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Trading Lessons

Perverse US Dollar Rally Prelude to Financial System Collapse

Interest-Rates / Financial Crash Sep 11, 2008 - 11:50 AM GMT

By: Jim_Willie_CB

Interest-Rates Best Financial Markets Analysis ArticleMore crucial than ever, observers must take the broader perspective that avoids overhearing the party on Wall Street. They know not what they celebrate. It is their demise. They rejoice over the collapse of mortgage bonds and now the mortgage centrifuge with a big fat fanny. They rejoice over collapse of Lehman Brothers. They rejoice over the disaster du jour offered at the financial lunch table. In the past two months, a remarkable sequence of events has taken place regarding US$-based bonds. They have been called home , a demand to be brought back to US shores.

While Wall Street and the key financial USGovt ministries celebrate the rise in the USDollar that results immediately, few seem to realize that something much more important is happening. Imagine a company calling to the corporate laboratory all defective devices, in order to prevent them from exploding in customer faces. The lab sends the collection of destructive items into a remote abandoned field so they can explode safely. That is the analogy, except that the US financial arena cannot explode the USTreasury Bonds and USAgency mortgage bonds safely. As they crater, implode, or default, the system is killed.

In all likelihood the Bank For International Settlements in Basel Switzerland ordered the United States to call in USTreasurys and USAgencys, the bond instruments, the financial weapons of mass destruction. The BIS ordered the financial leadership to call their damaged risky debt securities home, so that they can explode on US soil, so that their greatest concentration rests on US soil, so that the maximum loss occurs to US institutions, so that the risk can be kept to a practical minimum for foreign nations. The benefits given to Americans are two-fold, one a bizarre paradox, the other an open door to steal.


When the USTreasury Bonds were purchased with powerful bids in a gigantic display by major global central banks ( excluding Russia, China, Arabs), the USDollar broke through resistance levels easily. The volume was just too significant. The initial big move from 73 to 77 in the US$ DX index was powered by the unprecedented central bank purchase of USTBonds in July and August, as they tripled their usual volume pace. This is a vividly clear illicit market override. The latest big move from 77 to over 80 has been powered by the formal bailout of Fannie Mae & Freddie Mac. To call nationalization of this cratered corrupt colossus a positive for the USDollar is like calling the death of all your children a positive since it consolidates the family fortune. Take a close look at details of the bailout. Hidden from view is a giant severance package for Fannie Mae's CEO Daniel Mudd and Freddie Mac's CEO Richard Syron. They are to receive $14 million and $9.2 million respectively. They managed the corruption and slush funds well, supplying amply the USGovt friends and syndicate alike. Mission accomplished!

In truly perverse fashion, only in America, the USDollar is rallying as a prelude to a US financial system breakdown. Call it a blowoff top! The Wall Street carnival seems to celebrate anything to lift the USDollar, even recession and the death knell for USTreasurys. Nationalization is never a positive for financial prospects. A powerful reversal comes when intervention ammunition wanes and the reality of US bank system implosion returns. The rally could reach the 82 mark, if the reversal pattern reaches full completion. The three major factors pulling the US$ down are the bank losses, the housing decline, and the job loss situation. Nothing has changed with these factors, except they have worsened!

My position is unshakable. The financial structure of the Untied States is besieged by powerful bankrupt insolvencies. 1) USGovt federal deficits are exploding, from war, from handouts, from recession, from bailouts. 2) US trade deficits are chronic and have risen over $60 billion monthly, soon to worsen from the US$ rise rendering harm to exports. 3) US banks are insolvent, with congames the only force forestalling bankruptcy as they continue to distort their balance sheets, while showing inability to raise needed cash in their replenishment. 4) US homeowners are now increasingly living with loans that reflect negative equity, as the proportion sits around one third in such upside-down living rooms. In the next few months, all four wrecked pillars will worsen dramatically. Fundamentals drive the USDollar lower. An assault on the USTreasurys will put the US$ into No Man's Land.

