Monday, March 23, 2009

[sonus] understanding issues: part 4

In Part 4, Sonus gets down to the nitty-gritty of who is to blame for this mess. An auspicious day for America today.

Part 3 of the series can be read here.

Before going into detail concerning the almost global conspiracy on the part of Fiat currency holders to suppress the price of Gold, it is important to understand the depths of insecurity that Fiat owners exist under. Many millions, probable billions of taxpayers funds have been expended over the years, to this end. This is outright theft. It has no legal mandate.

But it does show the fundamental weakness of Fiat, particularly towards the end of its life-cycle, when administrations are increasingly forced to manipulate every damn economic read-out monitor to convince the electorate of their security.

The senior political class, the MSM, and professional economists become nothing more than bare faced liars.

Greenspan spoke honestly about the characteristics of Gold before he took the Chair of the Federal Reserve Board.

And this article speaks of the total conversion of Greenspan, from an Austrian/von Mises disciple, to a Fiat currency fool whose main tool was verbosity and deception, hidden by increasing levels of debt, off-shoring, manipulated economic statistics, excessive leverage, and manipulated markets. A totally failed economic formula.

The previous two articles show the entire change of mindset that a genuine economist must go through in order to administer the fraudulent Fiat Federal Reserve system.

They must become totally subverted.

However, it is claimed that Greenspan had a motive. It involved his ego. But can an ego really subvert years of intellectual study that had obviously convinced Greenspan of the futility, fragility, and unworkability of a Fiat financial system.

I think not.

Here is a quote:

“But Greenspan was and is a member of the “Council of Foreign Relations”. He was corrupted!!

Greenspan had written a scathing article in the Sixties which attacked the kind of policies the Federal Reserve used to manipulate the economy. That he became Chairman of an institution he so despised put him in position to radically change the financial world. So, it seemed the facts fit the case of an "inside job" on the system to drive it to a state from which it ultimately would crash and splinter to pieces, making it possible to rebuild it in a better way. A truly radical scheme, it seemed, to destroy the Phoenix and then reincarnate it in Greenspan's own image.

But, despite the fact that the anticipated scenario has been playing out on a grand scale, a simpler explanation has come to light now and it makes more sense than the one we had been postulating. The answer comes from Ian Gordon. He writes in “Longwave Analyst:

My deceased friend, Teddy Butler-Henderson, met Alan Greenspan in the 1960's. They apparently discussed the Kondratieff Cycle. According to Teddy, Alan Greenspan confided that he hoped he could be Federal Reserve Chairman at the onset of a Kondratieff winter, because he felt he could defeat winter by substantially increasing the money supply and reducing interest rates to near zero. He had his wish and effected those actions following the 2000 stock market peak.

This effectively put winter on hold but massively compounded already excessive credit to the extent that people who should never have had access to loans were willingly given them. Now the credit bubble that Alan Greenspan initiated is beginning to unwind. The process will be horrific and cannot be reversed. Incidentally, Mr. Greenspan told Teddy during that same conversation that if he failed to thwart the Kondratieff winter, it would make what followed 1929 look like a `Sunday school picnic.' This is what we have to expect.

The above was written almost two years ago. And, we now have a depression greater than that of the Thirties, which is why we call it the Greater Depression. Greenspan had a goal---to eliminate the Kondratieff Winter. But, Alan Greenspan has likely completely destroyed the fabric of the world economic system by trying to avert a Kondratieff winter. His mistake was in assuming that bankers would remain as prudent as they had been in the past, rather than being mesmerized by the new money paradigm Greenspan created.

With interest rates set to zero and money flowing in an endless cascade, all a banker had to do to earn an instant fee was to make a loan to any body warmer than room temperature regardless of income documentation, then securitise the loan to get it off the bank's books. That meant instant gratification and no long term obligation to the banker himself. Greenspan should have realized that bankers are not rational, or even intelligent, creatures. He should have seen them for what they are---lab rats who could be taught to run mazes via cheezy rewards, without any thought to the ultimate consequences of this conditioned response.

This led to the current systemic breakdown we are experiencing today.

