Gritty Questions on the Historic Collapse: Part I Editor: Thus far the US dollar’s decline has been orderly, but more and more countries are opting to conduct global trade in currencies other than the dollar and this trend looks certain to continue. Over time this will reduce the need for countries such as China and Japan to hold US Treasury’s, and outside of the Federal Reserve these are the two largest holders of US dollar-denominated debt. Ultimately it is this that will bring about the end of the dollar’s domination.

The typical articles over the last many years have featured a particular theme. In the last few months, the central theme in Jackass articles has been the isolation and demise of the US Dollar, how it is happening, why it must happen, and its importance in the restoration of the global financial structure. But this week, a sudden urge has come to address an overwhelming list of critical gritty questions. They crop up with clients, colleagues, and friends.

More than a crisis, it is more accurately described as a collapse of a corrupt inequitable monetary system, and a desperate defense by the major Western bankers to preserve their power over nations and their governments, alongside a vile vicious violent attempt by the United States to maintain its privilege as owner of the vast US Dollar counterfeit machinery, as controller of vast banking pillars of paper columns, and as commander of a vast military.

The current monetary system has a debt foundation, which is collapsing in lockstep with the rapid breakdown in the sovereign bond market. The last four years have seen a long drawn-out unstoppable process, where the collapse cannot be avoided and must happen. The pathogenesis is obvious to those in the Sound Money camp. The blossom of corruption and complete banker criminal immunity has only hastened the urgent need for the collapse. The cadaver in Intensive Care cannot be revived with more intravenous applications of contaminated money, the body dead since September 2008. Insolvent systems rush to the crash zone, where efforts can only delay the outcome.

The central banks are finally in crosshairs of focus, for not producing a solution, more recently for worsening the problem. They have confused their function from providing liquidity, in the belief that they are creating wealth. They have destroyed the system as costs rise relentlessly. Perversely, their efforts to dampen demand so as to reduce price inflation has added to the economic destruction. The outcome will be shocking in its power shift to the East, shocking in its evaporation of paper wealth, and shocking in the simplicity of the new financial structure that rises from the ashes based in barter and gold payments. However, the United States will be left behind, due to its basic ownership of the global reserve currency being scrapped. The extreme corruption cannot be reformed. The US financial system must be extinguished, and with it extreme damage to the US Economy, which has been hopelessly dependent upon asset bubbles for two decades. No single theme in this article, just an attempt to answer in a straightforward manner some extremely difficult and appropriate questions for this ongoing crisis. Some effort is made for the topics to be presented in a logical flow, with answers not lengthy. For much more detailed analysis, look to the Hat Trick Letter paid reports with a subscription, offered each month.


To be sure, a collapse is not only coming. It is happening before our eyes in what used to be ultra-slow motion. Each year the pace quickens. Two years ago, the MFGlobal client account theft episode was preceded by another red-line event a few months before, and followed by another a few months after. But nowadays, the crisis events occur every month or every week. With $1.2 trillion doled out by the US Fed to European banks in January, the Germans demanding repatriation of their official gold account, the Italians electing a comedian to halt the property tax hikes that bail out banks, the British sponsoring a Chinese Yuan Swap Facility, the attack on Mali to wrest its gold for German repayment, the move to shut down the Mongolian copper & gold mine by Rio Tinto, the raids larger and bolder of the GLD inventory, the US Fed preparing for QE5 (or rather QE187), the US facing a fiscal cliff, the Japanese ratcheting up the competitive currency devaluations, the Swiss managing their Euro-Franc peg, the Russians hosting a G-20 Meeting of finance ministers to coordinate the alternative to US$-based trade, the Iranian sanctions coming to a conclusion in US acquiescence, and a gathering of five aircraft carriers in the Chesapeake (against all rules, angering the Pentagon), to be sure, the pace of extreme events is quickening. All these have occurred just since the new year began less than two months ago. Extreme events have become the norm. A series of climax events is coming very soon. The changes will be rapid and breath-taking.


