How the Wars Are Sinking the Economy

From The Daily Beast Oct 27, 2010:
by Linda Bilmes

Nobel Prize recipient Joseph Stiglitz and Harvard budget guru Linda J. Bilmes are revising their original $3 trillion war cost estimate. As Bilmes reports, the Iraq and Afghanistan wars are at least 25 percent costlier than previous projections.

As Election Day draws near, it's pretty clear: Voters are worried about jobs, the budget deficit and the rising national debt.

But behind those issues—behind the ads and candidates' speeches, behind the rhetoric about "out-of-control" government spending—there lurks a hidden, less-talked-about issue: the cost of the ongoing wars.

Already, we've spent more than $1 trillion in Iraq, not counting the $700 billion consumed each year by the Pentagon budget. And spending in Iraq and Afghanistan now comes to more than

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$3 billion weekly, making the wars a major reason for record-level budget deficits.

Two years ago, Joseph Stiglitz and I published The Three Trillion Dollar War in which we estimated that the budgetary and economic costs of the war would reach $3 trillion.

Taking new numbers into account, however, we now believe that our initial estimate was far too conservative—the cost of the wars will reach between $4 trillion and $6 trillion.

For example, we recently analyzed the medical and disability claim patterns for almost a million troops who have returned from the wars, and, based on this record, we've revised our estimate upward to between $600 billion and $900 billion—a broad specter, yes, but certainly also a significant upward tick from our earlier projection of $400 billion to $700 billion, based on historical patterns.

Similarly, our estimates for the economic and social costs associated with returning veterans can be expected to rise by at least a third—the staggering toll of repeated deployments over the past decade.

The Bush administration not only vastly underestimated the cost of the wars but cut taxes twice—in 2001 and 2003—just as we were ramping up the war effort. This was the first time in U.S. history that a government cut taxes while also appropriating huge new sums to fight a war. And the consequence is that the wars added substantially to the federal debt.

Between 2003 and 2008—before the financial crisis unfolded—the debt rose from $6.4 trillion to $10 trillion, and, at least one-quarter of this increase was directly attributable to the wars, first in Iraq and then in Afghanistan.

We have already spent more than $1 trillion in Iraq… and weekly—yes, weekly—spending in Iraq and Afghanistan now comes to more than $3 billion.

For example, in March 2003—the month of the Iraq invasion—oil prices hovered just under $25 per barrel. Immediately afterward, however, prices started to soar, reaching $140 a barrel five years later. Add to that: for Americans, the war-spending left us with much less wiggle room domestically to deal with the financial crisis.

In the run-up to the election, people have expressed concerns about the debt and the deficit, as well as the huge ongoing burden of funding the conflict, and the constraints they exert on the size of the economic stimulus package.

Here is what we know: the legacy of the wars will continue to drag the economy down.

The long-term costs of the conflicts in Iraq and Afghanistan will be higher than previous wars because of higher survival rates, greater incidence of PTSD and other mental-health disorders. Additionally, a higher percentage of veterans are claiming disability benefits, and far more veterans have served multiple tours of duty.

Taken in context, history shows that the cost of caring for war veterans typically peaks 40 years after a conflict ends. The peak year for paying out disability claims to World War I veterans didn't occur until 1969; the peak for paying out World War II benefits was in the 1980s, and we have not yet reached the peak cost for Vietnam veterans. Even the Gulf War of 1991, which lasted just six weeks, now costs more than $4 billion a year in veterans' disability compensation.

Hundreds of thousands of veterans have already been treated in VA medical facilities; and many will require care for the rest of their lives. Half-a-million people plus have filed for disability compensation. And the total lifetime cost of providing for these veterans is likely to tally between $600 billion and $900 billion, as mentioned above. But of course, even these huge numbers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

don't include the economic costs that are borne by veterans and their families, in terms of diminished quality of life, lost employment and long-term suffering.

We will also to need to find billions of dollars to replace vehicles, weapons and other equipment that will never be repatriated.

It is this spending (and the accompanying debt) that will one day need to be paid, that is truly haunting the November elections. We just don't care to connect the dots. Iraq and Afghanistan cast a long shadow. We will be living with their legacy for decades.

