While the multitudes debate over whether an economic recovery is coming to the United States, signals sound loudly in harsh tones. While they point to the recent rise in the USDollar, signals sound loudly in harsh tones. Admittedly the signals are confusing, but they are important. The long-term bond yield for USTreasurys threatens the 4.0% mark. The crude oil price is close to threatening the $100 mark. Sleepy financial market anchors and mavens offer comment, but might miss altogether the significance of the signals. The signals clearly mean great strain on the credit markets still, and gradual decay of the major currencies led by the USDollar.
PREFACE ON MARKET RIGS
The hearings took place two weeks ago. The news of Andrew Maguire's testimony on March 25th has circled the globe, ringing shrill in the ears of anyone half awake. Maguire is a metals trader from London, but watch somehow that his career takes a turn for the worse. So far the car carrying his torso has been run off the English roads. He still walks and talks, but whistle blowers usually have short lives and shorter careers. Laws protect them, but not from the powerful syndicates. Maguire outlined the corruption in the gold market, and abused domination by JPMorgan in particular. The monolith transmits its signals and enlists the support of a small army of traders who pile atop the price suppression tactics. Despite almost 20 years of complaints lodged with the Commodities Futures Trading Commission, JPMorgan continues to operate with such a high degree of impunity that their staff openly boasts about after their illicit profits are garnered.
Maguire guided the CFTC, headed by Goldman Sachs alumnus Gary Gensler, through recent gold price manipulations before during and after a non-farm jobs report was issued. Maguire outlined in some detail how orders to short gold arrive in volume over 2500 contracts, designed to overwhelm the market, often when the market is thin. They are almost always naked short sales, without benefit of bullion posted as collateral. They are executed with the implicit blessing of the USGovt and UKGovt. The trades are not intended to seek the optimal price, but rather to corruptly reduce the market price. The GATA warrior (aka El Cid) named Bill Murphy offered his testimony at the hearings, running fleet footed past the secondary coverage easily. He has submitted many complaints over the past few years, all falling on deaf ears and blind eyes. See the Gold Anti-Trust Action article on the unprecedented hearing , which has been covered by dozens of other web journals. Nowadays, in order to be treated to the actual news, one must rely upon the alternative locations from the internet, like Zero Hedge and their small platoon of Wall Street soldiers in service to the truth .
The US financial markets are slowly being revealed as a series of corrupt Ponzi schemes. The gold market is the vulnerable linchpin for the USDollar and USTreasury markets. That is why gold is so important to be controlled and suppressed. The diverse sanctioned illicit and illegal activity renders it a damaged market screaming to be freed. Some readers and subscribers alike have written to the Jackass email inbox with messages of hope and some satisfaction, in the wake of the Maguire testimony about the CFTC lapses. The meeting organizers might have thought the hedge funds would be blamed for outsized illicit positions, but the blame was squarely place upon JPMorgan and the Big Four firms. The exposure process is long and slow, however. The Goldman Sachs class is still in control of the USGovt purse, still guides funds to Wall Street after first feeding at the trough, still operates as the great vampire squid in search of money pools as Matt Taibbi bravely describes.
The news has circled the globe, finding the financial pages in London and Germany. Some believe the news is too hot and viral to be reported on the mainstream US press networks. Do not hold your breath for exposure in the Untied States, where the syndicate maintains controlling ownership of the press networks, bringing them to heel, dictating their many messages, filtering their stories as suitable for coverage, painting patriots as villains and criminals as heroes. But, lest one despair, there is hope that exposure will come as powerfully and broadly as the morning sunrise. The lackey US press might cover the story eventually, but only after almost the entire planet covers it. My Jackass article about the corrupted gold market last May 2009 made a splash, earned some accolades, but also invited some mockery by nitwits who have turned silent. The bust of the gold market is in progress, whether or not people wish to see it. The hitmen cometh to the gold exchanges.
The Gold Anti-Trust Action committee made a statement after the German display of tungsten laced gold bars. They wrote, "What appears to be the first documentation of counterfeit gold bars made of plated tungsten was noted today by Zero Hedge as having been reported by a German television station. The counterfeit bar reportedly is in the possession of the W.C.Heraeus gold foundry in Hanau Germany, said to be the world's largest. This sort of thing might shake the gold market even more than, say, the International Monetary Fund's confession that it really does not have any gold and that it has been selling only bookkeeping entries all this time." Almost every single claim of impropriety, price suppression, falsified accounting, corruption in metals exchanges, and treason by US and British financial leaders lodged by GATA have come to be proven true. My contacts report the source of most tungsten gold bars is the United States during the Clinton Admin, using a clever trail with shutdown smelters and the same shipment routes as the narcotics (see Panama and Arkansas). Evidence is being gathered, and mounts, for release at the strategic moment by more direct players, since so dangerous to possess. For a fine article about the competing properties of gold versus tungsten, and detection methods. The tungsten gold theme is blossoming and going mainstream.