Some mid-sized seemingly minor bank will fail. It will have linkage to another big bank in a corresponding role. The obligations will not be possible to cover. The contagion will spread to numerous large banks across Europe to London and New York. The derivatives could be involved, very unmanageable. If not a mid-sized bank, then a major bank will fail from the inability to contain the profound insolvency and massive bleeding during capital flight. The Greek zone has been contained, where disaster runs its course. But larger Italy, Spain, and France are rapidly breaking down, each in its own unique important way. A great many fuses lie, each waiting to be lit.


Because the big banks that hold the power are insolvent, and they choose not to shut down their helm of power. Any valid solution must begin with liquidation of the insolvent broken structures, starting with the biggest banks, which happen to be the protected sites (if not headquarters) of the corruption. The power centers are the central banks and the big attendant banks. They are responsible for the bond fraud, the bond counterfeit, the dispensation of $trillions in secret deals, the narcotics money laundering, and the financial market interventions. They are protected entities with large private police forces. They will not be reformed or prosecuted or liquidated. Thus no solution from internal forces. The solution will be imposed from the outside.


The real objection to Iran is that they sharply increased their non-US$ energy transactions over a year ago. That is regarded as financial terrorism, which entered the propaganda mill only to come out as some daft baseless story on nuclear development. Iran has thus followed the Iraq pathway to depart from the US Dollar market, but Iran cannot be attacked like its neighbor since it has allies in China and Russia. They work to undermine the US Dollar dominance. To brush the US Dollar aside is to snuff the American Empire and to remove its full spectrum dominance by stripping the free money credit card. The significance of the Iranian sanctions by the US Govt can be described in chapters of volume, but described in simple terms. The sanctions have galvanized the efforts of Eastern nations to seek a non-US$ alternative in trade settlement that avoids the banks under Anglo-American control. By working to settle trade outside the reach of SWIFT bank rules, the Eastern nations led by China and the many Iranian trade partners have hastened their efforts to settle trade in unconventional ways that center on Gold as a means of payment, either directly or indirectly through hidden intermediaries. The United States did not shoot itself in the foot. The US shot itself in the face where the US Dollar is imprinted, and in the chest where the US TBond is held in favor. The US acted to accelerate the rejection of the US Dollar in global usage, and thus to quicken the pace of its lost global currency reserve status. The US has pushed itself down the path to the Third World.


The creation of a three-way coalition of Berlusconi, Bersani, and Grillo will shake Europe to its core. The Italians rejected the property tax hikes imposed by appointed leader Monti in very efficient timely grandiose style. The consequent risk is for the big banks to lose their guardian in Monti, the Goldman Sachs preppie. With attention and priority taken away from serving the needs of the big banks, complete with filling the channels to bigger European banks, the risk has risen ten-fold for an accident in Southern Europe. The insolvent (broke, illiquid, desperate) big Euro banks will be vulnerable to default events which could quickly spread across Europe to London and New York. The control room managed by Monti will be at great risk of being shut down. The risk of a great accident is acute.


All of them are in dreadful atrocious condition, none worse than the others. The bigger issue is which will ignite the explosion in the financial platform. Spain has a blossom of corruption exposed during a skein of financial firm failures. The scandals involve both politics and security laced with finance. France has capital flight in response to the self-mutilation common to socialism. An absurd tax rate directed against the wealthy might as well be 100%. Socialism will soon be equated with confiscation and tyranny. Italy has a comedian to join two political leaders, where the message is a counter-attack in response to higher capital gains to finance the banker aid. Their political system is far more responsive to the people’s will than any Western government, no exception. The distinction in these three nations is their size. Their populations range from 47 to 65 million, together 17 times the size of Greece. None can be bailed out, referring to their government deficits and their banking system. Any or all of the trio of broken nations could collapse, with triple the fuses exposed. If any of the trio falls, the other two will follow quickly. Germany cannot bail out any of the three, and certainly not all three. The duty of bail out would fall on the Euro Central Bank doorstep, which would reveal the monetization schemes as a grand paper mache sham game. As the trio in Southern Europe collapses, the titan Germany will depart the common Euro club. It will then embrace Russia and China, and help the establishment of the great Eurasian trade zone.