The most dangerous reaction investors can make now is to believe the USDollar has begun a major new upleg. The second most dangerous reaction is to sell gold or silver into this climax of fraud, manipulation, bankruptcy, and protected larceny. The sun is soon to set on the Fascist Business Model network. Those who put leverage into their portfolios have forfeited their freedom to hold. The father of a friend down here in half sunny, half rainy Costa Rica just lost his $250k silver account. He had told me of his father's strong belief in silver and the wrecked US$ condition, but he was not even aware that his father had a silver futures account, not physical silver bullion or coins. He owned paper silver, bound by the illusion of wealth. Now Dad has no silver at all, as he liquidated after a few margin calls. A piece of the inheritance is gone. My Dad has significant bank deposits, which might be under a different strain as banks drop like flies this winter. My advised strategy since the beginning of the year has been to hold silver or gold in physical form, for at least one third of accounts, maybe more.

The uplift coming this autumn and winter will be historic, as new chapters will be written on the global financial rehabilitation and remake. The world is planning the post-US era, amused by the celebration taking place on Wall Street. It will wind down soon enough. The next chapter will be characterized by isolation, retribution, receivership , dismissed government, overriding supply contracts, and redrawn lines.


A time limit has been granted, with high likelihood via order given by the most powerful bank in the world. The US has been ordered to bring its bonds home, to be buried under an avalanche of nationalized debt, foreign vengeance, and bank system collapse. During that period of time, Wall Street has been given a free ride, a blank check, a certificate of impunity, to rig markets for their own gain, to pull credit from client accounts for their own gain, to do whatever they can to force liquidation of positions, to basically rape & pillage private accounts. The fraud has been protected by regulators at the Securities & Exchange Commission and the Commodity Futures Trading Commission, each staffed by Wall Street mafiosi. They are taking full benefit of the granted OPEN WINDOW TO STEAL, pulling gold below 750 and pulling silver below 11.

The total split, the bifurcation described last week, has become even more laughable, stark, and obvious of Wall Street corruption of the precious metals market. The gold & silver owned (on paper) by folks has been taken. Since through corruption of the precious metals market, where supply is largely unavailable, call it theft, robbery, larceny. Call a spade a spade! Wall Street loves an investor panic. Do not give it to them. What infuriates me is the impunity. Wall Street firms have a license to corrupt markets and take money from people and businesses, as they are forced into liquidation or shrunk positions, often with credit pulled tactically. The regulators are sitting on their hands, permitting it all during this climax events of a fiesta. Banksters at the BIS are taken care of banksters inside the Untied States. A climax of theft is nearing an end.


On the week of September 15 thru 19, some initial events are anticipated to occur. An important event schedule will be initiated. The party and celebration and corrupt raids should come to an end abruptly. Many possible events are offered in conjecture in the September Hat Trick Letter, due out late this weekend. In all, 13 powerful shock wave events are suggested as possible. Foreigners are watching the tainted party, viewing it as staged atop the heavily listing Titanic vessel. The four pillars of insolvency, plus the looming credit derivative roof crumple, seem not to matter. The entire global playing field, related to commerce and finance, is soon to be reshaped, with the Untied States becoming a bit player, or not invited. The turkey carving is nigh.

When the events begin to unfold, one event will lead to another. Just like the Iraq War, a schedule does not adhere to a calendar, but rather to events. One event leads to released new pressures, factors to be made clear, obstacles to be removed (possibly forcibly), and the next event unfolds. My view of the sequence very simple is to reveal the big picture, RECEIVERSHIP & DEFAULT. The gold & silver prices will rocket higher. Part of the event schedule, down the road in time, not at an early stage, is the launch of the gold-backed Russian currency and the gold-backed Gulf dinar.

