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Monday, 30 December 2013

Golden Jackass: Deceptions, Dupes & Dots

Let us take a break from the hustle & bustle loaded to the gills with nastiness and mayhem. Consider some information cookies during the Christmas holiday down time, not without a few lumps of coal. The
deceptions are deep; the ranks of dupes are legion; connecting the dots is not so easy. Despite the constant stream of deception and the steady interference by the well-meaning but all too often simpletons in the madding crowd mixed with sheep, the story can be rather extensively told. It takes the new skill of connecting the dots, along with a mental stubbornness mixed with a certain measure of insight. The phrase connecting dots was not heard by the Jackass until a few years ago, from my unusual smart buddy UD in Nevada. His many messages over the years often contain the three words CONNECT THE DOTS. With his help and the guiding hand of numerous suspicious astute colleagues, we have made sense of widely scattered information from the battlefield during the global monetary war. After tying stories together, the main themes make for a fascinating spy novel that touches every corner of the world and reaches all our lives. A close examination reveals how the major nations and their leaders have been busy with popular betrayal on a grand scale, during a grand Paradigm Shift. The world will turn on more of an eastern axis in the future.

Deep deception makes fools of the majority of people in my former world. Many are the old friends, family members, and colleagues who refuse to give a close look at the ample evidence. Many prefer to live under outmoded wrong-footed assumptions. Some prefer to live under common deep delusions. The Jackass and buddies choose instead to make sense of the countless items on the table, since it tells a story. Regardless of whether the story is ugly, it is the event schedule of our times. We connect dots like Sherlock Holmes or Thomas Clancy and reveal George Orwell and Aldous Huxley. The people can take action, and need not succumb with mutterings and idle complaints. We can close bank and stock accounts and cash in bank certificates of deposit. We can buy gold & silver bars and coins. We can leave the country altogether, and take up residence elsewhere. The world does not revolve around the American Dome. Consider a cornucopia of items on the table, laden with deceptions.

***Introductory Concepts


A primary downfall of the American nation is a fundamental lack of awareness that the USDollar is not money. Try to explain that to the common person, and receive a blank stare. The USD is declared by fiat as valid legal tender, nothing more. That means it is legitimate legal medium of exchange to settle debts public and private, to pay bills, to settle accounts, to buy things. However, it is not money. For 42 years since the Gold Standard was broken, the nation has used unsound money, phony money. Such is not taught in college economics classes. Since it is actually (by default) denominated debt, the painful process of debt writedown will act like a wrecking ball to the wealth of the nation. Bank accounts, stock accounts, pension funds, and all types of wealth will suffer a debt writedown since the unit of supposed wealth is a debt unit. The USDollar is not money. They might as well have declared salt to be money, often used by the tribes who sold Manhattan in exchange for trinkets.


Just a little spice. The American royalty consists of a Camelot in lineage. The father of Jimmy Carter is Joseph Kennedy Sr, the father of John, Robert, and Edward Kennedy. Therefore Jimmy is their half-brother. That explains how a Georgia state governor would rise from obscurity to become president. A photograph of Billy Carter, Jimmy Carter, Robert Kennedy, and John Kennedy shows a remarkable resemblance between Jimmy and Robert, like with the prominent teeth, just like their common father. The key step was the designation of the Secretary of State, Henry Kissinger. His planned architecture for the Middle East would stand for a generation and enable the small ally on the Southern Mediterranean that looks northwest to Italy to control the US nation like a dog on a leash. Not outdone in lineage, William Jefferson Clinton is the grandson of John David Rockefeller. The word charming fits better than bastard. The key step was the designation of Robert Rubin, who presided over the raid of the national treasury. The Wall Street gang essentially stole the Fort Knox gold. In fact, they managed to steal it twice. The nation was pre-occupied by royalty and glitz, even stains on a dress. An element of royalty is very real, but hidden, shrouded in routine births out of wedlock.


The promoted story behind chemtrails is that the sky is being fertilized in order to reduce global warming. Another story is that aluminum particles are being seeded in order to interrupt the foreign telecommunication satellites from gathering information over the US airspace. The actual story is more like a toxic seeding of the natural rain water system. The presence of benzene has been widely detected, with no offered explanation. One tidy piece of evidence was the 2011 incident over Michigan, where thousands of birds and fowl dropped dead. They had an accident wherein the dosage from the aircraft machinery went awry. The promoted story behind the genetic food modification is that crop yield is being increased like for corn, also that insect resistance is being improved. The actual story is more like a genetic lacing to prepare the human population for chromosome programming and viral disease propagation, under the control room auspices. Think weird science with Mengele at work. The promoted story is that vaccines are to prepare the American population in developed immunological resistance against new diseases. The collusion with the disease control centers and major pharmaceutical firms has been exposed along the way, even cooperation with frozen victims of past virulent disease episodes (see Alaskan Military Bases and Spanish Flu victims stored). The actual story is more like the official vaccination programs are being exploited to deliver the disease, not prevent the disease. See the 30,000 dead in the United States from the swine flu vaccines in 2008. No children in Costa Rica whose mothers were warned personally by the Jackass took the suggested vaccine. One cousin was not so lucky. She has been plagued since 2009 by a mysterious brain disease. It is very likely the Guillain-Barre Syndrome malady, a malicious disorder with no commonly available cure. If a cure exists, it is in the hands of the elite.