Linda J. Bilmes is a professor at the Harvard Kennedy School of Government. She is co-author with Joseph Stiglitz of the New York Times bestseller The Three Trillion Dollar War: The True Cost of the Iraq Conflict. Bilmes has written extensively on financial and budgetary issues in newspapers, magazines and academic journals including the New York Times, The Washington Post, and the Financial Times.

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Leaked trade agreements and hidden things inside S 510: Corporations plan to end normal farming

From Yupfarming:

The Canadian Farmers Union wants the Canada-EU trade deal scrapped. 

Under provisions in CETA [Comprehensive Economic and Trade Agreement], using saved seed could result in a farmer's land, equipment, and crops being seized for alleged infringement of intellectual property rights attached to plant varieties owned by corporations such as Monsanto, Dow, Syngenta, and Bayer.

"It includes the freezing of bank accounts too, so you couldn't even defend yourself in court. And this is for alleged infringement," says NFU [National Farmers Union] president Terry Boehm. ...
"These are the most draconian measures possible and they would literally create a culture of fear in the farm population where, I think, that ultimately farmers would end up buying seeds every year for every acre just to avoid prosecution or the threat of prosecution."

The biotech industry is facing exposure of the health dangers of GMO/pesticide dependent crops, of attacks on scientists (even armed ones), and GMOs' poor crop performance across different crops, public outrage at no labeling of GMOs, media scorn at its humiliatingly poor science, and falling stock value. Is the industry now attempting an end run around all this, by trying to criminalize and thus end normal (organic) farming - its increasingly sought after, healthy, higher-performing competition?

Given the "draconian property rights enforcement measures" the biotech corporations wish put into effect through the Canada-EU free trade agreement, one might wonder.

US farmers face the same assault by their own government on behalf of agribusiness and the biotech industry. S 510, a "food safety" bill waiting for the Senate return, would put the US fully under the WTO and thus harmonize with CETA. It is replete with means to do to American farmers what the EU/Canada CETA plan would do to Canadian ones - and potentially more, including surreptitiously arranging to criminalize agricultural water, manure, essential farming equipment, and seed storage.

41 words inside S 510 would make the US subject to CETA.

1. 
   

   
   

   COMPLIANCE WITH INTERNATIONAL AGREEMENTS.

   Nothing in this Act (or an amendment made by this Act) shall be construed in a manner inconsistent with the agreement establishing the World Trade Organization or any other treaty or international agreement to which the United States is a party.

   
   

The significance of those words in S 510 is that they would end the Uruguay Round Agreement Act of 1994, which put US sovereignty and US law under perfect protection. Under S 510, US law would become subservient to the WTO, a corporate organization. Votes in the US would not matter. The decisions on food, energy, health, resources, and US economic policy would be made the very corporations responsible for contaminating food, oil spills, dangerous drugs, theft of common resources, and destroying the economy.

The enforcement powers created by S 510 (assuming it resembles other "food safety" bills) would be unlimited and apply to everyone in the country who "holds" food (does anyone not?).

S 510, a "food safety" bill, would (using sections from other food safety bills) set up a corporate court outside the constitutional court system. The expectation is that it would be run by Monsanto, just as "food safety" at the FDA is now, with Monsanto involved at every level. It would exist without Congressional oversight, with unlimited and unspecified remedies, "in addition to, and not exclusive of, other remedies that may be available," and without judicial review over even "the validity and appropriateness of the order ..."

That upturning of all sense (orders that don't have to be appropriate or valid) is a window into the extremity of power being sought by the corporations through S 510. That power would include total discretion to punish anyone they may wish. And in removing appropriateness and validity, their orders would not have to relate to food at all and could be used against anyone, applying any form of "remedy" they desire. Nothing whatever is excluded.

The merger of corporate and government power is defined as fascism.

1. 
   
   
   

   
   

   LIMITATION ON REVIEW- In a civil action under paragraph (1), the validity and appropriateness of the order of the Administrator assessing the civil penalty shall not be subject to judicial review.

   [Unless someone has died from a food related issue, which would put the case into a real criminal court, everything else would be "dealt with" as a civil penalty. S 510 includes long prison terms for mistakes in paperwork and "labeling" (to be defined at the discretion of those in charge), and from the leaked EU/Canada trade plans, seizures of farmers' crops and equipment and freezing of bank accounts are clearly sought.]

