Corruption and Financial Manipulation Behind Gold and Silver Takedown

From The International Forecaster September 28 2011

By Bob Chapman

A new milestone in corruption in the recent gold takedown, momentous psychological warfare being conducted in the markets, as well as with futures, derivatives, and options, calling a new bottom in the markets, Global systemic risk lurks around every corner, another liquidity crisis for Europe, shaky banks rattle the world economy.

The takedown of gold and silver markets over the past two weeks signified a new milestone in corruption, brazenness, arrogance and it reveals the level of evil control behind our government. This past week, in just one week, saw gold fall almost $200 and silver about $10.00. We have been involved in gold and silver for 53 years and the only event that comes close to this was October 19, 1987, when we witnessed the Bank of England sell down gold $100.00 under the orders of the Fed and the US Treasury, which borrowed the gold from the IMF. That was illegal, but that means little to the Illuminists who do as they please. Today thanks to Ronald Reagan we have the “President’s Working Group on Financial Markets,” which has legitimatized corruption to conform to the Keynesian model of corporatist fascism. After the close on Friday we were informed, that the CME, which controls the Comex, had raised margin requirements on gold by 21%, silver 16% and in copper by 18%. In retrospect it is obvious that many banking insiders and traders knew early in the week that this momentous psychological warfare was going to be unleashed on these markets. Your government definitely rigged these markets. Today in America and many other places as well, crime pays. What has been done to investors over this past week is not only a crime, but also a disgrace to all Americans.

Let us now look at the flipside. All is not lost, because there is a limit to the damage that can be done. The paper attack on gold was concentrated and accomplished by using futures, options and derivatives. Thus far there is no evidence of any major sales of gold or silver. This in the past has generated very short terms of suppression. The fundamentals have not changed one bit and if anything they are stronger than ever. The world is in the midst of financial collapse. It could take a few months to fall or several years. We do not have a presence behind the scenes, but we do know history and we know what these criminals are up too and what the end game is and that is world government. We have to back into time sequence. That has thus far been enough to help us to make excellent calls. The call this time is we are approaching another bottom. A bottom that probably won’t be seen again. Major buyers of gold and silver have to be waiting with open arms for such a great opportunity to purchase both metals at bargain basement prices. There are sovereigns who are loaded with US dollars, who have been waiting for just such an opportunity to sell them into a strong dollar market to purchase inexpensive gold and silver. Today’s market is totally different than the gold and silver markets of just two years ago. Big players are big buyers. Prior to that the opposite was true as sovereigns were sellers year after year, and both were transferred from weak to stronger hands. The monetary and fiscal situations in Europe, the UK and US are in a shambles. The privately owned Federal Reserve, the Bank of England and the European central bank have all lost credibility. Just look at the reception “Operation Twist” received – bonds rose and the stock market was hit by a typhoon. The Fed has lost its credibility in the investment arena worldwide, because of forced compromise to existing problems. The fed simply didn’t have the guts to implement a QE 3. If the Fed is not quickly forthcoming with a new plan the Dow could fall thousands of points. The damage to gold and silver is already in the history books and the turn back up is already taking place. No matter what the powers that be do they cannot for any period of time control gold and silver prices. There are too many buyers who want to dump fiat currencies. Under the circumstances the Twist was the wrong choice at the wrong time. Financial professionals worldwide believe it is a joke. They see the lack of proper action, the activation for events for more damaging then those of 2008 and if something doesn’t happen this week markets and economies are doomed. The elitists knew this and that is why they attacked gold, silver and commodities. This was so investors would think it was a general overall retreat not a reflection of Fed incompetence. Their fall had nothing to do with reality and everything to do with smoke and mirrors. This should not surprise anyone. It has been used over and over again by the gold and silver suppression cartel.

In reaction to Mr. Bernanke’s folly stock markets worldwide fell about 5% in just two days, which was a considerable feat, piling on to previous losses. Friday would have been a loser as well, but for the PPT being assisted by short covering. This poor choice of assistance has slammed the market and it has set the stage for a monster rally in gold and silver and commodities as well. The idea of pegging interest rates on Treasury debt is foolhardy in the current environment. Subsidizing rates leads to imbalance and losses. This and zero interest rate loans to banks, and massive monetization are going to eventually raise havoc with the economy, not to mention climbing inflation. It should also be noted that all these actions encourage more leveraged speculation. The elitist should learn that all their machinations won’t work especially these attacking gold silver and commodities. We might add that attacking every world currency won’t work either. The elitists in brokerage and banking are making a killing in this slaughter, but on the other hand it gives us cheap prices to buy into.

