Germany Mounts Nuke Missiles On Subs For Israel

From VeteransToday, Monday, June 4th, 2012:

Germany Delivering Soviet Nukes To Israel

Israel Has No Cruise Missile Capabability, Germans Violate Non-Proliferation Treaty

By Gordon Duff, Senior Editor

Today, Germany admitted arming nuclear submarines for Israel, not just selling subs, but supplying missiles and warheads.  Did they say so openly?  In fact, based on research any journalist is capable of, they did exactly that. 

We had long suspected, as have most Germans, that Merkel was an agent of some kind, a handmaiden of the secret societies trying to bring about global Armageddon.

Germany’s admissions today aren’t news to those who follow defense issues.  They don’t even come close to full disclosure, but they do make it inexorable, that we can now safely assume that Germany has long been a rogue nation and a “behind the scenes” manipulator with leadership only slightly changed from the Hitler era.

Officially, Israel has 3 Dolphin Class submarines supplied by Germany.  Der Spiegel announced today that these boats had been specially modified to launch nuclear cruise missiles.  What Der Spiegel failed to note is that the missiles themselves were supplied with the boats, nuclear weapons included.

Germany is helping Israel to develop its military nuclear capabilities, SPIEGEL has learned. According to extensive research carried out by the magazine, Israel is equipping submarines that were built in the northern German city of Kiel and largely paid for by the German government with nuclear-tipped cruise missiles. The missiles can be launched using a previously secret hydraulic ejection system. Israeli Defence Minister Ehud Barak told SPIEGEL that Germans should be “proud” that they have secured the existence of the state of Israel “for many years.”

 In the past, the German government has always stuck to the position that it is unaware of nuclear weapons being deployed on the vessels. Now, however, former high-ranking officials from the German Defense Ministry, including former State Secretary Lothar Rühl and former chief of the planning staff Hans Rühle, have told SPIEGEL that they had always assumed that Israel would deploy nuclear weapons on the submarines. Rühl had even discussed the issue with the military in Tel Aviv.

The Dolphin is not the first sub built for Israel.  Years previously, Germany retrofit several Type 21 subs, one of Hitlers “super weapons” from World War II, adding air populsion systems, with both surface to air missile capability, modifified American Patriot III systems illegally obtained and sold and a cruise system, most likely the older but very effective Soviet Granite 700.

Israel has no capability of modifying submarines and has no cruise missiles that are nuclear capable, their Delilah Al missile has a range of only around 100 miles, useless for use at sea, lacking both ability to penetrate targets nor carry proper warheads.  It is little more than a “standoff” version of the American “Hellfire,” designated for small fortifications or armoured vehicles.

Range 100 miles, warhead size appropriate for row boat or ox cart

The missile itself weighs around 300 pounds and, unless supplied with a micro-nuke warhead such as are rumored to have been tested by DARPA in Iraq, would only be capable of taking out a passenger vehicle at best.  These were used in Lebanon in 2006 with minimal success.  Truth being, the entire missile is barely a tenth the size of the warhead of a typical cruise missile and is extremely primitive and highly susceptible to ECM (Electronic Counter-Measures).

Then what is being put on the submarines?

Several weeks ago, a type 21, highly modified and refurbished was launched from Bremerhaven under the watchful eye of the NSA, Royal Navy, MI 6 and other agencies.  Attached to the bottom of the submarine, according to official sources under anonymity, was a droppable canister containing a 550 kiloton thermonuclear weapon, one of four discovered inside Germany by the American VELA satellite system, a transaction both illegal and highly irregular.

Below is a photograph of a refurbished World War II Type 21 submarines capable of nearly 20 knots underwater, even with 60 year old systems.  A refurbished Type 21 can actually outperform a newer Dolphin, using the best of its batteries and air drive system for silence with much better hull design and far greater range and capacity.  The photo below is a Type 21 still being used by the French Navy, considered still the most advanced diesel/electric submarine in the world:

70 Years Old? This Sub Capable of Nuclear Cruise Missiles, High Speed, Long Range and Sea to Air Missile Equipped

The best part of these Type 21 subs is that they don’t officially exist.  Refitting is totally secret, their individual capabilities, whether Cruise missiles or ICBMs is never reported and the buyers are unknown, whether governments, intelligence agencies or private concerns with issues about transporting large quantities of undetected “goods” around the world.

On June 1, 2009, it was a submarine like this one, armed with American Patriot missiles, that is said to have shot down Air France flight 447, an Airbus 330 bound for Brazil, while it was over the South Atlantic.  France was said to have failed to live up to an agreement and that this “tax” was considered punishment and incentive.  The source is both official and anonymous.

Coincidentally, Pablo Dreyfus, an expert on international drugs and arms deals was on this flight.  He alone would have been enough of a target to have downed this plane for.

The Soviet Union used these as ballistic missile submarines with three silos behind the mast.  They claim they were in active service when transferred to North Korea in 1990.  The Soviets said they were “scrap” but 22 years later, North Korea is still using them, one having recently sunk, in 2010, a South Korean ship:

YouTube - Veterans Today -

With Russian warheads discovered in Germany and Cruise type missiles being installed by German shipyards, admittedly on Dolphin Submarines destined for Israel, perhaps on others as well, up to 50 submarine “upgrades” have been done by Germany without accountability, there are only two choices for Cruise missile, the American Tomohawk or, more likely, the Soviet era Granite 700.  Here, Dimitri Khalezov, a former nuclear intelligence officer of the 12th Soviet Directorate, describes the Granit for Veterans Today:

What is a “Granit”?

