By Jim Willie, GoldenJackass.com
–The Euro Central Bank has problems with margin calls against the collateral it holds
-The LIBOR bank victims are aligned to seek justice, much like Lilliputians
-Bankers from the three zones of USA, London, and Europe are pitted in a war against each other
-The USFed must contend with constant demands and pleas for intervention to rescue faltering financial markets
–The JPMorgan derivative operators are in a struggle to keep the Interest Rate Swap machinery in place
-The JPMorgan gold office gamers are losing their game, reliant upon naked shorts and GLD inventory raids
-The USGovt propaganda artisans are fighting a futile battle in promoting the story of USEconomic recovery
Some extremely powerful differentials in power are setting themselves up, in a manner never seen before in modern history. Those who dismiss the uniqueness of the situation are those who continually are surprised by events as they unfold. The pressure features the managers of the system, complete with corruption and fraud with official coverups in a never-ending sequence of crime scenes, pitted against the forces of justice and fair markets. Not a single fair market exists in USDollar terms. In pure Orwellian style, every single market has a US-based or London-based financial engineer at a control panel doing duty in price intervention. The Western defenders of the syndicate do not wish for the price structure to reflect the reality of physical shortage or the bounty of paper-based surplus, for the currencies to reflect true toxic value, and for the discovery price systems to reflect the raids of private accounts. The system is broken, and the pressure is building.
When young in school, the principles of entropy and enthalpy were introduced in chemistry classes. The ENTROPY was taught as the thermodynamic property toward equilibrium and dissipation. In layman’s terms it was the tendency for a system to seek greater randomness. Sometimes the dissipation comes from the scattered heat, but often the spread of physical items. Like smoke from a fireplace to spread about the neighborhood, like for the odor of nail polish remover to dissipate about the house or porch, like for the toys from a children’s playbox to relocate in every corner of the house, like for pet mice to scatter from a shoebox in a bedroom closet, like for the heat from a car engine to spread across the driveway and around the yard. Extend toward information to spread on grapevines about the office building.
The ENTHALPY was taught as a measure of the total energy of a thermodynamic system. It includes the internal energy, and the amount of energy required to contain a system by displacing its environment when establishing its volume and pressure. Enthalpy is a thermodynamic potential, which is layman’s terms can be thought of as the tendency for an object or system to seek its lowest potential energy. Like a tree toppling in the wind, like a group of items moving from the top of the stairwell to the bottom, like tattered roof parts falling to the ground, like wall ornaments hitting the floor during a storm or tremor. Extend toward a market removing its props, where all channels of data enter the room to effect change toward an equilibrium. Transfer the concept the the financial system. The lower potential energy comes from the extraordinary coils and loaded springs that hold the artificial price structure in place, even the information devices that distort truth. Enthalpy is more recently defined as the amount of heat content used or released in a system at constant pressure. Notice the rising heat within the current distorted financial system. Enthalpy is usually expressed as the change in enthalpy. The pressure in the financial markets is building. Heat is soon to be released in great volumes. The victim will be the USDollar, the USEconomy, the USTreasury Bond, and the price structures all held with great artificial forces. The system seeks the familiar randomness of fair equilibrium-based structures, not the 8am daily whack to the gold price from the London fix, not the regular 10am or 3pm rescue to the S&P500 stock index, not the regular ceiling placed on a 1% upleg in the gold price from capping efforts. The most prominent energy relief valve is the USTBond 10-year yield, which had moved below the 1.5% mark comfortably, as the Jackass forecasted. Its move toward 1.0% would signal systemic failure, as capital needs would give way to the vortex of the Black Hole of USTBonds described in May.
Consider in brief terms the many extreme conflicts and pressure points. None of these existed five or ten or fifteen years ago, yet all are somehow considered part of the New Normal landscape. Give credit to Mohamed El-Erian for his contribution to Orwellian logic, the new spokesman for established normality and revisionist equilibriumn stasis. Nothing normal here, even if declared by the Harvard escapee. The conflicts and pressures come from every conceivable financial arena and marbled office, every nook and cranny.
