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Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Crunch Time for the Banking Cartel

Stock-Markets / Market Manipulation Nov 25, 2009 - 02:01 PM GMT

By: DeepCaster_LLC

Stock-Markets

Best Financial Markets Analysis ArticleWho Wins the Great War? - “Just over a year ago, the United States underwent a seemingly radical change, seemingly overnight. Its financial system had been revealed as insolvent under the weight of huge liabilities and worthless assets. The government refused to allow all the bankrupt institutions to fail, and thus permit the market to do its job of purging the rot from the system.


Instead, the authorities saved their favorites, effectively merging bank with state. They did so under cover of a witches’ brew of subsidies, guarantees and quasi-nationalizations bearing bizarre acronyms like TARP; PDCF; TAF; TSLF; and my personal favorite, the ABCPMMFLF, otherwise known as the Asset-Backed Commercial Paper Money Market Fund Liquidity Facility.

And those were just the visible programs. The Fed, our central bank, dropped interest rates to zero and monetized additional trillions of dollars worth of problem assets, away from prying eyes. The nature and source of these assets remain matters of speculation, because the Fed to this day refuses to tell us what it bought and from whom.

When the smoke cleared, we Americans found ourselves the subjects of a gangster state, in thrall to a clutch of greedy, corrupt and incompetent banks which only days before had failed. We were now the guarantors of trillions of dollars in worthless assets that had generated billions in profits for those same banks in recent years. Their gains remained their gains; but their losses were now our losses. Our money, the reserve currency of the world, was now backed by toxic waste.

The events of last fall were, to all appearances, a bloodless coup, taking us from freedom to fascism virtually overnight.”

Viva la Restoration Remarks of Robert K. Landis, finews.ch Gold Conference Zurich, Switzerland, November 17, 2009

For years now, (at least since the U.S. Congress authorized establishment of the Working Group on Financial Markets in 1987) the evidence has become increasingly convincing that a Fed-led Cartel* has been intervening in most Major Markets, and not just in the Gold and Silver Markets.

But The Cartel’s Special Focus has been Intervention in the Precious Metals Markets, regularly successfully taking down the prices of Gold and Silver. The Motivation for this is clear. To the degree that Gold and Silver become increasingly Widely recognized as the Ultimate Measures and Stores of value, they delegitimize the Cartel’s* Fiat (Colored Paper – Intrinsic Value Zero) Currencies and Treasury Securities.

*We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2008 Letter containing a summary overview of Intervention entitled “A Strategy for Profiting from the Cartel’s Dark Interventions & Evolving Techniques” and Deepcaster’s July, 2009 Letter entitled  "A Strategy For Profiting From The Cartel’s Dark Interventions & Evolving Techniques - II" in the “Latest Letter” Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.”

To Date, The Cartel has not lost a round in their repeated attacks to take down Gold and Silver prices (see Deepcaster’s Free Reports available at www.deepcaster.com), or in their Interventions in other Major Markets either, for that matter.

BUT, The Cartel’s Interventional Regime is now under unprecedented pressure.

Does the recent all-time-nominal high in Gold indicate the Cartel is finally losing Control?

What about the many signs that The Cartel is still in control of Gold and Silver (and Equities and Crude Oil) prices?

The Consequences of either result (continued Cartel Control, or lost Cartel Control) will be profound. For example, If The Cartel has, for the first time, lost control, Gold could, and arguably should, go to $6,300/oz. soon.

The $6,300/oz. figure comes from no less an Establishment Figure than Dylan Grice, investment analyst at the French Investment Bank Societe Generale. (It is the price of Gold at which the $1.7 Trillion Fed Monetary Base would be fully Gold-backed.)

So let’s listen in on a Debate between “BUT” and “OTOH” (On The Other Hand) regarding whether The Cartel has or has not lost control. Our Profits and Wealth Protection depend on the Result.

OTOH, if The Cartel has lost control, why has Gold not already exceeded its inflation-adjusted 1980 high (approximately $2,300/oz), given the unprecedented Uncertainties and Disasters in the financial markets in recent months.

BUT the Bank of India recently bought 200 Tonnes of Gold, confirming India’s Cultural View that Gold is the historic Store and Measure of Value. Such Central Bank purchases put upward pressure on the demand for and price of physical Gold, and will continue to.

OTOH, the Central Banks have used Gold and Silver Purchases as the Ultimate Weapon to support their Treasury Securities and Fiat Currencies. That is, recent Central Bank Buying could be for the purpose such buying has served the Central Banks in the Past – after buying, they all Sell in concert to drive down prices, thus plundering the longs.

And if the U.S. Dollar Bounces, even temporarily, Gold, Silver, Equities and Commodities will be impelled downward and fast.

BUT in spite of all the foregoing, Gold has been making record Nominal Highs in recent Weeks.

OTOH The Cartel still has in place a wholly panoply of Interventional Tools – TOMOS, POMOS, TARP FUNDS, TSLF Lending, PDCF funds etc. This Interventional Arsenal has not gone away. Rather, Congress strengthened it via all the Bailouts, etc. bills.