The P-700 “Granit” missile (also known by its NATO classification as “Shipwreck” or “SS-N-19”- where “N” apparently stands for “Navy”) is the most advanced Soviet-era Navy missile. It is intended to be fired from submarines in submerged position and is primarily intended to destroy the US aircraft-carrier battle-groups. This is a highly sophisticated and highly “intelligent” missile.

The “Granit” missiles could be used to strike battle-groups and other ship orders while fired in swarms of 12 missiles in one salvo, but could be as well used in single shots – fired against single naval targets, as well as against stationary ground targets (as was demonstrated in the case of the Pentagon strike on 9/11). Each “Granit” missile weighs about 7 tons, has length of about10 meters, could fly up to625 kmat the supersonic speed at 2.5 Mach. Each missile is typically equipped with a standard “Navy-type” 500 kiloton thermo-nuclear warhead; conventional warheads for this missile even though exist in theory, are never used in reality – so that all without any exception “Granit” missiles in service are nuclear-tipped.

 This missile deems to be totally indestructible, because NATO lacks any means to shot down this missile even if they detect it in advance. In fact, it was demonstrated in the case of the Pentagon attack on 9/11 – NORAD managed to detect the upcoming “Granit” missile at least 6 minutes before it struck the Pentagon. NORAD’s operational officers managed to ring the atomic alert, scramble the so-called “Doomsday plane” in response, but were not able to prevent the actual strike – the missile managed to successfully approach Washington DC and hit the wall of the Pentagon despite being detected by NORAD 6 minutes in advance.

Make you own conclusions – as to the danger of this weapon. I would also like to note, that according to the Soviet and Russian strategic plans, the submarines armed with the “Granite” missiles could be used as a “back-up” option for the retaliatory nuclear strike against the United States (while the primary role in such a strike belongs to strategic intercontinental- and submarine-launched ballistic missiles, of course).

Something for those Russian "non-Jewish" technicians relocated to the West Bank to program

“Granit” missile in the factory.

 For the reason of possible usage in the retaliatory strike the “Granit” missiles are also designed to produce airbursts above the US cities – so they are equipped with special non-contact detonators for such reason, in addition to the usual contact detonators. I should mention also that the “Granit” missile has a very advanced inertial guidance system that also has a list of pre-loaded most important NATO targets. While flying above the ocean the “Granit” missile will scan and reconnoiter the operational theater and try to distinguish ship orders and especially aircraft-carrier battle-groups and to select the most important targets in the ship orders and to strike them in automated manner.

If flying above the territory the missile will reconnoiter it too and will try to detect the most important stationary targets by comparing their coordinates with those pre-loaded in its warhead. Once encounter such targets the missile’s on-board computer will immediately select the most important target by the order of priority and the missile will strike it. So, once the missile was fired towards Washington D.C. it compared the two most important targets – the White House and the Pentagon and “preferred” to strike the latter one as being in its “opinion” the more important target.

Perhaps I should mention that this is the most heavily armored missile in the world – it is made from very thick steel and in fact it could be compared with a flying tank or with a giant bullet. Due to its tremendous speed, weight and strength of its body this missile managed to penetrate six capital walls of the Pentagon building when it struck it on 9/11.

As there is no other missile available for sea launch, there is nothing but the Granit that Germany could have been installing in the newer but less capable Dolphins or the Type 21 submarines it has produced over the years for special clients.  It has been reported by official but anonymous sources that it was a type 21 that delivered a device used to trigger the earthquake that destroyed the Fukashima nuclear plant in Japan and that a recently launched Type 21, prevented from organizing a nuclear terror attack on the 2012 Olympics, is now nearly on station for an attack on a secret Japanese plutonium production and storage facility, two possible locations given, one on Northern Honshu and the other on Hokkaido.

In neither case has there been conclusive proof as to the organization involved with British sources indicating a highly secretive multi-national terror group with a powerful cast of characters from China, Russia, Germany, the UK and US, all supporting a doomsday agenda.  Were it not for credible and highly detailed classified sources and coincidences such as the announcements made in Der Spiegel today, clear admissions of serious war crimes by the German government, feeling themselves totally immune to international law, a pretty good guess, we would have passed on reporting any of this.

ISRAEL and the CRUISE

More from Der Spiegel in today’s article:

Now SPIEGEL has learned that Israel is arming the submarines with nuclear-tipped cruise missiles. The German government has known about Israel’s nuclear weapons program for decades, despite its official denials.

Documents from the archives of the German Foreign Ministry make it clear, however, that the German government has known about the program since 1961. The last discussion for which there is evidence took place in 1977, when then-Chancellor Helmut Schmidt spoke to then-Israeli Foreign Minister Moshe Dayan about the issue.

Clear evidence exists that Israel has no program either to modify submarines for cruise missiles, to manufacture real cruise missiles or to mount nuclear weapons on these devices.  This we know for sure.  The missiles are of American or Russian design, were supplied illegally by the manufacturer and are installed with nuclear weapons while in Germany.

Israel has no such capability though there has been a recent influx of former Russian/Soviet missile technicians, all non-Jews, into Israel over the past two years.  No matter how secret an operation, the idea that non-Jews were awarded housing in areas where Palestinians had been expelled was seen as disturbing to many Israeli’s who coveted these properties and were very vocal about government actions in importing missile technicians from Russia who have no Jewish blood.

Despite the “top secret” nature of this program and its potential ties to 9/11, there have actually been public demonstrations that have brought  it to the surface.