This latest fiasco gives us two major problems. The other naturally being Europe and Greece. Duress isn’t the word for it. Global systemic risk lurks around every corner. In Europe the ESRB has called upon governments to prepare capital injections for banks, which were close to failure, or failed stress tests. The taxpayer is to be the lender of last resort. At this juncture those who do not recognize all of these machinations as a Ponzi scheme just do not get it. As we saw in QE 1 all the effort was put into saving the financial sector, and in Europe presently we are seeing the same thing happen. At the moment at least, and we do not expect any quick recoveries, Europe is weaker and in more serious trouble than the UK and US. The problems of Europe, the US and UK have now as well spread contagiously into Asia, its financial system and into their economies as exports fall. Europe is one step away from losing control. The question is how long will it take? We do not know, but we will have a better idea after September 29th. Then we will have to reassess Europe’s public and banking debt and bad debt problems. If you remember we predicted this crisis occurring a year ago. Well, here it is. What Brits and Americans fail to understand is that the worst is ahead for them as well.

Make no mistake Europe is facing another liquidity crisis worse than the Lehman crisis. This crisis is being exacerbated by massive markets manipulation by major US and UK banks and brokerage houses. They will do just about anything to gain an edge. You saw this last week in European, UK and US markets including commodities, gold and silver. These criminal opportunists are going to play this game to the bitter end, because they will not accept a purge of the system.

In the past spring we could see problems arising at banks and in the corporate world. Now we see those conditions manifesting themselves. These were the institutions that paid no heed to prudent lending and now are paying for it dearly. US money market funds and other institutions have pulled 2/3’s of their short-term investments out of EU banks, particularly in France. In addition European corporations are withdrawing funds from French banks and lodging the deposits at the ECB. It is not surprising to us that the Rothschilds had to come to the aid of Soc Gen three weeks ago.

The US has its share of shaky banks. We all should be aware of the condition of BofA and the Bank of NY. They are not the only US banks in trouble in the too-big-to fail category. There are a score of them that the media conveniently fails to report on. Many of these banks are finally being sued for fraud. Most of their officers should have been charged criminally long ago. The mortgage securitizations they were involved in were in some of the worst financial scams in history. Even worse yet, were the rating companies that courts have let totally off the hook. The complicity and criminality jumps right out into your face. As you can see in American society some are more equal than others.

Even German banks have not escaped the lack of capital, obviously having lots of bad assets on their books. They could need an infusion of some $200 billion. This is fairly widespread. They all made similar errors. We have always thought there was more to Germany’s bank problems than met the eye. We still believe there was a secret deal between these banks and the Fed. Why else would it have taken on 60% of American banks’ toxic waste? It is of interest as well that the IMF says European banks could be short capital of $270 billion.

The European crisis is still escalating and Ben Bernanke has chosen the wrong vehicle, operation Twist, for recovery. Mr. Bernanke and the Fed had best have a plan B for this week. For the moment the stock market decline has been arrested by the PPT, but for how long? At the same time this same group expends billions of dollars pushing gold and silver lower? These events go forward as the IMF says the world economy is in trouble. We see the fed’s efforts as having a slow effect that will perhaps relieve the 3.8 million house inventory they and lenders are carrying, but it is a losing battle even at 30-year fixed mortgage rates of 3%. The 4-year foreclosure projection is for an inventory of 8 to 11.5 million foreclosed homes as the building industry adds 550,000 new homes annually. We ask what can they be thinking? The Fed has taken the wrong road for its prime vehicle. It doesn’t mean they have to abandon operation twist, but they have to have something that will act quickly to move the economy into growth. It is quite evident at the same time that they will have to purchase $850 billion to $1 trillion in Treasuries as well, plus loan more than $1 trillion to European banks and perhaps governments. The downside on the 10-year note could be at 1%. Who would buy such paper with 11.4% inflation? No one of sane mind would make such an investment. They had best do something quickly. It should not be buying mortgage bonds and collateralized mortgage debt. That only shores bank balance sheets. The Fed needs banking to prudently lend out the $2 trillion they are sitting on if small and medium sized business will borrow it and create jobs. The Fed and government have only two choices, inflate or purge the system. They had the same choice in 1990, 2000 and three years ago. We have seen 20 years of lying, manipulation and incompetence and the American public is sick of it. There is no question that lack of confidence is hurting recovery and that could change if Mr. Bernanke was replaced. Reflection of that lack of confidence is the abrupt lack of insider buying of company shares. It could be the Fed, Treasury and the “President’s Working Group on Financial Markets” have lost control. If it were not for the terrible problems in Europe the dollar would be much lower versus other currencies, gold and silver. The economy needs inflation and it is up to the Fed to supply it. If chairman Bernanke cannot supply that he will soon be leaving his post.

