The great global Paradigm Shift involves far more than wealth migrating from West to East in the form of Gold bullion. The corruption among the Wall Street bankers, the Chicago pit commodity traders, and the London bankers is all playing out in the COMEX & LBMA fall from grace.
This article should add a good deal more light on the phony USTreasury Bond market which is not well understood for its status as being the greatest asset bubble in human history, not just modern history. It exceeds the housing & mortgage bubble that formed a decade ago, if not from volume, then from scope since it is laced throughout the entire global banking system.
The USGovt shutdown is blatant evidence of the march to the cliff.
The global USTBond dumping, combined with some diversification from sovereign bonds to gold bullion, aggravated by Indirect Exchange, will continue to put great pressure on the USFed to maintain the bond equilibrium charade. The volume of USFed monetization is going to rise from all these negative factors at work. In 12 months, it will be clear.
The climax blow will be the conversion of USTBonds and EuroBonds and UKGilts and JapGovtBonds into Gold bullion that kills the current system and opens the door to the new system. With great disruption, the new Paradigm Shift is in progress, unstoppable, but offering hope for a better day, a better system, a more fair system, with participants and savers given a just system. For three decades, Gold has had a nemesis in the USTreasury Bond. The USTBond is dying, a wreck in progress. As the old pillars fall and the new pillars rise, The Price of Gold will be set free.
It is written. It shall be done.
A rebuttal is warranted. The entire analytic discussion, defense of viewpoints, exposure of corrupted markets, and intriguing human psychology regarding forecasts is covered. It might be enlightening to many folks. It might be entertaining to some. It might be tawdry to a few. Gary North sounds more like a mainstream financial apologist than a sound money advocate. His days at the Lew Rockwell Institute are over. He seems a confused man with a limited comprehension of either the financial system or market developments, who has offered a shallow dispute of the Jackass recent perspective on the USTreasury Bond market. Given his extremely unimpressive analytic ability and dim vision, with a certain blindness extended from a certain perceptual inversion, he will be referred to henceforth as Mr South. Nothing personal, just hard to respect incredibly shallow attacks with no solicitation, surely without recognition of my past correct forecast trail. South is surely a good man, just not a good analyst. His recent essay featuring the Flash Trading and other USTreasury Bond factors was an unsolicited disgraceful assault with hardly a single point of valid substance. It was an extremely unimpressive display. To be sure, High Frequency Trading, also known as Flash Trading, is not skin in the game, and not typical capital at risk. It is a blatant price control practice that produces false levitation in asset prices. The Jackass has a long history of being a team builder. Mr South is not on any team, no longer on the Rockwell team. He has chosen to strike out errantly on his own. Let this article serve as my rebuttal, which should add a good deal more light on the phony USTreasury Bond market which is not well understood for its status as being the greatest asset bubble in human history, not just modern history. It exceeds the housing & mortgage bubble that formed a decade ago, if not from volume, then from scope since it is laced throughout the entire global banking system.
ROOTS OF GARY NORTH
The recent very strange attack of the Jackass work by Gary North is indeed unusual, unexpected, bizarre, lacking in proper perspective, shrouded in misquotes. It is always hard to make a solid rebuttal against small elderly figures, especially one with a rather shoddy track record. It is too easy. South is so full of mistaken notions and wrong accusations and false premises, it is difficult to begin. So let’s begin with his past, where in 1999 he warned of a systemic breakdown and widespread calamity from the changeover to year 2000, the infamous Y2K problem. A few clients have helped the Jackass to understand the tragic fall from grace by Gary South. Apparently, for a full year before the January transition to 2000, South wrote numerous articles, over a long period of time, predicting that Y2K would be a major catastrophe worldwide, that it would disrupt all kinds of computers and computer-driven activity throughout entire economies. For example, he pointed to banking, the stock market, and even in various well pumps for oil, water, and elsewhere. His past work has been mostly associated with Rockwell. One client BV in Texas recalls many of his friends who bought into South’s seemingly well-reasoned and informative articles about his Y2K predictions of a worldwide catastrophe. BV even lost some credibility with some of his family and friends, from merely passing on the rubbish analysis scribed by the dullard wayward South. Now those same people refuse to accept guidance on Gold & Silver, during the ongoing financial collapse. South was dead wrong on Y2K! (Please excuse the exclamation point, which is actually not common in my work.) Since his incredibly inept Y2K calamity forecast, South has been writing uninteresting essays about Sound Money and the Von Mises teachings, offering little if anything new or original. His Lew Rockwell essays were easily digested in a quick sitting, hardly anything ever learned. In time, they were passed over altogether.
