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Crack in Dam
Aubie Baltin CFA, CTA, CFP, PhD.

"One of the penalties of not participating in politics is that you will be governed by your inferiors.

- Plato

“We are in danger of being overwhelmed with irredeemable paper, representing neither, gold, nor silver; representing nothing but broken promises, bad faith, bankrupt corporations, cheated creditors and a ruined people.”

- Daniel Webster the U.S.Senate1833

“The Golden Age comes to mankind only after they have re-discovered gold’s value.”

“How prone all human institutions have been to decay; how subject the best-formed and most wisely organized governments have been to lose their checks and balances and totally dissolve; how difficult it has been for mankind, in all ages and countries, to preserve their most precious rights and best privileges, impelled as it were by an irresistible force of despotism."

- James Monroe, speech in the Virginia Ratifying Convention, 1788

"The care of human life and happiness, and not their destruction, is the first and only legitimate objective of good government." --Thomas Jefferson, letter to The Republican Citizens of Washington County, Maryland, 1809

There's a Crack in the Dam

The propaganda has been thick over the last few years, especially since the US banking system suffered a near fatal heart attack in September 2008, from which it has not yet recovered. It is still insolvent, still wrecked, having survived with an $800 billion government   bailout and with a UST Bond carry trade core and a money laundering lifeline. It is beyond belief that a Zero Percent Interest Policy (ZIRP) is being touted as a stimulus measure to encourage a so called economic recovery especially since empirical evidence tells us that ZIRP is neither a stimulant, nor is the US Economy in a recovery mode. The official 0% rate signals a death knell to the national financial system and the country’s economic vibrancy; the climax event slow in its pathogens is following the departure from the Gold Standard in 1971. The official 0% Fed Funds rate is a direct signal of terminal illness for the entire capitalist structures within both the United States and its Western partners who follow stupidly Socialist economic illiteracy. They followed the US lead into the housing and mortgage bubble disaster without learning their lesson and so they continue to follow the US monetary lead blindly. They claim to have no choice. But they do indeed have a choice: Stop being a lemming, discard the US Dollar, sell your US Treasury Bonds, cut back on your massive Socialist policies, reintroduce a Gold Standard and move back to Free Market Capitalism and prosper.

The reintroduction of the Gold Standard is just a matter of time. Do it voluntarily today and lead your economy back to prosperity or allow your economy to crumble, first into a socialist Depression, which is the inevitable conclusion of all Socialist economies. The East is no longer following the US lead, and a rebellion against the US Dollar and its toxic US Treasury Bond is already under way. Can you believe it?  The two formally Communist, Eastern giants, Russia and China are forging a new path towards Free Markets, and the installation of a new Gold Trade Standard that thumbs its nose at the Western banking system and the FOREX currency market. Their marketplace will be the Eurasian Trade Zone and its gold backed central bank will be the BRICS Development Fund (clever name to disguise its eventual function).

The time is almost past due for the Western Democracies to head back to their roots that once made them the envy of the world.

The Velocity of Money

Since the United States has put a zero price on money, two serious consequences become apparent. The first is that all capital became WRONGLY priced, which causes a serious measure of uncertainty throughout the entire business sector. Secondly, all financial assets are also improperly priced, from stocks to bonds to property and every other capital asset causing long term capital DESTRUCTION.

The US Federal Reserve, by keeping the official rate near zero for four years, has in effect subjected the US Economy to a death sentence. Evidence is seen in the Money Velocity. The US Fed told the nation in early 2009 that the 0% was temporary. It was not; they lied then and they are lying now. They oversee ZIRP forever and QE to infinity, making true money worthless by definition. They rob from the poor and the savers for the benefit of the crony Capitalists and the Big Banks.

