Banking Cartels Engineered Financial Crisis Endgame Banking Cartels Engineered Financial Crisis Endgame Banking Cartels Engineered Financial Crisis Endgame

Banking Cartels Engineered Financial Crisis Endgame

Stock-Markets / Market ManipulationJul 11, 2009 – 06:36 AM

By: DeepCaster_LLC

Stock-Markets

Diamond Rated - Best Financial Markets Analysis Article“…what is the reason for this “seemingly random monetary mess that multiplies its momentum every day?  The answer, in one word, control.  The elite/insiders already have control of the financial system, but they wanted more, much more…and it was not random, it was planned.” (emphasis added)

 “How will all the above manifest itself in your life?  The answer:  “All you own will shrink…your income, assets, net worth, will shrink year after year in real terms inflation adjusted and possibly also nominally.” – HS Letter, April 27, 2008.

Harry Schultz, Eminence Grise of the Newsletter writing Fraternity sees the Threat to Profits posed by the Fed-led Cartel* quite clearly.

The Cartel* ‘End Game’, as Deepcaster has named it, involves Stealthily transferring ever more Wealth to The Cartel at the expense of Investors/Citizens around the world. (See below, and “Coping with the Superpower Cartel Threat” (1/30/09) in the ‘Articles by Deepcaster’ cache atwww.deepcaster.com.)

Of course, The Fed-led Cartel’s increasing Power and Profits are threatened by Rep Ron Paul’s ‘Audit the Fed’ Bill (H.R. 1207) which fortunately has garnered a large Majority of the U.S. House of Representatives as co-sponsors.

The private for-profit Fed has predictability responded with a not-so-veiled counter-Threat delivered via Chairman Bernanke’s recent Testimony to Congress.

“Federal Reserve chairman Ben Bernanke unleashed an alarming veiled threat of financial terrorism when he was questioned by Rep. Duncan on Thursday about his response to the fact that a majority of Congress (is) co-sponsoring Ron Pauls H.R. 1207 bill to audit the Federal Reserve.

Bernanke clearly regarded the bills intent as hostile to the institution he represents:

“My concern about the legislation is that if the GAO is auditing not only the operational aspects of the programs and the details of the programs but making judgments about our policy decisions (it) would effectively be a takeover of policy by the Congress and a repudiation of the Federal Reserve (which) would be highly destructive to the stability of the financial system, the Dollar and our national economic situation.”

The brunt of Bernankes statement is as crystal clear as a threat from a common street thug — back off from the Fed, or the economy gets it.

The chairman clearly implies that any attempt to restore monetary powers constitutionally granted to the Congress would be seen as a takeover and that the defensive and repudiated Fed would respond destructively.

Of course Congress’ constitutional power over money is enumerated in Article I, Section 8 of the U.S. Constitution:

“The Congress shall have power To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures;” “

Bernanke Threatens Economic Collapse If Fed Audited

It is thus understandable that a large majority of the Members of the U.S. House of Representatives has signed on to a Bill (H.R. H.R. 1207) to audit the private for-profit U.S. Federal Reserve.

That is because, whether all the signatories are fully aware of it or not, Fed Policies and actions are The Primary Cause of the Economic and Financial Crises from which we suffer today, as we show below and elsewhere.

Indeed, there is clear and convincing evidence that the Fed leads a Cartel of key Central Bankers and favored Mega-Financial Institutions in an ongoing Regime of Overt and Covert Manipulation of the Precious Metals Equities, Strategic Commodities and other Markets, as we also demonstrate below.

*We encourage those who doubt the scope and power of Intervention by a Fed-led Cartel of Key Central Bankers and favored financial institutions to read Deepcaster’s December, 2008 Letter containing a summary overview of Overt and Covert Intervention entitled “A Strategy for Profiting from the Cartel’s Dark Interventions & Evolving Techniques” and Deepcaster’s July, 2008 Letter entitled “Market Intervention, Data Manipulation – – Increasing Risks, The Cartel End Game, and Latest Forecast” at http://www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.”

“Essential to maximizing profits and to avoiding losses is to recognize that the Fed-led Cartel manages two complementary Interventional Regimes – – one quite public, and the other dark one, at least as powerful, covert.  Thus, a critical key to profit and loss is tracking the Dark Interventions as best one can, as well as the public ones.”

This July, 2009 Letter is the ninth in a series of Deepcaster’s work originally entitled “Juiced Numbers”. It provides an Overview of Market Intervention and Data Manipulation.  It analyzes the recent Releases from (and actions of) the BIS (Bank for International Settlements – The Central Banker’s Bank), BLS (Bureau of Labor Statistics) and The U.S. Federal Reserve, as well as Highlights of recent Interventions culminating in the Fall, 2008 financial crises and accompanying Takedown of Gold and Silver, the early 2009 Interventions, and The Cartel* “End Game.”