The promoted story is the government coordinated projects to fight terrorism. The actual story is more like a smokescreen to clamp down on civil liberties, to clamp down on human movements like at airports and borders, for the unexpressed purpose of eliminating narcotics trafficking in competition while limiting the movement of cash. The prohibited water bottles onboard commercial aircraft was a major tipoff, not the shoe removals. To forbid water to passengers seemed far too odd to pass as reasonable policy. It is common knowledge that clear water is an excellent method to carry white diamonds in clandestine manner. The authorities are blocking money transport. The entire war on terrorism is a gigantic smokescreen to protect, obscure, and enable the narcotics monopoly by the USGovt security agencies. Between 1300 and 1500 tons of heroin per year currently come from Afghanistan. It goes to the NATO airbases, and onto Western cities. The Wall Street banks rely upon the Iraqi Export Bank run by JPMorgan in Baghdad Iraq for clearinghouse functions. The major Western banks would have collapsed years ago without the money laundering profits. In year 2000, only 7% of US street heroin came from Afghanistan. The current figure is 70%. When the Soviets abandoned the Afghan territory, they created a vacuum. Soldiers are sacrificing lives in narcotics production, whose gargantuan profits are on the order of $1 trillion annually, while bank shareholders are hidden beneficiaries. Neither profits nor agenda are shared by the barons with those who suffer with prosthetics or with the ultimate sacrifice in coffins. The US narco barons who captured the Cambodian Triangle heroin in the 1970 decade, and then captured the Eastern European heroin from Yugoslavia in the 1990 decade (kept from the Chechens), seized the moment and fabricated a bogus cause for war in Afghanistan. The vertically integrated narcotics business was established, without legal obstacles, managed like a sophisticated business. Call it nation building. Call me just a crazy wild-eyed Jackass with an over-active imagination, but with contacts who have seen the warehouses loaded with palettes.


Back in the 1970 decade, at least twenty different corporate entities owned the collection of newspapers, journals, radio stations, and broadcast news networks in the United States. By year 2005, the number of corporate firms in the news media was reduced to five. The monopoly in news networks is clearly permitted by the USGovt, despite the obvious violations of the Sherman Antitrust Act. No important story about national security goes to print or goes on the air without security organization approval. This is common knowledge among the news media professionals. The US public is increasingly aware, to the point that under 25% of the polled public actually believe the press stories, in very low credibility ratings. However, that is a macro figure. If individual stories are the focus, then the Jackass would guess that 80% to 90% of the fabricated slant is believed. On economic matters, my guess might be about 50% to 60% are believed. The mouthpiece for Reich Finance is firmly in place. The story of persistent economic recession is simply not permitted. It must be presented in terms of a stubborn recovery.


When the Jackass was young, a political principle was learned. When a strong president faced re-election, the middle was controlled. Therefore the challenger to the incumbent president tended to be a weak candidate with extremist views. Examples are many, like Goldwater and McGovern. After the Reagan Admin, all changed. The narco presidents began and have not been interrupted. The clue was a refusal to present the medical records to the USCongress, a requirement that has continued to be violated, not waived. To have USGovt officials poring over the evidence of narcotics usage by sitting presidents would have been embarrassing, not to mention the bipolar behavior for a president so near to the nuclear button. Since 1992, the series of presidents has been from the narco camp. They have also covered both sides, while maintaining the image of an alternative. Anyone who expected a different policy pathway from McCain or Obama is a total fool. To be sure, certain domestic differences can always be cited, like taxation versus entitlements. They are relied upon to keep the public off balance. The actual contest without much recognition is between the banker war complex candidates aided by narco funded interests and favorable news coverage versus the interests of the people. The narco presidents are all devoted to their drug of choice, with personal experience. Still looking here for what qualifications Hillary possessed to be New York Senator, or Caroline Kennedy to be Ambassador to Japan.


The salute is broad to the American Wehrmacht and the war machine. Whether it be the movies like “Argo” or “Zero Dark Thirty” which polluted the Academy Awards stage, complete with their propaganda and fictions, the trend is clear. The US movie world must pay homage. No scrutiny is required for factual rendition of important historical events portrayed, only a patriotic blitz with slant. The US professional sports world is also touched, with its own homage paid. The honor guard has become a common fixture at sporting events, even an occasional (costly) fly-over by a group of fighter jet aircraft. The message is to show appreciation to those in military service, but they are in service in most cases to the big ubiquitous oil business or the shady narcotics business. The message is as subtle as beer and trucks for sports fanatics, or even Macdonalds free toys in association with wretched food quality.