On the other hand, the Jackass made his position very clear in 1999 about a melt-up in the 2000 transition for the basic reasons that over $600 billion was spent on the software changeover, and then USFed Chairman Greenspan had opened the gates on money supply in anticipation of something that the Jackass found extremely unlikely to the extraordinarily high degree. My background in computer programming, dating to Fortran and COBOL, along with direct consultation with Staples IT co-workers, enabled me to conclude the problem would be a total non-event. As it turned out, the only snafu of note (surely others) was the Paris Airport recording the new year 19900 on its displays. The melt-up was an easy call, as the US stock market rose to untenable silly high levels, and Cisco Systems market cap threatened the $1 trillion mark. The easy call was due to absurd levels of money creation by the Greenspan Fed, little justification for it, and a bubble formed. The Jackass later concluded that Greenspan wished to create a big ugly asset bubble, but for more sinister reasons. Greenspan was the fool we respected. South is the fool in the corner making the noise, acting like Chicken Little, and serving as a tawdry spokesman for Von Mises and the Austrian School.
BV went on to mention that when the Y2K fallout turned out to be a non-event, South lost a great deal of credibility with many people from the Patriot and Boomer community. Afterwards, South changed his writing style. He stopped making forecasts and predictions, regurgitated the Sound Money principles in dull style, sticking to the facts of a topic or debate. The Jackass read many of his essays on the Lew Rockwell website, not learning much of anything. So the practice was halted, as South merely repeated basic Austrian School principles that are well entrenched for anyone with a rudimentary monetary education. For years, he was not as opinionated regarding a prediction of any future outcomes. He seemed humbled. It has worn off. His attack on Jackass analysis is very shallow and full of silly constructs and shallow perceptions. It is like South is unaware of the USTreasury Bond market structural changes in the last four years, or key events surrounding it. His work will be scrutinized more for content in the future. It is unclear what South has contributed to the gold community in ten years.
PAST JACKASS FORECASTS
Given the South criticism, let the Jackass take the opportunity to discuss forecasts and track records. They can provide both a contrast of the hack South, and justification for heeding the next Jackass forecasts. The record is very clear on Jackass forecast history. The public domain articles serve as adequate ground for their demonstrated accuracy. In fact, they are not small forecasts. Most were what are called mega-forecasts, the kind that call for systemic change and altered landscape, earning extra credit since bolder in nature. Take for instance the Insolvency forecasts and the Monetary Policy forecasts made from 2006 through 2012 by the Jackass, all correct. With several new forecasts pending, and a solid track record, the readers would do well to pay heed. The correct forecasts formed a long string. One or two errors did occur, but perhaps one supposed error is just a slowly developing correct forecast. Check the Jackass archive kept on Gold-Eagle.com (CLICK HERE), which contains articles dating back to 2004 and 2005. The G-E website managed by I.M.Vronsky is a superb online journal focusing on the gold world, the bond arena, the currency pits, and the economies. He is incorrectly rumored to be a computer. Rather, he is a warm-hearted man with whom the Jackass has made a nice friendship over the last ten years, a fellow comrade in arms.
South is not my comrade, since he directs his weaponry inside the gold fort. He never has sent a message to me, to discuss analytic points or to achieve a meeting of the minds, like with several other analysts. Actually, the Jackass has taken aim at several clowns in the past for their stupidity and arrogance, like Van Eeden and Nadler or Hartman, hacks one and all. The Jackass has been critical of the Deflation Knuckleheads, who were flushed aside by the torrent of hyper monetary inflation directed by the USFed (see QE to Infinity). The forecast record must be seen, since a valid record of the past. See the Golden Jackass website forecast webpage (CLICK HERE). It was assembled at the urging of my inner circle colleague Craig from Northern California area, who actually reminded me of a couple forgotten correct forecasts. Some forecasts are actually the result of team discussions and what emerges.
Correct Jackass forecasts include the following, all made months or years in advance of the actual events in occurrence. Each forecast is well documented, discussed in analytic terms with justification and reasoning in written posted work. The Hat Trick Letters were written around all these forecasts, with much more documentation and shared logical flow. The home webpage includes some dates in detail. Note #11 being wrong, and #13 being wrong so far. As for South forecasts, not sure of any. So step aside, as some light is shed from correct forecasts, except for one wrong call. Chalk it up to being human.
