Banks

Too Big To Fail Is Now Bigger Than Ever Before

September 17, 2013September 20, 2013 by Michael

The too big to fail banks are now much, much larger than they were the last time they caused so much trouble. The six largest banks in the United States have gotten 37 percent larger over the past five years. Meanwhile, 1,400 smaller banks have disappeared from the banking industry during that time. What this means is that the health of JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley is more critical to the U.S. economy than ever before. If they were “too big to fail” back in 2008, then now they must be “too colossal to collapse”. Without these banks, we do not have an economy. The six largest banks control 67 percent of all U.S. banking assets, and Bank of America accounted for about a third of all business loans by itself last year. Our entire economy is based on credit, and these giant banks are at the very core of our system of credit. If these banks were to collapse, a brutal economic depression would be guaranteed. Unfortunately, as you will see later in this article, these banks did not learn anything from 2008 and are being exceedingly reckless. They are counting on the rest of us bailing them out if something goes wrong, but that might not happen next time around.

Ever since the financial crisis of 2008, our politicians have been running around proclaiming that they will not rest until they have fixed “the too big to fail problem”, but instead of fixing it those banks have rapidly gotten even larger. Just check out the following figures which come from the Los Angeles Times…

Just before the financial crisis hit, Wells Fargo & Co. had $609 billion in assets. Now it has $1.4 trillion. Bank of America Corp. had $1.7 trillion in assets. That’s up to $2.1 trillion.

And the assets of JPMorgan Chase & Co., the nation’s biggest bank, have ballooned to $2.4 trillion from $1.8 trillion.

We are witnessing a consolidation of the banking industry that is absolutely stunning. Hundreds of smaller banks have been swallowed up by these behemoths, and millions of Americans are finding that they have to deal with these banking giants whether they like it or not.

Even though all they do is move money around, these banks have become the core of our economic system, and they are growing at an astounding pace. The following numbers come from a recent CNN article…

-The assets of the six largest banks in the United States have grown by 37 percent over the past five years.

-The U.S. banking system has 14.4 trillion dollars in total assets. The six largest banks now account for 67 percent of those assets and the other 6,934 banks account for only 33 percent of those assets.

-Approximately 1,400 smaller banks have disappeared over the past five years.

-JPMorgan Chase is roughly the size of the entire British economy.

-The four largest banks have more than a million employees combined.

-The five largest banks account for 42 percent of all loans in the United States.

As I discussed above, without these giant banks there is no economy. We should have never, ever allowed this to happen, but now that it has happened it is imperative that the American people understand this. The power of these banks is absolutely overwhelming…

One third of all business loans this year were made by Bank of America. Wells Fargo funds nearly a quarter of all mortgage loans. And held in the vaults of JPMorgan Chase is $1.3 trillion, which is 12% of our collective cash, including the payrolls of many thousands of companies, or enough to buy 47,636,496,885 of these NFL branded toaster ovens. Thanks for your business!

A lot of people tend to focus on many of the other threats to our economy, but the number one potential threat that our economy is facing is the potential failure of the too big to fail banks. As we saw in 2008, when they start to fail things can get really bad really fast.

And as I have written about so many times, the number one threat to the too big to fail banks is the possibility of a derivatives crisis.

Former Goldman Sachs banker and best selling author Nomi Prins recently told Greg Hunter of USAWatchdog.com that the global economy “could implode and have serious ramifications on the financial systems starting with derivatives and working on outward.” You can watch the full video of that interview right here.

And Nomi Prins is exactly right. Just like we witnessed in 2008, a derivatives panic can spiral out of control very quickly. Our big banks should have learned a lesson from 2008 and should have greatly scaled back their reckless betting.

Unfortunately, that has not happened. In fact, according to the OCC’s latest quarterly report on bank trading and derivatives activities, the big banks have become even more reckless since the last time I reported on this. The following figures reflect the new information contained in the latest OCC report…

JPMorgan Chase

Total Assets: $1,948,150,000,000 (just over 1.9 trillion dollars)

Total Exposure To Derivatives: $70,287,894,000,000 (more than 70 trillion dollars)

Citibank

Total Assets: $1,306,258,000,000 (a bit more than 1.3 trillion dollars)

Total Exposure To Derivatives: $58,471,038,000,000 (more than 58 trillion dollars)

Bank Of America

Total Assets: $1,458,091,000,000 (a bit more than 1.4 trillion dollars)

Total Exposure To Derivatives: $44,543,003,000,000 (more than 44 trillion dollars)

Goldman Sachs

Total Assets: $113,743,000,000 (a bit more than 113 billion dollars – yes, you read that correctly)

Total Exposure To Derivatives: $42,251,600,000,000 (more than 42 trillion dollars)

That means that the total exposure that Goldman Sachs has to derivatives contracts is more than 371 times greater than their total assets.

How in the world can anyone say that Goldman Sachs is not being incredibly reckless?

And remember, the overwhelming majority of these derivatives contracts are interest rate derivatives.

Wild swings in interest rates could set off this time bomb and send our entire financial system plunging into chaos.

After climbing rapidly for a couple of months, the yield on 10 year U.S. Treasury bonds has stabilized for the moment.

But if that changes and interest rates start going up dramatically again, that is going to be a huge problem for these too big to fail banks.

And I know that a lot of you don’t have much sympathy for the big banks, but remember, if they go down we go down too.

These banks have been unbelievably reckless, but when they fail, we will all pay the price.

Who Controls The Global Economy? Do Not Underestimate The Power Of The Big Banks

July 24, 2013July 24, 2013 by Michael

Are the big banks really as powerful as some people say that they are? Do they really control the global economy? If y0u asked most people, they would tell you that governments control the global economy. But the campaigns of our politicians are funded by the ultra-wealthy, the big banks and the large corporations that they control. Others would tell you that the Federal Reserve and the rest of the central banks around the world control the global economy. But the truth is that the Federal Reserve was established by the bankers and for the benefit of the bankers. As you will see below, at the very core of the global economy there exists a “super-entity” of financial institutions that control an almost unimaginable amount of wealth and power. These financial institutions and the ultra-wealthy individuals behind them are really the ones that are pulling all the strings. In this world money equals power, and the borrower is the servant of the lender. When you follow the pyramid all the way to the top, it begins to become very clear who really is in control.

In business schools all over America today, instead of dreaming of starting new businesses and contributing something positive to society, most business students are dreaming of going to Wall Street and getting rich. But Wall Street doesn’t actually create or build anything of value for society. Instead, the bankers make most of their profits by essentially pushing money and paper around. In a recent article, Chris Martenson commented on this…

Today, some of the most celebrated individuals and institutions are ensconced within the financial industry; in banks, hedge funds, and private equity firms. Which is odd because none of these firms or individuals actually make anything, which society might point to as additive to our living standards. Instead, these financial magicians harvest value from the rest of society that has to work hard to produce real things of real value.

While the work they do is quite sophisticated and takes a lot of skill, very few of these firms direct capital to new efforts, new products, and new innovations. Instead they either trade in the secondary markets for equities, bonds, derivatives, and the like, which perform the ‘service’ of moving paper from one location to another while generating ‘profits.’ Or, in the case of banks, they create money out of thin air and lend it out – at interest of course.