Part of what happens as a result of Thursday’s Bundestag vote will dictate how the ECB handles its problems pertaining to policymaking, its circumvention of rules and the holding of an enormous amount of securities and banks that are weak along with insolvent governments. In addition, they have to find a way to sell these securities. Their only hope is if Germany agrees to participate on Thursday.

In the meantime in case the Bundestag refuses behind the scenes a grand plan is being put together involving massive bank recapitalization, which would give the EFSF more power. This in part would be done by the ECB via leverage and a loss-sharing arrangement to avoid having to further submit to national congresses for approval, effectively relieving them of their sovereignty. The German people do not want this, but the CDU is pushing it in exchange for its support against intervention and a partial Greek default, which the CDU rejected two years ago. Many want the ECB leveraged, but within the legal framework of the EU Treaty and the bailout fund it cannot be leveraged. Just involving the central bank violates the EU Treaty. This past weekend the IMF meeting in Washington produced nothing. The effort to raise $3 trillion would trigger credit downgrades for all participants.

The ECB recently purchased some $55 billion of Italian and Spanish bonds in the open market, which was in breach of rules. We might ask whom will they sell them too?

There is no question bankers and central bankers are trapped and there is no way for them to painlessly extricate themselves. These are the experts that have been responsible for imprudent lending and they demand they be bailed out.

In the US the Fed has to resort to QE 3 and if they do not the system will collapse. They have to assist in creating jobs. There can be no recovery without job creation. The only way to recovery is lavish federal spending, not budget cuts, otherwise the great purge begins; already the hour is late.

What has to be indelibly printed in everyone’s minds is the self-interest of banks and bankers. Problems are not dealt with expeditiously because it is all about self-interest and survival. Jobs, the recovery and the economy are secondary. The continuation of the EU and the euro zone has to be saved at all costs by any means to bring about world government. The move toward a super-state has to be done quietly and with stealth, without the people realizing what is being done to them – eventual enslavement. Politicians who have ceased to represent their constituencies are expediting the road to serfdom. That is reflected by 70% of legislation coming from bureaucrats in Brussels. In the US it is done via payoffs.

The crisis is again in control and whether Europe can put its house in order remains to be seen.

Last week the Dow fell 6.4%, S&P 6.5%, Nasdaq fell 4.3% and the Russell 2000 8.7%, as Ben Bernanke performed his most recent magic. Banks only fell 9.5%; and broker dealers 8.8%. Cyclicals fell 11.1%, transports sank 9.6%; consumers 5.1%; utilities 1.4%; high tech 5.8%; simi’s 5.8%; Internets 6.4% and biotechs 4.1%. Gold fell $155.00, the HUI gold index fell 11.7% and the USDX rose 2.5% to 78.50.

Two-year T-bills rose 5 bps to 0.21%; 10-year T-notes 22 bps to 1.83% and the 10-year German bund fell 12 bps to a record low of 1.745%.

The Freddie Mac 30-year fixed rate mortgage was unchanged at 4.09%. The 15’s were off 1 bps TO 3.29%, one-year ARM’S rose 1 bps to 2.82% and the 3-year fixed rate jumbos fell 4 bps to 4.76%.

Fed credit fell $4.3 billion to $2.849 trillion. The yoy increases is 24.2%. Fed foreign holdings of Treasury, Agency debt fell $7.1 billion to $3.468 trillion. Custody holdings for foreign central banks are up $118 billion ytd and $255 billion yoy or up 7.9%.

M2, narrow, money supply fell $7.5 billion to $9.584 trillion, it is up 11.9% ytd and 10.3% yoy.

Total money market funds fell $11.8 billion to $2.621 trillion.

Commercial paper outstanding fell $13.4 billion to $1.030 trillion. That is a 10-week decline of $207 billion.
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Gerald Celente on GoldSeek Radio


Fundamentals Don’t Lie

Europe's High-Risk Gamble

From The Economic Policy Journal, September 28, 2011


My favorite mainstream economist, Martin Feldstein, is out with an excellent analysis of the current crisis in the EuroZone, below is the takeaway from his report.

The Greek government needs to escape from an otherwise impossible situation. It has an unmanageable level of government debt (150% of GDP, rising this year by ten percentage points), a collapsing economy (with GDP down by more than 7% this year, pushing the unemployment rate up to 16%), a chronic balance-of-payments deficit (now at 8% of GDP), and insolvent banks that are rapidly losing deposits.