- Demise of Fannie Mae and Lehman Brothers
- Housing Market Bust, to Remain a Long-Term Bust
- Mortgage Market Bust, Triggered by Subprime Mortgage Failures
- Insolvent US Banking System, from Mortgage & USEconomic Bust
- China Transition from Trade Partner to Rugged Adversary to Trade War Opponent
- Persian Gulf Credit Bust, from Overdone Construction (Dubai was struck)
- Southern Europe Sovereign Debt Bust
- USFed Move Down to Zero Percent, after US General Systemic Bust
- Dismissal of Green Shoots in USEconomic Recovery
- Later, Zero Rate Policy Forever (ZIRP ad Infinitum, dismissal of Exit Strategy)
- Sharp USTreasury Yield Rise due to $1 Trillion USGovt Debt (XXX, wrong)
- Repeated Annual USGovt Deficits over $1 Trillion
- Introduction of the Nordic Euro Currency as German Core Splits (XXX, wrong so far)
- Installed USFed Bond Monetization Program, aka Quantitative Easing
- Later, the Bond Monetization ad Infinitum (aka QE to Infinity)
- Japanese Yen Currency Rise to 125 After Earthquake & Fukushima Event
- Rising Global Cost Structure & Capital Destruction from USFed Policy
- Growing Spread Between COMEX Gold Price versus Physical Gold Price
- Irrelevance of Group of 8 (aka G-8) and Ascendance of G-20 Nations
- Rally in USTreasurys after London Whale Exposure by JPMorguen
Let the Jackass challenge Mr South to produce a list of any correct forecast calls that he has produced since his great fumble on Y2K. He seems much more prone to spouting the Sound Money line, of certain value, except that forward guidance for public benefit requires more specific forecasts which can be acted upon. Critique of other works is a sign of diminished ego. The Jackass ego is revealed in self-effacement, shown in the moniker. My tendency is to act more like a trapped animal, on occasion to emerge as a junkyard dog when kicked needlessly. My anger and disrespect is usually directed at bankers and economists. Exception here!
RATIONAL OF PAST FORECASTS
The themes of insolvency permeate the first several correct forecasts. The most harsh criticism that came to the Jackass desk from other analysts were related to the forecasts that the US Housing market would not recover at all, and the US Banking system would feel a ruinous impact with grotesque insolvency. Since much of the USEconomy had been made dependent upon the home equity extractions and the mortgage bond trading flows, my forecast was for a systemic failure. If the economy was to lose its critical (but perverse) dependence on the housing market, and the mortgage bond market was to be exposed for its faulty structures, then the entire US financial and economic system would suffer a calamity of sorts. The catastrophe has hit with a Global Financial Crisis without solution, marred by Weimar-like hyper monetary inflation and constant toxic bond redemptions. The Jackass mega-forecasts came true, and pervasive insolvency hit the entire US system, from households to companies to banks to government finance. All the while, China morphed from a trade partner to a trade war adversary, another important forecast that changed the geopolitical picture.
In response to the grotesque insolvency, the expectation seemed very simple that the USFed would take the interest rate down far below the previous cycle low of 3% or so, down to the Japanese norm of 0%. Also it seems very simple to expect the USFed to cover the USGovt deficits, when securitized. The US inherent system would not have sufficient savings to cover the debt. Besides, the unilateral arrogant destructive ZIRP & QE would succeed in alienating the entire planet, which would come to despise the United States and regard the nation as the new pariah. It is all coming to be. The US isolation is another correct forecast in progress, without need to record it on the list. So naturally, the next chapter is the global rejection of the USDollar and its financial weapon of mass economic destruction, the USTreasury Bond.
NEW PENDING JACKASS FORECASTS
So before South and the rest of the viewing and reading audience, let the record stand and speak for itself. That is 18 correct forecasts, one error, and one seeming error to play out. Several forecasts are in progress, pending. A few seem to be happening, but in this complex world, to be verified definitively is difficult and takes time. Below is a partial list. Time will tell, as always a fair arbiter over forecasts made. The Jackass forecasted a reversal of the Taper Talk back in July, correct again, but not listed. The eventual higher QE volume is a simple no-brainer forecast. Here is a list of the current ongoing forecasts, with no outcome yet, all pending. To be sure, a few seem to be happening, but guys like the bespectacled myopic South probably cannot notice the correct path they are on. He probably considers the above list of correct forecast calls pure delusion. So he would consider the next pending list of forecast calls equally fanciful.