STRAIN ON LONG-TERM RATES
The Jackass has a string of correct major forecasts in the last few years. See the call of a growing trade gap with a falling USDollar exchange rate. See the call of an unending housing decline. See the call for absolute bond market breakdowns beyond the subprime. See the call of an insolvent US banking system. See the call about Lehman Brothers going bust. See the call about Fannie Mae going from mortgage finance sewage plant to USGovt sewage plant. See the call for the Saudis to reject US$ payments for crude oil, pending action. See the call about Dubai being the focal point of debt collapse. See the call about the ruin of the gold market with gradual exposure, complete with bullion raids. Now watch the call about Germany not aiding Greece, which gradually enters default.
By far the area of my worst forecasting record is long-term USTreasury Bonds. After the autumn death of the US banking system, never to recover, my forecast was for much higher prevailing interest rates. All claims to remedy the banking sector are masked events to pilfer trillion$ in official rescue packages without a hint of disclosure, pure syndicate activity. While the long-term USTBond yield has touched 4.0%, the upward thrust is hardly strong. The incredibly large USGovt debt issuance supply should have sent the long-term rate to 7% or 8% or 9% or 10%, but JPMorgan has a device made by the same foundry as the US Federal Reserve. While the USFed can print money at near zero cost, the JPMorgan shamans can put to work Interest Rate Swaps at near zero cost. The IRSwaps are instrumental in pushing down long-term interest rates, using powerful leverage, the short-term USTBill as the fulcrum, and the USGovt as the protective cover shield. A Double Dip recession perception would go a long way to reducing the 10-year USTreasury Note yield, as demand would shift from stocks to bonds. Notice the significance of the 4.0% level. A huge reversal pattern is underway. The critical right side resistance level has been 3.9%, well defended. The left side critical resistance level has been 4.0% and 4.1% from late 2008. The trend is up, accentuated by the stochastix index since October. Watch a breakout above the important 4.0% level.
The chief nemesis of Gold is the USTreasury, both a US$ instrument and a traded paper security. THE NEMESIS USTREASURY BOND IS IN TROUBLE. Lately, something seems to have gone awry. The official USTreasury auctions have not turned out well. The direct bids and indirect bids and bound bond dealer participation and bid ratios and accounting all stink to high heaven. Yet regulators are nowhere to be heard. The USDept Treasury even has resorted to a new fictional ledger item called "Households" to hide their vast monetization. Recall USFed Chairman lied to the USCongress about continued monetization. The Household item, so we are told, pertains to Fannie Mae and the oodles of Pension funds out there who buy up hundreds of billion$ worth of USTreasury paper. They are joined by armies of private bank CD investors. How preposterous!! Fannie Mae is selling USTreasurys, if truth be known, since slower repayment of mortgages has reduced the need for hedges. The Fannie Mae convexity is a remarkable phenomenon, whereby they dump their USTBond hedges as rates rise, and as homeowners hold loans longer into maturity. The hedged protection offered by USTBonds, in offset to mortgage bonds in performance mode, would not be needed if the mortgage defaults continue. The defaults are still increasing. So Fannie Mae sells off huge blocks of USTreasurys. But they are the Household ledger item doing the buying, right??
Other factors are at work. The Greek Govt debt situation has brought about a serious decline in confidence for all government debt. It is becoming widely understood and accepted that sovereign debt receives high credit ratings not deserved. Institutions are not lining up to purchase USTreasurys at auctions. The USGovt with its masters JPMorgan and the USFed are deeply committed to a gigantic circle jerk. They are buying up all the auctioned bonds, hiding the evidence of their trails, using offshore entities to bid, colluding with British bankers in the process, but they are facing a dead end. They have forced the primary bond dealers into a state of terminal constipation. Then the Chinese have been net sellers in the last few months. Were we not told just last year that the Chinese had no choice but to finance the USGovt debt? Yes, we were, and wrongly so!
