It’s Not an Arab Revolution … It’s a GLOBAL Revolution

Washington’s Blog
Feb 25, 2011

While the revolution in Tunisia, Egypt, Libya and other North African countries may seem like an “Arab revolt”, it’s actually worldwide.

Protests involving thousands of protesters have recently been held in:

• Greece

• India

• North Korea

• China

• Halabja, Kut, Sulaimaniya and other Iraqi towns

• Iran

• And elsewhere

Predicted Years Ago

The worldwide riots are not mysterious or unforeseeable. They’ve been predicted for years, and are a direct result of the bad policy choices made by most nations worldwide.

The Bank for International Settlements – the world’s most prestigious financial agency, nicknamed the “central banks’ central bank” – warned in December 2008 that the bailouts and other bank rescue programs were putting nations were transferring risks from private companies to nations.
As I noted at the time:

BIS points out in a new report that the bank rescue packages have transferred significant risks onto government balance sheets, which is reflected in the corresponding widening of sovereign credit default swaps:

The scope and magnitude of the bank rescue packages also meant that significant risks had been transferred onto government balance sheets. This was particularly apparent in the market for CDS referencing sovereigns involved either in large individual bank rescues or in broad-based support packages for the financial sector, including the United States. While such CDS were thinly traded prior to the announced rescue packages, spreads widened suddenly on increased demand for credit protection, while corresponding financial sector spreads tightened.

In other words, by assuming huge portions of the risk from banks trading in toxic derivatives, and by spending trillions that they don’t have, central banks have put their countries at risk ….

The Root Cause: Bad Economic Policy

Specifically, nations around the world decided to bail out their big banks instead of taking the necessary steps to stabilize their economies (see this, this and this). As such, they all transferred massive debts (from fraudulent and stupid gambling activities) from the balance sheets of the banks to the balance sheets of the country.

The nations have then run their printing presses nonstop in an effort to inflate their way out of their debt crises, even though that effort is doomed to failure from the get-go.

Quantitative easing by the Federal Reserve is obviously causing food prices to skyrocket worldwide (and see this, this and this).

But the fact is that every country in the world that can print money – i.e. which is not locked into a multi-country currency agreement like the Euro – has been printing massive quantities of money.

By way of example only, the Economic Collapse Blog provides the following charts:
The U.S. is printing lots of money…..

Source, The St. Louis Fed

The Bank of England is printing lots of money…..

Source: The BoE

The EU is printing lots of money….

Source: The ECB

Japan is printing lots of money…..

Source: The BoJ

China is printing lots of money…..

Source: The People’s Bank of China

India is printing lots of money…..

Source: Reserve Bank of India
Moreover, the austerity measures which governments worldwide are imposing to try to plug their gaping deficits (created by throwing trillions at their banks) are causing people world-wide to push back.

As I warned in February 2009 and again in December of that year:

Numerous high-level officials and experts warn that the economic crisis could lead to unrest world-wide – even in developed countries:

• Today, Moody’s warned that future tax rises and spending cuts could trigger social unrest in a range of countries from the developing to the developed world, that in the coming years, evidence of social unrest and public tension may become just as important signs of whether a country will be able to adapt as traditional economic metrics, that a fiscal crisis remains a possibility for a leading economy, and that 2010 would be a “tumultuous year for sovereign debt issuers”.

• The U.S. Army War College warned in 2008 November warned in a monograph [click on Policypointers’ pdf link to see the report] titled “Known Unknowns: Unconventional ‘Strategic Shocks’ in Defense Strategy Development” of crash-induced unrest:
  

  The military must be prepared, the document warned, for a “violent, strategic dislocation inside the United States,” which could be provoked by “unforeseen economic collapse,” “purposeful domestic resistance,” “pervasive public health emergencies” or “loss of functioning political and legal order.” The “widespread civil violence,” the document said, “would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security.” “An American government and defense establishment lulled into complacency by a long-secure domestic order would be forced to rapidly divest some or most external security commitments in order to address rapidly expanding human insecurity at home,” it went on. “Under the most extreme circumstances, this might include use of military force against hostile groups inside the United States. Further, DoD [the Department of Defense] would be, by necessity, an essential enabling hub for the continuity of political authority in a multi-state or nationwide civil conflict or disturbance,” the document read.

• Director of National Intelligence Dennis C. Blair said:
  

  “The global economic crisis … already looms as the most serious one in decades, if not in centuries … Economic crises increase the risk of regime-threatening instability if they are prolonged for a one- or two-year period,” said Blair. “And instability can loosen the fragile hold that many developing countries have on law and order, which can spill out in dangerous ways into the international community.”***

  “Statistical modeling shows that economic crises increase the risk of regime-threatening instability if they persist over a one-to-two-year period.”***

  “The crisis has been ongoing for over a year, and economists are divided over whether and when we could hit bottom. Some even fear that the recession could further deepen and reach the level of the Great Depression. Of course, all of us recall the dramatic political consequences wrought by the economic turmoil of the 1920s and 1930s in Europe, the instability, and high levels of violent extremism.”

  Blair made it clear that – while unrest was currently only happening in Europe – he was worried this could happen within the United States.

  [See also this].

• Former national security director Zbigniew Brzezinski warned “there’s going to be growing conflict between the classes and if people are unemployed and really hurting, hell, there could be even riots.”

• The chairman of the Joint Chiefs of Staff warned the the financial crisis is the highest national security concern for the U.S., and warned that the fallout from the crisis could lead to of “greater instability”.

Others warning of crash-induced unrest include:

• The head of the World Trade Organization

• The head of the International Monetary Fund (and see this)

• The head of the World Bank

• Senator Christopher Dodd

• Congressman Ron Paul (radio interview on March 6, 2009)

• Britian’s MI5 security agency

• Leading economic historian Niall Ferguson

• Leading economist Marc Faber and billionaire investor Jim Rogers

• Leading economist Nouriel Roubini

• Leading economist John Williams

• Top trend researcher Gerald Calente

• European think tank Leap2020

Unemployment is soaring globally – especially among youth.

And the sense of outrage at the injustice of the rich getting richer while the poor get poorer is also a growing global trend.

Countries worldwide told their people that bailout out the giant banks was necessary to save the economy. But they haven’t delivered, and the “Main Streets” of the world have suffered.

As former American senator (and consummate insider) Chris Dodd said in 2008:

If it turns out that [the banks] are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay.

Of course, the big banks are hoarding, and refusing to lend to Main Street. In fact, they admitted back in 2008 that they would. And the same is playing out globally.

As I noted earlier this month:

Agence France-Press reports today:

The International Monetary Fund stands ready to help riot-torn Egypt rebuild its economy, the IMF chief said Tuesday as he warned governments to tackle unemployment and income inequality or risk war.

No wonder former U.S. National Security Adviser Zbigniew Brzezinski … warned the Council on Foreign Relations that:

For the first time in human history almost all of humanity is politically activated, politically conscious and politically interactive. There are only a few pockets of humanity left in the remotest corners of the world that are not politically alert and engaged with the political turmoil and stirrings that are so widespread today around the world.

***

America needs to face squarely a centrally important new global reality: that the world’s population is experiencing a political awakening unprecedented in scope and intensity, with the result that the politics of populism are transforming the politics of power. The need to respond to that massive phenomenon poses to the uniquely sovereign America an historic dilemma: What should be the central definition of America’s global role?

[T]he central challenge of our time is posed not by global terrorism, but rather by the intensifying turbulence caused by the phenomenon of global political awakening. That awakening is socially massive and politically radicalizing.

It is no overstatement to assert that now in the 21st century the population of much of the developing world is politically stirring and in many places seething with unrest. It is a population acutely conscious of social injustice to an unprecedented degree, and often resentful of its perceived lack of political dignity. The nearly universal access to radio, television and increasingly the Internet is creating a community of shared perceptions and envy that can be galvanized and channeled by demagogic political or religious passions. These energies transcend sovereign borders and pose a challenge both to existing states as well as to the existing global hierarchy, on top of which America still perches.

***
That turmoil is the product of the political awakening, the fact that today vast masses of the world are not politically neutered, as they have been throughout history. They have political consciousness.

***

Politically awakened mankind craves political dignity, which democracy can enhance, but political dignity also encompasses ethnic or national self-determination, religious self-definition, and human and social rights, all in a world now acutely aware of economic, racial and ethnic inequities. The quest for political dignity, especially through national self-determination and social transformation, is part of the pulse of self-assertion by the world’s underprivileged

***

We live in an age in which mankind writ large is becoming politically conscious and politically activated to an unprecedented degree, and it is this condition which is producing a great deal of international turmoil.

That turmoil is the product of the political awakening, the fact that today vast masses of the world are not politically neutered, as they have been throughout history. They have political consciousness.

