American Airlines quietly goes bankrupt.

The latest victim to succumb to the global debt Ponzi is AMR corporation which is the parent company of American Airlines.  AMR filed for bankruptcy today.  Of course it eventually had to; how could it not?  When its competitors are allowed to wipe away their debts in their own bankruptcies over the past few years and then continue flying, what chance does honesty have?  More to the point, what chance did AMR or any other airline have against competition which was taking on massive debt in the early days in order to grow quickly?  And so therein lies the scam of it all.

Damned if you do and damned if you don't.  Any airline that failed to take on massive debt would be hard pressed to survive back in the salad days of air transportation.  The best aircraft and the best pricing went to those who were considered the strongest customers.  And now, any airline with all that massive debt is destined to go bankrupt as deflation makes it impossible to turn a profit.  Airlines can't raise rates because people can't afford them.  People have come to think of the airlines as a form of public, government sponsored transportation.  Airlines must use the best equipment, maintain it perfectly and run with incredible efficiency day in and day out or people who are paying $200 to fly from LAX to MIA have a kinipshin and demand government "do something".  I wouldn't work in the airline industry on a bet.  It's just too government-infested.  Investors in these types of government backed ventures are eventually taken to the cleaners.

By the way, don't let the shape of that AMR chart escape your attention.  That is the face of an exponential collapse.  The company has actually been insolvent for a long time but the money men were able to hide the problems for much longer than many thought was possible.  I'm guessing that the US government had ongoing clandestine money injections going into AMR over the years and now that the government debt is under scrutiny those quiet injections had to stop lest they be discovered.  I have no proof of this but that is what I would do if I were the US government and I had free money at my disposal just for the effort of printing it from thin air.

Oh and before I close this post, let me take the opportunity to write once again that I think General Electric is a bloated, debt laden Ponzi Pig which will certainly default on its massive half trillion dollar debt.  I wonder how much GE was into AMR in the AMR BK?  GE is definitely in the vendor finance business.  It "sells" things to its customers and then finances the deals itself.  That is a total scam.  It books the profit as if the debt was paid and then carries the debt on its books pretty much forever.   GE currently trades at $14.70.  I predict that before this credit bust is over it will trade sub $3 and probably will have to file for bankruptcy.  Anyone who thinks GE is a safe long term investment for their retirement money has no clue what is going on.  Unfortunately, lots of pensions, retirement funds and insurance companies are heavily invested in GE so if you have one of these programs then you are likely invested in it by proxy.  Good luck with that.

Eurozone winding down toward unavoidable collapse

GATA reported today on an article from The Telegraph and, while not unexpected, the news isn't good.  In short, the global debt Ponzi is collapsing with the weak links going first but eventually it will be understood that there are no strong links – just weak and weaker.  We the people of the world all bought into the scam of fiat currency and fractional reserve lending and nobody did enough to get honest truth tellers like Ron Paul elected and so now we have a problem that must play out no matter who gets elected in 2012.

Once the fuel source of the Ponzi runs out (i.e. new credit and debt), the debt Ponzi must collapse.  If the following sentence from the forwarded article is true, the fuel source seems to be running very low: “Asian central banks and sovereign wealth funds are spurning all EMU bonds because they have lost confidence in a monetary system with no lender of last resort, coherent form of government, or respect for the rule of law.”  Bottom line: the Eurozone is rolling over.  Confidence has been lost in the leadership. “Unless Germany agrees to the full mobilization of the European Central Bank very fast, the eurozone will spiral out of control. As The Economist put it, "The risk that the currency disintegrates within weeks is alarmingly high.". Yeah, well it is now understood by everyone who is thinking clearly that Germany cannot save the Eurozone even if it wanted to.  The best it can do is to stall the inevitable collapse.  Any new money thrown at the problem will be lost.  It is a black hole of debt.  The on balance sheet numbers are bad enough but (because corruption is so rampant) the overall off balance sheet debt is far larger.  It is leverage upon leverage which simply cannot be repaid.  This is true of Europe, Japan, China, Russia, the USA and everyone else who is infected by a fraudulent money supply consisting of fiat currency and fractional reserve lending.  In other words, everyone.

Because the US dollar is the de facto reserve currency of the world, the final backstop of the global debt Ponzi is Ben Bernanke and the US Federal Reserve Bank.  The fact that anyone is talking about using U.S. backed federal dollars to save Europe demonstrates that it is 10 minutes to midnight for this con game.  The temptation will be to try to save the Ponzi from a deflationary collapse by printing more money.  So what if this is unconstitutional?  So what if it will not work anyway?  The con men don't care about any of that.   They don't care about moral hazard.  They don't care about the riots that will occur on Mainstreet if High Street in Euroland gets a bailout at US Taxpayer and US consumer expense.  And make no mistake: the US riots will come and they will make OWS look like a Sunday picnic.