The long-term USTreasury Bond yields will not go out of control high, at least not until JPMorgan is dead & buried. The yields might rise a little more, enough to spark a response by the financial syndicate that is Wall Street. They have a new trick in their repertoire. They talk up the optimism and wondrous rescues for the Greek Govt debt, so that volume on auctions rises significantly, enough for Wall Street firms to sell into the rally they assist in creation. Then the Wall Street firms put out news stories that the ugly nasty hedge funds are to blame for the fast decline in those sovereign bonds. Notice how the Greek 10-year Govt bond yield has risen to 7.19% this week, the highest ever. All talk of an aid package is just a ruse for Wall Street to exploit. The other ploy used by Wall Street is an old one. THEY WILL CAUSE A STOCK DECLINE IN ORDER TO PRODUCE FRESH USTREASURY DEMAND. If the financial news networks obediently report the economic recovery that graces the fictional pages of the US press is suffering from non-existence, then the bond demand will grow in a huge way. Even sporadic reports of a return to recession would greatly aid the USTreasurys.
Thus the USGovt has a grandiose vested interest to promote recessions, and they are expert in producing, sustaining, and deepening them. They must after all enable demand to keep the USTreasury Bond bubble alive at near 0%. They promote the nonsensical contradictory story of a jobless recovery. It should elicit much more laughter, like claims of prevalent virginity at a house of prostitution, like claims of wealth by a indigent street bum who holds a stolen credit card. A quick shift to a temporary recession would be easy.
The USDept Agriculture has reported this week that 39.4 million Americans, the most ever, received food stamps in January. They are participants in the jobless recovery. They are legion, whose recipient numbers are 22% from a year earlier. The total number of Americans receiving the subsidy has reached a record for 14 consecutive months. If one wishes for a whiff of reality, check the February and March reports within the paid Hat Trick Letter. Details on the powerful recession are provided, including home foreclosures, Fannie Mae default and delinquency rates, bankruptcies, municipal bond craters, tax revenue declines, and state budget shortfall crises. Such destruction must be the dark side of the recovery process. NOT! It is part of the propaganda process that conceals the deterioration with extreme power and momentum. These aspects are the rotten underbelly of the USEconomy deep in deterioration. It lacks an adequate industrial base, in case its clueless cast of economists fail to notice. It suffers from debt saturation, which explains why new debt offered in aid rescues cannot succeed in producing much of any benefits.
Despite the fact that USTBond yields will not go out of control on the upside, what might be growing much worse is the fires in the JPMorgan credit derivative workshop. As long-term rates rise, the Interest Rate Swap contract turns hostile, electric, and viral. Enter leverage in support of trillion$ in debt securities. The USGovt has the hidden credit derivative losses at JPMorgan, at Fannie Mae, and at American Intl Group to contend with. If the accounting were properly reported from basement labs, the new US$ creation might be much more than a measly $200 billion per month seen in the USTreasury issuance. The toll for credit derivative fires might be a few trillion$ per month!!! The truth would kill the USDollar and send gold skyward.
ECONOMIC COST OF RUINED CURRENCIES
The dynamics of the Competing Currency War are truly amazing and fascinating. When the Euro currency shows fundamental weakness, if not turmoil within the union, the USDollar benefits. Nevermind the $1.5 trillion deficit in 2009 and the similar $1.4 trillion deficit in 2010 that the USGovt must drag along. The USDollar has risen by about 10% against the Euro currency since November. Some properly call the FOREX market a reverse beauty pageant whereby the least ugly contender wins. The region with the least wrecked finances can boast of a rising currency. We are in Chapter 2 to the Dollar Death Dance. The first chapter occurred in autumn 2008 when Lehman Brothers was killed, when Fannie Mae was nationalized, and when the dead AIG corpse was adopted by the USGovt, the home of dead giants and fraud clearing houses. The demand from credit derivative payouts for ruined corporate bonds and destroyed mortgage bonds actually lifted the USDollar valuation. Payouts for Credit Default Swaps, those perverse insurance contracts against collateralized bonds, took place and did so in US$ denomination. The demand for the US$ zoomed. Uncle Sam danced hard, but without benefit of a functional heart, without benefit of oxygenated blood, without benefit of a circulatory system to distribute blood. The dead man danced.
The second chapter is centered upon the Greek Govt debt. Unfortunately for Europe, but fortunately for the USGovt, the second chapter has many pages yet to be written, from Spain, from Italy, and from Portugal. The Irish pages have already been written, crumpled sheets lying in the corner. This note came today by an email from an Irish friend. "Just heard from a good friend in Ireland that the austerity measures adopted by the Dublin government are causing untold hardship. He thinks there will be an uprising among the people that could get very nasty indeed." Outsized staggering Irish bank losses have been reported. The IMF fix is in and the destruction will be completed. But the Greek tragedy plays out slowly. Hope rises but is dashed. Aid is announced only to be illusory. Support is shown but not sincere. Bickering has turned ugly, evidence of no rescue even remotely possible.
