The Coming Isolation of US Dollar: Part II

POWERFUL CORRUPTION INERTIA

Corruption Inertia is a principle firmly believed in when Jackass forecasts must be made. The corruption will continue with firm immutable momentum, without an external force acting as agent of change. At times, this is simple science. When colleagues introduce hope and what must be, the OFF button is engaged quickly here in my office. Their views are out of touch with reality. Corruption will persist as long as the Syndicate continues to hold power. It will remain the constant while the US Dept Justice remains, while the US Dept Treasury remains, while the US Regulators remain, even while the US debt rating agencies remain. They all support the current system. They are all subject to momentum pressures. Only an external force will result in change. When the US Dollar is further isolated, that change will come. To expect change from the inside due to internal forces is lunatic, kind of like expecting an alcoholic to change on his own from an awakening. Al Capone was removed not from inside the Chicago crime boss conference of dons. He was brought down by external forces related to income tax. The world will similarly reject the US Dollar for its tax on the system, unwanted, discarded as a toxic agent.

PROTECTION FROM THREAT TO WEALTH

Again, delusion works well when fashioning a creepy little shell of existence to protect oneself from the psychological damage of a predatory government syndicate or security agency apparatus. The Jackass mocks such defense mechanisms, since a guarantee for poverty and misery. The vast legions of Americans will soon awaken to find their jobs are hanging by threads, their wealth either vanished or converted to US Treasury Bonds by force, their liberties long gone, and their ability to seek out foreign lands for residence curtailed. In fact, one nation after another is actually banning acceptance of Americans for bank accounts. See Switzerland,Panama, and Hong Kong. The US subjects are seen as persona non grata not for their own characteristics, but for the passport they hold from the United States. The US Govt as lord acts like syndicate bullies, agents to abuse embassy privileges, with imposed extra legal paperwork like an extra burden. The isolation is not only of the United States, but of its citizens, whose business is not desired. Hence the Americans will increasingly be trapped in the US along with their money. The Jackass response to threat is not to embrace delusion, and not to seek a blanket to cover my head in the basement quarters. Instead, the response has been to head for the hills with pockets filled.

People, both clients and colleague, inquire when the Gold price will rise with vigor, when the mining stocks will rise with gusto. They remind that with all the central bank debasement of currency from Zero Interest Rate Policy and Quantitative Easing, the ultra-cheap, artificially cheap, desperate cheap money to finance US Govt debt should make the Gold price zoom upwards with each QE official announcement. My answer is quite simple. Each new QE program gives the dark forces more motivation to slam the gold price with naked shorts in sale of paper gold and paper silver. To be sure, the true value of Gold and the true value of Silver is higher, but it is not reflected in the COMEX price. That market is the epitome of corruption. If they were in charge of measuring fevers, they would place the thermometers on ice. Instead, a vast divergence comes between the paper Gold price and metal Gold price. Unless and until the Gold market is freed from corruption and freed from the shackles of Wall Street and London and Swiss influence, it will continue to be suppressed. My full expectation is not for the system to correct itself from within. Instead, the COMEX seeks out new sources of supply, like the GLD Exchange Traded Fund. It is probably far more gutted than publicly stated. It has been converted into a bullion bank central repository for easy raided inventory. The Gold price will not rise from internal forces to push up value, in response to central bank monetary policy or shortage of COMEX inventory. The Gold price will rise from external forces in US Dollar isolation, along with isolation of the big banks in the US and London. Their gold inventory will be removed, returned, and drained. In time, the US Dollar will widely be rejected in trade.

THE NEW ISOLATION HAS BEGUN

The process of isolation is not just now beginning. It is a process well along. In fact, it has been told that immediately following the Lehman Brothers death (a deliberate exploited execution) and the adoption of toxic vats by the US Govt in the form of Fannie Mae and AIG, the major foreign players located primarily in the East began to feverishly prepare for new platforms on trade and banking. They sought to develop an alternative. For the last 20 to 25 years, a backwards principal has been at work. It dictated that the US Dollar would prevail in reserves management, actually the US TBond as vehicle. The rules for trade surplus recycle were constructed to lean toward usage of the US TBonds. Therefore, the global trade would be dominated by US Dollars. In other words, banking would dictate trade settlement. That is backwards, and keenly exhibits the brute force of the US Dollar hegemony. Also the crude oil payments have been standardized in US Dollars, ever since the Saudis cut a major deal with the US Govt and UK Govt in the mid-1970 decade after the famous embargo. Protection came to the Saudi regime and Persian Gulf emirates, in return for exclusive US Dollar payment on trade for oil. The Petro-Dollar defacto standard is the primary plank behind the US Dollar global trade patterns shown for over three decades. It is coming to an end, a sunset.