The only way out is for Greece to default on its sovereign debt. When it does, it must write down the principal value of that debt by at least 50%. The current plan to reduce the present value of privately held bonds by 20% is just a first small step toward this outcome...

The markets are fully aware that Greece, being insolvent, will eventually default. That’s why the interest rate on Greek three-year government debt recently soared past 100% and the yield on ten-year bonds is 22%, implying that a €100 principal payable in ten years is worth less than €14 today.

Why, then, are political leaders in France and Germany trying so hard to prevent – or, more accurately, to postpone – the inevitable? There are two reasons.

First, the banks and other financial institutions in Germany and France have large exposures to Greek government debt, both directly and through the credit that they have extended to Greek and other eurozone banks. Postponing a default gives the French and German financial institutions time to build up their capital, reduce their exposure to Greek banks by not renewing credit when loans come due, and sell Greek bonds to the European Central Bank.

The second, and more important, reason for the Franco-German struggle to postpone a Greek default is the risk that a Greek default would induce sovereign defaults in other countries and runs on other banking systems, particularly in Spain and Italy. This risk was highlighted by the recent downgrade of Italy’s credit rating by Standard & Poor’s.

A default by either of those large countries would have disastrous implications for the banks and other financial institutions in France and Germany. The European Financial Stability Fund is large enough to cover Greece’s financing needs but not large enough to finance Italy and Spain if they lose access to private markets. So European politicians hope that by showing that even Greece can avoid default, private markets will gain enough confidence in the viability of Italy and Spain to continue lending to their governments at reasonable rates and financing their banks.

If Greece is allowed to default in the coming weeks, financial markets will indeed regard defaults by Spain and Italy as much more likely. That could cause their interest rates to spike upward and their national debts to rise rapidly, thus making them effectively insolvent. By postponing a Greek default for two years, Europe’s politicians hope to give Spain and Italy time to prove that they are financially viable.

Two years could allow markets to see whether Spain’s banks can handle the decline of local real-estate prices, or whether mortgage defaults will lead to widespread bank failures, requiring the Spanish government to finance large deposit guarantees. The next two years would also disclose the financial conditions of Spain’s regional governments, which have incurred debts that are ultimately guaranteed by the central government....

If Spain and Italy do look sound enough at the end of two years, European political leaders can allow Greece to default without fear of dangerous contagion. Portugal might follow Greece in a sovereign default and in leaving the eurozone. But the larger countries would be able to fund themselves at reasonable interest rates, and the current eurozone system could continue.

If, however, Spain or Italy does not persuade markets over the next two years that they are financially sound, interest rates for their governments and banks will rise sharply, and it will be clear that they are insolvent. At that point, they will default. They would also be at least temporarily unable to borrow and would be strongly tempted to leave the single currency.

But there is a greater and more immediate danger: Even if Spain and Italy are fundamentally sound, there may not be two years to find out. The level of Greek interest rates shows that markets believe that Greece will default very soon. And even before that default occurs, interest rates on Spanish or Italian debt could rise sharply, putting these countries on a financially impossible path. The eurozone’s politicians may learn the hard way that trying to fool markets is a dangerous strategy.
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Euro-Zone Prepares to Print Trillions in Advance of Greece Debt Default

From Market Oracle,

By Nadeem Walayat
Published: Today

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It's not just the financial and economic world that's being turned upside down with fast changing events in motion that will impact for many years. Last week saw that maybe energy does not equal mass X the speed of light squared. Eeeek ! There goes Einstein's theory of general relativity and the past 100 years of physics (if true) over the event horizon and into a black hole, though the theory has always had something major missing which is why there existed the fundamental disparity between quantum mechanics and general relativity that maybe we will get much closer towards understanding if E=MC2 is busted.

Similarly the Euro-zone has reached the edge of its own event horizon of disappearing into a financial and economic black hole, the response to which is likely to be rampant Euro-zone money printing to monetize PIIGS debts that takes place following the orderly bankruptcy of Greece due to the impossibility of an economically contracting country being able to service an ever expanding debt mountain, a vicious cycle of ever higher debt to GDP triggering ever greater economic austerity, resulting in an even higher debt to GDP ratio as the economy contracts and the tax take falls.
Key measures being contemplated at the time of writing are :

• Greece debt holders to take a 50% hair-cut i.e. cut Greece debt from Euro 340billion to Euro 170billion.
• Cut the interest rate PAID on Greece debt, perhaps to even ZERO.
• Expand the financial stability fund from 440 billion euros to at least Euro 2 trillion and perhaps even Euro 3 trillion by leveraging up by ECB money printing.
• Re-capitalise the bankrupt European banks that would take a huge hit on a Greece default.