A. Fall of the House of Saud, the end of Saudi Arabian Regime (happening)
B. Death of Petro-Dollar, the USMilitary Displaced in Persian Gulf (happening)
C. Global Dumping of USTreasury Bonds, the Return to Sender (happening)
D. Three Big Banks at Failure Risk: Barclays, Citigroup, Deutsche Bank (DB happening)
E. Split of USDollar into Domestic Version and Intact Foreign Version
F. USFed Bond Purchase Plan (QE) will Double in Volume, and not Taper
G. Arrival of Gold Trade Settlement with Intermediaries, begun in the East
H. Metamorphosis of BRICS Bank into Gold Trade Central Bank
I. Price Inflation Impact to USEconomy from Global USDollar Rejection
The great global Paradigm Shift involves far more than wealth migrating from West to East in the form of Gold bullion. The corruption among the Wall Street bankers, the Chicago pit commodity traders, and the London bankers is all playing out in the COMEX & LBMA fall from grace. Along the evolution of corrupt financial systems, the SPDR Gold Trust (aka GLD Exchange Traded Fund) is being treated like a dedicated harlot purse in service to the Wall Street bankers, the modern day Knights in Satan’s service. The Jackass has his own past upbringing and background. It provided an excellent exposure to the seamy side of the society. Therefore, corruption is assumed and upon it are built the Jackass forecasts. The competitor analysts seem stuck in hoping the corruption is pushed aside. They tend to make assumptions about self-correcting healthy systems that seek equilibrium. Worse, they tend to integrate forecasts around assumptions of the world righting itself. None of such nice factors are at work unfortunately. Instead, the Jackass expects with the Fascist Business Model in place and entrenched, those firmly in power will prevail until the systemic failure is much farther along. So the system will be abused like a parasite host, and taken to ruin. The USGovt shutdown is blatant evidence of the march to the cliff. The Jackass advantage has also been of no loyalty to Wall Street, nor to any banking tower, only to subscribers and my legacy (whatever that might be).
ERRANT CRITIQUE BY SOUTH
Let’s review some of the specific errant stupidity of Gary South when offering shallow criticism to my last article on “Flash Trading that Hit the USTreasury Bonds” out last week. The points made by South seemed as misrepresentative (bordering on motivated smear) as they were shallow (indicating ignorance). South seems not to comprehend the USTBond market at all in its gradual degradation toward reliance upon monetary crutches for nearly total support.
The Carry Trade features big US Banks borrowing at 1/10-th of 1% and investing in long-term USTreasurys. Unknown to South, the practice began when the 10-year bond yield was south of 2.5% and even at times briefly above the 3.0% level. The evidence of the carry trade was the regular and frequent comments made by USFed Chairman Bernanke, as well as leading Wall Street bank executives. They boasted in 2010 and 2011 about replenishing their balance sheets by means of investing in USTreasurys. Did South miss this? Was he asleep? Wall Street banks never miss an opportunity to apply leverage to any successful trading scheme. Is this fact something that South is unaware of? Is he that obtuse? With the rise in bond yields from 1.6% to 2.9% (not 2.7%), my conclusion is that the carry trade is unwinding. This is Financial Engineering 201, not exactly the basics but still not very advanced. To be sure, the Big US Banks are losing huge amounts of money in their leveraged bond positions. They prefer bond futures, just like they prefer the S&P futures contract, and just like they used to prefer their mortgage bond REMIC invention. Their past track record and preferences are well known to almost any market student. That apparently excludes South! The concept of unwinding leverage with bond introduced the Convexity term. Apparently, South is ignorant of it also, as the bond market will tend to overshoot as it unwinds. Maybe South is unaware of the leveraged Collateralized Debt Obligations that Wall Street devised, which imposed leverage upon the leverage. These corrupt pillars even called it squared leverage. How is your math, Gary?
Heck, South is so obtuse that he probably believes the USTBonds being sold will release new funds directly into the US Stock market, even help to revive the USEconomy. Not sure he believes that, and sure would not want to put words in his mouth (like he did with my work). As the leveraged USTBond positions are unwound, they will not release vast funds into the financial markets or the economy. The reason why is simple. They are spread trades. Maybe South is unaware of spread trades also. As the wrecked spread trades (short the USTBill and go long the USTBond) are unwound, they are big BIG money losers. So to close them out, they must bring money to the table. In futures trading, they are marked to market. They are not carried on the books at book value, which South suggested. Not the futures contracts that Wall Street banks are so fond of, with a 30 to 40 year history. The big banks can conceal their losses only for the USTBonds held without leverage. And ten year maturities are almost never held to maturity, an absurd notion he postulates.