A) The dispersion of phony money throughout the economic and banking system, which in the process contaminated and undermined capital. B) The plethora of bond fraud, bond counterfeit, huge bailouts for the big banks, and hidden banker loans totaling $23 trillion (still counting), which created a banker syndicate and banker welfare system together. C) The spread of predatory war sponsored by the US Military and US Govt security agencies, for the advancement of banker seizures, resource grabs, and attacks on civilians. Aside from the costs to the US Govt deficit, the global impact has been horrendous concerning US prestige and good will toward the United States. With bad money, corrupt banks, and aggression through war, the world has been brought to its knees as it wishes to bring the US leadership to heel.


Multiple motives appear at work. The goal has been to loosen the grip of power by Moslem autocrats, which would permit the replacement of more suitable pro-West leaders (puppets). The goal has been to loosen the lines to official government accounts, like the 144 tons of Libyan gold that still sits in London banks, which is much more integrated into their bank management schemes. The goal has been to destabilize the national fabrics, an old favorite game of the US Govt security agencies, since it tends to permit a climate conducive to their ploys. Imagine pitting your neighboring husband and wife against each other with false sexual dalliances, while setting fire to other neighboring houses, then robbing the neighborhood homes. But a backfire is in progress on three fronts. Egypt is on the verge of a banking breakdown which might expose the US Treasury Bond is unwanted in the global financial market, outside the big US bank control. Syria is leaning more heavily toward a Russian alliance. Their naval port will not be yielded. The presence of HezBollah is clear, with the Saudi assassination of Prince Bandar in September, in response to other Assad family hit squad actions. The big impact crater is likely to be the House of Saud itself, which is in great danger of falling. King Abdullah is teetering in health, if not comatose. With the fall of the Saudi regime will come the fall of the Petro-Dollar, thus the USDollar itself as global reserve.


Not a single nation reports accurate gold reserves data. Doing so would reveal the absence of their gold from domestic raids and the consequent bankruptcy. Doing so would reveal the accumulation of gold toward new plans for the next financial chapter. Either weakness or strength would be publicized in a true accurate statement of the gold accounts. Not even foreign official accounts are accurate. In fact, no gold accounting is accurate the world over. The national treasure and jewels are well concealed, as the global monetary war runs white hot.


At least five times as much, and possibly ten times as much gold as reported, which would mean more than Fort Knox before it was pillaged in the 1990 decade. Both superpower nations purchase all their domestic gold mining output, with nothing exported. The Russians have gold accumulated over the centuries dating back to Peter the Great, Catherine the Great, and the Czars. (Tidbit: Russian word Czar is for Caesar, and German word Kaiser is for Caesar.) The Kremlin contains a vast system of tunnels under its main buildings, stretching for kilometers, filled with gold bars and gold artifacts (think chalices, necklaces, inlaid gemstones). The Kremlin is a veritable Eastern Orthodox version of the Vatican itself, in wealth under control, but surely not religious political power. Over the last decade or more, Russia has been converting its vast oil wealth into gold bars. Since the Soviet debt default, a new strategy has been put to work in the conversion. On the other hand, China has two gold accounts. Their official sovereign wealth accounts and central bank reserves have been accumulating gold at a much more rapid pace than revealed. They see no need to reveal any strategic plans. The fast accumulation of reserves from trade surplus has served as easy flow to gather gold, mostly through the Hong Kong window. The public statement of their Gold reserves data brought laughter to my best gold source of information, since he personally has brokered great volumes of Chinese gold purchases.


