that, “if the crisis in Greece spreads to the rest of the euro zone, it could be a bigger disaster than the fall of Lehman Brothers.”

The debt contagion will further consume Ireland and Portugal, with Spain, Italy, and Belgium not far behind. Eventually, the Greek crisis would go all the way to America. In January of this year, the IMF warned Japan, Brazil, and America about the potential for a massive sovereign debt crisis to grip their nations......read on

Foundations of Social Engineering

by GlobalResearchTV on 29 Jun 2011 From the Corbett Report, June 29, 2011:

Author, researcher and Global Research associate Andrew Gavin Marshall joins us to discuss the American robber barons of the 19th century and how they used tax-free foundations as a vehicle for transforming their vast fortunes into political and social control.

Paul Craig Roberts - None dare call it Conspiracy

By Paul Craig Roberts:

In a June column, I concluded that “conspiracy theory” is a term applied to any fact, analysis, or truth that is politically, ideologically, or emotionally unacceptable. This column is about how common real conspiracies are. Every happening cannot be explained by a conspiracy, but conspiracies are common everyday events. Therefore, it is paradoxical that “conspiracy theory” has become a synonym for “unbelievable.”

Conspiracies are commonly used in order to advance agendas. In the July issue of American Rifleman, a National Rifle Association publication, the organization’s executive vice president, Wayne Lapierre reports on a congressional investigation led by Senator Charles Grassley and Representative Darrell Issa of a Bureau of Alcohol, Tobacco, Firearms, and Explosives and Department of Justice conspiracy to further gun control measures by smuggling guns across the border to Mexican criminals and blaming it on American firearm sellers.

Lapierre writes:

“Thanks to federal agents coming forth with evidence on the gun smuggling operation, this government sanctioned criminal conspiracy has been exposed.

“Leading an administration-wide cover up--marked by an arrogant dismissal of Congress’ constitutional role--is Attorney General Eric Holder, who has blocked all efforts to get to the truth. His minions have directed federal employees with knowledge of the gun-running scam to refuse to cooperate with congressional investigators.”

Many Americans will find the uncovered conspiracy hard to believe. The US Federal agency, BATFE, with the DOJ’s participation, has been providing firearms to Mexico’s drug cartels in order to create “evidence” to support the charge that US gun dealers are the source of weapons for Mexican drug gangs. The purpose of the government’s conspiracy is to advance the gun control agenda.

Attorney General Eric Holder’s stonewalling of the congressional investigation has resulted in Rep. Issa’s warning to Holder: “We’re not looking at the straw buyers, Mr. Attorney General. We’re looking at you.”

The most likely outcome will be that Grassley and Issa will have accidents or be framed on sex charges.

Conspiracies are also a huge part of economic life. For example, the Wall Street firm, Goldman Sachs, is known to have shorted financial instruments that it was simultaneously selling as sound investments to its customers. The current bailouts of EU countries’ sovereign debt is a conspiracy to privatize public domain.

Economic conspiracies are endless, and most succeed. NAFTA is a conspiracy against American labor, as are H-1B and L-1 work visas. Globalism is a conspiracy against First World jobs.

The sex charge against Dominique Strauss-Kahn could turn out to have been a conspiracy. According to the New York Times, the hotel maid has bank accounts in four states, and someone has been putting thousands of dollars into them.

Sometimes governments are willing to kill large numbers of their own citizens in order to advance an agenda. For example, Operation Northwoods was a plan for false flag terrorist events drafted by the US Joint Chiefs of Staff and signed by General Lyman Lemnitzer. It called for the CIA and other “black op” elements to shoot down Americans in the streets of Miami and Washington, D.C., to hijack or shoot down airliners, to attack and sink boats carrying Cuban refugees to the US, and to fabricate evidence that implicated Castro. The agenda of the Joint Chiefs and the CIA was to stir up American fear and hatred of Castro in order to support regime change in Cuba.

Before the reader cries “conspiracy theory,” be apprised that the secret Operation Northwoods was made public on November 18, 1997, by the John F. Kennedy Assassination Records Review Board. When the plan was presented to President Kennedy in 1962, he rejected it and removed Lemnitzer as Chairman of the Joint Chiefs.

Wikipedia quotes extensively from the plan’s menu of proposed false flag terrorist acts. Those who distrust Wikipedia can obtain a copy of the plan from the National Archives.

