Hat Trick Letter – březen 2011

THE IMPACT OF JAPAN IS COMPREHENSIVE AND PROFOUND ACROSS ALL ASPECTS OF FINANCIAL MARKETS. THE NATION HAS HIT SEVERAL IMPORTANT TRIGGERS SIMULTANEOUSLY. ECONOMIC FALLOUT IS GREATEST INSIDE JAPAN ITSELF. THE IMPACT IS GREATEST WITH THE UNITED STATES AND JAPAN. THE USGOVT MANAGES A MONETARY NUCLEAR REACTOR THAT IS ALSO IN CORE MELTDOWN.

FUNDS FOR FINANCIAL MARKET SUPPORT: Tremendous emergency funds have been appropriated and set aside by the Japanese Govt for financial market rescue & support. The price will be even larger than reconstruction & relief efforts. The debt added is intended to stave off a total national meltdown. The initial pledge of funds was for $86 billion to stabilize their financial market, to make regional bank liquidity available, and to fund relief efforts. They reacted to factory shutdowns, a curtailment of distribution channels, and rolling electrical blackouts. The next pledge of funds was for $183 billion  to further stabilize markets and banks. The support continued until the latest amount is reported to be 55.6 trillion Yen, equal to almost US$700 billion Japan has rapidly crossed the bridge from deflation to inflation.

FUNDS FOR TANGIBLE PURPOSES: Tremendous emergency funds have been appropriated and set aside by the Japanese Govt for relief efforts, worker crews, earthquake & tsunami cleanup, body retrieval & searches, and reconstruction. The price tag will be huge, and seems to grow leaps and bounds on a daily basis. The deficit will be large, adding to an already enormous cumulative national debt. Japan must rebuild infrastructure as well as supply delivery systems for basics like food and factory material input, even cash at bank machines.

SALE OF FOREIGN ASSETS: Given the overloaded saturated debt situation in Japan, many assets must be sold in order to raise cash, mostly foreign. Without actual assets used, the size of the crisis and its funding aftermath would produce significant and immediate price inflation. Therefore, they will sell a large hoard of USTreasury Bonds, USAgency Bonds, and possibly US Corporate Bonds. The Japanese insurance companies must also raise cash to pay for claims from the widespread damage, including to businesses. They will sell US$-based bonds also. An unintended consequence is for a pinprick of the USTBond asset bubble, which has been puffed for over two years. Some funds will be made available with USTBond dumps for sure, but in an emergency setting, immediate money creation will be ordered.

REPATRIATION EFFECT: Concurrently, the March 31st deadline approaches for the annual Japan Repatriation of cash held in foreign accounts. The requirement will add to the inflow of money into Japan from overseas. This annual return migration involves funds held in all foreign lands, and will force the sale of EuroBonds, UKGilts, and loose cash in the Persian Gulf. The effect will cause the Yen currency to strengthen relative to all fiat currencies, rendering harm to Japan’s export industries. The world annually goes through this required effect, but this year should be more pronounced.

COMMODITY DEMAND EFFECT: The rush to undertake reconstruction will require a wide array of commodities at a time when the commodity market is afire in price increases. From steel to cement to lumber to fuel products to fuel, the major commodities will be in enormous demand, all on a marginal increase basis. The effect on commodity prices will be sizeable and noticeably attributed to Japan. It will be felt primarily after the landscape settles enough for work crews to begin the massive efforts. Already, critical supply shortages have been reported.

FOOD PRICE EFFECT: The shortage of foodstuffs comes from both disrupted original growing locations and disrupted supply chain in delivery systems. Again, a wide variety of foodstuffs will be in enormous demand, all on a marginal increase basis. The effect on commodity prices will be sizeable and noticeably attributed to Japan.

PRICE INFLATION EFFECT: Japan stands at risk of a hyper-inflation episode with more punch than what has begun to unfold in the USEconomy. The emergency funding for both reconstruction and financial market support will unleash price inflation from the inevitable spillover, a financial tsunami of funds. Also, the rising demand and supply shortage with intensify the price inflation. Since the Japanese Debt/GDP ratio is near 200%, they cannot hike interest rates without causing a default on their bonds. The Bank of Japan will monetize the required funds to rebuild their country and later worry about consequences of hyper-inflation. If foreign asset sales are not ordered, and fresh debt monetization occurs, the price inflation will be power packed and doubly significant. When a nation reaches saturation on debt, the new debt is monetized and hits the main street as inflation rapidly. However, it is hard for hyper-inflation to strike a nation with a rising currency. Incredibly strange crosswinds are at work.

