the advent, then the continuation of the Quantitative Easing exercise in
hyper-inflation and capital destruction, the US Federal Reserve has perhaps taken
its deeply damaged reputation as a central banker and decimated it into
shreds. They have lost the respect of the world, more so outside the nation's
borders than inside. The financial sector and politicians seem unable to stop
showing deep reverence for the post, even licking the Chairman's boots
whenever he appears before the USCongress. Recent hints of contempt in
WashingtonDC are encouraging. He has not made a single correct forecast on
major items. The USFed in short has lost control. See the rising bond yields,
which torpedo the housing ship, badly listing as a derelict vessel. The USFed
seems thoroughly content to rescue the big US banks, whose wretched condition
cannot possibly be rectified, even if such a rescue results in global price
inflation and revolts. The decision made after recognition that a recent QE
chapter has failed is clearly to repeat it. When QE2 is exhausted or deemed a
failure, expect QE3 at the doorstep. This behavior exhibits insanity. The
February package of Hat Trick Letter reports includes a special report
entitled "USFed as Agent of Destruction" that elaborates on
the deep damage.
USFed balance sheet reads like a Fannie Mae lookalike, with perhaps $1
trillion in negative value, if priced to market. No wonder they altered their
rules for a major dump on the USDept Treasury. The next chapter should see a
default in USGovt debt, as it spirals out of control, supported mainly by the
monetization engines, the stuff of hyper-inflation. Meanwhile, back at the
inflation farm, a widening array of economic mythology has sprung up, replete
with nonsense and deep deceptions like shallow walls to defend the monetary
press. The new myths extend from the standard Second Half Recovery dupe, the
Jobless Recovery insult, the Green Shoots absurdity, and the Exit Strategy
refrain that ushered in QE2. The inflation engineers must defend their craft,
which has destroyed the USEconomy and rendered its banking system insolvent,
as well as households. By the way, Ben aint no Atlas, holding up the world.
He aint no Poseidon, controlling the oceans and all their liquidity. He sure
aint pretty like Aprhodite neither, even though his bust might serve as a
fine pin cushion. Hey! Don't mention pins when standing near the USTreasury
CLIMAX GRAND DECEPTION
Hat Trick Letter has warned fully and repeatedly. The price inflation that
has begun to show itself in clear terms will be passed off with pure economic
deception, and extreme statistical fraud. The effect of higher prices will
be called economic growth. The price inflation within the adjustment
process with full motive will grossly under-estimate the actual rising price
rate. Therefore, the adjustment off the nominal economic activity will be
grossly inadequate. The 10% to 12% price inflation will be called 3% to
4%, and thus a 6% to 9% error in the Gross Domestic Product will be made.
The consequence will be that a powerful recessionary surge downward will be
called a positive 4% to 5% GDP growth. Credit goes to the stat rats who
betray my field of expertise. The deception will calm public fears on the
highly destructive effects of Quantitative Easing #2 and its price inflation
side effects. Actually it is more like direct effects. No longer are the QE1
effects isolated to excess bank reserves held by the USFed. They were not
excess anyway, since US banks simply held their loan loss reserves at the
USFed. The main point is that price inflation will rise sharply, called
economic growth, a process already begun. The USGovt and Wall Street
handlers will ignore it, under-state it, and herald the return of growth as
success of policy. The reality will be less growth, in a deeper decline into
recession. It has been my contention for the entire seven years of the Hat
Trick Letter that the topic of inflation has been the most egregiously
misunderstood and most common used deception device used against the American
people, as the USEconomy has deteriorated in grotesque fashion for 20 to 30
years. They have been told to hedge against that inflation by home ownership,
which has backfired in a national catastrophe. The underlying cause of the
deterioration is massive monetary inflation and price inflation, manifested
structurally as an over-priced US labor market that has sent jobs to Asia
since the first migration phase to the Pacific Rim in the 1980 decade. The
semanal event was the Vietnam War, which urged the broken Bretton Woods accord.
justifications, explanations, and clever deceptions have been and will
continue to be widespread. They are many, like singers in a chorus, each with
voices like Sirens leading men and their ships to the rocks and a watery
grave. Destruction awaits those attracted by their serene tones. My ear is
tuned to detect them and to record their many deceptions. Let's touch on the wrong
messages made on the US Public Address systems one at a time and dismiss
them. They are trumpeted by the USGovt, by the Wall Street bank staffers, by
the USFed Chairman and most Board members, by the US Financial press, by the
market mavens, and by numerous others, all of whom did not foresee the
wreckage and charred ruins like the burning of Troy. To be sure, the
principal player was Alan Greenspan, whose charisma and eloquence made him
the Helen of Troy for our modern day. Both his visage and utterances more
resembled Mr Magoo.