IRAN SEMINAL EVENT

The Iranian sanctions put forth by the US Govt and adopted by the Euro Zone nations have contributed more to unwinding the US Dollar trade system than any event in decades. It sounded the death knell for the US Dollar. It hastened numerous nations to seek a US$ alternative. It provided a fertile environment to fashion new trade settlement mechanisms. It pushed Turkey into acting as a gold bullion intermediary role in the provision of gold for usage in trade settlement. See their role with India and Iran, fully described in the December Hat Trick Letter. When an independent highly reliable gold trader source was asked to confirm the role of Turkey as a test case in developing gold based trade settlement, he gave a tacit confirmation. He has mentioned Turkey in past conversations over the last couple years frequently. Just as Turkey was a swing nation in the NATO alliance against the Soviet Union, Turkey will serve in my view as a critical swing nation in the movement to create a non-US$ trade settlement system. The new system will be decentralized, meaning not funneled through the major banks, not passing through the US Fed as clearing house. Turkey will be essential in the formation of the Eurasia trade zone. First comes the Asian trade zone (the US excluded), and next comes the hand shake between the Asians and Europeans to create Eurasia. Some folks have expressed doubt toward the arrival of a vast trans-continental trade region. They seem painfully unaware of an incredible network of railway lines connecting Russia to Germany and China, and of a incredible network of liquified natural gas lines connecting Russia with all of Europe and Central Asia. Across the new trade zone and its diverse commerce, the US Dollar will not be at the center. It is in fact being isolated, since it is a toxic agent. Everything US$-based is crumbling, from currencies to bonds to banks to credit lines to economies.

CHINESE YUAN BILATERAL CURRENCY SWAPS

The advent of barter has come. It has not been noticed by the incredibly distracted, misled, deceived, poorly trained, mentally challenged, and myopic American public. They read about a currency swap accord, give it no emphasis or importance, and then turn to the fund manager opinions on rotating stocks from one sector to the next. They read about a workaround to the Iransanctions, express some puppet-like response of anger or disgust, and then turn to IPOs and stories on Google, Apple, and Facebook shares. They do not even read about the failed Trans Pacific Partnership, since it did not make it onto the financial pages. Sadly, the Jackass is slowly adopting a cold view that vast swaths of the US populace will suffer from a Darwinian event. Their home equity has vanished. Their job security has vanished, unless they work for defense contractors. Their pension funds have been damaged. Their wealth has been over 90% dedicated to paper securities in very obedient fashion. The great majority has dismissed the arguments for sound money or gold investments. Some have a pitifully small portion devoted to hard assets like perhaps some energy companies. Only those who adopt a Gold strategy will survive the powerful storm underway, as it intensifies. Great wealth is being destroyed, and only Gold & Silver will enable that survival by the construction of lifeboats. Paper wealth is being blown away, as only hard metal assets will prevail. Add energy and farmlands.

When people ask about the best allocation, my standard response is at least 90% precious metals, the rest to energy deposits, but not actually stocks, perhaps farmland if possible. The best diversification in my view is for laddering of silver purchases, starting at $10/oz and moving to $15/oz then $20/oz and finally to $25/oz with continued accumulation at $30/oz and above. Gold will win the monetary war, but Silver will take the greatest gains. Gold is fine for a more stable long-term protection against toxic paper wealth, but my ongoing objection is that the New York,London, and Swiss syndicate centers play too many games. Silver is subject to global shortages, vast industrial demand, non-replaceable usage, and a much more dangerous situation that the powerful dark forces cannot manage. Silver coins will be widely used in commerce, while Gold bars will thrive in banking transactions. Besides, killing werewolves is the zinger factor with silver bullets.

China has made numerous bilateral swap accords with other nations. As the label indicates, they are deals cut between China and another nation to freely use Chinese Yuan from a credited account that will retain equilibrium. So far many nations have signed up and even renewed deals. The list of nations includes Brazil, Russia, Japan, and India. One might be correct to include all of Asia on the list, as nations like South Korea and Taiwan and Vietnam freely trade in Yuan transactions. The first major signal that the bilateral swaps have taken hold sufficiently to undermine the US Dollar through a new trade foundation will be the complete arena of Asian trade being conducted in Yuan transactions. They have no need for US Dollars in trade. They see their US TBonds held in reserves under management as vulnerable to serious loss. They see their US TBonds held as subject to grand debasement from US Fed central bank monetary policy itself. They see their US TBonds held as supported by Weimar machinery in hyper-drive. They see their US TBonds held as part of a corrupted Wall Street arena and its vast trappings. They see their US TBonds held as prisoner to the US Govt debt battles and a potential crush victim on a fall from the fiscal cliff.

The Chinese bilateral swap accords are actually barter deals. They often represent rather balanced trade, unlike with what the nations have set up with the United States. Unless nations purchase enormous lots of military hardware, they have little need for US products. Hence the end result is a bigger batch of toxic US TBonds to purchase in order to balance the accounts and to avoid the local foreign currency exchange rate from rising enough to damage their export trade. The bilateral swap accords work to create numerous two-way ties as part of a latticework that eventually will form a transnational fabric without the US Dollar as nuclear cores in each connection weld. The bilateral swaps are barter without the name in a direct confrontation against the US Dollar and its catbird seat. That seat, once a throne, is being dismantled. The latticework of bilateral swaps has created the critical mass of a global blanket with no centralized control room, no choke points with bank transactions, no SWIFT code ticket taker. The bilateral swap accords work to build a critical mass that isolates the US Dollar from an entirely new foundation for trade. The US Dollar is being isolated.

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