No body of information is perfect. It is usually not possible to prove any opinion construct in a definitive manner. However, the statistician uses the weight of evidence to tilt in favor of an inferred truth. Let the Jackass share a remarkable textbook problem, in order to demonstrate a method to fortify an opinion and thus to present it as well perceived fact in an imperfect arena loaded with deception and blurred images. The example is the famous two-headed coin problem from the college level probability class. Suppose the Jackass has two coins in the pocket, one an ordinary fair coin with a head and a tail, the other a rigged novelty coin with two heads. The guest is asked to select at random one coin from the pocket. He is not permitted to examine the coin, only to observe successive flip outcomes. The first flip is a head, no big reaction. The second flip is another head, and he begins to conclude the coin might be the rigged two-headed coin. One more flip is yet another head, and he nods that the coin must be the rigged coin. However, it is still possible the coin is the fair coin even after several consecutive head outcomes. The weight of empirical evidence has turned in favor of the rigged coin being held. In the Bayesian school, the prior probability upon original selection is 50% for the rigged coin before the flips began. The Bayes posterior probability after the first head flip is 67% for the rigged coin being selected. The Bayes probability after the second head flip is 80%, and after the third head flip it is 89%. The conditional probability exercise is not shown here in its mathematical detail. But let it be known that after K head flips, the posterior probability for holding the rigged coin would be (2*K/ 1+2*K). In words, two to the power K divided by one plus two to the power K. The posterior probability would approach 100% (but never reach it) with a longer succession of head flips.

In the gold community, the event under test is the GATA claim of gold market suppression. Numerous events have occurred since their original claim of extreme interference, regulator collusion, zero percent gold lease rates, and fraudulent rise in naked short futures contracts. It cannot be proved perfectly. But as evidence mounts over the years, with case after case, example after example, in support of the pervasive gold market interference and widespread price suppression, the Bayesian posterior probability that GATA is correct is closing in fast on one hundred percent. The Jackass has a vague mental threshold of about 70% to 80% required for making decisions in the analysis that a difficult to prove hypothesis appears to be true. The statistician (like the Jackass) requires a convincing convergent trend toward 100%. Apply the style of thought process to the murky financial and blurry economic world, where decisions must be done without the benefit of complete information.

***Monetary Policy


The promoted story is that the USFed is monetizing the debt as stimulus to the USEconomy, mired in recession. However, the true picture is far different. The bond monetization of USTreasury Bonds and USAgency Mortgage Bonds, even bank derivatives, requires at least $150 to $200 billion per month, far in excess of the $80 billion commonly stated. The actual story has a hidden purpose to prevent a financial collapse, if not to control the financial collapse. The entire Quantitative Easing is the largest backdoor Wall Street bailout in history, designed to aid the big banks with constant TARP-like relief. The official story will become increasingly difficult to sell, as the volume rises in the various relief requirements. When the derivative support becomes more clear, the data rising to the surface, the reality will hit hard. The Wall Street banks could not appeal to the USCongress for derivative support in the $trillions. The AIG nationalization could be sold well and easily. But to print a few $100 trillion for aiding the big banks would be impossible. So enter the QE to Infinity initiative to come to the aid of the Too Big To Fail banks. Their failure cannot be prevented. The ultimate screwball irony is that the public gradually accepts the debt finance dependence on newly printed money as the new normal. See El-Erian of PIMCO as the spokesman. The Jackass calls it all Reich Finance.


The promoted story is that the USFed offers a free money rate as stimulus to the USEconomy, mired in recession. However, the actual story is far different. Only the financial sector can pump up the volume and benefit from the artificially low rate. They need free money to refund and to redeem the impaired bonds of all stripes. The tangible economy cannot use the low rate effectively. The business investment is happening in Asia, not in the United States. No traction can be grabbed, since CAPEX is occurring within foreign economies, mostly the emerging markets. Worse, the low rate offered to savers acts like a giant wet blanket. More interest income is derived than consumer interest paid within the USEconomy. Therefore, the low rate acts to slow the system down and to punish savers. Pension funds and insurance portfolios are a total wreck. The lens of distortion produces an array of wrong notions. ZIRP slows money velocity, since less is generated. ZIRP also distorts all financial markets since all assets are priced incorrectly from the free money basis. The ultimate screwball irony is that the public gradually accepts the 0% rate as the new normal. The Jackass calls it all Reich Finance.