When I tell even highly educated people about Operation Northwoods, they react with disbelief--which goes to show that even US government-acknowledged conspiracies remain protected by disbelief a half century after they were hatched and 14 years after being revealed by the government.

An example of a conspiracy that is proven, but not officially acknowledged, is Israel’s attack on the USS Liberty in 1967. Captain Ward Boston, one of the two US Navy legal officers ordered to cover up the attack, not investigate it, revealed the Johnson Administration’s conspiracy, and that of every subsequent administration, to blame mistaken identity for what was an intentional attack. The unofficial Moorer Commission, led by Admiral Tom Moorer, former Chief of Naval Operations and Chairman of the Joint Chiefs of Staff, proved conclusively that the Israeli attack, which inflicted massive casualties on US servicemen, was an intentional attack. Yet, the US government will not acknowledge it, and few Americans even know about it.

Even the event Americans celebrate on July 4 was a conspiracy and was regarded as such by the British government and American colonials who remained loyal to King George. If we don’t believe in conspiracies, why do we celebrate one on July 4?

The Great Misdiagnosis

By Jim Willie:

Imagine a doctor who administers an elaborate treatment for a man suffering from multiple broken bones, joint arthritis, and fallen foot arches. The quack doctor orders massive amounts of liquids as though he has a horrible case of dehydration. The confused doctor also permits unlimited freedom of movement around the hospital and its grounds to the patient, as part of the blunt treatment. The man still cannot walk right or breathe normally, has trouble lifting any significant weight with the arms, and stumbles around from shaky legs. But he has plenty of fluids and freedom to roam. With the heavy mistreatment that is badly off the mark, he has a new problem, diarrhea and bloat together. His doctor has clear failing incompetence, but still is given respect. The doctor is the US Federal Reserve, led by the poor economist who never ran a business, the mad professor from Princeton University. His claim to fame was revisionist history of the Great Depression. He was chosen to be the bagholder, to print money until no tomorrow. The USFed balance sheet is almost totally ruined, without hope of repair. The clumsy professor posing as USFed Chairman actually admitted in public that he is confused why the USEconomy remains moribund, unresponsive to all the special treatment administered so thoroughly. Bernanke admits his incompetence and confusion. The national economy desperately requires a housing market revival that cannot come since banks are constipated with foreclosed homes in still rising inventory. The misguided licensed doctor continues to ply his trade, directing the wreckage, confused at the helm. Now the hospital is overrun by victims of the USEconomy, sinking under the weight of debt.

At least the health care sector is expanding as a business, the government sector too. Neither is productive. Meanwhile, the nation sinks into a depression, the debt approaches a default, and the USDollar faces extinction through revolt, rejection, and evasion. The nation suffers from lost direction, absent leadership, and unspeakable corruption from the climax of the Fascist Business Model introduced by the last administration with large doses of fear. The dominant themes in the USCongress and Executive branch are clearly paralyze, polarize, and partisan. Tainted money has been followed by tainted morality, policy, justice, and representation, enough to invite a public response. Let's take a quick look at numerous pressure points, broken parts, and centers of ailment. The doctor is extremely busy in confusing both the patient and anxious family. They are repeatedly told the patient is on the mend, but he keeps falling down when attempting to move on his own power. The family has lost faith in the doctor, but no other medical professionals seem any more enlightened.

THE ULTIMATE PROBLEM OF INSOLVENCY
The national officials have grotesquely misdiagnosed the problem. It is not one of liquidity. Rather the problem is widespread systemic insolvency and absence of industry for legitimate income and high level bank corruption that has caused a national sclerosis. Inefficiency reigns supreme, like with any fascist business model climax. The corporate leaders and political leaders sold out two to three decades ago. As long as the national policy is off the mark on recognition of the ultimate problem, no solution will come. Jamming a solution after a wrong diagnosis leads to tragic results. All the problems in the USEconomy from summer 2008 are actually worse today. No solution is even attempted. Mountains of money have been wasted, undermining the USDollar. In my view, the diagnosis is intentionally made incorrect in order to continue the elite largesse. The blunt instruments of the USFed are obviously from the wrong toolbag.