A Decline of the Velocity of Money

There has been and still is a severe decline in money velocity. Even the incompetent Socialist economists should recognize the importance of money flowing like blood through the veins of the economic arteries. The banks are debilitated by their blind, shortsighted greed. The finger of blame goes initially to Sir Alan Greenspan, who was the architect of monetary inflation management and who urged the nation to tap into home equity for sustained consumption. He personally also urged the second housing bubble, which enabled him to leave office as an apparent winner. He never advocated a new business cycle, only a new, speculative cycle. Greenspan defended to the hilt the sophistication of the risk offload vehicles called derivatives; those toxic unregulated bank chits sold in the underground market where the rats run free. There is a serious possibility that the world’s financial system can come crashing down because of those Deadly Derivatives. Be aware that nothing has been solved, no solutions have even been attempted and a drop in the money velocity bears out the gradual death process of money itself. Money no longer has value because it earns no interest and therefore has NO VALUE to the public that has no access to any of the counterfeit Fiat money printing. It has no value indirectly, due to its free creation and distribution by the chief moron (false liquidity boom) in charge of the US FED. He boasted of the electronic printing press with zero cost (there is no such animal as ZERO COSTS). Its unavailability to both the people and small business has rendered capital within the US economy to also have zero value. It is in a grand retirement trend, in response to rising costs and shrinking profitability. Capital is gradually dying in the US.
An examination of historical events shows the decline in the effectiveness of money has a much longer established pattern. The trend down in money velocity has been in progress since the 1980’s. I believe as an Economist that the forfeiture and abandonment of industry from the US Economy has had a devastating effect over the decades. The legitimate income from tangible work was removed. The nation grew devoted and dependent upon asset bubbles for wealth and paper asset funds for consumption and no actual wealth creation by making things. The US has pushed itself into a monetary straitjacket, run by crooked politicians and a criminal banker elite class, and a systemic failure is approaching rapidly. A harsh police state will be the eventual outcome from refusal to liquidate the too big to fail banks. What else could justify the massive government arms and ammunition build-ups by government agencies? Who does the government need protection from?

Reminds me how after the 1st World War, when the government would not pay the returning soldiers their just due, the government troops fired on the veteran’s tent city that grew up around Washington demanding food. The government did it in 1919 and they are preparing to do it again - only this time it will be against the entire population. Why else does the government need a billion rounds of ammunition?

A Giant Wet Blanket & Rising Tide of Costs

Capital destruction is not perceived by the harlot Socialist economists. They are paid to regard the 0% banner and QE operation as wildly stimulative. It is definitely not. It is rather a wet blanket that smothers what remaining existing capital that is still at work, or drowns it by a rising tide of costs. The income side is slowed since legions of savers are denied a safe and proper return for their savings - completely destroying the CD and money market funds. The pension funds are found wanting on income yield, as they now must take huge extra risks in their attempt to find their minimum required returns to meet their obligations. The US Fed has in essence forced the nation to adopt the moral hazard, to face the risks from the likes of high risk mortgage bonds, and to suffer huge losses. Those folders full of bank CDs (certificates of deposit) earn a piddling taxable 1% in interest, which is far less than the running rate of price inflation most evident in food and gasoline. The ZIRP policy pushes the grand distortions and imbalances within the US Economy and its obscene forces. Few realize that the Banks’ income from consumer borrowing (credit cards) is at near record high rates - far above the Ω% paid to depositors. The savings interest paid slows the US Economy down by reducing the normal money that would be available for consumption. However, consumer and small business interest rates have not been reduced, since they are considered to be high risks. The entire wet blanket causes an attack on capital and further smothered from rising costs.

Bernanke has Assured Systemic Failure

By promising QE’S until job growth and economic recovery have been achieved,  Bernanke has assured systemic failure. The idiotic, never to have ever worked Keynesian Socialist monetary and fiscal policy is causing tremendous harm to the US and world economies. The widespread hedging practices against monetary inflation go towards commodities, lifting cost of most everything. They hedge to protect their wealth from the official debasement process conducted in desperation by the central banks. The hedging is done globally. The entire unfolding of events and powerful effects make for a tremendous blind spot to economists and politicians, since QE is a huge suppressant instead of the free and easy stimulant it is thought and propagandized to be. The distortion to the entire pricing of assets is crippling, since the cost of money is at the center of everything.

Strip Bernanke of his PhD Degree

In the last four years, he has proved that his doctoral dissertation is completely wrong. His facts were wrong and he has completely misunderstood and misrepresented what happened during the 30’s Depression. A flood of liquidity does not in any way remedy insolvency, as his thesis claimed. He is the principal architect of revisionist history concerning the Great Depression, used as qualification for succeeding Greenpan. Without the Gold Standard in place, the United States would never have climbed out of the powerful Depression 80 years ago. Besides, who ever heard of a Depression in the midst of a World War; which ended only after World War II was over, along with the complete falloff of government spending. In the present day, since no Gold Standard is in place, the United States will face systemic failure and debt restructure (default).