Not the promoted story, but the longstanding historical norm (current assumption) is that a bank account is sacred and untouchable. It has for decades been insured by the FDIC as a depositor account. Since the new 2005 Bankruptcy Law was put into place, without much study of its financial firm chapter, the entire actual story changed. Nevermind the personal bankruptcy law changes. The financial firm bankruptcy law changes were profound, but went largely unnoticed. All deposits made to a bank or to a brokerage firm are now considered unsecured loans with no guarantees. If the firm fails, then the deposits are subject to loss, surely partial loss and possibly total loss. The extent of loss is determined by the depth of failure and the discretion of the executives of the firm. In the Jackass opinion, not 5% of the US population is aware of this important fact, still clinging to the FDIC guarantee of each account up to $100,000. No more, my little sheep.

***Economic Policy


The promoted story was that China would provide the USEconomy with a low-cost solution and realized advantage for the consumer. The Most Favored Nation granted by the Clinton Admin to China in 1999 had far reaching implications. The actual story is one of economic sabotage and national tragedy. It opened the floodgates to foreign direct investment, like for factories. Even Japanese corporations participated. The event was hailed by simpletons and morons alike in the United States as a low-cost solution which would offer benefits to the American consumers. The Jackass immediate reaction was bewilderment, as to why the national leaders would discharge its legitimate income base in factories, foundries, and mills. A consumer nation is a dying nation. The economic treason by the leaders was extensive. The industrial abandonment had huge consequences. The corporate betrayal was complete. The US nation was forced to rely more completely upon the housing bubble and other asset bubbles for disposable income. The legitimate income was to shrink and diminish. The MFN granted to China was a guarantee of systemic failure with a decade, governed by a ticking clock. It indeed occurred, as soon as the housing and mortgage finance bubbles broke in 2008, just like the Jackass forecasted in the first few years of the Hat Trick Letter. The failure is playing out slowly, very slowly, as in excruciating slow.


The promoted story is that the big US banks, the money center banks, are too large to afford to permit a failure sequence. The impact upon the national economy and financial sector upon failure would be catastrophic, like a nuclear event on the financial front. The actual story is that the big US banks have been converted to derivative casino financial centers, dens of raging recklessness and uncontrolled leverage. They are too big to manage, and absolutely insolvent pillars of hollow giant reeds. The executives are too big to jail. The big banks are the product of the Fascist Business Model, criminal enclaves and vats of toxic paper. They spread economic venom that destroys capital. The first and foremost requirement of a bonafide solution to emerge from the financial crisis is the liquidation of the big banks. Their insolvency is the source of economic rot, which spreads. They long ago lost their capital formation function as facilitator to the business sector. However, they are the power centers, the control room for the financial ministry to the USGovt and the operating arms to the government policy officers. They must be plowed under, but they never will be liquidated. Instead, their preservation will lead to systemic failure and the loss of tremendous national wealth, at the corporate and individual level.


The promoted story is that austerity imposed upon national budgets will result in better fiscal health, less wasteful spending, and pave the way to a recovery. Nation after nation adopted the lunatic plan across the Western world. Very little wisdom or planning was part of the strategy. The actual story is that heavily reduced budgets cut off the national economies from a funding state source which has grown too large. The economies grew overly dependent upon federal funds. The cutoff acts like removing a source for a drug addict, like a heroin withdrawal complete with the kicking. Not a single example of a nation severely curtailing its federal funding has seen a return to fiscal health. In fact, the momentum of the recession reached a gallop, resulting in greater deficits. For the recovery snapback, removal of obstructive federal regulations and encouraged capital formation and improved business prospects must occur. The main new growth is in Asia and the emerging market nations, not in the West. Austerity was called a poison pill by the Jackass two years ago, which is being recognized nowadays.


The promoted story is that a national economy based upon consumption is somehow advanced and enduring. Where this bizarre notion came from is a queer mystery. When the USEconomy began to shed its industry to the Pacific Rim in the 1980 decade, the distorted notions took root. The environmental movement helped along the notion of clean industry. The actual story is that outsourcing meant that the true wealth engines were sent away. The industrial base has always been the source for national income, responsible for the steel factories and the transportation vehicle plants. Take it away and the nation perishes slowly from lost income and a rising dependence upon the inflation machinery, manifested in asset bubbles. The nation has been consuming its capital, most evident in spending home equity. The Jackass called it burning the furniture, not my catch phrase. This has been painfully evident since the Lehman bust in 2008. The financial engineering turned on its masters.


The promoted story is that financial engineering is advanced and sophisticated. Even the Magoo cutout Alan Greenspan praised the off-loaded risk before Congressional committees as sophisticated, stable, effective, and impressive. When the USEconomy began to shed its industry to the Pacific Rim in the 1980 decade, the distorted notions took root. The actual story is that financial engineering was nothing more than Weimar inflation-based machinery taken to the next destructive level with more powerful leverage devices and more obscurity. The result is a decimated USEconomy, an insolvent financial structure, distorted asset prices, and chronic unemployment, amidst grotesque banker welfare. Leverage squared is not progress, seen in collateralized debt obligations. Interest rate derivative adoption is not progress. But their devices are efficient in distorting the credit market toward control. Let’s see if they can keep the USTreasury 10-year bond yield under the important 3.0% mark. Flash trading from efficient algorithm models and computer systems is not progress. But they do enable apparent price elevation. The casino of Wall Street and the various commodity trading shops have been turned into obscene price rig arenas. Greenspan has been fully discredited without the formal ceremony to remove his knighted status. In like manner, the Matrix Architect cutout Benjamin Bernanke should have his PhD in Economics stripped, since his disastrous QE has not been successful in promoting any recovery whatsoever. Liquidity does not overcome insolvency, regardless of the obscene volume. Its only success has been in preserving the banker political power structure, which reigns over a systemic failure.