But just because they aren’t adding much value to society does not mean that these big banks are not extremely powerful. In fact, anyone that underestimates that power of these monolithic financial institutions is being quite foolish.

A team of researchers at the Swiss Federal Institute of Technology in Zurich studied the relationships between 37 million companies and investors worldwide, and what they found was absolutely stunning.

What they discovered is that there is a “super-entity” of just 147 very tightly knit companies that controls 40 percent of the entire network…

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

So exactly who are the companies that are at the core of this “super-entity”?

Well, almost all of them are banks or financial institutions. The following is a list of the 50 “most connected” companies from the study, and the notes in parentheses are from Chris Martenson…

1. Barclays plc
2. Capital Group Companies Inc (Investment Management)
3. FMR Corporation (Financial Services)
4. AXA (Investments & Life Insurance)
5. State Street Corporation (Investment Management)
6. JP Morgan Chase & Co (Bank)
7. Legal & General Group plc (Investments & Life Insurance)
8. Vanguard Group Inc (Investment Management)
9. UBS AG (Bank)
10. Merrill Lynch & Co Inc (Bank)
11. Wellington Management Co LLP (Investment Management)
12. Deutsche Bank AG (Bank)
13. Franklin Resources Inc (Investment Management)
14. Credit Suisse Group (Bank)
15. Walton Enterprises LLC
16. Bank of New York Mellon Corp (Bank)
17. Natixis (Investment Management)
18. Goldman Sachs Group Inc (Bank)
19. T Rowe Price Group Inc (Investment Management)
20. Legg Mason Inc (Investment Management)
21. Morgan Stanley (Bank)
22. Mitsubishi UFJ Financial Group Inc (Bank)
23. Northern Trust Corporation (Investment Management)
24. Société Générale (Bank)
25. Bank of America Corporation (Bank)
26. Lloyds TSB Group plc (Bank)
27. Invesco plc (Investment mgmt) 28. Allianz SE 29. TIAA (Investments & Insurance)
30. Old Mutual Public Limited Company (Investments & Insurance)
31. Aviva plc (Insurance)
32. Schroders plc (Investment Management)
33. Dodge & Cox (Investment Management)
34. Lehman Brothers Holdings Inc* (Bank)
35. Sun Life Financial Inc (Investments & Insurance)
36. Standard Life plc (Investments & Insurance)
37. CNCE
38. Nomura Holdings Inc (Investments and Financial Services)
39. The Depository Trust Company (Securities Depository)
40. Massachusetts Mutual Life Insurance
41. ING Groep NV (Bank, Investments & Insurance)
42. Brandes Investment Partners LP (Financial Services)
43. Unicredito Italiano SPA (Bank)
44. Deposit Insurance Corporation of Japan (Owns a lot of banks’ shares in Japan)
45. Vereniging Aegon (Investments & Insurance)
46. BNP Paribas (Bank)
47. Affiliated Managers Group Inc (Owns stakes in 27 money management firms)
48. Resona Holdings Inc (Banking Group in Japan)
49. Capital Group International Inc (Investments and Financial Services)
50. China Petrochemical Group Company

Are you starting to get the idea?

The global economy truly is completely dominated by banks and other financial institutions.

In the United States, the big banks are not just content to own other companies anymore. Now, some of our largest banks are actually starting to directly get into businesses such as “electric power production, oil refining and distribution, owning and operating of public assets such as ports and airports, and even uranium mining”. The following is an excerpt from a letter that several members of the U.S. Congress recently sent to Federal Reserve Chairman Ben Bernanke…

We write in regards to the expansion of large banks into what had traditionally been non-financial commercial spheres. Specifically, we are concerned about how large banks have recently expanded their businesses into such fields as electric power production, oil refining and distribution, owning and operating of public assets such as ports and airports, and even uranium mining.

Here are a few examples. Morgan Stanley imported 4 million barrels of oil and petroleum products into the United States in June, 2012. Goldman Sachs stores aluminum in vast warehouses in Detroit as well as serving as a commodities derivatives dealer. This “bank” is also expanding into the ownership and operation of airports, toll roads, and ports. JP Morgan markets electricity in California.

In other words, Goldman Sachs, JP Morgan, and Morgan Stanley are no longer just banks – they have effectively become oil companies, port and airport operators, commodities dealers, and electric utilities as well. This is causing unforeseen problems for the industrial sector of the economy. For example, Coca Cola has filed a complaint with the London Metal Exchange that Goldman Sachs was hoarding aluminum. JP Morgan is currently being probed by regulators for manipulating power prices in California, where the “bank” was marketing electricity from power plants it controlled. We don’t know what other price manipulation could be occurring due to potential informational advantages accruing to derivatives dealers who also market and sell commodities. The long shadow of Enron could loom in these activities.

You can read the rest of their letter right here.

This week, Goldman Sachs has been facing allegations that it has cost American consumers billions of dollars by manipulating the price of aluminum. The following is from an article that was posted on CNBC…

Hundreds of millions of times a day, thirsty Americans open a can of soda, beer or juice. And every time they do it, they pay a fraction of a penny more because of a shrewd maneuver by Goldman Sachs and other financial players that ultimately costs consumers billions of dollars.

The story of how this works begins in 27 industrial warehouses in the Detroit area where Goldman stores customers’ aluminum. Each day, a fleet of trucks shuffles 1,500-pound bars of the metal among the warehouses. Two or three times a day, sometimes more, the drivers make the same circuits. They load in one warehouse. They unload in another. And then they do it again.

This industrial dance has been choreographed by Goldman to exploit pricing regulations set up by an overseas commodities exchange, an investigation by The New York Times has found. The back–and-forth lengthens the storage time. And that adds many millions a year to the coffers of Goldman, which owns the warehouses and charges rent to store the metal. It also increases prices paid by manufacturers and consumers across the country.

If that sounds shady to you, that is because it is shady.

But as the big banks continue to gain even more power in our society, this kind of thing will become even more common.

So what can we do about it?

Not much.

Do you think that the media will tell us the truth about all of this? I wouldn’t count on it. At this point, there are just six giant media corporations that control more than 90 percent of the news and entertainment that you see on your television. And those six giant media corporations are very hesitant to do anything that will damage their corporate owners or their corporate advertisers.

Do you think that our politicians will do anything about all of this? I wouldn’t count on it. In national elections, the candidate that raises more money wins more than 80 percent of the time. Our politicians know where their bread is buttered, and as history has shown most of them are very good to the guys with the big checkbooks.

As I said at the top of this article, money is power, and according to a report that was released last summer, the global elite have up to 32 TRILLION dollars stashed in offshore banks around the globe.

The global economy belongs to them. We are just living in it.

But hopefully if enough people start waking up, someday we will see some significant changes.

One of my favorite musical artists of all-time, Michael W. Smith, once wrote a song that contained the following lyrics…

Tell me, how long will we grovel at the feet of wealth and power?

Tell me, how long will we bow down to that golden calf, now?

(How long will be too long)

Will the people of the world ever get sick and tired of the overwhelming power of the big banks and start demanding changes?