There are no ifs, or buts, Greece IS bankrupt, this is nothing new but something I have been repeatedly iterating for the past 2 years. A Greece debt default is now imminent because it CANNOT PRINT MONEY! It cannot PRINT EURO's therefore it cannot do what Britain, and the United States are doing which is to STEALTH DEFAULT by means of HIGH REAL INFLATION. You know it when you go to the super market to do your weekly shop and see that your money can barely buy 85% of what it could a year ago. There is HIGH REAL INFLATION in the UK right now! Far beyond the official CPI of 4.5% or RPI of 5% which in themselves are HIGH, well above government target of 2%.
Yes, I know you still hear the highly vocal the deflation fools, crying DEBT DELEVERAGING DEFLATION, which has shown itself to be a RED HERRING as there has been NO DEFLATION as I warned of now near 2 years ago (18 Nov 2009 - Deflationists Are WRONG, Prepare for the INFLATION Mega-Trend) , and January 2010 Inflation Mega-trend ebook (FREE DOWNLOAD).
The fact of the matter is that even bankrupting Greece that has seen its economy CONTRACT for 2 straight years under the weight of economic austerity without end but yet has has had INFLATION during the whole period, for instance the current INFLATION RATE for Greece is CPI 1.67%. As you can see if there is inflation where there 'should' be deflation then what is that telling you about the real state of the global economy?
So how do deflationistas respond to there having been NO DEFLATION during the past 2 years ?
One prominent deflationist states -
"In my model, falling prices are not a requirement for deflation."
This is what happens when analysts become detached from the real world.
Euro-zone is Following the Inflationary Money Printing Plan
My long standing view has been that once money printing starts it cannot stop whilst large budget deficits exist, and large budget deficits will continue to exist until economies start to grow in real terms at trend, which means that the eurozone is now about to begin playing catch up by rampant money printing both overt (QE) and covert (off balance sheet) that is taking place elsewhere in the world, notably the UK, USA and Japan. For the UK we only need to look at the inflation indices to see proof of rampant money printing at work as all governments have only one solution which is to stealth default by means of high real inflation which stands several points above official indices of CPI and the UK more recognised RPI i.e. rather than at 5%, real inflation as most people actually experience is nearer to 7%.
The Eurozone looks set to leverage the current 440billion financial stability fund to as high as Euro 3 trillion through means of smoke and mirrors borrowings to hide the truth from the general populations as to the inflationary consequences of what is a policy of stealth debt default means of high real inflation as it prepares to finance PIIGS debt write offs.
Financial & Economic Crisis Lessons From History
Top secret documents reveal America's 1930's plan of war against the Red Empire, but America's foe in this war was not the Soviet Union or Japan, it was not even Nazi Germany, plan red was code for an apocalyptic war with Britain and all its dominions. The plan emerged from the Great Depression amidst the rise of evil regimes at a time when even some in America had been seduced by dark forces.
"I am speaking to you from the cabinet Room of 10 Downing Street, this morning the British Ambassador in Washington handed the American Government a final note stating that unless we heard from them by 11 o'clock that they were at once to withdraw their troops from Canada, a state of war would exist between us, I have to tell you now that no such undertaking has been received and that consequently this country is at war with America."Prime Minister Chamberlain
In the 200 years since the American Revolution, the United States and Great Britain have moved from enemies to firm allies. This documentary follows military experts and historians as they work through the top secret 'War Plan Red' to see how a hypothetical battle between America and Great Britain might have unfolded.

This image has been resized. Click on image to view full size.

