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I must also add that in the last week China has signed a multibillion dollar energy agreement with Brazil. Because China must use is reserves for all these energy agreements recently as well as dealing with their own unemployment and massive problems internally, I would suspect they cannot continue to buy U.S. treasuries.
From 321gold.com:
PROLOGUE & AFTERMATH
The World Economic Forum took place in Davos Switzerland recently. The global picture enabled a nice snapshot of sentiment, fault for the crisis, blame doled out, the vacuum of leadership, the perks for blunderers in a country club setting (instead of prison), and warnings on a potential situation that could spiral out of control. Amidst all the finger pointing, surprisingly little blame was given to themselves, the corporate chieftains in attendance. Let's be clear! The Davos Forum was a funeral wake, and Putin rode in on a white horse to announce there is a new sheriff in town!! Davos afforded a unique opportunity for Russian self-styled leader Vladimir Putin to storm the forum stage and to steal the show. Putin presented a basic Blueprint for what should be called 'The Post-US World' as the United States and United Kingdom have lost the mantle of leadership and control. They lost it from failed economic policy, wrecked banking systems, fraud-ridden bond markets, corrupted debt ratings agencies, abuse of IMF & World Bank, and the severe backfire of economies that depended upon housing bubbles. Inflation turned on its haughty financial engineers! Nations with insolvent banks, insolvent households, corporations in liquidation, economies in near collapse, they tend not to be good owners and custodians of the global reserve currency!!!
Davos provided a flashpoint for a profound change in global leadership. The whimpering US-UK-EU bankers have been shamed. Then after the finger pointing, insults, hand wringing, and gut wrenching, Putin rode in on a white horse carrying a banner. Chinese Premier Wen Jiabao provided the confirmation to what Putin laid out, like a second of a formal motion. Wen Jiabao proceeded from the Davos stage to four European capitals to seal the new path and its legitimacy. The barter system has been launched in quiet, while the Western press continues not to comprehend a ruptured status quo limping along. It cannot; it will not; the transition is on. Not only will the USDollar not provide the global highway for all to travel, but new barter systems will be dominant soon in working around the commodity price systems dominated by the US-UK corrupt price discovery systems. The other painful consequence to the new system soon taking root is that the global commodity supply routes will bypass the US destinations, enough to create mammoth shortages. Such is the fate of a nation thrust to the Third World. Its people and its leaders still do not realize it, as denial is ensconced in hope. The US credit supply has already been severed and cut almost completely off. Reliance upon the printing press to finance its own debts is a primary trait of a Third World nation, a shocking fact soon to be recognized.
The February Hat Trick Letter Crisis Update covers in detail the Putin plan and the Davos Meeting. Since the autumn, the regular macro-economic reports and gold & currency reports have been accompanied by frequent reports on the crisis for unique coverage. The Crisis Update this month also covers Obama's Opening Opus, not at all a promising start. He has surrounded himself with yet more Elite insiders who are in part responsible for the current failure and who are likely to continue the welfare raids for the Elite. The Crisis Update also covers many aspects of the Martial Law Threat. Those who think 'Never in America' need to catch up with what is happening, preparations being made, anecdotes from the field, hints of revolt from the states, and the dire straights that states find themselves, like in California. The martial law threat comes from economic disintegration more than anything else.
HOSPICE FOR US$, LAUNCH FOR GOLD
The USDollar is essentially dead, the Davos Forum its funeral wake. It is enjoying a physical erection in the medical morgue, a rise in a death dance ceremony. US leaders refuse to accept the reality. They desperately need its continuation for assistance in funding the USGovt monstrous deficits. Western leaders struggle to admit the reality. Russian leaders, Chinese leaders, and Arab leaders (more quietly) openly admit the reality. Read the billboards, as the Davos Forum offered an entire row of them to observe. THE BEST STRESS METER IS NOW GOLD. Notice how gold rose all through the Davos Forum gathering. Nothing was solved. The Putin Blueprint for the 'Post-US World' shook up the currency markets, as gold reacted. The gold price is breaking out in all major currencies, except in USDollar terms. It just hit a new euro high.