Rising prices are proof that the USEconomy can handle the higher costs. Not
true! They are an indirect effect of massive monetary inflation, as surplus
loose money sloshes until it makes higher priced items. A direct effect comes
from a falling USDollar in whose terms commodities are priced.
Rising commodity and material costs mean more profits all around. Not true!
The exact opposite is the case, since profit margins are being squeezed.
Businesses are making this statement openly.
Rising prices mean the USGovt and USFed stimulus applied is finally working,
as the system is coming alive. Not true! It signals the arrival of the
nightmare, in the form of price inflation that the banking leaders said would
not arrive. They boasted a year ago that the monetary inflation would not
have a spillover effect. That spillover effect is precisely broadly rising
prices, most evident in food & energy. Witness the spillover.
Rising prices mean final demand has arrived, which is pushing up the prices.
Not true! Final demand remains weak. Businesses do not anticipate a big rush
of new demand, as their business investment is modest to non-existent.
Consumers are strapped with weak income and no more home equity to raid.
USEconomy is least vulnerable to price inflation effects, since strongest and
most resilient. Not true! The chief export in recent years from the United
States had been mortgage bond fraud, along with the usual fare of USTreasury
Bond empty paper. The chief export in the current period is commodity price
inflation. The USEconomy remains a major importer, and thus will import the
price inflation, a process already begun with both commodities and finished
products. The US is the originator of massive monetary inflation. Since its
economy is deteriorating and stifled, the resilience is born of weakness. Its
back door will usher in that price inflation.
The housing decline has kept prices in check from powerful deflation effects.
Not true! The housing decline has guaranteed that the rising cost structure
cannot be handled by the entire system. With the resumption in housing price
decline, the insolvent banks will grow deeper in insolvency, while the
households will fall more broadly into insolvency. Demand will not meet the
higher prices required by corporations to even remain in business. Watch more
job cuts and business shutdowns, since they must but cannot pass along the
higher costs to customers.
Higher prices in the stock market is prologue and harbinger for the growth of
the USEconomy and corporate profits. Not true! The massive monetary inflation
has spewed new phony money into the system. It leaks through an array of
sieves. It finds paths of least resistance. Almost no resistance exists toward
the stock market, especially with the Working Group for Financial Markets
openly pushing up stocks, no longer in hidden fashion. The USDept Treasury
finally admitted as much.
Being a food producer, the USEconomy does not see rising food prices. Not
true! For five years, the USEconomy has turned into a net importer of food
products, although only slightly. The farm sector has seen their costs from
diesel and other energy sources rise uniformly. The farm end product prices
(like corn, wheat, soybean, cotton) are controlled on the commodity
exchanges, not by farmers. So higher product and costs mean much higher
prices at the US dinner tables.
Rising producer costs is obvious. The miracle of not ending up in final
product prices results in success of the system. Not true! If final products
cannot have higher costs passed on, that means the businesses suffer
important profit margin squeeze. In parallel, the lack of job or income
growth means that households suffer important squeeze also on discretionary
spending. The squeeze is systemic, not a success, resulting in lower demand
and business layout cutbacks.
Jobs will come eventually. Not true! This propaganda mantra is losing its
mojo totally. Be prepared for a brief rejoice followed by the horrors of
recognition that the USEconomy is suffering from broadbased price inflation
and continued powerful deterioration. Monetary inflation destroys capital,
a concept our clueless cast of economists cannot seem to conceive. In
response to failure from monetary inflation, they order more in higher
volumes. Prepare for QE3.
SUBTLE CON GAMES
turned out to be leveraged financial assets after all. Notice that the housing
sector is not rising in price, as almost every commodity in the universe is
rising rapidly, from rice crude oil to gold to cotton. Actually gold is
not a commodity, but rather MONEY, being pursued as the global monetary
system fractures and crumbles. Some Jackass warnings went back to 2006,
calling the home nothing but a leveraged futures contract that had no
callable feature for banks, but offered renewable reloads known as
refinances. Along with a drawdown in account balance (home equity) came a
foreclosure notice to millions of unwary investors. So much for the American
Ownership Society! It was more like a siren call to the marginal buyers and
minorities to lose all their life savings. The great majority of victims
never read the great warning by Thomas Jeffersona about banks.
clueless cast of US economists have lost their way so badly that they no
longer comprehend legitimate income. They insist on USGovt programs to put
more cash in people's hands, from tax credits, jobless benefit extensions,
home equity loan interest deductions, anything to put green in grubby hands.