That is a very good question. Please feel free to share what you think by posting a comment below…

Wall Street Banks Extract Enormous Fees From The Paychecks Of Millions Of American Workers

July 2, 2013 by Michael

Would you be angry if you had to pay a big Wall Street bank a fee before you could get the money that you worked so hard to earn? Unfortunately, that is exactly the situation that millions of American workers find themselves in today. An increasing number of U.S. companies are paying their workers using payroll cards that are issued by large financial institutions. Wal-Mart, Home Depot, Walgreens and Taco Bell are just some of the well known employers that are doing this. Today, there are 4.6 million active payroll cards in the United States, and some of the largest banks in the country are issuing them. The list includes JPMorgan Chase, Bank of America, Wells Fargo and Citigroup. The big problem with these cards is that there is often a fee for just about everything that you do with them. Do you want to use an ATM machine? You must pay a fee. Do you want to check your balance? You must pay a fee. Do you want a paper statement? You must pay a fee. Did you lose your card? You must pay a big fee. Has your card been inactive for a while? You must pay a huge fee. The big Wall Street banks are systematically extracting enormous fees from the working poor, and someone needs to do something to stop this.

The truth is that most American families need every penny that they earn. In America today, 53 percent of all workers make less than $30,000 a year.

It is hard to do everything that you need to do on less than $2,500 a month. If you doubt this, you should try it some time.

That is one reason why the fees that the big Wall Street banks hit payroll card users with are so insidious. The following is a short excerpt from a recent CNBC article about this phenomenon…

But in the overwhelming majority of cases, using the card involves a fee. And those fees can quickly add up: one provider, for example, charges $1.75 to make a withdrawal from most A.T.M.’s, $2.95 for a paper statement and $6 to replace a card. Some users even have to pay $7 inactivity fees for not using their cards.

These fees can take such a big bite out of paychecks that some employees end up making less than the minimum wage once the charges are taken into account, according to interviews with consumer lawyers, employees, and state and federal regulators.

Devonte Yates, 21, who earns $7.25 an hour working a drive-through station at a McDonald’s in Milwaukee, says he spends $40 to $50 a month on fees associated with his JPMorgan Chase payroll card.

If you are just barely scraping by every month, can you really afford to be paying $50 a month in fees to the fatcats at JPMorgan Chase?

Of course not.

But JPMorgan Chase is far from alone. Just check out all of the fees that another large financial institution is hitting users with…

On some of its payroll cards, NetSpend charges $2.25 for out-of-network A.T.M. withdrawals, 50 cents for balance inquiries via a representative, 50 cents for a purchase using the card, $5 for statement reprints, $10 to close an account, $25 for a balance-protection program and $7.50 after 60 days of inactivity, according to an April presentation by the company reviewed by The Times.

They are taking advantage of extremely vulnerable people and they know it.

And we see this kind of thing happening with other types of cards as well. For example, in some states unemployment benefits are now deposited on prepaid debit cards, and the banks that issue these cards are more than happy to extract huge fees from unemployed people…

Shawana Busby does not seem like the sort of customer who would be at the center of a major bank’s business plan. Out of work for much of the last three years, she depends upon a $264-a-week unemployment check from the state of South Carolina. But the state has contracted with Bank of America to administer its unemployment benefits, and Busby has frequently found herself incurring bank fees to get her money.

To withdraw her benefits, Busby, 33, uses a Bank of America prepaid debit card on which the state deposits her funds. She could visit a Bank of America ATM free of charge. But this small community in the state’s rural center, her hometown, does not have a Bank of America branch. Neither do the surrounding towns where she drops off her kids at school and attends church.

She could drive north to Columbia, the state capital, and use a Bank of America ATM there. But that entails a 50 mile drive, cutting into her gas budget. So Busby visits the ATMs in her area and begrudgingly accepts the fees, which reach as high as five dollars per transaction. She estimates that she has paid at least $350 in fees to tap her unemployment benefits.

There is something that is so greedy about all of this.

When the financial crisis hit back in 2008, the big banks had no problem begging the entire nation for mercy.

But when it comes time to show mercy to the poor, they tell us that it is “just business”.

In America today, there are tens of millions of families that are just barely surviving from month to month. The big banks should not be preying on them like this.

With each passing year, the ranks of the working poor in this country continue to get larger. The following statistics are from one of my previous articles entitled “35 Statistics About The Working Poor In America That Will Blow Your Mind“…

#1 According to the U.S. Census Bureau, more than 146 million Americans are either “poor” or “low income”.

#2 According to the U.S. Census Bureau, 57 percent of all American children live in a home that is either “poor” or “low income”.

#3 Back in 2007, about 28 percent of all working families were considered to be among “the working poor”. Today, that number is up to 32 percent even though our politicians tell us that the economy is supposedly recovering.

#4 Back in 2007, 21 million U.S. children lived in “working poor” homes. Today, that number is up to 23.5 million.

#5 In Arkansas, Mississippi and New Mexico, more than 40 percent all of working families are considered to be “low income”.

#6 Families that have a head of household under the age of 30 have a poverty rate of 37 percent.

#7 Half of all American workers earn $505 or less per week.

#8 At this point, one out of every four American workers has a job that pays $10 an hour or less.

#9 Today, the United States actually has a higher percentage of workers doing low wage work than any other major industrialized nation does.

#10 Median household income in the United States has fallen for four consecutive years.

#11 Median household income for families with children dropped by a whopping $6,300 between 2001 and 2011.

#12 The U.S. economy continues to trade good paying jobs for low paying jobs. 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.

#13 Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs.

#14 According to the U.S. Census Bureau, the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.

#15 There are now 20.2 million Americans that spend more than half of their incomes on housing. That represents a 46 percent increase from 2001.

#16 Low income families spend about 8.6 percent of their incomes on gasoline. Other families spend about 2.1 percent.

#17 In 1999, 64.1 percent of all Americans were covered by employment-based health insurance. Today, only 55.1 percent are covered by employment-based health insurance.

#18 According to one survey, 77 percent of all Americans are now living paycheck to paycheck at least part of the time.

#19 Millions of working poor families in America end up taking on debt in a desperate attempt to stay afloat, but before too long they find themselves in a debt trap that they can never escape. According to a recent article in the New York Times, the average debt burden for U.S. households that earn $20,000 a year or less “more than doubled to $26,000 between 2001 and 2010“.

#20 In 1989, the debt to income ratio of the average American family was about 58 percent. Today it is up to 154 percent.

You can find the rest of the list right here.

The working poor simply cannot afford to be paying hundreds of dollars in fees to the big banks each year just to use the money that they worked so very hard to earn.

Unfortunately, we seem to be living during a time when the big financial institutions will squeeze every nickel that they possibly can out of average Americans no matter how high the human cost is.

The Federal Reserve Is Paying Banks NOT To Lend 1.8 Trillion Dollars To The American People

July 1, 2013 by Michael

Did you know that U.S. banks have more than 1.8 trillion dollars parked at the Federal Reserve and that the Fed is actually paying them not to lend that money to us? We were always told that the goal of quantitative easing was to “help the economy”, but the truth is that the vast majority of the money that the Fed has created through quantitative easing has not even gotten into the system. Instead, most of it is sitting at the Fed slowly earning interest for the bankers. Back in October 2008, just as the last financial crisis was starting, Federal Reserve Chairman Ben Bernanke announced that the Federal Reserve would start paying interest on the reserves that banks keep at the Fed. This caused an absolute explosion in the size of these reserves. Back in 2008, U.S. banks had less than 2 billion dollars of excess reserves parked at the Fed. Today, they have more than 1.8 trillion. In less than five years, the pile of excess reserves has gotten nearly 1,000 times larger. This is utter insanity, and it will have very serious consequences down the road.