IMPORTANT NOTE:  The aforementioned important new data releases are quite astounding.  They reflect a considerable acceleration of overt and covert Market Intervention and ongoing Data Manipulation, as well as the apparent adoption of new Interventional Techniques in recent months.  They also reflect dramatic increases in OTC (Over-the-Counter) Derivatives (Dark Liquidity), in recent years, and an apparent intensification of Data Manipulation.  As we demonstrate, these developments dramatically increase Systemic Risk and also reflect the significance of The Cartel’s creating (and/or having available) more OTC Derivatives in order to affect market outcomes.  In sum, this report provides even more evidence of Increased Risk of Systemic Collapse, and thus of the beginning of the attempted implementation of The Cartel’s Nefarious “End Game.”

Indeed, the OTC Derivatives figures through December, 2008 released by the BIS in late May 2009 indicate that even greater Markets Turmoil and greater Systemic Threat are likely. They also suggest that The Cartel* and its Favored Financial Institutions gained Trillions in Profits while Investors lost Trillions in the Fall, 2008 Market Crash – see below.

In conclusion Deepcaster provides a Strategy for profiting and protecting from the Interventional Regime’s actions and policies.

The Covert Interventional Context – – Overview

Deepcaster is periodically asked to explain, and provide evidence for, our view that a U.S. Federal Reserve-led Cartel* (apparently composed of the U.S. Federal Reserve, Major Central Bankers and key Primary Dealers manipulates a wide variety of markets.  [Apparently one “Operational Vehicle” through which The Cartel works is called “The Working Group on Financial Markets” established after the 1987 crash, and which is often informally and widely referred to as “The Plunge Protection Team” or PPT.]

So it is important to explain what we mean by our claim of Cartel Intervention and to indicate how Deepcaster takes account of that in our Portfolio Recommendations

Essential to maximizing profits and to avoiding losses is to recognize that the Fed-led Cartel* manages two complementary Interventional Regimes – – one quite public, and the other dark one, at least as powerful, covert.  Thus, a critical key to profit and loss is tracking the “Dark Interventionals” as best one can, as well as the public ones.

Moreover, whether an Intervention is Overt or Covert is often a matter of degree.  Overt Intervention often has a Covert aspect (e.g. how is that TARP Bailout Money being used and who receives it?), and Covert ones are often difficult to detect, but nonetheless can be tracked using publicly available information.

It is important to note also that by “Cartel Intervention” we do not (usually) mean that the Cartel totally controls prices in any particular market, at all times. Various markets are affected in varying degrees, at varying times, by Cartel manipulation attempts.  Cartel actions can substantially affect, but often do not totally control, prices in many markets – – though they certainly have that capacity much of the time.  The price of Crude Oil is relatively difficult to manipulate, for example, but there has been substantial effective manipulation (as we shall show) for several years.

Also notable is the evidence that the degree of manipulation, and, therefore, control, varies from time to time and market to market.

In markets such as the (relatively) Small Cap markets for Gold and Silver Bullion and Securities, Cartel manipulation attempts can have much more impact and are, at times, and for certain time periods, tantamount to control.  Typically, Interventions in the Precious Metals Markets depress prices dramatically.

To answer the exceedingly important question regarding how the wide varieties of markets are manipulated one must recognize that there are two main methods of manipulation, Direct and Indirect.   Direct Manipulations are of two sorts:  Overt and Covert.  Here we do not focus on the Overt Interventions since they are described at length in various mainstream financial newspapers.

I.  COVERT DIRECT INTERVENTION

Covert Direct Intervention to manipulate a variety of markets appears to be accomplished primarily via three vehicles:

  1. “Repo” Injections from The Fed
  2. Over The Counter (OTC) Derivatives (reported at www.bis.org, see below)
  3. “Bailout” monies and authorizations which Congress unwisely gave The Fed without requiring full disclosure and, in particular, the TARP and TSLF (Term Securities Lending Facility) injections by The Fed.

Regarding Repos, The Fed makes injections of Repos (Repurchase Agreements – – usually TOMOs – – Temporary Open Market Operations typically expiring in 1 to 30 days) into the market most business days.

Repurchase Agreements are loans (at Fed Fund rates) issued daily, in amounts typically ranging from U.S. $1 to U.S. $20 billion, by the Federal Reserve to Primary Dealers, the proceeds of which can be used to buy, for example, Dow index futures, if the Fed seeks to boost the Dow.  The total amount of un-expired Repos on any given day constitutes the “Repo Pool.”  Monitoring changes in Repo Poll levels (which is publicly available information) is crucial to determining how the Interventions will likely affect the markets.

While the Repo Pool is one vehicle for manipulating the markets it is not the only one – – Interventions can and do occur without changes in the Repo Pool.  It now appears that The Fed uses TSLF injections and TARP funds to covertly intervene as well!