EURO CENTRAL BANK VS MARGIN CALLS
The European Central Bank is in a pickle. The opened their windows to accept all manner of toxic paper as collateral for newer fresher toxic paper. Market forces reduce the value of the sovereign bonds. The stream of debt downgrades is making life difficult within their chambers. The pressure rises for acquiring cash funds, as the resistance grows toward fair pricing of garbage paper bearing ink and signatures adorned in fancy calligraphy. The debt downgrades force many borrowers at the EuroCB window into a corner. They must deal with margin calls in the same way speculators do at the COMEX on futures positions. Thus the natural tendency toward lower potential energy. So conclude the ECB is nothing more than a purveyor of leveraged toilet paper with ornate trim, whose officers have dropped their pants, yet few notice. What holds constant is the utterly ghastly odor emanating from the window, where greater dispersion is underway of fecal effluence. It will end ugly, as the ECB will simply dispense paper currency to hold the system upright and to avoid collapse. They long ago became a Weimar apprentice. The conflict and pressure will grow until the pressure spills over.
EU TROIKA BANKERS VS PIIGS PEOPLE
The battle between bankers and people has been clear for over two years. The Greek Model is stark and clear. The bankers wish to redeem their toxic sovereign bonds by whatever means. The European Commission of babblers from Brussels has not shown any restraint, despite their forum being discredited as an empty chamber of voices. The finance ministers continue to talk a good game but with nothing under their belts to impress eager hands from the private sector in search of satisfaction, even a cheap thrill from a quick redemption. The Euro Central Bank has conspired to accumulate a mountain of worthless bonds in its basement, sure to disappoint their masters in the castles. Their balance sheets are running negative in the $trillions. On the other side is the people, the depositors at banks, the taxpayers to fund the government offices, even if their disheveled outposts resemble a tsunami on the day after in Athens. The stock investors and bond investors have been ravaged by the Troika who pay homage to the bankers with one vacant bailout after another. My forecast 12 to 18 months ago was that the bailouts would continue until the streets witnessed protest and violence. That has come. The pressures build for public release of anger. The dissipation is of people to the streets, out of their confined offices which no longer seem to harbor the function of added value in production terms. Random violence has grown common. The conflict and pressure will grow until the pressure spills over.
LIBOR BIG BANKS VS LILLIPUTIAN VICTIMS
The LIBOR scandal is best described as an assault on the center of Western banking, where the discovery process as part of justice will pry open every conceivable filing cabinet, computer hard drive, email box, and contract in a drawer. Permission is granted to search. The process will relieve the pressures upon distorted markets and inherent collusion. The brush fires will extend from the basic LIBOR forest to the narco money laundering fields to the Allocated Gold account basements to the raided GLD fund vaults. The extended brush fires will be enabled by the dispersion forces known to the crowbar. As the light is directed to the scummy basements and putrid laundry fields, the potential exists for serious systemic change as the pillars of syndicate controls are slowly removed. That process will come by means of erosion, faltering, and dismantlement. The other side is chockfull of victims, the lists becoming gradually clear. Any recipient of a swap contract is a loser. Any underwriter to an adjustable rate mortgage is a loser. Any financial engineer who re-geared complex machinery via swaps is a loser. They will all line up in lawsuits, sure to capture attention. The gaggle of class action cases will be just as important as the collection of high profile cases.
The armada of smaller victims will form like Lilliputians to tie down the oversized Too Big To Fail banks. Oh, how the Jackass despises that moniker! It means too big to control, too big to enforce the law, too big to succeed, standing as the billboard of failure on the flipside to the Fascist Business Model. Pressure will be relieved and lower potential energy will be realized as the big banks suffer massive lawsuit awards as pent-up grievances are addressed. Their control of the system cannot continue under such circumstances. The greater de-centralization of bank power will be the manifestation of much higher randomness. Systems might seek some concentration of power, but not like what the West has formed. The banks will eventually serve a noble but boring cause, of acting like utilities in bill payments, cash dispersal, and currency conversion. They will also manage credit dispensation. The age of the investment banker will revert to regional offices. The conflict and pressure will grow until the pressure spills over.
