� Faber: Nations Will Print Money, Go Bust, Go to War…We Are Doomed - Big Government

� Faber: Nations Will Print Money, Go Bust, Go to War…We Are Doomed - Big Government

Faber: Nations Will Print Money, Go Bust, Go to War…We Are Doomed

by Andrew Mellon

Today the leading Austrian economic think tank, the Ludwig von Mises Institute held a conference at the University Club in Manhattan in which Marc Faber, famed contrarian investor and publisher of the “Gloom, Boom and Doom Report” gave his perspective on the financial crisis and his outlook for the future.

Marc Faber

Below are his main points and entertaining quotes:

  • Central banks will never tighten monetary policy again, merely print, print, print
  • Bubbles used to be concentrated in 1 sector or region in the 19th century, but off of the gold standard this concentration has ended
  • “The lifetime achievement of Greenspan and Bernanke is really that they created a bubble in everything…everywhere.”
  • “Central banks love to see asset prices go up,” and their policy reflects their desperation to perpetuate this
  • US housing bubble that Greenspan could not spot (even though he has recently spotted bubbles in Asia) stands in stark contrast to that of Hong Kong in 1997, where prices fell by 70%, yet none of the major developers went bankrupt; this was a result of a system not built on excessive debt like that of the US
  • “You have to ask what they were smoking at the Federal Reserve,” during the housing bubble, as prices were increasing by 18% annually when interest rates started to steadily rise in 2004
  • Over the last couple of years, when the gross increase in public debt has exceeded the gross decrease in private debt, markets have risen, whereas when private debt growth has outpaced public debt growth, markets have tanked
  • The next 3-5 years will be highly volatile

  • Americans must re-think what constitutes a safe asset; in a “traditional” period, one would generally rank from most to least safe assets: cash, Treasuries, corporate bonds, equities, commodities
  • However, last year Economist Gregory Mankiw articulated the position which according to Faber essentially echoes that of Fed #2 Janet Yellen and pervades much of the Fed generally, that “The problem is that people are saving money instead of spending, and we have to get the bastards spending to keep the economy going,” so the key is to inflate the money supply at something like 6% per annum
  • Thus, Faber says “As far as I’m concerned, the Federal Reserve will keep interest rates at 0, precisely 0…in real terms”
  • As such, cash and longterm bonds will be a bad place to hold one’s money; equities are an avenue to preserve wealth (but this is a risky proposition, given the effects of rampant currency depreciation); precious metals are a sound place for wealth preservation
  • As for the US being the most important economy for the world, there is a sea change going on right now; recently car sales in emerging economies (such as Brazil, China) are outpacing those of the US, Europe and Japan; oil consumption in emerging markets is increasing, while in the developed world it is contracting; the whole world does not depend on American consumption anymore – 60% of total exports are now going to the emerging world when one includes E. Europe; the US is still a large economy but it is not growing, while the growth in the emerging world is and will continue to be strong
  • “People still think of emerging market economies as poor cousins, but because 80% of the world’s people are here, in aggregate the consumption is huge.”; these are not saturated markets and they are growing rapidly
  • “Everybody should have 50% of their money in the emerging world, outside the West.”; people should also keep the custody of their assets overseas
  • Contrary to what the talking heads are saying, markets are not out of control, central banks are out of control printing money
  • The drivers of growth in the emerging world will be the urbanization of India and China; stocks won’t necessarily rise in the short term, but there will be significant growth in Asia in the long run
  • The shift in economic power from West to East has been remarkable in speed, largely due to the rapid industrialization of the emerging world and the speed at which information travels today
  • There will be a massive increase in resource-intensive industries and new export markets, met with increased volatility and tension around the world
  • The supply/demand characteristics of oil are great due to the need for oil in China, India, rest of Asia
  • Oil is the top priority for China, as they are now a net importer
  • US has a huge strategic advantage over China given that we have access to our own oil, and that of Mexico, Canada, the Middle East and off the western Coast of Africa, in addition to the ability to travel on the Atlantic or Pacific Ocean; meanwhile, China sources 95% of their oil from the Middle East, and while they are building pipelines throughout Eastern Europe for example, their oil supply points in terms of ports for example are limited, and the US has defense bases surrounding these areas; Chinese subs could sink our boats however; the Russians are also not happy about our forces being in the region, and tensions will grow as the need for natural resources in these nations grows
  • Eventually, there will be war and one will want physical commodities “not paper from UBS or JP Morgan”
  • In war, cities will not offer safety because one can get bombed, water may be poisoned, electricity shut off; instead, one should buy a house in the middle of nowhere/on the countryside
  • The tremendous economic Sophism of the day is that a nation can print its way into prosperity; “If debt and money printing equaled prosperity then Zimbabwe would be the richest country.”
  • “Mugabe is the economic mentor of Ben Bernanke.”
  • Our fiscal situation is much more horrendous than it is made out to be; total debt (public and private) as a percentage of GDP counting unfunded liabilities is an astounding 800% of GDP, more than double that during 1929
  • Sovereign credits in the Western world are all bankrupt, but before bankruptcy governments will print money; US government leaders will try to postpone the hour of truth, pushing the problems off till succeeding Presidents and Congressmen
  • If deficits didn’t matter as many like Economist James Galbraith argue today, why should citizens even pay taxes? It would make everyone happier if they didn’t
  • Faber is sure that the economists in academia are intelligent and they study the textbooks hard, but they study the wrong textbooks and are totally inconsistent in their philosophy
  • In an environment of money-printing and high volatility that exists in the US and that will be created by future policy, physical gold is the best thing to own
  • Once currency depreciation does take place, stocks may become very cheap, as happened when the Mexican peso depreciated by 95% in the early 80s, as the fund managers invested in Mexican equities completely undervalued them after currency collapse
  • In a nutshell Faber says he is essentially bearish on everything, though he favors commodities (especially physical precious metals and agriculture), owning a house in the countryside, equities in emerging markets tied to resources (especially necessities like water and oil) and healthcare, and most of Asia including especially Japanese stocks
  • There is no means of avoiding a total collapse in the West; at the first train station in 2008, the financial system went bust but didn’t die, at the next station nations will go bust (though this could take 5-10 years or less), but first they will print money as this is the most politically tenable option, and ultimately the world will go to war
  • All of us will be doomed

Bear in mind that Faber said all of this quite matter-of-factly.