Thus, the several Primary Dealers (e.g. Goldman Sachs, J.P. Morgan Chase, Citibank), who apparently work under the Fed’s direction, are able to use these loaned funds and/or “TSLF/Bailout Funds” and/or OTC Derivatives to buy or sell various securities and futures to affect the markets.  The fact that the loaned funds can be used to purchase Derivatives (as well as plain equities) gives the manipulators the tremendous leverage which derivatives afford.

But along with that tremendous leverage comes great and greatly increasing (as the recent data releases described below indicate) Systemic Risk.

The Challenge:  Determining the Impact of The Interventionals

The challenge for Investors and Forecasters is to determine where (i.e. in what Sector/s) and how (immediately, in increments, etc.) the Repo-backed funds and/or TARP/TSLF/Bailout Funds and/or OTC Derivatives (“Interventional Funds”) will be employed.  Deepcaster and those very few others, who monitor the daily Interventional Funding (and related Cartel and Allies’ actions) to the extent that is feasible, make educated Forecasts of where and how such funds are likely to be used based on patterns, tendencies, and judgments.  But no outsider can know for sure (So where is the transparency, Ben?).

Those who doubt whether the Cartel has the capacity to manipulate the markets (and especially the larger markets like the multi-trillion dollar currency and bond markets) are invited to inform themselves about the tens of trillions of OTC Derivatives at Fed Primary Dealer J.P. Morgan Chase, or Fed Primary Dealer Citibank, or the U.S. $592 trillion in December, 2008 (up from U.S. $370 trillion in June, 2006) total Dark OTC Derivatives positions reported by The Bank for International Settlements (the Central Banker’s Bank).  See www.bis.org, then follow the path: Statistics>Derivatives>Table 19).  Note that Dark OTC Derivatives total has increased by over U.S. $200 trillion in just two and one-half years!  (Table 19 below) Unlike publicly visible and clearinghouse-guaranteed Exchange Traded Derivatives, OTC Derivatives are not generally publicly revealed, except in the aggregate.

Indeed both Opportunities for and Threats to Investors Profits and Wealth are generated by Cartel Policies and the Massive OTC Derivatives positions. Consider:

“With Key Mega-Financial Institutions around the World claiming in 2008 that they risked collapse if they were not bailed out, one must ask which ones benefited from the $13 Trillion plus Increase in Gross Market Value of their OTC Derivatives in the six months between June, 2008 and December, 2008 when the Equities Markets were crashing and Investors were losing Trillions? A logical Conclusion: Key Central Bankers and Favored Financial Institutions of The Fed-led Cartel*, quite possibly including the shareholders of the private for-profit U.S. Federal Reserve” (See Chart below)

Deepcaster, May 29, 2009

OPPORTUNITIES & THREATS IN DERIVATIVES SHOCKER

For investors, both Opportunities and Threats reveal themselves in the recently reported stunning drop ($90 Trillion+) in Total Notional Value of OTC Derivatives Contracts Outstanding worldwide and an equally stunning rise ($13 Trillion+) in Actual Gross Market Value of OTC Derivatives Contracts Outstanding, in just the last 6 months of 2008. (See Chart Below)

The Total Notional Value of OTC Derivatives Outstanding dropped from some $683 Trillion as of June, 2008 to $592 Trillion as of December, 2008, according to the Bank for International Settlements (BIS – the Central Banker’s Bank – see http://www.bis.org, Path: Statistics > Derivatives > Table 19) (Ed Note: A Rough “Cocktail Party” Definition of “Notional Value” is “Unrealized Potential Maximum Value.”)

This first drop in Notional Amount of OTC Derivatives Outstanding in years, mainly reflects the massive deleveraging which occurred during the Fall, 2008 Market Crash.

Perhaps even more stunning was the drop in Notional Amounts of OTC Gold Contracts outstanding from $649 Billion in June, 2008 to $395 Billion as of December, 2008. Yet the change in Gross Market Values of the OTC Gold Contracts outstanding during that period was minimal – a drop from $68 Billion to $65 Billion. We comment on what that portends for Gold below.

In order to determine and evaluate the Opportunities and Threats created by the aforementioned drop in Notional Value of OTC Derivatives outstanding coupled with a dramatic increase of $13 Trillion in Gross Market Values we must first consider a few facts.

To put the Derivatives Monster in perspective, consider that the value of all publicly (exchange-traded) Equities now existing in markets world-wide is “only” about $31 Trillion.

