Gold Price Breakout, the Ominous Silent Canary

     

Alan Greenspan had full knowledge of his betrayal to the principles of sound money. He wrote early in his career about the only legitimate basis for a monetary system, namely Gold. His published works from four decades ago read like an indictment against his career for monetary crimes against the nation. His accommodation, giving the financial sector what they wanted, betrayed his mindset. He knew the nation courted disaster with a long delayed fuse. His quote is being circulated frequently and broadly lately, "Gold is the canary in the financial coal mine." Exactly, precisely, perfectly. Greenspan proved to be a great handler of the politicians, offering them obfuscation of the most erudite variety. They were so confused by his drivel to be immensely impressed.

The Jackass was not impressed, not after the 2000 events unfolded to reveal the US as a naked asset bubble blower. Not after the same events revealed Greenspan to be an inflation engineer specializing in serial asset bubbles blown to wreck the nation. My attitude years ago was to listen to his topics of debate, to ignore the words, and to anticipate a crisis event in the sector he mentioned. It worked every time. What Greenspan brought to the nation was a nearly complete interruption to the process of capital formation by virtue of the asset bubbles he engineered. His policies undermined and destroyed capital itself. He puffed up the finance sector at the expense of the tangible economy. Industry was forfeited in the pathogenesis of managed inflation.

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THE WAR FACTOR

To be sure, the war machine, immature during the Vietnam War, more mature for the advanced Iraq and Afghan Wars, accelerated and completed the process of saturating the nation with debt. The combination of domestic asset bubble development and war machine maturity conspired to gut the nation of industry and force it to depend upon a sequence of asset bubbles. They all busted. Few analysts dare to point a finger at the war costs, deemed sacred, rarely debated, always funded. Half the national debt of $12 trillion is attributed to war spending, hardly defensive anymore. The US Military expansion has become servant to its own gargantuan appetite, no longer driven by security motives. Expansion of war to secure supplies for the nation might be better explained as the global stretch of the military complex in order to secure supplies for itself. The complex is a vibrant independent enterprise. It might require new wars to secure its own supply chain in order to sustain its own operations, which increasingly depart from the objective of the people, and increasingly conform to the Syndicate objectives.

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Deception of war motives and war purposes is replete with the same sort of deception inherent to US Economic statistics. In Iraq, supposedly masses of troops are heading home. Those not heading home reveal a convenient reclassification. The soldier title of HBCT (Heavy Brigade Combat Team) was changed to AAB (Advise & Assist Brigade). Presto! Far fewer combat troops, but same duties, same operations. It reminds a person of economic statistic deception, relabeling what makes for an unemployed worker. The soldiers are mere accounting ledger items. The soldier death count is another statistical deception. The actual death count is at least triple the official number posted by the US Military. The official count is of soldiers who died on Iraqi soil, not those who were moved to hospitals outside of Iraq, like other Persian Gulf nations, a ship on the Gulf itself or the Mediterranean Sea, or even Germany. The best statistical accounting deception in the gold world is the US Treasury reporting. Gold on the US Govt balance sheets is accounted for as Deep Storage Gold, as per ore mined but not processed in a mountain. More tricks. For those Americans who engage in reading novels, the book 1984 is relevant.

The Jackass has a controversial forecast, initially made in autumn 2008. Expect the pressures to build eventually until the US Military complex, including the defense contractors and the military service contractors, are led to splinter off into a private corporation. Its business will be arms dealer and mercenary provider, with a core narcotics business segment. Those who deny this inevitable path must be blind, must be dumb, or prefer to wear underwear bearing the stars and stripes. In their wake will be a nation they once served sliding into the Third World. In their foreground will be vast wealth accumulated by the Syndicate.

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THE FINAL BUBBLE

In the aftermath of the tech telecom bubble bust ten years ago, Greenspan actively pursued the next bubble. Historical precedence dictated that a housing decline would come in 2001 and 2002. But such an event would have spawned a powerful recession that would have killed the banks, whose main diet had become credit derivatives. The lack of regulatory oversight enabled this queer racket to expand into a mammoth hidden business, a giant casino where the Wall Street banks actually placed billion$ bets against their own clients, against the major corporations of America. To say that constituted a conflict of interest is the understatement of the decade. Its scummy effects are slowly coming to fore in the United States and Europe, in the mortgage market and sovereign debt market. The awakening has led to great anger, harming the banker image irreparably, when combined with home foreclosure disgust.

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Greenspan encouraged a housing revived bubble ten years ago. He actively lobbied the financial markets to believe that full support for a US Treasury rally and mortgage bond rally would ensue, given the full beneficial power of monetary policy. He spoke at conferences. He gave press conferences. He interviewed with the press. He leaned on Wall Street. He preached to the US Congress. He finally swayed the financial markets. The result was that a typical housing market correction was averted. Instead, a powerful housing market rally took place, a climax rally. It sucked in every conceivable vagrant buyer, including a homeless bum in St Petersburg Florida who bought two homes without income or assets, full exploit of the NINJA loans (no income, no job or assets). What a travesty and blotch in American financial history. Even Fannie Mae entered the act, advertising on television with minority actors to encourage the last buyers to fall into the bubble trap. They succeeded, and minorities became the first victims of the wrecked, dispossessed, and bankrupted citizens.

The subprime mortgage chapter was a planned event, not by Greenspan, but by Wall Street firms. They went far beyond what Mr Magoo planned. They needed fresh meat to feed upon. Unqualified buyers served as cannon fodder to Wall Street bond merchants, offering hefty fees in bond securitization. Foreign investors were lined up like toy soldiers on a table for execution. The backfires are a plenty. The MERS database for title registration, intended and designed to handle the rapid trading of mortgage bonds, has been declared in several states to have no legal standing. Thus MERS has turned into a crowbar that intelligent enlightened emboldened homeowners can use to apply pressure on the banks and mortgage firms to avoid foreclosure, and live rent free in a home while still holding title. The strategic mortgage default practice, simply not paying, has spread like a mild virus.

Greenspan built the next asset bubble with full motive. It was a doubled chambered asset bubble, which enabled him to retire before a deep intractable crisis struck. The housing bubble grew leaps and bounds, doubling prices in some regions, called the Sand Bubbles. Arizona, California, Nevada, Florida, they all expanded, and now have contracted. The city of Miami has hosted a national jamboree for the foreclosure victims, another blight much like the tent cities. New home prices in the Phoenix area have been cut in half. Talk about the wings being burned off the rising bird, which fell hard to the ground! Millions each year have been tossed onto the national dump of foreclosures, left with no savings, no homestead, often with no job, and too often with no pension, and clearly no hope. The other bubble was mortgage finance. A great majority of the Wall Street business model transformed into leveraging profits off mortgages, either from fees off bond securitization or nasty gains from insuring against bond failures as clients lost arms and legs. The parade of client lawsuits has replaced the parade of clients seeking bond issuance. Talk about wings being burned off the financially engineered bird!

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September 17, 2010