Tag Archives: credit bubble

The Financial System Is On The Cusp Of Collapse

DB stock is now in a full panic sell-off as I write this.  It just hit another new all-time NYSE low on by the heaviest volume ever in the stock since its 2001 NYSE listing.  It’s currently down almost 10%.  No doubt the Central Banks will try to bounce it.

Deutsche Bank may well be the scapegoat this time around just like Lehman was the scapegoat in 2008. Central Banks in collusion can prevent just one bank from collapsing. It was the co-collapsing of AIG and Goldman Sachs that prompted then-Secretary of Treasury, ex-Goldman CEO Henry Paulson, to put in motion the bailout of the U.S. and European banking system.

Yesterday it was reported that the rate the Fed charges the banks to borrow collateral surged to its highest rate in 7 years – LINK. The rush to borrow collateral was no doubt prompted by OTC derivatives-related counter-party collateral calls. A collateral call is like a margin call in a stock account. This occurs when a derivatives trade goes south for an entity that is on the long side of the derivatives bet – a bet that Deutsche Bank won’t default, for instance – and the counterparty to that trade demands more collateral to be posted in order to insure that the bet can be paid off if the “long side” loses.

Now multiply that concept across thousands of derivatives trades involving hundreds of hedge fund and bank counterparties totalling $100’s of trillions. It does not take too many collateral calls before counterparties and Central Banks run out of collateral that can posted against these OTC derivatives margin calls. That’s happening now.

This is 2008 redux – only this time the damage inflicted by derivatives counterparties collapsing will be much worse because the size and scale of the problem is much larger.

Deutsche Bank is at the center of focus, but there’s no question that U.S. Too Big To Fails are in similar financial condition.  If that’s not the case, then why won’t Fed unwind the “QE” that created the $2.3 trillion in bank “excess reserves” sitting at the Fed?  Pull this rug out from under Goldman, JP Morgan, Wells Fargo, B of A etc and the entire U.S. banking system will collapse.   But that will happen at some point unless the Fed cranks up the printing press again.

Deutsche Bank may well be the catalyst that throws a “spark” that lights the fuse on $100’s of trillions of financial weapons of mass destruction.  It was just reported that DB’s hedge fund clients are rushing to draw all excess cash held at the bank.  That’s how the run begins.   DB’s stock is down 8% right now on 33 million shares.  This is 3x the 10 day average trading volume and over 6x the 90 day average – with 2 hours left in the trading day. It’s as if someone turned on the light in the kitchen and the cockroaches are running for cover.

Make no mistake, DB is not the only big bank in trouble right now.  I have no doubt the phone wires between the U.S. and European Too Big To Fails are sizzling.  This is also the reason the manipulators have been throwing a “scorched earth” attempt to push gold and silver lower.  Again, this is just like 2008 when the manipulators took the price of gold down from $1020 to $700 – right before the entire banking system de facto collapsed.

Deutsche Bank may well be the “canary” but the “coal mine” is the banking system – European and U.S. – and there will be plenty of dead birds before this is over.

For additional insight on the DB saga, see Eric Dubin’s:  Deutsche Bank Is Imploding.

Derivatives: Unexploded Financial Weapons

Central counterparties keep records of trades and help suck risk out of the banking system, but this only works if they themselves are well capitalised and have plans in place to deal with a sudden collapse of one or more of its members and get close to failure. Otherwise, they’re just unexploded nuclear bombs nestling deep in the financial system.   – Business Insider LINK.

Who are we kidding.  Since the 2008 de facto banking system collapse, the OTC derivatives problem has mushroomed out of control.   The Obama Government heralded in the Dodd Frank legislation, which allegedly made the financial system safer for everyone.  In reality it is nothing more than a fairlytale written with  the goal of allowing the Too Big To Fail banks to cover up their continued derivatives Ponzi scheme.

Now the BIS has issued yet another warning about the dangers lurking with derivatives. The “central clearing exchanges,” like the Depository Trust Clearing Corporation, are giant derivatives-infested vipers nest which harbors the next – and possibly imminent – financial system collapse.