EXPORT TRADE EFFECT: The redemption of US$-based bonds will be staggering and sudden, compounded by the sale of other US$ assets. The effect will be a steady relentless significant rise in the Japanese Yen, a decline in the US$/Yen exchange rate, with a powerful effect on the Japanese export industries. A big trade deficit is coming to Japan, a new concept. The system will work to bring the Yen currency down on the tangible side while the financial side actually pushes the Yen up. A big conflict and paradox comes. The lost surplus is a direct result of the rise of Chinese industry, something Japanese firms have invested in, with important technology transfer. The newly arriving trade deficit could easily become a permanent fixture, and its funding will aggravate the high government debt burden.

YEN CARRY TRADE CLIMAX EFFECT: The reversal unwind of the Yen Carry Trade appears to be entering its third and possibly final phase. The unwind has required over ten years to complete. The YCTrade took 15 to 20 years to build into the largest, most powerful, and significant financial engine of phony wealth the world has ever witnessed. The YCTrade unwind is to be assured by the heavy Japanese selling of USTreasurys. Call it a major unintended consequence. The unwind spells major problems for the Japanese export industries, but also for the USTreasury Bond complex. The entire world will continue to abandon the USTreasurys except for a few nations that wish to openly protect their export trade.

EMERGENCY G-7 YEN SELLING PACT: The emergency meeting of G-7 nations was given a general purpose of dealing with Japan, but it was all about the rapid unwind of the Yen Carry Trade without a single mention of the vast perverse engine. The accord resulted in a global consensus that all nations would help to purchase USTBonds sold by Japan, from the unwind of the YCTrade. The G7 Yen weakening accord is a disguised USDollar rescue, since a rising Yen goes with a falling USDollar. Attempts are made to avoid the USFed being isolated as the sole buyer of USTBonds, which is inevitable. The USFed must monetize all the foreign central bank asset purchases of USTBonds ordered abroad, or face higher US interest rates and threatened USGovt debt default. So they print huge amounts of money through the New York Fed window. A USTreasury auction was postponed so as to enable more efficient printing operations. The sales in Brussels, London, and Tokyo will be covered by the USFed. Thus foreign currency exchange rates are rising versus the USDollar still. The Yen Selling Pact by the G-7 emergency is better described as a Global QE3. Monetary expansion cannot be concealed, since out in the open, and blessed with global consent. A risk of a global central bank franchise model destruction could be in intermediary stage. The monetary system is at risk of greater and sudden fractures.

GOLD & SILVER EFFECT: With all the newly created money from Japan in direct inflation, with all the USTBond sales to undermine the USDollar, with all the commodity demand in reconstruction, the overall effect on demand for Gold & Silver will be positive and powerful but a little delayed. One can smell a monster midyear rally in Gold & Silver after some time to gather facts, assess the situation, and detect the positive winds. The entire Japan story is huge bullish for Gold and extremely bearish for all paper currencies certain to be debased further. The G-7 Yen Selling Pact is all about coordinated currency dilution. With Japan, the United States, and and the EuroZone all printing money, global monetary hyper-inflation cannot be avoided. Gold & Silver will react. Attempts to deal with the breakdown will contribute to global systemic price inflation, which has already been initiated. Gold & Silver will react.

CHAOS & KILLING FIELD EFFECT: None of the above points even touches on the nuclear radiation threat to Japan and its downstream global neighbors. My fear is that the long awaited global population reduction programs might be set off by the evil syndicate that has infiltrated far too many governments, led by the USGovt. The natural disaster of the earthquake in Japan in my view was caused by the corona mass emission from the sun, with a powerful impact that altered the earth’s rotational axis. The resulting damage to the inferior nuclear generator complex might invite other more intentional events from the vile corners occupied by the syndicate, which brought viral weapons like the SARS and Swine Flu, among other devices like HAARP weapons. The darkest elements of humanity, where bankers roam, in tight control of government forces, including the narcotics barons, wish to reduce the global population by 20% at least. They might undertake some nasty projects, even with false flags, and set off a chain of highly destructive events. It could be disguised within a world war. Those who refuse to believe in genocide plans are some of the nicest but dumbest people alive.

AMERICAN FINANCIAL NUCLEAR REACTOR MELTDOWN: Chris Martenson describes the Great American Financial Nuclear Reactor, which is in the process of going through its own core meltdown. He wrote, „For decades, the world has been running its own nuclear style reaction, only in the currency and debt markets, where exponentially accelerating piles of debt and money have spun about faster and faster in a gigantic, complex, coordinated reaction, the core of which is, and always has been, the United States. At the very center of this ungainly money reactor is the main fuel pile itself, the USTreasury market. With any interruption to smooth flow of money through this pile, it will immediately become unstable. The abrupt slowdown of the world’s third largest [Japanese] economy alters the smooth flow of cash around the globe, and even causes reversals of some other longstanding flows. Eventually Japan has to sell some of its vast hoard of US bonds in order to pay for external items needed for its reconstruction. Further, insurance companies, huge holders of US bonds, face stiff liability claims in the wake of the worst natural disaster to hit a heavily industrialized center and will be forced to redeem enormous amounts of Treasury paper. Stressed governments are finding themselves in more of an arguing mood, and agreements are hard to come by. Banks will begin to fail again, global trade to fall off, unrest to continue to build. And then it happens, a currency crisis!“

