ac·tiv·ism [ kt-vzm ]
n.

The use of direct, often confrontational action, such as a demonstration or strike, in opposition to or support of a cause.

Ever heard the expression, “this one just fell into my lap”?  Well, this one certainly did just that – and I wasn’t even looking for it. Just happens to involve every mainstream economist’s favorite whipping boy these days – CHINA.  Just today I found myself reading part 2 of what is undoubtedly going to be a gem of a trilogy [my way of saying must read].  Maybe you have heard the plot line – China is growing so fast, there are no controls and it’s rumored that regulators have lost control of the situation.  Well, I hate to be the bearer of bad news – but there’s a little more meat on the bones of those shallow whispers than you might think at first blush.  What I’m referring to is China Aviation Oil Corp’s 550 million derivatives loss uncovered by regulators.  In Joe Duarte’s most recent pen, The China Syndrome, Part 2, Duarte points out that China Aviation Oil apparently got caught making a rather large one way bet on the future price of jet fuel.  For those of you who aren’t aware of this incident, I’ll give you a little hint, China Oil was not betting the price of oil was going up.  Now I will admit that I’m only guessing that China Oil’s paper losses mounted, as oil prices rose, to the point where responsible regulators forced China Oil to at bare minimum disclose the extent of their losses – if not make plans to cover.  This timely revelation should serve as foreshadow as to what might befall institutions that do nothing but short precious metals on the COMEX exchange - regardless the size of their short positions?  Duarte’s article got me thinking, this fact is seldom if ever reported.  Thank goodness, a writer with connections to some of the other mainstream financial media outlets, Joe Duarte, has finally taken up the cause.  Duarte aptly points out that there is mounting international concern, as predicted here 12-2 [assume Dec. 2/04?] citing Bloomberg quoting S & P that, 

“Complex corporate structures and unreliable accounting practices make it difficult to perform substantive analysis on some China-related companies. On the accounting side, the problem of limited disclosure is compounded with problems of compliance.''

Now that’s quite a mouthful isn’t it?  In the above quote, the author cites complex corporate structures?  He cites unreliable accounting practices with limited disclosure compounding everything.  I must admit, at first I was confused as I read through all of this.  I mistakenly thought the author was writing about Enron and Arthur Anderson or Long Term Capital Management and the secretive circumstances surrounding the Fed’s bail out of the same.  Isn’t it funny how timely reporting can trigger thoughts about similar issues a whole continent away.

You see, over the past year I’ve been doing a fair amount of reading and I’ve even written the odd quip as well.   Gotta tell ya, I’ve noticed something really interesting – perhaps you have, too.  What I’ve noticed is that every time the price of strategic commodities [like oil, gold, silver and copper to name a few] get a full head of steam –  pundits get concerned that China is going to imminently go directly into the tank and blow up.  Whether or not that comes to pass, who knows?  Others have predicted it and, so far, it hasn’t come to pass.  But that got me thinking about the implications of the derivatives quagmire that large financial institutions are in today.  If the most recent oil price surge, from roughly 41 and closing in on 50 bucks just today, can destabilize China – just think what kind of damage five years worth of annual production short position in gold can do, if prices rise [which they have], to a company like Barrick Gold, or worse yet, their banker J.P. Morgan Chase with a 43 Trillion derivatives book?

The timeliness of this article cannot be understated. Duarte has really hit the mark with his concern for the potential of malfeasance as it relates to the exponential growth in the use of derivatives.  You see, I think the world needs more “good guys” – ones affiliated with news outlets like CNN, CNBC and the WSJ, to point out the pitfalls as to how nasty things can get when derivatives are used unwisely or to excess. So, by extension, I’m sure it’s only a matter of time before writers like Joe are all over Fannie Mae, their accounting chicanery and their 5 Trillion in notional derivatives.  I’ll bet there are no one way bets in a book that size eh?  Oh, then there’s the small question of J.P. Morgan Chase’s 43 Trillion notional derivatives book too?  This number I speak of – 43 Trillion – just how big is it anyway?  Well, that’s roughly four times the size of the U.S. economy [GDP of 11 Trillion].  That’s roughly two times the size of the total market capitalization of all companies listed on the New York Stock Exchange. You see folks, a derivatives book this size is akin to a black hole; we know that it exists but is so immense that even the light of day cannot escape its grasp nor can regulators get close enough to its event horizon to fully understand it.  I mean, you are all aware that there is absolutely zero regulatory oversight on these books, aren’t you?  You see, dear reader, where Fannie and J.P. Morgan et al are concerned, it seems to me it’s always a case of, trust us, we’ll tell you all if and where it hurts.  Well spotted Joe! 