TURNING POINT, NOT BROKEN BRETTON WOODS
The turning point was not breaking the Bretton Woods Accord in 1971, the movement off the gold standard. Obviously, that was an extremely significant event, but analysts miss the original wart that changed the financial complexion. My viewpoint is different from most within the gold community. The turning point was the Vietnam War, whose costs forced the federal deficits to an extreme, the first $1 trillion in the national debt. At the time, when the Jackass was in college chasing frisbies and coeds, that first trillion was hugely important. The reaction was the broken Bretton Woods Accord in order to avoid a run on the national gold treasury held by the USGovt. The ultimate irony is that 20 years later, the Rubin Gang lowered the gold lease rate, enabled raids on Fort Knox for $trillion profit by the Wall Street bankers in private gains. The USDollar has had no collateral ever since, the basis for a vaporous currency, and a grand setup for debt default. The emphasis on war remains a high priority, even a sacred topic not permitted in debate. The budget battle has effectively removed the military budget when making proposals for spending cuts, precisely as the Jackass forecasted two months ago.

GOLD READY TO RESUME
With all the lousy USEconomic news (no need to provide ample detail), the obvious nature of continued fiscal and monetary stimulus has permeated into the financial markets. The most direct beneficiary has been the S&P500 stock index. Stocks have jumped off the double bottom tested low. The entire stock and commodity market can be appropriately described as a risk trade, as in risk of paper securities. The silly empty bluff by the USFed has been called. The USGovt debt limit will be raised, even if on a temporary basis by a small amount. The absurd gesture to release US Strategic Petroleum Reserve crude oil, coupled with a similar release of IEA European oil, has seen an effect come and gone. It was not exactly minimal, but surely fleeting and meaningless. They will replace those reserves with more costly oil, no doubt. No solution has come for the global monetary mess with fracturing sovereign debt. No lasting solution has come to Greece, although the ineffective means will assure that another month of tranquility will come, except for minor events like street riots. No lasting solution will ever come to the USGovt budget, where spending cuts are obstructed and tax hikes are obstructed, and war spending will continue into oblivion.

Gold has benefited from the lost credibility of the global monetary system, from the loss of unquestioned faith in the central bank franchise system. Gold represents the mirror image of the crumbling monetary system and its soured debt foundation, managed by dubious central bankers. The system will perpetuate its ruinous debasement of money itself, since the power structure will struggle to preserve itself. It is that simple. In no way will JPMorgan or Citigroup or Bank of America voluntarily commit to bankruptcy and debt restructure, accompanied by impaired asset liquidation. They are the insolvent pillars of the US financial syndicate, firmly in power, never to release that power unless from cold dead fingers. The Gold & Silver prices will continue to make new highs in the second half of the year. We should look forward with juicy anticipation to all the back-peddling by countless analysts who claimed the anti-USDollar trade was over. It was just resting in consolidation. The battle cry remains INFLATE OR DIE!! The system will continue to seek vast resuscitation via harmful inflation, or implode. The latest lousy USTreasury auctions should be viewed as having great importance. The USFed will continue its debt monetization or face failed auctions. Notice the strong signal for continued debt coverage in the S&P500 stock index itself. Crude oil has recovered. Gold & Silver have bottomed. Onward and upward. The great spring shock was administered in empty threats.

POLITICS & ILLUSION, NO SOLUTION
In the last three years, at least 100 direct questions have come to my INBOX or telephone, asking what solution might come. My answer has been consistent, that no solution is even pursued. The objective is not remedy, but rather retained power by the banksters. Any meaningful remedy must begin with a foundation of liquidated failed insolvent big US banks. That will never happen, since they hold the power over the USGovt and control the USDollar printing press. We are witnessing moral hazard over the top, the acceptance of the most dangerous risk. The entire concept of Too Big To Fail for banks ensures no serious attempt to deal with the problems, no meaningful policy to encourage recovery, and a sinking toward systemic failure. The business model leads always to a climax of ruin.

