Imminent Big Bank Death Spiral Means Gold Price Will Skyrocket

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The mortgage
& foreclosure scandal runs so deep that ordinary observers can
conclude the US financial foundation is laced with a cancer detectable
by ordinary people. The metastasis is visible from the distribution
of mortgage bonds into the commercial paper market, money market
funds, the bank balance sheets, pension funds under management,
foreign central banks, and countless financial funds across the
globe. Some primary features of the cancerous tissue material are
mortgage bond fraud, major securities violations, absent linkage
to property title, income tax evasion, forged foreclosure documents,
duplicate property linkage to single mortgage bonds, NINJA (no income,
no job or assets) loans to unqualified buyers, and more. In fact,
more is revealed it seems each passing week toward additional facie
to high level and systemic fraud. The world is watching. The growing
international reaction will be amplified demand for Gold, from recognition
that the USDollar & USEconomy have RICO racketeering components
extending to Wall Street banks and Fannie Mae mortgage repositories.

The centerpiece
question, when the US bond fraud is coupled with European sovereign
debt distress, comes down to WHAT IS MONEY? The answer is Gold &
Silver and not much of anything else. Other assets like crude oil
or farmland are effective hedges against tainted money, but when
they contain debt tethers, they too are vulnerable. Huge flows of
funds are fleeing traditional asset groups. Some mistakenly still
believe the USTreasurys to be a safe haven. A shock of cold water
comes to them when that bubble goes into reverse perhaps several
months later after reaching 2% yields. The big magnificent epiphany
in the last couple years has been that a house is not a hard asset,
but rather a debt instrument extension. Important questions have
arisen as to what assets are free from counter-party debt risk.
The grand demands for physical gold prove that the futures gold
contracts are not money either, but tainted Wall Street and London
securities contracts that keep the system going.

The big banks
have been called too big to fail. What a ruse! They are too big
to plow under without removal from power of the bankers themselves.
They are too big to permit their balance sheets to be liquidated
without a US banking system seizure together, and a 30% to 50% additional
housing market price decline. They are too big to send into receivership
without igniting a credit derivative sequence of explosions. They
are too big to block the widespread practice of fraud and enforcement
of law of regulations. However, a wondrous spectacle has begun to
shine light. The mortgage & foreclosure scandal could turn out
to be the big US Bank tombstone epitaph, as bank revenues from mortgages
halt, as home owners refuse to make mortgage payments, as court
cases unfold in full view, as class action lawsuits prove racketeering
at a systemic level, as MERS and REMICs are frozen by the courts
from further activity. Time will tell. Time will reveal extraordinary
efforts by the USCongress to pass ex-post facto laws that legalize
the bond fraud and contract violations from the past. Remember back
in July 2007 when Bernanke claimed this was just a subprime mortgage
problem. The Jackass called it an absolute bond crisis.


Two critical
elements have been identified. The MERS electronic title registry
system was designed to facilitate recording of property titles as
associated mortgage bonds traded freely and changed ownership hands.
Unfortunately, the title database has no legal standing, as declared
by several state courts, including some supreme courts. Banks or
financial firms holding the mortgage notes cannot team with the
title database and force eviction during the home foreclosure process.
That is the first gaping flaw. The second is the REMIC funding facility.
The Real Estate Mortgage Investment Conduit was designed to facilitate
funding mortgages, in particular Fannie Mae mortgages. Unfortunately,
the conduit funding vehicle intentionally omitted citation of the
mortgage income stream owner, so as to avoid income taxes. The lack
of identification means that the Fannie Mae asset backed securities
might lack any legal tie to the mortgage loan income stream.

If the casual
observer concludes that Fannie Mae mortgage bonds have no value,
then that observer matches the same thought pattern of the Jackass,
and the same as an increasing number of financial experts. The mortgage
finance boom was more a racketeering scheme to send financial products
through the pipeline, earn fees, set up arbitrage, enable leveraged
schemes, and justify executive bonuses. At the same time, the scheme
had the perceived benefit of putting money in people’s hands to
spend when their jobs were shanghaied on a ship to China. It concealed
the destruction of the USEconomy. It made homes very convenient
piggy banks to abuse in consumer binges, as people eagerly burned
their furniture. Harken back to the Great Macro Asset Economy, a
slippery chapter scripted by Greenspan, one of several heretical
chapters. Many citizens were turned into paupers who lost all their
home equity, while 22% of the nation today lives in homes bearing
negative equity overhead. To claim an elaborate Ponzi Scheme seems
a fair characterization. The USGovt hands are dirty. The reflection
on USTreasurys is filled with risk of a popped bubble. The reflection
on the USDollar is filled with risk of downdrafts since a corrosive