The questions we have to look at is what actions are likely to make use of weapons such as these to realign global issues and on whose part.

An immediate assumption, one quite probably off the mark, is that Israel feels a need to use long range cruise missiles against Iranian targets.  In truth, any nation to cause civilian deaths making use of nuclear weapons in a first strike capability would face, minmially, total sanctions, fully back by Russia and China with abstensions at the Security Council by the US and Britain.  France is the only potential vote and any French government voting on this issue would fall that day.

Israel has no plans to attack Iran with nuclear weapons.  We have reliable information that Iran has had nuclear capability, deliverable high-output warheads, since 2002 with a deliverable range of about 1500 miles.  We have also been informed by sources in Iran that there is no potential for deployment of such weapons, and no remote possibility of their use unless Tehran itself is under nuclear attack.

All of this is more than unlikely.

What is more likely is an attack on the US, Great Britain or South Korea.  What makes this possible is that Israel currently has, unlisted in its inventory, more than one submarine with long range nuclear capability and an unclear naval command stucture.  Israel, in actuality, has no civil government and only a minimal military government.  An examination of political moves made by Israel clearly demonstrates that they don’t function as a nation at all but rather as an outpost for a post war conglomerations of secret societies, some closely aligned to Himmler’s SS and Gehlen’s DVD.

British security experts are of a general belief that the Gehlen group, under Operation Paperclip, run by the Dulles brothers, Allen and John Foster, aided by a young Richard Nixon (highly classified) created the CIA, not out of the OSS but entirely out of German intelligence groups who had worked, hand in hand, with counterparts in America during the entire Second World War.  Among their best known operations were the Kennedy assassinations, their manipulation of American media and their ability to hide behind Jewish identity organizations and partner with communists when needed.

Most American presidents have DVD members among their staff, their top advisors as does the British prime minister.  Canada has long been an outpost for these groups who have been able to openly export nuclear technology and highly enriched weapons grade uranium from Canada unnoticed.  No one ever asks why a nation with almost no Jewish population is overrun with Jewish defense organizations.  Ernst Zundel was prevented from exposing this issue and, in his failure, unknowingly probably saved his own life.

The most likely targets are American aircraft carriers, one or more, easy to blame on Iran but more likely to lead to worldwide instability rather than an immediate attack on Iran without clear evidence.  Clear evidence.  With the press as it is, you could create “clear evidence” with a crayon.

Here is a NASA photo taken of Mars from an orbiter.  Tell me what is wrong with this photo:

Mars Orbiter Photo Taken from 17 inches above "something"...not tripod lower right

Carefull examination of this photograph, supposedly taken last month, supplied by NASA as one taken from many miles above the Martian surface is something quite different.  See the lower right?  That is part of the foot of a small tripod.  Note the blue substance?  Spectroscopic analysis indicates they came from the bottom of a home aquarium.  This photo was taken from a small model built inside a wooden framework, one sculpted from everyday household items, but why?  Do we not have a Martian orbiter or is NASA prone to jokes of this kind?

Note the arrow, the sample used for analysis.  This isn’t Mars and may well have been done in someone’s garage.

ENDLESS POSSIBILITIES

If one can blow up Chicago, send a missile into the Pentagon, sink an aircraft carrier or run with no accountability while the bastion of freedom in the world is involved in a series of war crimes, overrun by drugs, has rigged elections that “banana republics” would be ashamed of, if news can print “garage made” photos of Mars, then what can’t be done and what can be trusted?

If we take Zbigniew Brzezinski at his word, that the world is a grand chessboard, then any act can lead to any potential consequence, alway beyond our grasp.

Drone Killings a Sexual Thrill for Obama

From TheUlstermanReport, June 4, (excerpt):

WHI (WhiteHouseInsider): Obama loves them drones. He has made them a personal priority above all else....

It's what has been brewin' for well over a year now — its causing all kinds of hell between the administration — the military — infighting and concern among the staff — even Jarrett don't have a handle on all of it. Even she is not entirely comfortable with how the president has sunk his teeth into the drones — the kill list. She's not bothered by their use specifically — she's more — I would guess she's more worried over the political implications of Obama's obsession — that eventually enough people will stand together and say ENOUGH....

So having Obama so oddly focused — not just focused — he gets excited — visually — the guy gets off on it and he ain't even hiding that fact anymore. And some are repulsed by it. They've done video reviews you know of the missions. The drones. The kills.

UM: The president you mean? He watches videos of the drone attacks?

WHI: Yeah — like it was — like it was porn. I can't emphasize... I don't think I'm painting a clear enough picture here for you of how this thing has people really freaking out inside the administration....

The fact it's gotten this bad — these drones — an American president who has the video sent up to his personal study so he can watch them over and over again — like I said — sh-t ain't right. And more and more people are figuring that out — and that is what has Jarrett concerned. But even she — Obama won't listen to her on this one....

He picks a name off a list — some of these people have been U.S. citizens — he picks that name off a list and orders the kill. Then he gets the video confirmation of the kill, and he watches it. Over and over and over again....

But now Barack Obama, he's judge and jury. With a pointing of a finger to names on a list, Barack Obama gets to play God. No day in court. No guarantee innocent people won't be killed as well, and they have been killed. Children. Women. Over and over again. And this president — he has that knowledge when he watches the kill confirmations. And he watches it over and over again. These are high-tech snuff films — a multi-billion dollar snuff program — and he gets off on it.