***Gold Events in Progress

Many are the deceptive and destructive events in the gold world, whose dots must be connected in order to make sense of the dizzying array of events. The COMEX tail will not wag the gold dog much longer. An end game has turned the corner, since the metals exchange is fast running out of gold bars. Even the SPDR Gold Trust (aka GLD Fund) is fast being depleted, the final stockpile to raid and pillage in betrayal of dopey stock holders. They are not permitted to withdraw gold bars, even when qualified, another fraud. The COMEX in year 2014 might end up as a Cash & Carry Gold Mart finally.

Behind the curtains, in a complex process loaded with intense pressure, to resolve violations of gigantic Eastern Allocated Gold Accounts, in forced margin call resolution for failed FOREX and Southern European sovereign bond trades, a massive exodus of gold continues. It began in April 2012 and has not stopped. Its volume is staggering and tests the limits of imagination at 1000 (one thousand) tons per month, moved from London and Switzerland and shipped to Hong Kong and Beijing. Its movement is closely associated with the reported massive movement of gold from the very busy Swiss refiners, whose output of recast gold bars conforms to 1-kg bars with .9999 gold standards dictated by China. The Paradigm Shift is seeing the power structure shift, given the tremendous displacement of wealth. Gold is going eastward. Banker phone calls are going eastward. Construction cranes are going eastward. Engineering talent is going eastward. Power is going eastward. In retaliation, watch viruses go eastward. See the SARS virus.

The latest important riddles pertain to the Global Currency Reset and the Chinese Encroachment on Wall Street. A devaluation of the entire set of major fiat currencies is near, which implicitly will occur versus Gold. In other words, the Price of Gold will double soon. At the same time, a USDollar devaluation is being demanded by major global forces. It can only be accomplished by the creation of a new Republic Dollar, not bound by the cited 5% band. It will suffer a series of devaluations like the Venezuelan Bolivar. A penalty is demanded for the monetary abuse to the USD, the gaping trade deficits, the unresolved USGovt deficits, the prevalent banker fraud, even the predatory wars waged on a credit card. Much more will be revealed on the highly disruptive reset that is underway, amidst tremendous obstacles. Regard it as a step within the Petro-Dollar Demise and the arrival to the De-Industrialized Third World (DI3W).

The Chinese have become managers of an indirect audit on the COMEX itself, through acquisitions and warehouse purchases. It is an intriguing but effective strategy. With surprisingly little fanfare and almost zero US press coverage, a large Chinese property conglomerate acquired One Chase Plaza for a paltry sum of $725 million. The purchase includes the JPMorgan Chase headquarters and their large gold vault. The smell of derivative default is thick in the air. What better way to prove the gold vault is empty than to buy it. What better way to store their own purchased gold bullion than to buy the biggest private gold vault in the world that is located within the belly of the beast. At the same time, metals warehouses are being gobbled up by China, and the Morgan Stanley energy trading desk is being gobbled up by Russia. Not only is an indirect audit to be conducted, but price control rooms will cede control to the new Eastern tagteam of China & Russia.

***Energy Events in Progress

Many are the deceptive and destructive events in the energy world, whose dots must be connected in order to make sense of the dizzying array of events. The new marginal oil producer is Russia, no longer the Saudis, who typically have lied about any excess capacity for several years. The giant Russian oil firm Rosneft (twice the size of Exxon-Mobil) just acquired from Morgan Stanley the energy trading platform. Look for them to control the crude oil price, now that the Petro-Dollar is going to sunset. With the advent of the Shanghai crude oil futures contract priced in Yuan terms, expect great changes to the Persian Gulf structural equation and balance of power. In truly perverse events unfolding, watch the Saudis be painted as the new terrorists in the Middle East. Their objectives were thwarted in Syria, where their agents dispensed chemical weapons. The dutiful Western press laid blame without proof on the Syrian loyalists behind the Assad regime, but the markings on the chemicals indicated made in Britain, bought by the Saudis. The tide has turned, as the Saudis might be blamed next on the 911 events. Keep in mind that the propaganda spin can blame anyone they wish, with no proof, the news network owners being the actual perpetrators of the heinous act, part of the vast syndicate with many chambers.