An important camp within Germany is no longer part of the Anglo-American financial team of syndicate bankers. When Deutsche Bank CEO Ackerman was pushed out, fell out, or was dropped into the hot seat of interrogation, the German role changed more visibly. The nation is of two camps, one still beholden to the Anglo-American bankers and the satellite offices at the Intl Monetary Fund and the World Bank. Their past cooperation and allegiance had been firm and loyal. The other camp has been building ties with Russia and China, even the Persian Gulf. It has been working diligently and vigorously for over four years in establishing the framework for a new trade system founded in barter, to be transacted in gold. Germany offers the engineering, project management, and coordination, like from the Finns on connecting the electronics from commodity to monetary markets. The other camp has been busy in heavy railroad construction directly with Russia for resource and mineral delivery. It has been busy in trade with China, centered on construction equipment. Germany no longer trusts the bankers to the West, having suffered a fraud from both London and New York. The fraud involved runs far deeper than reported, since it includes a substantial amount of fake gold bars made of tungsten. The British Brown Bottom in 2001 involved Deutsche Bank in gold delivery to cover massive short positions. The Mali excursion in yet more USMilitary (NATO cover) adventure involves an attempt to secure more gold in order to repay the German gold account. Germany has changed teams in the true playbook, the new adversary to the Anglo-American bankers who will find themselves increasingly isolated. Germany has been defrauded, and they are angry. The Germans make for a strident determined potent adversary. In the Jackass view, Germany is the swing nation, the brain trust, the key member of the newly formed Eastern Alliance. It has aligned with Russia, China, and the Persian Gulf.


The COMEX will be drained eventually of its Gold & Silver inventory. They had to resort to stealing 140 thousand accounts at MFGlobal in November 2011 in order to preserve its inventory. Do not be surprised if the Libyan 144 tons of liberated gold found its way to the LBMA and then COMEX. The two crime events should indicate the final stages of desperation. The COMEX has resorted to regular raids of the GLD & SLV exchange traded funds over the last two to three years, in greater recent volumes. They short the ETF shares, a privilege granted only to the big banks, then arrive to cart off bullion bars in overnight shipments. Also, vast supply routes have been established between the LBMA and COMEX, with help from the Swiss castles situated at the Bank For Intl Settlements, and from the Roman Catacombs, where decades of cooperation have been afforded. The armored shuttles have been at a frenetic pace to avoid defaults, especially in Silver. The most recent element has been the solicited aid of Scotia Mocatta, the Canadian pillar which appears to have joined the big US banks in naked shorting. The COMEX will shut down from a vicious combination of absent inventory and thin ranks of brokerage accounts. The players have left the COMEX, after the MFGlobal thefts which were endorsed by the corrupted US court system beholden to Wall Street objectives. All across the United States, compliance departments have banned usage of the COMEX by futures risk management teams. Empty shelves and no traffic.


The inelastic demand for Gold is well known. Demand rises with a rising Gold price, called Gold Fever. But inelastic supply is less understood and mentioned. As forward sales schemes unravel, they drain large mining firms of scarce cash. Operations suffer and big projects are not funded like in the past when a lower Gold price was the case. Two new ravaging effects have taken root. As the major central banks debase the currencies worldwide, they lift the cost structure for businesses and the cost of living for workers. So mining firm profit margins are reduced and worker household stress increases for feeding families. The pinch from reduced profitability combines with the nasty pinch of labor strikes to hinder mining output. Also, the new wave of resource nationalism has struck in several nations. The poorer nations that host mining projects have turned hostile. They are suffering from slower economies and wider deficits. The response has been for their governments to renegotiate royalty agreements, to confiscate properties, and to manage a much tougher line against the foreign mining firms. They have imposed harsher strictures on environmental contamination, often as a ploy to gain more revenue from royalty or penalties. The end result is lower mining output in association with a higher price for Gold & Silver, which defines inelasticity. It is the opposite of what clownish conventional economists predicted, and exactly what the Jackass predicted over the last seven years.

Part II of Gritty Questions on the Historic Collapse will be published tomorrow.

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