Unfortunately the problem is even bigger than the Federal Reserve can handle.  Much bigger.  But that won’t stop people from believing in false hope, especially when they see it as being in their best interest to do so. Those who will be most tempted to do this will be those with the most to lose: Berkeley's Brad DeLong said it is time for Bernanke to act on this as the world lurches straight into 1931 and a Great Depression II. "The Federal Reserve needs to buy up every single European bond owned by every single American financial institution for cash," he said.  In short, the US bankers already own a lot of Euro debt which will get hammered when the Euro crashes.  Their solution: Just have the Federal Reserve buy them out of their bad investments.  Again.  Yep.  The bankers are at it again.  They collected interest payments for years on that Euro debt but now that the debt is going bad, they don’t want to face the risks anymore.  They want Uncle Warbucks to make them whole.  They already privatized their gains and now they want to socialize their losses.  Again.  The only way to do that is to debase the dollar even more.  That means higher gas and food prices, higher taxes, higher everything.  This will result in reduced imports by the US because Americans will have less buying power.  Reduced imports by the US means less exports by others and thus less cash for Europeans and Chinese and Japanese to spend on paying off debt.  The markets will view this as increased risk and thus demand even higher interest rates for their sovereign debt.  At some point the debt will just get too expensive to roll over.  These are the mechanics of the debt spiral.

One thing people really need to wake up to at this point is that posturing is no longer going to help.  During the early days of the collapse, government used to tell us that if they walked around with a bazooka in their pocket that they would never have to use it.  The threat of government intervention, they said, would force the market to stay engaged.  They thought the market could be so easily manipulated.  Since then this theory has been debunked in actual practice several times.  Still, it didn't stop The Telegraph from repeating the fairy tale yet again: “The Fed could buy E2 trillion of EMU debt or more, intervening with crushing power. The credible threat of such action by the world's paramount monetary force might alone bring Italian and Spanish yields back down below 5 percent before one bent nickel is even spent.”. Based on what I have seen, any improvement in confidence would be short lived – on the order of 7 days or less – and then the panic would set in again.  If real stimulus didn’t reflate things permanently, the simple threat of further stimulus certainly will not.  The market is, in essence, more afraid of getting left holding an empty bag by the other players in the debt Ponzi than it is of the Federal Reserve or any other central monetary authority for that matter.  If Bernanke goes too far with his helicopter drops then pretty soon the US will be the one struggling with increasing interest rates.  Once the US can no longer afford to roll its debt over, I guarantee you that the whole corrupt system will collapse.  There is no more powerful monetary authority on the planet than the Fed and once confidence in it is lost, confidence will be lost in the global monetary system.

At the end of the day people have to understand that, due to the interconnectedness of the global economy, there is no fix that does not result in a major crash.  Every positive sounding false hope action will result in a negative reaction of unintended consequences.  That is not to say that we should not elect Ron Paul and drive honesty back into monetary policy; we must do this so that we don’t continue to have problems years into the future and long after we should have gotten past the upcoming series of defaults.  We need to learn from our mistakes and stop doing the same things over and over expecting different outcomes than before.

Look for tops in Wall St darling stocks.

An article on Yahoo Finance news which cited the Wall Street Transcript suggests that we all go out and buy the big name Wall St. darlings which have not had any correction yet while things like the solar sector are selling below book.  IMO such blatantly bad advice and analysis is a sign that a top is near for these stocks.  Nothing else but shilling the bid could account for big print headlines suggesting that we all pile even further into an already overcrowded flight to safety trade when in fact no stocks are safe.  This is exactly the type of game I would play if I were in the business of herding sheeple around for my own profit.  And all of this soul-less pumping is happening even though Wall Street Transcript's Wiki says, "In publication for more than 37 years, The Wall Street Transcript does not endorse the views of those interviewed, nor does it make stock recommendations.".  I laugh at how they claim to be unbiased even though they are the ones who pick who gets interviewed. 

To me, this is a tip of the hand by those who make a living gaming the system.  This sort of signaling used to work when fools and patsies far outnumbered every other player in the investment world.  Back in those days you could get away with this type of thing and nobody would bat an eye.  But people have wised up over the past several years of first hand observation of just how corrupt the big money system is where banks and industry collude with military and government in order to fleece the people of the output of their daily labor.

Yeah, it's currently blasphemy to say that IBM or MCD or other darlings can crash.  Everyone thinks these companies are unstoppable.  But the truth of the matter is that credit deflation is the most powerful economic force on the planet and that the fortunes of all companies are controlled by it. Once credit deflation locks its teeth into the global economy, where is IBM going to get a government contract?  You think IBM's business in Spain and Italy and Portugal, etc. hasn't suffered?  If the people are being forced into austerity and it is resulting in riots then I cannot believe that big contracts are being awarded to multinationals.  If the crowds got wind of it then the very lives of the leaders could be threatened during times such as this.  People are pissed and they have no patience for explanations and excuses from politicians these days.

Oh, and when will MCD account for all of its real estate losses globally that must have occurred over the last 5 years?  All we hear about is their profit and their measly little 3% dividend but nobody wants to talk about the fact that it was all paid for with debt.  MCD debt has been steadily increasing and now it has $12.54bn in debt as opposed to only $2.4bn in cash.  That's better than 5:1 leverage.  Deflation is very hard on those who are mired in unpayable levels of debt.  MCD's stock price is dependent on its growth which is dependent on its store expansion which is dependent on its ability to take on new debt for store expansion.  In a credit crash new debt becomes more expensive or even impossible to take on because nobody has money to loan.  As we have seen with sovereign debt in the Eurozone, the interest rates can move very rapidly once people figure out that there is no escape for the entity in question.  MCD and many other corporations are completely dependent on the availability of cheap credit for their growth.