Watch an excerpt:

http://www.youtube.com/watch?v=qawPPSxbrYw&feature=player_embedded

Big Brother: The Orwellian Nightmare Come True

When George Orwell (pen name of Eric Blair) first published his famous novel, Nineteen Eighty-Four, it was the year 1949, and it told a dark story of what he envisioned life may be like in the future-in the year 1984. His book, as well as his name, have become synonymous with privacy concerns involving technology and also an all-powerful, oppressive ruling elite that strictly governs the activities of the population with an iron fist.

Orwell’s book is where we get the term Big Brother from, such as when people say “Big Brother is watching you.” When people say this, they’re referring to the omniscient surveillance system described in the novel that continuously watched and listened to people-even in their own homes. When we call something Orwellian to describe the invasiveness of certain technology or government policies, we are also referring to George Orwell’s nightmarish vision he described in his novel. There are several other terms that Orwell himself coined in Nineteen Eighty-Four, such as doublethink, thoughtcrime, and memory hole, which have also become part of our vernacular.

Even if you have not read the book or seen the film, you are still undoubtedly familiar with the issues that make up the storyline, such as the high-tech surveillance system watching and listening to everyone in order to keep them in line with the government (called the Party in the novel). You are probably also familiar with the concept of a small elite ruling class (what Orwell calls the Inner Party) living in luxury and wielding unimaginable power over lower level citizens. In the novel, people have lost their freedom, their critical thinking skills, and even the ability to love due to the cultural depths society has sunk to as a result of Big Brother’s control. The reason Nineteen Eighty-Four remains so popular, and the reason society has adopted vocabulary from the book, is because it serves as more than merely a fictional novel for the reader’s entertainment. The novel served (and continues to serve) as a stark warning of what the future may hold if we don’t resist invasive technology and oppressive government policies, or if the population at large becomes so lost in a world of pop culture, sports entertainment, or our own selfish desires, that we simply don’t care. My new non-fiction book, Big Brother: The Orwellian Nightmare Come True, looks at technology that now exists or is under development and will exist in the near future, that threatens to make our world just as horrific or even worse than the world George Orwell described. I have assembled information from mainstream news sources, industry experts, and even patent numbers of the most invasive and sinister Orwellian devices anyone could dream of. We will also look at actual government programs and policies that seem as if they came right out of Orwell’s dark imagination, such as the government secretly paying mainstream media reporters to act as gate-keepers and propagandists for the establishment, and the FBI illegally spying on and smearing peaceful political activists who were seen as problematic.

I am certainly not anti-technology. Technology is a fantastic tool which can benefit those who use it, or harm them, depending on the intentions of the person designing it or using it. Technology has brought us amazing inventions that would seem supernatural to civilizations that lived just a few hundred years ago. Arthur C. Clark, the author of 2001 a Space Odyssey, was correct when he said, “Any sufficiently advanced technology is indistinguishable from magic.” While this magical technology has brought us the convenience of calling our friends or family on our cell phones, allowing us to talk with them from virtually anywhere in the world, and given us the ability to watch events on the other side of the earth unfold live on television, and other wonders such as the Internet, DVR recorders, YouTube, Excel spread sheets, word processors, e-mail, Facebook, and more; it has also brought us identity theft, illegal wiretaps, Peeping Toms using hidden video cameras, cyber stalkers, and worse. If you have ever left your cell phone at home when you’ve left the house for the day, you’ve realized how much we depend on technology for what have become common and necessary activities. If you’ve ever been at home when the electricity unexpectedly goes out, you have also realized how much we take for granted in our modern world.

Unfortunately, with tremendous advances in technology often come unforeseen consequences. Nobody could have envisioned young teenage girls taking nude photos of themselves with their cell phone cameras and sending them to their boyfriends, and then having the boyfriends forward them to others, eventually ending up on the cell phone of someone over the age of eighteen, resulting in what is essentially child pornography in their possession. The music and film industries certainly didn’t anticipate millions of Internet users downloading music and movies for free, sometimes before the products are even officially released. And when Albert Einstein was searching for the laws of physics to learn how our Universe functioned, he could have never imagined that his work would be used to design weapons capable of destroying the entire earth. It seems that the dark minds of men in power always strive to build sinister devices designed to enable them to hold onto their power, no matter how disastrous the consequences.

In my book I will show you some of the sinister inventions currently in operation, as well as the ones on the drawing boards, and the ones mad scientists are hoping to one day create. Facial recognition video cameras that can pick you out of a crowd of tens of thousands of people in a split second, machines that can read your mind, high-tech killer-robots, psychotronic weapons that can literally put voices in people’s heads, and more. You will see beyond a doubt that George Orwell’s description of Big Brother was chillingly accurate, and perhaps not as horrific as the reality we may one day face. Like a Pandora’s Box, once much of this technology is created, there will be little hope of stopping it or even regulating it.

If one reads old Popular Mechanics magazines from the 1950′s, one can realize how wrong, and even silly, the techno-utopian dreamers were in the past. Many were led to believe that by the twenty-first century we would all be living lives of luxury like the Jetsons, with large blocks of free time to enjoy ourselves as we had most manual labor and menial tasks taken care of by robots and computers. Yet more than a decade into the twenty-first century, we still need to spend time cooking and cleaning, and commuting to work and raising the kids, and fixing up the house and countless other tasks and obligations that are required of us in our daily lives. Our cars must still continuously be maintained, the oil needs to be changed, the engine serviced, the tires rotated and replaced, and the average vehicle now costs as much as a house did for people just two generations ago. The grass still needs to be cut, the bushes need to be trimmed, and things around the house continue to break and need to be fixed or replaced. People are working longer hours, having less time with their families, having to retire later in life, and are having less savings than past generations. Where is this techno-utopia that so many had promised would come in the near future?

Instead of living lives of luxury and leisure, now many people can’t escape their job even after they leave the office. Where once we left work and were outside of the reach of our boss, now he or she can call us on our cell phone at anytime, day or night, and expects a promptly returned phone call or e-mail.

People are being turned into numbers and statistics, and mathematical formulas are used by employers to determine whether an employee is being efficient enough. It’s difficult to get a person on the phone when calling a company’s customer service department, and social networking sites such as Facebook and Myspace have turned everyone into their own favorite celebrity and supplement actual friendships and interactions. People don’t need to get together for a dinner party to catch up on each other’s lives anymore; we just monitor their newsfeed on Facebook from the comfort of our own home while sitting in our favorite chair getting fatter from lack of exercise and a poor diet. Where we once discussed politics and religion with our friends and neighbors, such topics have become taboo and are replaced with the enticing entertainment of celebrity news as most people feel that it is more important to know about who our favorite celebrities are dating than it is to know what bills are being introduced and voted on in the halls of Congress or our own city council. It’s interesting that while people seem to be getting dumber, computers are getting smarter.

We are becoming a nation of morons who can’t think for themselves, and are being dehumanized into nothing more than a mentally enslaved workforce who are constantly being monitored, databased, and kept in line by the fear of the omniscient Big Brother technology that has gotten so advanced and so cheap, that the watchful eyes of surveillance cameras are mass produced, almost as if they were disposable.

At a presentation at the 2010 DICE Summit (Design, Innovate, Communicate, Entertain), an annual meeting of videogame executives, Jesse Schell, the former Creative Director of the Disney Imagineering Virtual Reality Studio, gave a speech on the future of gaming and talked about how in the future, “Before too long we’re going to get to the point where every soda can, [and] every cereal box is going to be able to have a CPU, a screen, and a camera on board it, and a Wi-Fi connecter so that it can be connected to the Internet.”

He concluded his speech by saying that our children and grandchildren will be able to know exactly what books we’ve read, what foods we ate, and practically everything we’ve done in our entire lives. He gave this speech not to warn people about these Orwellian technologies, but he was extremely excited about them, and looked forward to them.

“You have no idea what books your grandparents read, or where they went on a daily basis, but these sensors that we’re going to have on us and all around us everywhere are going to be tracking and watching what we’re doing forever,” Schell said. He concludes by saying that because we will all be constantly watched and our actions and interests databased forever, that we’ll possibly be better people and be nicer and make better decisions because of the fear of judgment from others. Is this the kind of world you want to live in? Well, it’s the kind of world that’s rapidly approaching.

Big Brother: The Orwellian Nightmare is meant to serve as a warning for what is already here, and what is soon to come. It is to encourage people to think about how to possibly prevent or minimize dramatic hazards to our lives by the very technology we have created. It is my goal to give you an accurate forecast of the coming storm so that you as an individual, and we as a society and species, may be better equipped to handle it when it hits. It is my hope that we do not lose our privacy, freedom, or our humanity in this 1984-style New World Order.

Trends Journal Predicted Global Anti-Gov’t Protests: What’s Next?

Gerald Celente
Trends Research
Feb 25, 2011

It is a matter of record! The spate of seething, youth-inspired Middle East uprisings that are toppling governments, reshaping the geopolitical landscape and roiling world markets blindsided the world’s intelligence community.

Not the CIA, Joint Chiefs of Staff or National Security Council saw it coming. Mossad and MI5 missed it! None of the mainstream media’s star-studded stable of scholars, experts and think-tank policy wonks were thinking ahead.