Instead of averting a normal Kondratieff winter, Greenspan created a Kondratieff "Ice Age." We will be lucky if this depression ends before 2027. The last depression lasted from 1929-1949, so we may have that long to endure this downturn. But, if the estimate that this is going to be worse than the last one proves correct, that 2027 date may be too optimistic. Of course, in the last depression, the stock market hit bottom less than three years after the depression started and trended higher from 1932, so we won't have to wait until 2027 for the stock market to bottom.”

The author of that quote makes an interesting case, but he forgets that under Greenspan a series of bubbles were blown, and Greenspan always maintained that it was not the job of the Fed to deflate bubbles, after all it was difficult enough to diagnose bubbles before they burst, but the job was to pick up the pieces afterwards.

This main change in Greenspans methods came shortly after his “irrational exuberance” speech, in 1996, after a visit by Mr Rubin. One wonders what was said at their meeting.

After several of these bubbles it must have been obvious, despite Greenspans ego, and outside pressure, to a skilled economist and Fed banker, that serial bubbles were not the answer, and a reversion to intelligent economics would have been the policy. This obviously did not happen, in fact, Greenspan became a cheer-leader for the securitisation of debt and its sale around the globe. He had obviously been corrupted!!

Concerning the details of the developed corruption resulting from free “money”, Karl Denninger speaks his mind.

Well said, Karl.

Let me make the point a little stronger.

As Chairman of the Fed, Greenspan had oversight responsibility for the banks. They were obviously dealing in OTC derivatives of various types. These were totally opaque and unregulated. Banks, allegedly, are regulated bodies, and were thus in breach of their charter. Greenspan not only failed in oversight responsibilities, he was the cheer-leader for their advancement, globally, and as a reasonably intelligent economist would have been perfectly aware of the consequences of a completely derivative based shadow banking system, that is now imploding, and is sucking the REAL WORLD into an economic/financial black hole. J P Morgan balance sheet has $88 Trillion of derivatives, of various types. European clearing banks have a £16.3 Trillion POTENTIAL LOSS, that no-one dare own-up to. Bernanke, as new Fed chairman also has oversight responsibilities. He has also failed to fulfil those responsibilities, by not preventing banks from participating in these instruments.


Bernanke was appointed because of his previous published papers concerning central bank actions to get out of, or avoid, a great depression. The current debacle was known, anticipated, years ago! But more, - the current debacle was PLANNED and EXECUTED years ago!

Who are the AIG counter-parties?

Karl Denninger wades in as usual with well made points.

Before the Sub-Prime broke, the XAU, as a proxy for gold miners, was systematically taken down, month after month, when the price of gold was rising rapidly, and the share prices of other non-gold miners was also rising. A completely counter intuitive move.

It was done to counter the anticipated rise in the share price of miners, in a repeat of the late 1970s, (and other actions were taken against Gold), that the upcoming financial collapse would create. Someone had prior knowledge of these events.

Intrepid Rob Kirby explains.

Who could afford to do this? Who would benefit?

Who wanted to avoid the public judgement that the Gold Price delivers on failing Fiat currencies? Logic says it is the “owners” of the Fiat system.

Early in the life of nulab, Chancellor Brown sold off a significant part of the UK gold reserves, deliberately advertising the fact globally, which served to depress the world price further. Significantly, this was round about the time of LTCM troubles, and the Eddie George comment! He currently defends the action as all simpletons do, by asserting that he would do it again, thereby confirming suspicions concerning the logic of his reasoning processes, and his devotion to the Fiat. He was “Bought” very early into his bout as Chancellor!!

Blair now works as a “consultant” for J P Morgan!

Recently Bear Stearns was “taken over” by JPM, with a subsidy from the Fed, of some $30B. During fractious negotiations, which involved the Fed, Geithner, and a few other familiar names, someone omitted to inform Bear that 24 hours later the Fed would be opening a window that would have allowed Bear, an investment bank to borrow from the Fed. Well, hoodathunkit?

Bear was assassinated, because they were long gold. Significantly long. The cancellation of Bear's long, and increased shorting took gold down significantly, another counter intuitive move at a time of financial upheaval.

Once again, Rob Kirby takes up the story.