US BANKS VS LONDON BANKS VS EURO BANKS
The first real evidence of bankers from one region attacking the bankers from another came not from the LIBOR scandal, but from inside word about Deutsche Bank. My banker source from Central Europe informed that in the wake of Josef Ackerman being deposed as CEO without ceremony, the once venerable bank has turned state’s evidence and is working closely with the Intl Court of Hague, the Interpol special fraud division, and other key investigators. The DBank officials wish to avoid prison time as they assist in attacks on London bankers and New York bankers for multi-$billion criminal activity. The new sheriff from the East is busy at work and has lined up some formidable snitches. The same source mentioned how Diamond of Barclays would cooperate in London to avoid prosecution, but he would be eaten by US wolves. He mentioned how DBank in Germany would avoid prosecution in the homeland but would be devoured by the US wolves. The stage is set for vast attacks, retaliation, and exposures. The result will be the bankers from all three camps decimated, discredited, and scattered to the wolves and their thirst for justice. They will tear each other apart with grand gestures laden in attack, appearing as self-preservation.
Back in May, the Jackass wrote about how the Wall Street bankers would undermine Europe in order to deflect blame, as they would accelerate the sovereign bond bust in Europe in order to redirect attention from the USTBond bubble and wecked machinery to support it. That process is moving along as scheduled. What follows will be a grand amplification though, as each camp betrays the others in a battle for survival. Irony will win, as each will deliver mortal blows to the others, leaving all three camps in ruin. The public will not be aware of the source of informational grenades and computer file howitzers. The pressures between camps cannot be ameliorated by subsidiaries of foreign origin. The loyalties will be tested. Immunity offered by one group of authorities will not count for anything as the other authorities will ignore such deals and proceed with deeply damaging assaults. The jurisdiction lines will become battle lines in a banker war already begun. Defensive maneuvers will deliver deep wounds across the oceans. All camps will lose their banker helm positions of strength. The conflict and pressure will grow until the pressure spills over.
EASTERN TRADE PARTNERS VS USDEPT TREASURY
A battle for trade standards has been building for five years. The dominant industrial producers in the East, the developing nations, have been gaining numbers and building strength. They oppose the USDollar standard, which funnels all flow through the mighty swift gates of US control. A recent important event saw the Chinese offer their $3 trillion in reserves, mostly held in USTBonds, as a core to a trade fund for usage by the many partners in global trade. The US is left handcuffed, unable to respond. The bank bond fraud, the unbridled USFed hyper monetary inflation, the heavy handed usage of banks as weapons (see SWIFT bank code tactic), the favored treatment by the inflitrated IMF and World Bank, these all invite retaliation. The pressure builds to conform to the USDollar reserve standard or face isolation if not military rebuke. The East rallies in response around the new global leader in China. They are developing a new trade settlement system. It is ready for prime time usage. They await the collapse of the USDollar flagship running aground in the troubled bubbly USTBond waters, contaminated by the acidic sovereign bonds, weighed down by arrogance. A vast differential in potential energy has set up a very dangerous global situation. The US$-based system is on its last legs, yet half the Western population cannot see the clear message.
The billboards are too dominated by the corrupted press, which spews a banker message of resolve, recovery, and solutions. The chief negotiator and medical administrator remains Jack Daniels with his staff from Southern Comfort. They solve nothing. As the de-centralization of trade settlement becomes the norm, the dispersion of power centers will exert its powerful opposing forces. It will be a remarkable sight. The US might actually be left out almost completely from the process, and suffer walking through the doorway into the Third World. The Fascist Business Model has a portal to the Third World which is not well understood, as inefficiency and corruption push elements on the pathway. The USGovt officials will be powerless to stop the movement. The Chinese will be unfettered in pursuing the non-US$ solution. It is only natural to seek water from many alternate storage centers, to channel from the most available local supply locations, not just the USFed and the US big banks. The relief of vast differential forces is near. The Jackass has called it a Paradigm Shift in past work. Few comprehend it. The conflict and pressure will grow until the pressure spills over.