Posted below is a chart that shows the explosive growth of these excess reserves in recent years…

This explains why all of the crazy money printing that the Fed has been doing has not caused tremendous inflation yet. Most of the money has not even gotten into the economy. The Fed has been paying banks not to lend it out.

But now that big pile of money is sitting out there, and at some point it is going to come pouring in to the U.S. economy. When that happens, we could very well see an absolutely massive tsunami of inflation.

Posted below is a chart that shows the growth of the M2 money supply over the past several decades. It has been fairly steady, but imagine what would happen if you took the hockey stick from the chart above and suddenly added it to the top of this one…

The longer that the Federal Reserve continues to engage in quantitative easing and continues to pay banks not to lend that money out to the rest of us, the larger that inflationary time bomb is going to become.

In a recent article for the Huffington Post, Professor Robert Auerbach of the University of Texas explained the nightmarish situation that we are facing…

One reason that the excess reserves grew to an extraordinary level is that in October 2008, one month after the financial crisis when Lehman Brothers went bankrupt, the Bernanke Fed began paying interest on bank reserves. Although it has been 1/4 of 1 percent interest, this risk free rate was not low compared to the Fed’s policy of keeping short-term market rates near zero. The interest banks received was and is an incentive to hold the excess reserves rather than lend to consumers and businesses in the risky environment of the major recession and the slow recovery.

The Bernanke Fed is now facing a $1.863 trillion time bomb, they helped to create, of excess reserves in the private banking system. If rates of interest on income earning assets (including bank loans to consumers and businesses) rise, the Fed will have to pay the banks more interest to hold their excess reserves.

If interest rates move up dramatically (and they are already starting to rise significantly), banks will have an incentive to take that money out of the Fed and start lending it out. Professor Auerbach suggests that this could cause an “avalanche” of money pouring into the economy…

Eighty five billion a month will seem tiny compared to the avalanche of the $1.863 trillion excess reserves exploding rapidly into the economy. That would devalue the currency, cause more rapid inflation and worry investors about a coming collapse.

So the Fed has kind of painted itself into a corner. If the Fed keeps printing money, they continue to grossly distort our financial system even more and the excess reserves time bomb just keeps getting bigger and bigger.

But even the suggestion that the Fed would begin to start “tapering” quantitative easing caused the financial markets to throw an epic temper tantrum in recent weeks. Interest rates immediately began to skyrocket and Fed officials did their best to try to settle everyone down.

So where do we go from here?

Unfortunately, as Jim Rogers recently explained, this massive experiment in financial manipulation is ultimately going to end in disaster…

I’m afraid that in the end, we’re all going to suffer perhaps, worse than we ever have, with inflation, currency turmoil, and higher interest rates.

The Fed and other global central banks have created the largest bond bubble in the history of the planet. If the Fed ends quantitative easing, the bond market is going to try to revert to normal.

That would be disastrous for the global financial system. The following is what Jim Willie told Greg Hunter of USAWatchdog.com…

Everything is dependent on Fed support. They know if they take it away, they’re going to create a black hole. The Treasury bond is the greatest asset bubble in history. It’s at least twice as large as the housing and mortgage bubble, maybe three or four times as large.

But even if the central banks keep printing money, they may not be able to maintain control over the bond market. In fact, there are already signs that they are starting to lose control. The following is what billionaire Eric Sprott told King World News the other day…

It’s total orchestration. And it’s orchestration because they might have lost control of the bond market. I find it such a juxtaposition that central banks on a daily basis buy more bonds today than they ever purchased, and interest rates are going up, which is almost perverted. I mean how can that happen?

They’ve lost control of the market in my mind, and that’s why they are so desperately trying to get us all to forget the word ‘taper.’ In fact, we probably won’t even hear the word ‘taper’ anymore because it has such a sickening reaction to people in the bond market, and perhaps even people in the stock market. They will probably do away with the word. But the system is totally out of control. And then we’ve got this quadrillion dollars of derivatives. It just blows blows my mind to think about what could really be going on behind the scenes.

Sprott made a really good point about derivatives.

The quadrillion dollar derivatives bubble could bring down the global financial system at any time.

And remember, interest rate derivatives make up the biggest chunk of that. Today, there are 441 trillion dollars of interest rate derivatives sitting out there. If interest rates begin skyrocketing at some point, that is going to create some absolutely massive losses in the system. We could potentially be talking about an event that would make the failure of Lehman Brothers look like a Sunday picnic.

We are moving into a time of great financial instability. People are going to be absolutely shocked by what happens.

Our financial system is a house of cards built on a foundation of risk, leverage and debt. When it all comes tumbling down, it should not be a surprise to any of us.

Thousands Of Companies Have Been Handing Over Your Personal Data To The NSA

June 14, 2013June 14, 2013 by Michael

It isn’t just Internet and phone companies that are giving your personal information to the U.S. government. According to an astounding report by Bloomberg, “four people familiar with the process” say that “makers of hardware and software, banks, Internet security providers, satellite telecommunications companies” and a whole host of other sources are handing over your personal data to federal agencies. The truth is that there is so much more to this NSA snooping scandal than the American people know so far. When U.S. Representative Loretta Sanchez said that what Edward Snowden had revealed was “just the tip of the iceberg“, she wasn’t kidding. The U.S. government is trying to collect as much information about everyone on the planet as it possibly can. And this incredibly powerful intelligence machine is not going to go away just because a few activists get upset about it. The United States government spends more than 80 billion dollars a year on intelligence programs. Those that have spent their careers constructing this monolithic intelligence apparatus are doing to defend it to the bitter end, as will the corporate partners in the private sector that rake in enormous profits thanks to big fat government contracts. But if the American people don’t stand up and demand change now, it is going to be a signal to those doing the snooping that they can push the envelope even more because nobody is going to stop them.

So why are thousands of companies handing over your personal data to the NSA? Well, according to Bloomberg they are getting things in return…

Thousands of technology, finance and manufacturing companies are working closely with U.S. national security agencies, providing sensitive information and in return receiving benefits that include access to classified intelligence, four people familiar with the process said.

These programs, whose participants are known as trusted partners, extend far beyond what was revealed by Edward Snowden, a computer technician who did work for the National Security Agency. The role of private companies has come under intense scrutiny since his disclosure this month that the NSA is collecting millions of U.S. residents’ telephone records and the computer communications of foreigners from Google Inc (GOOG). and other Internet companies under court order.

Thanks to the recent revelations by Edward Snowden, much of the focus so far has been on the information that the NSA gets from Internet and telecommunications companies, but apparently government agencies collect information about all of us from a vast array of sources…

Makers of hardware and software, banks, Internet security providers, satellite telecommunications companies and many other companies also participate in the government programs. In some cases, the information gathered may be used not just to defend the nation but to help infiltrate computers of its adversaries.

Along with the NSA, the Central Intelligence Agency (0112917D), the Federal Bureau of Investigation and branches of the U.S. military have agreements with such companies to gather data that might seem innocuous but could be highly useful in the hands of U.S. intelligence or cyber warfare units, according to the people, who have either worked for the government or are in companies that have these accords.

We have become a “surveillance society”, and this is exactly the sort of thing that the Fourth Amendment was supposed to protect us against. The government is only supposed to invade our privacy and investigate us when there is probable cause to do so.