As the Eurozone crashes, global credit is contracting rapidly.  This cannot be good for the likes of MCD and so the shameless stock pumping machine is turned on in order to lure more suckers into the debt Ponzi.  This is required so that the con men can take that money and slip out the back door.  If the con men just sold now with no new stream of steady buyers, the stock price would plummet and people would get the sense that there is something fishy going on.

Time will tell but I sense that the con men know that the credit deflation in Euroland will be an unstoppable force which will not be beneficial for shares of even the best name companies out there and so they are looking to make a fast exit stage left.  Alternatively, these guys could all be on the up and up and I am the only person in the universe who thinks global markets could be ripe for a collapse.  Yeah, sure.  Anything I see they have known about long before.  These con men are some of the most clever and insightful people on the planet.  If only we had them working on cures for cancer instead of trying to find yet another way to screw their fellow man out of his hard earned money...  If we got rid of fiat currency and fractional reserve banking that is exactly what would happen.

German 10 Year Bond Auction "A Disaster"

Reuters reports today that a recent German bond auction would have failed had not the German central bank purchased 39% of the debt. 

""It is a complete and utter disaster," said Marc Ostwald, strategist at Monument Securities in London.  "This does not bode well, it is the worst of uncovered auctions that we've had this year and little wonder that the Bund sold off on the back of it.""

So what does all of this really mean?  Well, in layman's terms, despite the media portraying it as the strong economy of Europe, Germany is a debt laden piece of $hit just like all other global governments, including the USA.  They cannot live without debt.  Their bond auctions are failing (i.e. no bonafide buyers are stepping up) and so their central bank has to print up money from thin air in order to buy the debt.  They have no choice in this.  They either do this or let the debt Ponzi collapse and just admit what a bunch of scumbag con men they have been all along.

They (and the USA) strut around telling the smaller players to behave like adults, to implement austerity, blah blah blah but Germany and France are just as bankrupt as the rest of the PIIGS.  This is not to bash Euroland.  Japan is a silent crisis.  I cannot stress how badly I think Japan will turn out.  It is entering into the teeth of the perfect economic and demographic storm.  Japan is screwed.  China is going to have a massive real estate bust, far worse than what happened in the USA.  Civil unrest in China will be extreme IMO, and the USA is going to have a real debt crisis within a couple years if not far sooner.  The USA will see significant civil unrest that will make Occupy Wall Street protests and its clones pale in comparison.

This is not new knowledge for people who understand that the world is controlled by the fraudulent concepts of fiat currency and fractional reserve banking which have pushed us into a global debt Ponzi.  Lots of "experts" will claim they never saw the collapse of France and Germany coming.  They will concede that the PIIGS are weak but they always protrayed France and Germany as the unsinkable overlords of that region.  But during the height of German and French politicians looking down their noses at the PIIGS, I wrote that Germany and France are no better off than anyone else in the Eurozone and explained why that had to be the case.

In short, we're all PIIGS now.  The entire global banking system is bankrupt.  You know this is the case because people are now talking about "saving" the Eurozone via the use of gold to either pay for or to collateralize debt.  Yes, that's right GOLD.  The money of last resort when confidence has been lost in fraudulent fiat currency.  The only real money that ever existed in the world.  As Mr. J.P. Morgan said, "Gold is money and everything else is credit".  As recently as two years ago if you mentioned "gold" in polite conversation you were labeled an extremist or a survivalist or some other such intimidation wording commonly used by the ignorant masses against people who would tell them the truth.  But now, apparently, that foolishness has been dropped.  Desperation has led the very people who used to laugh at gold to suggest and to hope that gold will be the savior of the Euroscam. 

Well let me say for the record that anyone who pays their fiat currency debts using gold at only $1500/Troy oz. is a complete A$$!  I mean, world class fool.  Pay paper denominated debts with paper!  Let me also say for the record this: anyone who accepts gold as collateral for a loan without having physical possession of such gold is a FOOL.  Nixon's elimination of the dollar-gold convertibility in 1971 proved beyond a shadow of a doubt that sovereign promises to back debts with gold are lies.  If the US defaulted on its promise to pay paper debts using physical metal then who else is going to feel morally obligated to do so?  The US has already set the precedent here.  If someone follows the US example of defaulting on gold backed debt notes (for that is what dollars were pre-1971), including Eurobonds, then the US will not be able to wag its finger at the perpetrators of the default.  It will not be able to talk about lack of moral character because we already proved that we would gladly dispense with morals if we had to choose between them and gold.