NOT A REPEAT OF 2008 COMMODITY SELLOFF: Independent analyst Dan Norcini cautioned gold investors not to expect a similar commodity price meltdown like in 2008 after the Wall Street death event. Gold & Silver each sold off sharply during the ensuing months after the collapse of the US banking system, as a liquidity drain was joined by a Wall Street attack of hedge funds. This time is totally opposite. Back in 2008 no Quantitative Easing program was in place, as hyper-inflation engines had not been turned on like now. QE will be global next. The 2008 problems had an unknown element embedded with bank derivatives. Norcini argues that the crisis today is more known, and more centered in Japan, but the Jackass disagrees. The extent of the wrecked export trade of Japan is a big unknown. The extent of the Yen Carry Trade unwind, and its drain from USTreasury Bond sales is a big unknown. The strain on the USFed might actually be more aggravated than they can manage. The extent of the radiation fallout to foreign lands downstream from the trade winds is a big unknown. California must be watched, as well as the NorthWest and Vancouver. Big unknowns remain and lurk with potential lethal impact to both economies and people.

Norcini makes great points about the monetary response being engaged and already at work. He makes great points about the reconstruction demands on commodities of many types. He concluded, „Back in 2008, there was no Fed QE and there was no Japan QE. Once the QE was announced by the Fed near the end of 2008, the hemorrhaging stopped and when the program actually commenced in March the next year, Gold and the rest of the commodity world took off to the upside. The action by the Fed seemed to take the unknown out of the situation in the one sense that many believed that the Fed would not allow the financial system to utterly fail, when many had believed it would. My strong belief is that the panic selling we are seeing in the markets is tied not to the earthquake damage or even the tsunami damage, but at this point to the unknown associated with a nuclear issue. The truth is the Japanese are going to require massive amounts of raw materials to rebuild their battered infrastructure. That is going to put a firm bid under the base metals and other commodity markets a bit further down the road. The implications are more of a short-term bearish thing, long-term bullish for commodities in general, but particularly bullish for Gold because of the implications associated with a QE program by another massive economy.“

THE USGOVT IS SECRETLY ATTEMPTING TO FLOAT AN IDEA TO RETIRE THE USDOLLAR, PAY OFF CREDITORS WITH TOILET PAPER, RETIRE THE ENTIRE DEBT, DEVALUE OLD ASSETS, START ANEW, AND ISSUE A NEW USDOLLAR. THIS NEW USDOLLAR CONCEPT SEEMS GROTESQUELY FLAWED SINCE IT LETS THE UNITED STATES OFF THE HOOK AS DEFAULTED DEBTOR, AND IT ASSUMES NO CONSEQUENCE FROM THE USTREASURY BOND LIQUIDATION. THE USGOVT AND USECONOMY WOULD DESTROY THE URGENTLY NEEDED CREDIT TO MAINTAIN ITS ONGOING MASSIVE DEFICITS.

In early February, over 150 US State Dept emissaries were called home to WashingtonDC for secret meetings. The news came and went quickly on internet journals. Many thought meetings were convened to discuss the growing Arab world upheaval. Instead, my sources report that the USGovt wanted to canvass opinions and coordinate feedback, if not to simply float a trial balloon on an historically unprecedented idea. The USGovt is trying to end the USDollar, to retire it, and to replace it in a fresh start after forcing a stern devaluation on all US$-based assets in conversion. The Boyz are printing $100 billion per month. So why not print $5 to $6 trillion and pay off all creditors with fresh colored toilet paper? The plan would call for all foreign creditors to be paid off, and all US-based depositors converted, both parties suffering devaluations. They would all be betrayed under the conceived plan, handed a hefty 30% instant devaluation that would accompany the birth to the new Republic Dollar by name, backed 80% by gold and 20% by silver. My guess is that Gold & Silver would be revalued at $7000 and $250, or $5000 and $175, something like that.

The old US$-based USTreasury Bond debt would be paid off with Printing Pre$$ toxic effluent output. The new US Republic Dollar would be backed by precious metals finally, in a return to the Gold Standard. The entire concept does not receive solid confirmation, but rather numerous repetitions from the same secondary source, and reports on support mechanisms working feverishly to enable its enactment. The story does receive an echo from Bob Chapman. The plan is very unclear about the status of old US$-based stock and bond and property assets, but my belief is they would be devaluated in hidden manner, to minimize public objection and to enable acceptance. It is also unclear the status of old US$-based debt obligations like home loans and car loans and business loans, but my belief is they would be converted in like kind. Recall that the world rejected the Amero concept for a omnibus North American currency before, largely because the United States could not dictate terms of contracts across the world, like between Chile and Europe on copper or between China and Brazil on sugar cane or between Canada and China on industrial metals.