Even if you disagree with his points on the trajectory of the West, it cannot hurt to understand and prepare for the worst case scenario while still hoping for the best.

Is Europe heading for a meltdown? Edmund Conway

This financial crisis is worse than the sub-prime crash of 2008 because the sums are so much bigger and it is governments that are in dire straits. Edmund Conway explains the dangers.

Mervyn King, the Bank of England Governor, summed it up best: "Dealing with a banking crisis was difficult enough," he said the other week, "but at least there were public-sector balance sheets on to which the problems could be moved. Once you move into sovereign debt, there is no answer; there's no backstop."

In other words, were this a computer game, the politicians would be down to their last life. Any mistake now and it really is Game Over. Or to pick a slightly more traditional game, it is rather like a session of pass-the-parcel which is fast approaching the end of the line.

The European financial crisis may look and smell rather different to the American banking crisis of a couple of years ago, but strip away the details - the breakdown of the euro, the crumbling of the Spanish banking system to take just two - and what you are left with is the next leg of a global financial crisis. Politicians temporarily "solved" the sub-prime crisis of 2007 and 2008 by nationalising billions of pounds' worth of bank debt. While this helped reinject a little confidence into markets, the real upshot was merely to transfer that debt on to public-sector balance sheets.

This kind of card-shuffle trick has a long-established pedigree: after the dotcom bust, Alan Greenspan slashed US interest rates to (then) unprecedented lows, which helped dull the pain, but only at the cost of generating the housing bubble that fed sub-prime. It is not so different to the Ponzi scheme carried out by Bernard Madoff, except that unlike his hedge fund fraud, this one is being carried out in full public view.

The problem is that this has to stop somewhere, and that gasping noise over the past couple of weeks is the sound of millions of investors realising, all at once, that the music might have stopped. Having leapt back into the market in 2009 and fuelled the biggest stock-market leap since the recovery from the Wall Street Crash in the early 1930s, investors have suddenly deserted. London's FTSE 100 has lost 15 per cent of its value in little more than a month. The mayhem on European bourses is even worse, while on Wall Street the Dow Jones teeters on the brink of the talismanic 10,000 level.

Whatever yardstick you care to choose - share-price moves, the rates at which banks lend to each other, measures of volatility - we are now in a similar position to 2008.

Europe's problem is that the unfortunate game of pass-the-parcel came at just the wrong moment. It resulted in a hefty extra amount of debt being lumped on to its member states' balance sheets when they were least-equipped to deal with it.

Europe was always heading for a crunch. For years, the German and Dutch economies pulled in one direction (high saving, low spending) while the Club Med bloc - Greece, Portugal, Spain, Italy (and their Celtic outpost Ireland) - pulled in the other. At some point, there was always going to be a problem, given that these two economic blocs were yoked together in the same currency, controlled by the same central bank. By triggering the global recession and shovelling an unexpected load of debt on to Greece's balance sheet, the financial crisis has effectively smoked out the European folly.

The Club Med nations - and in many senses Britain - were not so different to sub-prime households: they borrowed cheap in order to raise their standards of living, ignoring the question of whether they could afford to take on so much debt. But, as King points out, sub-prime households - and the banks that lent to them - can usually be bailed out. The International Monetary Fund simply does not have enough cash to bail out a major economy like Spain, Italy or, heaven forfend, Britain. So, again, we find ourselves in unknown territory.

There are plenty of episodes in history when countries have been as indebted as they are now, but they are all associated with periods of war. History shows that when nations reach as high a level of indebtedness as Greece, and have as few prospects of growth, they will almost certainly default. Indeed, the IMF, which has pretty good experience of fiscal crises, privately recommended that Greece restructure its debt (a kind of soft default, renegotiating payment terms). It was refused point-blank by the European authorities.

To understand why, step back for a moment. It is fashionable to compare the current situation to the Lehman Brothers collapse, but that understates its severity. The sub-prime property market in the US, together with its slightly less toxic relatives, represented a $2 trillion mound of debt. The combined public and private debt of the most troubled European countries - Greece, Portugal, Spain and so on - is closer to $9 trillion.

Moreover, whereas the pain from sub-prime was spread out relatively widely, with investors hailing from both sides of the Atlantic, the owners of the suspect European debt tend almost exclusively to be, gulp, Europeans. No one is suggesting all of this debt will go bad, but the European policymakers fear that the merest hint that Greece might default would spark a chain reaction that would cause a more profound crisis than in 2008.

The problem is not merely that holders of Greek government debt would dump their investments, or even that they would ditch their Spanish and Portuguese bonds while they were at it. It is that government debt is the very bedrock of the financial system: should Greek government bonds collapse, the country's banking system would become insolvent overnight. In fact, banks throughout the euro area would be at risk, given that they tend to hold so much of their neighbours' government debt. That, at least, is the theory, but as was the case in the aftermath of Lehman's collapse, no one really knows how great their exposure is.

The other, more cynical, explanation for Brussels' refusal to countenance default is that it fears that this would fatally destabilise the euro project itself - which of course it would. But as the politicians are discovering, organising a European sovereign bail-out is far, far more difficult than rescuing a bank. It took barely more than a few days in September 2008 for the Government to push through the semi-nationalisation of Royal Bank of Scotland and HBOS.