   
   

   Remedies Not Exclusive- The remedies provided in this section are in addition to, and not exclusive of, other remedies that may be available.

   
   

   
   

While not listed as a civil "remedy" but treated as disease prevention, slaughter of their animals is another Orwellian measure within S 510 which goes well beyond seizures to military arrangements with the DOD and DHS. They would come onto farms and slaughter normal animals if any disease outbreak is announced, regardless of harmlessness. "Valid and appropriate" do not matter.

This is not a "food safety" bill, as even a short overview of S 510 makes clear.

S 510 offers numerous ways for corporations to get rid of farmers and take their land. The astounding falsity of forcing farmers (or anyone with a farm animal) to sign onto a international contract in which they lose their rights to their property is transparent. Taking global coordinates of the size and shape of farmers' land and feeding them into a corporate data bank, has nothing to do with tracing animal diseases. Farmers' addresses are known.

But the USDA lie about wanting to stop animal diseases grows especially repugnant when one with awareness that the USDA is actually working against the vehement protests of cattle ranchers, to import potentially diseased animals from Brazil and to transfer an off-shore animal disease lab to Kansas, the heart of cattle country and the most tornado prone state in the country, while it's well known that it was lab leaks in the UK which led to the slaughter of millions of cattle, whether ill or not.

Such mass slaughter of animals is structured by S 510 and is yet another gift to the biotech industry for without the extermination of normal animals, their investment in GE-animals and GMO meat is worthless.

The corporations, faced with public upset at ravages of industrial agriculture and the contaminated food coming out of it, are using fear of food, fear of minor animal diseases (including a faked H1N1 pandemic still promoted by government agencies), and lies and fraud to try to eliminate real farming in the US and to facilitate the theft of all US farmland.

The greed and hubris of S 510 pales in comparison to its unconstitutionality and danger to life.

The grass roots are saying no to S 510, each in their own idioms, whether by referring to the Constitution or to the Founding Fathers and to rights or to patriotism. Across the political spectrum, people are coming together to reject S 510 on constitutional and human rights grounds, and the plans of those behind this extreme corporate bill.

The corporate attempt to end US farming and set up their own court system over all Americans far outstrips the destruction of jobs, the forcing of millions from their homes, Citizens United, and the Wall Street theft. Now, through S 510, the corporations seek to remove all bounds on what they themselves do, on what they can do to any who oppose them, and on what they can seize. And this is only on the food side.

The threats to health are as profound. S 510 would remove the long sought cure for cancer as well as cures for an endless array of diseases, by removing access to supplements (one in particular). S 510 would suppress a medical revolution poised to free mankind from all fear of disease, leaving the country instead at the mercy of a pharmaceutical industry with a disturbing history and recent threatening actions with vaccines.

With S 510, those behind GMOs, vaccines, and drugs seek to remove access to normal farming, normal food and to nutrition (health) itself. They are seeking total dominance over what sustains life and over people.

S 510 is not a food safety bill. What is it, then? Is it a corporate enabling act? Does it open the door to corporate control over all Americans, all food supplies and health resources, and all US farmland?

Canadian Farmers Union are demanding that the draconian trade plans with the EU be scrapped. Will groups here demand the same of S 510?
__________


Related: 

EU food safety chief forced to quit GM lobby role

Philip Agee - "In the CIA, we didn't give a hoot about democracy"

From Disquietreservations: 


Philip Agee served in the CIA from 1957 - 1968. He left the CIA because its murderous and authoritarian activities in Latin America, and elsewhere conflicted with his moral upbringing. In 1975 he wrote a book about his work as a case officer in the CIA called 'Inside the Company: CIA Diary.' Click here to read some excerpts from the book.


Agee understood that the CIA was waging class warfare in the Third World on behalf of the tiny oligarchs in the United States, and that the American people would have to face this inner anti-democratic menace because they too are in the grips of the oligarchs. In his book, he said that counter-insurgency methods that were developed by the CIA and U.S. special forces in the Third World would be used against the American people: '... The killings at Kent State and Jackson State show clearly enough that sooner or later our counter-insurgency methods would be applied at home.'