The Country’s industry has been hollowed out since the 1980’s decade, starting with Intel and the rest of the exploding electronics industry relocating to Japan and the Pacific Rim. The crowning blow was the massive shift of US industry to China, replete with Wall Street betrayals that followed their ransacking of Fort Knox. It is utterly amazing that 95% of American citizens do not care about the empty vaults in Fort Knox and have never demanded an audit of our Gold Holdings as the rest of the world is now doing.

The Price Suppression of the Precious Metals Markets

How do you explain the drop in the price of Precious Metals in the face of a massive DEMAND for Gold and Silver by Central Banks the world over (except by the FED), while at the same time supply is shrinking due to massive strikes in South Africa and nationalization in Africa as well as other parts of the world including Peru and Eastern Europe. And yet the government has sold out of all their record high minting of Gold and Silver coins almost as fast as they can mint them.

US Government Deficits will Continue to Grow, Not Decline

Warning: The government budget deficit will spiral out of control. No recovery is occurring. Both the Obamacare and the Social Security tax increases and other tax hikes both Federal and State will be inflicting incalculable damage on the US Economy. Contrary to Socialist beliefs, empirical evidence has consistently shown that the higher the tax rates, the less the total revenue the government receives. WE DO NOT HAVE AN ACCOUNTING PROBLEM; WE HAVE A GOVERNMENT SPENDING PROBLEM.

The constant competition from Asia with its lower wages, lower fringe benefits, lower regulatory burden, and lower taxes, imposes a tremendous obstacle for the US economy causing contraction instead of expansion. The recovery is a propaganda myth promulgated by the Democrats, their economists and their know nothing media (to such a degree that the old fascist kingpins, Hitler and Mussolini, would have to offer praise). The sequestered federal spending cuts will reduce economic activity, increase the deficits and not restore fiscal health. The US Government deficits will grow much larger, toward $2 trillion plus rather than the $1.5 trillion in the years to come as tax revenue shrinks instead of increasing as projected. The something for nothing morons at the helm will drive the economy into Depression. Their vacant wisdom will introduce austerity and revenue enhancing programs and thus introduce more poison pills, sealing the economy’s fate. Will they never learn?  Increased growth is the only thing that can save us. OUR ONLY WAY OUT IS TO UNLEASH OUR NEW FOUND ENERGY WEALTH.

Reagan, Clinton and Bush have shown us the way: Lowering taxes greatly expands tax revenue by way of an expanding, growing economy. So instead, they are mimicking Japan that is mired in 20 plus years of Recession (just as I have been warning for the last 15 years that they would be). And as I have been warning for the last 3 years, China must also follow the same natural laws of economics that the rest of the world must follow whether they like it or not.

Our monetary policy suppresses economic activity by raising the cost structure at a time when almost no businesses are expanding. The untold fact is that the hyper monetary inflation policy firmly in place, is pledged to remain in place for another three years and will assure an attack on capital and business, with a certain rise in business shutdowns with their corresponding job cuts. The nation has turned hopelessly stupid on all matters economic and financial, having totally lost its way. America has no concept or comprehension of capitalism or capital formation. The distressed economic results will come in the form of continually rising government deficits, which will be covered by the central bank’s printing press that bears a Weimar nameplate. As the US Dollar becomes isolated, so will the Fed in its not so hidden inflation operation to buy US government debt that nobody wants. Its bond principal value is zero, yet it sports a lofty high value in the marketplace of horrors. It is Third World toxic paper.

The Fed has become the near total buyer of the toxic US Treasury Bonds issued. Foreigners will not only simply avoid the purchase of US T-Bonds; they will continue to react to the staggering deadly debasement of the US Dollar, which undercuts the value of their savings stored in FOREX reserves. They will actively abandon the US Bonds, by finding a dumping ground for them, like the vast new BRICS Development Fund, which will morph into a Gold Standard Central Bank.  This will mark the end of the US Dollar as a global reserve currency.

Nations of the world are forming the US Dollar alternative on the trade side, not the banking and currency side just yet. Once again, like a breath of fresh air, banking will follow trade, a concept that not 2% of American economists understand or wish to understand. The US Economists like NOBEL Prize Winner Grubman brought up on Keynesian Socialism since the 1920’s are all culpable for the systemic failure.

One is left to wonder if the US systemic breakdown and failure will be blamed on Iran or North Korea. Maybe blame will Fall on the Arabs, who are close to abandoning the Petro-Dollar defacto US Dollar standard or as is more than likely on an intransigent Israel and Republican House. When they accept Yuan, Euros, Pounds, Yen, and Francs for crude oil, the game is over. And we have already forced Iran and their clients to start trading oil for Gold.


