By: Jim Willie CB, GoldenJackass.com
Published: Sunday, 7 August 2016
The big US banks are dead, as in giant hollow reeds. Such has been the Jackass refrain for eight straight years. They are insolvent monsters and destroyers of wealth and capital. They are massive criminal enterprises. Events prove the case well. The Too Big to Fail policy has instead assured the wreckage and destruction of the USEconomy. Save the big banks, but ruin the capital base. The USGovt under the management of the banker cartel since the 9/11 event, which they orchestrated in a bold move, has systematically brought down the macro business sector, permitted the USDollar platforms to decay completely, and rigged the financial markets in every conceivable arena. The central bankers are running scared. The Jackass wishes they would all depart in exile, locate on a lovely Polynesian island, and eat each other, with the winners wearing their bones and teeth.
USTREASURY BOND BLACK HOLE SEWER
The growing fear about the global banking system has driven the 10-year USTreasury Bond yields to all-time record lows as a safe haven. Investors might perceive the powerful Western Economic recession, provided they are not of low intellect. The USTBond Black Hole is drawing capital from the US land mass and the global centers, just in time for the new currency launch with devaluation. The wealth loss will be magnficent for all the dopey clumsy mindless investors who believed the bond market offered safe haven. No security can be offered by a bond market with almost no legitimate buyers, an annual $1 trillion deficit (huge supply), and deep dependence upon the Interest Rate Swap derivative contract which produces artificial bond demand at zero cost. The free ride comes as a result of the Zero Interest Rate Policy, which will never change. The entire bond market depends upon it. The truly remarkable fact is that millions of investors believe the USTBond market is a safe haven. Let Darwin do his work, and remove them from the scene, along with their wealth, which is mostly phony anyway.
Meanwhile, they might enjoy a little more gains as the TNX sets sights on 1.0% flat on the yield. The risk is acute from a list of dangers. a) The derivative machinery might break down. b) The actual price inflation might be published, as well over 6% or 7%. c) The pension funds across the United States might be forced into new Special Treasury Bonds, and thus tarnish the pristine USTBonds. d) The New Scheiss Dollar might be launched, with a devaluation, casting a bad light on the protected USTBond toilet paper. e) Narcotics might be revealed as holding up the entire US banking system nucleus, namely Wall Street banks. f) As new gold-backed currencies arrive on the financial tables, the USDollar might be recognized as a Third World currency with nearly $20 trillion in debt to default.
The TNX reached lows of 1.35% in recent bond trading. The rebound will face resistance with the pair of declining moving averages. The captive range for around a full year was 1.75% to 2.45%, showing a 7.0% range. Subtract the potential to arrive at an intermediary target of 1.05%, which due to the psychological factor can be called a 1.0% target. Loud gongs and alarms will go off when the target is reached, not if but when. To claim an economic expansion is in place is one of the greatest economic lies ever told. The nation is gripped in its eighth consecutive year of recession.
Here is the significant factoid, drawn from historical records. New history is being made. USTreasury yields during the Great Depression were notably higher than today, which should warrant a serious dialogue on the reckless monetary policy stuck in place by the US Federal Reserve. They are conducting ruinous experiments with Quantitative Easing which have driven out legitimate bond investors. They claim reinvestment of principal gains on a $4.5 trillion Fed balance sheet. If truth be known, the USFed is sitting on the largest toxic waste paper basket in history. Its only close rival is the Euro Central Bank, which has over $3.0 trillion in its toxic paper vat. They each act as buyer of last resort, of garbage. They will each be declared bankrupt entities, a process well along in stages.
BIG US BANKS ON THE BRINK
The Wall Street bank stock selloff was powerful from July 2015 to February 2016. The rebound has been pushed surely by the USFed easy money channels. The central bank has no authority to buy stocks, but it does so via its bank cohort accomplices. The declines have put the big US banks in the danger zone. Their selloff will resume soon, as the moving averages for the Bank Stock Index BKX are in a downward slide, and the downtrend line is strong in resistance. Their monetary policy has undermined the safety and soundness of behemoth banks that constitute the core of the US financial system. Attention could be given to the broken banks and the decidedly errant heretical policy. A risk stands for the big US banks to be suddenly booted from the revered Dow Jones Industrial Index, the marquee stock index. They are insolvent hollow reeds, steeped in criminal activity. Their profit is from bond carry trade and accounting gimmickry.
The chart shows an important turning point in the making. The intermediate downtrend provides some strong resistance. The moving averages were penetrated quickly, probably with enormous easy money from the USFed pushed into bank stocks. The move up in the last week for the BKX index went against the Jackass forecast in the July Hat Trick Letter report. The banks are their boyz, a protected lot. The 20-week and 50-week MA’s might still serve as some resistance, to be seen immediately. The inescapable truth is that the big US banks are deeply insolvent and dependent upon casino activity and narcotics money. They have been perverted beyond all recognition in the last two decades. The Jackass maintains that a major systemic Lehman event is in progress, with the collapse of several national banking systems. The risk is ripe for bank failure in contagion. Italy and Germany are in focus.
The on again off again USFed rate hike talk in 2013, 2014, and 2015 has worked against the big US banks. The hint or threat of a rate hike sends their stock values down. At the same time, the next in the endless series of fraud investigations (never criminal for the exceptional players) also works to send their stock values down. They had to absorb $280 billion in just fines and penalties from bond fraud in the last few years. Then tack on the credit portfolio losses, most recently suffered in the energy sector. With QE to Infinity stuck in place, and lending to business put on hold due to endless chronic economic recession, the big US banks look vulnerable to a systemic breakdown. Nothing describes better the systemic Lehman event heralded by the Jackass than the BKX Bank Index and $750 trillion in derivatives on the verge of blowing up.