First broadcast at 20:00 20 Sep 2011 - Available until 20:00 19 Sep 2012
The Lesson From History?
Wars follow economic depressions, and the enemy may not be who you think it will be. Whilst we can discount a war between America and Britain today, after all the red empire now only exists in the history books. There remain several candidates beyond the usual suspects.
To the North is Canada (for which the US has been actively planning to invade for close on 200 years), to the South is Mexico (there have been several wars of conquest already), To the West is China and to the East is Africa (the past decade has seen much action).
I think we can discount Europe and Russia, ..... for now as likely the forces of these military blocks could be utilised in an 'Allied' attack on China as one empire rises and another empire declines.
Now what usually happens the politicians coupled with the intelligence agencies who's primary function is to spread misinformation and propaganda via the mainstream media will seek to demonise and dehumanise the Chinese into a new evil empire, to build up a fever of nationalism in the general population so that they will be eager to lay down their lives on mostly the basis of lies just as countless have fallen for the Iraq threat propaganda and many of whom still continue to believe the lie that somehow Iraq was behind Sept 11th stockpiled with invisible WMD's that were an imminent threat to America and the West.
Economic Depressions are dangerous because they provide easy fuel for the politicians to inflame nationalism with the ultimate conclusion is to mobilise the millions of unemployed towards war on a scale that would make Iraq and Afghanistan look like a picnic. Therefore those that rightly criticise the bailouts of banks and even whole countries and the inflationary stimulus spending (including yours truly) need to contemplate the broader picture beyond monetary considerations in that these fiat paper printing actions are mere tips of an ice-berg of what could follow if trends were allowed to proceed towards their logical conclusions, because just as all countries are trending towards debt default bankruptcy and an hyperinflationary panic event (loss of confidence in fiat currency), all countries are also trending towards their own destruction as we repeatedly see but yet fail to acknowledge i.e. Iraq destroyed, Afghanistan destroyed, Libya, Egypt, Syria, pending....?
The continuing trend of economic stagnation is stoking the fires of paranoid nationalism that will ultimately result in the need to create enemies to be dealt with for which the prime candidate at this point in time is the emerging China superpower, though when paranoid nationalism lets rip anything is possible, anyone can become 'the enemy'.
The War on Terror and the stripping away of many civil liberties and freedoms so that anyone that does not agree with the military machine must therefore be a traitor, which has created the backdrop for the next phase for the militirisation of America as the only growth industry appears to be the military industrial complex which requires expanding budget deficits and an never ending stream of new enemies to justify its expansion. Watch out for The Patriot Act II, then III, then The Traitor Act I. At the end of the day the enemy will morph to become the general population.
Will Greece Leave the Eurozone ?
On face value Greece appears on the fast track towards economic collapse and war with its neighbours (Macedonia ? Turkey? Albania? ), so I can well understand why the Euro-zone will try its hardest to not let it leave because they understand that it would open Pandora's box that has kept ancient hatreds in check and thus so far succeeded in preventing a Europe wide war for over 60 years, which is the primary purpose for the creation of the European Union, to anchor Germany down to such an extent so as to prevent Germany from starting its third World War which would result in the annihilation of Europe and much of the rest of the world.
If Greece does leave the euro-zone we may well look back on such an event as the spark that ignited World War III, which means that despite the severity of the current crisis Greece probably won't leave the Euro-zone even when it does go bankrupt as the 50% hair-cut implies.
So Greece WILL default on its debts AND REMAIN in the Euro-zone.
How Could Greece Go Bankrupt and remain in the Eurozone ?
The problem with Greece is that it's Government and population have become lazy by spending well beyond their means (not helped by their gambling banks). The first thing Greece needs to do is to cut its budget deficit, it needs to wipeout the welfare state that it could never afford, this is the purpose of the austerity measures, to reduce the burden of the public sector that is acting like a noose around the Greek state, the debt is not the problem, the debt is the stick to beat the Greece economy into a competitive state so that it can grow, because the debt will be defaulted away, but this will only work if the economy becomes competitive.
Secondly the debt interest burden needs to be slashed, this is what debt default and fixed low ECB bailout interest rates will succeed in delivering, i.e. the ECB will likely continue to subsidise Greece interest rates on new debt at well below the market rate for many more years. As long as interest payments continue to be rolled over into new debt, then this will ensure that interest payments are spent within the Greek economy rather than sucked out of the economy, these twin forces should eventually result in igniting economic growth as it will leave Greece with a lower debt interest burden and a more competitive economy. However it may take a several more years of several more hundreds of Euro-zone billions pissed down the Greek drain to get to that stage, given the current lack of competitiveness of the Greek economy as a consequence of the inability to devalue wages via exchange rate adjustments.
Thirdly, Greek and other exposed european banks would have to be fully recapitalised by the ECB (nationalised) to ensure that they do not go bankrupt during a Greek debt default and similarly repeat the process with other PIIGS banking sectors. The effect of preventing the eurozone's worst run country from leaving the Euro-zone will hugely strengthen the Euro (a major buy signal!) as it would imply other potential bankrupting PIIGS would also similarly have their debt written down without triggering a collapse of the Euro-zone currency block.
This could mark the first of a series of periodic debt write offs that could take place every few years in response to the recycling of budget deficits into debt rather than debt interest leaving the PIIGS as wealth from Core Europe is transferred to Peripheral Europe until a system of transfer payments is formalised in the form of the permanent financing of a large part of Peripheral State deficits to the point where economies are able to compete across the Euro-zone in terms which generally means significantly lower wages for peripheral european workers.
The Decline of the West and Rise of China?
Many argue that debt crisis is a symptom of the west being in terminal decline to be soon replaced by the likes of China or that a clash of civilisations is taking place between the West and Islam. However these are flawed arguments that ignore the reality that the East has not been able to compete against the West for over 400 years due to myriad of fundamental reasons that go far beyond debt and deficits which encompass systems as a whole that include innovation, relatively free political systems and free market competition.
If the European Union is today seen as being a fundamentally flawed entity, it then still is far more robust than the system that operates in China which is at far greater risk of imploding than the EU or the US. In fact rather than witnessing the rise of the East we may soon be witnessing the Peak of the East.
The answer as to why is staring us literally in the face, in that China, and large swathes of the Islamic world are WESTERNSING, i.e. their system CANNOT compete against the WEST but instead are being forced to CONVERT to the WESTERN MODEL in virtually every aspect, and it has to be EVERY aspect, because any element that does not replicate the Western Model will leave such nations at a comparative DISADVANATGE and if it cannot compete then ultimately as GDP per capita converges will stagnate ultimately resulting in economic collapse.
In recent months we have been witnessing the Islamic world in revolt, they want freedom of expression, freedom of thought, economic freedom from corruption, they want free elections, they want to WESTERNISE. The masses don't want Islamic Sharia Law, they want a WESTERN model of laws for which they are literally willing to die for by the thousands as we have see in Libya and are seeing in Syria.
So all the academics that write reams of books about the decline of the West have it completely wrong ! The West WON 400 years ago! Since which time the trend has been to assimilate the WHOLE WORLD into a Global Western Civilisation.
The West's Greatest Enemy is the West Itself
The clash of civilisations is nothing more than propaganda, the reality is that the real enemy the west faces is not China or Islam but rather western politicians that are attempting to strip away what has made the west great, namely they wish to diminish capitalism in favour of socialism through the bailout of bankrupt banks and nations, when the lessons of countries going bankrupt such as Iceland show that it is infinity better to experience a couple of years of pain than die a slow lingering economic death like Japan.
Therefore crisis are a good thing, we need crisis, we need recessions we need to clear the decks of all of the froth that has been built up and most importantly we need to inflate the debt away that will be soon forgotten during the next boom so the UK and US have it right, print money and inflate the debt away, the Euro-zone is collectively walking up to this reality.
Stock Market Euro-zone Crisis Correction Over?
For investors crisis present opportunities to accumulate at bargain basement prices with a view to protecting ones wealth in inflation mega-trend proof assets such as dividend paying stocks, commodities and housing. You buy when no one else is willing to buy and sell when everyone else is buying. We had our bust in 2008 into 2009 and are clearly still nowhere near the end of the recovery / boom cycle.
The past 2 months have been extremely volatile for the stock market with the market flipping as much as 5% on several days. However despite this my last analysis and concluding forecast trend for the Dow has proved even more accurate than I thought possible at the time as the below graphs illustrate (07 Aug 2011 - Stock Markets Panic Crash Continuing, Is the Stealth Bull Market Over?):