A cherished contact with deep global experience had some very strong words about Davos and the Putin Blueprint. He made additional comments about the Wen trip across major European capitals. In an important message, he said, "Read in between the lines of Putin's speech and you find all the hints you want. The Chinese and Russians are burying the US alive. The Japanese, Germans, and Gulf States keep a very low profile for the moment. The decisions have been made: wait for 2010. They will use the unfolding chaos to introduce the new currency basket and trade rules... There is a brand new system being designed that will borrow from the past and apply 21st century tools for barter / counter trade / excess capacity etc. An Exchange Platform will cut out the banks altogether... [Chinese Premier] Wen delivered his speech in Davos and went straight to Berlin where they put the final touch on the new world currency basket, sponsored by Berlin-Moscow-Beijing-Tokyo-Riyadh. Moscow and Berlin already have a massive counter trade / barter trade agreement in place, and Beijing was eager to joint that platform as well." The new global currencies are planned for launch in January 2010. They will be launched amidst growing chaos. Events up to that time will be tumultuous.
The gold price has completed an important U-shaped reversal. Its low of 710 and top at 980 indicate a target of 1250 next. Notice the crossovers of the crucial moving average series. Both the 50-day MA and 100-day MA have run above the 200-day MA, very bullish. Technical chart traders use them to direct traffic flow. The cyclicals are aligned with strength. The fundamentals could not be better for gold than at any time in a few decades. All major governments are ruining their currencies in a desperate attempt to avoid economic collapse after bank system insolvency has rendered their nations hostage to dangerous accommodative monetary policies. All major currencies are now at risk simultaneously. The gold price breakout over 1000 again could come when the Dow Jones Industrial Index and the S&P500 index each breach critical support. They have been dancing at that support for days. The USEconomic field has become a swamp, and it is sinking. It should sink the US stock market.
The USDollar should not be the true focus of attention. Paradoxically, as it dies a horrible death, its reserve currency status ensures it might be last to crumble. All other currencies are at risk, except perhaps the Japanese yen. The focus of attention should be directed to gold & silver. The pundits, anchors, and supposed experts believe that the rise in the gold price means that price inflation is an imminent but hidden threat. THEY ARE SO WRONG. The threat is of a collapsed global financial foundation, complete with rising chaos from no current viable alternative, as the Untied States finds itself tossed into a dungeon. The process is slow, but the pace is accelerating. The signpost in the dungeon is marked 'Third World' with full shame. The charges will go without trial, as the marketplace is brutal. But bank ruin, institutional corruption, exported bond fraud, permission of counterfeit rings, protection of crime syndicates, and abused global reserve currency custodial responsibility lie at the core. Most scrutiny of charges will be conducted much later, when too late, in an examination of the wreckage.
THIRD WORLD INTRODUCTION
My analysis has been very consistent in its message. The broken bank system, crippled households, endless housing decline, corporations in retreat, and federal debt that cannot be financed by foreign creditors, these work together to guarantee that the Untied States does not just enter the Third World, but that the US will be thrust quickly into the Third World. Imagine a criminal in old colonial times being thrown down a staircase into a dirty dank dungeon, landing with many bruises, a bloody mouth, and perhaps a broken arm. The new US leadership is already making huge errors. Their lack of integrity is for now a well-kept secret, since the camp they emerged from is foul. Third World nations are not known for integrity or sound judgment. At a time when the US, UK, and European banks face dire need for bailouts and rescues, one might consider the specter of entire nations requiring bailouts, not just their banks. Iceland gave notice. Watch in horror as the risk rises for failures of states.
As a reminder, the USGovt federal budget deficit this year should hit 15% of the national GDP size, more than double anything ever witnessed, and more than double what usually causes a 25% to 30% currency correction. This time will be no different. The gold price has responded. Given the turmoil in foreign lands, with their own attendant currency threats, the USDollar is the not concurrent indicator of gold anymore, a topic addressed two weeks ago. GOLD IS RESPONDING, ALONG WITH SILVER. Even the knucklehead financial media and lamebrain financial sector managers have noticed.
