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JIM
WILLIE: DEATH KNELLS FOR THE US DOLLAR
26
September, 2012
The
recent decision by the US Federal Reserve to contaminate the
financial body until it responds favorably was the
last straw in my book.Witness
a declaration of permanent QE and hyper monetary inflation of the
most virulent strain, unsterilized. The USFed is essentially
admitting failure.
The signal serves as the loudest death knell for the USDollar among
many in a sequence. The
QE bond monetization of USGovt debt has turned viral and entrenched.
It is sold as stimulus, when in fact it acts like a giant wet blanket
on the USEconomy. It is intended as stimulus to businesses, but the
effect is felt on the financial speculation and on Asian direct
business investment. In the past the emergency lever device had been
successful only because it was used on a temporary basis. But
now the USFed high priest assures it is a permanent fixture, a sign
of their failure.
The
money is not finding its way into the USEconomy for further
circulation. The plague is insolvency, soaked by endless applications
of tainted money from central bank fire hoses.
GOLD
PRICE READY TO EXPLODE UPWARD
Gold
market instability could be a tremor before a burst upward. The same
appears true for the silver market. On
a single day last week, JPMorgan dumped two years worth of US silver
mine output in the form of paper silver supply on the COMEX market.
The corruption went largely unnoticed. They defend the important $36
level.
A powerful USDollar decline is imminent.
The
public is too ignorant to comprehend the ruin. They can only see the
threat to their personal ruin.
The
bankers are determined to ruin the entire system in order to retain
power, all while dispensing increasingly nonsensical dogma like from
heretical high priests about the effectiveness of their solutions.
Theirs is heresy built upon alchemy laced with arrogance, with no
precedent of success in past history. A definition of insanity comes
to mind, offered by a psychologist who works in a clinical practice.
Let’s stick with the layman translation. Insanity is defined as
repeating the same action but expecting a different result. So the
USFed conducted QE, then QE2, then Operation Twist (a deceptive QE),
now is set for QE3. It expects a different result from the rising
costs and debasement of the currencies. Somehow by enlisting the
cooperation of the Euro Central Bank, the Bank of England, the Bank
of Japan, and the Swiss National Bank, together they can pull off QE3
in a veritable ongoing QE to Infinity when all previous efforts have
failed to produce a solution or economic recovery. The high priests
from the central bank altars do admit that liquidity does not address
the insolvency ills, yet they hit the monetary levers and
accelerators more quickly. The central bankers are in a panic, and it
is beginning to show clearly. Their solutions solve nothing. They
will next attempt to rule more formally over the ruins.
MONEY
VELOCITY
Money
velocity is going down as quickly as money supply is going up. This
report card is a grand contradiction of the USFed actions for a
generation. The American Weimar experiment is turning into a tornado
of financial ruin with inadequate recognition. As industry was
dispatched and forfeited to Asia, the USEconomy lost its base for
traction. New money has lost its effect in producing economic
activity following a series of asset bubble busts, a spinning of
capitalist gears, now stripped gears. New money is devoted to the
financial sector in perverse fashion, as a reward for the past
destruction of capital itself. The
central bankers cannot dictate the speed at which money moves. They
can only create it and drop it in the mix,
speak their incantations, sprinkle pixie dust, offer some loony fiat
prayer to the duped public, and continue with the next paper dump.
The Untied States will gradually achieve systemic failure from
redoubled efforts, suffer debt default from inability to manage the
debt structure, and fall into the Third World. The nation will
experience the monsters of high prices and acute shortage without
comprehension of its source. It is toxic money.