THE CAN HAS GONE NUCLEAR
The Rubin Doctrine has a more colloquial translation, of kicking the can down the road. Even Joe Kernan of CNBC fame coined the phrase of kicking the can into the cul-de-sac, a dead end. My preference is the jump shift in metaphor, where the can has gone nuclear. Those who kick it are infected. Whatever the can touches is infected. The air on the road is infected. The latest Greek example with austerity measures points out the futility. One year ago a bailout solution was handed to Greece. In no way did it resemble a solution It was a grand cover of big bank exposure, nothing more. The process will continue until the people interrupt the handouts to the bankers. If not added public debt, then added money supply has been abused to redeem Southern European debt held by the bankers. A great irony presents itself, since a Greek Govt debt default might trigger huge Credit Default Swap contract payouts by AIG, now obligated by the USGovt. Increasingly, but secretively, many deals have been cut to collateralize the Greek debt. In fact, a private source informs that in Greek dock warehouses, an estimated 200 to 400 billion Euros in shrink wrapped unopened cargo containers lies in limbo. The EuroNotes come in Greek denomination, but also German and other national markings. The pressure is strong to avoid a removal of the Euro currency, even though fully broken. The owners of the vast hoard of EuroNotes are scared witless and sweating profusely, fearful of loss from obsolescence or retirement. The funds were from secret payment to purchase stakes in major properties like telecom firms, shipping firms, media firms, commercial properties, and more. The owners struggle to put the funds into the system without detection.

FAILED KEYNESIANISM TURNSTYLE
Despite the failure of the entire textbook theory of government stimulus through debt propagation, the policy continues without end. Extended to the Great American Politburo for administered price controls, it is failing in public view. It will continue until conclusion, a national debt default. The centers of cancerous thought continue to be the University Chicago, Harvard University, and lately Stanford University. The purveyors of failed economic and monetary policy typically come from these dens of heresy. They serve as Fed Governors and members of the White House Council of Economic Advisors. Hardly a one has any business experience, but they do have impressive credentials, complete with lofty theses about something equally abstruse as useless. Wall Street has colluded effectively with the titan schools, offering them decades of chaired posts, plenty of prestige to go around.

QE2 NOT AN ECONOMIC STIMULUS
What a laughable concept that the Quantitative Easing was to stimulate the USEconomy!! Not even close. In fact, the Stimulus Bill had only a trifle stimulus inherent either. It was primarily about plugging the vast state budget shortfalls, which have reappeared in full force. Even the name Quantitative Easing is an insult to human sensibilities. It is hyper monetary inflation, which would sound bad. Heck, Neo-Conservative was another euphemism a few years ago. It also fooled the public, an easy task. The actual beneficiaries of QE and QE2 were the big banks. They were given freshly printed electronic funds for their toxic bonds in a vast redemption process. They have been given nearly infinite credit lines to speculate in the easy USTreasury carry trade. They borrow at near 0% and invest in long-term bonds. In the process, low rates enable the big US banks to play the carry trade while their balance sheets fall backwards from the crippled housing and property credit asset. The practice keeps long-term rates down. The USGovt is hard pressed to find willing investors in USTreasurys. So QE and QE2 really helped to compensate for those scarce investors.

THE MONETARY POLICY BLUFF
Anyone who truly believes that QE will stop lacks intellectual muscle. Already this week, three USTreasury auctions took place. All three were borderline dismal. The main advantage for the USGovt again was the slide deeper into recession for the USEconomy. The effect exposes the destructive inter-relationship, since the USGovt needs a stumbling moribund USEconomy in order to sell its USTreasurys, the packaged USGovt debt. During the last several months, the USFed has been the buyer, directly or indirectly, for 70% of the USTreasury debt securities. Apply the indirect argument to include the inventory of bonds gobbled by obligation from Primary Bond Dealers. They typically have been recycling their USTBills and USTBonds back to the USFed during Permanent Open Market Operations in three weeks on average, an abomination. With foreign creditors backing away and the USFed supposedly buyers no more, a huge vacuum cometh. Again, anyone who truly believes that QE will stop lacks intellectual muscle.

USGOVT DEBT LIMIT STENCH
The power merchants in Washington DC are playing a dangerous game. They have been attempting, much like the Europeans, to redefine what debt default means. The debt rating agencies have been rushing on stage to clarify the matter. The one party refuses to budge on tax hikes. The other party refuses to budge on spending cuts. Both sides obediently leave alone the sacred war. The sad fact of life is that Wall Street banks would sink into a failure pit in three months time without the wards. A glimpse of what might happen with a closer flirtation on debt default has been seen with a quick move in the 10-year USTNote yield from 2.86% low last week to the 3.18% Thursday. It rises to give a quiet alarm.

