Jim Willie
Kitco
Posted July 28, 2010
A significant feature of fiat money systems is the privilege for the custodian of the reserve currency to engage in regular practices of ham-fisted monetary management, even permission for fraudulent centers to flourish, surely developing a debt monster that an economy grows dependent upon. Fannie Mae might be the most offensive blight on such privilege. Unfortunately, many shenanigans have matured into grand fraud. They are smoking guns of USTreasury fraud and counterfeit, with strong whiffs of monetization. Much more monetization is to come, fully endorsed and sanctioned. Other clever techniques are being used, given the Quantitative Easing has officially been halted. A close look reveals that Excess Cash Reserves at the USFed are being drawn down, which are thus funding the USGovt deficits in the last couple months. Ironically, such reserves held by big banks at the US Federal Reserve were the only thing preventing vast insolvency. Now that cash is being used, and the USFed insolvency is slowly exposed. Details can be found in the July Hat Trick Letter reports. Evidence is compelling, and grand motive for foreign creditors to reject the USDollar, whose active control strings are traced to Wall Street. When recognized monetization destroys the last vestige of trust and confidence in the USDollar, when more official rounds of sponsored Quantitative Easing arrive, the USDollar will be on a downward spiral. In fact, all major currencies face the same prospect of vast monetary expansion. They will all fall sharply in value, and by counter-effect, the Gold price will rise powerfully.
CHINESE WARNING SHOTS ACROSS THE BOW
- A d v e r t i s e m e n t
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This story is a gem. The Chinese Dagong credit agency made an inaugural splash with a debt downgrade of the USTreasury Bonds. They called the US-based trio of debt rating agencies politically biased, an under-statement. The Dagong agency used its first splash into sovereign debt to establish a bold standard of creditworthiness around the world, giving much greater weight to wealth creating capacity and foreign reserves than Fitch, Standard & Poors, or Moodys. Dagong pays more attention to rapidly escalating debt levels. The Chinese Govt has coordinated their strategy, selling off short-term USTreasury Bills, but hangs onto a large raft of long-term USTreasury Bonds. On a net basis, the Chinese purchases have hit a plateau.
Meanwhile, with distracting commentary, China has doubled its gold holdings. At least the Chinese Govt has promised not to use their foreign reserves as a weapon. What a relief!! And Wall Street promises no more bond misrepresentation, no insider trading, no more fraud, no more drug money laundering (see Wachovia & Wells Fargo). What a relief!! The USGovt strives for clarity about management of China’s $2.5 trillion in FOREX reserves, the world’s largest. It contains $868 billion in USTreasurys at last count. The growing fear is that, in anger over trade friction, or in disgust over reckless USDollar management, or from a response to discovered hidden USTBond monetization, or with ambition to displace the US from its dominant post, China could dump USTreasury Bonds with a vengeance. The credit market analysts justifiably call it the Nuclear Option. The Beijing officials have given veiled warning to reduce the USGovt deficits and to put aside thoughts of another Quantitative Easing. The next QE2.0 comes as sure as night follows day. It comes with a heavy cost. The message is written on the wall, that the United States has forfeited its sovereignty with rampant debt production rather than industrial production.
US TREASURY ISSUANCE EXCEEDS US GOVT DEFICITS
This story is a gem. USTreasury bond issuance exceeds even the gargantuan USGovt deficits. The gap is $1.5 trillion over four years. One could guess that Wall Street is selling bonds and squirreling the money in foreign banks, a basic counterfeit in a syndicate operation. The operation might bring new meaning to monetization. At least a parallel exists. The majority of home mortgages have their income stream used in more than one mortgage bond. That is the real reason why home loan modification is a thin farce. The MERS database conceals the game, but the public has the satisfaction of knowing that MERS has no legal standing. The state courts are declaring no legal standing, and foreclosure procedures are blocked as a result. People cannot be removed from their homes when the database is used in handoffs of notes and titles.
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