The
growth of the monetary base has been staggering high since the
financial crisis broke in September 2008 with the collapse of Lehman
Brothers. Since
the end of August 2008, the monetary base has risen from $877 billion
to $2,651 billion as of September 2012. That is a giant 3-fold
rise. Witness
the American Weimar era, its final chapter. The massive increase in
new money has done nothing to foster growth in the USEconomy. The
main reason is that fiat paper money destroys capital, a concept the
hapless corrupted US economists cannot comprehend, either from
compromise to their masters or lack of intellect due to years of
exposure to the ass backwards preachings. The USEconomy is stuck in a
powerful recession based in grotesque insolvency and bond fraud. As
the USFed is poised to kick in another round of QE bond monetization,
the money supply will ramp sharply up again. Do
not expect much of any economic benefit, since the cost structure
will rise again, then shrink profit margins. This capital destruction
factor is a great blind spot to the hack economists who operate more
as marketing harlots for Wall Street and the USGovt than analysts and
advisors. The Ponzi Scheme theory dictates that an acceleration in
new money is required to keep a constant speed. Expect more wreckage
from the stripped gears of the US Economic engine.
The
money velocity chart shows a deadly decline since 1980, and a
powerful decline since the 2007 outbreak of the absolute bond crisis.
The new money is going to the big banks in bond redemption,
derivative coverage, and Black Hole (Fannie Mae, AIG) fills under the
USGovt supervision. The
money is not finding its way into the USEconomy for further
circulation. The plague is insolvency, soaked by endless applications
of tainted money from central bank fire hoses. The
velocity of money has been falling for years, in reflection of an
economy that is not turning over much at all. Think of a car missing
its cylinders, spinning its gears, burning itself out, going nowhere.
The above chart serves as pictorial evidence that the root cause of
ruined money was the war. In the current decade, the wars are
endless. America chose war over industry. A fuller explanation is
offered in the September Hat Trick Letter.
Three
eras are worth identifying in my view. The Vietnam War era and its
aftermath saw huge expansion in money supply, huge nominal income
growth, and huge increases in price inflation. The USFed did not
interrupt the expanded USGovt debt from reaching Main Street, simply
put. For consecutive years, the Consumer Price Index rose over 10%,
which led to big worker pay hikes. The result was that US
corporations began to send industry overseas. It started with Intel
going to the Pacific Rim. The money velocity fell, as income fell on
a real basis. The climax event was China being given the Most Favored
Nation status in 1999, which released the gates for foreign direct
investment. China made a deal with the Wall Street devils that has
yet to gain publicity. The
hidden motive was for Wall Street firms to borrow the Chinese gold
hoard from the Chairman Mao era, so as to continue the great gold
suppression game that has bankrupted the Untied States and betrayed
the nation. US
and London bankers skimmed and stole the gold.
HOUSE
OF SAUD STARTS TO UNRAVEL
More
loyal Jackass wannabee followers will recall a story (repeated often)
that on the Easter Sunday weekend of April 2010, a secret gathering
of over 200 Arab billionaires convened in Abu Dhabi. They arrived in
unmarked jets. My source was one of only two or three white faces in
the crowd, invited by his clients. One result of the meeting was an
accord struck between the Persian Gulf oil producers, led by the
Saudis, to work toward a pact with Russia and China as protector of
the gulf in return for financial cooperation, economic construction,
and forward progress. The implicit message was that the Untied States
would be phased out in the protectorate. In the balance would lie the
Petro-Dollar defacto standard as victim. Events continue to this day
in movement toward that end.
However,
since the Syrian uprising, a new lethal element has entered the mix.
Account will be kept brief, since so volatile and controversial. Just
some bare notes. The Assad family in Syria has suffered some
assassinations. Apparently, the Saudis had a hand in the killings.
HezBollah has vowed retaliation. Their ties to Iran might be
longstanding, but perhaps are exaggerated. My view is their home is
in Lebanon. In August, Prince Bandar was assassinated. He was the
Saudi head of security, and long-time ally to the USGovt. The Saudi
regime is concealing his death, with outdated photos and false
statements. They are working toward a transition. The House of Saud
has been unstable from threats to the south in Yemen. It is unstable
from internal threats tied to the fundamentalists. Although
cooperation and respect has been shown between Riyadh and Tehran, the
Bandar hit has created an entirely new environment. The Saudi regime
with high likelihood is in its final months.
