Jim Willie

BLACK HOLES

A truly astounding event has taken place in the last several years. The public, the captains of industry, and the investment community have been exposed (if not victimized) by a great financial black hole. Of course, the bond industry has been at its center, selling securitized debt as bonds, laced with fraud, improperly linked to property titles, blessed by false debt ratings. Focus instead on the Collateralized Debt Obligation, a leveraged instrument with a bond core. The CDO has been a remarkably destructive device acting like a black hole in more perfect form than anything seen in modern history. It took future financial revenue streams, locked them into a bond security, leveraged it up five-fold, slapped on a few credit derivatives like inadequate bandaids and bandages, and sold them as CDO bonds. The credit derivatives served only to fool the public, and satisfy the debt rating agencies, enough to approve with a 'AAA' rating. The streams of revenue came from mortgages, as well as other diverse businesses, like from car loans, aircraft leases, and even from movie box offices. So the CDO bond sucked in future revenue, enabled vast bond trades, doled out hefty fees to Wall Street, and contributed to the financial sector destruction. The wealth and value of corporate entities that once were in possession of these future revenues streams have been lost. Their lack of liquidation means the drainage continues from future revenue, and future wealth continues to be destroyed. The active CDO trading bought a lunch, a paycheck, and a bonus for a corrupt Wall Street employee. Until liquidated, the CDO bonds continue to act, sucking value from the future. THINK BLACK HOLE! The fight against such a powerful force will send gold upward in price, not downward. The deflationist knuckleheads have it backwards, and have failed to notice that gold has risen in price since November.

A new black hole has been exposed. It is the USGovt devotion to Wall Street and the banking elite. In the process, gigantic zombie banks are being constructed and provided with intravenous lines. Their characteristics are considerably weaker than those constructed in Japan, aided by strong keiretsus (conglomerates). The funds made available by the USCongress have gone into the Wall Street black hole. They claim their deal flow has improved. Show me! Meanwhile the fifty states have announced a $350 billion deficit. The federal system has shown itself to be a subservient tool to the financial elite, ever since Goldman Sachs took the role of managing the USDept of Treasury. Robert Rubin was the founding father of financial failure. Now his protégé Tim Geithner is Treasury Secretary, and the states find themselves in ruin. At least twenty of them have begun to serve notice to the federal agencies in the form of the Tenth Amendment.

THE CHAOS FACTOR

The factor not yet integrated into gold price forecasts is from chaos. How will the gold price respond to further deterioration of the USEconomy, enough to qualify as a slow gallop from unemployment to chaos? People have begun to object to USGovt support of the owners of failed mortgages, a step beyond their derision of fraud kings on Wall Street. Soon, people might not pay mortgages or car payments or credit card bills. Their knowledge of video games is surely greater than the work of Henry David Thoreau, a hero of mine. His Walden Pond in Concord outside Boston was once a frequent spot by me for hikes and swims in a majestic setting after a bicycle ride to the idyllic location. Households exercising civil disobedience might strive to be rescued themselves. How will the gold price respond to further deterioration of the system from public defiance? Foreign creditors have served notice to the USGovt, to control its debt and to defend its USDollar currency. The nation can do neither. The US Secretary of State as a post has been demoted into an emissary for the Dept of Treasury. How will the gold price respond to greater isolation? The answers are easy. The gold & silver prices will rise and rise and rise, first from lack of proper policy toward remedy, and then from foreign imposition of a remedy, in the form of new global reserve currencies, three of them. Don't lose heart by the slowness of the pace toward remedy. Take advantage of it.