Talk of helicopter cash drops never materialized. The economist and bank
leaders never seem concerned about the origin of money put in hands. They
seem ignorant that credit extension and monetary inflation are almost always
the source. They US economists ARE totally ignorant of the founding
principles of capitalism, led by a mindless stream of expectation indexes.
They fund elite bankers, redeem fraud-ridden bonds, create liquidity
facilities to grease the debt system, erect channels for corporate paper,
bail out dead corporations, feed the Working Group for Financial Markets in
their stock market support, reload JPMorgan after the Lehman killjob for more
commodity market price suppression, and much more. All these devious
endeavors are funded by funny money or tainted money. Nowhere is open debate
about a grand revival of US industry, a return of factories to US shores, a
reversal of the PacRim outsourcing that reached a climax with the Chinese
low-cost solution, followed by the current national insolvency. The nation
has lost its way on basic capitalism, whose mantle China has picked up from
the ground. Their many factories produce not only shiny useful products, but
legitimate income. The clueless cast of US economists would do well to read
basic textbooks on capitalism, capital formation, and the other cycle. It
starts with business investment, then hiring, then value added, then worker
income, then consumer spending. The United States must shed its devotion to
asset bubbles and the Virtuous Cycle espoused by the USFed, which ends in
systemic ruin, a ruin they cannot even recognize.
recent history of enforcement against insider trading and excess speculation
Its pursuit of insider trading reads like a cheap spy novel. Right after the
Lehman failure came attacks by Wall Street firms against their own hedge fund
clients. Their trading investment positions were open to see. Wall Street
banks cut the credit lines on hedge funds with prominent long positions in
assorted commodities, including crude oil, gold, and silver. The attack was
complete and vicious, leading to widespread liquidations. Many commodity
prices fell hard. Obviously, Wall Street firms gobbled up the positions
forced into liquidation on margin calls. The attack was followed by a ban on
shorting the big US bank stocks. An exception was granted for Goldman Sachs,
since they were busy doing God's work. My guess is their god is money, and
their lord breathes fire not love. The last few months have seen a sequence
of arrests and prosecutions against insider trading, except that no Wall
Street firm is implicated. Those conducting the investigations are of Wall
Street pedigree, to be sure. In my view, moves against insider trading are
disguised attacks against Wall Street competitors and opponents to the heavy
handed naked shorting of important commodities led by the titans in South
a single effective prosecution took place after the May 2010 flash trading
despite ample evidence that the malfeasance went far beyond insider trading.
The illicit practice involved raids of the trading exchanges, deep looks at
the order stacks, and front running of placed positions. The SEC and CFTC
investigators should take a closer look at JPMorgan and Goldman Sachs orders
placed in front of the actions taken by the Working Group for Financial
Markets, aka the Plunge Protection Team. Furthermore, investigators should
take a closer look at the common Wall Street practice of naked shorting of
USTreasury Bonds. The evidence lies in the nearly $1 trillion in Failures to
Deliver in the bonds. The inventive Wall Street firms found a way to produce
instant liquidity from which they fund a large portion of their business
operations, like meeting payroll and covering overhead costs.
high paradox is kept a dirty secret by the USGovt and USFed. Low interest
rates hurt savers, to be sure. However, the low prevailing interest
rates actually slow down the USEconomy, not stimulate it. The total
typical income from savers through bank CDs and bond fund income is in the
neighborhood of $850 billion annually, in usual times with normalized bond
yields. Compare that figure to the estimated $620 billion paid in interest
for consumer loans, student loans, and revolving credit also in usual times.
Higher bond yields put more legitimate income in the hands of savers, which
more than compensate for the higher interest payments made. This grand
deception must be kept quiet. The Wall Street fraud kings want that 0% rate,
since it fuels their USTreasury carry trade. Free money can redeem their
disastrous errors that tarnish balance sheets. It produces income without
work, the great advantage of the elite.