More
importantly, the Petro-Dollar is losing its all important Saudi
leg. Implications
are vast. The US public takes the USDollar for granted, with almost
no concept of FOREX exchange rates. If the House of Saud falls, when
it falls, the impact crater will include the entire waistline of the
USEconomy and its financial dog tail that wags it. The USGovt and its
banker handlers have relied heavily upon the Petro-Dollar in general,
and on the Saudis in particular, ever since Henry Kissinger signed an
accord that governs over the grand surplus recycling back in the
1973-1974 era. Watch the Saudis convert USTBonds to Gold, then bug
out of the desert to their new mansions in Southern Spain.
CHINA AS
INTERMEDIARY AGAINST PETRO-DOLLAR
Reports
swirl that China is attempting to act as intermediary in global oil
transactions, for Yuan currency settlement. The rebellion globally is
picking up momentum against the USDollar. The Petro-Dollar defacto
standard is slowly unraveling. The denizens of the Untied States have
no idea the ravaging impact of a lost global reserve currency. It
will unleash price inflation when the USFed central bank is letting
loose the monetary flood gates. This declaration is an act of
financial war directed at the US by China. To fortify the rear flank,
Russia has promised to meet all requests for crude oil made by China,
with settlement in Yuan and Ruble currencies. Take the pledge as a
protection from any sudden USGovt threat or retaliation. The
Russia-China Axis is forming more clearly in opposition to the
USDollar, the Syndicate behind it, the many Embassies that offer
sanctuary for espionage, and the global rules that enforce its
hegemony.
Crude
oil payments are the critical core of global trade. The rest of
global trade will follow in non-USDollar payments, all in time.
Entire banking systems will gradually make a transition away from the
USTreasury Bond in its reserves managements. The banking practices
will follow the trade payment structures, as it should be. The
profound effect on the USEconomy will be clear, as blame is shifted
as usual to external factors, even to extremists. In reality the US
is up against vengeful Cossacks and the angry Mongol Horde. The
entire world is moving against the USDollar, seen increasingly as a
toxic agent within their internal domestic systems. They see the lack
of solutions, the spreading bank insolvency, the accelerated
debasement of currency, and the corrupted grants of multi-$trillion
banker grants. They are taking action in response. They are following
the Chinese lead with the Russians acting as a quasi-Rasputin.
Gerald
Celente reported in early September, “On
September the 6th of 2012, China officially announced that any
country in the world that wishes to sell crude oil using its currency
the Renminbi instead of the USDollar can do so. The following day
September the 7th, Russia announced that the nation will sell China
all the crude oil they need, no limitations whatsoever. They will not
use the USDollar for their trade.” The
claim by Celente is far reaching. The USDollar is dying a slow death.
Its antagonists do not wish to speed the death process too rapidly,
for fear of quickening the ravage to their own nations. They also do
not wish to invoke the wrath of the USGovt, which since 2003 has
enforced the USDollar as global reserve currency via its war
machinery.
What
China is offering is an intermediary clearing house role to sidestep
the Petro-Dollar, where crude oil payments can be made in the Chinese
Yuan currency. This
offer is a financial act of war against the Untied States currency,
where China will backstop all transactions. It is a violent offer to
disrupt the USDollar. Look to see if any Saudi oil sales are settled
in Yuan currency as alternative, even the Euro currency as expedient.
The superpowers are openly attempting to isolate the USDollar, the
clear victim to be the USEconomy, the land of consumption excess. The
move is a tacit push of the US into an isolated place where it can
very easily slide into the Third World.