USFED QE3 VS FINANCIAL MARKET BEGGERS
Since 2008, a queer pathetic phenomenon has shown itself. The broken financial markets and their captains of futility seek constant and regular aid (if not sustenance) from the official offices. The call for more Quantitative Easing with its attendant destructive bond purchases in direct monetization initiative are heard more frequently. No calls for the system to remedy itself through proper pricing and seeking equlibrium due to supply versus demand, during a vast liquidation process. The desperation is evident and thick. Whenever the S&P500 stock index falters too much, the calls are heard louder for more intervention. Heaven forbid the move to proper pricing of assets, or even of the USDollar arbiter. The fund managers, the big investors, even the Wall Street office managers appear in regular pop-up interviews calling for urgent USFed bond monetization, to feed the badly needed liquidity infusions. Two or three years ago the conversation centered upon the many alphabet soup facilities devised by the USFed to accommodate the liquidity needs. Nowadays the facilities have folded like tributaries into the primary channel of QE. Little does the investment community realize that QE was followed by QE2, and Operation Twist was actually QE3, which morphed into QE4, while the entire nest of central bankers engaged in Global QE. In fact, the pathetic fact of financial life is that QE to Infinity is the working theme. That or collapse.
In my view, QE to Infinity assures the destruction. It is an implicit admission of central bank failure brought about by debt saturation. The group of major central bankers has failed in full view and in front of governmental panels. Chairman Bernanke is a bagholder. The modern nobility of economists is unspeakably incompetent, having lost their chapters on capital formation, having replaced them with chapters on controls and hidden intervention tools, with an appendix of banking system diagrams that appears like a perpetual motion machine (or vast money laundering system). The pressures are building for the hidden tools to work their way to the surface, much like pus does from a giant boil on the skin. The toxic condition of the banking system has proved to be prevalent acne on the body economic. The system strives toward more equilibrium in market price structures. In my view the stock market and bond market and currency market for the United States should be priced 50% lower across the board. Panic is nigh it seems. The lower potential energy from a lower priced asset structure is sought. The conflict and pressure will grow until the pressure spills over.
JPM INTEREST RATE SWAPS VS USTBOND CAVE-IN
In May the vast Interest Rate Swap structures were given attention in Jackass analysis. The USTBond tower cannot grow to the sky anymore than the Tower of Babel could in ancient times. Some irony must be pointed out, as the London Summer Olympic games chose to embrace some ancient Mesapotamian symbols in the music and hill props for the opening ceremonies. It was the established bankers issuing a FU flipped bird to the public. They are under assault, yet defiant and apparently in control. The Interest Rate Swaps permit the JPMorgan shop of horrors to apply props to the USTBond tower. Each month the USGovt debt grows higher. Each month the pressure on the IRSwap machinery grows, eventually to the point of breakdown. Imagine a crane operator who must climb to his cabin in the sky, where every six months the height of the cabin increases. Whereas one year ago the cabin was 150 stories high, six months ago it was 180 stories high, and today it is 210 stories high. If the dizzying altitude does not inhibit the crane, it is the difficulty is twisting its cantilevered arms to drop the materials. High winds are the new normal. So are collapses the new normal. Notice the increasing attention given to the IRSwaps.
The scrutiny of Morgan Stanley financial books and strategic positions is the untold story. The army of 900 highly paid financial accountants and analysts will soon reveal their verdict on health. Word will leak out, seeking greater dispersion along the information laws of thermodynamics. The pressure mounts, as the reality of actual solvent condition bounces off the strained leveraged machinery to keep it all in place, and to maintain a front of strength. The machinery cannot win. The tower will fall. The cracks are showing in the props. As my excellent banker source said in early June, a wrench was tossed in the JPMorgan machinery, and the assured collapse of the derivative mechanisms will proceed until its natural conclusion. The quarterly statements from the big US banks read more and more like an obituary, but their stocks trade against the painted expectations without mention of the word failure. The gears are breaking, but only those with ears can hear. The cables are snapping, ubt only those with eyes can see. The conflict and pressure will grow until the pressure spills over.