But what was breaking news to them was yesterday’s news for Trends Journal readers. In the summer 2010 issue, we wrote:

What’s happening in Greece will spread worldwide as economies decline. There are no organizations behind this response, it’s a public response. This is a 21st century rendition of ‘Workers of the World unite’ … Initially the strikes, riots and protests by unions, student groups, the unemployed, pensioners, and the outraged were sloughed off as predictable (but short-lived and ineffectual) responses that would either peter out on their own or be stomped down by the police … The unofficial reality was that, as Gerald Celente has repeatedly warned: “When people lose everything and have nothing left to lose, they lose it.”

By the Autumn of 2010, our Globanomic methodology pointed to socioeconomic conditions rapidly deteriorating to such an extent that we warned readers of an imminent explosion: “Off With Their Heads 2.0” read our headline, capturing the revolutionary impulse of people who could no longer ignore the toll financial hardship was taking on their lives.

We subsequently identified the role the social media (a megatrend-in-waiting) would play in tipping the balance of political power and breaking the grip of government control. In December 2011, just days before the world tuned into Tunisia, we released our “Top Trends of 2011.” Among them was “Journalism 2.0” which, we predicted, would put an arsenal of digital/Internet weapons into the hands of virtually every citizen via Facebook, Twitter, YouTube, etc. Deployed by youthful revolutionaries around the world, they would bypass corporate/government media, outwit intelligence agencies, outflank the military and police and rally the populace into the streets and onto the barricades. (See, “Journalism 2.0.” Trends Journal, Winter 2011).

As we wrote before Tunisia and Egypt erupted, the outbreaks would go global and the reasons behind the unrest would be more about bread and butter issues than politics. As economies decline, unemployment rises, taxes are raised and services cut – while those at the top get richer and most everyone else gets poorer – revolutions will continue to spread.

But that’s not the way it’s being represented by the same people who didn’t see it coming. The media, pundits and politicians have misrepresented the historic geopolitical events that have occupied the news since the onset of the New Year. Virtually overnight, the revolutions have been glorified as courageous fights for freedom and liberty by democracy-hungry-masses.

But it is not hunger for democracy that drives them. Democracy, autocracy, theocracy, monarchy – right, center, left – it is mostly a gut issue…an empty gut issue. When the money stops flowing down to the man in the street, the blood starts flowing in the streets. It’s a simple equation. A few at the top have too much, and too many others have too little.

What’s Next In response to the current Middle East uprisings, gold has broken above $1400 an ounce and Brent Crude climbed to $111 a barrel. There is no end in sight to market volatility. As the violence escalates and expands, the fallout will be felt around the world.

From the onset of the financial crisis that began in August 2007, and through the ensuing Panic of ’08, Washington, the Federal Reserve and central banks have managed to forestall a Great Depression-grade meltdown by way of a variety of multi-trillion dollar rescue packages, bailouts and stimulus programs. For three years the programs were able to induce an illusory and superficial recovery that, barring a major external geopolitical jolt, might have continued to run its course until the inevitable denouement.

But now the jolt felt around the world is in the process of shattering the recovery illusion. Whether deliberately (as calculated policy) or as fallout from fear-based denial, the pieces are not being put together. The current unrest is not confined to the Middle East and North Africa, and as we had forecast, it will spread to Europe and other parts of the world. The more volatile and widespread the insurrections, the greater the probability that some combination of events (e.g., oil shock, terror attack, cyber wars and regional wars) will crash already fragile economies, and roil sound ones.

Higher Inflation Is On The Way

Charles Kadlec

Reported inflation is headed higher- much higher

The stakes have seldom been higher. With the unemployment rate still above 9%, and federal debt at record levels, this latest error by the monetary authorities is likely to be the most costly since the Great Inflation of the 1970s. Monetary instability will slow employment growth and further erode confidence in government at the same time that higher interest rates will add billions of dollars to the interest cost on the national debt. Yet, failure to act in a timely basis will lead to an even greater crisis.

When it arrives, the Federal Reserve and its defenders will call it “cost-push” inflation and blame it on economic growth, the weather, Arab sheiks, China, and perhaps greedy companies and labor unions.

The actual cause of the looming crisis is the same as the cause of the Great Inflation of the 1970’s: a too easy monetary policy that has devalued the dollar by 40% against gold during the past two years.

I choose gold as the reference point for the dollar’s value because it has the remarkable characteristic of maintaining its buying power in terms of other goods and services over long periods of time. As a consequence, the dollar price of gold is the best, though imprecise, real-time measure of the price level. Other, more traditional measures, such as the consumer price index (CPI) are merely lagging indicators of inflation or deflation that has occurred already.

I also choose gold because I remember what happened after President Richard Nixon in August 1971 severed the link between the dollar and gold. At the time, those who warned that the rising price of gold was signaling higher inflation ahead were widely dismissed as “gold bugs.” The conventional wisdom then, as now, is that economic slack would protect the U.S. economy from inflation regardless of what happened to the value of the dollar in terms of gold.

But it didn’t work out that way

At first, the conventional wisdom seemed to hold. The rate of inflation as represented by the CPI slowed in 1972 to 3.2% from 4.3% in part because of wage and price controls, and then rose 5.6% in 1973. But, in 1974, the CPI jumped 12.2% in the face of rising unemployment. Shocked and dismayed, the purveyors of conventional wisdom made the circular argument that the unexpected rise in the overall price level was caused by the rise in commodity prices, especially the tripling of the price of oil. In other words, they blamed rising prices on … rising prices!

But, those who followed the price of gold were not shocked. For example, the sudden tripling in the price of oil between 1971 and 1974 roughly matched the tripling in the price of gold over the same time period. In other words, the rise in the price of oil was simply the mirror image of the preceding devaluation of the dollar against gold.

In the last two years, the price of gold has increased around 75% – roughly half the increase of 1972 and 1973. Last week’s inflation reports indicate that this devaluation of the dollar will hit the CPI in the year ahead just as it did in 1974.

The price of crude materials in the Producer Price Index (PPI) increased by 3.3% in January alone and now stands 21% above where it was just six months ago. Moreover, during the three months ending January, the rate of advance in the producer price indices for intermediate products, and finished goods have all accelerated into double digit annual rates of advance.

This upward adjustment of prices to the cheaper dollar is beginning to flow through to the consumer. For the past 3 months, the seasonally adjusted annualized rate of advance in the CPI is up to 3.9%, with food and energy prices – the items that have the greatest short-term impact on a family’s budget – accelerating to 3.1% and 27% over the same 3 months. Given the relative magnitudes of the dollar’s devaluation against gold, it is reasonable to expect consumer prices to be rising at a 5% plus annualized rate in the months ahead.

Fed Chairman Ben Bernanke’s assurance during last December’s interview on 60 Minutes http://www.cbsnews.com/video/watch/?id=7120553n that he was “100% certain” the Fed could control an outbreak of inflation above 2% was hubris. These data show that inflation has already broken out, and that there is little the Fed can do to stop the price indices from reflecting the dollar’s devaluation of the past two years. And, his statement last Friday in Paris at a meeting of the finance leaders of the Group of 20 http://www.federalreserve.gov/ that “resurgent demand in the emerging markets has contributed significantly to the sharp run-up in global commodity prices” ignores the central role of the dollar’s devaluation on rising global inflation.

Moreover, Bernanke’s promise to respond to higher inflation by raising the Fed Funds rate carries with it significant additional risks. Slowing the economy reduces the supply of goods and services relative to the supply of money, which itself can be inflationary. In addition, higher short-term interest rates increase the opportunity cost of holding currency and checking accounts, and therefore will lead to an increase in the turnover or velocity of money. That too will add upward pressure to prices.

The experience of the 1970s illustrates the danger. The Fed raised the Fed Funds rate from a low of 3.3% in February 1972 to more than 10% in July 1973. But consumer price inflation continued to accelerate for the next year.

To avoid another extended period of high inflation and interest rates, the Fed and the Obama Administration need to acknowledge that the current, paper dollar system is deeply flawed and prone to error and instability. The alternative is a rules-based system in which the Fed begins to use quantitative tightening and easing to steady the value of the dollar as represented by the price of gold. A monetary system in which the dollar is as good as gold – for all of its imperfections – would quickly deliver price stability, low and stable interest rates, and increased financial security to the American people.

Bernanke, You Stupid Bastard

Karl Denninger

Yes, you.

And Trichet, and the rest of the Central Bank fools.

But especially you, Bernanke.

There’s dumb and then there’s really dumb. Let’s take a short walk back down history lane.

You were sure there was no housing bubble.

Then you were sure it wouldn’t pop.

Then you were sure when the subprime problem hit, that it wouldn’t cause a recession.

Then you were sure you had it under control with Bear Stearns’ hedge funds.

Then you were sure you had it under control with Bear Stearns itself.

Then you were sure it was under control with Lehman, even though you had to know Citibank and others were refusing their collateral in the repo market.

You were sure QE would support higher bond prices – and lower yields. The exact opposite thing happened.