Earlier this month, when the French President Nicolas Sarkozy announced that the continent would be saved by a "shock and awe" $1 trillion bail-out package, markets convinced themselves for a moment that the politicians might be able to manage it. But the challenge of having to co-ordinate an unprecedented rescue across a 16-nation region without a common language or central Treasury is proving too much for Europe's leaders. Add to this the fact that most citizens (particularly in Germany) resent the idea of bailing each other out at all, and are willing to vote out their governments to prove it, and you get the idea of the challenge at hand.

Despite his rather aloof appearance, European president Herman Van Rompuy put it pretty well this week, saying: "Today, people are discovering what a 'common destiny' in monetary matters means. They are discovering that the euro affects their pensions, savings, and jobs, their very daily life. It hurts. In my view, this growing public awareness is a major political development. It forces the governments to act."

That action, so far as Van Rompuy is concerned, means more integration and some eye-watering spending cuts across the continent. Unfortunately, both are being carried out in haphazard fashion. The bail-out package may pave the way for a central EU Treasury, but it is still being muddled through the legislative process, and could well fall foul of voters in France or Germany. Spain and Italy are, rightly, inflicting severe cuts on their budgets, but so is Germany, which ought, according to a host of economists including Mervyn King, to be spending more, not less.

In the meantime, European politicians, torn in one way by their voters, in another by Brussels, emit even more confusing signals which only destabilise markets further. Angela Merkel's ban on investors short-selling German bank shares, and the collapse of a swathe of Spanish savings banks have hardly helped, either. And all the while, the euro continues to fall as investors mull its fate. The single currency can survive - but only if its members agree to more political union, and the prospect of that would be about as palatable to the people of Europe this summer as an ouzo and retsina cocktail.

http://www.telegraph.co.uk

The Number One Tool Of Financial Enslavement Economic Collapse

Today there is a great awakening going on across the United States and all around the world. Tens of millions of people are becoming aware of the growing tyranny of the global financial elite. Yet millions of those same people willingly enslave themselves to those very same financial powers. So how is this happening? It is called debt. The financial powers of the world use it to enslave individuals, corporations and governments. For thousands of years humanity has been taught the proverb that "the borrower is the servant of the lender", and yet today hundreds of millions of people around the globe willingly have run out and have made themselves servants of the money powers. You see, when you borrow money from a financial institution, you not only have to pay that money back, but you also have to pay a significant amount of interest. In fact, often the interest ends up being much more than the principal of the loan. Thus the borrower ends up devoting a great deal of his or her labor to earning money for the lender. Certainly there are times when it is necessary to borrow money. But what Americans have been doing over the last 30 years goes far beyond "necessary" borrowing. In fact, the massive debt binge of the last three decades has been nothing short of a huge percentage of the American population entering into willing financial enslavement.

Do you think that is an exaggeration? Just consider the chart below. The word "insanity" does not even begin to describe the growth of household credit in the United States over the last 30 years....

So why is debt so bad?

Well, there are a lot of reasons. Debt strips you of your freedom and slowly drains you of your wealth. It puts the fruits of your labor into the pockets of others.

Getting others enslaved by debt is how the most powerful financial institutions in the world got so dominant. It is one of the most profitable ways of making money ever invented.

What many people don't realize is just how much interest they end up paying on some of their debts.

For example, if you go to mortgagecalculator.org, you can calculate the amount of interest that you will pay over the life of your home mortgage. According to that calculator, someone with a $250,000 mortgage at an interest rate of 6.5% over 30 years will end up paying over $300,000 in interest before it is all paid off.

So when those 30 years are over, you have bought a house for yourself and you have also bought a house for the bankers.

But there are many forms of credit that are far worse than mortgage debt.

So what are they?

Just look in your wallet.

Do you have a credit card in there?

If so, and if you carry a balance each month, then you are "feeding the monster" and you have financially enslaved yourself.

But you are far from alone.

According to the United States Census Bureau, there are approximately 1.5 billion credit cards in use in the United States.

In fact, 78 percent of American households had at least one credit card at the end of 2008.

So it is a rare person who does not have at least one credit card.

But not only do the vast majority of us have credit cards, we are using them at unprecedented rates.

At the end of 2008, the total credit card debt piled up by American consumers was more than 972 billion dollars. That is an amount that is greater than the GDP of the world's 122 poorest nations combined.

So why is credit card debt bad?

Well, because it can drain your wealth faster than almost any other method ever created.

For example, according to the credit card repayment calculator, if you owe $6000 on a credit card with a 20 percent interest rate and only pay the minimum payment each time, it will take you 54 years to pay off that credit card.

During those 54 years you will pay $26,168 in interest rate charges in addition to the $6000 in principal that you are required to pay back.

That is before you include any fees or penalties you might accumulate along the way.

Are you starting to get the picture?

Do you really want to repay over $30,000 for a $6,000 purchase?

Of course not.

So what should you do?

Stop feeding the monster.

They are getting insanely wealthy off of your financial enslavement.

It is time to get out of debt.

One of the most common financial questions that people ask today is what they should do with their money.

Well, the answer to that question is a lot more obvious than people may think.

After purchasing all of the food and supplies that are needed for the hard times that are coming, people need to get out of debt.

There are very, very few investments that will add to your wealth faster than debt is draining it.

So don't let your money sit there and earn a couple of percentage points if you are carrying any debt that you can easily pay off.

Paying off debt will reduce your living expenses and will give you much more flexibility. It will also put you in a much better position to weather the very difficult financial times that are coming.

When you get into more debt, you are playing the game that the Federal Reserve, JPMorgan Chase, Morgan Stanley, Citigroup, Bank of America and Goldman Sachs want you to play. There are always going to be financial predators that are ready to drain your wealth.