INTEREST COST WILL SOAR IF EXIT FROM ZIRP
The most basic reason why extreme monetary inflation will continue is the absent demand for USTreasurys. The most convincing practical argument down the road only a little in time is that the entire USGovt debt structure cannot afford higher borrowing costs. The Zero Interest Rate Policy has been blessed as near permanent. Debt Monetization as policy goes hand in hand with ZIRP. Since the US banking system died in September 2008, the USGovt deficits have exploded past $1.5 trillion annually. Most of the recently issued debt securities have been in the very short term maturities, a trend begun by the Clinton Admin. If QE is halted, then short-term yields would rise and long-term yields would rise. The result would be a doubled borrowing cost for the USGovt debt. Not gonna happen! Inflation as policy will rule!!

UNITED STATES IS GREECE TIMES HUNDRED
The national implosion, disintegration, and ruin of Greece is in full view. The plight of the United States debt situation is 100 times worse than Greece. The people of Athens are angry, with focus of their anger on the duplicitous and corrupted politicians who favor the bankers and yield to their demands. The people of the United States are angry but less perceptive. They still believe the mean nasty oil producers are lifting gasoline prices, still believe mean nasty speculators are lifting food prices, still believe mean nasty Chinese are lifting import prices, but have clearly come to believe that mean nasty bankers are illegally foreclosing on their homes. The intentional poor education on economic and financial matters has left the American public as mere cannon fodder on the financial battle field. The great advantage of the Printing Pre$$ has spared the American marketplace of much higher rates. Like Greece, the nation flirts with debt default. The artificially low interest rates, the result of dictated monetary policy with the fortification of Interest Rate Swaps, have conspired to avoid heavy borrowing costs for the USEconomy. The bond market gives a false signal. In Athens, the bond yields are out of sight high, from 20% to 30%, due to a broken insolvent wrecked system. In the United States, the bond yields are out of sight low, from 0% to 3%, due to a broken insolvent wrecked system. The paradox and irony are incredibly ugly, stark, and confusing. The US is Greece, and only the true experts are aware. Leaders in both nations are sweating profusely and quaking in their boots. They each march backwards into debt default.

EMPHASIS ON HOME PRICES
If one were to be told in 1960 that the USEconomy would turn up or down depending upon the housing market, the reaction would be a conclusion of stupidity and break from reality. In 2004, when the Hat Trick Letter was hatched, my belief was firm that the dependence upon a string of asset bubbles for wealth creation in the USEconomy would end in a national catastrophe. My forecast was for a chronic housing decline to begin around 2007 or 2008, one to thrust the nation into an endless recession and lethal insolvent condition. It is happening precisely as expected in broad strokes, and much as imagined in the details. The nation exchanged legitimate factory income for home equity sources of funds after the great Chinese industrial buildup. The corporate feudalists in the United States betrayed the American workers and invested in China. They began that process in the 1980 decade with the PacRim investment that was triggered by Intel, the semiconductor chip maker. So here we stand with housing firmly lodged in the septic field of lost dreams. The national USEconomy cannot recover unless the housing market rebounds and revives. It will not, at least it will not until home prices fall to 30% below construction costs. What a travesty awaits this market in climax!!

BLOAT OF BANK INVENTORY
Supposed experts actually discuss early signs of a housing market recovery, but they sound like idiots. They overlook the ugly shadow inventory held by banks. Almost never does the financial press touch the ugly factor of bank owned home inventory. Imagine over a million homes held on bank balance sheets, an extra inventory held in secondary fashion. It will be years before the inventory clears, and when it does, the home prices will be 20% lower. Analysts spout their nonsensical perspectives not worth squat. Even Shiller during interviews avoids the topic of the enormous bank inventory acquired from foreclosures, some perhaps illegally. Like with many other statistics, the analysts focus on the headline news and avoid the meat of the story. The meat is often rancid. The housing market cannot rebound. It cannot revive. It is a wrecked market. It is weighing down the already insolvent big US banks. It is dragging down the USEconomy. Housing is actually the key factor that will assure a USGovt debt default, since it replaced industry in function. The system has forfeited and abandoned its industrial base. The nation must be re-industrialized, a process not even begun.