Folks we are in the end game now.  The global debt Ponzi is collapsing because it has to collapse.  No Ponzi scheme ever ran forever and none can ever run forever because payouts to those who are exiting the system are only possible if more fools enter the system.  Right now, the world has grown incredibly short of fools who are willing to loan money to con men and liars.  Thus, the debt Ponzi must collapse. Failure to recognize this (and its obvious implications) can be one of the worst mistakes anyone can make in their whole lives.  The implications are far reaching and serious.  As I have told family and friends, the time to wake up is past.  It is now time to grow up and see things with adult eyes.  Childish ignorance about the state of the global debt Ponzi is not your friend at this point.  The impact of a failing debt market on all other markets, including the stock markets, cannot be overstated.  Debt is used to purchase everything.  When debt markets fail, prices on everything else will plummet due to credit deflation.

Be sure to check out my new fixed post on Investing.

I've created a new fixed post on Investing.  Access it via the top level menu for the blog using the Insight drop down menu.  There you will see fixed posts on Money, Investing, etc.  The Investing post is brand new and it is required reading for anyone still trying to figure out what is really what in today's complex economy.

Hedge Fund manager Kyle Bass is interviewed by the BBC: France and Japan are on deck for collapse.

The BBC’s Hard Talk show recently interviewed Kyle Bass, Managing Partner of hedge fund Hayman Capital.  I think the 20 minute interview  (part 1 and part 2) is well worth your time.  Note that his interview ends 5 minutes into part 2 so you can stop watching there.  But if time is short for you then here’s my brief synopsis:

• The interviewer tried to demonize him for betting against the markets and she tried to imply that he made tons of money on other people's suffering.  His response was that he needed insurance because he saw all the problems coming and he had a duty to his investors to not lose their money.  He also indicated that he made big percentage gains but on a very small amount of money invested against the markets.  His real goal was to insure his main holdings against catastrophic losses which he succeeded in doing with his hedging strategy.  My take: if you are in financial markets then you are effectively trying to screw the next guy out of his money.  That's basically what non-dividend investing is.  So if you lose then don't be a poor sport.  Don't get angry at the winner for being smarter than you.  Instead, use the feedback as a growth mechanism.
• Greenspan blew up the housing bubble as an attempt to stop the dot com bust from playing out.  Then he walked away and handed the reins to Bernanke.  Bass saw this and made leveraged bets against the housing bubble.
• Every time a big bank or company got into financial trouble, governments bailed them out.  Bass noted that governments were doing this and then looked at government debt and how much damage it would do to them to take on debt from banks and industry.  This is how he figured out where to place his hedges which resulted in profitable bets against Greek sovereign debt.
• He talks about “asymmetry” quite a bit and so I want to decode that.  What he really means by that term is that a particular market is/was not realistically pricing in the economic truth of a situation.   For example, back in 2007 Greek debt was carrying similar interest rates to German debt as if they were both similarly credit worthy even when anyone who could do math could see that was ridiculous. Because of this ridiculous assignment of good credit ratings to low quality Greek debt, it was possible for Bass to buy derivatives that would pay off “asymmetrically”.  In other words, a small amount of money would be lost (think of it as an insurance premium) if the "insurance contract" never paid off, but a huge payoff relative to the insurance premium if the insurance had to pay up.  Needless to say, the insurance paid off for him.  Because it was highly asymetric, a very small premium was needed in order to produce a big return.
• The easy money has already been made on the Greek crisis and so Bass is already looking to the next markets that he thinks will blow up and those would be French and Japanese sovereign debt.  These are still highly rated with low interest rates being demanded by creditors even though their economies are weak and debt load is already very high.  In the case of Japan, it’s going to be a wipe out.  I have written about these things in more detail here and here. 
• When asked the specific question of whether Germany can bail out Europe, Bass was adamant: No Way.  Germany has not recapitalized its banks like the US and UK have.  While people currently consider them the economic powerhouses of Europe, both Germany and France will swirl the bowl with the rest of Euroland when the sovereign debts of the PIIGS begin to default to the degree that they eventually must.  Any bailouts that Germany provides from now on are just throwing good money after bad.  The PIIGS cannot have real austerity measures without riots and perhaps civil war.  Thus, each time they fail to implement austerity they will just ask for another bail out.  They will have no choice.
• Global debt has gown from $80 trillion to $210 trillion in the past 9 years (12% annually).  During the same time, global GDP has only grown 4% annually.  Despite Keynesian promises that you can grow the economy sustain-ably using debt, debt is outpacing growth at an exponential pace.  Nobody can say when it will blow up, but you have to be sort of brain dead to believe that exponential aggregate debt growth can end up any way other than badly.
• Bass compared the Japanese (and by extension the global) sovereign situation to Bernie Madoff’s Ponzi scheme.  It will collapse when there are more people exiting the debt market than entering it.  Japan currently spends 50% of tax income on debt service alone.  Half of that amount is spent on interest payments.  If Japan’s interest rates move up by a measly 2% then its debt service costs will exceed its tax revenue income.  Think they can just raise taxes to make up for shortfalls?  Think again.  This is at a time of population reduction due to their baby boomers dying off when there are not enough young people to replace them.  Japan will eventually default on its debt because math will not allow any other outcome.
• Bass pointed out that Italy was thought to be doing great and then a 1% rise in interest rates sent the country into a financial crisis.  In other words, things appear to be OK until they suddenly collapse. 
• I wrote about the exponential nature of these collapses here.  In short, the damage has been done slowly over a period of time but people only figure it out at the very end (as in the case of Madoff) and that’s when everyone runs for the exits in panic.  Anyone who doesn’t run away gets left holding an empty bag in a Ponzi scheme.  Very few people understand even today that fiat currency and fractional reserve banking have created a global debt Ponzi that must collapse at some point.  At some point everyone will understand and they will all try to get out of the markets at the same time.  Many will lose everything.  The eventual collapse of the debt Ponzi is mathematically guaranteed.  There is no saving it.  People who let other people hold their retirement funds will be the worst hit IMO.  Smart people will lay hands on their own money whatever it takes.  Any penalties paid today will seem cheap compared to the haircuts that are bound to happen later on.
• Bass recommends that everyone invest in “guns and gold”.  He says that the US and Europe have created 6 trillion dollars out of thin air since the crisis began.  As a result he wonders why anyone would want to own paper currency.  As for guns, he suggests that people look back into history.  When people rack up this much debt and it results in default, it generally ruptures the social fabric and civil unrest is the likely result.