MONEY VELOCITY CONTINUES DOWN
Nothing displays the failure of modern central bank monetary policy better than the falling Money Velocity chart. They speak of stimulus, when the only benefit is to big banks in redeeming worthless bonds. They puff up the bond market, even the stock market. They neglect the muni bond market. They send wrecking balls into the pension fund system and the insurance company sector, which cannot possibly cope with the nil interest rate yield. No stimulus is given to the USEconomy by sustaining dead insolvent criminal enterprises call the big US banks. The QE monetary policy is destroying capital, seen in the mass of corporate job cuts. The USEconomic recession rivals the Great Depression, in all but recognition.
The proof is in the pudding, the money velocity defined as the number of annual round trips for existing money within the system. If truth be told, and it never is by the big banks or their agents running the USGovt, the USEconomy has been mired in recession since 2007. The gray shaded area should extend all through 2007 and in every year since. However, the Fascist Business Model rules dictate that any desciption of economic performance must place an adjective before the word RECOVERY. The favorite is the sluggish recovery. Mine is the fierce economic recession that qualifies easily as a depression.
DESPERATE MONETARY POLICY MEASURES
Many are the desperate monetary policy measures. It has been over three years since Bernanke admitted that the USFed had exhausted its standard tools. It has had to resort to non-standard tools since that time. Each policy item is fraught with risk, danger, and a deeply destructive element certain to undermine the wrecked monetary system to yet another level of degradation. The high risk desperate policies are racking up, adding to the risk, worsening the central bank integrity. If some professor had been asked in the 1970 decade about current modern day policies, the response would have been that none could possibly be installed, since all are insane, destructive, and counter-productive. Yet they are all in place, and more might be soon proposed. They are necessary to sustain the broken system. Consider the list of truly mind-boggling insanity in monetary policy.
1) Zero Percent Interest Rate: It causes distortions in asset allocation. It wrecks the pension system and insurance sector. It offers no reward to savers. It acts like a wet blanket on the entire economy. It makes a mockery of the entire credit system. However, it is required to fuel the Interest Rate Swap derivatives which make artificial bond demand, from the feeder tubes.
2) Quantitative Easing & Bond Purchase: It redeems worthless bonds owned by the Wall Street banks, providing them with urgently needed liquidity and capital. It prevents big US bank failures. It has been exported to the BLICS nations as secondary buyers of USTreasury Bonds. It forces hedging, thus raises the entire cost structure, resulting in lost profit margins. The result is killed capital, shut down in businesses, and job cuts. The experiment has failed, since no stimulus is evident within the chronic recession and decline in Money Velocity.
3) Negative Interest on Savings: It will encourage departure of money held in banks, and soon cause widespread bank runs. It will push investors into the Gold market. It is possibly required in order to maintain a constant spread on the bonds, from long-term to short-term. It is a banker elite tax on the entire system, like vultures.
4) Bail-in on Private Accounts: It is a powerful threat on confiscation. Banks require 50 to 100 times more funds than private accounts, in order to be rescued from derivative losses. It is a nationalized poverty step imposition. More risk of bank runs from threat of loss in accounts. More banker desperation and tax.
5) Phony Interest Rate Hike: The effective Fed Funds Rate made the USFed out to be a liar. It was a gimmick to enable Reverse REPO bond purchases. It resulted in the big US banks leveraged higher. Think taller narrower Tower of Babel, more unstable.
6) Helicopter Money Dispensation: It is lunacy. The effect would be fleeting. The prices would rise immediately, then return to the previous levels. Nothing spells central bank stupidity and recklessness more than helicopter money drops on households. Its administration might be a nightmare, since those receiving the funds probably would see it from tax rebates. The lower class might not see anything hit their lawns. The fuse again might light the Gold market. Any helicopter drops would mean the end of the central bank franchise system. Bring it on!
BIG NEW DEVELOPMENT ON GLOBAL FRONT
THE CHINESE FINANCE OFFICIALS AND THE BASEL-BASED BANK FOR INTERNATIONAL SETTLEMENTS ARE NEGOTIATING A GLOBAL REFORM OF ALL BILATERAL CONTRACTS. THEY STRIVE TO ALTER USDOLLAR-BASED CONTRACTS, AND CHANGE THE CONTRACT TERMS TO GOLD SETTLEMENT. THEY ARE WORKING ON A GLOBAL CONTRACT AT THE $5000 GOLD PRICE IN CONTRACT CONVERSION. CHINA REPRESENTS EASTERN INTERESTS, WHILE BASEL REPRESENTS WESTERN INTERESTS. It is not yet clear what will happen to commodity price mechanisms.
If and when the global contract reform is completed, all bilateral contracts will be shifted into Gold settlement, no longer USD settlement. The result will be the USGovt is then made free to launch a domestic-only new USDollar, called disrespectfully the New Scheiss Dollar by the Jacksass for the last two years. It will resemble a Third World currency, and be subjected to a sequence of devaluations. A $500 billion trade deficit will require several years to overcome. If reduced by 50% in five or six years, it will be a miracle. The $1 trillion federal deficit has a different solution in mind. The USGovt plans to commandeer pension funds, forcing investment in the Special USTreasury Bond. It will not be a confiscation, but rather forced conversion with all the disadvantages of currency devaluation that come.
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