BUT the unprecedented liquidity which has been and increasingly is pumped into the economy via everything from Bailouts to Borrowings, virtually guarantees the U.S. Dollar Price of Equities, Precious Metals, and other commodities is up.

OTOH the recent appreciation in nominal U.S. Dollar value of Precious Metals is illusionary, the Dollar having lost over 35% of its purchasing power over the last seven years, basis the USDX. Besides, the Real Numbers are very different from the bogus Official Statistics. Consider the Real Numbers as calculated by Shadowstats.com, which determines them the old fashioned way there were determined before their serious political manipulation began in the 1980’s and 1990’s.

Official Numbers      vs.      Real Numbers

Annual Consumer Price Inflation reported November 18, 2009

-0.18%                            7.13% (annualized November Rate)

U.S. Unemployment reported November 6, 2009

10.2%                             22.1%

U.S. GDP Annual Growth/Decline reported November 24, 2009

-2.51%                            -5.71%

The Cartel Controls the Statistics and the Markets.

BUT, that ongoing debasement of the U.S. Dollar simply guarantees that the Real Price of Gold and Silver will continue to rise. They are Real Money. The Fiat U.S. Dollar and other Fiat Currencies are Not.

OTOH, if Shadowstats is correct we are in a Deepening Depression and all Real Assets including Gold, Silver and Crude Oil decrease in price during a Depression.

BUT, Prices of key Real Assets have been either increasing, or flat, and not decreasing, in the last few months.

OTOH, The Cartel has held Real Assets such as Crude Oil in a Trading range for Weeks Crude has traded between $77 bbl and $83 bbl since mid-October. For example, the Silver Price has been non-confirming of Gold’s rise. It is still below its approximate $22 21st Century record high. The Cartel is still in control.

Moreover the performance of the Gold shares basis the HUI, has been underwhelming at best, non-confirming Gold Bullions rise.

BUT the Real Numbers show that CPI is still over 7% notwithstanding all the deflationary pressures of the last year and a half.

In these circumstances Gold and Silver are Bound to Continue to rise regardless of the Rigged Numbers.

And The Fed must increasingly Monetize (Buy) U.S. Treasury Debt since U.S. creditors of China and Japan increasingly unwilling to do so, further impelling Gold and Silver higher. Indeed, the U.S. Treasury will have to finance $3 Trillion of Maturing Debt in the next 12 months. In addition, the U.S. owes Foreign Creditors at least $1.3 Trillion in the next 12 months. No amount of Intervention can overcome these Realities.

OTOH, if The Cartel had lost control Gold would be above its 1980 Inflation-adjusted high, and Silver would have shot above its 21st Century $22 high.

BUT, Gold and Silver are headed above those highs rapidly.

We interrupt this debate here because it could continue indefinitely.

Deepcaster does, it must be said, come down on one side of this debate. His Conclusion (Takedown or No Takedown) Forecasts and Recommendations are available in his latest Letter and Alerts in the “Latest Letter” cache and “Alerts Cache” at www.deepcaster.com.

But Deepcaster’s Key Conclusion is: It is Crunch Time for The Cartel. If they do not Control and Takedown Gold and Silver Prices in the Next Few Weeks they will have been seriously wounded.

Regardless of which side of the debate the reader favors, there are a few crucial facts on which most open-minded observers should agree. And these facts are crucial to profitable Investing and Trading decisions during Crunch Time for the Cartel.

-- Regardless of whether The Cartel ultimately loses or wins, it will continue to try to manipulate the Markets. And that will continue to make it essential to monitor the Interventionals, (as well as the Fundamentals and Technicals) as Deepcaster does.

-- There will be no quick Recovery -- Past Corporate Earnings and Economic Growth have been generated mainly from ever-increasing Consumer and business spending, and that spending has been enabled mainly by increasing debt.

-- But Consumer Debt can expand no more with Real Unemployment at 21.1% and ARM rates Resets, and thus foreclosures, rising for two more years at least.

-- And Government spending will increasingly be limited, with decreasing tax revenues and decreasing creditors’ willingness and ability to buy government debt.

-- With the Consumer on the Sidelines what would Make Earnings Increase. Exports? NAFTA et. al. have wounded the U.S. manufacturing base. And the lower Dollar won’t help. China’s Yuan still moves in lockstep with the U.S. Dollar.

-- Yet record Multi-Trillion past, present, and future Expenditures and borrowings, virtually guarantee future price inflation.

So Economic Activity is likely headed Down and Inflation up. A recipe for pure Stagflation, or more likely, an Inflationary Depression. We hope for the best, and prepare for the Worst.

Best Regards,

By DEEPCASTER LLC

www.deepcaster.com
DEEPCASTER FORTRESS ASSETS LETTER
DEEPCASTER HIGH POTENTIAL SPECULATOR
Wealth Preservation         Wealth Enhancement

© 2009 Copyright DeepCaster LLC - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

DEEPCASTER LLC Archive

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