But now the government is trying to collect as much information about all of us as it possibly can even though the vast majority of us will never be charged with any crime.

There seems to be no limit when it comes to how much personal data the government wants to gather on all of us. As I have written about previously, the chief technology officer at the CIA says that they “fundamentally try to collect everything and hang onto it forever.”

And this does not just apply to American citizens. The U.S. government is compiling data on everyone on the planet. And since such a high percentage of Internet traffic flows through U.S. networks and U.S. companies, that gives the U.S. intelligence community a tremendous “home-field advantage”. The following is from a recent piece authored by Ronald Deibert, a professor of political science at the University of Toronto…

While cyberspace may be global, its infrastructure most definitely is not.

For example, a huge proportion of global Internet traffic flows through networks controlled by the United States, simply because eight of 15 global tier 1 telecommunications companies are American — companies like AT&T, CenturyLink, XO Communications and, significantly, Verizon.

The social media services that many of us take for granted are also mostly provided by giants headquartered in the United States, like Google, Facebook, Yahoo! and Twitter. All of these companies are subject to U.S. law, including the provisions of the U.S. Patriot Act, no matter where their services are offered or their servers located. Having the world’s Internet traffic routed through the U.S. and having those companies under its jurisdiction give U.S. national security agencies an enormous home-field advantage that few other countries enjoy.

But what is really the point of all of this intelligence gathering?

Is it to make us a little bit safer?

If so, we are making a massive mistake.

Benjamin Franklin once wrote the following: “They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.”

Are you willing to give up your Fourth Amendment rights in order to feel a little more safe?

I hope not.

The U.S. Constitution never guaranteed us safety. But it is supposed to guarantee our privacy.

Fortunately, it appears that at this point public opinion is very much against all of the snooping that the government has been doing. According to the Guardian, most of the recent surveys that have been done are coming up with very consistent results…

Thursday, the Guardian released a poll conducted on Monday and Tuesday nights by Public Policy Polling looking at America’s reaction to the National Security Agency (NSA) controversy. The public appears to be reacting negatively to the revelations – and it seems to be hurting President Obama.

We found 50% of American voters believe the NSA should not be collecting telephone or internet records, compared to the 44% who think they should. The results hold even when respondents were told that the data the government is collecting is “metadata” (and not necessarily actual content of communications).

These results are consistent with a CBS News poll, Fox News poll, and YouGov survey that showed only 38%, 32%, and 35% of Americans respectively approved of phone record collection in order to reduce the chance of a terrorist attack. A Gallup poll was consistent with these, showing only 37% approved monitoring of Americans’ phone and internet use.

And Americans also seem to be very suspicious about what the government will do with our personal data once they have it.

In fact, according to a new Rasmussen survey, 57 percent of Americans believe that the government will use the information that it collects “to harass political opponents”.

And of course many of the recent scandals that have erupted this year involve the government harassing political opponents. We have seen this with the IRS scandal, and we have seen this with the spying on reporters scandal.

Just this week it was reported that CBS reporter Sharyl Attkisson has had her computers hacked repeatedly. If you are not familiar with Attkisson, she is the one reporter in the mainstream media that has been relentless when it has come to pursuing the Operation Fast and Furious and Benghazi stories. Now we are learning that a “sophisticated” intruder hacked into her computer “on multiple occasions” in late 2012…

CBS News announced Friday that correspondent Sharyl Attkisson’s computer was hacked by “an unauthorized, external, unknown party on multiple occasions,” confirming Attkisson’s previous revelation of the hacking.

CBS News spokeswoman Sonya McNair said that a cybersecurity firm hired by CBS News “has determined through forensic analysis” that “Attkisson’s computer was accessed by an unauthorized, external, unknown party on multiple occasions in late 2012.”

“Evidence suggests this party performed all access remotely using Attkisson’s accounts. While no malicious code was found, forensic analysis revealed an intruder had executed commands that appeared to involve search and exfiltration of data. This party also used sophisticated methods to remove all possible indications of unauthorized activity, and alter system times to cause further confusion. CBS News is taking steps to identify the responsible party and their method of access.”

Meanwhile, in a desperate attempt to deflect attention away from all of these scandals, Barack Obama is starting a war with Syria.

In this war, we are actually going to be helping al-Qaeda rebels that are beheading Christians to take over Syria.

If you aren’t aware of the deep connection between al-Qaeda and the Syrian rebels, just read the recent USA Today article entitled “Syrian rebels pledge loyalty to al-Qaeda” or any of the dozens of other articles that you can find on the Internet that document this very clearly.

And the sick thing is that a large number of Republicans are actually applauding Barack Obama for teaming up with al-Qaeda.

Has it suddenly become “conservative” to help al-Qaeda?

What in the world is going on?

And you know what?

The truth was that our troops were in position long before Barack Obama made his “stunning announcement” on Thursday. In fact, it has been confirmed that U.S. troops are already in Jordan along the Syrian border.

And could this conflict with Syria actually set the stage for a much larger conflict?

The Russians have been providing “mortars, light artillery, antiaircraft guns, antitank weapons and ammunition” to the Syrian government and they have loudly denounced the latest moves by the Obama administration.

Yes, the Assad government is horrible, but what Obama is doing in Syria is a terrible, terrible mistake.

If the U.S. takes down the Assad government, forces loyal to al-Qaeda and other radical jihadists are going to take over and we will have made Russia and China very angry. If the U.S. is unsuccessful in removing the Assad government, it will be considered a crushing defeat for the United States.

Either way, we lose.

So what do you think about all of this? Please feel free to post a comment with your thoughts below…

Obama’s Super Secret Treaty Which Will Push The Deindustrialization Of America Into Overdrive

June 3, 2013June 3, 2013 by Michael

Did you know that Barack Obama has been secretly negotiating the most important trade agreement since the formation of the World Trade Organization? Did you know that this agreement will impose very strict Internet copyright rules, ban all “Buy American” laws, give Wall Street banks much more freedom to trade risky derivatives and force even more domestic manufacturing offshore? If you have not heard about this treaty, don’t feel bad. Obama has refused to even give Congress a copy of the draft agreement and he has banned members of Congress from attending the negotiations. The plan is to keep this treaty secret until the very last minute and then to railroad it through Congress and have it signed into law by October. The treaty is known as “the Trans-Pacific Partnership”, and the nations that are reported to be involved in the development of this treaty include the United States, Canada, Japan, South Korea, Australia, New Zealand, Chile, Peru, Brunei, Singapore, Vietnam and Malaysia. Opponents of this treaty refer to it as “the NAFTA of the Pacific”, and if it is enacted it will push the deindustrialization of America into overdrive.

The “one world” economic agenda that Barack Obama has been pushing is absolutely killing the U.S. economy. As you will see later in this article, we are losing jobs and businesses at an astounding pace. And each new “free trade” agreement makes things even worse.

For example, just check out the impact that the recent free trade agreement that Obama negotiated with South Korea is having on us…

A 10 percent decline of U.S. exports to Korea
The U.S. trade deficit with Korea has climbed 37 percent
U.S. auto industry has been crippled
Loss of U.S. control where international trade, banking and finance is concerned
A projected 159,000 jobs will be lost

Wait a second – I though that “free trade” agreements were actually supposed to increase exports.

