[curcercanty]

OPERATION TWIST DECEPTION
An asterisk is required for the analysis. Results are somewhat confounded (mixed, confused) with stock market shifts and European crisis developments. Lastly, do not be fooled by arguments that QE has targeted the long maturities in Operation Twist, scheduled to phase out at end June. The QE program never ended, as it went global. The QE to Infinity has been ON for over a year. It affects all bond maturities and does so month in and month out, even if only to provide replacement demand. The twist story painted a phony billboard, as usual. The real story is that Operation Twist was designed to help the Asians diversify in risk decisions on their massive portfolios. The Chinese and Japanese wanted to shift their long-dated USTBonds into shorter maturities. Also, a solid argument can be made that Operation Twist was designed to buy ALL of all auctioned 30-year USTreasurys ever issued, from inception. Cute trick! A review of the volume for bond buys and past bonds issued bears this out, as the figures are almost exact. Prior to the Oliver Twist fast hand chicanery, the invisible hand was buying most of them in a visible manner anyway. The program merely made the task official. The actions have turned more bold, with official bond purchases done by the USFed immediately before auctions on the same day. That reeks of pure desperation.

USDOLLAR BACKWARDATION
A fascinating but challenging concept has been put forth. A USDollar backwardation might soon show itself. It would precede and preview a violent removal of the USDollar as global reserve currency. Contract commitments might be avoided and shunned, in favor of hard cash. Demand for the physical paper bills is likely to reach acute levels, as the USDollar approaches the day of actually losing its privileged global reserve currency status. That privilege has been abused in historically unprecedented manner, with a climax of bond fraud, central bank hidden loan grants, a financed endless war, even construction of underground cities (see Virginia, Denver).

Keith Weiner is senior advisor at the Gold Standard Institute. He anticipates an important and highly disruptive split between physical USDollars (paper) and electronic USDollars (computer or contract), a very plausible development. His opinion has merit. As people begin to panic and exhibit desperation, they will attempt to cope with the enormity of a collapse. At first, sellers of real goods may accept electronic credit money, but demand a higher price in compensation for the inherent US$ risk. An unusual price spread on the electronic USDollar might then widen, with the bid from real goods falling. At the same time, a fast growing demand for the real paper might cause the bid on the paper USDollar to rise. Refer to paper currency folded into wallets. Demand should grow on an unlimited basis as the crisis peaks, and the recognition of the US$ losing its prized global supremacy is widely known. People might continue accepting paper USDollars out of longstanding habit. An unstable situation will eventually lead to collapse. Unlike Gold, the paper USDollar has no value other than the promises, most of which have been broken with protected impunity. Weiner dubbed the concept with differentials building with the name USDollar Backwardation. The concept is well understood in the metals world, but has never been extended to the currency world. It will as the tangible paper is demanded out of growing distrust. Contracts like savings accounts in banks will do vanishing act.

LTRO: DRAGHI STILLBORN BABY
The story not told adequately is the extreme failure of the LongTerm Refinance Operation installed by Mario Draghi as his first act and deed at the Euro Central Bank. He has in the process lost all credibility before his first year of tenure is over. The Southern European sovereign bonds did not take well to the LTRO solution at all. It caused an immediate vomiting episode that continues to this day. The solution wrecked the banks further, applying a supposedly better quality elixir of fiat paper bonds to replace a dismissed toxic bond. The Draghi solution of LTRO funding was a stillborn baby. The Spanish Govt Bond yield is stuck at alert levels. The Italian Govt Bond is fast approaching the panic levels, while experts attempt to explain that Italy is in much better condition. The failure of bond auctions in Rome will put aside such silly notions. The bond yield in Spain will remain near 7% to keep the pressure on. The bond yield in Italy will push past 6% to apply renewed pressure. Nothing changed, nothing fixed, and worse, no real attempt to remedy or reform. As long as big bank liquidation is avoided, the supposed solutions are all empty cans of hope and heretic games.

Clearly to anybody with a good solid mental pulse, Italy is next on the big bailout trail. My German banker source assured me back in February that it was the failing prospect of Italy, and its totally unmanageable volume of debt, that led the German bankers to obstruct all additional aid to Southern Europe. Italy is next, and even the Austrian finance minister Maria Fekter admitted as such. Her words angered Monti in Italy, a confirmation of their validity. The stakes in the European debt crisis are rising fast. Italy is the EuroZone's third largest economy. Reality bites, as Europe is far from ending its credit crisis turmoil.