ef·front·er·y  [ -frnt-r ]
n. pl. ef·front·er·ies

Brazen boldness; presumptuousness.

In fiat we trust.  Quite a bold statement isn’t it?  The next time you stand naked in front of the mirror [another thing we all do and never admit or talk about] ask yourself if you really are a believer?  By most learned accounts, few would argue that the world is facing some pretty serious challenges right now.  In a big picture sense, natural disasters give rise to homelessness, hunger and famine.  Drugs and substance dependency tear at the fabric of civilization.  Lies, fraud, chicanery and self indulgence are endemic in society today – or am I being presumptuous?  The last time I checked, theft was still a crime.  We, the people, and our currency have been robbed of our purchasing power to the tune of 95 % over the past 75 years.  Stated another way, a dollar today buys about the same amount of goods and services as 3 cents in the 1920s

When governments or their agents steal in this manner, we call it inflation.  I call this fraudulent – or am I being brazen?  The debasement of fiat money is not an Act of God like an earthquake, volcano or a tsunami.  Debasement of money only occurs when leadership and monetary officials consciously unleash its insidious clutches on an unsuspecting public.  It amounts to legitimized state sponsored and ensconced theft.  To suggest otherwise is an overt lie – or am I being bold?

Fiat currency is a proxy for wealth or what is valued and, used as intended, allows for an orderly exchange of goods and services.  Gold is wealth.  Because it is scarce, indestructible and desirable; it has honorably performed its role of currency for millennia.   Gold is honest money.  It also facilitates trade.  Why do you suppose governments have opted to replace honest money with fiat currency?  Do you really believe their claims that honest money would stymie growth and prosperity?  Shouldn’t we all remember that the 75 year period prior to the creation of the Federal Reserve were highly productive, typified by rising real incomes, low unemployment, no federal/national debt, adherence to a gold standard and ever so slight deflation?  The rub here folks, as I see it, honest money limited the government’s ability to steal our wealth through stealthy inflation, on top of and in addition to regular taxation, right in front of our noses with most of us being none the wiser.  Have you ever stopped to consider how similar the word “wealth” is to “stealth” and “health”?  In particular, take note that the root word of stealth is “steal”.  Isn’t it odd how we, by the good Grace of God, use our health to create wealth which government then steals through stealth to relieve us of the fruits of our labor?  A classic “double – dip” I’d call it!  What this insidious process does is it dilutes compensation, trivializes effort, breeds contempt and amplifies disparities between the haves and have - nots.  Do you remember, there was a time when hundreds of thousands or a million dollars was a whole lot of money?  Then we moved on up, so to speak, where we spoke in nonchalant terms of billions of new borrowing daily.  Lately, it seems to me that we speak of our debt in term of Trillions, a third magnitude of increase – without batting an eye?  Has compensation for the average Joe seen increases of three magnitudes?  Is anyone besides me wondering how long it takes before we hear the next magnitude of measure – quadrillions – quietly creep into the accepted lingo of our financial consciousness?  When we start speaking of the obligations and debts of the U.S. government in terms of quadrillions – any bets as to what the price of a home, loaf of bread or GOLD might be then?  The erosion of these meaningful benchmarks has given rise to the next topic:  moral decay.

mor·al  [ môrl, mr-]
a.
Conforming to standards of what is right or just in behavior;

de·cay  [d-k]
n.
To decline from a state of normality, excellence, or prosperity, rot; 