A senior adviser to Dmitry Medvedev criticized the magnitude of the new USGovt economic rescue package and projected budget deficit, claiming it would draw heavily from other global markets. Igor Yurgens heads a think tank to advise Medvedev. He said, "What is discouraging is Obama's statement that [the USGovt] is going to run a $1 trillion deficit for years to come. For us, that means that all the free liquidity in the world will run into American Treasury Bills. Of course, [Obama] expects the Chinese or Russians to buy USTreasury bills. That is pretty selfish and philosophically, it is protectionism." The reality is that foreign creditors have already announced to key USCongressional members that they will not be purchasing any USTreasury Bonds for several months. Whether active boycott or inability from lack of trade surplus, it does not matter. Dire straits come to the US shores very soon.
OBAMA'S FIRST FOREIGN POLICY BLUNDER
If the retarded Stimulus Bill is Obama's first blunder of domestic policy, then refusal to attend the Davos Forum himself was his first foreign policy blunder. Newly inaugurated Barack Obama could have traveled to Switzerland and met numerous finance ministers, bank leaders, and iconic individuals, even Vladimir Putin, Dmitry Medvedev, and Wen Jiabao. Instead, he sent greenhorn Timmy Geithner, the Treasury Secretary. Timmy shot his mouth off right away and lost global respect instantly. He repeated the oft-used and extremely old tired saw that China was manipulating its yuan currency. This angered the Chinese again, at a time when the US leaders need their creditors in full gear. Recall that Geithner's stupid comment came only a couple weeks after an even more stupid comment was made by outgoing Treasury Secy Henry Paulson. Hanky told the Chinese that they are mostly to blame for the global banking meltdown because their trade surpluses had grown too big, and they invested too much in USTreasury Bonds and USAgency Mortgage bonds. The Chinese shot back in anger and defiance to call that 'Gangster Logic' rightly. The integrity of US leaders is declining as fast as their judgment exercised. Already, the Chinese have no respect for the new US Financial Dream Team.
BRITISH LEAVE US MEMBERS TO TAKE THE HEAT
The message behind the actions was extremely loud. Chancellor of Exchequer Alistair Darling and Foreign Minister David Millibrand decided to cancel their trip to Davos. They stated publicly that certain people they wished to meet at Davos had canceled their trip and would not attend. They stated publicly about how affairs in the United Kingdom were pressing, the emergency too important to leave home. What a crock! The only guests who canceled their trips were the British. Perhaps the UK delegation planned to attend Davos and only meet among themselves. The nixed meetings planned with attendees might have been dominated by angry European Union finance ministers. Europeans are launching Currency War salvos at the British. Maybe the British did not want to be the subject of broad European criticism. The other important consequence of the British canceled plans was that the members of the Untied States contingency were left all alone, exposed to take the heat of criticism. The US & UK were united when they ruled the roost from corrupt platforms. They are divided as they fall.
PUTIN STOLE THE SHOW
The Russians realized the vacuum of banking and political leadership. Vladimir Putin took the high road actually. His criticism of the US failure and corruption was implied. He let the decimation of Wall Street firms, their colossal losses, and their calamitous fall from grace speak for themselves. He would not permit anyone in attendance to yack about how Putin droned on and on about US failure. Failure is painfully obvious for almost all to see. He skipped over much direct criticism to offer solutions, a sign of leadership. No, Putin was the only bright spot in Davos. Putin offered a Blueprint for the next decade, for the 'Post-US World' where the US-UK corrupt tag team does not control the helm or sit at the catbird seat. Vladimir Putin and Dmitry Medvedev served as dominant figures over a gloomy forum. A Putin spokesman actually told reporters "This is Davos under the Russian flag." More accurately, the Davos Forum gave Russia, and to some extent China, a chance to exert leadership.