Unsurprisingly, American citizens with different political stripes are all being classified as 'domestic terrorists' and 'anti-government extremists' by Homeland Security, which means that violence by the United States government against the American people is not far behind. If it gets to that point, however, more people in America will come to recognize that the CIA, and the United States government does not represent them, or cares about their interests. And it is highly possible that after a period of crisis popular reforms will be implemented in the United States that will help recover America's constitutional republic and the freedoms of the American people, and help disband the National Security apparatus which exists solely to extend, and defend the power of the tiny percent of state terrorists and criminal oligarchs that control the U.S. government.


II.


In his SpyTalk column today, Jeff Stein reports that the library of New York University has attained the private writings of Agee, and will publish them in the spring of next year. Stein says that Agee's 1975 book 'was arguably more damaging than anything WikiLeaks has produced,' and he is right. WikiLeaks could publish one million documents about the wars in Iraq and Afghanistan, and the effect on public perception would still be minuscule compared to the Pentagon papers. What will reverse the direction of the wars, and ultimately put an end to the criminal war on terror, is if decision-making documents and highly-secret memos are made available through WikiLeaks by honest officials within the government. These officials don't even have to be courageous like Ellsberg was when he released the Pentagon papers because the nature of WikiLeaks allows current whistleblowers the security of anonymity.


III.


Agee in a clip from John Pilger's documentary 'War on Democracy.'

Jim Willie: Imminent Big Bank Death Spiral Means Gold Price Will Sky Rocket

From MarketOracle Oct 27, 2010

By: Jim_Willie_CB

The mortgage and foreclosure scandal runs so deep that ordinary observers can conclude the US financial foundation is laced with a cancer detectable by ordinary people. The metastasis is visible from the distribution of mortgage bonds into the commercial paper market, money market funds, the bank balance sheets, pension funds under management, foreign central banks, and countless financial funds across the globe. Some primary features of the cancerous tissue material are mortgage bond fraud, major securities violations, absent linkage to property title, income tax evasion, forged foreclosure documents, duplicate property linkage to single mortgage bonds, NINJA (no income, no job or assets) loans to unqualified buyers, and more. In fact, more is revealed it seems each passing week toward additional facie to high level and systemic fraud. The world is watching. The growing international reaction will be amplified demand for Gold, from recognition that the USDollar & USEconomy have RICO racketeering components extending to Wall Street banks and Fannie Mae mortgage repositories.

The centerpiece question, when the US bond fraud is coupled with European sovereign debt distress, comes down to WHAT IS MONEY? The answer is Gold & Silver and not much of anything else. Other assets like crude oil or farmland are effective hedges against tainted money, but when they contain debt tethers, they too are vulnerable. Huge flows of funds are fleeing traditional asset groups. Some mistakenly still believe the USTreasurys to be a safe haven. A shock of cold water comes to them when that bubble goes into reverse perhaps several months later after reaching 2% yields. The big magnificent epiphany in the last couple years has been that a house is not a hard asset, but rather a debt instrument extension. Important questions have arisen as to what assets are free from counter-party debt risk. The grand demands for physical gold prove that the futures gold contracts are not money either, but tainted Wall Street and London securities contracts that keep the system going.

The big banks have been called too big to fail. What a ruse! They are too big to plow under without removal from power of the bankers themselves. They are too big to permit their balance sheets to be liquidated without a US banking system seizure together, and a 30% to 50% additional housing market price decline. They are too big to send into receivership without igniting a credit derivative sequence of explosions. They are too big to block the widespread practice of fraud and enforcement of law of regulations. However, a wondrous spectacle has begun to shine light. The mortgage & foreclosure scandal could turn out to be the big US Bank tombstone epitaph, as bank revenues from mortgages halt, as home owners refuse to make mortgage payments, as court cases unfold in full view, as class action lawsuits prove racketeering at a systemic level, as MERS and REMICs are frozen by the courts from further activity. Time will tell. Time will reveal extraordinary efforts by the USCongress to pass ex-post facto laws that legalize the bond fraud and contract violations from the past. Remember back in July 2007 when Bernanke claimed this was just a subprime mortgage problem. The Jackass called it an absolute bond crisis.