But you don't have to play that game. Work to get yourself free. You will be glad that you did.

theeconomiccollapseblog.com

Greek Scramble For Physical Brings Gold Price To $1,700 Per Ounce Tyler Durden

And there are those who wonder how Sprott's PHYS could have traded at "ludicrous" NAV premium of over 20%. Coinupdate.com reports that prices at which the Greek Central Bank is selling one ounce gold equivalents are as high as $1,700 (40% over spot), and prices on the black markets are even higher. The punchline, as Athens slowly returns to a forced gold standard: " A popular spot for street vendors to sell their coins is near the Athens Stock Exchange. There the traders wait for citizens to bring payments received from unloading their paper assets like stocks and bonds." That's good - downtown Manhattan close to the NYSE has some free space for gold vendors to set up shop as well, they just need to push some of the frontrunning/collocation boxes off to the side. And in other rhetorical ruminations, is it safe to say that the last days of the fiat experiment are among us now that people themselves are bypassing the government and enforcing their own gold standard?

More from Coin Update:

The fear running through the Greek populace is that the nation’s government may default on some of its debts. Since 1965, the Greek government has imposed restrictions on trading British Sovereign gold coins (gold content .2354 oz). Despite those restrictions, the Bank of Greece reports that it is selling an average of more than 700 coins per day to worried Greeks. In the first four months of 2010, the Greek central bank sold more than 50,000 sovereigns at its main downtown Athens office. Bank officials estimate that at least 100,000 other coins changed hands on the black market. The Bank of Greece has received as much as $409 per coin, which works out to a price of more than $1,700 per ounce of gold! Prices paid on the black market are reckoned to be even higher. A popular spot for street vendors to sell their coins is near the Athens Stock Exchange. There the traders wait for citizens to bring payments received from unloading their paper assets like stocks and bonds. The US government and some state governments such as California are in financial straits as bad as or even worse than Greece. How long will it take before American buyers will have to wait in lines to pay outrageous premiums for what are now bullion-priced gold and silver coins? More than one analyst thinks those days will come within a few months or sooner.

The article then goes on to discuss the well-known gold price supression schemes developed over the past 30 years by JPM, Goldman and the LBMA, which should by now not be news to any readers.

What should be news, is that if one could find a way to legally transfer 10 or so ounces to Athens, anyone could make $5 grand on the spot. With some patience the same return will be achievable in our very own US of A.

http://www.zerohedge.com

Ron Paul: Inside Sources Told Me Fed Is Panicking At Mass Awakening Paul Joseph Watson

Appearing on The Alex Jones Show yesterday, Congressman Ron Paul revealed that through his inside sources he had learned that the people who control the Federal Reserve are panicking about the fact that Americans are waking up to the fact that the U.S. is controlled by the central bank.

"I had some information passed on to me, sort of inside information, somebody who knew somebody who was well tuned to the people at the Federal Reserve - and they said they are really really concerned about our movement to expose the Fed for what they're doing," said Paul, adding, "What they're upset or worried about is the fact that more and more people are aware of the Federal Reserve now like never before," explaining that exposure will lead to change and a reform of the Federal Reserve.

Paul attributed the success of the freedom movement in the last decade to the growing awareness of the power that the Federal Reserve wields over America.

"Even those who defend the Fed are very frightened about it," added Paul, noting that a growing number of Americans were knowledgeable about the central bank despite the fact that the subject is rarely covered by the education system.

Host Jones made reference to a recent Council on Foreign Relations speech by Trilateral Commission and regular Bilderberg attendee Zbigniew Brzezinski in which he warned that a "global political awakening," in combination with infighting amongst the elite, was threatening to derail the move towards a one world government.

"I hope he has some real reasons to be worried about that," responded the Congressman.

Despite the Senate voting down Ron Paul's version of the audit the fed bill earlier this month, a weaker version was passed which will mandate the central bank to reveal which financial institutions received bailout money at the peak of the economic crisis, something the Fed has desperately tried to avoid divulging.

Paul expressed his own disappointment at the watered down bill, but his colleague Congressman Alan Grayson expressed confidence that the stronger provisions of the original House amendment could be added in Committee, ensuring the Federal Reserve doesn't get off the hook, as Congressman Paul has warned.

Paul told host Jones that people should look into which Senators did not vote for the original audit the Fed bill, characterizing the weakened version as "A bailout for the system and for the Federal Reserve."

Paul said he was going to try and influence the bill in conference by adding stronger provisions.

"I think right now the cards are stacked against us but we're going to keep fighting because the more attention we get and the more people know, I think we can be proud of how far we've gotten already," said Paul.

Watch the full interview with Ron Paul below.

PART 1

PART 2

www.infowars.com

25 Questions To Ask Anyone Who Is Delusional Enough To Believe That This Economic Recovery Is Real Michael Snyder

If you listen to the mainstream media long enough, you just might be tempted to believe that the United States has emerged from the recession and is now in the middle of a full-fledged economic recovery. In fact, according to Obama administration officials, the great American economic machine has roared back to life, stronger and more vibrant than ever before. But is that really the case? Of course not. You would have to be delusional to believe that. What did happen was that all of the stimulus packages and government spending and new debt that Obama and the U.S. Congress pumped into the economy bought us a little bit of time. But they have also made our long-term economic problems far worse. The reality is that the U.S. cannot keep supporting an economy on an ocean of red ink forever. At some point the charade is going to come crashing down.

And GDP is not a really good measure of the economic health of a nation. For example, if you would have looked at the growth of GDP in the Weimar republic in the early 1930s, you may have been tempted to think that the German economy was really thriving. German citizens were spending increasingly massive amounts of money. But of course that money was becoming increasingly worthless at the same time as hyperinflation spiralled out of control.

Well, today the purchasing power of our dollar is rapidly eroding as the price of food and other necessities continues to increase. So just because Americans are spending a little bit more money than before really doesn’t mean much of anything. As you will see below, there are a whole bunch of other signs that the U.S. economy is in very, very serious trouble.

Any "recovery" that the U.S. economy is experiencing is illusory and will be quite temporary. The entire financial system of the United States is falling apart, and the powers that be can try to patch it up and prop it up for a while, but in the end this thing is going to come crashing down.

But as obvious as that may seem to most of us, there are still quite a few people out there that are absolutely convinced that the U.S. economy will fully recover and will soon be stronger than ever.