This is one of the reasons behind Carl Icahn’s recent candor regarding the U.S. financial system:  “sooner or later there’s going to be a massive problem.”  LINK

In today’s episode of the Shadow of Truth,   we discuss the reasons why the BIS is sounding the derivatives alarm bell again and why Carl Icahn has become “Dr. Doom” on the stock market:

Tuesday Morning Massacre In The Large Cap Miners

Something very ominous is brewing behind the scenes.  It is systemic and related to a ongoing credit collapse behind “the curtain.”  The indicators are right in front of our eyes, regarded with indifference by a zombified, propaganda-infused public injected with the “hope heroin” greedily pedaled by Wall Street, the Fed and the Government.

The credit markets are in a slow state of collapse led by high yield bonds and leveraged loans, which have been declining for the better part of a year.  Recently that decline has turned into a tail-spin in the more toxic classifications of “high yield.”

It was revealed by Zerohedge LINK, in a display of adept journalism, that the Dallas Fed has quietly told its regional member banks to refrain from marking to market their distressed energy loans and to defer an initiative to foreclose on defaulting loans to technically bankrupt energy companies drowning in debt.

Of course the head of the Dallas Fed, a former high-ranking Goldman Sachs executive, has issued a polished denial.  We need to two more denials before the intel is confirmed to be true.  But I know from a source that it is indeed true.  A couple months ago a little birdie passed on the remarks made to his client from the President of a big regional bank in Texas:  the economic hurricane brewing from the collapse in energy prices is about to hit Texas hard and it will hit every sector of the Texas economy.

Back to the Dallas Fed issue, does this sound familiar?  Anyone happen to learn anything from “The Big Short” about the fraudulent behavior of the big banks when their fraudulent business activity hits the wall?   One well-read analyst dismissed this latest round of fraud by attributing it to the change in mark to market accounting rules passed in 2009.  But these rules were meant to enable the big banks to avoid reporting asset mark-downs for GAAP purposes, enabling them to mark-up bad assets.  This further enabled these banks to misrepresent their earnings per share in quarterly earning reports.  But that analyst is whistling past the graveyard on this issue.   This is much more insidious and fraudulent than changing the GAAP accounting rules.  This is about telling banks to let bankrupt companies pretend to be solvent, just like we saw in The Big Short with CDO’s and CLO’s.

This latest move by the Fed is an attempt to play Atlas and hold up the world of banking on its shoulders.  It’s about enabling these banks to avoid taking big hits to their reserve capital.  This lets the banks carry on as if nothing is wrong when they should be selling assets hand over fist and raising even more capital to use as reserves against collapsing energy assets.   The canary has died and the Dallas Fed is going to try and carry the canary out of the mine before anyone sees the corpse.

Now does it sound familiar?  This is exactly what happened in 2008 in the mortgage market. Only this time around it will be worse because this dynamic will encompass most of the biggest lending sectors of the financial system:   energy, auto loans and student loans.  Don’t worry, mortgages won’t be left out.  The pool of homebuyers sitting on 0-3% down payment mortgages has bubbled up.  I predict that within the next twelve months a large portion of the subprime mortgages disguised as FNM/FRE/FHA conventional loans will be come quite problematic for the banks.

How does this relate to the Tuesday morning massacre in the large cap miners?  Whenever something really bad is about to hit the system, one of the first places it manifests is with an unexplainable raid on the mining stocks.  I thumbed through the news announcements of every single component of the HUI index and could not find any news reports that would have triggered a 6% hit on the HUI.   Some of the biggest stocks, like BVN, Kinross and Newmont are down 7-10%.   Unexplainably down.

This could lead to a big attack on gold/silver, so brace yourself.   It won’t last and anyone who sells into it out of fear will regret doing so in 3-6 months.

The global financial system is collapsing.  It was reported yesterday that Italy’s big banks are melting down.   This will trigger a big daisy-chain explosion credit default swaps.  I expected to see the S&P futures down 2% on this report.  They were up 1.5% overnight. I guess a melt-down starting in the European financial system is a good reason to pile into U.S. stocks…But on the contrary, I knew I would wake up to find the SPX futures up big and that’s what confirmed for me that the system is collapsing.   The Tuesday morning slaughter in the large-cap miners is Fed’s attempt to get that canary past the last group of people entering the mine and it further confirms that the global economic system is failing.