These are not new news items, but well advertised and fully ignored by a dismissive US failing financial fortress. The gold & silver prices have become laughable. Very little supply was available in the low 800s for gold. Very little supply was available at 13 for silver. Now prices are lower. One should try to imagine the building rage by angry foreign owners of physical gold & silver, who look at the price schemes dominated by paperhangers on Wall Street, who use the printing press and electronic switchboards to create new counterfeit supply to sell. Foreigners seek justice, to stem the corruption, to stem the threat to global stability, both financially and militarily. Do Americans have much of any idea of the foreign perspective? Do they know about violated NATO treaties, and poking the Russian bear with sharp sticks repeatedly? Americans are soon to be given a fresh course in receivership. The opening salvo was Fannie Mae and the fat little brother Freddie Mac. Never in modern history has a widened pattern of nationalization been favorable to a currency!

Note that the Credit Default Swap on the USTreasury Bond itself has moved up 3.5 basis points in the last week to a record 18 basis points. In April it was 6 bpts. This is record territory. German Bund CDSwap protection costs only 8 bpts. The USTBonds have suffered from greater risk after assuming the Fannie & Freddie risk. The risk of USTBond default is next. Watch the CDSwap continue to rise, as the rest of the bailout candidates knock at the door. The precedent has been set. The door is open. The die has been cast toward deep decay of socialism. Add to insolvency exported fraud and aggressive military behavior, and the prescription for foreign reaction is huge. It is coming!


The end of the third quarter is coming, less than three weeks away. In Q2 the investment community was told that first quarter bank losses were the peak. Early in Q3, the investment community was told that again, bank losses had peaked, the worst behind us, the solutions have been forged. What a continuing crock! As we come toward the end of Q3, losses previewed by JPMorgan and Lehman Brothers will serve as opening salvos. Much worse news comes. Over a month ago, my chart analysis suggested the BKX bank stock pattern might soon reveal a pennant pause pattern as the quarterly end approached. We are here. The triangle pennant is forming, although it is a clear one. While all eyes are on Lehman, the big failure is likely to be Merrill Lynch. Both firms have failed to find idiots in SKorea to bail them out. The discovery phase was way too ugly, and they were too smart.

Next the banksters from New York will turn to severe accounting distortions, sleight of hand, and other devious deceptions. The Lehman quarterly report was the biggest disaster imaginable, even though it was loaded with garbage methodology laced with hokus pokus. The last resort is liquidation, the dread by Wall Street banksters, since one failure could easily result in another rapidly. A liquidation fire sale of Lehman assets lies directly ahead, a huge threat to the congame. The Wall Street firms, since the Bear Stearns kill job, are all aligned in similar fashion, long US$, long USTBonds, short gold, short silver. A liquidation would force a big move in the reverse direction.

The latest economic myths are two: the USDollar is stronger and price inflation is gone. Neither is true. The foreign currencies have moved down, as their economies have slowed, as their own bank distress is evident. The US$ is a giant beneficiary of global debt liquidation, hardly a strength. The US$ rally is actually a signal of its imminent implosion or disappearance. As for price inflation, it is raging at 12.5% from the 2Q2008 according to Shadow Govt Statistics. The official heavily distorted CPI has posted back to back months above 5%. Suppressing the gold price via paper games does not constitute a repeal of price inflation. The biggest story on the price inflation front is the nationalization bailout of Fannie & Freddie mortgage giants. Even with no additional bailout beneficiaries (losers) such as General Motors or airline firms or even Citigroup, the price inflation inside the USEconomy will be magnificent next year. Some analysts expect the doctored CPI to rise above the 10% level.

Higher prices could come from storm effects. Hurricane Gustav inflicted some damage, but nothing significant. Hurricane Ike heads toward the heart of the oil platforms in the Gulf of Mexico, due to hit this weekend. Storm surge waves of over 15 feet (five meters) are forecast between Galveston and Houston Texas. Next year, look for a parade of lawsuits to be delivered as further tidal wave assaults on Wall Street. The Auction Rate Security case, successfully won, was just the beginning. In one year, look for most Wall Street firms to disappear. They have no business left, only managing liquidation, directing accounting fraud, and soliciting sucker bagholders to donate to their corrupt cause. This picture aint New York City, but it don't look good.


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by Jim Willie CB
Editor of the “HAT TRICK LETTER”
Home: Golden Jackass website
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Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at . For personal questions about subscriptions, contact him at

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