So the following are 25 questions to ask anyone who is delusional enough to believe that this economic recovery is real….

#1) In what universe is an economy with 39.68 million Americans on food stamps considered to be a healthy, recovering economy? In fact, the U.S. Department of Agriculture forecasts that enrollment in the food stamp program will exceed 43 million Americans in 2011. Is a rapidly increasing number of Americans on food stamps a good sign or a bad sign for the economy?

#2) According to RealtyTrac, foreclosure filings were reported on 367,056 properties in the month of March. This was an increase of almost 19 percent from February, and it was the highest monthly total since RealtyTrac began issuing its report back in January 2005. So can you please explain again how the U.S. real estate market is getting better?

#3) The Mortgage Bankers Association just announced that more than 10 percent of U.S. homeowners with a mortgage had missed at least one payment in the January-March period. That was a record high and up from 9.1 percent a year ago. Do you think that is an indication that the U.S. housing market is recovering?

#4) How can the U.S. real estate market be considered healthy when, for the first time in modern history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together?

#5) With the U.S. Congress planning to quadruple oil taxes, what do you think that is going to do to the price of gasoline in the United States and how do you think that will affect the U.S. economy?

#6) Do you think that it is a good sign that Arnold Schwarzenegger, the governor of the state of California, says that "terrible cuts" are urgently needed in order to avoid a complete financial disaster in his state?

#7) But it just isn’t California that is in trouble. Dozens of U.S. states are in such bad financial shape that they are getting ready for their biggest budget cuts in decades. What do you think all of those budget cuts will do to the economy?

#8) In March, the U.S. trade deficit widened to its highest level since December 2008. Month after month after month we buy much more from the rest of the world than they buy from us. Wealth is draining out of the United States at an unprecedented rate. So is the fact that the gigantic U.S. trade deficit is actually getting bigger a good sign or a bad sign for the U.S. economy?

#9) Considering the fact that the U.S. government is projected to have a 1.6 trillion dollar deficit in 2010, and considering the fact that if you went out and spent one dollar every single second it would take you more than 31,000 years to spend a trillion dollars, how can anyone in their right mind claim that the U.S. economy is getting healthier when we are getting into so much debt?

#10) The U.S. Treasury Department recently announced that the U.S. government suffered a wider-than-expected budget deficit of 82.69 billion dollars in April. So is the fact that the red ink of the U.S. government is actually worse than projected a good sign or a bad sign?

#11) According to one new report, the U.S. national debt will reach 100 percent of GDP by the year 2015. So is that a sign of economic recovery or of economic disaster?

#12) Monstrous amounts of oil continue to gush freely into the Gulf of Mexico, and analysts are already projecting that the seafood and tourism industries along the Gulf coast will be devastated for decades by this unprecedented environmental disaster. In light of those facts, how in the world can anyone project that the U.S. economy will soon be stronger than ever?

#13) The FDIC’s list of problem banks recently hit a 17-year high. Do you think that an increasing number of small banks failing is a good sign or a bad sign for the U.S. economy?

#14) The FDIC is backing 8,000 banks that have a total of $13 trillion in assets with a deposit insurance fund that is basically flat broke. So what do you think will happen if a significant number of small banks do start failing?

#15) Existing home sales in the United States jumped 7.6 percent in April. That is the good news. The bad news is that this increase only happened because the deadline to take advantage of the temporary home buyer tax credit (government bribe) was looming. So now that there is no more tax credit for home buyers, what will that do to home sales?

#16) Both Fannie Mae and Freddie Mac recently told the U.S. government that they are going to need even more bailout money. So what does it say about the U.S. economy when the two "pillars" of the U.S. mortgage industry are government-backed financial black holes that the U.S. government has to relentlessly pour money into?

#17) 43 percent of Americans have less than $10,000 saved for retirement. Tens of millions of Americans find themselves just one lawsuit, one really bad traffic accident or one very serious illness away from financial ruin. With so many Americans living on the edge, how can you say that the economy is healthy?

#18) The mayor of Detroit says that the real unemployment rate in his city is somewhere around 50 percent. So can the U.S. really be experiencing an economic recovery when so many are still unemployed in one of America’s biggest cities?

#19) Gallup’s measure of underemployment hit 20.0% on March 15th. That was up from 19.7% two weeks earlier and 19.5% at the start of the year. Do you think that is a good trend or a bad trend?

#20) One new poll shows that 76 percent of Americans believe that the U.S. economy is still in a recession. So are the vast majority of Americans just stupid or could we still actually be in a recession?

#21) The bottom 40 percent of those living in the United States now collectively own less than 1 percent of the nation’s wealth. So is Barack Obama’s mantra that "what is good for Wall Street is good for Main Street" actually true?

#22) Richard Russell, the famous author of the Dow Theory Letters, says that Americans should sell anything they can sell in order to get liquid because of the economic trouble that is coming. Do you think that Richard Russell is delusional or could he possibly have a point?

#23) Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter of 2010. In fact, that was almost twice the level of a year earlier. Does that look like a good trend to you?

#24) In March, the price of fresh and dried vegetables in the United States soared 49.3% - the most in 16 years. Is it a sign of a healthy economy when food prices are increasing so dramatically?

#25) 1.41 million Americans filed for personal bankruptcy in 2009 – a 32 percent increase over 2008. Not only that, more Americans filed for bankruptcy in March 2010 than during any month since U.S. bankruptcy law was tightened in October 2005. So shouldn’t we at least wait until the number of Americans filing for bankruptcy is not setting new all-time records before we even dare whisper the words "economic recovery"?