Then we come to the criticism that sale by big banks of USTreasury Bonds is an action that generally reduces liquidity. This is an obvious point of error. Where South misses the point, is that the banks each have internal liquidity requirements. They are (by the Dallas Fed insider’s account) being forced to sell their bonds at losses in order to produce INTERNAL LIQUIDITY, not systemic liquidity. The same insider quote addressed the need to meet capital requirements, the hint of internal individual bank dynamics, not macro system dynamics as he errantly suggested. Being a shoddy student, South misses the hint. Recall that these big US banks are all insolvent. The old adage is Insolvency + Illiquidity = Bankruptcy. Maybe South is unaware of such financial axioms. The insolvent structures lack liquidity. Perhaps the Big US Banks are suffering from USTBond carry trade losses in addition to interest rate derivative losses, together which have rendered deep damage to their capital structure and liquidity. They are being forced to sell in order to raise internal liquidity, to defend not only their own financial integrity but the USDollar. South is thinking macro but the force at work is micro. The big banks within the Federal Reserve system are each struggling within their own broken structures and caved in walls. The entire point about the round robin being played by the USFed and its member Big Banks was missed by South. He seems like a Mr Magoo running over the bushes with his car, myopic if not blind.
South saved his most obtuse and absurd arguments for the Flash Trading. He calls mine an attack on the free market. Not sure where the free market is, surely not USTreasurys, surely not the FOREX currency market, surely not the US Stock market, and surely not the Gold market. Lest one forget, surely not Fannie Mae or AIG or General Motors with all their props. Free market is not at work, surely not with Big US Banks, which a free market would have liquidated years ago for insolvency, if not fraud. Obviously Algorithm Trading is legal, but it is not from entrepreneurs. Wall Street bankers are hardly entrepreneurs, but rather the vampire squid types. Al Capone and Bugsy Moran and Corleone were entrepreneurs also. South claims Algo Trading undermines price rigging, when it is actually a key device used precisely to rig prices, to elevate them. This is utterly basic. It is unclear whether South is suffering from dementia or is just demented. The High Frequency Trading, otherwise called Flash Trading or Algorithm Trading, is not a healthy form of arbitrage. The Wall Street schemers using Algo Trading do not seek out price disparities so much as they stack on phony volume and lift price in a highly disruptive manner than requires the participation of dumb money. Perhaps South can offer an explanation as to why Flash Trading caused a few market seizures in recent years. He might not be aware of the dependence on flash trades for regular supply of dumb money to exploit, like lubrication in the distorted market (not free market).
South concludes that the Jackass forecast of a ramped up QE to Infinity with greater bond purchase volume will be incorrect in the next 12 months. Given the 90% correct track record, and Gary South’s bumbling Y2K call, and his absence from the forecasting risk tables, think twice. The need to contend with growing USTBond volume sales must be addressed. He does not address the selloff in USTBonds by foreign entities (seen in TIC Report), sure to add to sales volume. He does not address the Indirect Exchange in foreign asset acquisitions (seen in Russian Rosneft deal), sure to add to sales volume. He does not address the growing animosity and resentment by the global community for the unilateral monetary policy administered by the USFed for Wall Street and London banker benefit. The global players are diversifying out of USTBonds. He does not address the gathering momentum by the G-20 nations, the BRICS nations, the SCO nations, in developing a non-USDollar alternative. He does not address the mature global alternative (a growing consensus device) being embraced with the Yuan Swap Facility, useful in weaning off the USDollar in trade settlement. In fact, South does not really offer much depth at all in his analysis. He focuses unduly on exclamation points, italics, bold facing, and capitalized words. The Psychology community would say that South focuses on the syntax of things without proper attention paid to the messages. In today’s world, with the ongoing global financial crisis, with the ongoing Weimar monetary policy, with the global rejection of the USDollar, with the great Paradigm Shift, with the extraordinary wealth transfer, with the controversial rehypothecation of Allocated Gold Accounts, such editorial features are well warranted. Perhaps South used some in his wrong Y2K forecasts in 1999.