BREAKS LOOSE OF GOLDEN LINK
are the important events taking place behind the curtains, behind the closed
doors, the stratospheric ploys, under the cover of intrigue. They are
reviewed in the Hat Trick Letter issues with analysis. China is gobbling up
COMEX gold & silver, draining the London supply chain. The widely done
but hardly publicized practice of settling COMEX precious metals contracts in
cash with a 20% bonus has caught the eye of many. So gold & silver
contracts contain little metal anymore, mainly paper. The recent tactic of
building Dollar Swap Windows to gobble up Southern Europe sovereign debt at
discount by the Chinese was outlined in the last article. They will likely
convert much of those ruined bonds to gold bullion, with the aid of the IMF
harlot. A global shortage of silver has grown acute. Several nations have
announced skyrocketing silver coin demand, and outright shortages at the
official mints. The latest tactic reported by intrepid analysts is that
China has been gobbling up SPDR shares from the GLD gold exchange traded
fund. They intend to convert GLD shares directly to gold, according to the
London Deep Throat broker. Massive deliveries of gold bullion from this
SPDR, managed by HSBC, have been reported in recent weeks. Gold bullion is
exiting the fund inventory vaults in high volume, an order of magnitude
greater than only two to four months ago. Apparently, the Chinese have
noticed a faster method to acquire vaulted gold than the COMEX. Central banks
in the Eastern world are loading up with gold bullion, not reporting all
their accumulation, as they prepare and executive the Paradigm Shift. Power
will move eastward. An excellent source informs me that China is accumulating
gold at least 5x faster than the official figures indicate, maybe up to 10x
faster. Russia posts some official numbers, more as chicken bones tossed
before the feet of conmen. These topics are analyzed in the private
newsletter Hat Trick Letter reports.
the silver price leaps toward its high at $31/oz with reflex ease, the gold
price struggles. My long held belief has been that on the Supply side
argument, silver beats gold, and on the Demand side argument, silver beats
gold. My forecast has been and will continue to be that the gains in
Silver price will be around triple to the gains in the Gold price, due to
tremendous shortages and colossal demand. So far, so good since last
summer. It is my firm contention that China has been very busy buying silver.
They probably are motivated by yet another USGovt betrayal. The Most Favored
Nation status granted to China in 1999 apparently had at least two possible
important components. In return for diverse industrial buildup, direct
foreign investment, and shared technology, China appeared to have promised
years of deep USTreasury Bond support. The side deal demanded by Wall Street
appears to have been a large lease of Gold & Silver bullion left over
from the Mso Tse Tung era. Recent demand for its return by the USGovt to
China, as part of the lease contract, appears to contain a betrayal. Wall
Street sold the leased hoard into the precious metal market, so it appears.
To those who dispute the allegations, take note of the track record of
profound fraud by the Wall Street banksters. Sale of the Chinese gold &
silver came during and after sale of Fort Knox, and sale of the European
swaps as well.
Silver price has advanced handsomely since July 2010. Its gains have outdistanced
those fo Gold. In the last two weeks, the rebound for Silver has embarrassed
that of Gold. Thanks to Adrian Douglas for the fine chart, not showing the
dimension of time but instead the paired prices of Gold & Silver. The
chart exhibits clearly the falling Gold/Silver ratio. He
"This update of my previous work adds more fuel to the fire that the
dynamics of the silver market have dramatically changed. Because silver has been
suppressed for so long we do not know what its free market price should be,
but we are going to find out soon. I strongly suspect it will be many
multiples of the current price." Here, here!! Bring it on!!
Jim Willie CB
Home : Golden
Subscribe: Hat Trick
Jim Willie CB is the editor
of the “HAT TRICK LETTER”
Use the above link to subscribe to the paid
research reports, which include coverage of several smallcap companies
positioned to rise 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
compromised central bankers and inept economic advisors, whose interference
has irreversibly altered and damaged the world financial system, urgently
pushed after the removed anchor of money to gold. Analysis features Gold,
Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US
Economy and US
Federal Reserve monetary policy.
THE HAT TRICK
LETTER PROFITS IN THE CURRENT CRISIS.
From subscribers and readers:
At least 30 recently on correct forecasts regarding the
bailout parade, numerous nationalization deals such as for Fannie Mae and the
grand Mortgage Rescue.
"As for your financial and economic analysis, I
appreciate your contemptuous style and how you bring facts and
commentary to your readers before most of the alternative media and light
years ahead of the mainstream press. You are a beacon in a dangerous
(DanC in Washington)
"You have the unique ability to sift through the
mountains of disparate economic data and hearsay and weave them into a
coherent compelling storyline. The amount of unbiased factual information you
provide is unparalleled in the industry (and desperately needed in these
scary times). I love your no holds barred approach to dealing with the narrow
minded purveyors of dis-information in the industry."
(BobA in North Carolina)
"I think that your newsletter is brilliant. It will
also be an excellent chronicle of these times for future researchers."
(PeterC in England)