This image has been resized. Click on image to view full size.

This image has been resized. Click on image to view full size.

My strategy all along has remained constant as iterated several times in articles and comments that I have viewed the series of panic lows as opportunities to accumulate more for the long-run in target stocks. Where the panic sell offs have cycled through sectors as most notably witnessed in the severe sell off in the metals and mining sector during the past few days.
So what's next ?
Well, that should be it, times up for the correction that was anticipated to end by about now, and I have seen little to change this expectation, after all there is now plenty of bearish sentiment out there courtesy of the perma-fools that tell people to SELL right at market bottoms which I am sure look set to contribute towards igniting a powerful stock rally for which there will be plenty of reasons published as to why stocks have rallied AFTER the market has risen.
I will seek to map out a probable trend for the the next few months in my next article, ensure you remain subscribed to my always free newsletter to get this in your email in box.
But look, its simple, they print the money, it floods into stocks and other assets. The money printing is perpetual i.e. for ever, as long as you value invest i.e. are leveraged to the effect of the money printing then you can't really go wrong! Unless you listen to the perma-fools, academics and the journalists, which unfortunately means approx 98% of the media your exposed to.
Deflation ? Deflation is a delusion of delusional minds - as the earlier example illustrated.
Your Inflation mega-trend investing wealth protecting analyst.
Source and Comments: http://www.marketoracle.co.uk/Article30666.html
By Nadeem Walayat
http://www.marketoracle.co.uk
Copyright © 2005-2011 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.
Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of three ebook's - The Inflation Mega-Trend; The Interest Rate Mega-Trend and The Stocks Stealth Bull Market Update 2011 that can be downloaded for Free.