As an aside, Bass recently diversified his fund into nickels to the tune of $1,000,000.  I guess I was not far wrong when I seriously suggested that exact strategy back in March of this year for the same reasons he stated.

It's the debt, stupid.

The Eurozone is toast.  It’s game over.   Despite all of the posturing and promises and threats, interest on Greek 1 year bonds is now well over 250%.  As in 10x the rate of an individual consumer credit card for someone with questionable credit.  Or to think of it in the simplest terms, invest $10,000 today and hold it 

 for 6.5 months and the Greek government promises to pay you $10,000 in interest AND still owe you your initial 10k.  In other words, loan sharking rates.  Or, more to the point, the type of interest rate that you would have to charge a deadbeat based on the very likely chance that he will default on the loan.  Greek debt is clearly a form of economic arsenic.  Touch it and you die.  Greece can’t afford to pay those rates.  It also cannot afford to pay off the principal.  It must roll over debt.  1 year bonds must be rolled over each year or the principal must be paid off (which there is no money to do).

Now, for preexisting debt, the rate has nothing to do with Greece.  What it really means is that the street value of the bonds that Greece already sold has tanked.  Greece got the cash and investors got screwed.  The initial interest rate that was offered by Greece was probably well under 10% for these and that never changes.  But if the lower street prices for the bonds means I can now buy (from existing bondholders/suckers) 10x the number of bonds than I used to be able to do for a given amount of money, it means that I will collect 10x the interest relative to my invested capital and so the interest rate to me is now 100%.  Or in the case of Greek bonds, 267%.  Where interest rates do matter to the Greeks is when it comes time to roll over that 1 year debt.  After having gotten burned there will no longer be any buyers at 10%.  They will all want the street interest rate of 250+ %.  Greece cannot even begin to offer bonds at that rate and so Greece is effectively locked out of the credit markets.  If the European Central Bank (ECB) wants to loan them money then fine, but the ECB is backpedaling on the whole “lender of last resort” mandate.  The only other recourse is some form of default and there really is no such thing as a little default.  If you are going to default, go big.  Throw in the kitchen sink.  Default on everything and start over.

Of course when Greece defaults then anyone it owed money to will be left holding an empty bag.  Those creditors who claimed to be rich because deadbeats owed them money will get Madoffed.  One day their account statements will show that they are rich.  The next day the account statements will simply stop coming forever.  What cannot be repaid will not be repaid.  Of course, if Greece gets away with stiffing its creditors, why shouldn’t Spain, Italy, Portugal, and a host of other debtor nations including eventually the USA.  As Mish points out, the interest rates on the other PIIGS are rising.  They have entered the debt interest rate spiral.  Interestingly, France’s name is in that list as well.  As I have written many times, France and Germany are no better off than the PIIGS.  The regional relative prosperity of France and Germany was driven by “selling” stuff on credit to people from other countries who could not afford to buy it.  Enabling that credit was the only purpose of the EU and the Euro.  When they get stiffed for the debt then they will be nearly as poor as anyone else and the EU will fall apart.

Meanwhile, Obama is blathering on about the Eurozone lacking the “political will” to fix the problems: "Until we put in place a concrete plan and structure that sends a clear signal to the markets that Europe is standing behind the euro and will do what it takes, we are going to continue to see the kinds of market turmoil we saw".  Earth to Obama: you can’t fix an insolvency problem by sheer force of will, whether political or otherwise.  Who do you think you are, the Green Lantern?  This is not a comic book where a guy in a green, dollar colored suit can change anything he wants to simply by force of will.  That is just rhetoric from the elite who sold us down the river in the great debt Ponzi a long time ago.  It falls into the same category as wishing upon a star and the American Dream.  Those of you who have done any study on the monetary elite will understand those references.  The rest of you won’t think much of it even though these things have been controlling our lives for decades.  But to the point, the old “bazooka” in the pocket threat is now the laughing stock.  The markets are no longer being herded around by the will of the elite.  The market has run out of suckers to fleece.