USTREASURY BOND VS FREE MARKET
Then we come to the South criticism that the Jackass assumes the USTreasury Bond market is not a free market. To claim or assume or even to imply the USTBond market is a free market, or a fair market, or a market that seeks equilibrium is incredibly naive, basically ignorant, and fundamentally stupid. After the Big US Banks were permitted to place any value they wished on assets, the USTBond market soon went into the Grand Toilet of Integrity. About the same time as the FASB accounting rules were suspended, the Flash Trading in the New York Stock Market was exposed. It does not represent entrepreneurs placing money at risk with investments. Given how the practice made up 80% of the NYSE volume, it was clearly designed to maintain high phony share prices. Maybe South was asleep at the office that month? Notice the common 80% again with USTreasurys. The USFed has been buying at least 80% of USTBond issuance for two years running. In some months, the USFed bond purchase exceeds the actual USGovt debt issuance, a point made by competent bond analysts. So a nice easy leap for the Jackass to believe the Flash Trading has jumped from stocks to bonds. It is called connecting dots.
The next big event to influence the USTBond market was the abuse of Interest Rate Swap contracts. The facts in evidence have been presented, and will not be done again for South’s benefit. In the second half of 2010, the Morgan Stanley offices added a ripe $8.5 trillion in interest rate derivatives. The data is according to the Office of the Comptroller to the Currency. The practice was given attention by friend and colleague Rob Kirby, intrepid to the end. Thus the flight to USTreasurys was phony, fabricated, and false in late 2010 and 2011. No free market here. The beached London Whale was about Interest Rate Swaps gone bad, something South might have missed in June 2012. The Jackass (with Kirby) was all over the story, even to dismiss and disprove the JPMorguen claim that the London Whale losses were over the Southern European sovereign bonds. That lie was unmasked easily, since over the quarter in question, all such PIGS bonds rose in value, improved in position with falling bond yields, calm somewhat restored. So no fair market in USTBonds as the derivative machinery was exposed, except to those with poor mental aptitude and shuttered eyes. Maybe South was busy that month critiquing another analyst, and not doing his homework?
Then comes the Quantitative Easing, which is an aberration clearly not inherent to a free market. The USFed has been busy purchasing $80 billion worth of these toxic bonds, along with mortgage bonds, each month. Greater volumes were purchased behind curtains with the Operation Twist, yet another deceptive program to undermine the free market. The theory brought to the table by Catherine Austin Fitts was that the USFed, with their QE3 plan, was trying vigorously to bury and put away the most corrupted and toxic mortgage bonds. The motive was to free the logjam of toxic and fraud-related mortgage bonds, in order to permit the long awaited housing market recovery. The USFed wanted to attract foreign investors. All they succeeded in doing was to attract the Wall Street sponsored private equity funds. The entire USFed QE programs are horribly undermining the free market characteristics of the USTreasury Bond market. It is unclear if South is aware of the private equity fund influence to the supposedly fair market in US Housing. Refer to South. No bond market with the central bank purchasing between 80% and 90% of the USGovt debt issuance is a fair market, not by any definition. It is being supported by rabid applications of interest rate swaps. See the OCC data, there for public viewing, but almost never viewed.
The Jackass logic uses extensions from the recent June TIC Report on USTreasury Bond and other US$-based bond sales. The flow is always dominated by USTBonds. A record month of net dumping by foreign institutions took place in June. Perhaps South is not aware? The Jackass does his homework, but South probably does not. One can add to the bond dumping exercises, motivated by extreme anger over unilateral USFed monetary policy decisions, the Indirect Exchange phenomenon. Foreign central banks and big financial firms are angry over the QE initiatives, for the monetary inflation hitting their shores. The results have been higher prices across the board, in particular for food. Even the food markets are not free markets. The Jackass has been very vocal about the QE effect of rising cost structures, falling profit margins, and businesses shut down, jobs cut. It is unclear whether South regards the QE initiatives as being loaded with stimulus, and whether he notices the capital destruction effect. The Jackass does not care what South sees or does not see, only what he criticizes. The Jackass never has written about a 2014 bond market collapse. Where did Gary South find such a timed reference?