Expect the Saudis and their OPEC power center to yield to Iran and their Nat Gas Coop power skeleton. The Gazprom gas giant will run the coop cartel, but the Iranians will direct several important gas pipelines to West Asia (e.g. Iran-Pakistan Pipeline) and to Western Europe (e.g. Shiite Pipeline to Syria). The Saudis just signed a weapons deal with China, for missiles and more. The Iranians have made a score of weapons deals with Russia over the past 15 years. The military protectorate role will have two flanks. The Persian Gulf will be managed by the Chinese Navy, whose presence is already well placed. The Mediterranean Sea will be managed by the Russian Navy, whose presence will be made known in Syria (existing port of Tartus), Lebanon (new naval base), and Jordan (new naval base). Watch the events flow whereby the Saudis will be painted as villains, once they permit oil payments settled outside the USDollar. Watch the events flow whereby Iran will be painted as the new cooperative linchpin, holding the region in check, maintaining the balance. The key is the USMilitary withdrawal from the Persian Gulf, and its dismissal from the Med Seaside. The crude oil basis of the USDollar foundation is fading fast. Be prepared for the Petro-Yuan arrival. The impact to the global reserves banking system will be as powerful as broad. The USTreasury Bonds will be flowing back to sender in New York and London, where they cannot be refused. Beware that a certain level of disorder will hit the planet, since the United States did a creditable job in keeping the oceans safe and stable. The Gulf of Eden is the exception.

The truth has yet to be told about the Syrian objective. It was to halt the development of the Shiite Gas Pipeline to the Syrian port, making Iranian natural gas ready for delivery to the European market. Such motive cannot be told by the American press. The Iran Peace Talks should have been called the Petro-Dollar Surrender Summit. The many gas pipelines from Iran will make important additions, which combined with the Qatar gas and the existing Gazprom network, will form the Nat Gas Coop. Expect the gas output from the Israeli Tamar floating platform to join the coop supply lines also. The Petro-Dollar defacto standard bound by OPEC will yield to the Petro-Yuan defacto standard bound by the Nat Gas Coop. The principal victim of the massive currency shift will be the USEconomy, with price inflation, supply shortage, and rising violence. Furthermore, the United States will be left in a massive bagholder role behind the Bakken dud and the Shale Oil fizzle. Rapid depletion rates and water table pollution will be the recognized calling cards from the Halliburton con game and fracking monopoly. It is hard to find a good horse that the US syndicate control room has backed.

***Systemic Backlash

The next year will feature many powerful new effects. The Indirect Exchange will become a prominent fixture, its channel filled. It will direct many $billions in USTreasury Bonds from large scale asset acquisitions by Eastern and BRICS players, sent back to New York and London. The payments for the asset purchases will be done in USTBonds, as the Eastern entities dump them as fast as they can before the great devaluation. See the Rosneft purchase of the British Petroleum stake in the Russian energy business. See the Chinese purchase of Russian crude oil from direct pipeline supply. See the Chinese purchases of Brazilian assets in bankruptcy proceedings. At the same time, the Russians & Chinese will be busy conducting indirect audits of the Wall Street and USFed themselves. By becoming the landlord at the JPMorgan gold vaults, the Manhattan metals warehouses, and the Platt energy offices, they can push aside the corrupt gold and oil market interventions. They can preside over the emancipation of the physical gold market (a Sinclair coined term). They can realize a capital gain in the 15,000 tons of gold sitting as reserves at the Peoples Bank of China, more than enough to offset USTBond writedowns. The year 2014 will see important changes in the bond market, gold market, oil market, and currency market.

But the biggest shock waves will come from the currency reset followed by the introduction of the Gold Trade Settlement. The return of the Gold Standard is near, but it will arrive on the trade vehicles, not the FOREX currency or SWIFT bank platforms. It will feature the Gold Trade Note, used as letter of credit. It will feature Turkish intermediary function in provision of gold bullion to counter-parties. It will feature decentralized transactions on a peer-to-peer basis. It will feature the BRICS central bank, where emerging market reserves held in USTBonds and other toxic sovereign bonds will be redeemed for Gold bullion. The year 2014 will see important changes to global trade, in a major Paradigm Shift. The movement of gold eastward confirms it. The USGovt shutdown (debt default) confirms it. The indirect audits of warehouses by the Eastern powers confirm it. The hostility between the United States and Saudi Arabia confirms it. The rise of the Nat Gas Coop confirms it. The new Shanghai crude oil futures contract in Yuan denomination confirms it. The shift of military power in the entire Middle East confirms it. The year 2014 will be tumultuous.

Sunday, 29 December 2013

Lessons from History: How will the End of the US Empire continue in 2014?

Immanuel Wallerstein’s highly influential, multi-volume (currently 4 volume) opus, The Modern World-System, is one of this century’s greatest works of social science. An innovative, panoramic reinterpretation of global history, it traces the emergence and development of the modern world from the sixteenth to the twentieth century. In essence it traces the shift of economic hegemony from China to Europe.