You were sure QE2 would suppress long end yields. The exact opposite thing happened.

Oh yeah, you made excuses both times, but in fact you publicly said that in both cases the exact opposite thing would happen that did.

Now let’s look at what happened just today.

Oil went up almost $7 today for the WTI contract. For each dollar that crude oil rises, we transfer roughly $95 billion (estimates vary from $90-100) outside of the United States.

That’s a direct hit to GDP.

In ONE DAY the entire impact of your so-called “QE2” was ERASED.

(As an aside, yes, I can do the math on the direct import numbers; the argument here is on the total economic impact, which is as noted above. Estimates there vary somewhat, but they’re centered around $90-100 billion/year/dollar increase.)

Your entire gambit and what you sold to Congress and President Obama was that you could “restart” credit expansion with your policies. Implicit in your policy was a need to do so, because without it you cannot succeed. The World Economic Forum at Davos released a paper saying that we needed, collectively, to add one hundred trillion dollars of new debt to the system to support the paltry growth numbers you and your economists are putting up. Worse, the CBO stuck up numbers in the TBAC report that show another doubling of Federal Debt in the next nine years and a rough quadrupling of debt service costs to $800 billion, implying a paltry 3% blended rate.

We had the collapse starting in 2007 because people couldn’t afford the debt they already had and yet your entire scheme, to succeed, requires doubling all systemic debt AGAIN.

So how are you going to do it Ben?

Who’s going to take on that debt, and how are they going to service it?

You know damn well it can’t work, and won’t. You also know damn well you’ve goaded and prodded the Federal Government into taking on $4.5 trillion in debt we cannot afford, or nearly 30% of GDP.

How are you going to take that back off Bernanke? You keep being asked this, but all you say is that you’re confident “you have the tools.”

Uh huh.

You don’t have jack and you know damn well you can’t pull your pump-job back one iota without laying bare on the table the fact that the Federal Government is supporting 12% of GDP with borrowed money. If it disappears we have an instant Depression worse than the 1930s.

The bad news is that if you keep this crap up it will disappear by force of the market, there’s not a damn thing you can do to prevent it, and that day is rapidly approaching.

EVERY prediction you’ve made about the economy over the last five years has been wrong.

All of them.

The market is rising only because you’re “promising” infinite leverage.

But infinite leverage means certain financial ruin if you’re wrong about external forces. And the economy is not a closed system under your control. You cannot control other nations, you cannot control commodity speculators and you cannot control other central banks and politicians. You think you can force China off their peg, but they can suppress riots longer than we can. You think you can keep printing but now Egypt has gone down, Libya is collapsing and if Saudi Arabia folds you’re instantly ****ED and so are the rest of us.

Never mind that it’s not just the Middle East. What if Venezuela folds? Mexico goes feral with their drug war? How about South Korea, which now has how many banks closed due to runs?

The longer you keep this crap up the worse the instability will become. Eventually something will break that’s important, and then it’s too late.

You can’t win this game Bernanke. And the longer you keep trying to protect the banks that should have been shut down and taken into receivership in 2007 the more damage you’re going to do. When the history books are written on this catastrophe your name is going to be featured in bright lights as the personal architect and chief jackass who pontificated that he knew it all because he studied The Great Depression.

Yeah, you studied it all right. And now you’re duplicating the mistakes made then, writ even larger.

There are no statesmen left in this nation when it comes to Congress. Not one who will haul your ass in front of them by force of subpoena, put your clear and public record of “accuracy” in front of you and then demand that you justify your twisting of the clear English language to come up with “2% inflation” as your “interpretation” of STABLE PRICES.

You’re going to fail Bernanke. You’re failing right now. You’ve destroyed one nation’s government and this evening, as I write this, a second is falling apart. The madman behind the second, Qaddafi, has apparently ordered his military to strafe civilians, murdering hundreds.

But behind it all, your policies and those of your cronies, believing in an indefinite Ponzi Scheme of exponential debt without bound, are responsible for every bit of what’s happening today worldwide – and what is to come tomorrow.

The only way you can stop it is to admit you were wrong, pull liquidity and allow the insolvent institutions to collapse. And collapse they will – all of them. I’m convinced you know that too. And I’m also convinced that there’s three words you will never utter so long as you infest Washington DC: I ****ed up.

So here we sit as Americans, with no solution. There is nobody in Congress or The Administration that has the balls to stop you, and you’re too much of a douche to admit you blew it and do what should have been done three years ago.

As a result, all we have left is to be prepared for what’s to come.

It’s not going to be pretty, and I hope Americans are ready for it.
Congratulations Ben Bernnake. Your place in history is secure, and I’m sure Beelzebub thanks you daily for your cooperation.

Some day I’m quite sure you’ll meet him face-to-face.

QE2: The Road to a Gold Standard

Jim Willie CB

What an incredible few weeks with global uprisings! It is not all too surprising that social eruptions over food prices come from the Arab world, since they spend up to 75% to 80% of income on food for basic needs. What proof that the global economy is not a closed system! The QE and QE2 initiatives have spread like a powerful virus, leading to global commodity prices heading upward and quickly. Even cotton is up 170% in price. The USFed has suffered even more credibility blows, calling the global food price inflation unrelated to its QE2 policy. It is obviously connected. What we have is the Western Big Banks protected from fraud prosecution, redeemed for their broken toxic balance sheets at government expense, leading to a global price tag in the form of foodstuffs and commodities. Worse, the USGovt and USFed continue to be run by fraud kings, who continue to maintain a tight strangehold on the purse of the state and the Printing Pre$$ itself that produce deficit spending and fresh phony money. Ironically, the punishment for the US banking system is chronic unending insolvency. Despite the largesse to prop them up, fund their channels, redeem their toxic debt, enrich their executive packages, they remain the same Zombie banks from late 2008. Tragically, the USGovt will continue to fund their black holes instead of restructuring like Iceland, which is back on its feet. The battle cry of Too Big To Fail for the Big US Banks is a call to sustain the corruption and to ensure no recovery ever!!

In the meantime, fast rising gasoline prices and higher crude oil price, along with a host of industrial metals like copper, have lifted the entire cost structure of the USEconomy, and the global economy since all are priced in US$ terms. The banking officials act like keeping US wages down it a noble objective with a national purpose. It is indeed a noble purpose, as the nobility remain with money, but the masses will not be capable of effectively dealing with the cost squeeze. Businesses not well placed within the Fascist Business Model will also fare poorly. The list of US companies is long that have complained of an important cost squeeze. Expect many businesses to suffer a vanished profit margin in the next few months. The process has already begun, in fact well along. Across the oceans, the untold story on the geopolitical front is not the billboard message given by the obedient US press. The Arab world does not simply demonstrate on the city streets as a result of higher cost for hummus, bread, and cooking oil. The Arab people sense the demise of the Anglo Empire. They sense the end of the US & UK support for their tyrants and royals, who have enriched themselves and their families. The Arab people sense a weakening of their leaders and their system of government, often harsh and repressive. The food prices only serve as a lightning rod to gather the people together. What is happening is the defacto Petro-Dollar Standard is crumbing ever so slowly. Many eyes are fixed on Saudi Arabia, where the royals are increasingly fearful. All hell breaks loose if the Saudis lose their grip of the Petro-Dollar device, by which the OPEC crude oil is sold in USDollar terms. THE PETRO-DOLLAR IS THE LACE ON THE CORSET THAT SUPPORTS THE THE ANGLO-AMERICAN FRONTISPIECE. Remove the Petro-Dollar practice in global crude oil sales, and the United States becomes isolated, its currency rejected, since it cannot stand on its own. Observe the US trade gap and escalating federal deficit.

SILVER SIGNIFICANCE

Put aside the fundamentals of Silver. It continues to see huge industrial demand, no replacement opportunities, and totally depleted stockpiles. It continues to see skyrocketing investment demand growth, massive shortages for national coin mints, and reports of extreme machinations to relieve the inventory shortages at exchanges. Focus instead on the silver market. The everpresent Big US Banks continue to ply their trade, selling silver contracts without benefit of posting collateral, otherwise known as naked shorting. However, since the autumn months, their game, their modus operandi, has backfired badly in their faces. By means of lowering the paper contract silver price, they enable a cheaper physical silver price. Imagine being a big buyer of silver bullion metal. If the strongarm syndicate forces choose to offer a discount from the corrupted price discovery system, then the outcome is hardly favorable. The physical buyers ramp up their purchases, enjoy the price discount, and thank the absurd connection between the paper silver and physical silver markets. In fact, evidence is growing fast that the two markets are gradually diverging. The Jackass forecast from months ago was for the eventual divergence between the paper silver market, where increasingly contract settlement takes place in cash (with a 25% bribe to keep quiet and walk away) and the physical market, where acute shortages have not stopped the aggressive purchases of those seeking to diversify out of the USDollar.