Understand that JPM is a tool of the Fed. Here is a direct quote:

“The tag team of JP Morgan as the monster and Goldman Sachs as its harlot represent a powerful pair that is more responsible for destroying the entire US financial system than 95% of the American public has any awareness. The colossus of JP Morgan is a monster, a predator, nurtured by pond scum. It has gobbled up Chase Manhattan, Manufacturers Hanover, Chemical Bank, Bank One, and more over the past two decades. Their profound presence in keeping the US Treasury Bond yields down can never be understated. They do so by managing 85% of the credit derivatives on the planet. They distorted usury prices, as in price of borrowed money, thus aggravating the LIBOR (London Inter Bank Offered Rate) market in a very visible manner. The oblong usury prices have contributed mightily to the destruction of the US Economy itself, created bubbles, killed jobs, and wrecked savings.

The ugliest hidden activity for the JP Morgan monster is to manage the Bank of Baghdad, where they manipulate the crude oil price, where drug trafficking money is funnelled from Afghan sales, under management by the US Military aegis (guys with no uniform stripes or markings). Maybe such illicit money offsets Credit Default Swap losses, making America strong for freedom and liberty. Goldman Sachs is clearly the investment banking agent for the US Govt, given the privilege of insider trading in unspeakable proportions. They manage the Plunge Protection Team efforts to intervene in financial markets, making America strong for freedom and liberty. The new kid on the block is the FDIC. The Federal Deposit Insurance Corp is steering fresh meat into the corralled JP Morgan stockyards for slaughterhouse feeding. The label of harlot might be too kind, especially from the perspective of senior bond holders. But JP Morgan requires fresh meat (capital) periodically, thus making America strong for freedom and liberty. Never mind the fires caused after its hearty meals and flatulence.”

“The maze of unscrupulous, devious, and insidious fraudulent business units of JP Morgan is worthy of a 500-page chapter in the US financial history treatise, someday to be written. See the complete distortion of usury costs (interest rates kept low) by JPM, with such a volume of Interest Rate Swaps that was sufficient to run the Bond Vigilantes out of town. Skewed cost of money is the foundation for speculative bubbles. See the management of US Treasury Bonds by JPM on behalf of the Federal Reserve, along with the $2.2 trillion that they sold above and beyond the officially stated US Govt issuance of US Treasury Bonds. That is called counterfeit evidence, the records for which were lost in the third building at the World Trade Centre. See the management by JPM of the Bank of Baghdad. Twice as much money is missing from the Iraq Reconstruction Fund than was stolen by Bernie Madoff, up to $100 billion being estimated. And never overlook the financial tentacles that extend from Afghan operations on the contraband side, to the Bank of Baghdad as the clearing house.”

And speaking of JPM derivatives …

Recently J.P.Morgan announced profits of $5 Billion, on the trading of derivatives of $87 Trillion.

There is no justification for a commercial bank, with regulated depositors' funds insured by the government, to be speculating on a level this great. 
One also has to wonder who actually 'lost' in those derivatives bets that JP Morgan made, who the counterparties were. How many losses were taken by AIG, Bear Stearns, and Lehman? 
Who is really being bailed out here? Aren't we paying for JP Morgan's "winnings?" 
If they speculate and lose, who pays for that? The tax payer. 
What is a bank doing gambling in unregulated over-the-counter derivatives involving commodities and financial instruments worth $89 Trillion?

This figure dwarfs the GDP of the entire world. 
Getting paid by the public whether they win or lose it appears. 
When a single player with deep pockets and government guarantees is placing bets in markets on a scale, that is the very definition of moral hazard. 
Until the Obama Administration takes strong steps to bring back Glass-Steagall, and put hard limits on the banks there will be no reform and no recovery. 
The US is 60 ish days into the Obama Administration. There is little or no systemic reform. Just a continuation of crony capitalism under Bernanke, Summers and Geithner.

To return to the main topic, - Notice also that HSBC is the other main holder of derivatives.

And HSBC is a Market Making Member of LBMA, along with a few other familiar names.

The London Bullion Market Association sets the Gold price twice per day, and it is a completely private setting, not open to public sight.