The Europeans
have their damaged sovereign debt, but the Americans can boast twin
beasts in the USTreasury Bond bubble and the USAgency Mortgage Bond
scam. The scam involves mortgage bond fraud from improper perfection
of property title that ensures revenue stream. The scam involves
securities violations from usage of the MERS title database, duplicate
properties in multiple bonds, and forged documents. The scam involves
faulty finance vehicles (REMIC) with deep intractible flaws in the
structure of funding the loans, whose remedy would come with a $1
trillion tax bill due (estimated by bank analysts). Just last weekend,
the state of California demanded as part of a class action lawsuit,
with MERS at the center, between $60 and $120 billion in unpaid
property title recording fees. One might wonder if any potential
criminal fraud was avoided in the mortgage industry during the last
decade that saved a few bucks and added to bank profit. The MERS
& REMIC twins represent the two unfixable banking Achilles Heels.
Can the USCongress forgive the fraud with a fresh piece of supercharged
legislation?? If they do, then civil disobedience will blossom across
the land, in the form of public demonstrations, marches on Washington,
non-payment of monthly mortgage bills, and demands to prove property
title. The global response will be to sell any bonds with a US$

The fallout
comes as shattered integrity of the USDollar after broken credibility
of the USFed and ruined prestige of Wall Street, all while a sanctioned
USTreasury Bond bubble puffs. The full USGovt guarantee of the Fannie
Mae clearinghouse cesspool contents bridges the gap between USTBonds
and USAgency Mortgage Bonds. One might argue that Agency Bonds differ
from USTBonds only in the claim of linkage to mortgage income and
ultimately home seizure, except that linkage is being removed in
plain view to the public. The USDollar will suffer. Rather than
fall versus other major currencies, the wrecked monetary system
will take down all major currencies. Each fiat paper currency
is being exposed as illegitimate in different ways. The consequences
will be:

  • All cost
    structures will rise, causing a worse global recession, a very
    heavy painful consequence.
  • Income levels
    will not rise to meet the challenge, since monetary inflation
    destroys capital and erodes wealth engines in corporate structures.
  • The US$-based
    bond markets take on a racketeering glow in global view.

The vast monetization
schemes are set to come into motion for the bond market in general.
The objects are hardly just USGovt debt securities, not even just
Fannie Mae mortgage securities, but big bank Corporate Bonds as
well. The scheme will paint the USDollar in a light with a RICO
tint, as in racketeering, sanctioned by the US finance ministry
and shielded from prosecution by US legal authorities and regulatory
bodies. Worse still, the Financial Accounting Standards Board has
permitted accounting fraud to the big dead US banks. Since April
2009, they have been permitted to declare any value they wish on
their toxic balance sheets. That has enabled them to take advantage
of USGovt largesse, direct USFed redemption of toxic bonds, called
widely banker welfare. That has enabled them to tap the 0% money
tree that produces carry trade profits. The only stipulation was
the banks were required to place their excess cash at the USFed
itself, which thereby hid the central bank’s insolvency, and distracted
attention from the absence of Loan Loss Reserves for the banks.
Details on the USFed balance sheet, and big bank vulnerability to
further losses, are provided in the October Hat Trick Letter. Toss
in the High Frequency Trading schemes, and the US financial markets
look to contain more crooked venues than the Las Vegas casinos.
The USDollar lies at great risk in the process.


The next QE2
is a done deal but with the details missing. The next TARP-2 bailout
package is having its justification and foundation fashioned from
the building blocks of need and desperation, along with the cement
provided by banking lobbies. The two initiatives will likely meld
paths. A disorderly condition comes. An armada of lawyers is on
the job ready to challenge mortgage securities, foreclosure orders,
and much more. Class action lawsuits are on the docket. The US financial
platforms are unraveling. The USDollar will follow a path to oblivion,
locked in a destructive spiral. The Competing Currency War assures
that other major nations will undermine, debase, and devalue their
currencies rather than seek out, plan, and establish a new monetary
system. The investment in a broken system will soon be realized
as infinite, with unchecked aid, even $trillions tossed in Black
Holes. The sound money experts have always argued that accelerated
funds are required to maintain a bubble. Gold will therefore skyrocket
in price, as the monetary system will be actively ruined from unchecked
money creation. The silver price gains will be at least double the
gold gains. Markets are beginning to take control, and kick aside
the corrupt control levers. The horizon features a big US bank on
death watch. The ripple effects will be shocking even to those who
expect it. Other big banks will be dragged down in a chain reaction,
while illicit control in certain key markets will be stripped away.
Control will be lost by the Powerz. Confusion will rein. The
bank stock index BKX signals an imminent breakdown. The dustbin

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29, 2010

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