The beneficiary, we are told, of the Euro currency distress, is the USDollar. If the US$ exchange rate indeed was improving with tangible ancillary benefits, then a confirmation would come with gold and the crude oil prices. Gold holds its own, refusing to falter. But the crude oil price has just broken above the $80 mark. It threatens the $90 mark and is a clear lock to hit $100 and cause global shock waves. If the US$ is on the mend, on the rise, gaining ground versus other major currencies, then the crude oil price should be moving toward $50, and not toward $90. What we see demonstrates the broken nature of the major currencies in general, and the USDollar in particular. If the USDollar was returning to health, a breakout in the crude oil price would never happen.
The consequence is not pleasant of a rising crude oil price. The entire commercial sector of the USEconomy has a cost structure tied to energy costs. The natural gas price is indeed subdued. But crude oil is widely used in the futures markets to hedge against the USDollar. The demand for such hedges has increased. The light sweet Saudi crude oil is no longer available to meet WTIC crude oil contract demands. The rise in the crude oil price for Europeans using the Euro currency is even more pronounced, brought to view in previous articles. The collection of major currencies is under siege, deeply damaged, and subjected to constant debasement. The ongoing credit crisis and strong recession requires a governmental response on all continents. In Europe, the Untied States, Great Britain, and Japan, the printing of new baseless money continues at an astonishing pace. All major currencies are together in a death spiral. One key item of proof is the West Texas Intermediate Crude oil price shown above. When it hits $100 per barrel, listen to the quacky silly lunatic explanations given by the mainstream press and financial arenas. You will not hear any argument that all major currencies are mortally damaged. You will not hear any arguments that the central bank franchise system of monetary management has failed in spectacular fashion. You might even hear that the jobless recovery is strong enough to withstand the greater pressures of higher energy costs.
THE STEALTH RISE IN GOLD & SILVER
Give a hat tip to James Turk of Gold Money. He wrote in December that the gold low for 2010 would occur in the first quarter with a $1075 price, and a possible impulse low of $1050. We saw it almost exactly, but the year has nine more months to slug through. The 1Q2010 has been put to rest, the quarter ended last week. The March futures contracts are also put to rest, enough to clear a possible path to a higher price for both gold and silver. The gold price chart has a pennant pattern embedded that hints of a slow release to a higher price. It should start slowly and gain momentum once above the enclosed pattern. The news of the gold price rigging has had a positive effect on the psychology of this gold market. The endless monetary growth and federal government deficit explosion adds power to the gold price. Actually, the flip perspective is more accurate. The major currencies are all being diluted in value, while gold remains almost fixed in value. Seen from the currency point of view, gold is rising. Notice the uptrend in the MACD, which addresses the moving averages and the support offered. The long-term trend is still up, seen in the 200-day MA. The consolidation could be at an end. One thing is for certain. The gold community has been put to sleep. Most investors wait for the breakout in price, only to pay a higher price. They tend not to be savvy and capture the lower price during sleepy times. All claims of a gold price plunge to $900 were stupid and baseless, but were given plenty of airtime. To have a falling gold price when trillion$ of new money is created and dispersed into the ether is pure nonsense, the part & parcel of Wall Street syndicate tenets. Such invalid notions rely upon the goofy discredited deflation argument that circulated.
The gold price is slowly moving up. Its psychological basis is gaining firm strength. The recognition of ruined major currencies is gaining broader acceptance. The corruption of central banks is being more widely understood. The solutions offered to Europe are not only vacant, but they expose the Untied States and Great Britain to comparisons of equal vulnerability and similar fundamental wreckage. The gold price has made its lows in year 2010. The next important level is $1150. The resumed Quantitative Easing programs in the US and London will soon be given more publicity, more monetary debauchery via rampant dilution. All talk of an Exit Strategy is pure diversion, if not moronic. The USGovt cannot afford to pay higher borrowing costs, nor can the USFed afford to dump its bloated balance sheet on the credit market. Doing so would reveal that there is almost no market for what they hold in leveraged toxic mortgage bonds. Doing so would result in mortgage rates rising another 1% to 2% quickly. Not gonna happen! Instead, mortgage rates will rise 1% on their own without an Exit Strategy, without USFed liquidation of worthless bonds.
What would really ignite the gold market would be further investigation of the rigged gold market, some prosecution, demands by formal audits by USTreasury creditors, and revelation of absent gold at the exchanges that trade in the gold market. What would really ignite the gold market would be a resignation of the Goldman Sachs preppy Geithner at the USDept Treasury, or better yet, prosecution for bond fraud by him while serving as New York Fed Governor during the Lehman Brothers scandal, its coverup, and its kill job.
THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.