MEXICO CUTS
A DEAL WITH CHINA FOR OIL
Mexico
is in the process to make concrete a major deal to sell crude oil to
China, but not in USDollar terms. The Chinese declaration of
financial war against the Untied States has reached both the northern
border in Canada and the southern border in Mexico. To be sure, the
Canadian oil is not sold outside the USDollar. But other factors are
hard at work. The bulk of Athabasca oil produced from the oil sands
in Western Canada (Alberta) output is directed to China, by way of
the Vancouver ports owned 100% by China. In fact, the Chinese
influence is so strong in the beautiful city on the Pacific coast
that it has earned the nickname of Hongkouver. Some shallow analysts
attribute a wayward motive to the decision by the USGovt to abandon
the Keystone Oil Pipeline several months ago. The more realistic
hidden motive was to assure the Western Canada oil output would be
sent to China. The cutoff to the pipeline came with spurious official
accounts, all quite humorous to the informed. The pipeline was
abandoned to accommodate China, owner of significant USTBond
holdings. They are the largest USGovt creditor. The tipping point was
passed many years ago when the majority of USGovt debt was held by
foreign creditors. Its consequence is vivid and unmistakable. The
Untied States is converted into a colony, a killing field, as
pathways are fashioned for entry into the Third World.
China through
closed door negotiations is sealing deals to purchase Mexican crude
oil without using USDollars as its trading currency. The
Yuan is slowly moving toward global reserve status, not by a summit
meeting and signed accord, but rather by numerous bilateral deals.
Consider the bilateral swap accords signed by China with partners in
Brazil, Japan, and elsewhere. The list grows, and beyond oil trade.
As it does, the net is cast over the USDollar in isolation. Officials
claim meetings were held with the Mexican Govt and PEMEX, the state
owned oil giant. They are in progress with a brokered secret deal to
purchase crude oil using currency means other than the USDollar.
Expect a public announcement soon by Chinese Govt and PEMEX firms. In
the past decade, China has planted seeds in trade while ignoring
politics with numerous major players in global trade. The USGovt
prefers the heavy handed financial banking games, backed by the heavy
handed military maneuvers, all part of the sickening Full Spectrum
Dominance that has blossomed in ruin. The Chinese have responded with
an archipelago of trade pacts, best viewed as a Full Spectrum
Encirclement of the USDollar. It cannot be conquered. So their plan
apparently is to isolate it, to starve it, to let it suffer the
Weimar consequences of its own high pitched debasement, and to permit
it to become a Third World currency by default.
Over
the past ten years with new trade agreements China has invested
$billions inside Mexico. China has helped the Mexican Govt create
jobs and has financially supported investments in the privatization
of ports and infrastructure throughout Mexico. As the movement toward
privatization of large sectors of its economy continues, China is in
line to benefit from additional investments inside Mexico. Since the
2009 global economic crisis, Mexico’s central bank has been quietly
purchasing large quantities of gold. In
fact, some of the recent boost in May for Mexico Central Bank gold
holdings was gold purchased from Chinese sources. The gold sales
belie a closer relationship building with Mexico on the southern US
border. While
the USGovt is occupied with the Mexican Govt on matters pertaining to
gun running, to handling illegal immigrants, and to shielding vast
narcotics sales, the Chinese are busily working on trade, with a gold
foundation and crude oil blood system. Those are the stuff of a
stable currency. Perhaps Mexican leaders are preparing for the
imminent and unavoidable devaluation of the USDollar. In more
practical terms, regard the movement as the collapse of the USDollar
in a vast sea of liquidity, better identified as toxic fiat paper
currency.
STRIKES
HINDER GOLD OUTPUT
Not
in sufficient focus is the radical impact on gold supply. The gold
investment demand has been on a tear in recent months. A sinister
effect has been realized from the vast QE bond monetization conducted
by the USFed and its partners at the Euro Central Bank and the Bank
of Japan. The effect is of rising food and energy costs. The impact
is particularly hard felt in poorer areas of the world. The great
majority of major gold and silver mines are located in the poorer
nations. The labor strikes at mining facilities are as much based
upon unsafe worker conditions as they are based upon a higher cost of
living, centered on food costs. The workers need more to survive at
home, as they provide more precious metal output that satisfies
mining company production targets. The end result is lower output in
pockets of South America such as Bolivia, but more importantly in
South Africa. A whopping 39% of South African Gold production has
been taken offline. The impact on global output will be seen in the
next few quarters. The
fast rising investment Gold demand will be met by a significant
decline in Gold supply. Price
pressures will force a much higher Gold price. But first comes the
depletion of the COMEX, as its paper contract merchants continue to
ply their trade. Their new specialty is stealing client accounts that
stand ready for contract delivery. See MFGlobal and the JPMorgan
thefts, all fully blessed by the tainted US Court system.