Atlas Shrugged

A friend sent me a news item from U.S. News and World Report which reported that Louisiana’s board of education is going to implement a new policy which requires all students to fill out a Free Application for Federal Student Aid in order to receive a high school diploma – LINK.

Think about that for a moment.  In order to receive a high diploma, the State of Louisiana is requiring that high school seniors fill out an application which would enable them to go into debt the moment they receive their diploma.

This is a mind-blowing event.  Most jobs available to high school grads do not require a college degree.  But some might require a high school diploma.  I have to wonder what the motive is behind this.  A significant portion of student debt is now being used for corporate-owned “universities” which are largely worthless to everyone except the entities who own the schools.  Goldman Sachs is a big player in this space.   Student debt, backed by the Taxpayer, is just another form of wealth transfer from the public to the banks and big corporations.

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The amount of student debt issued and outstanding is now over $1.3 trillion. Obama pats himself on the back because student loan delinquency rates are falling a bit.  But this is because he has made it easier to defer payment – LINK.  While 11.5% – roughly $150 billion – is in delinquency, about 50% of this debt is in some form of grace period, deferment or forebearance.  Loans in deferment are not part of the delinquency rate calculation.  The true level of delinquency and technical default is probably somewhere in the 35-45% range.

I have to believe that the requirement being implemented in Louisiana is violating some part of the Constitution.  Of course, with the simple stroke of a pen, Obama can override the Constitution with yet another Executive Order upholding this requirement.

This requirement in Louisiana is exactly the type insane laws which were imposed by the Government as described in the narrative laid out in “Atlas Shrugged.”  Acts of mandate which enabled the Government and the corporate friends of the Government to suck wealth from the populace and from productive workers and redistribute the largesse amongst themselves.

We know how the story unfolds in “Atlas Shrugged.”  Unfortunately, I see the same type of story unfolding in the United States.

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…I believe that banking institutions are more dangerous to our liberties than standing armies… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.  – Thomas Jefferson

The Credit Markets Are Starting To Collapse

I kind of wish Alan Greenspan were still the FOMC Chairman.   He makes a great “Wizard” figure.   Bernanke looks more like an unethical elf – a spineless pansy who couldn’t bluff his way out of a paper bag but viciously vindictive when no one can see him.  And Janet Yellen…well, she just looks like Aunt Bea on the Andy Griffith show, only with a much lower IQ.

I mention this because it’s become glaringly apparent that the credit markets are starting to collapse behind the proverbial “curtain.”  Several analysts point to the Merrill Lynch triple-C junk bond yield index and remark that “something” blew up:

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But it’s not “something.” “Something” is a general melt-down of the credit markets.  The C-rated high yield index reflects this reality.   If it were just one or two names blowing up, yields on related paper might drift higher, but not spike up like this.   This is the market’s realization that it has been overpaying for its risky investments not by a little bit, but by a gargantuan amount.   Add to that the well-publicized dearth of liquidity to accommodate general selling and we have the perfect recipe for the collapse of the entire credit market. The spike in the graph above is the market’s way of saying, “I want out.”

The unraveling of Kinder Morgan is another indicator of the malaise prevailing behind “the curtain.”  When KMI announced its earnings on October 22, it increased its dividend and projected growth over the next year of 6-10% in its dividend payout.  Seven weeks later, it slashes its dividend by 75%.

What the heck happened?  What changed?  If you look at KMI’s statement of cash flows, over the last three years KMI has funded both CAPEX and its dividend payout by issuing more debt every year.   How many Wall Street or Seeking Alpha Einsteinian analysts pointed out that fact?   Zero.   This is just speculation on my part – as it would be on anyone’s – but I suspect that Kinder Morgan was informed by its investment bankers that any continued debt issuance would be extremely expensive and conceivably not possible, especially given the collapsing price of oil and gas.  Yes Virginia, contrary to the popular myth of CNBC La La Land, KMI has business exposure to the directional movements in the price of oil and gas.

There are plenty of other market signals but perhaps the one that reflects the most desperation by the insider elitists to keep  a pretty cover page on the horror story unfolding is the daily price beating administered to the price of gold.  In a Groundhog Day scenario, every night the price of gold rallies while the physical gold buying heathens and NATO foes of the east feast on the cheap gold that the criminals of the west provide for them every day once the paper gold markets are in full swing.