The global USTBond dumping, combined with some diversification from sovereign bonds to gold bullion, aggravated by Indirect Exchange, will continue to put great pressure on the USFed to maintain the bond equilibrium charade. The Indirect Exchange occurs when third parties are given USTBonds in asset deals or certain commodity ongoing purchases. The third parties take the bonds and sell them immediately, requiring the cash. The volume of USFed monetization is going to rise from all these negative factors at work. In 12 months, it will be clear. In fact, within 4 to 6 months it will be more clear the QE volume ramp up, not taper down. Shooting fish in the barrel is not quite what is happening here, a metaphor used improperly by South. In fact Gary South while trying to shoot a special fish of Jackass species, actually fell in the tank. It was not a barrel after all. From the looks of the flailing around, South cannot swim too good, as his scribbles dont qualify as an actual stroke. The Jackass was on a swim team when young, and can swim like a fish. The South review is shallow, ignorant, and full of absurdities that indicate a guy asleep for over three years. He lost his credibility long ago, like in year 2000. The Jackass will stack up his forecast record against South, or anybody else.
STRANGE PSYCHOLOGY ON FORECASTS
For several years, the Jackass has given significant study to the psychology of forecasts. Refer not to the actual content and analysis beyond lodged forecasts, but rather to the mindset of people who react to them before, during, and after the forecast outcomes. It is a truly mindboggling study into the recesses of strange human mental processes. It is full of denigration, denial, and dispute, with refusal to do self-evaluation. Most people regard a correct forecast to be stupid beforehand, then ignored while coming to pass, but obvious afterwards. They do not give credit for the last correct forecast, while denigrating the next probably correct forecast. They do not wish to consider the logic and justification for the past correct forecast or the next new forecast, which is based on the same correct line of thinking. Notice Gary South did not notice the string of correct Jackass forecasts. Instead, he attacks the next forecasts. Ridicule is a regularly anticipated feature of forecast reactions.
People typically do not acknowledge correct forecasts. They might not comprehend them. They might be angry over not foreseeing them on their own, or the dynamics at work. They might wish to ignore them, since personal loss was suffered. Many emails have been received by the Jackass, highly critical and insulting, calling me stupid, on forecasts which eventually came true. Only about three or four emails have ever come from the same insulting people, a sign of integrity. People tend to live within assumptions from which to derive happiness and security. They tend to believe the USGovt and USMilitary take care of the population and protect it. They tend to believe the police forces and the FBI protect us. They tend to believe the CIA seeks out intelligence for national protection. The tend to believe the big banks are deeply committed to capital formation, healthy lending practices, which help to fortify the USEconomy and to create jobs, even good jobs. They tend to believe the financial markets are fair, seek equilibrium, and are self-correcting. They tend to believe the regulatory bodies do their jobs and enforce the rules of fair play. Most of these assumptions and beliefs are not correct. A predatory element has been fostered among the leadership classes, evident in the financial markets, in recent years. A crime syndicate has taken control and taken root. The Jackass noticed it long ago in the early 1990 decade. The Black Monday event in 1987 awakened me to look for additional hidden factors. The Clinton glory years were a study in crime.
Most people do not respect correct forecasts. They resent them and the person who posts those forecasts. They resent past losses from not seeing the same phenomena, from not avoiding the pitfalls that seem so clear in hindsight. Competent and correct forecasts are the opposite of unseen pitfalls. People resent others who implicitly point out their failings and losses associated with the wrecked investments. Curiously, many people will continue on the same path, out of inertia and dedication to an assumption pathway. Many subscribers told me that the housing market had been solid for generations and would never collapse, the ultimate inflation hedge. They did not comprehend the mortgage bond corruption, the MERS title database corruption, the duplicate income flow on bonds. They lost their equity and hate the forecaster, who himself avoided the pitfall, sold his house long ago, and bought Gold & Silver (generally speaking). Most people resent the correct forecasts, since they are committed to their communities, to their businesses, to their pension plans. They are more hostages than participants. They resent the correct forecasts, and the new forecasts, because it places a billboard in front of them which highlights their poorly planned lives, deeply entrenched in a failed system, perhaps even a captive or worse, a disenfranchised person without employment any longer. They do like appreciate exposure of their shortcomings and faulty thought process, if not even somewhat beneficiaries of a worthless education. Several times, the Jackass has heard that such a position behind a forecast could not be true, or else all they learned in college would be false. My response has been that no Economics or Finance courses are offered on corruption. Even my favorite graduate school professor who teaches about bank derivative mathematics refused to offer an additional perspective in his advanced class on the effect of derivative valuation with introduced corruption. He is a great teacher and fine man, a tremendous professional influence on my education and career, but one must wonder what he thought of the London Whale story, and if reminded of the Jackass conversation.