And so in light of this, the con men are coming clean as I predicted they would.  I wrote,” Unfortunately for the con men, organized crime rings are generally brought down from within, not from external forces.  The con men and criminals take to infighting about who owns the right to fleece the people.  The numbers of con men grow and grow until there is not enough fat on the sheeple to feed all the wolves and then the wolves start infighting.  Eventually some of them start telling on the other ones and the whole thing unravels.”

They aren’t beginning to admit the truth because they feel guilty but rather as a shield against blame that they know is coming when the whole debt Ponzi just collapses.  They want plausible deniability.  They want to identify with the victims and to have the victims thank them for their honesty.  Of course this is only happening after the damage is done.  When the con men were rolling in the easy debt based money there was no negative talk or truth telling.  It was strictly taboo and anyone like Ron Paul who had the guts to tell the truth was labeled whacky or odd.

In the most recent Con Man Confession, Bond King Bill Gross of PIMCO states that “we’ve discovered that debt driven growth is a flawed business model when financial markets no longer have an appetite for it”.  So, Bill, it was a good and true business model as long as there were suckers willing to lend but when all the suckers got fleeced and the lending dried up it suddenly because a bad “business model”?  No Bill, it was ALWAYS a bad business model.  In fact it was never any kind of “business model” at all.  It was a debt Ponzi from day frigging one.  You knew it.  You ALL knew it.  Greenspan, Bernanke, Paulson, Goldman Sachs, JP Morgan… ALL of “you”.  You knew how it must eventually end yet you sold us down the debt Ponzi river anyway in order to make a buck.  You and people like you have betrayed the United States.  You belong with Greenspan and Bernanke with the title of traitor.  You are all part of an elite organized crime syndicate which has taken over the world using your scam ridden money supply tricks which are all powered at their root by the fraudulent concepts of fiat currency and fractional (fictional) reserve banking.  You all deserve the punishment of traitors.  And of course you already know that which is why you are now trying to feign ignorance.

Sorry Bill, you can’t fool all the people all the time and sometimes you just can’t fool anyone.  Keep making up the fairy tale stories about how you are just figuring all of this out along with the rest of us.  Keep trying to convince everyone that you have just been a misguided old fool all this time while sitting on your Bond King throne.  That story is not going to fly at the end of the day.  You will be better off finding a non extradition country to go create a new “just in case it all unravels” residence in just like GW Bush did back in 2006.

Open letter to the good people of Italy.

Dear Hard Working People of Italy,

It's time for your wake up call.  Getting rid of one puppet playboy con man "leader" and replacing him with an EU insider like Mario Monti is not going to solve anything.   Sure, Berlusconi was a long time public embarrassment.  He was sort of a cross between the USA's Clinton and Obama (be thankful there was no Bush component to him!).  Sure, it was frustrating as well as an assault on the intelligence of the average Italian citizen to know that he even got to power in the first place.  Who knows how this happens but it happens globally.  Only buffoons and scammers seem to get ahead in the world of politics (ever wonder why that is?  THINK!) so don't feel too badly about it.

But Berlusconi's exit and Monti's entrance is no cause for celebration.  You've simply replaced one type of political scumbag with another.  Monti is an EU company man.  He has been placed there to try to make sure you pay the debt that you have been foolish enough to take on.  Again, don't feel too badly about having been swindled into taking on big debt, the USA leads the way in the foolishness here.  Debt is the natural outcome of a fraudulent money supply made up of fiat currency and fractional reserve lending.  It allows you to consume today based on future earnings.  It makes you think you are getting something special.  But all you are getting is the shaft because when everyone has easy money to buy things it pushes the prices upward essentially devaluing your labor.  If find that you work harder but end up with less, that is the reason for it.

For anyone who thinks Monti is going to be able to  "Lead Italy Out of Debt Crisis", please tell me, how will he do this?  Italy is like any other country, it has more debt than it can ever pay back.  Again, this is not the fault of the last government but rather the natural outcome of a fraudulent money supply based on fiat currency and fractional reserve lending.  So how is Monti going to fix anything?  Does he have a trillion Euros in hiding that nobody knows about with which he can pay the debt?  Of course not.  He was not installed to do anything for you, the people.  He was installed by the bankers and for the sake of the bankers.  Don't forget that!  There is nothing he can do for you but there is a lot that he will do *to* you if you don't watch him very closely.  He will sell you down the river at any chance he gets.  That is his one and only job despite anything that he might say.

Here is the truth of the matter.  You have national debts that cannot be repaid.  It is a sham to believe that you can repay them but many parasites make good livings keeping that sham alive.  Eventually the debt will collapse and eventually the Eurozone will collapse because it was a scam from day 1.   The ONLY purpose of the EU was to enable the offering of credit to other nations so that the industrial producers of Europe (Germany and France) would have more customers to sell their production to.  Without the EU and the Euro and the lines of credit that it allowed German and French bankers to set up to people who obviously could not afford to buy their stuff otherwise, German and French growth would have been very limited.  But now that the con is falling apart, the Germans and the French no longer worry about growth, they worry about collecting payments on what they have already loaned.  And so they installed their man Monti to facilitate that. 