If you don’t want everyone to run out of the coal mine when they see the dead canary, remove the bird before it dies.

As this unfolds, there is a lot of money to be made shorting all of the hideously overvalued stocks.   My new subscription service will be rolling out at least one idea per week that will help you find ways to exploit the gross price distortions and sector bubbles that have developed after 6 years of extremely reckless monetary policy by the Federal Reserve and U.S. Treasury.    You can subscribe by clicking here:   SHORT SELLER’S JOURNAL.

It’s a weekly report delivered to your email inbox with:  1) a brief comment on the previous week’s trading action plus any thoughts on the upcoming week;  2) I will feature 1 or  2 short-sell, trading, or investment ideas – the investment ideas will be primarily junior mining stocks; 3) trading recommendations, charts and put/call option ideas.

A Bearish Warning From The Pending Home Sales Report

The warning signals are coming from several sources now.   Many major MSA’s have gone from apartment rental shortages to oversupply with more supply on the way;  Sam Zell recently unloaded a big chunk of apartments from his flagship REIT – a repeat of a  move he made in 2007;  housing prices have been dropping for the better part of the last year in several MSAs – 30% All Homes Lost Value Last Year;  large investment funds are now starting to  unload large portfolios of homes that had been  structured for  high yields from rents but have significantly underperfomed.

The crux of the problem is that the Fed’s massive stimulus of the mortgage market, combined with increased Government subsidization of FNM/FRE/FHA mortgage programs, accomplished no more than temporarily stimulating a small bounce in homebuying.  But a large portion of this homebuying was done by “investors” and flippers.  That ship has sailed as housing prices, contrary to the calculus reported by the Case-Shiller index (which Robert Shiller has admitted in the past is flawed) have been declining in most cities since the spring.  Flippers are now finding themselves stuck on homes that they are unable to flip unless they are willing to eat loss.

I explore the significance of the latest Pending Home Sales Index report, which has now declined in 3 or the last 4 months in this Seeking Alpha article:  Pending Home Sale Indicating The Bear Is Back.    This is true despite the fact that the Government just allocated more taxpayer support by rolling out  a zero-down mortgage program for the low-income demographic.   As I discuss in this article, mortgage subsidies won’t help a population that can’t earn enough income to support the monthly cost  of home ownership.

I have published a new homebuilder report which shows why this particular homebuilder is going to get cut in half in price over the next year.  This company happens to focus on the lower-end homebuying demographic and it recently reported a continued decline in unit sales.   This stock fell 9% after it reported and it has yet to rally back to its pre-earnings level despite the massive move up in the S&P 500.

You can access this report here:  HOMEBUILDER REPORTS

In response to several recent inquiries, I’m offering a package of my older homebuilder reports at a discount.  The numbers in the report are dated but the primary premise explaining why each homebuilder is a great short is still intact.  In fact, two of the companies are now well below their stock price when I published the reports, despite the fact that the S&P 500 is significantly higher than when the reports were published.  There’s a message there…

I am offering the older reports at a discount until I get the numbers up-to-date, which  I will be doing over the next couple of weeks.  Anyone who buys these reports will be entitled to receive future updates per my report buying policy.  If you are interested, contact me at investmentresearchdynamics@gmail.com

 

Ominous Signals Coming From The High Yield Market

Are you prepared for impact? One of my readers alerted me to the fact that someone bought 15,000 January 2016, 80-strike puts on the HYG high yield bond ETF. That’s a $1.6 million cash bet on an event that has not occurred since July 2009.

The high yield bond indices are rolling over quickly.  As the graph below shows, after the QE-driven big bounce from the 2008 collapse in the financial markets, the high yield market has largely drifted sideways since the middle of 2010.   Energy bonds represent about 15% of the high yield market.  But the junk bond market actually began slowly rolling over a full year before the price of oil collapsed:

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You see that the junk bond market, as represented by the HYG ETF, peaked in July 2013. The price of oil began to drop like a rock in mid-June 2014. This event didn’t seem to infect the junk bond market until early July 2014.

For a lot of reasons, the high yield market is a lot more sensitive to changes in the financial and economic condition of the system than are stocks. From the graph above, you can see that HYG is down 12.5% from its peak in 2013. At that point in time, the S&P 500 was still on its way to an all-time high. More than half of the 12.5% drop in junk bonds has occurred since the spring of 2015.