My thinking has many parts, best summarized with a caption heading NO WAY IN HELL but summarized in three reasons.

1)      The USGovt does not own enough Gold & Silver to back a new currency, even at higher precious metal prices.

2)      The USGovt is the debtor nation, and debtors never dictate the terms of liquidation and restructure. The creditors do.

3)      The USGovt has huge deficits, and the USEconomy has huge deficits, each not to be funded since creditor nations would halt all new credit to the US after they are handed forced devaluations on the instant payoff and devaluation.

The USGovt and USBankers cannot possibly dictate the terms of a new USDollar since they are bankrupt, since they are guilty of multi-$trillion bond fraud, and since the USGovt and USEconomy are both deeply insolvent with ongoing massive deficits. The defaulting debtor does not dictate terms to the creditors, even if the debtor is dominated by global banker elite. The wild card in such a deal would be nuclear weapons and an eager CIA to deliver terrorist attacks surreptitiously to any creditor nation seeming uncooperative. Instead, somehow, unsure how, the global elite bankers eat some crow, mixed with toxic bread & butter, and are demoted on the global stage of power, secret pacts with China notwithstanding.

With a new US Republic Dollar, the deficits would cripple the United States immediately. The USGovt deficit would force the United States to find and hand over many tons of Gold & Silver every quarter and year, without fail or exception or forgiveness, since no more scheister paper repayment in settlement.  The US lacks the base monetary metal from which to continue the outsized and worsening deficits. The USEconomic deficit would force the US into insolvency immediately. The result would be that right away, the US would forfeit massive amounts of Gold & Silver that it does not own to settle trade gaps. Perhaps massive hidden Syndicate Gold supply would come to the table, taken as counter-party from Wall Street shorts that destroyed those shell corporate entities. My position has been stated before, that a new hard currency behind the US financial system would result in rapid insolvency and ruin, since the old systemic insolvency would instantly cripple any new launched monetary initiative. Thus the US never proposes one like the new Republic Dollar. Other foreign nations that would use the new Republic Dollar would generate large surpluses, and therefore make possible grand demands for US forfeited Gold & Silver. A new gold-backed US$ currency would force an immediate Black Hole inside the US system. The new system would promote in fast return exactly the same grotesque imbalances in a grand degradation. The United States could not expect to be given renewed credit after betraying the world’s major creditors with the USTreasury Bond devaluations and liquidations, not in this real world.

Lastly, the new Nordic Euro currency would have to be subjugated under the new Republic Dollar. Such a development could only happen under some very scummy power sharing agreement with Russia and China and Germany. Then again, they might make a decision under nuclear threat. Any new Chinese Yuan currency with a hard asset backing would also have to be subordinated under the new Republic Dollar also. Those agreeing to subjugation under continued Anglo banker rule must accept $trillions in losses from USTreasury Bonds, USAgency Mortgage Bonds, even US Corporate Bonds during the devaluation process. The surplus nations, those blessed by huge surpluses, huge reserve savings, robust industry, and absent debts are planning the new Nordic Euro currency, a gold-backed currency. My belief is that as the Nordic Euro comes closer to its anticipated June 2011 launch, enormously important negotiations, hidden battles, important posturing, and desperate ploys will be put forth. The new Republic Dollar seems fanciful and totally impractical, surely such a desperate ploy to be shot down, unless a nuclear threat is delivered.

My best banker source, with solid international experience over 30 years, dismissed the idea as a wet dream by Anglo criminals to gain forgiveness, or rather to dictate forgiveness. This sage generous veteran claims the next phase will unfold very differently, with the foreign group called the Eastern Alliance pulling the rug from under the criminal Americans and British bankers, who operate a syndicate and display an evil streak. They are plainly nazis with nice wrappers. Neocon meant fascist nazi, for those naive in the crowd. The coming arrival of the gold-backed New Nordic Euro is causing a rush to duplicate it. The United States and Great Britain will either maintain a control position within a huge global slavery fascist brutal regime (featuring genocide), or else the US will descend into the Third World with a dead currency which must bid for the good useful currency in order to secure supplies. My belief is that the US$ in current form will be rejected within 18 months, globally, for crude oil and global trade settlement. My belief is that the USEconomy will suffer profound price inflation in the coming two years. My belief is that a new Republic Dollar would fall on its face before launch, but after presentation. A payoff of USTreasury Bonds with soon retired toxic paper with promise of deep devaluation would have immediate consequences of grave proportion, like the US being totally isolated from global commerce. The other name for that place is the Third World, marred by huge price inflation and credit cut off.