JPM GOLD SHORT GAME VS COMEX RIG & GLD RAIDS
JPMorgan serves as a symbol for the heavy controls, the corrupted devices, and the rigged game. They do not act alone, but rather serve as the visible syndicate fortress, replete with obnoxious arrogance. The gold market is the center of the corrupted control mechanisms. If the gold price were permitted to sit at a more accurate, more justified, more equitable price of $2500 per ounce right here, right now, it is an absolute guarantee that the USDollar would sink in shame below the 70 level in the DX index. It is an absolute guarantee that the USTBond would be offered above the 5% yield level amidst hue and cry. It is an absolute guarantee that the US-based price inflation index would be above the 5% level also, complete with screams of pain. What JPMorgan does in order to maintain the price structures, much like a master maestro, is to raid Allocated Gold accounts while at the same time raid the GLD exchange traded fund gold inventories. Their routine naked shorting in the COMEX arena is inadequate, as their strategy requires some physical metal even if stolen or seized or captured. They repeat the process in the silver market for Allocated Silver accounts and the SLV exchange traded fund inventories for silver.
A source for Bill Murphy of the GATA organization has told him that the powerful move in precious metals prices that took place between August 2010 and April 2011 was a direct result of certain restraints placed upon JPMorgan and their interference with the Gold & Silver markets. The story was never told properly. My view at the time was of colossal Chinese purchases overwhelming the system. The system has had the capability to put on a seeming infinite load of naked shorts. The JPMorgan machinery has actually doubled its naked short position in the last two years. Nothing stops them, surely not regulators in their pocket. Well, except the natural forces toward greater randomness and lower potential energy. A great deal of attention has come to the bar inventory of GLD and SLV funds, in addition to the rules that guide the raids from their back door via stock share shorting practices. It will be interesting to see if Eric Sprott will acquire as source for new silver bullion for his Silver Trust the actual inventory from the SLV fund itself. What a coup that would be!
Internal word from the Monaco source who spoke with Murphy indicates that a repeat of August 2010 is soon to occur. JPMorgan is out of time, and their illegal devices will be halted. The event for release of the Gold & Silver prices could occur again in August. The actual enforcement is not clear. But be assured that forces pitted against evil are involved. The JPMorgan machinery might be stalled in ways unclear even to those informed within the gold community. Confirmation of the Murphy source has come from a highly reliable Jackass source. An exciting move is coming for the precious metals markets. Any delay to the revelations of criminal action in the gold market by JPMorgan will be a result of threats and intimidation by the big bank against the whistle blowers. My main hope is that as the price rises, the exposure of corrupt controls is also made more available for public view. The people must see what has occurred to both the gold market and the currency market. The potential energy is growing to incredible levels, as a corrupt lid has been placed on the true money of the world for seveal millenia, gold. The conflict and pressure will grow until the pressure spills over.
USECONOMIC RECOVERY VS PROPAGANDA REALITY CHECK
The final example of cumulative strain concerns the USEconomy. At the start of the new year, it seemed a political propaganda plank was trotted out. Obviously, it was laughable on its face. The supposed recovery is not occurring. The constant deterioration of the economy is the constant of reality, much as described without hesitation or restraint by the Jackass. No amount of political need for continuation of an incumbent administration can compensation for the pressures of reality and exposure to the altered markets, even to the vastly deteriorating USEconomy. The national economy is approaching a freefall that later will produce a collapse. The many indexes like the Philly Fed, other regional indexes, the Institute for Supply Management, retail sales, and capital investment all look dismal. The sources of the problem are too numerous to cite, but they include a broken investment bank system, an insolvent banking system, a ruined bond market for all sovereigns, and debt beyond saturation levels. The true refuge is Gold & Silver, the constant over the ages, which will return to the core center of banking and trade. The justice meted out will be trade systems dictating to banking reserve systems, or else face obsolescence. The pressures of reality for citizens living their lives, raising their families, and managing their households, will continue. They know of the mess facing the nation, and tolerate on a reduced level the propaganda. The sitting administration has not bothered with the story of recovery anymore, but Wall Street does in laughable fashion. The conflict and pressure will grow until the pressure spills over.