The story got a lot more interesting today.  A reader of my blog emailed that someone had bought 15,000 January 2016, 80-strike put options on HYG today (Wed, 9/23).  Here’s the tape – click to enlarge:

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Assuming an average price paid for the puts of $1.08, which was the last trade price in the option contract, someone plunked down $1,620,000 to buy puts on HYG with a strike price set at $80. But as you can see from the graph above, HYG has not closed below $80 since July 17, 2009. In fact, it really hasn’t even “sniffed” the low 80’s since late 2011.

In other words, someone pulled $1.6 million out of their pocket to speculate on what, up until now, has been a very low probability occurrence for the last 6 years.

You can see from the graph that if the financial system melts down before the end of the year, and I believe this event is quite possible, HYG could plunge. If it were to do a cliff-dive before mid-January down the the $62 level it hit in early 2009, the value of this put bet will soar to $27 million.

One last note, historically, the big movements in the junk bond market tend to lead big movements in the stock market. If this guy is right on the timing of his bet on the junk market, the stock market will crash before Christmas.

The economic fundamentals are highly supportive of this thesis, at this point it’s only a question of whether or not the monkeys at the Fed are losing their  ability to rig the markets.  I know several market analysts each with decades of experience who think this is the case, including me.

“AAPL Is Crashing – It May Be Over”

We’re dying to see Icahn’s next filing on Apple. The fact that Carl has not Tweeted anything on Apple since June 24 is interesting. – The King Report, M. Ramsey Securities, Aug 4, 2015

AAPL has been by far the biggest contributor to the run-up in the stock market since the Fed began printing trillions of dollars to save the big banks and reinflate every paper-fueled financial bubble that has infected our economic system since the mid-1990’s. While everyone points to Bernanke as being the “king of the printing press,” the Maestro himself, Alan Greenspan, worked his “maestro-ism” by pressing down hard on the money-printing accelerator in order to “fix” every big financial collapse since the 1987 stock market plunge.

Now one-by-one the bubbles are popping. EU sovereign debt and the Chinese financial system are clearly the most visible for the time being.  It also looks like the pancreatic financial cancer that took down Greece has now invaded Spain.

But the bubble-popping pin is also starting to invade the U.S. economy. One has to wonder if the Obama Government will invoke the “national security clause” of the Patriot Act and try to incarcerate the bubble-popping-pin without a judicial hearing at Guantanamo (the Guantanamo that Obama promised to close after he was elected in 2008). Maybe Wesley Clark will suggest putting the bubble-pin in an internment camp…

The poster-child for the U.S. financial system bubble has been AAPL.  Aside from Carl Icahn pimping his big position in the stock for a few years, Wall Street money slaves have tripped over themselves to drool over the Company’s overpriced cellphones and computers.  Not only is the price of AAPL stock a bubble, but it is a bubble in marketing, shameless promotion and the amount of unused tech gadget computer power for which the AAPL cult adherents happily pay – often with credit.

While no one knows which coming event will ultimately crash the U.S. financial system, the economy is clearly receding deeper into recession.  The GDP bounce reported for Q2 is nothing more than statistical smoke and mirrors fabricated by Government statisticians and Orwellian propaganda.  Every private-sector economic metric is now showing declines further into negative territory.  Today, for instance, factory orders plunged for the 8th month in a row, down 6.2% for June vs. June 2014.

Along with the deteriorating economy, the dislocation between the fiction of stock market valuations and the reality of Main Street continues to widen.  This will not have a happy ending.  The law of “regression to the mean” will at some point assert itself in brutal fashion and the multiple paper-fueled financial bubbles blown by the Fed will pop and decimate our entire system.

I doubt AAPL will be the trigger, but anyone blindly bullish on the stock market has to take notice of the 15% plunge in AAPL’s stock since its recent all time high:

AAPL

With Carl Icahn likely selling furiously, if not out of his position entirely, and every large hedge fund over-weighted in AAPL, who will catch the falling knife?  If the Fed or the Swiss National Bank does not insert a safety-net – and it appears as if the SNB is already filled on AAPL paper – AAPL has a long way to fall before it reaches a fundamental price that makes any sense.  Of course, the same can be said for the entire stock market…

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Gold Manipulation: It’s Much Bigger Than You Think

From Michael Edwards, editor of the Activist Post:   All of your work is outstanding, but this one goes beyond – wow, thank you very much for your analysis. This is one of those stories that can really open people’s minds on a broad scale that there truly are things called “conspiracies.”  Maybe if people can face the obvious, they will dig even deeper.