We get to this at the end

Although now a retired academic Wallerstein continues to observe and write from his website.
I have long argued that U.S. decline as a hegemonic power began circa 1970 and that a slow decline became a precipitate one during the presidency of George W. Bush. I first started writing about this in 1980 or so. At that time the reaction to this argument, from all political camps, was to reject it as absurd. In the 1990s, quite to the contrary, it was widely believed, again on all sides of the political spectrum, that the United States had reached the height of unipolar dominance.
This meshes neatly with the gold community who point to the closure of the gold window by Nixon after which point it was no longer possible to exchange your dollars for gold, in effect the end of a Gold Standard.

Looking at the role of Gold in the financial history of the United States this includes
By an executive order (No. 6102 issued on April 5, 1933), the US administration under President Franklin D. Roosevelt made ownership of gold illegal due to the “economic emergency” of the Great Depression.
If you owned 100 ounces of gold bullion, worth $20.67 per ounce at the time, you would have been obligated to turn it in to the Fed, which would have paid you $2067 in paper currency for your 100 ounces.
After depriving the American public of the right to own gold, the following year the government devalued the dollar by 41% by raising the gold price from $20.67 to $35 [a price at which it stayed until 1974]. This increased the nominal dollar value of the now-enlarged US gold reserves by 69%.  
The forced call-in was done not as a punitive measure against gold owners but as a way to enrich the government at the expense of the entire US population, whose purchasing power would be reduced in the future by both inflation and the subsequent devaluation. The government’s new-found wealth supported New Deal programs such as Social Security (1937).
The gold price was controlled through the Exchange Stabilisation Fund, a fund which is still around today using derivatives to control all markets (and therefore the price of all goods). It controls interest rates through interest rate swaps, is responsible for the waterfall decline in the price of Gold futures and the price of Oil.

Everything is controlled including the now regular 'debt ceiling debates' in the US for which a complete playbook is available.

But let's just roll back through time to the height of Great Britain's economic hegemony, the “Great Game” or the geo-political rivalry between Great Britain and Russia for supremacy in the central Asian region during the nineteenth and early part of the last century. In his famous speech, “The Geographical Pivot of History”, to the Royal Geographical Society in 1904, Sir Halford Mackinder outlined his “Heartland Theory.

Mackinder’s theory was a counter-argument to notions that maritime supremacy was sufficient for a power such as Great Britain to safeguard its hegemony. He claimed that, with the emergence of new transportation routes [e.g. Trans-Siberian railway largely completed by 1916] and technology, a power that could control the centre (and the abundant resources) of the Eurasian landmass...would ultimately be able to attack the colonies of a sea power everywhere on the continent. 

When the British Navy switched from coal to oil power and with techonological advancement in the form of the creation of 'HMS Dreadnought' [based on observations of the Sino-Soviet Naval conflict of 1906] which at a stroke made all other Royal Navy ships obsolete. In trying to maintain Naval Superiority which in British eyes meant having a Navy the size of the next two largest navies combined (in this instance the US and Germany), bankrupted the nation and lead to the United Kingdom abandoning the Sterling [Silver] standard which it had entered into at the end of the Napoleonic Wars, establishing itself as the 'Global Economic Hegemon'.

The establishment of a 'gold back' global currency for trade is therefore the key element of Economic Hegemony. The period between 1914 and 1945 when there was no stable gold backed currency was marked by economic uncertainty and of course world wars.

Going back to Wallerstein he continues:
"However, after the burst bubble of 2008, opinion of politicians, pundits, and the general public began to change. The real question is what the consequences of this decline are. The first is the manifest reduction of U.S. ability to control the world situation, and in particular the loss of trust by the erstwhile closest allies of the United States in its behaviour. In the last month, because of the evidence released by Edward Snowden, it has become public knowledge that the U.S. National Security Agency (NSA) has been directly spying on the top political leadership of Germany, France, Mexico, and Brazil among others (as well, of course, on countless citizens of these countries). 
I am sure the United States engaged in similar activities in 1950. But in 1950, none of these countries would have dared to make a public scandal of their anger, and demand that the United States stop doing this. If they do it today, it is because today the United States needs them more than they need the United States. These present leaders know that the United States has no choice but to promise, as President Obama just did, to cease these practices (even if the United States doesn’t mean it). And the leaders of these four countries all know that their internal position will be strengthened, not weakened, by publically tweaking the nose of the United States."
The same process as occurred in the early twentieth Century is now at work today. The battle for McKinder's heartland is renewed and the tensions along the River Euphrates, the fertile crescent, the Sunni/Shi'ah muslim conflict.