Aw heck!! Don’t put the shortage aside. Observe it instead and take personal action with the remaining wealth not destroyed. Understand the incredible shortage. Thanks to Nick Laird of Sharelynx for the fine chart. By the way, shortages result in massive price increases to achieve balance between Supply & Demand, a concept totally missed by the clueless cast of economists that litter the USGovt and Wall Street landscape. They believe price is something achieved by JPMorgan market intervention, for the national good. They wrecked the system and markets, yet remain in control of the USGovt and its finance ministry. They should be in prison. They should watch over their shoulders.

In the last week, two significant factors must be mentioned, each important in its own right. Last week, both factors were overrun by the silver market as new highs were established in the silver price. Options expiration for silver futures contracts usually brings about a huge ambush by the usual suspects, the Big US Banks, who sell vast additional futures contracts without posting any collateral. Mere mortals are prohibited from such naked shorts! Usually the imminent options expiration date results in a significant sudden swoon in the silver price, at least in the futures market, the so-called but increasingly absurd price discovery arena. This past week, the silver price zoomed toward $34/oz despite the threat of ambush, in total defiance to the options expiration deadline. Also, the COMEX in their height of wisdom and market rig efforts decided to raise the margin requirements for silver, for the umpteenth time since last summer. Usually such a margin hike results in a significant price drop like a wind sheer to an commercial jet aircraft. This past week, the silver price zoomed toward $34/oz despite the threat of margin ambush, in total defiance to the greater hardship to maintain margin. It is unusual to see a silver price advance in the face of one such factor. But it rose with gusto in the face of two important obstacles. My forecast in the last few months has been steady, that silver would lead the precious metals. That has been confirmed. While silver raced past $30 and $31 with ease, Gold has yet to confirm the breakout beyond the January highs. All in time.

A final comment on price estimates for goals and targets. As preface, consider that despite a powerful USEconomic recession in progress, and despite earnings declines for the major US companies, and despite the profit margin compression to lower levels from rising costs, the S&P500 companies have a collective Price/Earnings Ratio that stands as ridiculously high. The absurdity lies in forward P/E Ratios, since the supposed expert equity analysts do not factor in the rising costs and falling profit margins. Estimates on future earnings are ridiculously low and totally fallacious. The P/E Ratios might be subject to division by zero soon, as profit margins vanish from fast rising costs. Numerous companies from Whirlpool to Kraft have tipped the market off, but the market has so far ignored the warning call about costs. These costs are obvious consequences to the Quantitative Easing initiatives done by the US Federal Reserve. Next consider the estimated price target for Gold if the monetary aggregate is based in gold held by the USGovt in reserves. My argument, and the argument of many informed analysts, is that the USGovt has no possession of gold whatsoever, having leased and sold the entirety of Fort Knox, then sold European gold, then sold Chinese gold. So the recent estimates of $7000/oz gold or $8000/oz gold make little sense if the monetary aggregate is divided by a gold reserves quantity likely to be ZERO, bound by lies at worst and myth at best. Therefore, the potential Gold price is infinite, since division by zero cannot be done. This utterly basic point escapes many conventional analysts, who have yet to benefit from any independent audit of the gold reserves. The claim of national security is given, but the reality is more like national insecurity!

It should always be noted that silver has gained much greater acceptance as a monetary asset. The Chinese Govt in February announced a new objective to put into action, for diversifying their reserve assets to include silver and platinum. This is huge news. Never before has the silver metal been included in national sovereign reserves management, an unprecedented event. Gold awaits confirmation of the silver breakout. The momentum swing move was so quick, so sudden, so breaktaking, so powerful, that it could not be sustained. Just like in the last four months of year 2010, expect the corrections to be brief and not too painful. After three or four such mini-corrections, only later can the silver market expect another consolidation that endures like what was seen in January. Maybe by June the timing will produce a month of consolidation.

THREAT OF USDOLLAR CRISIS

The Bernanke USFed is on the road to triggering a USDollar panic, a run on the buck. The USEconomy can become more competitive if the USDollar declines hard and worker pay scales fall hard. In the view of many, QE2 then QE3 will present two alternatives, rabid price inflation or USTreasury debt default. A QE3 program is guaranteed by the chronic federal deficit in excess of $1.5 trillion. Even the usually compliant Wall Street Journal has been opposing USFed policy, with dire warnings of deep USDollar devaluation, debt downgrade, and hefty labor wage cuts. Higher USTreasury Bond yields are the currently ignored flashing signal, hardly what Bernanke promised over a year ago when QE1 was launched, and hardly what he promised when QE2 was launched. But then again, he has been wrong about the housing market, the  mortgage market, the economic recovery, nascent price inflation, bank stability, a housing recovery, and just about everything. Serving as Secretary of Inflation, he manages the money creation diligently and liquidity facilities with such aplomb and dexterity. Thus he is revered. Unlike the Great Depression, for which he is a revisionist history expert, massive price inflation has begun to accompany the hyper-inflation on the monetary side. Bernanke was selected as the dumb professor in residence, the bag holder, the obedient lackey, and idiot savant. My forecast is for both rabid price inflation and USTreasury debt default, the former in spades at this moment and the latter in due time.

If the USDollar declines significantly more than what it did in the 2000 decade, and worker wages fall to more competitive levels, then to be sure the US labor market would find itself more in line with foreign worker wage levels. A stimulus would be felt, but at a great cost. The price inflation effects would be powerful, while the lower income purchase power would aggravate the price effects in a profound double whammy. US households would feel an introduction to the Third World of poverty. USTreasury Bond yields have risen markedly in the last several months since the USFed announced the reckless QE2 bond purchase program born of cancer. Focus on the opposite ends of the USTreasury yield curve. The 30-year USTBond yield has shot up noticeably, the opposite of what the oafish clownish Bernanke expected. During that time, the 2-year USTBill yield has been stuck under 0.5% for over a year. The Treasury Yield Curve has grown steeper, which normally happens at the beginning of a recovery, due to investors moving out of risk free bonds into riskier assets like stocks. This time around, the steeper yield curve signals the advent of unwanted price inflation without any trace of recovery prospects. In a typical credit cycle, the yield on the long-term bond would start to fall due to investor expections that the USFed intention to raise short-term rates to curb potential inflation. The yield curve is signaling one of two things: inflation or default. My forecast is for BOTH. In fact, NO signal can be seen of a robust recovery. Fast rising costs are spreading like a powerful virus across the USEconomy. The latest crude oil threat out of Libya highlights the viral aspect. Businesses will suffer vanishing profit margins. Household will suffer vanishing extra income, the discretionary spending source.

The USFed credibility will experience yet another huge blow when prices rise across the entire spectrum but they take no action. They will instead deny the price inflation and point to absurd meaningless measures, their habit. The preppy lieutenant in charge, Geithner actually claimed that the banking officials had ample experience dealing with the crude oil threat. Mularky! They are experts at producing inflation and asset bubbles, following by fraud coverups and regulatory body silence. Even worse, US bank leaders will explain the urgent need for QE3, especially when the new USGovt fiscal budget is approved, complete with its inherent deficit estimated to be at least $1.6 trillion. USGovt debt buying has dried up. Recall the baseless chatter two years ago about reducing the deficit from $1.3 trillion to $500 billion in two to three years. The Jackass rebuttal stated in early 2009 was to expect $1.5 trillion federal deficits for as far as the eye can see. We have exactly that! The Bernanke Fed is totally committed to keeping interest rates low for an extended period, like forever. Chronic high deficits and a crippled housing market guarantee 0% rate policy continuation forever, or at least until a USTreasury Bond default. Few mention even in the gold community that the high negative real rate of inflation is the most powerful elixir and fuel propellant for the Gold price rocket. With the true CPI at 8% and rising (see the Shadow Govt Statistics), and near 0% official FedFunds rate, the real rate is falling more dangerously negative. Such is constant fuel for the rising Gold price. The flood of extra liquidity has lifted commodities prices in a grotesque display of unintended consequences.

A climax comes for an end of the USDollar. The extravaganza of monetary expansion ushers in the advent of hyper-inflation. The response will be an urgent global demand for monetary discipline. The Gold Standard is a device for that discipline. The demand for USDollar as well as other currencies comes from the failure of the bond world, including sovereign bonds. The supply for USDollars as well as other currencies comes largely from the Printing Pre$$, gargantuan government deficits, and coverage of black holes like the credit derivatives and Fannie Mae mortgages. Witness an historic bust of a fiat currency system resting upon numerous economies built atop bubbles. A revolution in currencies is in progress. Hyper-inflation in prices is well on its way, the aftermath from monetary hyper-inflation by reckless bankers insistent on bailing out bank failures, enabling bank frauds, and providing banker bonuses. Even Black Swan author Nassim Taleb urges avoidance of the USTreasury Bond and the USDollar. Taleb trumpets a theme, advising every single human being to bet Treasurys will decline because of the policies of USFed Chairman Bernanke and the Obama Admin. Taleb believes the United States is just like Greece, only without the Intl Monetary Fund to enforce discipline. Worse, the Euro Central Bank is often a voice of restraint, whereas the USFed is the grand centrifuge of inflation and perpetrator of monetary fraud. Bill Gross of PIMCO also believes the a bond riot would be a positive event to enforce debt discipline by the USGovt. The USTreasury Bond is the final asset bubble, but a very harmful one. Its bust will ensure an economic depression, and an explosion in the price of Gold & Silver, even crude oil. Gold is guaranteed to rise by double, and silver certainly much more. If a USTreasury Bond bust occurs, the Gold & Silver prices will rise to breathtaking levels. Those who believe Silver will be harmed by economic ruin are just plain morons. Their deflation arguments are the dumbest chapters written in our day, since they ignore the monetary inflation response and how Silver has been included as a monetary asset, even a reserve asset.