The overriding theme of the Putin plan is a new multi-polar world, where power is shared and no longer concentrated in a dangerous fashion. Putin was as specific as required for a blueprint, which typically does not need to go into great detail. It requires a new structure. When an entire system is shattered, one needs a foundation with large structural descriptions as planks. Putin gave it. He is not a hero, but rather a man who realizes the disorder in progress and the dire need for new direction. The USDollar-based system is dead. Within the vacuum, the global financial and economic system is slowly collapsing. Actually, my view is that the USEconomy is accelerating in its breakdown, unlikely to last through the summer without some very clear evidence of failure. The untold story is that the global system failure has pitted two groups of powerful billionaires against each other. Putin represents a force that pursues greater equitability in commerce, trade, and banking with multi-polar power centers. His opposite force pursues greater concentrated power, more fascist towers, and a beneficial reduction in world population. This thorny topic is given occasional coverage in the Hat Trick Letter, yet is highly controversial and risky to discuss. Broad strokes rather than detail are my choice.
PUTIN CRITIQUE OF GLOBAL FAILURE
Putin openly questioned the reliability of the USDollar as a global reserve currency. He all but said it is dead in the water for that role. He called the one reserve currency a danger to the world economy, in fact! He acknowledged that globalization has multiplied the destructive force, so that the US-UK crises have touched all nations and everyone. To be sure, other nations are epicenters for crisis like Spain. Several nations are feeling the impact of the shocks from the crisis epicenters, like Germany, Russia, and China. Some specific criticism was given. Putin talked about the disproportion between the scale of financial operations and fundamental value of assets. That means huge US-UK financial flows in trading centers against a backdrop of miniscule current valuation of the bank centers. The US & UK bank sectors are insolvent. Putin talked about the differences between the increased burden of international loans and source collateral. That means the Western nations, led by the US & UK, but also Southern Europe, have outsized debt burdens against a backdrop of near nil collateral, a stark trait of insolvency, if not bankruptcy. Putin attacked indirectly the Untied States for printing money with abandon, consuming what Asian factories produce, while Asians respond by saving money in the form of government debt securities. Putin warned the global leaders not merely to treat the symptoms, which is precisely what they are doing, but to work toward serious reform.
Putin warned of blind faith in the omnipotent power of states, and the distorted concentration of assets in the hands of the states. That might be a slap at the central bankers, who are serving as quasi-bank systems unto themselves in a desperate action. Their biggest new ledger item is Dollar Currency Swap. Putin warned that unbridled growth of budget deficits and public debts is destructive. In essence, Putin urged a return to free enterprise principles. The Western leaders are moving toward socialism and fascism. What irony that former KGB leader from the Soviet Union was lecturing the West on the benefits of embrace for capitalism and free enterprise!!!
PUTIN RECOMMENDATIONS
Putin was specific in key areas. He did not lay out many details to flesh out his planks. He kept some close to his vest. The barter accords are a work in progress, actually a revolutionary shift. He was not going to offer up details of his 'End Run' plans. But he offered four main recommendations that make a great deal of sense, a starting point:
Get real and declare hopeless debt securities as bad assets, and write them off. The current crisis will only be prolonged unless the balance sheets are cleaned up. A liquidation process is essential. (The refusal for banks to come clean has resulted in extreme constipation for the credit system, while the patient slowly falls into mud.)
Get rid of virtual money, exaggerated reports, and dubious credit ratings on financial securities. He wishes for fundamental asset values to be determined by the ability to generate added value, apart from subjective models. (He refers indirectly to credit derivatives and futures contracts, the artificial mechanisms to control price structures, those onerous devices that act as pseudo-money.)
Get away from the single reserve currency system, which he regards as dangerous. Instead, install several strong reserve currencies in a smooth and irreversible switch. (This is the unofficial death knell of the USDollar itself, for alternatives in usage.)
Get currency reliability for foreign reserves management, which can be used by other states. This can be achieved by enabling more open monetary policies, and enforcing economic and financial discipline. (This will enable regional stability and cooperation.)