TAXATION CHOKEHOLD ON JOB GROWTH
A little known fact by the investment community and public at large is that the USGovt taxes the business sector at a higher rate than any other of the top 18 industrial nations. Yet one administration after another talks about growing the USEconomy and enabling the creation of new jobs. They are hardly sincere. The tax policy along with oppressive regulations are the main problem, not even addressed. The recent folly of the Obama Health Care program has actually exacerbated the problem. The great economic policy failures of the last four decades feature one case after another of raising tax rates and realizing lower tax income. The economic corps has no brain in trust. They learn nothing. They push the nation into the abyss.

STATISTIC LIES & PAINTED BILLBOARDS
The Clinton Admin started the process, with sage counsel provided by Robert Rubin. They deceive with statistics. Substitution, hedonics on value, curious adjustments, bogus models, bias galore, they all contribute to corrupted statistics. Imagine a patient in a hospital whose temperature cannot be properly measured, whose blood pressure cannot be properly measured, whose blood sugar cannot be properly measured, whose heart rate cannot be properly measured, whose brain waves cannot be properly measured, whose blood gases cannot be properly measured, whose antigens cannot be properly measured, whose organ function cannot be properly measured. The patient surely could not be given proper treatment. The attendant staff would have no clue of what medication or therapy to offer. That is the USEconomy.

DESTROY OIL PRODUCTION IN THE MENA REGION
The story of the Libyan War is typical. The American public is told of murder of US civilians by the hands of Qaddafi. Sure, he is a vile specimen. Whether or not he was in the midst of launching a Petro Dinar with gold backing is possible. Not in debate though is the $90 billion in Qaddafi funds located in European and US banks that have been frozen. The word frozen always sounds better than seized or stolen. It is motive for war. Wealth is transferred. The story of the Libyan War dominated the news in April. The heist is complete. Move on, nothing to see. The destabilization of the entire Middle East and North African theater is well along. Their oil production might be the secondary target. The oil barons might want a much higher crude oil price, and curtailment of global oil supply. Their sprawling corporations and vast properties might include numerous locations where development awaits, if only the crude oil price would climb above the $150 level. If it does, the blame can be put squarely on Libya. The shutdown of the Gulf of Mexico succeeded in removing considerable oil supply. Despite Cushing Oklahoma crude oil facilities being flush with supply, a release of the reserve oil supply was deemed necessary. Question that motive.

THE PEOPLE NOT PREPARED
After years of mis-education, the American people are not prepared to defend themselves. They have seen their home equity vanish. Over 28% of US households live under the oppressive stench of negative equity, which puts them in a consumer straitjacket. They have seen their pension funds damaged, if not from direct value then in purchase power value. They have been subjected to non-stop propaganda that gold offers no yield, is a dead asset, and cannot aid an economy. Yet gold was the best performing asset in the 2000 decade. Amazingly, after a near COMEX default event, amidst global sovereign debt crisis, as government debt threatens default in numerous trouble spots, at a time when all major currencies are being debased in unspeakable fashion, the US press media networks have succeeded in some part in convincing the US public even since May 1st that gold is not the place to find refuge and security. They sell the USTreasury bond as safe haven still. Less than 2% of the American public owns gold in any way. Less than 2% of US managed mutual funds or pension funds have any significant gold ownership. Yet the babbling US press talks about the gold market being a bubble. The actual asset bubble is the USTreasury Bond market. Unlike housing, the bond sucks capital out of the system as part of its Black Hole function. It slows the USEconomy from its small yield offered to savers and pensioners. The speculation it encourages does greater damage to the USEconomy, inducing investors to search for the next asset bubble instead of rebuilding the industrial base. Only those Americans who leave behind the financial markets dominated by paper values will survive to thrive in the next chapter.

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

Greek rescue package will mean a default, warns S&P

From The Guardian:

Efforts to resolve the Greek debt crisis were dealt a blow on Monday when rating agency Standard & Poor's ruled that Europe's favoured rescue plan is in effect a default.

S&P warned that it would declare that Greece had defaulted , if the debt rollover plan proposed by France's banking sector is implemented. The decision, which echoes the views of other rating agencies in recent days, casts a cloud over the eurozone as policymakers struggle to devise a second bailout for Greece.

...S&P, though, has concluded that this plan must be treated as a debt restructuring because investors would receive less value than was promised when they bought their original securities, and because without the deal Greece would almost certainly be unable to service its debts......read in full