Some climactic events are being delineated as a blueprint by Cyprus legislation, adding to a gradual methodical isolation of the US Dollar for the raping of bank depositors and the rejection of the US Dollar as the only global reserve currency.

Most Americans regard the US Dollar as their currency, with zero knowledge or awareness of its function as a global reserve and the staple item within myriad banking systems across the world. For their error, they will face catastrophic losses to their life savings, unless they have invested in Gold and Silver bars and coins and stored then outside the banking system.

Liquidate the Big Banks or Face Systemic Failure

Some important messages should be heard. At the macro level, the entire financial system has become hopelessly sclerotic. The chronic Western financial crisis is more like a monetary war for elites to retain control of the production of money, the setting of rules, the process of confiscation, while they desperately attempt to preserve the fiat currency system with the US Dollar as its flagship. That ship should fly the Skull & Crossbones. The refusal to liquidate the big insolvent banks stands as the quintessential message of corruption and control to execute the Fascist Business Model, which will result in systemic failure. With MF-Global and Robo Foreclosure Fraud and Cyprus Bank type taxes, layered atop the QE to infinity, the fascist bankers are finally being unmasked.

The big banks no longer serve as capital formation engines. They no longer serve as business investment partners. They are pure predators. At a micro level, they are giant hollow shells ripe with bond fraud, phony accounting, and insider trading, replete with financial market parasitic functions. They are no longer credit engines for commerce, but rather carry trade platforms and money laundering centers.

If the big US banks are not liquidated, absolutely no solution will come, and systemic failure will eventually occur. They are not too big to fail institutions. They are not systemically important financial institutions. They are the criminal syndicate foundation headquarters. The fear is that if they are liquidated, the nation will enter a US government debt default. It is that simple. Our compromised leadership will impose a Fascist police state rather than liquidate the big banks where the real power center lies.

Since the big US banks will never be liquidated, instead the nation will be liquidated. Its wealth will be subjected to a vanishing act. The nation's households suffered the loss of home equity, exploited by the banking sector who have come out of it making 100’s of billions. Their bond fraud and contract fraud and a plethora of other criminal activity have been converted into mere business costs under the tarp of the Fascist Business Model. The nation's pensioners have suffered the loss of income, are no longer given a justified yield on their life savings, which in point of fact have already been confiscated by the Congress. And after stealing their savings they have termed the seniors’ bought and paid for Social Security ENTITLEMENTS as a means for terminating  their contracted for benefits.

The futures contract players have been given fair warning by the MF-Global private account thefts, and the Peregrine Financial Group matching private account thefts. The recent bankruptcy law revisions and financial regulatory bill revisions have given clear warning in their many insidious provisions. Next comes the vanishing of private bank accounts, private pension accounts, private stock accounts, private mutual fund accounts and especially 401K’s (where the largest pool of money lies) as well as private bank safety deposit boxes. It will all be done in the name of the government taking care of our retirement just like they are now taking care of our medical coverage.

End Game for Motive to Impoverish

A sinister vile malicious motive is coming into view, hidden for years within legislation, pushed to the fore by newer regulatory legislation. What is coming is a magnificent vanishing act of wealth itself, since the Western economic system has suffered diverse Ponzi symptoms for 20 to 30 years. Its financial foundation has been built on money fashioned from debt, since debt is disguised money. Worse, a pernicious attack is set to be waged on private wealth. The first volley stripped citizens of their home equity, that prized homestead nest egg of wealth. The second volley will be more disguised, the removal of wealth held in the stock market. It is held up in value by hyper monetary inflation. Its purchase power in value diminishes by the day during the currency debasement process. And even though the Stock Markets are at all-time highs, the majority of the public is not in the market and therefore have not benefited from its rise.