Putin openly called the current unipolar world obsolete, referring indirectly to the US-UK dominance. This is as close as one could come to hearing that the current system is one step from the scrap heap. Unfortunately, chaos reigns as leadership is absent, insolvency rains down as economic troubles all over, and no leaders seem capable of pulling back the reins. Putin urged a new system of global regulators, an obvious slap at the unspeakably corrupt Securities & Exchange Commission (for stocks) and the unspeakably corrupt Commodity Futures Trading Commission (for commodities). Each is a lapdog steeped in conflict of interest, paid to look the other way to criminal activity, with no urge to prosecute their friends. The SEC and CFTC have been team players for the four major US-based crime syndicates in order for them to conduct their business. They are parasites to the system, while the syndicates spread cancers. Putin all but said to eliminate the Intl Monetary Fund and World Bank. Putin wants to see shared technology across borders. This is a slap against the US, which refuses to export advanced computer technology and telecommunications technology.
Putin made a comment about possible energy shortages and obstructed growth prospects, but urged constructive inter-dependence. This could be regarded as a threat, and should be taken as a claim for leadership. Putin reminded the group of his recommendation in 2006 for cooperation among energy suppliers, consumers, and transit countries. These suggestions fell on deaf ears over two years ago, but now after the Ukraine incidents, their time has clearly come. Putin wants a new international legal framework for energy security, with clear-cut legal statutes. Some of what Putin mentions comes as a reaction to US financial sources that are exerting extreme force on energy prices with political motive. Putin openly called for a balanced price determination system free from the vagaries of financial derivative instruments.
One might detect a theme in much of what Putin urges for new systems. Putin pursues a new energy framework to possibly serve as the foundation for a new financial structural foundation. This is a natural progression, based upon a solvent foundation, that would play into Russian strength. See the February reports for details. However, hard assets and natural resources must supplant the corrupt networks that control price systems in the current broken apparatuses. Putin is attempting to fill a dangerous vacuum. The Western leaders are caught in a vise, caught in a policy pattern toward more of the same ineffective elixirs. Putin also delivered stern warnings about NATO, whose broken treaties cause great stress. The nettlesome trend toward NATO inclusion for former Soviet Republics has also caused great stress. Expect extremely loud backfires on this front, as Ukraine will probably be used as a display case for Russian power. They will destroy the Ukrainian political structure, punish them for permitting themselves to be used as US puppets, and probably carve the nation into territories. Other Eastern European nations had better take notice.
BARTER SYSTEMS INITIATED
New important barter systems are soon to spring up. Just this week, China entering the on-ramp to the barter system highway by lending Russia $25 billion in return for a guaranteed 20 years of energy supply. It is not so much a loan, as an initial stake in a new trade system. My sources indicate that two bilateral barter accords are in progress, soon to be made public. The Russians have another bilateral barter plan with Germany, soon to be hatched. These plans will catch the Untied States off guard, and isolate the US. The pricing for commodity resources will circumvent the US-UK corrupted systems. In the process, the US will find itself outside looking in. Commodity supply routes will be redirected from Russia to China, from Canada to China, from Australia to China, and from Venezuela (as well as the Andes region) to China.
CHINESE LEADER WEN FIRMS BARTERS
Chinese Premier Wen Jiabao was more clever in his acute criticism of the United States. He made scathing comments at Davos about the 'inappropriate macroeconomic policies' and the 'unsustainable model of development characterized by prolonged low savings and high consumption' of some unnamed countries. Wen attacked 'blind pursuit of profit' by financial institutions and their 'lack of self-discipline' by them. After speaking at the World Economic Forum, where he echoed the criticism laid out by Putin, he went on an important trip across Europe. Wen traveled to four major European capitals, whose significance is enormous. He met with Swiss leaders in Bern, with German leaders in Berlin, with Spanish leaders in Madrid, and with European Union leaders in Belgium. One should interpret this not as an endorsement of the status quo, as reported by the US press media, but rather as an announcement of the new structure to conform to the Putin Blueprint for a Post-US World. The entrenched and defensive US-based and UK-based press media have no interest in mentioning a new framework. Loss of the current framework represents an invitation to the Third World. China has no interest in furthering the status quo. Wen served notice to European leaders.
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Me gusta la salsa picante!! ??Y'tu??
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