U.S. Engineered Commodity Collapse

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No hint of investment in the US Economy is coincident with the paradoxical US$ rise. In “Plumbing the Depths of Depravity” posted of October 29 (the intrepid expert forensic financial analyst Rob Kirby, and erstwhile bond trader, confirmed my view of a twisted engineered perverse US Dollar rally. He echoes one of my major points delineated, that settlement of credit derivatives, like with the credit default swaps from failed insured asset backed bonds, has produced a demand for US Dollars in contract settlement payouts. His website contains a treasure trove of information that reads like criminal indictments, but without the hundreds of obscurely written pages and weird words.

In the cited article, Kirby wrote: “What folks need to understand is that the global OTC derivatives market, measured in tens or hundreds of Trillions, is virtually all US Dollar denominated. Its SYSTEMIC failure, which is now occurring, requires US Dollar balances to clear (settle) the trades (bets). This has created the paradoxical global demand for US Dollars, the currency of a country that is fundamentally bankrupt. By rationing credit to hedge funds that were naturally levered and ‘long commodities’ (institutions like JP Morgan routinely took the other sides of their customers commodities bets, ruining institutions like natural gas player Amaranth), and propping up the balance sheets of those who were short commodities [such as] the Banks. The Federal Reserve led cabal of Central Bankers have ENGINEERED the collapse in commodities prices while creating the illusion (of a perverse USDollar rally). The engineered collapse of the commodities complex became necessary in the eyes of monetary elites because the rush for tangibles and corresponding repudiation of fiat money was becoming manic, as so CLEARLY evidenced by the emerging shortages of precious metals, gold and silver bullion.” My rejoinder is that the crude oil price, and many commodity prices, have come down right before the election, just like in autumn 2006, a perception we share.

Kirby went on to conclude that “We are CLEARLY going to HYPERINFLATE!!!!” He steadfastly contradicts shallow assertions that deflation will dominate the scene. Anyone observing the money supply acceleration in recent weeks can easily see this, yet deflationists seem unable to observe the human response in desperation. We two have frequent debates between ourselves, whether USTreasury Bond default will occur or else a big Reflation Episode. It is possible both will occur. These exchanges will contribute toward a key section in the upcoming November Hat Trick Letter on the weekend of November 9. A topic raging lately between us has been the failures to deliver USTreasurys. This extraordinary phenomenon highlights the extreme mountain of toxic bond (in)securities spewed worldwide by the corrupted US financial sector, but it also highlights the questionable legitimacy of USTreasury Bonds. The traded volume of USTBonds had been recorded a few years ago to be over $2 trillion above official issuance in USTBonds. So maybe we are seeing a redux of counterfeit issuance of USTBonds in order to satisfy unprecedented demand. By the way, USTreasury management is done, and accounting is done, handled by only one giant bank.

Jim Willie on Rob Kirby

http://www.kitco.com/ind/willie/oct302008.html







http://news.goldseek.com/GoldSeek/1225289916.php


http://www.marketwatch.com/news/story/d ... 25C14914FF}