So why have they declined by 10 percent?

Did someone make a really bad deal?

And of course we have all seen the economic devastation that NAFTA has wrought.

When NAFTA was pushed through Congress in 1993, the United States actually had a trade surplus with Mexico of 1.6 billion dollars. By 2010, we had a trade deficit with Mexico of 61.6 billion dollars.

And “free trade” with China has turned out to be a complete and total nightmare as well.

Back in 1985, our trade deficit with China was approximately 6 million dollars (million with a little “m”) for the entire year.

In 2012, our trade deficit with China was 315 billion dollars. That was the largest trade deficit that one nation has had with another nation in the history of the world.

But instead of learning from the mistakes of the past, Barack Obama is pressing for more “free trade” agreements.

The New York Times is calling the Trans-Pacific Partnership “the most significant international commercial agreement since the creation of the World Trade Organization in 1995“. It is reportedly going to include a whole host of provisions which would never be able to get through Congress on their own. Even though this treaty will affect all of our daily lives, the Obama administration is keeping this treaty a total secret. In fact, Obama won’t even show it to Congress even though members of Congress have asked repeatedly to see it…

The agreement, under negotiation since 2008, would set new rules for everything from food safety and financial markets to medicine prices and Internet freedom. It would include at least 12 of the countries bordering the Pacific and be open for more to join. President Obama has said he wants to sign it by October.

Although Congress has exclusive constitutional authority to set the terms of trade, so far the executive branch has managed to resist repeated requests by members of Congress to see the text of the draft agreement and has denied requests from members to attend negotiations as observers — reversing past practice.

While the agreement could rewrite broad sections of nontrade policies affecting Americans’ daily lives, the administration also has rejected demands by outside groups that the nearly complete text be publicly released.

So exactly who in the world does this guy think that he is? Why won’t Obama let us know exactly what is in this treaty?

Fortunately, there have been a few leaks. One thing that we have discovered is that this new treaty would reportedly ban all “Buy American laws“.

That certainly would not be popular if it got out.

And do you remember SOPA?

The American people wanted nothing to do with the very strict Internet copyright provisions of SOPA and loudly expressed their displeasure to members of Congress.

Unfortunately, now the provisions of SOPA are back. It is being reported that most of the provisions of SOPA have been quietly inserted into this treaty. If this treaty is enacted, those provisions will become law and the American people will not be able to do anything about it.

And according to the New York Times, there are all sorts of other disturbing things that have been slipped into the treaty…

And yet another leak revealed that the deal would include even more expansive incentives to relocate domestic manufacturing offshore than were included in Nafta — a deal that drained millions of manufacturing jobs from the American economy.

The agreement would also be a boon for Wall Street and its campaign to water down regulations put in place after the 2008 financial crisis. Among other things, it would practically forbid bans on risky financial products, including the toxic derivatives that helped cause the crisis in the first place.

Are you starting to understand why the Obama administration is keeping this treaty such a secret?

If the details of this treaty were revealed to the American people right now, it would create such an uproar that Congress would never approve this treaty.

So please share this article with as many people as you can. We have got to get the American people educated about this.

Enough damage has already been done to the U.S. economy by “free trade” agreements. Just consider the following statistics…

-The United States has lost more than 56,000 manufacturing facilities since 2001.

-Back in the year 2000, there were more than 17 million Americans working in manufacturing. Now there are less than 12 million.

-There are less Americans working in manufacturing today than there was in 1950 even though the population of the country has more than doubled since then.

-According to the Economic Policy Institute, America is losing half a million jobs to China every single year.

-According to Professor Alan Blinder of Princeton University, 40 million more U.S. jobs could be sent offshore over the next two decades if current trends continue.

-Today, corporate profits as a percentage of U.S. GDP are at an all-time high, but wages as a percentage of U.S. GDP are near an all-time low.

-Without enough good jobs, more Americans are becoming dependent on the government. If you can believe it, the number of Americans on food stamps has gone from about 17 million in the year 2000 to more than 47 million today.

-Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.

And things continue to get even worse. The Institute for Supply Management manufacturing index declined to 49.0 in May. Any reading below 50 indicates contraction.

That was the lowest reading that we have seen since June 2009. Just like most of the rest of the world, we are rapidly heading toward another major economic downturn.

And if you want a perfect visual example of what deindustrialization is doing to America, just look at the city of Detroit.

It was once one of the greatest manufacturing cities in the history of the world, but now it is a rotting, decaying, festering hellhole.

According to the New York Times, there are now approximately 70,000 abandoned buildings in Detroit, and at this point the city is so broke that there is talk that the female giraffe at the Detroit Zoo could be sold off to help pay the bills.

For much more on how deindustrialization is ripping the guts out of the U.S. economy, please see the following articles…

1) “55 Reasons Why You Should Buy Products That Are Made In America”

2) “40 Ways That China Is Beating America”

3) “Show This To Anyone That Believes That ‘Things Are Getting Better’ In America”

4) “10 Amazing Charts That Demonstrate The Slow, Agonizing Death Of The American Worker”

5) “22 Stats That Show How The Emerging One World Economy Is Absolutely Killing American Workers”

What Barack Obama is trying to do is a mind blowing mistake.

The “one world” economic agenda that he is pursuing is destroying the American worker and the American middle class.

U.S. workers are being thrown into a global labor pool with workers on the other side of the planet that live in countries where it is legal to pay slave labor wages.

Do you want to directly compete with a worker on the other side of the globe that is doing your job for a dollar an hour with no benefits?

If not, you need to stand up and make your voice be heard.

There is no way in the world that American workers should have to compete for jobs with workers making slave labor wages in communist China.

What we desperately need are some red-blooded economic patriots to arise and to tell both political parties that we do not want this “one world” economic agenda.

So what do you think?

Will the American people wake up, or will our economy continue to lose thousands of businesses and millions of jobs?

Please feel free to post a comment with your thoughts below…

Top 1% Own 39% Of All Global Wealth: Hoarding Soars As We Hurtle Toward Economic Oblivion

May 31, 2013 by Michael

According to a study that was just released by Boston Consulting Group, the wealthiest one percent now own 39 percent of all the wealth in the world. Meanwhile, the bottom 50 percent only own 1 percent of all the wealth in the world combined. The global financial system has been designed to funnel wealth to the very top, and the gap between the wealthy and the poor continues to expand at a frightening pace. The global elite continue to hoard wealth and heap together enormous mountains of treasure in these troubled days even though the economic suffering around the planet continues to grow. So exactly how have the global elite accumulated so much wealth? Well, one of the primary ways is through the use of debt. As I have written about previously, there is about 190 trillion dollars of debt in the world but global GDP is only about 70 trillion dollars. Our debt-based global financial system systematically transfers wealth from us and our governments into the hands of the global elite. And of course the gigantic banks and corporations that the elite control are constantly gobbling up everything of value that they can find: natural resources, profitable small businesses, real estate, politicians, etc. Money, power, ownership and control are becoming very, very tightly concentrated at the top of the food chain, and that is a very dangerous thing for humanity. When too much money and power gets into too few hands, it almost always results in tyranny.

What will eventually happen when the global elite have ALL the wealth?

Will the rest of us work as serfs in a system that they have iron-fisted control over?