THE GIGANTIC ACHILLES HEEL EXPOSED

Two critical elements have been identified. The MERS electronic title registry system was designed to facilitate recording of property titles as associated mortgage bonds traded freely and changed ownership hands. Unfortunately, the title database has no legal standing, as declared by several state courts, including some supreme courts. Banks or financial firms holding the mortgage notes cannot team with the title database and force eviction during the home foreclosure process. That is the first gaping flaw. The second is the REMIC funding facility. The Real Estate Mortgage Investment Conduit was designed to facilitate funding mortgages, in particular Fannie Mae mortgages. Unfortunately, the conduit funding vehicle intentionally omitted citation of the mortgage income stream owner, so as to avoid income taxes. The lack of identification means that the Fannie Mae asset backed securities might lack any legal tie to the mortgage loan income stream.

If the casual observer concludes that Fannie Mae mortgage bonds have no value, then that observer matches the same thought pattern of the Jackass, and the same as an increasing number of financial experts. The mortgage finance boom was more a racketeering scheme to send financial products through the pipeline, earn fees, set up arbitrage, enable leveraged schemes, and justify executive bonuses. At the same time, the scheme had the perceived benefit of putting money in people's hands to spend when their jobs were shanghaied on a ship to China. It concealed the destruction of the USEconomy. It made homes very convenient piggy banks to abuse in consumer binges, as people eagerly burned their furniture. Harken back to the Great Macro Asset Economy, a slippery chapter scripted by Greenspan, one of several heretical chapters. Many citizens were turned into paupers who lost all their home equity, while 22% of the nation today lives in homes bearing negative equity overhead. To claim an elaborate Ponzi Scheme seems a fair characterization. The USGovt hands are dirty. The reflection on USTreasurys is filled with risk of a popped bubble. The reflection on the USDollar is filled with risk of downdrafts since a corrosive currency.

The Europeans have their damaged sovereign debt, but the Americans can boast twin beasts in the USTreasury Bond bubble and the USAgency Mortgage Bond scam. The scam involves mortgage bond fraud from improper perfection of property title that ensures revenue stream. The scam involves securities violations from usage of the MERS title database, duplicate properties in multiple bonds, and forged documents. The scam involves faulty finance vehicles (REMIC) with deep intractible flaws in the structure of funding the loans, whose remedy would come with a $1 trillion tax bill due (estimated by bank analysts). Just last weekend, the state of California demanded as part of a class action lawsuit, with MERS at the center, between $60 and $120 billion in unpaid property title recording fees. One might wonder if any potential criminal fraud was avoided in the mortgage industry during the last decade that saved a few bucks and added to bank profit. The MERS & REMIC twins represent the two unfixable banking Achilles Heels. Can the USCongress forgive the fraud with a fresh piece of supercharged legislation?? If they do, then civil disobedience will blossom across the land, in the form of public demonstrations, marches on Washington, non-payment of monthly mortgage bills, and demands to prove property title. The global response will be to sell any bonds with a US$ denomination.

The fallout comes as shattered integrity of the USDollar after broken credibility of the USFed and ruined prestige of Wall Street, all while a sanctioned USTreasury Bond bubble puffs. The full USGovt guarantee of the Fannie Mae clearinghouse cesspool contents bridges the gap between USTBonds and USAgency Mortgage Bonds. One might argue that Agency Bonds differ from USTBonds only in the claim of linkage to mortgage income and ultimately home seizure, except that linkage is being removed in plain view to the public. The USDollar will suffer. Rather than fall versus other major currencies, the wrecked monetary system will take down all major currencies. Each fiat paper currency is being exposed as illegitimate in different ways. The consequences will be:

• All cost structures will rise, causing a worse global recession, a very heavy painful consequence.
• Income levels will not rise to meet the challenge, since monetary inflation destroys capital and erodes wealth engines in corporate structures.
• The US$-based bond markets take on a racketeering glow in global view.