The gold price manipulation scheme will go down as the biggest financial market scandal in US history for numerous reasons. They include the destruction of the free market system in the United States. The manipulation of the gold and silver prices eventually led to the manipulation of US interest rates via the Fed, the stock market via the Plunge Protection Team, and to the currency markets.  – Bill Murphy, GATA.org

The gold manipulation scheme has taken on historic proportions.  It’s been going on for several decades – witness the London gold pools of the 1960’s which were implemented to prevent the price of gold from taking off because the U.S. was running out of gold with which to back the Treasury debt it had issued to foreign creditors who were redeeming their Treasury notes for gold per the Bretton Woods Agreement.

Ultimately this scheme failed when Charles de Gaulle famously began redeeming France’s Treasuries for gold because he had calculated that the U.S. had issued significantly more Treasuries than it had gold to back those Treasuries.  France pulled out of the London gold pool operation and a couple years later Nixon was forced close the gold window or, rather, end the convertibility of foreign-owned Treasuries into gold.

Frank Veneroso, who wrote the brilliant “Gold Book” in 1998, told Sprott’s John Embry and I many years ago that the gold price suppression scheme was “much bigger than you think.” Frank found out the US Government was taping his phone calls and ever since has shut up about what GATA has to say. Frank was the one who exposed the gold leasing scheme, which is how The Gold Cartel did their thing so many years ago. It is how GATA knows the central banks have well less than half the gold they say they have in their vaults. Frank got his information from a Bank of England source who has since died.  – Bill Murphy

Each new financial crisis (emerging market debt, Long Term Capital, tech bubble, housing/credit bubble, etc) was met with successively larger amounts of money printing and credit creation.   Print money to keep the banks and the markets from collapsing and create more credit to keep the giant Ponzi scheme going.  Once the gold bull market got underway in late 2000/early 2001, in order support the monetary intervention required to keep the U.S. systemic “shell game” going, the manipulation of the gold markets began to intensify.  It also started to become more obvious in nature to those where researching, trading and investing in the precious metals sector.  GATA was and is instrumental in exposing and reporting the facts about the manipulation of the gold market.

At the end of 2000, the Treasury had $5.6 trillion in debt outstanding.  The current amount is $18.15 trillion but there is a debt issuance ceiling in force now for which the Obama Government is circumventing by raiding Federal pension funds, the Social Security Trust, issuing IOU’s and other cash “reservoirs” that will soon run out.  The debt ceiling will have to be lifted again, like to $20 trillion.  That’s nearly a 400% increase in just Treasury debt since 2000.  At the end of 2000, the Treasury debt to GDP ratio was 54%.  Today it is 102.5% and this does not include the Treasury’s Fannie Mae and Freddie Mac guarantees.  In other words, the amount of Government debt has grown at twice the nominal rate of the U.S. economy in the same time period.  Note: the “wealth” produced by the U.S. is part of the theoretical backing of the dollar.

This is just Government on-balance-sheet debt.  Total Government contingent liabilities, i.e. on-balance-sheet plus off-balance-sheet, is now estimated by several different sources to be at least $200 trillion.  This would include pension, Social Security, and several other Government entitlement programs.  Recently it was estimated that State pension funds are now underfunded by at least $2 trillion.  Student loan debt  is now well over $1 trillion, of which 30%-40% in arrears or in outright/technical default,   Most private pension funds are at least underfunded by 50%.  

An “underfunded” liability is a socially correct term for “debt.”  When the stock and credit markets re-collapse, the underfunded status of most if not all pensions will likely approach more like 90%.  Some pensions will  be wiped out.

Then there’s the derivatives…

The point here is that the fundamentals underpinning the precious metals market have strengthened cumulatively since the gold bull market began.  There has not been one point in time in the last 15 years, in fact, when these fundamentals have weakened.  What has changed is the degree of intervention engaged in by the Central Banks and U.S. Government as a means of preventing the price of gold from rising and signalling to the world that the U.S. political and economic system – the system which issues the world’s reserve currency – is increasingly corrupt, criminal and entirely fraudulent.