And what if they decide that they don’t really need billions of people working for them? Will they decide to implement population control measures in order to reduce the number of “useless eaters”? It is already happening in China and other highly centralized societies.

When all of the economic rewards of a society go to a very small handful of people, it tends to be very destabilizing. We have seen this again and again throughout history.

When people have everything taken away from them and they have nothing left to lose, they tend to become very desperate. And right now we are rapidly hurtling toward a time of great global instability. Anger and frustration are growing all over the globe, and the rate at which the gap between the wealthy and the poor is widening seems to be accelerating. Just check out these numbers…

-The wealthiest 1 percent of the global population now owns 39 percent of all the wealth on the planet.

-According to a report that was released last summer, the global elite have up to 32 TRILLION dollars stashed in offshore banks around the planet.

-According to a study conducted by Credit Suisse, the bottom two-thirds of the global population owns just 3.3% of all the wealth.

-A study by the World Institute for Development Economics Research discovered that the bottom half of the world population owns approximately 1 percent of all global wealth.

-It is estimated that the entire continent of Africa only owns approximately 1 percent of the total wealth of the world.

-Approximately 1 billion people throughout the world go to bed hungry each night.

-If you can believe it, more than 3 billion people currently live on less than 2 dollar a day.

In the world that we live in, money equals power. And the more money that the top one percent accumulate, the more power they will accumulate as well.

So exactly who are the top one percent? I discussed this at length in my previous article entitled “Who Runs The World? Solid Proof That A Core Group Of Wealthy Elitists Is Pulling The Strings“. The global elite are absolutely obsessed with power and control and they have been working to implement their agenda for a very long time. In the end, they hope to unite the entire planet under a monolithic global system that they control. They are actually quite open about this – it is just that most people do not want to believe it.

The gap between the wealthy and the poor is rapidly growing in the United States as well. Sadly, this means that the middle class is steadily disappearing as the ranks of those that are living in poverty continues to increase.

But of course not everyone is doing badly in the U.S. right now. In fact, those that own stocks have had lots of reasons to celebrate in recent months.

So who owns stocks?

Well, the wealthy do of course. In fact, approximately 60 percent of all individually held stocks are owned by the top 5 percent of all Americans.

During the last recession, Americans lost 16 trillion dollars of wealth. Since then, about 45 percent of that wealth has been “recovered”, but the vast majority of that “recovery” has been due to rising stock prices. The following comes from a recent Washington Post article…

From the peak of the boom to the bottom of the bust, households watched a total of $16 trillion in wealth disappear amid sinking stock prices and the rubble of the real estate market. Since then, Americans have only been able to recapture 45 percent of that amount on average, after adjusting for inflation and population growth, according to the report from the St. Louis Fed released Thursday.

In addition, the report showed most of the improvement was due to gains in the stock market, which primarily benefit wealthy families. That means the recovery for other households has been even weaker.

“A conclusion that the financial damage of the crisis and recession largely has been repaired is not justified,” the report stated.

Once upon a time, the United States had the largest and most thriving middle class in the history of the world. That was a great thing. But now the middle class is being destroyed and government dependence has surged to an all-time high.

The following are some of the incredible statistics that show how wide the gap between the wealthy and the poor in America is becoming…

-The wealthiest 1 percent of all Americans now own more than a third of all the wealth in the United States.

-In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

-According to Forbes, the 400 wealthiest Americans have more wealth than the bottom 150 million Americans combined.

-The six heirs of Wal-Mart founder Sam Walton have as much wealth as the bottom one-third of all Americans combined.

-On average, households in the top 7 percent have 24 times as much wealth as households in the bottom 93 percent.

-Between 2009 and 2011, the wealth of the bottom 93 percent of all Americans declined by 4 percent, while the wealth of the top 7 percent of all Americans increased by 28 percent.

-The poorest 50 percent of all Americans collectively own just 2.5% of all the wealth in the United States.

-The top 0.01% of all Americans make an average of $27,342,212. The bottom 90% make an average of $31,244.

For much more on how poverty is rising and the middle class is being destroyed, please see my recent article entitled “22 Facts That Prove That The Bottom 90 Percent Of America Is Systematically Getting Poorer“.

Obviously we have a huge problem here.

With each passing day, poverty is rising and more people are becoming dependent on the government.

So what is the solution to this mess?

Please feel free to voice your opinion by posting a comment below…

Are We On The Verge Of Witnessing The Death Of The Paper Gold Scam?

May 8, 2013 by Michael

The legal claims on physical gold far exceed the amount of physical gold that the banks actually have by a very, very wide margin. And right now the bankers are scared out of their wits because their warehouses are being drained of physical gold at a frightening rate. So what happens when their physical gold is gone but they still have lots and lots of people with legal claims to gold? When that moment arrives, it will represent the end of the paper gold scam. Many believe that the recent takedown of the price of paper gold was a desperate attempt by the bankers to put off that day of reckoning, but it appears to have greatly backfired on them. Instead of cooling off demand for precious metals, it has unleashed a massive “gold rush” all over the globe. Meanwhile, word has been spreading among wealthy families in both North America and Europe that they had better grab their physical gold out of the banks while they still can. This is creating havoc in the financial community, and at least one major international bank has already declared that it will only be settling those accounts in cash from now on. The paper gold scam is starting to unravel, and by the time this is all over it is going to be a complete and total nightmare for global financial markets.

For years it has been widely known that the promises that banks have made regarding their gold far exceed their actual ability to deliver, but we have never reached a moment of such crisis before.

Posted below are quotes from people that know precious metals far better than I do. What these experts are saying is more than a little bit disturbing…

–CME President Terry Duffy: What’s interesting about gold, when we had that big break two weeks ago we saw all the gold stocks trade down significantly, we saw all the gold products trade down significantly, but one thing that did not trade down, was gold coins, tangible real gold. That’s going to show you, people don’t want certificates, they don’t want anything else. They want the real product.

–Billionaire Eric Sprott: So we see all of these paper (trading) volumes going through that bear absolutely no relationship to what’s going on in the physical markets. As you know I have always been a proponent of the fact that supply in the gold market was way less than demand, and by a very large factor. I think demand exceeds supply by at least 60%. The central banks are surreptitiously supplying that gold, and ultimately they will be running on fumes.

When we hear about the LBMA not willing to deliver gold, and JP Morgan’s inventories at the COMEX have gone from 2.4 million (ounces) down to 160,000 ounces, it just makes you realize that all of this paper trading means nothing. It’s the real physical market that you have to rely on.

–JS Kim: FACT #1: COMEX gold vaults were recently drained of 2 million ounces of physical gold in one quarter, the largest withdrawal of physical gold bullion from COMEX vaults in one quarter during this entire 12-year gold and silver bull. There has been speculation about the reasons that spurred these massive withdrawals of gold from COMEX vaults, but the most reasonable speculation is that no one trusts the bankers to hold on to their physical gold anymore, especially in light of Fact #2. Note below, that both registered AND eligible stocks of gold had heavily declined in recent months. Such an event signals a general distrust of the banking system from everyone holding gold in registered COMEX vaults.