The vast monetization schemes are set to come into motion for the bond market in general. The objects are hardly just USGovt debt securities, not even just Fannie Mae mortgage securities, but big bank Corporate Bonds as well. The scheme will paint the USDollar in a light with a RICO tint, as in racketeering, sanctioned by the US finance ministry and shielded from prosecution by US legal authorities and regulatory bodies. Worse still, the Financial Accounting Standards Board has permitted accounting fraud to the big dead US banks. Since April 2009, they have been permitted to declare any value they wish on their toxic balance sheets. That has enabled them to take advantage of USGovt largesse, direct USFed redemption of toxic bonds, called widely banker welfare. That has enabled them to tap the 0% money tree that produces carry trade profits. The only stipulation was the banks were required to place their excess cash at the USFed itself, which thereby hid the central bank's insolvency, and distracted attention from the absence of Loan Loss Reserves for the banks. Details on the USFed balance sheet, and big bank vulnerability to further losses, are provided in the October Hat Trick Letter. Toss in the High Frequency Trading schemes, and the US financial markets look to contain more crooked venues than the Las Vegas casinos. The USDollar lies at great risk in the process.

BIG BANK VULNERABLES AGAIN

The next QE2 is a done deal but with the details missing. The next TARP-2 bailout package is having its justification and foundation fashioned from the building blocks of need and desperation, along with the cement provided by banking lobbies. The two initiatives will likely meld paths. A disorderly condition comes. An armada of lawyers is on the job ready to challenge mortgage securities, foreclosure orders, and much more. Class action lawsuits are on the docket. The US financial platforms are unraveling. The USDollar will follow a path to oblivion, locked in a destructive spiral. The Competing Currency War assures that other major nations will undermine, debase, and devalue their currencies rather than seek out, plan, and establish a new monetary system. The investment in a broken system will soon be realized as infinite, with unchecked aid, even $trillions tossed in Black Holes. The sound money experts have always argued that accelerated funds are required to maintain a bubble. Gold will therefore skyrocket in price, as the monetary system will be actively ruined from unchecked money creation. The silver price gains will be at least double the gold gains. Markets are beginning to take control, and kick aside the corrupt control levers. The horizon features a big US bank on death watch. The ripple effects will be shocking even to those who expect it. Other big banks will be dragged down in a chain reaction, while illicit control in certain key markets will be stripped away. Control will be lost by the Powerz. Confusion will rein. The bank stock index BKX signals an imminent breakdown. The dustbin awaits!!

The pressured bank stock index breakdown will be led by Bank of America, HSBC, and Wells Fargo. The Wall Street firms remain protected bastions. The comprehensive fraud in a chain link, from home loan origination to bond securitization to debt ratings to ultimate foreclosure, reveals a corrupt protected broken bankrupt system. Its financial status will be clearly broken soon in full view. Further accounting fraud sanctioned by the FASB might come about, but the date with the destiny of failure is assured. My best source from the banking world believes the wheels come completely off the renegade wagon train that blocks the free market for determining a fair gold price when HSBC fails, and that event is imminent.That renegade wagon train has trademarks bearing the name USGovt and Wall Street nameplates, a merged enterprise. A chain reaction will follow. HSBC manages the SPDR gold exchange traded fund for its gold bullion inventory (symbol GLD). To those who were shocked by the mortgage fraud, wait until they witness the broken suppression levers and devices holding down the gold market. An estimated 50 to 60 thousand tonnes of gold bullion have been naked shorted by the biggest banks. Its value is worth between $2.16 and $2.60 trillion. Wait until the GLD fund lawsuits line up, since most of their gold has been leased by the COMEX and LBMA, since many of its shares have been used to cover short gold contracts.

PERHAPS JUST LAUNCH QE2 AT NIGHT

The USFed is showing some reluctance, remorse, or second thoughts about launching a gigantic second Quantitative Easing ship loaded with acid into icy waters. John Hilsenrath has reported the hesitation in the Wall Street Journal, claiming only a few hundred $100 billion of bond debt might be monetized. The prevailing sentiment is that QE2 might not succeed in reviving the USEconomy and not might succeed in clearing the sclerotic condition in the banks. Whether wrenching constipation or multiple sclerosis in the banking channels and arteries, what difference!! My main question is WHEN DID 'QE1' EVER END??  The grand bond monetization is mostly hidden from view for USTreasurys, since almost every auction is a failure. The grand bond monetization is mostly hidden from view for USAgency Bonds, since mammoth activity in Fannie Mae basements keeps the lid on evidence that their bonds have gone worthless, and contains the acidic spillover. Watch the backdoor bank welfare in a TARP-2 package soon to be tossed into QE2. Watch the overall debt monetization be kept much more hidden from view, a new national priority. The USDept Treasury and the USFed do care what the world thinks, when the threat of them pulling the global plug on the United States seems a viable option to stop the cancer from spreading even more on a global scale. A cancer has been exposed in the global reserve currency. Reaction should be much more evident in the Gold price than in currency exchange rates. They move relative to each other.