BANK RUNS SPREAD, NOT YET LIKE WILDFIRE
Europeans are seeing scattered and growing bank runs, in at least four nations. The United States and London have not seeing anything similar. The bank run phenomenon has hit Great Britain though, in their colonial bastion of Northern Ireland. The three identified locations of bank runs, complete with anecdotal evidence, can be delineated. It includes Bankia in Spain, which is a well-publicized story of halted withdrawals, followed by a nationalization plan, then an absurd display of honesty. The bank revised the full 2011 fiscal year to overturn a small profit, and announced instead a gargantuan loss in the $billions. One should suspect all big Spanish bank balance sheets as a shelf of dishonest accounting, hiding their grotesque insolvency and wreckage, with deep rot in the cupboards. Banks in Central America shine by comparison.

Reports circulated a couple weeks ago of blocked withdrawals from Banque Postale in France. Online bank wire transfers were completely halted. The Hat Trick Letter reported in May that high wealth accounts had been vacating Paris in search of Scandinavian safer grounds. The run has continued. Other reports have come that BNI depositors in Italy were told of blocked withdrawals. The bank went bust, without any decency to give any warning to its own clients. Instead it cut off its depositors from accessing their money. The Bank of Italy (cental bank) authorized the suspension of payments by Bank Network Investments without communicating anything to the depositors. They are mere pawns in the process, whose interests are secondary to supplying banks. The Bank of Italy extended receivership of the bank. Compulsory clean-up exercises followed. In addition to BNI, depositors of Banca MB were also affected.

Bank runs have finally begun in Spain, Italy, and Greece in earnest. The savings accounts are being depleted within a broad vanishing act. Argentina is the lesson few learn. The latest is a report that NatWest within the RBS Group in the UK has suffered computer meltdown. Millions of customers had been unable to move or withdraw money from their accounts. A widening suspicion has come that the supposed technical glitch was instead a disguised kiting scheme designed to save the big bank conglomerate million$ in delays while clients were denied access to their money. It is theft by another name. The Ulster and Belfast bank interruptions blocked over 100 thousand account holders from access in Northern Ireland.

GREEK FLASH POINT FUSE
The Greek debt default is inevitable. It lies somewhere between tragic and funny to watch the futile extraordinary measures to stave off the day when big European (and London) banks must suffer their losses. The tragic comedy continues to turn pages. The Germans will not fund anything more, period. If another bailout is fashioned, it will be a pure shell paper game concocted in Brussels. When the inevitable Greek default comes, it will be like a Lehman Brothers crash times ten. A default is best for the Greek nation, unless they prefer to see the entire national wealth shipped to foreign lands. A default is a dreaded event for the bankers, naturally. So they spin the story about popular benefit, stated in pure backwards form. The extreme risk is being recognized for its contagion across borders, a process begun. To think that Greece would topple the larger nations of Southern Europe was a laughable concept two years ago, but that was the Jackass forecast clearly stated without hesitation, only early.

Companies must be cautious not to enter into binding contracts, thereby aggravating the recession in Greece. If not the poison pill of austerity to satisfy bailout demands, then caution on contracts will send the nation into a halt. The government deficits recorded in Athens are making the history books. And a strange footnote, businesses are springing up in Bulgaria across the border, owned by Greek interests, simply to avoid the toxic Euro currency. A smooth transition with a Greek Govt debt default would cause a 20% to 25% devaluation in assets in Greece, from bank accounts to home values to business value. That level of downgrade is what the new Drachma would require upon conversion from Euros. A disorderly transition could result in a 50% devaluation. Expect disorder. Thus the motive for capital flight, bank runs, and smuggling cash across borders. No officials are pursuing solutions in the best interest of the citizens. The other larger PIGS nations are not strong. France is an unrecognized PIGS nation. It is a PIGS dancer falsely posing in Teutonic clothing. It has been acting like a strong German banking resource, in a pretender’s role. By extending so deeply in PIGS loans, it became a PIGS nation.

DEBT CONTRADICTED AS WEALTH
The Western monetary system is built upon debt. That debt is crumbling, the process having begun with mortgage bonds, and extended to sovereign bonds. Recall the nitwit USFed Chairman Bernanke’s words in 2007, that the bond contagion was contained. It was not, and it spread to an absolute bond fiasco exactly as the Jackass forecasted. Debt is not wealth. The wealth of Western nations is evaporating. The illusion easily promotes a fantasy. Recall the 1980 decade where access to credit was perversely considered wealth. It ended in ruin and tears and bad health. The United States is on the verge of being plowed under, just like Greece, just like Spain. The dominos are lined up to fall, including Italy and England.