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Hidden Dollar Swap Hammer Jim Willie, CB

Let me start the article with a personal note. For the last six years, my pen has put forth a public article almost every week. Since the end of 2009, a change has come from that pattern, for four reasons. First, articles take time and serve as free volleys sent into cyberspace. They are attempts to raise awareness of a broken corrupt system, to encourage increased investment protection by the investment community, and to make repetitive messages that can sink in. Second, many of the warnings have come true of a monetary system in tatters, an insolvent banking system, a failed central bank franchise system, and a discredited amalgam of sovereign bond markets. There is no need to repeat warnings of further events toward breakdown when the forecasted breakdown has arrived in full glory. Third, I wanted to both digest the crisis myself, to discuss and ruminate over the disaster with my trusted colleagues, and to permit folks to digest the disaster, ruin, and continued breakdown themselves. Fourth, more time has been devoted to Hat Trick Letter subscribers, and less to the public. Events never occur according to a script, or forecast, or plan. Too many unintended consequences come. Too many complex elements take a toll within the system. Too many corrupt players defect or are badly weakened. This is history in the making, a highly important chapter of history being written before our eyes. This is World War in Finance with the AngloSphere under great pressure of losing its hegemony in the control of global financial structures. Entire national economies are at high risk. These are historic times.

THE USDOLLAR SWAP FACILITY

USDollar swap lines have been revived, rejuvenated, and applied. They are critical in sharing the workload in monetary expansion, the inflation machinery. The US Federal Reserve issued the following press release on May 9th, heralding the facility. It enabled the printing of money for immediate usage by foreign nations, as they essentially print their own money but use the USDollar wellspring as conduit. See the USFed press story (CLICK HERE). This announcement should be viewed as a response to debt abuse, and an open license to continue the great game. The public balance sheets have systematically built up greater debt in order to rescue private banks from ruin. The government leverage upward has enabled a private bank leverage downward, with little success however, as perception of wreckage is pervasive and turning universal. The bond market recognizes the ruin has shifted attacks from banks to sovereign accounts, the government debt arena. So the USFed will produce mountains of new money, and gold notices the debasement process. The USFed press release read as follows.

"In response to the reemergence of strains in US dollar short-term funding markets in Europe, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing the re-establishment of temporary US dollar liquidity swap facilities. These facilities are designed to help improve liquidity conditions in US dollar funding markets and to prevent the spread of strains to other markets and financial centers. The Bank of Japan will be considering similar measures soon. Central banks will continue to work together closely as needed to address pressures in funding markets.

The Federal Open Market Committee has authorized temporary reciprocal currency arrangements (swap lines) with the Bank of Canada, the Bank of England, the European Central Bank (ECB), and the Swiss National Bank. The arrangements with the Bank of England, the ECB, and the Swiss National Bank will provide these central banks with the capacity to conduct tenders of US dollars in their local markets at fixed rates for full allotment, similar to arrangements that had been in place previously. The arrangement with the Bank of Canada would support drawings of up to $30 billion, as was the case previously. These swap arrangements have been authorized through January 2011. Further details on these arrangements will be available shortly."

This spigot is precisely what lifts the gold price along the powerful long-term trend. It is the great monetary inflation lever. However, in the last two weeks, the easy credit lines have been taken advantage of to supply funds to central bank agents who have a constant habit of selling huge contracts of gold futures, of course often naked short selling. It should come as no surprise that the gold price was pushed down $60 and the silver price pushed down $2.20 after the Dollar Swap Facility kicked in, yet the gold community seems unaware. Harken back to the autumn 2008, to the crisis acceleration events and banking system demise. Recall the $132 billion payment made to JPMorgan on a Saturday morning before dawn before a crooked bankruptcy court judge in Manhattan. The official story was a diversion, claiming the private Lehman accounts were compensated for. In the following two weeks after the giant slush fund was delivered to JPMorgan, the gold price and silver price plummeted. The gold cartel had money to put to work immediately to suppress precious metals, the enemy of the USDollar. Last week was a sort of replay with the slush funds similarly reloaded with Dollar Swap Facility funds, courtesy of the USFed.

OPTIONS EXPIRATION

If the Commodity Trading Futures Commission truly wished to do their job, and identify manipulation in the precious metals market, they need only to open their eyes and monitor the Big Four trades in this current week when futures options expired for gold. The gold cartel illicitly pushed down the gold price so that options expire worthless. Notice the cartel kept the gold price below the critical $1200 waterline until Tuesday afternoon. Poof, a heap of options go worthless, and whoosh, the gold price moves over $1200 in the wake of the criminal event. Some analysts actually made sneid comments like the gold traders "had it coming to them" or some such. So if a band of Florida retirees goes to Vegas on a field trip, eager to double their money at the casino tables, do they also have it coming to them to be victimized? The Florida Suckers face crooked blackjack tables and altered roulette wheels, and their greedy grubby plans are rightfully stripped by corrupt operators? Never should greedy gold traders who expect monumental mammoth monstrous monetary inflation to push gold toward $1300 per ounce, be considered cannon fodder. The CFTC is just another Goldman Sachs office, obedient to their masters on Wall Street and the USDept Treasury. Referring to options expiration day of Tuesday May 25th, Jesse of the Cafe Americain said "Gold traded all day below 1200, at times rising to within fifty cents of the key strike price of 1200 where a large concentration of call options were clustered. Well, since the call options at 1200 have expired worthless, why bother using the energy to continue to suppress the price?" The games, tactics, and devices to suppress illicitly the gold price are fully out in the open. One must wonder if the CFTC officials are asleep. We know Larry Summers is asleep on the job.

DOLLAR SWAP RESCUED USTREASURYS

The USTreasury Bond functions with two roles. It competes as safe haven with gold during crises and sudden asset price stormy declines. But it also serves as funding agent for the powerful monetary inflation. Confidence in the USTreasury market had to be restored. Notice the IEF bond index fund of long-term 7-10 year USTreasurys, lifted at a critical juncture. It was at the point of decision, breakdown or rally. The Dollar Swap Facility was used to bail out big banks with a heavy inventory of Greek and other PIGS nation sovereign debt. The banks turned around with their impaired bonds redeemed handsomely, and placed a great deal of the final funds in USTreasurys. That might have been an actual requirement for participation in the Swap Facility in the first place. So the Bond Vigilantes appeared at the barn door, but were scattered by a flurry of machinery. A bond rally ensued, aided and abetted by the Dollar Swap Facility. So did the USFed have motive to aid European banks or the USTreasurys at the precipice?