An enormous pressure point in the legal process right here, right now is the threat of Put-Backs. A mortgage security is put back to the bank that packaged the securities from a portfolio neatly arranged in tranches of loans, when the mortgage backed bond is forced by the courts to be bought back by the bank, after fraud or negligence or contractual defects were demonstrated. A fiduciary responsibility is enforced in the bond securitization process. Estimates wildly have come forth that $2 trillion, give or take a few hundred $billion, in mortgage bonds will be put back to the big banks. They are scrambling to win support from the USCongress for quick action. The TARP-1 package worth almost $800 billion was motivated by declines in the housing market. To be sure, plenty of Bait & Switch was evident, but leave that aside. The TARP-2 package might be required at least $1.5 trillion, motivated this time by securities violations, defective fraudulent MERS & REMIC devices, and contract fraud, when the specter of class action lawsuits, even with RICO claims, hangs overhead. These are felony crimes, a far cry from a declining market.

The second round of big bank TARP bailouts certainly has come in a vastly different light. To solve the challenge, look for the USDept Treasury (controlled by Goldman Sachs) and the USFed (controlled by godfathers to Wall Street banks) to conduct a more secretive monetization of the big bank bond exposure. THEY WILL MONETIZE THE PUTBACKS IN THE DEAD OF NIGHT, DONE IN SECRET, WITHOUT FANFARE, IN A MORE DIRECT CABAL EXERCISE. They will use Fannie Mae as a bad bank, a bond garbage can, its reason for being, its raison d'être. When caught, they will claim they did it to avoid a USEconomic Depression. The truth is more that they will conceal their activity in order to retain power, to enable much more banker welfare courtesy of the captured USGovt, even to prevent a collapse on US soil.

GLOBAL BANKERS ANGRY & FEISTY & DEMANDING

The G-20 ministers have come forth with a vacant pledge as a working theme. Regard it as the billboard message of crisis. Ignore the words, but take serious note of the theme, since it wraps words around the alarm. The competitive currency devaluations will be devastating, even as fast moving trade deficits will be the visible outcome. National trade gaps will go out of control. The G-20 finance ministers issued an opening preliminary statement, a working theme. They will pledge to refrain from competitive devaluations and endorse market based exchange rates, whatever that means. Of course, the silent vote is not made by nations that shun attendance, like Brazil. They decided not to attend, due to stated concerns over growing hostility in competitive currency policy. China might have pulled that cord, as Brazil earned a favor. A US proposal was evaluated to set targets for current account gaps on the pathway to rebalancing global growth and realigning exchange rates. The United States will surely be kept exempt, causing more friction. The G-20 Meeting is telling of the crippling devastation coming in the Competing Currency War, which will take down the entire monetary system. And furthermore, the evidence will be seen in the trade deficits. For instance, even Turkey is setting record deficits. Large deficits will be unavoidable. The obvious outcome of the G-20 Meeting was a sharp pullback in the US monetization project planning, but it will be temporary.