She's gotta try and contain it — but the president's obsession is becoming too much to do that. The knowledge of it — its getting out now. Reaching other world leaders — it ain't good. Even if it might give us a political advantage — you want sickening?

Those drones — their domestic use — don't think he ain't thought about it. A lot.

You see, Obama — he don't trust the military. Not all of the — not many of them. But he trusts those drones, now don't he? Don't take him having to trust some military official to order troops to carry out an order inside the United States. It's just inputting a bit of data — and the push of a button, right? And keep the f-cking military out of that equation there. Move the program — attach it directly to the White House. Make it part of Homeland Security, right? Simple as that. One appropriations bill — just one — and its done. [See http://theulstermanreport.com/2012/06/04 /white-house-insider-barack-obamas-high-tech-snuff-films ]

_____-

Related:

''NATO strike blamed for wedding deaths in Afghanistan''

COLLATERAL DAMAGE OR CRIMES OF WAR? Women, children among 18 Afghans dead in NATO wedding strike

An Empire of Bones: Obama's Drones, iSkulls, And The U.S. Genocide of The Third World

Dozens of civilians die in bloody day in Afghanistan
Attack of the drones: 27 killed in just three days as U.S. increase strikes in Pakistan

Drone attacks will continue in Pakistan: US

Playing God in Pakistan

The end is here for financial markets warns veteran gold guru Jim Sinclair

By: Peter Cooper, Arabian Money

Wednesday, 6 June 2012

Veteran gold trader and a former adviser to the Hunt Brothers in the silver spike of 1980, Jim Sinclair is now saying boldly on his website jsmineset.com that ‘The end is not near, it is here and now’ in reference to the global economy.

That means of course that the time for gold and silver prices to hit the roof is also very close, and much closer than anybody else is currently forecasting. Mr Sinclair is laughing at George Soros for saying that the euro has three months to sort itself out. He thinks it will be lucky to have three weeks.

End is here?

After a couple of years of crises in the euro zone market commentators may have become somewhat hardened to bad news and in danger of missing the real denouement when it is actually about to happen.

The Greek election on June 17th is only 11 days away and is the obvious flash point ahead. Meeting after meeting of European leaders and committees do not seem to be getting anywhere. Nobody really seems to have a handle on the situation.

The danger of simply falling over the edge of the precipice with everybody behaving like a flock of disturbed sheep is only too clear. ArabianMoney reads the earnest US op-eds about what Europe ought to do, should do or could do with some amusement. Europe is not the USA with your federal institutions and history.

Master forecaster

Mr Sinclair could therefore well be right. He’s the guy who predicted back in the early 2000s with gold around $300 an ounce that gold would reach $1,650 within a decade. Now he is talking about ‘quantitative easing to the moon’ and a similar trajectory for gold and silver prices.

For the central bankers of the world would have only one way to respond to another global financial crisis and that would be massive money printing to inflate debts away and reset the global financial system. Nothing else could be done.

It is the gold and silver bugs contention that this would crash equity, real estate and bond markets around the world and send money pouring into the only money that can never be printed, gold and silver. Can this really happen? We may not have long to wait to find out if Mr Sinclair is right again.

Jim Willie: US T-BONDS: BLACK HOLE DYNAMICS

By Jim Willie, GoldenJackass.com

The USTreasury Bond might be a Tower of Babel, but when it begins to fall, it will produce a vast powerful gigantic Black Hole. The process has already begun, as junk bonds are being cast aside.
Like with astronomy, the star is dying, the core being USDollar, the revolving part the USTBonds.
As the bond rally continues, will a collapse occur before the 10-yield hits 1.0% ??

• The Zero Percent Interest Policy produces poor consumer decisions and bad impaired management

• The capital investment process has been disturbed very badly, as businesses cannot be managed well

• The 0% cost of money distorts all financial markets, all asset pricing

• Raids on private pensions are soon to come (401k, IRA, Keough), which will add power to the Black Hole

• The unspoken effect of ZIRP is the powerful ongoing destruction of capital

• As equipment goes off line further, the USEconomy will weaken further, a vicious cycle

• The official Zero Percent Interest Policy is the calling card of the Gold Bull Market

• The Eastern Coalition appears to have rested enough to permit a strong gold price bounce last week

• Much higher gold prices come in the near future

• The USTBonds will fail from their own success, unleashing the Gold Price

Man-made financial phenomena imitate nature, but more importantly they are subject to the powerful laws of economic nature. The Wall Street financial engineers have built vast structures, which tragically are crumbling and soon will fall to the ground. Vast illusory wealth will be lost, never truly garnered. The fiat currency system has required tremendous efforts not only to build the financial skyscrapers ever higher each year, but also to provide support structures that prevent their topple. With the aid of the subservient press, an illusion of wealth, prosperity, and stability has been fashioned and defended. It is all being blown away by the powerful storms known as the global financial crisis. The term has even earned an acronym for the popular lexicon GFC. My alternative view is that the global monetary war is in full swing, World War III with the USDollar at the epicenter of the conflict and pecuniary violence. A few years ago in June 2005, the Jackass penned an obscure article entitled “Financial Market Physics” just for amusement. Thanks to Vronsky and his intrepid work, the Gold-Eagle archive still lives (for old article CLICK HERE). In it was described momentum, pendulums, traction, leverage, resistance, support, inertia, coiled springs, meltdowns, high versus low pressure differentials, flow dynamics, imbalances, and the infamous black hole. The final concept is of extreme relevance today.