What has become of our institutions?  I would contend that one of the most important hallmarks of our western society has been freedom of speech and thought and the ability to express oneself within the bounds of decency.  Revelations like the article cited here, tell me that free speech has a price tag dangling from it and 

“How pervasive is the practice of pundit payola? First it was black conservative Armstrong Williams found sucking on the federal teat to the tune of $240,000 to promote the Bush administration's "No Child Left Behind" legislation. Armstrong, in his own defense, revealed that there were plenty of other pundits on the government dole, and it wasn't long before "pro-family" columnist and author Maggie Gallagher was outed by Howard Kurtz in the Washington Post. Gallagher's $21,500 contract was with the Department of Health and Human Services to push the administration's $300 million "marriage initiative" aimed at persuading the nation's breeders to tie the knot – while simultaneously (and just as actively) campaigning against the legalization of gay marriages. In pushing the initiative in National Review and other venues, Gallagher neglected to mention that she had rented herself out to the U.S. government.”

decency has no bounds.  Should any of us really be surprised at these revelations?  We claim to live in a “just society” where theft has been consciously and officially sanctioned by and for the state.  Is it such a stretch that these same cads wouldn’t hijack the media too?  Shouldn’t we all have seen this coming?

Have we made progress as a society?  Oh sure, if you can call this progress – we’ve come a long way.  With a little luck, we should “progress” all the way back to the Stone Age within a few years.  Funny thing, GOLD actually meant something back then.

Citigroup bond market trading memo revealed
By Päivi Munter
Published: January 31 2005 22:06 | Last updated: February 1 2005 10:17

”Citigoup's huge trades in the eurozone government bond market last August - which were later described as “knuckle-headed” by Chuck Prince, its chief executive - came shortly after an internal memorandum spelt out how the US investment bank could “very profitably” destabilise the market.

The memo, obtained by the Financial Times, outlines a strategy to shake up the eurozone market, where trading margins have contracted because of transparency and stiff competition.

The document dated July 20, two weeks before the trades were conducted says Citigroup wanted to “turn the European Government bond market into one that more closely resembles” the less transparent US Treasury bond market, which is dominated by a much smaller number of investment banks. “Over time, this may help to kill off some of the smaller dealers,” the memo adds.

On Tuesday, Gianluca Garbi, chief executive of EuroMTS, the company that runs electronic trading in European government bonds, said he was “astonished” in response to the FT’s report about the memo……”

Unfortunately conspiracies live, dear reader. Silence on these matters, like the press itself, is usually bought and paid for with the fruits of our labor.

How Many Devils in Doublespeak and Doublethink?

Folks who see through the Smoke and Mirrors of politics, the controlled news media, and the shenanigans of central bankers and their minions [GSEs which operate as second tier central banks themselves being able to siphon [steal or stealth, perhaps] money from Wall Street through the process of money market fund intermediation],  are generally labeled as “childish persons who have a major problem.”  It seems like I read a lot of stuff by problem children who have likewise, never been given the opportunity for a modern day time-out. In my youth back in the 50s,  “time-out” meant the time it took for my behind to go out the kitchen door to the poplar tree for a switch bringin’ it back to Momma for a little “constitutional discipline” – which they lock parents up for today under the doublethink of child abuse.

Benjamin Franklin said in Poor Richard’s Almanac that a penny saved is a penny earned. He also said neither a borrower nor a lender be.  Ben also stated that at the signing of the Constitution that the Founding Fathers had created a Republic – a long as we could keep it. It is absolutely amazing how intelligent our Founding Fathers really were during the American Revolution and in the formulation of the Constitutional Republic. All powers not delegated to the federal authority remained with the individual states that formulated the Republic. The major weakness in the US Constitution was the issue of slavery, not being able to deal with the immorality of the economic as being so capital intensive that it was on the onset, a burdensome economic. This economic would haunt American politics for over 70 years before April 12, 1861 when Confederate cannons would open fire on the Boys in Blue in Fort Sumter in Charleston harbor – beginning the bloodiest conflict in American History with 622,511 dead. If the bullets didn’t kill you on the battlefield [110,000 Blue + 94,000 Gray = 204,000], the disease or starvation did [418,511]. The War of American Secession as it is known in Dixie began as an economic war grounded in national politics.