FACT #2: One of the largest European banks, ABN Amro, defaulted on their gold contracts and informed their clients that they would only settle their gold bullion contracts in cash and not in physical. So much for the supposed legality of financial contracts as a “binding” contract. So whether Fact #1 caused Fact #2 or vice versa is irrelevant. What IS apparent is that the level of trust in bankers to safekeep physical gold and physical silver is disappearing, as it should be, and as it should have already been for years now. But truth always takes some time to catch up to banker spread lies and that is what is happening now. I have been warning people never to trust bankers in deals involving gold and silver for years now, as in this article I wrote nearly four years ago informing the public that the SLV and GLD are likely a banker invented scam as well.

FACT #3: Silver fraud whistleblower and London trader Andrew Maguire stated that the LBMA was having trouble settling gold contracts in bullion as well and stated that institutions that asked for physical settlement “were told they would be cash settled instead by a bullion bank.” In plain English, this is a default. So Andrew Maguire reported that the LBMA had already gone into default. In light of Fact #1 and Fact #2, the dominoes were starting to tumble and the house of cards that the bankers had built in gold and silver paper derivatives to deceive and hide the true fundamentals of the physical gold and physical markets from the entire world was rapidly starting to crumble. A financial earthquake of magnitude 2.5 was quickly threatening to evolve into one of the biggest financial earthquakes of all time in which the world’s confidence in all global fiat currencies would effectively have a well-deserved funeral.

–Jim Sinclair: I think the reality is the supply situation is extremely volatile at this point, and even discussing it is like rubbing a raw nerve to the people who are in charge. The amount of discussion on the subject of warehouse supply, supply that is represented by the gold leases, indicated to the central planners that the demand for physical was going to continue to effect the exchanges.

Although they did not expect any grandstand delivery, the mere continued draining of physical inventories was threatening the very functioning of the paper exchange. That threatening of the paper exchange and its ability to continue functioning is really taking off the blinders and revealing the truth behind the critical question, ‘Where is the gold?’

The question now is, ‘Where has the gold gone?’ Who has all of this gold? Because of the nature of gold leasing, all of this gold has been purchased and it has gone somewhere. The reality of the empty vaults reveal that the gold has gone missing.

–Ronald Stoeferle: We’re seeing this rush to physical gold not only in the retail market, but also for the institutional players…[it’s] just overwhelming…I [estimate] a 130-to-1 [ratio of paper to physical gold]…and I think in the last week we were really close to [triggering] a default of the paper market.

–Gerhard Schubert, head of Precious Metals at Emirates NBD: I have not seen in my 35 years in precious metals such a determined and strong global physical demand for gold. The UAE physical markets have been cleared out by buyers from all walks of life. The premiums, which have been asked for and which have been paid have been the cornerstone of the gold price recovery. It is very rare that physical markets can have a serious impact on market prices, which are normally driven solely by derivatives and futures contracts…

I did speak during the week with several refineries in the world, of course including the UAE refineries, and the waiting period for 995 kilo bars is easily 2-3 weeks and goes into June in some cases. A large portion of the 995 kilo bars in the UAE goes normally into the Indian market, but a lot of the available 995 kilo bars are destined for Turkey, at this time. We heard that premiums paid in Turkey have reached anything between US $ 20 and US $ 35 per ounce.

–James Turk: Another indication of the demand for large bars is the huge drawdown in the gold stock in COMEX warehouses. It is noteworthy that COMEX reports show the drawdown is largely the result of dealers removing their inventory, their working stock. When that happens, you know the availability of supply is constrained.

What all of this means, Eric, is one thing. If the central planners want to keep the precious metals at these low prices, to meet the demand for physical metal they will need to empty more metal from central bank vaults, or borrow metal from the ETFs as some have suggested is happening. Otherwise, the central planners will have to step back and stop their intervention, thereby letting the price of gold and silver rise so that demand tapers off, bringing demand and supply of physical metal back toward some kind of balance.

We’ve seen this same situation several times over the last twelve years. It is what I have been calling a “managed retreat.” Despite the current weakness, I firmly believe we have again entered a critical period where the central planners will need to retreat once again in order to let the gold and silver prices climb higher.

–The Golden Truth: And then I get a call from a close friend in NYC last Friday. His career has been in private wealth management in the private bank department of the Too Big To Fail banks. He’s been looking for work and chats with old colleagues all the time. He called my Friday and told me he just got off the phone with a very high level private banker from a big Euro-based TBTF bullion bank, but who was at JP Morgan until about six months ago.

This guy told my friend that there is a scramble by many very wealthy European families/entities to get their 400 oz bars out of the big bank vaults. He knows this personally, for a fact. He said the private banker community is small over there and the big wealthy families all talk to each other and act on the same rumors/sentiment. The Bundesbank/Fed and the ABN/Amro situations triggered this move. He knows for a fact JPM tried to calm fears about 3 months ago by sending a letter to it’s very wealthy clients assuring them their bars were safe, in allocated accounts. He said right now those same families are walking into the big banks like JPM and demanding delivery of their bars or threatening to take their $100’s of millions in investment portfolios to competitors. His wording was “these people are putting a gun to the heads of private banks and demanding their gold.”

I know this information is good because I know my friend’s background and when he tells me his source is plugged in, the guy is plugged in. Not only that, my friend’s source said that there’s no doubt that someone like a John Paulson, not necessarily specifically him, but entities like him or it may include him, have held a gun to GLD and demanded delivery of physical in exchange for their shares.

Regarding the Bundesbank/Fed situation, recall that the Bundesbank asked to have some portion of its gold sitting – supposedly – in the NY Fed vault in NYC sent back Germany. The total amount is 1800 tonnes. After behind the scenes negotiations, the Fed agreed to ship 300 tonnes back over seven years. To this day, the time required for that shipment has never been explained. Venezuela demanded the return of its 200 tonnes held in London, NYC and Switzerland and received it all within about four months.

And regarding the ABN/Amro situation. ABN/Amro offered a gold investment account product that offered physical delivery of the gold in the investment account when the investor cashes out. About a week before the gold price smash, ABN sent a letter to its clients informing that the physical delivery of the bullion was no longer available and that all accounts would be settled with cash at redemption.

I believe it was these two events that triggered the big scramble for physical gold by wealthy families/entities who were suspicious of the integrity of their bank vault custodial arrangement anyway.

*****

So what does all of this mean?

It means that we are entering a period when there will be unprecedented volatility for precious metals. There will be tremendous ups and downs as this crisis plays out and the bankers try to keep the paper gold scam from completely unraveling.

Meanwhile, nations such as China continue to stockpile gold as if the end of the world was coming.

According to Zero Hedge, Chinese gold imports set a brand new all-time record high in March…

Quite the contrary: as export data released by the Hong Kong Census and Statistics Department overnight showed, Chinese gold imports in March exploded to an all time record high of 223.5 tons.

And the number for April is expected to be even higher.

Does China know something that the rest of us do not?

We are also seeing a rapid decoupling between spot prices and physical prices. In fact, it is quickly getting to the point where the spot price of gold and the spot price of silver are becoming irrelevant.

For example, demand for silver coins has become so intense that some dealers are charging premiums of up to 30 percent over spot price for silver eagles.

That would have been regarded as insane a few years ago, but people are now willing to pay these kinds of premiums. People are recognizing the importance of actually having physical gold and silver in their possession and they are willing to pay a significant premium in order to get it.

We are moving into uncharted territory. The paper gold scam is rapidly coming to an end. In the long-term, this will greatly benefit those that are holding significant amounts of physical gold and silver.

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