Is the LBMA twice daily setting of the Gold price also deliberately depressed by shorting or central bank selling via Bullion Banks?

Who knows, only the LBMA.

And that is wrong!

Rob Kirby goes further in this link and examines the activities of central banks leasing arrangements. Central banks lease out bullion as a way to suppress the price, knowing that the gold will probably be sold. They would only be confident in doing that if they were confident that the gold could be re-purchased for a lesser price in the future, and returned to them. This arrangement can be lucrative for banks struggling for profitability.

I'll hand over to Rob.

“Gold price suppression is not simply a “paper game” where relentless amounts of price suppressive “futures” can be sold forever; the price suppression scheme also requires that the price riggers expend some physical gold too – to make the ponzi-esque selling of futures “believable.” The physical gold which is mobilized to accomplish this is typically sovereign gold that is “leased” from Central Banks.

Leasing is preferred to outright sales because you can only outright sell something “once” – and it is gone. By leasing, the physical gold leaves the vault to be sold in the open market but Central Banks replace the missing physical gold with an I.O.U - for accounting purposes – and claim that they still posses the same amount of physical bullion! So, by leasing gold instead of “outright sales,” Central Banks can and do double count [cheat] – a la Enron – their gold stocks!”

Yes, they do double count leased out Gold, BUT THE RULES OF THE IMF AND BIS ALLOW IT.

Strange, don't you think?

Is it designed to mislead researchers?

Hyper inflation is a CURRENCY event and moves from deflation where there is a sudden loss of confidence in the currency creating a sudden loss of value, via the exit door., as in Iceland recently.

Eric de Carbonnel is a fine blogger who we will visit shortly, however Rob picks up a problem in one of his blogs.

Interesting, ain't it?

This is a chart to look at regularly, it is the price of Gold over three days. Regularly viewing this chart shows in which market the manipulation is taking place.

Finally for Rob.

Here Eric de Carbonnel speaks about the dangers of Gold ETFs. Many hold no gold, and are secured by Gold derivatives, thus there is a counter part risk.

Note that the providers mentioned, JPM, and Barclays, are members of LBMA, as is HSBC Bank, USA, and as we have seen, JPM and HSBC also deal heavily in Gold derivatives on the short side.

Seems very risky to me. At some point the Banks will probably blow. What then?

The only Gold to hold for investment purposes, is PHYSICAL GOLD.

Take a simple example.

You live in Iceland.

You go to bed on D day, minus one, with your left hand holding 100 units of currency, and your right hand holding gold to the value of 100 units of Icelandic currency.

You wake the following morning, D day.

In your left hand your 100 units of Icelandic currency can only now purchase 20 units of yesterdays Icelandic currency imports.

Your right hand can still purchase 100 units of yesterdays Icelandic imports.
However, your right hand is now worth 5 times yesterdays Icelandic units of currency, and can purchase 5 times yesterdays value of home produced Icelandic goods.

Join the EU for safety, and you lose your only industry to foreign fishing fleets.

Pity no-one thought of owning Gold!

When, not if, devaluation comes to the UK, caused by Browns stupidity, the above scenario will play out. The degree of change will vary, the principle of devaluation, happening slowly now, remains.

GATA is an American action group that has campaigned for a decade against the obvious institutional suppression of the Gold Price. In a recent series of articles they cover the entire Gold suppression scenario, with an explanation that involves corruption at the highest levels of the US administration.

Upon appointment, Clinton was disturbed that bond holders would be rewarded by higher interest rates, which would in turn add costs to his democratic voter base. Robert Rubin advised that they should allow the leasing of Gold by the Central Banks to the Bullion Banks, who would then either use them as backing to short paper Gold, or use it for outright Gold sales. This would have the advantage of depressing the price of Gold, and, since the Bullion Banks would use the profits from shorting, or the receipts from the sale of Gold to invest in Government Bonds, it would also suppress interest rates, so benefiting the Clinton voter base.

The GATA link is here.

And here.

Certain analysts realised three years ago that the leasing and disposal of Central Bank Gold Reserves had been going on for over a decade, and the remaining Central Bank Stocks must be heavily depleted, thus creating a future scarcity of Gold, as they considered that Central Banks would be loath to sell off the remain Gold stocks, thus altering the Global supply paradigm. A future price increase in Gold was therefore anticipated.