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MORONIC GOLD BUBBLE TALK

Whenever talk turns to gold being a bubble, regard the syndicate message as one of desperation. The true bubble is USTreasurys, if not all government debt including UKGilts, the PIGS national debt, and much more. The AngloSphere is replete with asset bubbles in the last 20 years. From tech stocks to housing & mortgage bonds to USTreasurys in a march over the cliff under the aegis of fiat folly. The phenomenon most striking in the last two to three years has been the transfer of wrecked assets from private banker balance sheets to the government balance sheets, now wrecked also. The tragedy is that the private banks remain deeply mired in insolvency, while the debt ratios and extreme leverage of the sovereign debt is coming to light. Thus gold has begun to be openly recognized as a legitimate safe haven in full competition with the USTreasurys and the major currencies. The rout of the Euro currency has opened the floodgate of criticism against ruinous governmental policies centered upon bailouts for banks and futile stimulus plans. Each and every grand error by policy makers is followed by bigger grander policy errors, working toward a climax. They double down like in a poker game with a losing hand, and double down repeatedly, stuck without alternatives.

The untold story of the gold correction in the last two weeks has been that it was funded by the Dollar Swap Facility, but the good news is that its price movement abides by the parameters of a breakout correction. The 1180 level has been honored, not broken. The moving averages are still in uptrend. The powerful reversal since the Dubai and Greek crises were unleashed has resulted in a breakout, a correction that typically revisits the point of breakout, and a continuation. The ruined monetary system continues in ruins. The broken central bank franchise model continues in wreckage. The discredited sovereign debt continues to be rejected. The entire globe seeks a solution, but the buffoons in charge can only reach for the same liquor that turned the brains of monetary leaders into vinegar and rotted the body economic. They have ordered $1 trillion more liquor for distribution, totally ignorant of its ineffectiveness. Worse, they are unaware how the destructive effect of continued monetary excess kills capital formation and leads to enduring recessions that morph to depression.

2

Each new round of Quantitative Easing and gold price suppression assures an even higher potential gold price as long-term forecast target. The official policies are ruinous, and even destroy capital, eroding capital formation, and circumvent job creation. The eventual gold target in my view has moved from $5000 to $7000 in the last few months. No remedy is in the works. No solution is even pursued. No liquidation of toxic assets is underway. More stimulus is planned for the USEconomy, as home foreclosures continue and bankruptcies continue and bank closures continue and lending is obstructed. The more money the syndicates and governments in partnership create in futility, the higher the gold target becomes. Their ship is but a derelict at sea. The lifeboats consist of golden vessels. Soon no more lifeboats will be available. The clowns on the helm will be the last drowning victims.

FINANCIAL REGULATION & THE FLASH CRASH

Hats off to the Wall Street financial syndicate. They arranged a 1000-point stock market descent precisely on the day (May 6th) the Financial Regulatory bill had a key provision being scripted for auditing the US Federal Reserve. The US Senators blinked, watered down the provision, and will force an audit but only for certain TARP-related events. At least it is a foot in the door to the corrupted halls. The Flash Crash, as it is known, has turned the US stock market even more into a round robin competitive backyard for Wall Street firms, where 73% of the NYSE trading volume used to be derived from their computer program trades. Figure even more now. The US stock market has become the butt of jokes. Miraculous recoveries after 3:30pm are standard these days, like Tuesday. Even the NASDAQ was 3.3% down late in the day, only to stage a recovery. The Plunge Protection Team is operating much more in the open. As they ply their trade, they have rendered the US stock market into one of the most irrelevant of all financial markets. Recall its foundation for recovery one year ago was relaxation of the financial accounting rules, thus converting equity valuation into over $1 trillion fluff. The most striking and predictable aspects of the Fin-Reg Bill are how the USFed has even more power than before. The original plan was to limit its power. So again, hats off to the syndicate. They took the honorable motive to limit syndicate powers and to audit the USFed, and turned it into even more USFed powers, like the rod to dissolve any financial firm that endangers the US financial system. Or should it be said endangers the syndicate? Goldman Sachs bribery to the US Congressional members must have played a prominent role. That is the capitalism at work in the United States. One should demand to see mainstream economists provide a Supply & Demand curve for USCongress members.

INTERPOL & THE LIST

Word has come to the Jackass desk from a very different location, two of whose university chums serve on an elite commission in Central Europe. Recall the stories of a mid-December landing of a planeload of Interpol agents and cops. Recall the announcement by President Obama in January of strong subpoena power granted to Interpol operating in the United States, a story that should have sent shivers through the press networks. Instead, it was duly reported and forgotten, a typical syndicate tactic. The subpoena power is not to be dismissed. It enables Interpol agents and cops to obtain documents, to force testimony, and to investigate with some teeth. My source tells of how the Interpol has been ON THE GROUND IN THE UNITED STATES FOR MONTHS doing their work, building a case against corrupt bankers. The same source told of how last August 2009, at least thirty former USDept Treasury officials and Wall Street executives together appealed to Interpol, turned state's evidence, and were granted asylum. They arrived with much damaging evidence in the form of documents, emails, CDs, trading logs, and personal testimony. The information gained has been used for several months in criminal investigations of very high order. Much progress has come, but it is not shared publicly. Finally, lists are being compiled for Arrest Warrants of US & UK & West Europe bankers and politicians complicit with banking center corruption. The story mentioned London bankers working for Goldman Sachs as having their passports lifted. More to come on this showdown. It begs the question who delivers the warrants and what happens if an F.U. is given in reply, especially if armed bodyguards are present. The list reportedly reads like a Who's Who, not yet seen by Jackass eyes though. A climax is coming, but unclear when.

