Extreme Danger Signposts
By: Jim Willie CB
Thursday, 12 July 2012
In recent public articles, the USTreasury Bond bubble was described, supported by Interest Rate Swaps to produce artificial demand and to create an illusion of a flight to safety in toxic USGovt Bonds. A Black Hole phenomenon was described, which will suck the capital life out of most assets, celebrate the USTBond rally, and accelerate the recession in the USEconomy. Numerous endgame signals were described, all alarming in their own right, not a single signal being from the realm of normalcy. Extreme danger is the warning. This week consider just a handful of danger signposts, all screaming loudly of systemic breakdown. They are all deeply disturbing signposts that complement the endgame signals with a scattered pox of symptoms on the landscape. The Jackass is firm and rigid in maintaining that ugly forecast made in late 2008, dismissed by many as foolish and off the mark. No longer. The USGovt debt default in the form of a massive forcible debt restructure is being considered by creditors in charge. The USEconomy is imploding, and Money Velocity is falling. The true protection in both an inflationary spiral and a deflationary spiral is GOLD. The current storm center has a mix of both, a fast rise in the monetary expansion coupled with a painful decline in the value of all things paper. Never overlook that home prices are a consequence of paper games, not the hard asset ploy. The USDollar is being pushed off its coveted throne as global reserve currency. A system based upon GOLD is coming, designed to manage trade settlement. The paper kings hope to impose a new and better paper bond vehicle, and a new and better paper banking depot, but they are failing miserably. They are on the extreme defensive. Their captains are cutting deals to stay out of prison. Justice might actually be served. Watch the LIBOR lawsuits, which will be a different kind of mushroom cloud.
USECONOMY IN GALLOPING RECESSION
Forget what the political leadership claims on a USEconomic recovery. Reality could not be farther from their claims, as their credibility is strained. Their deception and wishful thinking put to public speeches could not have been more incorrect. The domestic gasoline volume sales from refiners has fallen a ripe 50% since the 2007 peak. Notice that Quantitative Easing, the hyper monetary inflation designed to purchase USTreasury Bonds and USAgency Bonds that almost no global creditor wishes to buy, did not result in stimulus. Instead as my claim has been, it results in capital destruction from rising costs, vanishing profit margins, and retired equipment. Much more stimulus will have to come, much more bond purchase, much bigger federal deficits, much more currency debasement. The effect on the GOLD price will be huge, but only after the blockades are removed that interfere with free markets.