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

___________-

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Pakistan and "The Haqqani Network" : The Latest Orchestrated Threat to America and The End of History

By Dr. Paul Craig Roberts

Global Research, September 27, 2011

Have you ever before heard of the Haqqanis? I didn’t think so. Like Al Qaeda, about which no one had ever heard prior to 9/11, the “Haqqani Network” has popped up in time of need to justify America’s next war--Pakistan.

President Obama’s claim that he had Al Qaeda leader Osama bin Laden exterminated deflated the threat from that long-serving bogyman. A terror organization that left its leader, unarmed and undefended, a sitting duck for assassination no longer seemed formidable. Time for a new, more threatening, bogyman, the pursuit of which will keep the “war on terror” going.

Now America’s “worst enemy” is the Haqqanis. Moreover, unlike Al Qaeda, which was never tied to a country, the Haqqani Network, according to Admiral Mike Mullen, chairman of the US Joint Chiefs of Staff, is a “veritable arm” of the Pakistani government’s intelligence service, ISI. Washington claims that the ISI ordered its Haggani Network to attack the US Embassy in Kabul, Afghanistan, on September 13 along with the US military base in Wadak province.

Senator Lindsey Graham, a member of the Armed Services committee and one of the main Republican warmongers, declared that “all options are on the table” and gave the Pentagon his assurance that in Congress there was broad bipartisan support for a US military attack on Pakistan.

As Washington has been killing large numbers of Pakistani civilians with drones and has forced the Pakistani army to hunt for Al Qaeda throughout most of Pakistan, producing tens of thousands or more of dislocated Pakistanis in the process, Sen. Graham must have something larger in mind.

The Pakistani government thinks so, too. The Pakistani prime minister,Yousuf Raza Gilani, called his foreign minister home from talks in Washington and ordered an emergency meeting of the government to assess the prospect of an American invasion.

Meanwhile, Washington is rounding up additional reasons to add to the new threat from the Haqqanis to justify making war on Pakistan: Pakistan has nuclear weapons and is unstable and the nukes could fall into the wrong hands; the US can’t win in Afghanistan until it has eliminated sanctuaries in Pakistan; blah-blah.

Washington has been trying to bully Pakistan into launching a military operation against its own people in North Waziristan. Pakistan has good reasons for resisting this demand. Washington’s use of the new “Haqqani threat” as an invasion excuse could be Washington’s way of overcoming Pakistan’s resistance to attacking its North Waziristan provence, or it could be, as some Pakistani political leaders say, and the Pakistani government fears, a “drama” created by Washington to justify a military assault on yet another Muslim country.

Over the years of its servitude as an American puppet, the Pakistan government has brought this on itself. Pakistanis let the US purchase the Pakistan government, train and equip its military, and establish CIA interface with Pakistani intelligence. A government so dependent on Washington could say little when Washington began violating its sovereignty, sending in drones and special forces teams to kill alleged Al Qaeda, but usually women, children, and farmers. Unable to subdue after a decade a small number of Taliban fighters in Afghanistan, Washington has placed the blame for its military failure on Pakistan, just as Washington blamed the long drawn-out war on the Iraqi people on Iran’s alleged support for the Iraqi resistance to American occupation.

Some knowledgeable analysts’ about whom you will never hear in the “mainstream media,” say that the US military/security complex and their neoconservative whores are orchestrating World War III before Russia and China can get prepared. As a result of the communist oppression, a signifiant percentage of the Russian population is in the American orbit. These Russians trust Washington more than they trust Putin. The Chinese are too occupied dealing with the perils of rapid economic growth to prepare for war and are far behind the threat.

War, however, is the lifeblood of the profits of the military/security complex, and war is the chosen method of the neoconservatives for achieving their goal of American hegemony.

Pakistan borders China and former constituent parts of the Soviet Union in which the US now has military bases on Russia’s borders. US war upon and occupation of Pakistan is likely to awaken the somnolent Russians and Chinese. As both possess nuclear ICBMs, the outcome of the military/security complex’s greed for profits and the neoconservatives’ greed for empire could be the extinction of life on earth.

The patriots and super-patriots who fall in with the agendas of the military-security complex and the flag-waving neoconservatives are furthering the “end-times” outcome so fervently desired by the rapture evangelicals, who will waft up to heaven while the rest of us die on earth.

This is not President Reagan’s hoped for outcome from ending the cold war.