At this point it is clearly in Italy's best interest to just call the whole thing a scam, repudiate the debt and then return to your own national currency.  But instead of letting new con men like Monti set that up, return to the old ways, the gold ways.  Back the New Lira with gold.  Make the backing public.  Make the Italian gold publicly auditable and restrict the printing of paper money in accordance with some intelligent, predictable, auditable PUBLICLY UNDERSTOOD formula that ties it to the national gold reserves.  This will force Italians to live within their means and it will push honesty back into all aspects of your society.  I'm sure you know that many sellers on EBay will not even ship to Italy these days because the mail system is corrupt and many packages are "lost" along the way.  It is fiat currency and fractional reserve lending which promote this type of corruption because people know they are not getting what they worked for and so they seek other means to attain it.  

This debt crisis might seem to many as a catastrophe; a crisis.  I contend that it is actually a healing, a return to sanity and an opportunity to drive real, long term prosperity into your country.  Italy could transform itself into a world leader by embracing gold backed currency which is managed openly and honestly.  The banksters will not like this because it will mean they can no longer sneak outsized profits out the back door.  Politicians will not like it either because they are owned by the banksters.  You need to find your own local version of Ron Paul and elect him into the lead role and throw the EU-installed company shill out into the street.  Of course, none of this is specific to Italy.  It is as true for the USA as well.  But the world has to start somewhere.

In bocca al lupo, come a trovare la strada in avanti.

Conditions may be ripe for a global market collapse.

I will be the first to say that nobody can predict the future.  I also respect the fact that some people are pretty fair at predicting direction while others are pretty good at predicting the timing but pretty much nobody gets them both right at the same time.  But since that doesn't stop anyone else from flapping their virtual gums, why should I be held to a higher standard?

I like watching stock charts in the same way that a hunter watches herd movements.  It is not an absolute predictor of the next step but it can give a good idea.  Right now the charts are perfectly set up for a major 3rd wave Elliott style collapse.  I'm not saying that it must happen right here and right now but the odds do

favor a mass "run on the markets".  5 waves down finished the 1st wave of this sequence and we might just have finished the 2nd wave retracement.  The result is a very ominous declining double top.  A break out of the downward sloping olive line would make me reconsider but it seems to me that all the unkeepable promises in the world have only kept the Ponzi plate spinning.  No real progress has happened and in fact Bernanke has signaled that he is out of gas in his helicopter.  Besides, the fuel source for the debt Ponzi which was, of course, debt, is beginning to be seen as a bad thing by the American voter.  All of a sudden, deficits are beginning to matter again.  It means that buying our way out of this hole with more debt is going to be impossible.  People are tired of living in fear and they are starting (very early still, but starting nonetheless) to face the debt down.

Combine that with the fundamentals and you still can't guarantee anything, but your odds of being right go way, way up.  And so the fundamentals are that a corrupt money supply consisting of fiat currency (aka debt money) and fractional reserve banking (aka credit/debt) have created a global debt Ponzi which must either continue to grow or it will deflate rapidly.  The marginal places will get hit the first and the worst which is why the Eurozone looks more like a battle zone and everyone is preparing for a Greek exit from the common currency.  Of course, when they do that, their debt to others will collapse and never be paid back.  I don't mean part of it won't get paid back.  I mean that virtually none of it will be repaid.  At least not without war.

Picking up speed in a very Greek like direction now are Italy, Spain and Portugal.  When they roll over, and they will, then France and Germany will also roll over.  How rich are you really if your debt slave defaults?  How can you make payments on all those factories if those who you were "selling" the goods to flip you the bird and tell you to have a nice day.  And then there is China.  What a massive real estate bubble they have.  I predict that China will probably have the worst bout of civil unrest and violence of any affected country.  I expect it to get pretty bad in some places over there.  It's one thing to be lied to like we were in the states.  But in China they were darned near tied down and then lied to.  Even those who did not believe the lies could not escape the system.  Well, maybe a relative few at the top.  In the US people will get screwed as well but they will have only themselves to blame for going along with the scam.  In China it wasn't a matter of going along.  It was a matter of survival and it changed the way people treated each other.  This is why I suspect their anger will be far greater: they were forced to believe in the system.  When the system fails them as it must, there will be blood.  Unfortunately, the export-driven Chinese economy seems to be rolling over right now.

The normal mechanisms for trying to soften the crash are money printing, capital controls, price and wage freezes, etc.   All of these are likely to benefit gold holders.  Right now there is a global circular chain of currency debasement and collapse happening.  Look at Greece for example.  Anyone there who hasn't moved his entire savings into gold is a complete fool.  Greece is going to leave the Euro one way or another because it can't pay its Euro denominated debt.  When that happens its credit will go to $hit and its money will likely be devalued big time: 50-80% with a week or two of the Exit Event.  Same happened to Iceland when it defaulted.  Gold is the only safe haven for them.  There is virtually no other way it can turn out.  People of Greece, are you listening?  Get your a$$es down to the gold broker and buy metal!!  People will begin to learn this as the serial defaults continue not only to occur, but to get bigger with time.  People in the most marginal countries will come to undertand that you either get into gold or get wiped out.  The US will have its future shocks as well and they could be quite significant, but not as bad as the most marginal players in the world.