The Jackass belief is that the engrained corrupt element and the distorted markets are the bitter fruit of the Fascist Business Model which flourished in the Clinton-Rubin Admin, and reached climax after 911. Most people do not respect correct forecasts. They resent them, since their coming to pass calls into question the surfeit of baseless assumptions for deriving happiness and security. They resent them, since they find themselves stuck in a world that resembles 1984 and the Brave New World far more than a wondrous New Age and Goldilocks. The Jackass is Henry David Thoreau writing for the Hat Trick Letter in a log cabin at Walden Pond. The site was visited countless times after a bike ride and hike around the pond, sometimes a swim in the deep cold spring-fed waters. Despite losing home equity, despite losing pension funds, despite losing jobs, most people refuse to believe the entire system is corrupted by the leadership classes. But the population is awakening, at a very late stage. As a result, the dire forecasts of systemic failure and the grind toward insolvency and collapsing platforms is seen as very unsavory, all too often an unwelcome insertion into the conversation.
The Jackass forecasts are not designed to make people feel good. They are designed to help people correctly see what is coming in the next few months, so that they can plan accordingly. Most of the forecasts are for extreme disruption and broken structures, part of what can be called mega-forecasts. Most people do not perceive the Paradigm Shift underway. If they did, they were be more scared. They would fear poverty and the Third World as much a lost freedoms and the emerging totalitarian state. There are only so many Gold & Silver lifeboats, and most are taken (a constant wise Voice refrain). The Jackass forecasts will continue to be delivered, tested, and confirmed. When the forced USGovt debt default and restructure comes, and when the Gold Trade Standard is put in place, a countdown will be watched for the end of the Hat Trick Letter. It might be a long countdown, but honestly, there could never be a follow-up act on either forecast call.
Permit the Jackass to repeat the conclusion from the same Flash Trading article on the USTreasury Bonds. The major currencies will be forced to scurry like cockroaches in the dark to find and source gold bars for renovation of the currencies themselves. The crumbling sovereign debt serves as flawed foundation for the major currencies. The climax blow will be the conversion of USTBonds and EuroBonds and UKGilts and JapGovtBonds into Gold bullion that kills the current system and opens the door to the new system. With great disruption, the new Paradigm Shift is in progress, unstoppable, but offering hope for a better day, a better system, a more fair system, with participants and savers given a just system. For three decades, Gold has had a nemesis in the USTreasury Bond. The USTBond is dying, a wreck in progress. As the old pillars fall and the new pillars rise, The Price of Gold will be set free. It will reach $3000/oz when the COMEX defaults from empty inventory and Shanghai arbitrage, then reach $5000/oz when the great conversion begins in earnest from USTBonds to Gold bullion, then reach $7000/oz when the Gold Trade Settlement is installed in its full glory. It is written. It shall be done.
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.
“Jim Willie is a gift to our age who is the only clear voice sounding the alarm of the extreme financial crisis facing the Western nations. He has unique skills of unbiased analysis with synthesis of information from his valuable sources. Since 2007, he has made over 17 correct forecast calls, each at least a year ahead of time. If you read his work or listen to his interviews, you will see what has been happening, know what to expect, and know what to do.”
(Charles in New Mexico)
“I commend the Jackass for being the most accurate of all newsletter writers. Others called for the big move in Gold right away, but you understand that the enormous fraud in the system needs to play out before free market forces can begin to assert themselves. You seem to have the best sources and insights into the soap opera that is our global financial system. Most importantly, you have advised readers to be patient, stay safe, and avoid mining shares like the plague. Calling the top in the USTreasury Bond (10-yr yield at 1.4% yield) stands out as a recent fine accomplishment. The Jackass understands the markets, understands the fraud, and also has the sources to keep him the most up-to-date on the big geopolitical and financial events and scandals. Few or no other writers have all three of these resources.”
(Austin in California)
“A Paradigm change is occurring for sure. Your reports and analysis are historic documents, allowing future generations to have an accurate account of what and why things went wrong so badly. There is no other written account that strings things along on the timeline, as your writings do. I share them with a handful of incredibly influential people whose decisions are greatly impacted by having the information in the Jackass format. The system is coming apart on such a mega scale that it is difficult to wrap one’s head around where all this will end. But then, the universe strives for equilibrium and all will eventually balance out.”
(The Voice, a European gold trader source)
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 [email protected]