THE GOLD STANDARD, RELUCTANTLY

A powerful Reactive Law of Nature dictates that in the absence of a Gold Standard, the world will seek an alternative, a quasi-Standard, a stand-in substitute, whatever functions reasonably well or effectively. Crude oil and homes served well. Nowadays the entire commodity basket serves the purpose, except that means a destructive rising cost structure. Recall the fraudulent underpinning of the QE2 movement itself, to produce jobs and stimulate the USEconomy. One must be a total blockhead idiot to believe that further Quantitative Easing, aka monetary hyper-inflation, would stimulate any economy. Instead it will act like a huge wet blanket, one that even eliminates a return on investments in savings certificates of deposit, keeps down the earnings that fund pensions, and much more. The hidden message behind the QE2 chapter, the second of many, is that the USFed is planning to give every working man and woman in the US a big pay cut, so the USEconomy can more capably compete with foreign labor. The US is heading to a dangerous place where poverty abounds, the population is rendered unable to contend with the rising costs, shortages crop up, and labor turns cheap. The many claims that the USTreasury Bonds cannot default come from simple minds and empty craniums, fed by propaganda and arrogance. They have never seen a run on the USDollar, which has begun.

China might be considering a gold-backed Yuan currency. But they must not go alone. Any launch of a currency with strong basis foundation will threaten to de-throne the USDollar. China must NOT form the lone currency with a gold component in operation. If China did it alone, embarked on the path without other monetary allies like Russia or Germany, then the Yuan currency would rise by 50% to 100% quickly. That would kill their export industry and turn the economy of the Middle Kingdom into a burned crisp. Such a radical move must be done in concert with most of the world monetary leaders, excluding the most egregious nations in violation. Point the finger at two nations most responsible for bond fraud, market interventions, bank insolvency, and constant monetary inflation. Read the United States and United Kingdom. Basically, those nations not participating with the Chinese lead would plunge into the Third World. A Gold-backed Yuan could happen alongside a Gold-backed Nordic Euro, a planned coordinated direction. Try to imagine the US & UK, along with PIGS nations, bidding up the Yuan and Nordic Euro, killing the USDollar and other native currencies. That process would force a shocking price inflation episode on American and British soil, as well as Southern Europe, that would invite a systemic failure. No global financial dominance is possible without control of global monetary system from a catbird seat, a control position. The fallen nations, if debt burdened, risk falling into the Third World in the flip flop. The rise of China can only come if the United States falls perilously. Such is the powerful motive for world war.

Dominique Strauss-Kahn from the Intl Monetary Fund has called for a new world currency. All such attempts to replace the USDollar by a basket of paper currencies are absolutely futile. Observe desperate maneuvers to switch discredited executives on a Board of Directors with other unqualified executives. The currency basket concept is a subtle attempt at currency exchange rate fixing, since a basket of currencies inherently would contain fixed ratios within the basket. So if the Powerz cannot prevent a USDollar decline that releases a wave of global price inflation, they might attempt to hitch the US$ to the other damaged currencies in a clever gesture. It will not work. The Axiom of Sound Money dictates that only a hard asset currency can replace a broken fiat paper currency as global reserve for usage widely in banks and commerce. Dominique is totally clueless, preaching in front of a burning bonfire of paper currencies without recognition that the underlying problem is paper money and QE is the lighter fluid. The world needs a reasonable US monetary policy first and foremost!! He advocates inclusion of the Chinese Yuan from the emerging market nations to a basket of currencies that the IMF administers, a move be believes could add stability to the global system and reduce exchange rate volatility. The IMF device called Special Drawing Rights (SDR) is an official fixed basket currently composed of the USDollar, Pound Sterling, Euro, and Yen. The SDR is not a new class, but a repackaged old class. At the Paris G-20 Meeting of finance ministers, absolutely nothing was either agreed upon or solved. The SDR basket vehicle might gain widespread acceptance in order to halt the global price inflation. But its basket will break apart since the USDollar is the generator of monetary hyper-inflation. The fixed inherent ratios would have to change on a weekly basis, not every several years. The reduction by numerous nations in their US$-based reserves in a diversification to a different basket would result in a powerful decline in the USDollar exchange rates. The basket is not a static concept. How idiotic!

A new alternative as supposed solution to the monetary crisis is a foursome basket of global reserve currencies. The world saw a desperate gambit revealed at Davos to retain the fiat paper currencies with multiple reserve currencies. The move would be an exchange rate price fix attempt, nothing more. The concept is akin to the IMF basket, and equally unworkable in a futile attempt to avert imposition of the Gold Standard. Lack of action assures chaos, the Jackass forecast. Action is far too difficult to agree upon and implement. A movement is afoot to create four global reserve currencies, as other major currencies would join the crippled USDollar. The vehicle instrument would be the Special Drawing Rights (SDR) from the IMF. This is a crackpot concept born of total desperation and steadfast refusal to work toward realistic reform, simply a patchwork of the broken currency regime. Multiple reserve currencies would mean immediate diversification out of the USDollar, and thus a significant US$ devaluation within the process of its actual installation, since the US$ would go from 65% to 30% of reserves held officially. The four-part reserve basket could work for a short time, like a month or two, provided the USDollar is devaluated by 20% suddenly within the basket inception. How totally unworkable, as though a sudden change could avoid a transition. These bankers are idiots as much as witch doctors.

Alan Greenspan supports the Gold Standard. After almost two decades of making great contributions to destroying the global monetary system, encouraging a sequence of asset bubbles, blessing them as good, and reinforcing the calamitous bank derivative foundation, Greenspan repeated his devotion to the inert precious metal of historical importance. A Gold Standard would enforce laws against abuse, fraud, and basic counterfeit. The Gold price in the sanctified regime would require a reset to at least $6000 per ounce. One must truly wonder if Greenspan, along with countless other monetary criminals of our era, have invested personal fortunes in Gold while destroying the global monetary system in thorough fashion. My suspicion is that for over 15 years, Greenspan, Rubin, Paulson, Dimon, Blankfein, Mack, and a dozen major Wall Street executives took the opposite long gold position in their personal accounts while their wrecked corporations took the short gold position. Former USFed Chairman Greenspan again reiterated his support for the Gold Standard, following World Bank president Robert Zoellick, credit analyst Jim Grant, and Kansas City Fed president Thomas Hoenig. They have no political capital to lose in doing so, since none is elected. They are all elite members of different pedigree.

Greenspan stands out as the person most responsible for the American addiction to cheap toxic credit, the nearly complete destruction of the middle class, displaced industry, a ruined economy, and insolvent banking system. Greenspan said, “We have at this particular stage a fiat money which is essentially money printed by a government. It is usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a Gold Standard or a currency board, because unless you do that, all of history suggest that inflation will take hold with very deleterious effects on economic activity. There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard.” The deleterious price inflation has arrived. The USEconomic risks depression. Greenspan actually questioned openly whether the United States really needs a central bank.

Some quick napkin calculations. According to Dylan Grice of Societe General, a great adjustment would be required if a Gold Standard is imposed. The monetary base would have to go through a re-index stage, setting the currencies to a real time equivalent price of Gold. He estimates the proper value of Gold to be $6300 per ounce. His reasoning is derived from simple arithmetic. He said, “The US owns nearly 263 million troy ounces of gold, the world’s biggest holder. While the Fed’s monetary base is $1.7 trillion. So the price of gold at which the US dollars would be fully gold backed is currently around $6300.” Next bring into the calculus that the USGovt has almost zero gold except admittedly in Deep Storage reserves, namely mountain ore bodies of yet unmined gold bullion final product, like deep beneath the Rocky Mountains. Primary school arithmetic teaches us that when zero enters the denominator, the resulting quotient bears an infinite result. Hence, the gold price in USDollar terms, given the total lack of gold reserves, has an infinite potential price. The Jackass believes that no upper barrier exists in the Gold price. The march upward in price will be halted only when a global replacement to the USDollar is launched, with great effort, courage, and gold initiative. The Gold Standard is not only the obvious solution to enforce discipline, it is a reluctant solution since the banker elite prefer their fraud.