When IBM and McDonald's and Apple shares begin to tumble with big gaps downward then it is the sign that the big money is bailing on the market.  They are now canaries in a stock market collapse coal mine.  A rapid collapse could easily follow when these untouchable stocks begin to get sold off to pay the margin calls on the weaker stocks.  Each time a country defaults on it debt, gold should get a shot in the arm because if you can't trust sovereign debt then the only real haven left has to be gold.  Gold is old money.  How old? Nasa suggests that it is born in neutron stars. Whether or not that is true, we do know for sure that it is never as a result of government decree.  Gold was among the first things on record to be used as money.  It will likely be among the last things standing as money.

Swiss National (central) Bank proves (again) that there is no safe fiat currency

It's almost a waste of time to go into all of the daily news regarding Germany, France and the PIIGS.  It has devolved into one predictable can kicking action after the next.  The collapse is coming which will be followed by the public anger stage, the civil unrest stage, the "contagion" stage, the finger pointing stage, etc.  There is no way out.  Every "fix" is nothing more than an attempt to issue more credit to already insolvent countries.  What cannot be paid back will not be paid back and there is no such thing as a little default.  If you are going to default, go big.  Default everything.  Throw in the kitchen sink.  This is what is going to happen in Euroland and elsewhere.  As I have often written, no scam lasts forever and a debt Ponzi is absolutely a scam.  The marginal players will get whacked the first and the worst.  It will be one for the history books and I would not be surprised if it resulted in war at some point.

While I'm waiting for something that can truly be called a catalyst for that sequence to go to the next level, I do want to point out again that the Swiss Franc, supposedly a "good" fiat currency, is turning out to be no better than anything else.  The Swiss Central Bank is promising to debase it yet again should it remain too strong relative to other worthless fiat currencies in the world.  The message is clear: there is no such thing as beneficial diversification from one fiat currency into another; all of them are crap waiting to hit the fan.  The reason is simple: fiat currency and fractional reserve banking (which, if you haven't made the connection yet, is a placeholder for credit of all kinds) have led economies to rely on exports.  When the currency gets too strong, export revenues fall.  Simple as that.  When export revenues fall, GDP falls, taxation falls, jobs fall, infrastructure collapses, safety nets collapse and then people starve and riot.  That's the inescapable math of it.  Ergo, the global race to debase.  The US is doing it.  The Japanese are doing it.  Euroland is doing it and even the supposedly "it's different with us" Swiss are doing it.  They have no choice because they are all painted into the same corner. 

The only safe haven from all of this is gold and perhaps some silver.  Governments can (and do) manipulate these money metals over the short and medium term to try to make them appear as risky assets.  But look around you: central banks are buying gold and calling their gold home from foreign vaults.  Bailouts in the trillions?  No problem!  As long as they are all paid for with fake, debt based fiat currency!  But request that payment for bailouts be done with gold and central banks will show you the door as Germany recently did to the G20.   Only an idiot will spend his gold on anything as long as other people are spending worthless paper on those same things and getting away with it.

A lot of people that I talk to are still incredulous when I explain to them the basics of gold.  You can spot the folks who really haven't done much thinking on the subject because they will be the ones saying "you can't eat gold".  I guess they read this is the mind-washing financial "news" along with the one liner that a gold standard is a "barbarous relic" blah, blah, blah.  People need to slow down a bit and consider that you can't eat fiat currency either yet everyone has absolutely bet their entire future on it.  To someone like me, this is a very scary thought.  Trusting in fiat currency is tantamount to trusting in greasy politicians and central bankers whose only goal is to remain in power without doing an honest day's work.  I'm still searching for the words that will be effective in explaining this to those who are still in The Matrix but the bottom line is that anyone who trusts in paper money is trusting their retirement to con men and liars.

Let me remind people that money was invented in order to store one's excess labor in a form that will not rot, deteriorate or go out of style.  The goal of this was to be able to work hard today and be able to save for a time when you are too old to work.  If there was no money, people would be storing their long term wealth in stores of dry goods, clothing, equipment and the like.  But if you get flooded or get forced out of your house by conflicts, you can't take all of this with you and so you lose your wealth or you have to sell it for a fraction of its worth. 

We've been there in the past as a people.  It was clear that we needed some small, easily divisible, high value per weight and size commodity token that is universally recognized as having value and easily exchanged that could serve as a marker for stored wealth.  By design, this token should be something that cannot be eaten because doing so would rapidly change the supply of it and thus its value (according to the laws of supply and demand).  I hope this point is not lost on people who believe that the inability to eat gold should negatively affect its value.  Anything could work as money as long as it cannot be easily acquired without doing any work to get it (and it passes a whole litany of other tests) but over thousands of years the people of the world have always selected gold as the best, most trusted form of money.  As JP Morgan said, Gold is money and everything else is credit.