My objective is to explain how the crumbling USTreasury Bond tower has an effect on the ground. Last article dealt with the inevitable collapse of the tower, since its support buttress in the Interest Rate Swap has begun to rupture. My best source claims a trigger mechanism has been pulled from deep within the USTBond/IRSwap system managed by JPMorgan. The collapse is assured. It cannot be stopped. It will continue until its conclusion. In the wake of the collapse are dynamics on the ground, at the site of the tower. A grand black hole will be formed, complete with tremendous power to suck down all assets. The process has already started, sucking down weak sovereign bonds and junk corporate bonds. My purpose will be to describe the process from the top down, then the bottom up, as lost faith in all things paper gathers like a gigantic storm that covers the entire earth. The great power is seen an the following image, a great piece of Fotoshop work in itself. Money vanishes in the hole. Notice how in the past few years, grand bank aid has come, $trillions tosses at the banking structures. Yet they are still insolvent, in ruins. The money went into the Black Hole, which should include Fannie Mae and AIG in a wider focus.

The tremendous power in nature for similar anomalies can be seen in a gorgeous water hole, whose location could not be verified with a little research. Also the awesome beauty of the inter-stellar black hole has been captured probably by the Hubble telescope. The intense gravitational field traps all matter, all wave elements (such as transmissions), even light itself. Black Holes in nature occur when a star dies, its mass collapses, to produce a gravitational field beyond what can be managed in a stable system. That star is the USDollar core and revolving USTBond system, which are collapsing. Some scientists believe alternative universes lie on the other side of such voyages through the eye. The water that descends into the hole goes into the ecosystem, recycled, maybe purified, only to emerge elsewhere on the other side. If only the Western bankers could be forced to travel through the astronomical eye, suffer the crush, and emerge in another world far enough away not to harm the population. Could the light flashes be dragon breath on each side? The poles could be viewed as producing future Gold demand.

JUNK BOND RELEASE VALVE

The top has many forces. The impaired higher risk bonds are shed like yesterday’s trash with newspaper wrappers (prospectus filings). In the Hat Trick Letter May report, the topic of widening junk bond spreads was exposed. Mistakenly in my view, the Seeking Alpha author describes the junk bonds as offering good value, only because their yields are higher than before. Those yields will go higher still, much higher, corresponding to much lower values. In the process of shedding the high risk bonds, investors will turn to the supposed safe haven of USTreasury Bonds. The author points out that in the last month alone, the situation has worsened. He wrote, “As I mentioned in a recent article, high-yield spreads to Treasuries, as measured by the BofA Merrill Lynch US High Yield Master II Option-Adjusted Spread, recently reached a new high for 2012, now at 7.17%, up 123 basis points in the past month alone.” It has risen 17 basis points so far in June alone, in only three active trading days. If still rising, the junk bond value continues to fall. He went on to compare to historical levels, without paying much attention to the acute risk of the spread widening considerably further. The junk spread can move fast, as seen in the last crisis chapter. It went from 3.73% in January 2006, to 5.92% in December 2007, to 21.8% in December 2008. It could repeat such exaggerated moves in the current crisis. See the Seeking Alpha article (CLICKHERE). The multi-year chart shows the early stage of another eruption.

A closer view was given just a couple weeks ago. Notice the divergence process underway, as the junk bond yield index moves up and up, but the USTBond index moves down and down. In the last couple weeks, my forecast of a 1.5% USTBond yield on the 10-year came true. That was one of the easiest calls in my memory. The trajectory on the junk yield (in blue to the sky) continues to go higher, while the trajectory on the USTreasury yield (in brown like feces) continues to go lower. Next will come the more mainstream corporate bonds, tomorrow’s potential junk bonds, which will be sold off in favor of the USTBond for perceived safety. We are already starting to hear the chorus on the favorable performance of USTreasurys, the lone winner in the crowd. The financial press anchors and analysts simply do not comprehend that the USTBond is the final asset bubble, how its rise means the failure of other assets, how the implosion has its epicenter powered by 0% by the USFed itself. The faith shown to the USFed has become a more desperate hope. Ignored has been the 30-year USTBond. If its yield goes from 2.65% currently to 2.0% as is likely, a ripe 15% profit can be gathered. Not bad in today’s ugly climate.

THE PRIMARY QUESTION WITHIN THE CRISIS SETTING SHOULD BE: WILL THE SYSTEM IMPLODE BEFORE THE 10-YEAR YIELD REACHES 1.0% ???

DISTORTED MONEY MANAGEMENT

An interesting little exchange occurred this week between the Jackass and Tyler Durden, the crack analyst editor at Zero Hedge. My point was that he misses the point of capital destruction from the ZIRP policy of enforced 0% as official rate. He argued two excellent points that did sink into the stubborn Jackass brain stem. Artificially low interest rates enable consumers to spend improperly and unwisely. The setting was prepared by an unusually enlightening debate between Rick Santelli and Gary Kaminsky on CNBC, the official Wall Street public address system wall with loudspeakers. They argued that the now status quo financial repression identified by low interest rate and QE environment are not good for the USEconomy. How true!! But this spout of wisdom occurs in the mainstream. Santelli cannot be suppressed, too smart, too experienced, too outspoken. Durden wrote, “Borrowing and saving are really about whether to consume more now or later (or more later and less now). We agree with Professor Antony Davies that these decisions are best left to individuals, and not the Nanny State Fed. Each person’s judgment of what is best for them is replaced by the Federal Reserve’s judgment and the free market interest has become a thing of the past (for now). Lower rates don’t mean more spending; they mean more spending now and less in the future.” See the Zero Hedge article (CLICK HERE).