The Pundits at CNBC are doublespeaking and doublethinking today, February 2, 2005, with the captions on the bottom part of the Bubble Vision tube  “Waiting on the FED” and “decisions on interest rates.”  The FED Boys have been in secret squirrel FOMC meetings this week trying figger out what to do next and what kind of obtuse and obfuscated English words they can construct in a few sentences to keep everyone in the dark about their Ponzi Legal Tender Funnie Money System – one of the greatest con games in economic history.

When Mr. Lincoln ran out of money, he printed his own under Mr. Salmon P. Chase, the Secretary of the Treasury. They were called greenbacks, made legal tender, and became about as worthless as the Continental that the Continental Congress printed to finance General Washington and his boys. Mr. Chase later on the Supreme Court judged that the greenbacks were illegal, and by the mid-1870s they were mostly redeemed in specie. The Confederate paper money, was never redeemed in specie. That is what happens when you lose. There is a scene from the movie Gone with the Wind, where Gerald O’Hara, who’s lost his mind since his wife, Miss Ellen, has died in the war from disease, tells Scarlet that they have plenty of money to live on and run Tara, the plantation. Of course Miss Scarlet is thinking real money like gold and silver, and the expression on her face looking at worthless wallpaper Confederate paper money when Pandora’s Box is opened, tells a big story. This is similar to Thomas Andrews’ answering Captain Smith’s question about the 300’ gash below the waterline in RMS Titanic’s hull…. since the watertight bulkheads didn’t extend to the upper decks. Realizing the unthinkable was about to happen, must have been a truly enlightening experience about the faulty design of the ship – and there was no one else to blame since he [Andrews] designed the ship.

Specie [better known as heavy metal, or gold and silver, if you prefer], paper money declared legal tender not redeemable in specie, central banking, the GSEs, and real estate are all related in my view. A lot of folks are impressed by a large expensive home in a micro realty market. I am not, if this large expensive home is financed with long term debt. I am even less impressed if the large expensive home has a 125% to 150% loan to value ratio home equity loan placed on top of the mortgage. Knowing that mortgage pools are riddled with home equity loan torpedoes in our view, gives new meaning to a very nasty four-letter word – Risk.

Central bankers and their minions [GSEs] have everyone convinced that real estate is a store of value and a hedge against their destruction of the paper money system through the printing press [inflation or stealing by Ponzi Stealth]. The US financial markets and economic survives by the kindness of strangers in foreign lands, like China and Japan buying our treasury bonds and what not. I certainly hope that the kindness of strangers will be extended, however, strangers are generally loyal to themselves when it comes to money, investment, and their own laundry. One of the pillars of the Communist Doctrine is a central banking system, which was implemented in the US in 1913 with the Federal Reserve Act. We all know that enslavement of another human being [slavery] to be morally wrong. Yet in the world of doublespeak and doublethink,  we as a people are unaware of the yokes, chains, and shackles that bind us all together as a Nation of enslaved people to the greatest fraud in economic history – the Federal Reserve Note and the American Central Bank as the 4^th unelected branch of the Federal Bureaucracy of Big Brother and Big Government.

The National Socialist government in Germany in the 1930s and 1940s proved beyond a shadow of doubt, that if it told a big enough lie, and told it often enough, and convincingly enough, that the people would buy it. This becomes the elevated art of effrontery. Without activism by the folks the effrontery is perpetrated against, there will be moral decay.

Mr. Jackson knew this.

Mr. Wilson did not.

One was a traitor to the US Constitution.

One was its champion and defender.

When the day of Constitutional Discipline finally occurs on our Judgment Day…

How many Hells filled with how many Devils will we all have to pay?

Rob Kirby

KirbyAnalytics.com

All articles by Rob Kirby

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