THIRD
WORLD THREAT
The
implications are vast. A lost Petro-Dollar standard would mean a
grand shift in payment for oil transactions, the most important of
all global trade. In the last 20 years, all has been turned upside
down. A global phenomenon of a powerful nature has been at work since
the Lehman Brother failure, the Fannie Mae adoption, and the AIG
redemption in 2008. The entire world is losing trust in the USGovt
and its financial institutions. Personal email exchanges cite a
regular occurrence of US corporations not receiving return phone
calls, and of open disrespect in Europe for American businesses. The
debt rating agencies do their part in upholding the paper fortress
walls, but they must over time deliver the downgrades. An important
catalyst took place when the USGovt imposed trade sanctions against
Iran. The result was angering US trade partners more than anything
else, well, except for causing severe price inflation on the Iranian
Economy. The movement in reaction has been swift by global trade
partners, in establishing bypass routes for payment systems between
nations. The workarounds against the SWIFT bank payment system have
been remarkable. The climax will be the non-US$ payment system to
emerge, with no centralization, complete independence, relying upon
non-bank devices like mobile communications.
Another
bypass event just hit the news wires. The
Swiss-based Vitol is the latest oil firm bypassing the USGovt
sanctions against Iran. They
exploit a legal loophole in Swiss law, since the nation did not abide
by the US-led sanctions, a notable resistance. Vitol boasts being the
largest oil trader in the world. It buys and sells Iranian fuel oil,
undermining Western efforts to choke the flow of flow of money to
Tehran. In August alone, Vitol purchased two million barrels of fuel
oil, used for power generation, from Iran and offered it to Chinese
traders. The Vitol firm is not obliged to comply with a ban imposed
in July by the European Union on trading oil. The
tale of the cargo for Iranian fuel oil involves tanker tracking
systems being switched off, frequent ship-to-ship transfers, and the
blending of the oil with fuel from another source to alter the
physical specification of the cargo. How
crafty.
Global
finical markets are acutely aware that oil trade outside the USDollar
will rapidly destabilize the USDollar even further. With Russia and
China having entered into an agreement to trade crude oil using their
own currencies, the Mexican news of a Chinese oil deal has
potentially devastating consequences. The eventual effect is that the
USDollar will lose its prestigious reserve currency status. In the
process, it will lose value gradually. My
view is that the defense of the USDollar will lead to all major fiat
paper currencies to implode, step by step, taking down the banking
systems and economies of major nations. The
prevailing currency will be what is used in global trade. All
signposts point to Gold. A new global trade system is ready to be
installed, based upon gold in special notes. The transition awaits
further collapse of the current currency regimes, the further
collapse of the sovereign bonds, and the further collapse of the
banking systems, which all assures the collapse of the global
economy.
The
QE fallout by the desperate central bankers has been seen in fast
rising demand for gold bars and gold coins. The phenomenon is
primarily in the Eastern world but also in Europe. The American
crowds remain transfixed on their dwindling paper assets locked in
stock accounts, many not easily altered due to tax rules. They remain
transfixed on home equity losses, in a mindnumbing effect that the
Jackass described in years 2005 and 2006 and 2007. The American Home
was not a hard asset at all. Since its value was largely determined
by the mortgage loans and mortgage bonds, together with the vast
network of devices like MERS among bankers and the hidden caches with
slush funds at Fannie Mae. The entire criminal history of Fannie Mae
has been safely buried under the USGovt roof. Ten years ago, people
would laugh at comments that the largest and most powerful criminal
syndicate was operating under the USGovt label. They do not laugh
anymore, including my own family. They protect themselves with the
real deal currency for storing life savings, GOLD. They will soon
enjoy the benefits, safety, and efficiency of trade systems based
upon GOLD also.