The next QE3 initiative will be born from desperate need. Numerous causes will be put forward as beneficiary to the next Quantitative Easing chapter. It will form like a bandwagon. Its approval will invite a global shrill outcry, and demand for a Gold Standard. The USFed must overcome the price inflation (especially food) objections in order to win political approval. That would involve a vigorous debate to be sure, but one that USFed and USCongress can overtime with other false promises and twisted logic, their specialties. The QE programs will be endless until the United States is cut off globally. Many are the causes and suppliers of bonds for entry toward USFed support in QE3, via the monetization engines. Of course, the USTreasury Bonds will need buyers, given the chronic continuing yawning federal deficits. The Fannie Mae mortgage bonds will need buyers, given the desired movement to phase out the toxic firm (key word desire). It will never be phased out, any more than a garbage dump is removed from city outskirts. Big US Banks will stand in line looking for buyers for the flood of Mortgage Putbacks, given the court decisions that come and the MERS court dismissal of legal standing. The Municipal Bonds are overdue for needed buyers, given the plight of the states and cities, provided they all abandon their employee pension obligations. The hidden need is for the derivatives that hold together the US banking system structurally, in particular the Interest Rate Swaps, given the difficulty in keeping interest rates down. So the advent of QE3 is a lock, my forecast. The Bernanke Fed must sell QE3 from urgency and national survival!! His credibility has never been lower, still falling rapidly with each passing month and each fresh chaotic outbreak like Egypt and Libya. Each QE chapter makes the next far easier to sell, since desperation and ruin are nearer to the system and its participants. Prepare for QE to infinity!!

Technical and Fundamental Analysis Fall Woefully Short When Assessing Manipulated Markets

JS Kim

I have stated this for many years now and I’ll continue to stand by this statement: Technical and fundamental analysis are of limited utility in predicting short-term trends in manipulated markets when analyzed in a vacuum absent of the context of government and bank manipulation. This not only applies to US stock markets but also to two of the most manipulated markets of all, the gold and silver futures markets. Often, with technical analysis, two analysts with multi-years of experience may offer widely diverging analyses when interpreting the exact same chart. However, if an analyst refuses or fails to take into account the massive amount of fraud and manipulation when interpreting charts of the S&P 500 or the Gold & Silver Continuous Contracts, then I would fathom that analyst would be off the mark at a much higher clip than he or she would be on the mark. For the past decade, it has been foolish to deny that massive fraud and manipulation existed in these aforementioned markets. Refusing to account for the “x factor” of fraud and manipulation, as it is frequently the single most important factor that moves these markets in the short-term, is what ultimately turns some gold/silver analysts into nothing more than weather forecasters.

During sharp corrections and/or consolidation periods in gold and silver, I inevitably stumble upon comments posted by gold/silver investors online that become greatly worried by some article posted by some analyst online that states that the silver and gold bull run has ended and that silver and gold prices are now going to crash. When this happens, gold/silver investors need to keep their focus on the big picture to avoid being led astray by the white noise that will constantly surround them during every single gold and silver pull back. As for the subset of gold and silver investors who, by nature, are worrisome creatures, they will always find analysts in the mainstream media that will gladly fuel their anxiety during every gold and silver correction or consolidation period. For ten years in a row now, gold and silver analysts come out of the woodwork to state that gold and silver are going to crash every single time these particular assets suffer a decent, rapid short-term correction or consolidation period.

To begin, it is quite easy to dismiss many of the analysts that call for a crash in gold and silver simply by conducting an internet search of their past predictions. Doing so will reveal that some of theses analysts have called for a crash of gold and silver every single year since the gold and silver bull run began. Other searches will reveal that many of these analysts are just flat-out terrible and that they have made many other severe warnings about commodity crashes just about at the exact time they bottomed and then proceeded to soar higher. Why waste energy worrying about an analyst’s calls when that analyst has proven himself or herself to be massively wrong multiple times year in and year out?

But what about analysts whose calls have been fairly accurate in the past and whose current calls create a level of concern for you? Then use this second process of separating the wheat from the chaff. Search the internet, find this analyst’s blog, and read about this analyst’s calls in the same asset class over a multiple numbers of years. If you can’t find any public record of past calls for this analyst regarding the specific asset class he or she is speaking of, then dismiss this analyst. Sure, a lot of analysts will want to reserve their most detailed and best analysis for their paying clients only and perhaps this is why they lack any kind of past track record. I reserve my best and most detailed calls and strategies for my paying clients only as this makes good business sense. If an analyst posted his best calls online all the time, why would anyone every pay the analyst for information they can receive for free?

However, if any analyst ever wants to develop his or her business, he or she needs to establish a track record in the public arena as well to prove he or she indeed is worthy of a following. After establishing a track record for at least two or three years, then such an analyst can begin to pull back his public predictions and reserve them more exclusively for the privacy of his or her clients only. Thus, I believe that any analyst worth his or her salt will have a decent public track record.

Given the rise of gold/silver in the public consciousness for the past several years, there are now a plethora of self-proclaimed gold and silver analysts online now that have no discernible track record of accurate past predictions regarding past movements in the gold and silver markets nor had made a single comment about gold or silver markets until two or three years ago. First of all, if such a person was truly an expert in gold and silver, realizing that we are in the midst of one of the largest gold and silver bulls of our lifetime only after gold had risen from $250 an ounce to $1000 an ounce and silver from $4 to $16 an ounce should automatically disqualify that person from ever being able to proclaim they are an “expert”. Furthermore, if an analyst has discussed gold and silver markets before but never once discussed fraud and manipulation in gold and silver futures markets until the past couple of years when it became “chic” and mainstream to do so, then his or her credibility should be highly questionable. The job of an analyst is to dig deeper than the level of public understanding and to not be afraid of taking a stance that he or she knows to be true even if the rest of the world disagrees with him or her at the time. How could a gold/silver analyst refuse to acknowledge the single most important factor – fraud and manipulation – that frequently moves these markets in the short-term, for years and call him or herself a gold/silver analyst? The equivalent scenario would be a US stock market analyst that refuses to acknowledge the massive effect of US Federal Reserve POMO schemes on the current short-term market behavior of the S&P 500, the DJIA and NASDAQ.

On January 25th, in this article I posted an article titled “Will Junior Mining Stocks be THE Investment of 2011?” on my online investment blog, the Underground Investor.

I iterated that my outlook for gold’s ongoing correction would be for a short-term bottom to form “somewhere around the $1,300 an ounce mark…and not with a further $250 an ounce correction and the $1,090 an ounce mark called for by Seabreeze Partners Management’s GP Doug Kass.” I further stated, “I’m going to directly contradict Kass and predict a pop higher of at least $40 to $50 an ounce in gold sometime during the 10 trading days between January 28th and February 11th.”

To my subscribing Platinum Members, to whom I provide much more detailed analysis than anything I publish in the public arena, I granted them even tighter timeframes for the turnaround on January 25th –

“I believe that this correction will end by Friday of this week [January 28th] if not sooner and that we are very close to a strong reversal now. Look for a bottom to form, and a rebound from gold at about $1,300 and the HUI at about 495.”.

In regard to these predictions, I provided subsequent actionable strategies regarding gold/silver mining stocks as well. For the time being, gold bottomed at about $1,308 an ounce on January 28th in Asia, and the HUI bottomed in New York at 492.04 later on the same day (I issued my bulletin to my members before market open in New York that day). Between January 28th in Asia and February 4th in New York, gold popped higher by $51.70 an ounce, meeting my call for a $40 to $50 bounce between January 28th and February 11th.

I based these short-term predictions and dates of short-term reversals not by blindly picking numbers out of a hat, but by studying the behavior of the bullion bank manipulators that continuously manipulate gold (and silver) markets and by combining this information with technical chart analysis. Of course, we’re not completely out of the woods yet with gold and silver, and I’ll have to track and interpret both technical charts and the movements of bullion bank manipulators on a daily basis to understand whether this reversal in gold/silver markets will now stand its ground or not. Below, I’ll provide further examples of how I’ve been incorporating fraud and manipulation analysis into my technical analysis to accurately foresee both the short-term and long-term direction of gold and silver markets for years.

With gold and silver futures markets, one must understand the mechanisms of the likely fraudulent paper gold and silver ETFs, the GLD and SLV, and the fraudulent paper gold and silver futures markets and how both of these paper markets influence gold/silver prices independent of free market supply and demand mechanisms. Of course, this is just the tip of the iceberg when it comes to understanding the difference between the mechanisms of how markets truly operate and the false mechanisms that business schools worldwide teach to the future analysts of the world. An analyst must always keep in mind fraud and manipulation whenever using technical charts to predict future behavior in manipulated markets or that analyst’s technical analysis will ALWAYS be distorted and inaccurate. Whether it’s by design, sheer arrogance or plain ignorance, this is why a five-year-old child’s predictions about future US market behavior during the last five years would have stacked up very well against the predictions made by supposedly very learned men like US Fed Reserve Chairman Ben Bernanke.