The 2005 Bankruptcy Law

The law has come front and center into view. Its features, reinforced by the Financial Regulatory Bill (aka Dodd-Frank,) have never been more important than now. The individual side to the reformed bankruptcy provisions received the most attention, including the removal of the Chapter 7’s wipeout of debts to be now offset by other assets. However, it made standard, Chapter 13, in restructure of debt with respect to income, establishing a lifetime of tax obligations. But the corporate side is far more pernicious - it subordinated all bank assets to the derivatives owned by the financial firms (but they certainly won’t share any profits) The subordinated structure still exists, like senior and junior bond holders, savings accounts, certificates of deposit, mutual funds under management, money market funds, but these all lie subordinated UNDER the vast pool of derivatives, the unregulated contracts. The US and United Kingdom, even Canada, have enacted laws that serve as guidelines in the preservation of the largest banks, by opening up the possibility of the seizing of private accounts. But there are no provisions for sharing their profits.  Better described, the laws offer guidelines on the death of the big banks, since they will be washed clean of assets, including those belonging to private citizens. The insidious Bail-In Laws will catch attention. Their invocation in Cyprus was the alarm that sounded. Not many Americans heard it clearly, since they are still distracted, still incredulous that it could never ever happen here?!?!

The FDIC has been transformed, not to insure depositor wealth, but to remove it, to confiscate it, to tax it, and to make it vanish. Protection comes from removal of personal assets from the financial and banking system altogether. It would be best to use the banking system only as a utility function, for cash flow purposes, maintenance of bill payment, the account balances kept to a minimum in case of confiscation suddenly during an unscheduled bank holiday.

The ideal scenario is to invest your free cash assets into Gold and Silver bars and coins, kept outside banks, preferably outside the US.

Gold Market Divergence

The divergence between the paper Gold price denominated by futures contracts, and the physical Gold price dominated by purchase and delivery of the metal bars, has grown wide and will grow wider. While many a hue and cry is heard because of the decline in the Gold price, it is not the real Gold price. It is the corrupted paper Gold price that the deceived masses are focus on. The professionals in the Gold market who actually act on contracts for large volume deliveries are noticing the strains on supply, which is fast disappearing. The true Gold price is much higher than advertised by the corrupted paper gold networks manipulated by the financial syndicate in charge. The drainage of Bullion held by COMEX and LBMA is being hastened by the discounts offered. The Boys are watching the draining of their own blood on stage and in full view, while the majority of investors within the Gold community are lamenting the falling corrupted price. What irony! The Boys in New York and London are committing bank suicide on the global stage, yet the investor crowd cannot see it. When the big US and London bank vaults are empty of Gold and Silver bullion, the game will suddenly change. The power will shift to the East. The US Dollar will be devalued, buried and replaced as the only reserve currency. The Gold Standard will rise in the East like the sun brings forth a new dawn, that will turn the West upside down.

The Shanghai Metals Exchange (Gold & Silver) sports a significant useful practical Gold price spread, higher than the posted London and New York price. It has opened the door for arbitrage for the last two months or more. My firm suspicion is that the BRICS Development Fund will convert US Treasury Bonds by means of the Shanghai window, thus draining the London centers of their Gold and Silver bullion. As of 8:00 am Thursday in London, the Shanghai Gold price had a $1595 handle, compared to a $1545 handle in London. That constitutes a $50/oz spread, very feasible for arbitrage trades and the associated drainage of London metal. The professionals are having a field day, exploiting the artificially offered Gold price achieved from yet more naked gold futures contract shorting. The depletion of the SPDR Gold Trust (GLD shares) continues at a frenetic pace. (Don’t say I haven’t been warning you to shift your Gold and Silver to either bullion or to PHY.U.CA (TSX)   and PSLV (NYSE).) It also gets your Gold out of the US and into Canada. The big US banks are shorting the GLD shares, removing its gold bar inventory overnight and selling it into the market and/or they are covering their short sales obligations in like manner. The key to the divergence is that as the phony paper Gold price declines, it signals the coming demise of the COMEX itself. The event cannot happen without the price divergence, the fast falling paper Gold price versus the stable and rapidly rising physical Gold DEMAND. When the COMEX goes dark, from depleted inventory, from vacated client players accounts, the Gold price will actually not be known for some time. Then later, it will be on display from various key centers across the globe, including Shanghai where naked futures contract activity is not sponsored or permitted by the state or the exchange. It will be shortly thereafter that Gold will explode and reach my projected price of $6,250/oz.

The US is due for a Cyprus-like event in the not too distant future. The remaining freedom afforded can still be exercised by taking your money out of the banks and buying Gold for cash. We just got an opportunity of a lifetime as Gold crashed by $74 on Friday, $25 below the 12 year Bullish TREND LINE. What looks like a long term SELL SIGNAL is in reality a Major Buy Signal instead. Should the Gold Market rally in the next few days, it will look like the beginning of a lasting bottom being formed especially once Gold reverses and starts heading up. It looks like the best buying opportunity since 2008. Time is running out on the manipulators.

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