GOLD
PRICE READY TO EXPLODE UPWARD
Gold
market instability could be a tremor before a burst upward. The same
appears true for the silver market. On
a single day last week, JPMorgan dumped two years worth of US silver
mine output in the form of paper silver supply on the COMEX market.
The corruption went largely unnoticed. They defend the important $36
level. Volatility has returned to the Gold price. The current pause
could be interrupted very quickly with a strong upward leg in both
precious metals. The announced QE3 bond monetization program cannot
be sterilized any longer. A
powerful USDollar decline is imminent.
As the USDollar reserve status is threatened, the gold price will
zoom upward. Notice the occasional propaganda and basic lies
regarding sterilization of new bond purchases. The
USFed is fast running out of short-term USTBills to fund long-term
USTBonds in the Quantitative Easing shell game that is more
reminiscent of the Weimar Republic.
Fortunately
for the USFed paper mache artisans, the American public is a lousy
student of history and especially the concept of money, even the
nature of economics and capitalism. The dumbing down of the public
has reached a critical mass, but hope lies in the Gold sanctuary if
people have any savings left after the busted bubbles and the parade
of banners to join. They joined asset bubble parades instead of lines
to enter factories. Across the world, an army of Gold soldiers is
awakening after a 16-month slumber. They react to the stark awareness
that QE not only ruins money, but its purpose is to redeem the toxic
bonds owned by banks. The
QE programs are not intended to bolster, stimulate, or fortify the
economy. In
fact, they render the USEconomy incredibly deep harm by raising the
cost structure, reducing profit margins, wrecking business segments,
and killing jobs. But the hard sell sure is fun to watch, as the
central bankers squirm. The Jackson Hole conference was a gathering
of buffoons without the clown suits. The public must seek refuge in
Gold & Silver or face personal ruin.
The
USFed mandate on inflation moves next to an absurd mandate on jobs.
They will fail on both. Inflation
will be permitted by the USFed central bank in order to produce jobs,
in the most heretic and misguided folly ever seen in modern
times. The
0% rate will stick until economic growth arrives, but it will never
arrive, due to the damaging effect from the 0% rate itself. The dog’s
tail is eating the entire dog in a perverse reverse effect of modern
alchemy. The USFed ignores all Weimar chapters, after having
rewritten the Great Depression chapter. The nation emerged from the
depression only due to the Gold Standard and ample industry. The
nation has neither today, and will therefore plunge into a systemic
failure. The Third World awaits. Watch for the pressure points of
tens of thousands of gasoline stations and food supermarkets, certain
to erupt as the frustration and disorder spread.
The
response in the Gold price has smelled a QE3 in bond monetization
since the summer months. The
difference is that this time, unlike the deceptive Operation Twist,
the bond purchases will be unsterilized with new money injected into
the system. That
is a Golden supercharge to recognizable inflation. A major
intermediate reversal is underway, with a 1570 base, a 1780 top,
which indicates a 1990 Gold price target. The kicker in the market is
the broad mining industry strike, which extends from South Africa to
South America. Gold supply will be inhibited. Expect some regrouping
with a pause at the 1720-1770 area, as a critical consolidation takes
place before a breakout that captures the world’s attention. The
right side handle is being formed, carved out. During this time, the
doubters are tossed off the train. The new believers join. A recycle
process is underway, as the monetary dumb are unloaded and new
intelligent soldiers join the ranks. The
renewal will permit a run over $2000.
Once over 1800 price level, the 1900 resistance will be overrun like
a paper fortress by angry mobs bearing torches and sticks. But in the
meantime, a big battle is being waged at the right side handle, a
consolidation before breakout.
THE HAT
TRICK LETTER PROFITS
IN THE CURRENT CRISIS.
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Jim
Willie CB is a statistical analyst in marketing research and retail
forecasting. He holds a PhD in Statistics. His career has stretched
over 25 years. He aspires to thrive in the financial editor world,
unencumbered by the limitations of economic credentials. Visit his
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The
money is not finding its way into the USEconomy for further
circulation. The plague is insolvency, soaked by endless applications
of tainted money from central bank fire hoses.
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