So what exactly divides Sunni and Shi'ah Islam and how deep does the rift go?
The argument dates back to the death in 632 of Islam’s founder, the Prophet Muhammad. Tribal Arabs who followed him were split over who should inherit what was both a political and a religious office. The majority, who would go on to become known as the Sunnis, and today make up 80% of Muslims, backed Abu Bakr, a friend of the Prophet and father of his wife Aisha. Others thought Muhammad’s kin the rightful successors. They claimed the Prophet had anointed Ali, his cousin and son-in-law—they became known as the Shia, a contraction of "shiaat Ali", the partisans of Ali. Abu Bakr’s backers won out, though Ali did briefly rule as the fourth caliph, the title given to Muhammad’s successors. Islam's split was cemented when Ali’s son Hussein was killed in 680 in Karbala (modern Iraq) by the ruling Sunni caliph’s troops.
Just another example of the corruption of a spiritual ideal for how an individual should conduct oneself, by self-serving, power hungry humans eager to inflict their views on others.

It has been observed that the message of Al'Qaeda changed in 2005 from being 'we are all Muslims and we should unite against outsiders trying to tell us how to live' to 'we are Sunnis and our mortal enemy is the Shi'Ah'. The Golden Jackass postulates that it was in 2005 that Osama Bin Laden dies and not, as claimed by the US, in 2011. The movement then took on a new direction under other Saudi Princes/CIA backing.

The 'reconciliation' between the US and Iran recently may well have significant consequences for the region. How will the US allies Israel and Saudi Arabia react? The Saudi's have underpinned the US dollar since World War II, insisting that any oil purchased must be purchased in US dollars - both Saddam Hussein and Colonel Gaddafi had been trading their oil for Euros immediately prior to their demise. The US military acting to secure the US economy and the dollar's hegemony.

Back to Wallerstein:
Insofar as the media discuss U.S. decline, most attention is placed on China as a potential successor hegemon. This too misses the point. China is undoubtedly a country growing in geopolitical strength. But accession to the role of the hegemonic power is a long, arduous process. It would normally take at least another half-century for any country to reach the position where it could exercise hegemonic power. And this is a long time, during which much may happen. 
Initially, there is no immediate successor to the role. Rather, what happens when the much lessened power of the erstwhile hegemonic power seems clear to other countries is that relative order in the world-system is replaced by a chaotic struggle among multiple poles of power, none of which can control the situation. The United States does remain a giant, but a giant with clay feet. It continues for the moment to have the strongest military force, but it finds itself unable to make much good use of it. The United States has tried to minimize its risks by concentrating on drone warfare. Former Secretary of Defense Robert Gates has just denounced this view as totally unrealistic militarily. He reminds us that one wins wars only by ground warfare, and the U.S. president is presently under enormous pressure by both politicians and popular sentiment not to use ground forces. 
The problem for everyone in a situation of geopolitical chaos is the high level of anxiety it breeds and the opportunities it offers for destructive folly to prevail. The United States, for example, may no longer be able to win wars, but it can unleash enormous damage to itself and others by imprudent actions. Whatever the United States tries to do in the Middle East today, it loses. At present none of the strong actors in the Middle East (and I do mean none) take their cues from the United States any longer. This includes Egypt, Israel, Turkey, Syria, Saudi Arabia, Iraq, Iran, and Pakistan (not to mention Russia and China). The policy dilemmas this poses for the United States has been recorded in great detail in The New York Times. The conclusion of the internal debate in the Obama administration has been a super-ambiguous compromise, in which President Obama seems vacillating rather than forceful. 
Finally, there are two real consequences of which we can be fairly sure in the decade to come. The first is the end of the U.S. dollar as the currency of last resort. When this happens, the United States will have lost a major protection for its national budget and for the cost of its economic operations. The second is the decline, probably a serious decline, in the relative standard of living of U.S. citizens and residents. The political consequences of this latter development are hard to predict in detail but will not be insubstantial."
Looking back when the United Province (modern day Netherlands) lost hegemonic sovereignty it did so at the hands of France who were a potential successor only to be eclipsed by the United Kingdom over the period 1779 to 1815. When the United Kingdom's star faded they appeared to be likely to be eclipsed by Germany, but were to be eclipsed by the United States over the period 1914 to 1945.

Something happened in the 1990's between the US and China, the US can not possibly have simply granted China 'most favoured nation' status for no return consideration. Our friend the Jackass postulates that the US took a loan from China in the form of a loan of Gold. A loan ten years later which they could not pay back, a gamble by Bill Clinton that he could turn the economy around although how he hoped to achieve this whilst simultaneously exporting all industry to China one can only imagine. This coincided with the return of Hong Kong to the Chinese at the end of the 100 year lease with all the expertise of that area and with the 'Brown bottom' in Gold of $295 per ounce.

The US defaulted on its mortgage, not the government of the US, for the loan was taken out in the name of the people of the United States, by their elected representatives in whom they had entrusted such authority. It is the people of the US and not the government who will have to pay it back. The price of this failure to repay may already be in the public domain, perhaps it is the return of the continent to nature as pictured at the start of the Article. From FEMA resettlement camps to the mega-cities of tomorrow.