Low interest rates far below where they belong encourage a new car that should not be bought, a boat that should not be bought, those items of jewelry (or furniture or lawn ornaments) that should not be bought. They even encourage a bigger house that should not be bought. Many such purchases end up in a liquidation sale, a yard sale, a repo sale, or a foreclosure sale much later after the spending high wears off and the bill is due. Great bottom up argument by Durden. The larger point in parallel is that artificially low interest rates bring about a misallocation of capital, far beyond the misjudged consumer spending.

The second excellent point made by Tyler Durden was that inadequate capital investment has led to a decline in corporate profitability, due to a deteriorating capital base. The working capital of big Western firms, perhaps to some extent in Japan also, has resulted in a dilapidated aging asset base that produces a declining cash flow. An absent capital expenditure (CAPEX) reinvestment will lead to amortization and depreciation to the point of no return. See the disaster in Venezuela where Chavez has driven their petroleum business down hard, well over 25% to 30% lower output. Economist David Rosenberg used to be a favorite economist of mine, but he embraces the nonsense about a recovery when the USEconomy has been stuck in a semi-permanent recession of minus 3% to minus 5% for four years running. Despite that errant position, Rosey pointed out earlier that corporations are forced to spend the bulk of their cash on dividend payouts, courtesy of ZIRP which has collapsed interest income. They must also replenish flagging pension programs subject to lofty forward views. Companies have less to invest in new equipment, new workers, and research & development. In other words, the business sector cannot invest properly in their own main product lines. Ultimately, the corporate profit margins suffer from neglect and age, like an old car. The USFed sponsored 0% rate shifts capital allocation equations, so that ever less cash is going into replenishing asset bases. In many cases the threshold of useful asset life has been crossed. Job cuts and the savings involved cannot breathe renewed life into any business. Besides, most companies are already cutting into the bone. Once the depreciation and amortization cliff is reached, the cash flow will be much worse. See the Zero Hedge article (CLICK HERE) for an excellent survey of capital investment, working capital, debt reduction, R&D, acquisitions, stock buybacks, dividends, and more.

The problem is as diverse as it is perverse. The low mortgage bond yields, coupled with cratering commercial paper, has attacked the corporate sector. It does not produce the cash flow from stored cash anymore. Compare to a human body whose heart pumps much less blood within the circulatory system, and the body slowly starves of oxygen. The artificially low USFed ZIRP policy of zero percent interest rate has resulted in a disaster of mammoth proportions. Corporations and fund managers, including pension funds, have made decisions to accept higher risks since the safe USTBond complex has offered such paltry returns. The risk has backfired since 2007 in a big way. Having lost their core, they direct their remaining assets into USTBonds which earn tiny interest, but are seen finally as safe. The USGovt is not a good business investment, a grandiose money loser. A rally is occurring in bonds for USA Inc, which is losing $1.5 trillion per year, a horrible investment. Again, more misallocation of capital as funds chase the USTBond Tower of Babel. The fund managers have gone from risk ON to risk OFF, as the economic and financial worlds hurtle toward implosion and systemic failure. On the consumer household side, the low 0% rate has hit savers too. They cannot live off savings income. Retirees are the new poverty stricken class, forced to choose between food or medication, sometimes opting for dogfood. The fact of economic life not reported by the financial anchors and supposed expert analysts is that the official 0% acts to suppress economic activity, not to stimulate it. It is a gigantic wet blanket. The collection of savers has twice the volume as consumer loans. The interest income is twice that of interest paid. Therefore the USEconomy grinds slower.

PRIVATE PENSION FUNDS

A jet assist will be given to the Black Hole swirl when the USGovt makes its next horrendous decision on treatment of private pension funds. The mass of 401k, IRA, and Keough funds enjoys a tax deduction benefit on much of the incoming investments from the payroll side. That might soon end with a forced directive by the USGovt in all its limitless short-sightedness, if not stupidity, surely desperation. They must find buyers of USTBonds, just like Japan twenty years ago. Japan forced all public pension funds, postal also, into Japanese Govt Bonds, even though they earned squat for interest. The same will happen in the United States. The discussion has been tossed around for months, a very tempting concept indeed. Imagine the $16 trillion in US retirement funds being redirected in part into USTBonds. Just attacking the personal 401k, IRA, and Keough funds would bring a cool $2 trillion at least, maybe more. They would declare the tax benefit as lost on new income entering the private pension funds, unless they purchased USTBonds. A more extreme decision would be to force old money in the funds to exit their stock investments and enter USTBond investments instead. Even if only on the margin of new entering funds, the effect would be huge. A backfire on the stock market would occur, to be sure. If the extreme option were declared law, then the stock market effect could be another 10% sudden decline or worse. My point is that forced personal pension funds into USTreasury Bonds would add considerable new force to the Black Hole that sucks capital from the system, and pushes it into the natural toilet.

CAPITAL DESTRUCTION FROM 0%

For some reason, after considerable observations, the Jackass has been unable to find more than one or two other analysts that pay any attention whatsoever to the very important effect of 0% official rate. The Capital Destruction effect is profound and damaging. Few if any economists or financial analysts seem to comprehend that a sustained 0% rate kills capital. The dynamic is simple, mentioned every third or fourth public article by the stubborn Jackass. As 0% prevails for the return on money, the investment community pursues alternatives to the empty USTBond savings window. The investors seek out investment alternatives like commodities, while others rely upon the commodity sector as a hedge against inflation. Whichever the point of view, the result is that commodity prices rise and the cost structure rises. The brunt is felt in higher industrial feeder system costs, and higher household costs like with food and utilities. The profit margins shrink for businesses, and for the diverse business segments. The final product price cannot keep pace with a rising pattern, not with the intense competition in China, as well as Japan and the entire Pacific Rim. Product prices cannot rise to maintain a constant profit margin. So capital dies in a vicious cycle as the USEconomy weakens further with each passing month.