Talk of a Plaza-2 Accord has begun, but it will find zero traction. Unfortunately, any such accord requires nations to take the lead in sacrificing their domestic economies and banking systems. Such nations would have to agree to higher currencies, which harm their economies. Not gonna happen!! Instead, expect conflict, disruption, and chaos to grow. What is needed is consensus and order to depreciate the USDollar in relation to the other major world currencies by direct intervention. The present day environment has no maturity, no cooperation, and no order. It is loaded with resentment, animosity, and a desire to topple the horribly corrupt and recognized villains in Wall Street and London, where power is wielded without respect and thefts are perpetrated without conscience. In fact, a spirit of retribution and deserved vengeance permeates the FOREX winds. Witness the Competing Currency Wars soon in full glory, which have moved past first gear, and are well into second gear. USFed Chairman Bernanke has in essence threatened to inflate with QE2 to infinity in order to support a system that cannot any longer be supported, a rickety US$-centric system. Commodity prices are surging, and emerging economies are battling against fast rising price inflation. The USEconomy operates under 7% to 8% annual price inflation, but emerging nations have it a bit worse. Currency appreciation is a necessary tool to keep prices under control for other nations. The BIG problem here is that they are reluctant to allow significant currency appreciation as long as the Chinese Yuan remains static and fixed. The key is China. No nation will agree to a currency rise without China doing so first, and doing so with some magnitude to matter. Emerging nations are cutting deals, even with non-Anglo industrial nations, to avoid usage of the USDollar in trade settlement. If Plaza-2 happens, it will have China as its champion.

The Yen Carry Trade has a vast hidden doorway. Japan has revealed a hidden pressure point. It is the unwind of the great Yen Carry Trade. It was the greatest financial engineering project in modern history. The Jackass found it utterly amazing that the venerable Kurt Richebacher had no idea what it was, and his popular acclaimed newsletter had a moniker devoted to credit and currency markets. Its unwind is coming to an end finally with a climax upward thrust in the Yen, amidst clouding factors like the rise of China. In fact, China is diversifying its FOREX reserves to some extent by using USTreasurys to purchase Japanese Govt Bonds, which has drawn great anger from Tokyo. Witness more currency war battles, bigger than skirmishes.

The climax chapter of the USTreasury Bond bubble, with its benchmark 0% label, removes the Yen Carry Trade since both sovereign bonds offer near 0% yield. The yield differential is eliminated. The end of the great carry trade signals a monetary system breakdown and finally a USGovt debt default. The carry trade provided tremendous demand for the USTreasurys, which has been replaced by the Printing Pre$$. The Yen currency is the quiet litmus index of the competing currency war, its turbo-charge. It remains hidden from view and free from discussion. Details are provided on it in the October issue of the Hat Trick Letter, along with many implications of the bank condition on the gold price.

GOLD CONSOLIDATES BIG GAINS

The gold price rose almost 200 points from the beginning of August to the first week of October. It is consolidating the gains, a digestion process. The resistance was broken. More importantly, the big US bank chokehold of the gold market was somewhat broken. A bull market remains, and the strong seasonal months of December and January lie around the corner. The effect of a seasonally strong September has been seen. The Competing Currency War, the deadly round robin exercise to devaluate currencies, feeds the gold bull in magnificent style. The G-20 platitudes will be brushed aside. The gold bull is given a rich diet in huge volumes of fiat money from strained monetary presses, justified to protect export trade, committed to serve the broken banks. In the middle of the sovereign debt crisis and the mortgage bond eruption and the insolvent bank condition, GOLD IS REGARDED AS THE SAFER HAVEN, since not tied to debt and not associated with counter-party risk. Gold has emerged as a global reserve asset, a competing currency!!

Expect a consolidation in the gold price while the USDollar attempts to bounce up. The Euro currency defense is only beginning. The Euro hit 140 per US$, and has come down with a mild selloff. The damage to be done to the European Economy is being evaluated. The 78 level on the US$ DX index was not defended. A bounce was made possible at 77 instead, a firmer support level. The monetary system is crumbling. All attention is on the USDollar, especially after the mortgage foreclosure scandal erupted. Pay note to the bearish crossover of the 20-week MA below the 50-week MA. It signals a test of the 75 critical support, which will bring about a thrust move in Gold past $1400. Notice how the bullish MA crossover in March signaled a test of the upside resistance. A full 800 basis point run-up followed the reliable sentinel signal. My expected 78 to 84 range was blown out. An eerie calm does not seem likely, not with the mortgage bond fraud and home foreclosure scandal in full blossom. The United States financial structures have never looked more corrupt or broken in the national history. As the US$ standard bearer of the monetary system takes severe damage, look for the Gold price to march toward $1500 and the Silver price to march toward $30. It is written; it will be done. The bankers in the temple will eventually be placed in their deserved domicile or find themselves on the run.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

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

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

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