Their report is here.

Eric de Carbonnel has been doing some more digging, and seems to have found interesting evidence that the US has no stocks of Gold remaining other than that melted down in the 1930s from confiscated bullion and coins, and is now engaged in bullion swaps with European Central banks, for US gold “in deep storage”, which is assumed to be gold not yet mined but contracted for with US miners on US soil.

Here is the link.

On the face of it, if true, this is political dynamite. National Gold Reserves are regarded as the property of the entire population. There was a loud outcry when Brown last sold part of the UK Gold reserves, in very dubious circumstances for very dubious motives, and against professional advice.

In the current”hunt the banker” atmosphere, if Brown has sold any more Gold reserves, and it can be seen that evil banks have benefited from this sale......... I seriously doubt there will be upcoming audits, just more spin. Nevertheless, the public would also ultimately blame Brown for further Gold mistakes.

(Just as an aside, it's a bit rich that Brown should be chasing and spinning on Bank executive pensions, when he is the one person most credited with the National Destruction of pension schemes by his pension-grab when first elected. And that figure now runs into many £ billions.) And also his total debasement of State Pensions by indexing them to blatantly fraudulent inflation indices.

Paul Volker, (Chair, Group of Thirty) who was responsible for beating inflation in the early eighties is on record as saying that his one regret concerning that era was that he failed to take the measures to cap the price of gold. Gold had jumped to $800/ounce at that time ($2,000 inflation adjusted now). Coincidently, it was Volkers economics that started the massive shift of wealth to the top 1% of the top 10% of the US population, and destroyed the wealth of the US Middles Class over the following years, requiring the increasing levels of credit (debt) that we now see, in an effort to maintain standards of consumption.

The global financial system is far more precarious right now, so we could say that the capping has been successful, but the intended, and unintended consequences of that act have contributed to the ultimate demise of the entire planet.

Tinkering by fools may work in the short term, but in the long term basic forces reassert themselves with a vengeance.

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration.

"How long can the US government protect the dollar’s value by leasing its gold to bullion dealers who sell it, thereby holding down the gold price? Given the incompetence in Washington and on Wall Street, our best hope is that the rest of the world is even less competent and in even deeper trouble. In this event, the US dollar might survive as the least valueless of the world’s fiat currencies."

Adrian Douglas is a professional markets analyst who writes regularly, and has just completed a major TV interview for Russian Television concerning the Fiat owners suppression of the price of Gold. (I mentioned earlier the Russian Gold deposited in western banks seemed to have vanished, sold or leased away in exchange for an Fiat IOU that is about to be devalued if presented in currency terms).

He has his own website, subscription for professionals, but among the free tempters, he offers are some very interesting PDFs.




The interview on Russian TV has not yet been screened, I will try to get a link, or copy of the transcript.

Here it is - not as detailed as I thought it would be.

I find it interesting and depressing that this entire episode of fraud on a global scale goes totally unreported in the western MSM, and where the subject of monetary metals is raised, it is banal reporting matched only by the ignorance/self interest of the interviewees, yet Russian TV is prepared to film in-depth analysis. A real pity they chose not to show more!

Signs of the times!

The prices of the monetary metals, despite assertions to the contrary by the Fiat owners, are a central part of the global monetary/financial/economic system. Their manipulation by the Fiat owners, in order to also affect other system monitoring alarm bells, has played a significant role in the destabilisation of the entire global financial system.

As the Fiat system entered a more dangerous final stage, the suppression of gold and the resultant investment in bonds proved inadequate to hide the alarm bells describing the fiat collapse. Thus the growth of Derivatives, encouraged by Fed support, and its global seeding of financial destruction! 

Is California really Blue? Refreshment Break.

Halcyon Days. 

Part 5 of the series can be read here.

It says 'written by James Higham' below. Actually, it was written by Sonus but I can't reformat the author in my template.


  1. What a post. Sounds like the gold market will go as well then.

    It's really rather difficult to contemplate how f**ked we may actually be.

  2. your template displayed incorrectly in my browser(chrome)