3

ENDLESS Q.E. ROUNDS

The public is told that each Quantitative Easing round is the last, the one and only. Just as my forecast was for absolute bond contagion two years ago, and my forecast was for frequent unending AIG & Fannie Mae bailouts, and my forecast was for no Exit Strategy with a steady unerring path of 0% policy, next my forecast recently has been for numerous announced formal QE rounds. In fact, they will become a global round robin, as each continent announces theirs, which opens the door politically for a redux on ours. Then ours invites another of theirs like a merry-go-round with exposed knives cutting capital and its engines. Great Britain is on course for a powerful second QE round. The US by virtue of the revived Dollar Swap Facility has its second QE round, although hidden, the first being in the autumn months of 2008. This month we see the first big QE round in Europe. Combine these QE rounds with government stimulus designed to resuscitate the many moribund economies that stand unresponsive, and surely monetary destruction is on a clear path.

MORE ECONOMIC STIMULUS DIRECTLY AHEAD

Meet Lawrence Summers, head of the White House Council of Economic Advisors. His reputation is of brilliance, but laden with obnoxious and arrogant behavior. He tends to become bored at policy meetings. He is reported to be pushing for another USGovt stimulus package. He must not be reading about the nascent economic recovery that blesses the US nation, endorsed and promoted by USGovt agencies and the President himself, echoed by his Cabinet of extinguished business minds. Perhaps Summers read the recovery reports and was put to sleep. Perhaps the policies seem more like Politburo pablum, certain sedatives. We the People can count on Summers to serve as vigilantly and diligently. Wake up, Larry! There is a crisis to manage!!

4

GREEK DRAIN PLUG & FAILURE PLAN

Key provisions are outlined in the European Union Bank Bailout plan that permit backdoor scuttles. The first provision states that the aid package will be "immediately and irrevocably cancelled" if it is found to breach the EU Treaty's official No Bail-out clause. Such finding can come in a ruling by the European court or the Constitutional courts of any EuroZone nation. The second provision states that if any country finds it cannot raise funding for the rescue at interest rates below the 5% level agreed for Greece, it may opt out of the bail-out. One might soon observe the biggest sellers of European Govt debt and speculators in the EuroBond sovereign Credit Default Swap contracts might be the governments themselves. That includes both the distressed nations in the PIGS pen, and the core healthier nations themselves which have born the brunt of the intramural welfare system in fracture. In my view, the Greek Govt debt crisis has been used as a distraction from the extreme problems not only in Spain, Italy, and Portugal, but in the United Kingdom as well. The sovereign debt rejection in the bond markets serves as an indirect repudiation of the global monetary system, whose backbone is not gold but rather debt. The climax will be the UKGilt default followed by its partner default in the USTreasurys. The primary truth in the sovereign debt market is that these bonds cannot be rescued, since the device for any rescue under consideration is more fiat currency, whose basis is indebted acid in the mix.

5

Notice the string of failed sovereign bond auctions, most notably in Germany. Rejections are in progress, in lands that do not possess the Printing Pre$$. Expect the bailout in Europe to fail. Its litmus test is the Euro currency itself. It has fallen to a lower level than before the announced bailout. These are band-aids applied to a gaping wound, a fatal wound that needs far more than tourniquets. It needs a new monetary vehicle upon which to build a new foundation. Its failure can also be seen in the separation effect. The rising Euro no longer spreads good tidings or provides favorable winds for US stocks. See the above graph.

NORTHERN EURO CURRENCY

Word has come to the Jackass desk from the War Room itself, where important decisions were made in a series of meetings inside Germany. The new Northern Euro currency is finally in its formative stage. Contracts have been forged. Relationships with the more independent Central European central banks have been arranged. Market mechanisms with the commodity markets have been delegated to Finland. A role for Russia is being planned, source of many commodities. The timing of the new Northern Euro is planned for June 2011, with perhaps little if any formal news releases. The key element of the new Northern Euro will be its gold component. Permit a Jackass conjecture of a 1% or 2% cover clause, meaning $100 million in Northern Euros could be redeemed for assets that contain $1 or $2 million. The new currency will be born in crisis. It will be begged for. One must wonder if Saudi crude oil will eventually require payment in Northern Euros. Maybe it will contain not only a gold component but a crude oil component.

For over a year, my openly stated belief has been that the first nations to create a monetary and banking system with clear distance set from the USDollar will be the next global leaders emerging. It will be Germany and its cohorts that include the Benelux nations and Austria. In debate is the future role of France, which might be assigned squire duty for the Germans who hold 94% of their sovereign debt. The antics of Sarkozy are as annoying as a mosquito roaming near the face during bedtime hours. By the way, the Northern Euro as planned is a USDollar Killer, since the present day world reserve currency will fall rapidly in valuation, finding its true worthless value, in reflection with its hemorrhage of USGovt deficits and debt ratios that put it in the same PIGS manure pen as the Southern Europe nations heaving in convulsion.

FASCIST BUSINESS MODEL

Take a minute to be reminded of the model at work for almost two decades, ever since Goldman Sachs took control of the USDept Treasury under the destructive hand of Robert Rubin in 1992. Much has been written in the past few years in these columns about the Fascist Business Model, where large corporate interests are merged with the state. Federal policy actually melds with those of Wall Street, or the former is directed by the latter. Much has been written about the near total lack of remedy, lack of reform, lack of liquidation, and lack of law enforcement. The key characteristic of the Fascist Business Model is that its corruption and inefficiency lead to a total breakdown of the system. Its conclusion is the failure of the state and breakdown of the economy. The housing market failure and chronic insolvency is its bitter fruit. The insolvent banking system is its backfire blast. The TARP Fund fiasco was a huge flag signal of the corruption climax rooted in extortion. The Louisiana Oil Volcano is just icing on the cake. The ultimate breakdown will be seen as a USTreasury default, whether technical or actual.

Copyright © 2010 Jim Willie, CB

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.

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