As the profit margins are reduced, entire businesses along with certain business segments shut down. They take their equipment off line. They retire their capital. In some cases after a period of time, they liquidate their equipment in order to raise needed cash. The result overall is a destruction of capital, a retirement of capital, a shrinking of the economic capital base. This is the biggest blind spot in the collection of American, British, and Western European economists. They believe the ZIRP is a stimulus. It is a stimulus only to speculation, which has turned on its masters to destroy their ill-fated elaborate but flimsy structures. ZIRP has systematically been destroying working capital. The standing permanently declared 0% monetary policy assures an endless recession, and no recovery ever. Worse, the free cost of money distorts all financial markets, all asset pricing, everything. It is an epitaph on monetary rule.

The ZIRP will continue forever, or until the USGovt debt default, or until the systemic failure signaled by the JPMorgan major losses. The two major reasons why no Exit Strategy is available to the USFed and USDept Treasury are that 1) USGovt borrowing costs would rise to uncontrollable levels, adding to already unmanageable deficit levels, and 2) the Interest Rate Swap control apparatus would implode, leading to $100 trillion in losses or more. So the Zero Interest Rate Policy will go on forever, until the USTBond Tower of Babel falls, or until the entire financial structure based on the fiat USDollar collapses. Arguments to the contrary are both baseless and have been proved wrong by events of the last four years. No recovery, no remedy, no liquidation, endless war, deficits to the sky. Systemic failure awaits.

GOLD RISE DURING SYSTEMIC BREAKDOWN

The official ZIRP is the calling card of the Gold Bull Market. What commodities are for investments and hedges in the tangible arenas, Gold & Silver are to the financial arena. As long as the Zero Percent Interest Policy is in force, the Gold Bull Market will persist and thrive. The ZIRP assures that the inflation adjusted real interest rate, like with the 10-year bond or 30-year bond, will remain negative. Take the 2.5% yield or 1.5% yield, subtract the actual price inflation of 7% to 9% in order to arrive at a negative 6% interest return in real terms. The negative real rate has persisted for over ten years, and assures an ongoing Gold Bull Market. It requires repeating. The official ZIRP is the calling card of the Gold Bull Market.

The battles on the ground are more full of intrigue. One should never lose sight of the sinister motive to disrupt nations, to enable overthrow of tyrant leaders, with the side benefit to capture their gold as booty. The raid in Libya of 144 tons, the raid in Greece of 112 tons, cannot be dismissed as asterisks when they might have been the primary objective. The Arab Spring saw other gold released from vaulted bases, like in Tunisia, a story long forgotten. The capture of gold bullion in movement from political instability occurs on the periphery of the black hole. Almost no central bank gold remains from any major country, as almost none is left in any central bank vault. The Bank of England attracted attention several months ago by sending into circulation very old gold bars, easily identified by markings. Switzerland has a different problem, caught in their own web of deceit and fraud. They have been ransacking private Allocated accounts for years. Von Greyerz has pointed out how investors wishing to transfer their gold bars find themselves wrestling with bullion bankers who do not any longer have the bars in possession. Proof is the new serial number stamps on bars, whose dates make liars out of the bullion bankers, since those dates are newer than the accounts. The bars held are a few years younger than the initial investment time frames. Only the smaller countries seem to have gold, along with Russia and China and India. These small countries are vulnerable, subject to raids.

The SPDR Gold Trust will be the final gold victim of the black hole forces. It has been dubbed the central bank of gold bullion bankers. It recently saw a reduction in bar volume equal to the amount that was just increased in the Sprott Gold Fund (symbol PHYS). The Sprott Funds are loaded with integrity, as honest as the GLD fund is dishonest and corrupted. As the flight to true safety increases, money (in form of gold bars) will fly out of the GLD corrupt corner caves. The hapless clueless dumbfounded GLD investors will be holding paper certificates in their empty hands. They will pursue legal avenues, replete with lawsuits, seeking clawbacks from emptied vaults. In time, the GLD share price will be 20% to 30% below the gold spot price. The proof lies in its price discount relative to spot. Take the GLD quoted price today at 158.9 per share and compare to the gold spot price of 1637 per ounce. Factor in the 10:1 ratio, and arrive at a hefty 3.0% discount of GLD to spot gold price. The Sprott Funds typically have a notable premium in price since they actually purchase the gold bars. The SPDR Gold Trust relies heavily upon paper certificates, and permits routine and frequent short raids out its back door that drag down the share price.

My position has been laid out clearly in recent weeks. The biggest factor behind the gold price (with corrupted paper futures discovery aspect) is the Eastern Coalition.Their grand raids have resulted in 5000 metric tons pulled out of New York, London, and Swiss banks, and sent East, principally China, but not exclusively China. Their motivated raids are intended to weaken the Anglo bankers to the point that they are rendered toothless to defend their massive naked short positions. My excellent reliable gold trader source has pounded the table for over a year, that the gold cartel is net short over 20 thousand tons from improper illicit illegal usage of Allocated accounts. Their nightmare is only beginning.