On September 16, 2006, in my article “Has the Commodities Bubble Burst? No, No, No!”, I stated:

“Everywhere in the media, you have pundits saying that the commodities Bull Run is over – including even chief global economists of major investment firms like Steven Roach of Morgan Stanley. THEY’RE ALL WRONG…I’ve dug deep enough down into the rabbit hole to know that gold will rise much much higher in the future.. Yes, oil has slipped to below $60 a barrel but again, this doesn’t mean that oil is done either.”

At the time I made the above prediction, gold had tumbled nearly 14% in the previous two months to $573 an ounce, oil had tumbled 25% from $80 a barrel to $60 a barrel and many global commodity analysts had called for people to sell out of all commodity based stocks across the board. In particular, a few precious metals analysts used this steep correction to foment fear among gold investors and called for gold to retrace all the way back down to its initial starting point in this gold bull run at $250 an ounce. So what happened? Gold, by the end of 2007, soared from its September 2006 correction that was supposed to usher in a collapse, by more than 45%, to $833 an ounce!

And for those of you that believe I am always positive on gold and silver because many of my public postings happen to be posted near interim bottoms when gold and silver are set to rebound, this is hardly the case. In my last 2010 Crisis Investment Opportunities newsletter issue, I warned of an impending gold/silver correction to begin 2011:

“The likely time frame for the likelihood of a Central Bank engineered attack against gold and silver prices has now been pushed out until January or February 2011.”

Interpretation of fraud and manipulation can help one identify warnings about short-term pullbacks in the price of certain assets as well as identify short-term bottoms.

On December 6, 2007, subscribers to my free online investment newsletter received this warning:

“Over the past six months, soaring oil prices are much more directly connected to a devaluing dollar than decreasing oil supply or peak oil. Had the Gulf Nations declared this week that they were going to unpeg their currencies from the U.S. dollar, I guarantee you that oil would have shot up beyond $100 to $120 a barrel within a matter of weeks [oil was trading at $88 a barrel at this time]. And that would have had nothing to do with supply and demand and everything to do with feared U.S. dollar weakness.”

Again, my statement above had nothing to do with fundamentals or technical charts but everything to do with the fraudulent nature of the US dollar and my understanding of the fraudulent nature of currency and oil markets. Sure enough, several Gulf Nations unofficially and quietly temporarily unpegged their currencies from the US dollar over the next few months, following Saudi Arabia’s lead of temporarily unpegging the Riyal from the US dollar at the end of 2007. During the next six months that followed my above statement, oil rose from just $88.40 a barrel to more than $120 a barrel. In mid-2008, oil peaked out at more than $140 a barrel, though a certain Wall Street firm’s opportunistic positioning in the oil futures markets based upon their knowledge of a single U.S. hedge fund that was short 260 million barrels of oil was largely responsible for the final spike in prices (again, just another example of how short-term price behavior was driven by manipulation of the banks and not supply-demand based).

Today, I’ve read in newspapers from the Americas to Europe to Asia, the attempt of many country’s finance ministers once again to deflect blame away from their Central Banks’ fiat currency devaluation policies as the root cause of rising commodity and oil prices. Today finance ministers worldwide have colluded to keep the people in the dark about reality by stating unilaterally that rising commodity prices are responsible for inflation versus stating the reality that currency manipulation is the main culprit of massive inflation.

This same type of “fraud and manipulation” analysis can be extended to another massively manipulated market, the US stock market. When predicting the future behavior of US stock markets, an analyst must always incorporate the fraud of Federal Reserve POMO schemes and the artificial propping up of a handful of core index stocks that keep entire indexes afloat into one’s technical analysis.

On March 21, 2007, on my investment blog, I pricked quite a few investors’ nerves when I wrote the article “The Short-Term May be Rosy, But Beware the Financial Crisis that is Building Steam”. In fact, back then, the rise of US stock markets on the back of massive fraud and manipulation was remarkably comparable to today’s current state of US stock markets four years later. In that article, I stated:

“Everywhere global stock markets have rebounded whether in China, Australia, Europe, or the US , short positions have decreased dramatically, and the bulls are back in full force. However, there are still two scenarios that every investor should be wary of, one that is very likely, and one that is near inevitable…I know that a lot of people will think that any talk of a future global economic crisis is ludicrous but that is why so few people actually build wealth through investing. Only the handful of people that take the time to really understand the economics that brew well below the surface of the Bloomberg reports and CNBC and the Wall Street Journal will readily prepare their investment portfolios for this crisis.”

“And this crisis that seems inevitable to me will be much bigger than the U.S. Great Depression of the 1930’s and much larger than the Asian Financial Crisis of 1997 because the conditions that are creating this crisis will have a much wider and more significant global impact than either of these two previous crises. Before those two crises hit, the overwhelming majority of investors believed that those people that believed a crisis was imminent were crazy. And during those times, salesmen and women in the financial industry were able to leverage the naivete of the thundering sheep herd to get them to do things that led to certain financial ruin.”

The “economics that brew well below the surface of the Bloomberg reports and CNBC and the Wall Street Journal” that I referenced in my above prediction was, of course, the real levels of key economic indicators versus the fraudulent, “official” government-reported economic statists that governments disseminate to the public via mainstream media distribution channels. Because I have always focused my analysis on government and banker levied fraud and manipulation of capital markets, even in March of 2007, at a time when many commercial investment advisors were taking advantage of the steady 9-month advance in US stock markets to tout their usual “get on board [the US market bull] or get left behind” propaganda, the precarious nature of the situation at that time was crystal clear to me.

So what happened after I made this prediction? US markets continued to be rosy in the short-term as the title of my article indicated before eventually topping out in October of that year and falling by more than 20% by March of the next year. As far as the remainder of 2008, we all know the disastrous year that 2008 ended up being worldwide. How did we do in 2008? Our Crisis Investment Opportunities investment newsletter portfolio still ended up positive for the year (barely positive, but still positive). Due to my prediction that a crisis would unfold, we avoided the 40% haircuts that almost all commercial investment firm clients suffered that year. Furthermore, just a few weeks ago, Reuters reported that:

“home prices fell for the 53rd consecutive month in November, taking the decline past that of the Great Depression for the first time in the prolonged housing slump” and that “home values have fallen 26 percent since their peak in June 2006, worse than the 25.9-percent decline seen during the Depression years between 1928 and 1933”.

But what about my prediction that this unfolding crisis would be “much bigger than the US Great Depression”? I still believe that the prediction I made on March 21 of 2007 will come to fruition over the course of the next several years and this global crisis will become much bigger than the US Great Depression as at some point this year, we will move from the eye of the economic hurricane back into the turmoil of the hurricane. In fact, we may already be witnessing the first signs of my prediction above that this current crisis would “have a much wider and more significant global impact than either [the Great Depression or the 1997 Asian Financial Crisis]” in the food and unemployment riots that have already started this year in Egypt, Tunisia, Algieria and India.

By April 23, 2008 as the signs of an imminent US stock market crash were becoming clearer, I posted another warning shot on my investment blog titled “Will US Markets Crash Now or Later?”

In that article, I stated:

“Should an extended rally of the Dow above 13,000 occur, it will serve no purpose other than to create the illusion of wealth, as opposed to the creation of real tangible wealth. The higher U.S. markets rise in today’s environment, the more likely it is that they will fall even harder in the future. Here’s why. Currently, the U.S. Federal Reserve is playing the same shell game that it has for decades, one in which they alternately inflate stock markets and real estate markets. If stock markets are crashing, then they inflate real estate markets, and vice versa. It’s a vicious circle that eventually will collapse under the weight of its own foolishness. In the late 1920s, in very simple terms, the U.S. Federal Reserve’s solution to forestall a mild U.S. economic contraction and to stop England’s gold losses was to print more money.”

What happened? The U.S. Market started a steep decline just one month later, shedding almost 5,000 points between May and October of 2008!

In conclusion, I’m not stating that by studying fraud and manipulation, one’s predictions will be spot on year in and year out. There is no analyst, including myself, that has not made, or will not make a prediction or two at some point, that will appear silly in hindsight. No one is infallible, though some may infer as much. But I can guarantee you this. If an analyst incorporates an understanding of how bullion banks and governments operate fraud and manipulation schemes into his or her technical analysis of capital markets, his or her chances of making uncannily accurate calls in the behavior of capital markets year in and year out become exponentially better than if he or she were to attempt to predict future market behavior based on technical analysis alone.

At a time when everyone but the most naïve of the naïve understand how grossly distorted capital prices are both to the upside (in global stock markets) and to the downside (in gold and silver markets) due to massive manipulation schemes executed through collusive bullion-bank and government efforts, it makes zero sense to continue to put faith in technical analysis alone. Though fundamentals may drive behavior in the long-term, fundamentals have had, at times, zero effect on the price discovery of assets in the short-term. Furthermore, with certain sectors such as the banking sector where insolvent bankrupt banks have been magically transformed into solvent profitable banks by corrupt regulatory agencies that have allowed banks to cook their books, the fundamentals of many sectors are not fundamentally sound! Fraud and manipulation analysis today is more than ever, more critical than either fundamental or technical analysis.