The industrialized nations are the primary abusers of debt, in order to sustain their standard of living even as they have discarded or forfeited their industrial base. No need to work, just invest and speculate, all clean industry. It is no coincidence that Germany remains wealthy, since it made a concerted effort not to lose its industry to Asia. Important deals were struck in the 1990 and 2000 decades, to preserve jobs, to cut pay, and to refuse outsourcing and offshoring. The United States embraced both practices, and has suffered a systemic failure as a result. The final chapter is playing out. The financial markets perversely treat debt as an asset, trading it actively in many forms, like sovereign bonds, corporate bonds, mortgage bonds, and municipal bonds. Now enter LTRO bonds, more toxic junk paper. The process of downgrading the bond paper is well along, not yet having hit climax. The home foreclosure chapter will be followed by a sovereign debt default chapter, complete with numerous debt restructure events. It will play out in a series of falling dominos.

The climax will be the fall of the House of Morgan, as JPMorgan fails and the USGovt debts default. Many regarded the concepts as unthinkable in 2008. Not anymore. The JPMorgan fortress of USTBonds and Interest Rate Swap supporting structure will surely topple, as the Credit Default Swap contract shop floor erodes and disintegrates, as the sovereign debt tied to it crumbles. The JPMorgan episode will bring down the house of cards, with the Interest Rate Swap machinery caving in. The wreckage process started with the weakest nations in Greece, Portugal, and Ireland. It will end in France, London, and the United States.

The advanced nations carry between three and ten times as much total debt as they have economic activity, as measured by Gross Domestic Product. The worst offender is the United Kingdom, whose debt is about 9.5 times its annual economic activity. With a string of bank welfare programs and endless empty economic stimulus (little more than reshuffling taxes and extending doles), the UK piles more debt upon debt without a remote hint of remedy and solution. The United States is piling up debt at an extremely rapid rate, as is Europe. Notice the Japanese debt at over six times GDP after two decades of Quantitative Easing and endless stimulus. The cost of 0% policy is heavy but hidden. The pervasive systemic problem is founded in the misconception that debt is wealth. Debt can be used as collateral. Debt is securitized into bonds that are avidly traded on exchanges as items of value. With such transfer of debt to securities, the cancer is spread from the banking industry under its regulatory oversight. To support debt valuations, and to prevent massive writedowns during the global financial crisis in its fourth year, the central banks of the world have been willing to swap out bad debt for good money. The counter-party risks have been overlooked and shoved under the carpet. As conversion of debt to hard assets continues, with a gold wave included, the asset downgrade will be conducted until its conclusion.


GOLD, THE LAST ASSET STANDING
In no way can the current ambushes and nasty schemes conclude quickly within the Gold market. The desperation of the gold cartel and their partner big bankers is visible. The naked shorting of Gold & Silver is done more openly. Their oversized positions cannot stand simple scrutiny as being hedges. The timing of attacks is clear, to coincide with vast expansions of the money supply or USFed public appearances with speeches made. The imbeciles that cry outward about Deflation are pathetic, as they fail to comprehend much of any of the formidable factors at work. They observe but one table, while at least seven are bustling with movement. The time honored correlation between the Gold price and the money supply is being strained, much like the USTBond tower and its supporting Interest Rate Swap buttresses. The game is futile. The bankers will play it to the end. They will soon be forced to play without much of any gold in their arsenals. Not until the Western banking and bond system is fully wrecked will the new Eastern Coalition system of trade settlement be put into place with trumpets blasting to herald arrival. The Eastern architects do not want the blame of ruining the Western fiat paper system. Until that day, the Gold price will be subjected to openly criminal activity, fully permitted illegal steps to keep the game going, and nothing but lipservice to maintain the rule of law. Some powerful events are coming, which will provide such incredible disruption, that they will make history. Do not expect justice to handle the criminals. Expect the new gold-based system to sweep them aside. They will vanish with a dragon’s breath. When the new day dawns, the Gold price will be multiples higher, as will the Silver price. A grand divergence between the paper Gold price and the physical Gold price is happening exactly now, with great forces at work to pull them apart. The events in between contain the mystery and intrigue and confusion. A day will come before long when the paper discovery Gold price will not be reported at all, because their market will contain no gold, as in zero gold!

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.
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