The gold price can be viewed apart from the background wartime battles, which have left plenty of blood on the fields, offices, and delivery ramps alike. The JPMorgan troubles have underscored the vulnerability of the USTBond complex, and exposed the Interest Rate Swap as a reinforcement device. The truth is slowly emerging. The declared JPMorgan losses are soon to exceed $20 billion. CEO Dimon has admitted the Delta Hedge strategy that manages the Interest Rate Swaps has gone somewhat out of control. His tormented elite financial engineer staff cannot even estimate the losses. During the lifting of the curtain to show the world the vast machinery at work creating a facade of safety and security in the USTreasury Bonds themselves, money moves into Gold. During the last few weeks, anyone with an IQ greater than the Bush family can notice the USEconomy is hurtling into a recession. All indicators scream recession. With strained facial expressions and almost apologetic tone for reporting a more truthful picture, the financial news networks cannot avoid the reality of a recession. They report the dire stream of economic news with sheepish regret.

The USTBonds will benefit from the recession outlook, but talk has already begun in two important messages. First, that the strong performance of the USTBonds signals a recession and widespread damage to the USEconomy, along with even greater USGovt deficits. Second, that the USTBonds might be the only successful investment in town. The latter speaks directly to my point of the USTreasury Bond sucking all capital, inducing sales of all asset classes, and purchasing the US sovereign bond since it is the supposed safe haven, the only asset that is not losing value. The USTBonds will fail from their own success, as instability enters the base while the Tower of Babel goes higher. Again, the biggest question in my mind is whether the 10-year USTBond yield (the TNX) will reach the next important target of 1.0% before the systemic breakdown. My intermediate target of 1.25% will be achieved, but only after the USEconomy is recognized by the dumbest people in the room, the USGovt stat rats. As the USTBonds continue to rally, the Gold price will rally alongside it. Eventually, the USTBonds will be regarded as toxic paper, the cause of a Black Hole, subject to severe default writedowns in a debt restructure. Then Gold will rise without competition, unimpeded by a phony USTreasury safe haven.

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

Krugman-in-Wonderland: This Goldstein Economy

From Krugman-in-wonderland, JUNE 5, 2012
By William L. Anderson

Goldstein strikes again. We are not at war with Eurasia; we are at war with Eastasia!

Likewise, the economy was doing just fine UNTIL THE REPUBLICANS TOOK OVER THE HOUSE IN 2011!! We'd be in recovery by now and everyone would have a job!

For two years -- two years -- Barack Obama had an overwhelming Democratic majority in the House and a filibuster-proof majority in the Senate, but apparently even then Goldstein was lurking, directing everything in the shadows, keeping the government from spending like it should. Or so Paul Krugman would have us believe.

As I have said many times, I have no hope that Republicans in power would do any better than has Obama, especially given the fact that the housing bubble occurred under the watch of a Republican president and a Republican Congress, at least until 2006. However, I do believe that academic economists should do more than just shill for a political party, and that also means taking a critical look at what those parties are doing in regards to public policies. Instead, Krugman feeds the Democratic Underground more red meat and calls it "economics."

Krugman's latest assertion is that Obama is not spending very much at all, and if one counts state government spending, we are in a nation-wide "austerity" program. He writes:

What do I mean by saying that this is already a Republican economy? Look first at total government spending — federal, state and local. Adjusted for population growth and inflation, such spending has recently been falling at a rate not seen since the demobilization that followed the Korean War. 

How is that possible? Isn’t Mr. Obama a big spender? Actually, no; there was a brief burst of spending in late 2009 and early 2010 as the stimulus kicked in, but that boost is long behind us. Since then it has been all downhill. Cash-strapped state and local governments have laid off teachers, firefighters and police officers; meanwhile, unemployment benefits have been trailing off even though unemployment remains extremely high. 

 Speaking as someone who has had to deal with several years of furloughs because state tax receipts did not match overoptimistic projections (Gov. Martin O'Malley each year has presented budgets to the state legislature that seem to be from another planet and another economy), I know that spending is not what state politicians want it to be. However, in reading Krugman, one would think that this fall inprojected spending is due to a Goldstein-like plot rather than a reflection of the hard fact that this economy is in a depression.

Yes, I know it is shocking to readers, but when economies are moribund, tax receipts tend not to be as high as politicians and Keynesian economists want them to be. However, that is a reflection of reality, not a dastardly Goldstenian Plot hatched by black-cape-wearing Republican politicians. 

Furthermore, the fall in projected tax revenues is an effect, not acause of the depression. I know that Keynesians don't believe that; furthermore, I realize that Keynesians believe that if states raised tax rates to astronomical levels and the U.S. Government would double the amount of its borrowing, that the economy would be back to levels of prosperity in no time.

However, according to Krugman, while Goldstein has kept the Obama administration from bringing back prosperity, nonetheless this government has some "proud" and great economic achievements:

At this point, however, Mr. Obama and his political team don’t seem to have much choice. They can point with pride to some big economic achievements, above all the successful rescue of the auto industry, which is responsible for a large part of whatever job growth we are managing to get.

 Yes, the creation of "Government Motors" is a big engine of the prosperity that is left. Now, Krugman does not cite facts and figures for proof; instead, he blurts out an ex cathedra statement, knowing that the Democratic Underground and the Daily Kos will jump on that statement as being authoritative and a Self-Revealing Truth.

So there you have it. If we want real prosperity, we have to raise taxes, borrow more money, put more public employees on the payroll, and bail out failed industries. And when that rendition of the Broken Window Fallacy fails, there always is Goldstein to blame.