Yes, China has its issues as well but it has two things that the U.S. does not:  $3.4 trillion in foreign currency reserves backed by a big trade surplus and a massive amount of gold.  On the other hand, the U.S. foreign reserves are roughly $39 billion and it runs a $40 billion/month trade deficit.  It is highly unlikely that the U.S. Government possesses legal title to little if any gold.

In my opinion, the ability of the U.S. in conjunction with its European vassals and the BIS to keep the U.S. dollar fiat money system in motion is largely dependent on the ability to keep the price of gold suppressed.  In 2011, when silver threatened to take out $50 and gold was headed in the $2000’s, the U.S. elitists were staring into the abyss.  That’s when the gold market intervention took on a whole new dimension.  This is best visualized with this graphic:

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The dislocation in the correlation between the price of gold and the size of the  Fed balance sheet shown in the graph above is further supported by the manipulation activity reflected in these two graphs (inset chart on the right graph sourced from Zerohedge, with my edits) – click to enlarge image:

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The graph on the left shows the massive paper ambush on the gold futures market on Sunday evening July 19. An enormous amount of paper gold contracts were dumped into the Comex’s globex electronic trading system during one of the slowest trading periods at any point in time during the trading week. A bona fide seller trying to sell a big position at the best possible execution prices would never have dumped a position like this. The only explanation is that someone wanted to drive the price the price of gold lower and make a point of doing so. This particular occurrence in the gold market has been a recurring event over the life of the gold bull market. However, the frequency of the above trading pattern has significantly increased since 2011.

The graph on the right is the daily, year-to-date graph of the price of gold. As you can see, despite the continuous strengthening of the underlying fundamentals supporting the price of gold, including the heightened risk imposed on the global financial system by the probable financial collapse of Greece, the price of gold trended lower during Q1 2015. The inset graphic, however, shows the big spike in gold OTC derivatives issued and held by the big banks, JP Morgan being the largest issuer of OTC gold derivatives. There is a definitive correlation between the big spike in gold OTC derivatives and the downward pressure on the price of gold.

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This graph on the right, prepared by the TFMetalsReport, shows the record level of the ratio of paper gold to physical gold on the Comex – 117x.  You can see the ratio exploded and went vertical starting mid-2013, which is right around the time Bernanke delivered his infamous “QE taper speech.”  This graph unequivocally reflects the sense of desperation by the Fed and the Treasury in its efforts to push the price of gold lower using the extremely fraudulent paper gold market.

Finally, since mid-December, when it seems some sort of derivatives bomb exploded – LINK –  the anti-gold propaganda from the media has significantly intensified.  This especially true since the July 19 ambush.  It’s not just anti-gold propaganda, however,  it’s a grotesque preponderance of insidious misinformation and disinformation.  The blatant manipulation of the gold market in conjunction with the rabid dissemination of anti-gold rhetoric from both the financial press and Wall Street reeks of desperation – desperation to keep a lid on the one market signal that would undermine the elitists’ perpetuation of the U.S. dollar-based systemic Ponzi scheme which enables them to loot and confiscate middle class wealth (“middle class” being defined as anyone not wealthy enough to buy their own politician or not in the privileged position to benefit from the wealth confiscation schemes).

The Shadow of Truth will be releasing a podcast in two-parts of a two hour conversation with Jim Willie sometime tomorrow.  In a portion of the podcast, Jim Willie lays out the elaborate scheme being used to keep interest rates low and to push the dollar higher in one last desperate attempt to maintain the reserve status of the U.S. dollar and global hegemony of the United States, both of which are being systematically dismantled. Keeping a lid on the price of gold is the nexus of the blueprint for implementing the extreme market intervention by the Federal Reserve and the Treasury’s Working Group on Financial markets.

When the intervention in the gold market fails, which it inevitably will as have all other market interventions in history, it will have the systemic affect of delivering a massive blow from a 2 x 4 on the back of the heads of the unsuspecting public in this country.  In other words, be prepared for life to become very uncomfortable in every respect.  My personal view is that will be the case even for those of us who have taken steps to prepare for this inevitability.