Such upheaval is known by many names. The system is turned upside down. Those in office face the nasty consequence of the more universal legal system at work. Some will seek asylum in foreign nations, including the old refuge of Paraguay. History from the 1940 era repeats itself, since the evildoers merely found rooted sanctuary in New York, WashingtonDC, and London, if truth be known. About five years ago, a remarkable fact came to light, about fractures within most agencies, departments, and ruling bodies within the United States. Deep divisions grew as cracks spread across the power structure. My best description has been of Loyalists versus Constitutionalists in the layout of the struggle. The Loyalists had devotion and showed fealty to the Syndicate in charge, with the power of men prevailing over the rule of law. Their calling card has been the endless wars and the ample flows of ill-gotten gains where the underworld dominates, the cancerous banking system replete with bond fraud and contract fraud perpetrated with impunity and official protection, the vast monopoly of contraband and its flows into financial structures, the extensive application of control mechanisms to protect the system and to sustain it. The deep divisions are not resolvable without tumult and upheaval. The hope and prayer is for an orderly transition without the loss of live by innocent masses, nor the undue loss of wealth by the ignorant masses.
The locations of the divisions include the USDept Treasury, the Federal Bureau of Investigation, the Central Intelligence Agency, the Pentagon Chiefs of Staff, the USDept Justice, the Securities & Exchange Commission, the Commodity Futures Trading Commission, the Congressional finance committees, and more. Many of the divisions extend from conflicts between elected officials and appointed officials. Refer to elected representatives versus the embedded syndicate. The USDept Treasury for instance does not have significant turnover from one election to the next. In fact, when a new Treasury Secretary is to be appointed and approved, the syndicate message is to have in place someone with experience, to avoid on-the-job training. Translate to mean a syndicate henchman to continue the nefarious inner works. Numerous scattered reports have come from deep within the power centers of the United States. A reaction has come against the steady stream of executive decrees. The new sheriff in town from the East is taking charge with a team of international cops. Too many violations at the top have occurred. The claim that the United States is a beacon of freedom is much like Vladimir Lenin proclaiming a paradise for the proletariat in Russia. The US leadership is in the process of being exposed. The ugly rancid underbelly will be in view soon on the global stage.
Many quiet leaders are apalled at the course of events, who sit in offices that never receive much spotlight, but which harbor much power. The forces toward greater randomness go hand in hand with the movement toward free spirits. The forces toward reduced potential energy go hand in hand with the direction toward de-centralization of power. The entire broken system revolves around a toxic USDollar and its fierce defense by dark powers. Their failure is evident in the 0% official interest rate managed by force by the USFed central bank, together with the bust of sovereign European bonds. The USTreasury Bond ultra-low rates serve as a mockery to the asset pricing system. The strain with wars and press support add pressures from deep within the system. The conflict and pressure will grow until the pressure spills over. When it does, a new global system will be in effect, based upon Gold. The shiny inert yellow metal is the fair arbiter of trade, the true store of value, the timeless object of money. Gold has often showed its value during times of upheaval and radical systemic change. These are dangerous times, especially for those who refuse to heed the warnings. Gold is the refuge and core of stability, as the thermodynamic forces show themselves.
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.
“In my 40 plus years of business experience that includes stints in public and private companies as well as entrepreneurial ventures, I have read numerous newsletters in an effort to stay abreast of a rapidly changing world. In my opinion, you seem to be tying the pieces together better than any other source.”
(BobT in Maine)
“Your monthly reports are at the top of my list for importance, nothing else coming close. You are the one resource I can NOT do without! You have helped me and countless others to successfully navigate the most treacherous times one can possibly imagine. Making life altering decisions during tough times means you must have all the information available with direct bearing on the decision. Jim Willie gives you ALL the needed information, a highly critical difference. You cant afford to be wrong in today’s world.”
(BrentT in North Carolina)
“You have warned over and over since Fall of 2009 that Europe would come apart and it sure looks like exactly that is happening. You have warned continually about the COMEX and now the entire CME seems to be unraveling. You must receive a lot of criticism regarding your analysis, trashing the man, without debate. Your work is appreciated. I do not care how politically incorrect or how impolite your style is. What is happening to our economy and financial system is neither politically correct or polite.”
(DanC in Washington)
“The best money I spend. Your service is the biggest bang for the buck.”
(DaveJ in Michigan)
Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com. For personal questions about subscriptions, contact him at JimWillieCB@aol.com