That $31 Trillion is only just over 5% of the still remaining nearly $600 Trillion in Notional OTC Private (i.e. Dark) Derivatives Contracts outstanding. The implications are stunning:

  1. If the unwinding of a “mere” $91 Trillion in Derivatives contracts (to bring the Total down to $592 Trillion from $683 Trillion) reflected the Magnitude of the pain that the Fall, 2008 Crash caused, then imagine the Pain which awaits if and when (and probably when) any substantial Portion of the $592 Trillion remaining get unwound.
  2. But a substantial portion will likely have to be unwound given that various ongoing Crises have yet to be resolved, and, in many cases are worsening e.g.: Consider:
    1. The U.S. Treasury/Fed etc have already committed some $12.8 Trillion (by one reckoning) for Bailouts, Loans, Stimulus packages and Guarantees, much of it borrowed from, or guaranteed by, U.S. Taxpayers. Yet, clearly, the Toxic Derivatives problem has a long way to go before being solved.
    2. The Fed has moved over $577 billion of U.S. Treasuries onto its Balance Sheet in the short time since it publicly admitted it was monetizing the Debt. (One wonders how many hundreds of Billions in Treasuries were moved (and where!?) before that public admission.)
    3. The Chinese are switching from a U.S. Dollar basis to a Yuan basis domestically.
    4. The Chinese have authorized certain non-Chinese Banks to sell Yuan – based government Bonds.
    5. Foreign Creditors own over half the U.S. Dollar based government and Agency bonds leaving the fate of the U.S. Economy and Security in the hands of foreigners and primarily the Chinese government.
    6. The United Arab Emirates are spearheading plans to launch an Asset-backed (likely with Gold and Crude Oil) Currency, the Dinar.
    7. Germany has reportedly demanded return of all Gold held in custodial Accounts in the U.S.
    8. The Chinese have increased their Gold reserves from 400 Tonnes to over 1,000 Tonnes in the past five years.
    9. The default rate on U.S. Option ARMS recently rose to 35%. There are still some $300 Billion of these loans still outstanding.
    10. The interest Rates on about one Million Pick N Pay loans will reset in the next two years.
  3. Clearly, given the foregoing, acquiring Gold and Silver as Safe Haven Assets is the Prudent Course. However, Gold and Silver are subject to price Manipulation by the Fed-led Cartel* of Central Bankers and Favored Financial Institutions as we explain below. But we also explain that there is a Strategy to Profit from these Interventions while acquiring an increasing core Position in these Precious Metals.
  4. A substantial portion of the aforementioned $592 Trillion in OTC Derivatives is available to The Fed-led Cartel* to continue to overtly and covertly manipulate the Precious Metals, Strategic Commodities, and Equities Markets.
  1. And Market Manipulation is an Enterprise with Great Profit Potential. Consider specifically, as of June 2008 the Gross Market Value of all Derivatives Outstanding was $20,353 billion (see chart below). By December 2008, that $20 trillion has risen to $33,889 billion, a rise of over $13 trillion in Actual Gross Market Value of OTC Derivatives. Clearly, some of the Derivatives that were liquidated in the drop from the notional value $683 to $592 trillion resulted in (or, at least, were accompanied by) a very considerable increase in market value (otherwise known as “profits” – whether realized or unrealized) for the Mega-Financial Institutions holding them.

These remarkable developments reflected in the BIS Gross Market Value of OTC Derivatives figures (below) for period June 2008 through December 2008 prompt certain questions.

      1. First question: which financial institutions in the world experienced an increase in $13 trillions of market value in their OTC Derivatives Positions in the last six months of 2008 while the Equities Market were crashing?
      2. Why do we not see anyone publicizing this information (Tongue-in-cheek-intended) much less the private for-profit U.S. Federal Reserve, which has declined to respond to inquires from Members of Congress about the specific amounts of, or parties to, their transactions and holdings.
      3. Can we not logically conclude that some Mega-financial entities profited immensely from the market takedowns of the Fall 2008 – specifically profiting in the amount of $13 Trillion in increase Gross Market Value of derivatives owned?

Consider too that the aforementioned figures were generated by the Ultimate Official Source. They come from the Bank of Central Banks itself, The Bank for International Settlements, Switzerland, housed in the Tower of Basel.

Indeed we encourage readers to consider the figures themselves, by visiting http://www.bis.org  > statistics > derivatives > Table 19, “Amounts outstanding of over-the-counter (OTC) derivatives by risk category and instrument.” Of course, not all “official” statistics are accurate as we demonstrate below. Indeed, some are intentionally misleading. (See chart below)

But an increase of $13 trillion in gross market value of Derivatives held by major Financial Institutions, is testimony to the Resources and Power of The Fed-led Cartel*. See Deepcaster’s article “Coping with the Superpower-Cartel Threat!” (1/30/09) at www.deepcaster.com.

Source: Bank for International Settlements
www.bis.org, Path: Statistics > Derivatives > Table 19

  1. Moreover, Key Statistics continue to be gimmicked by Official Sources much to the detriment of American Citizens and Investors Worldwide.

Indeed, the True State of the Economy is much worse than the Official Figures suggest.

As the Real Numbers mentioned below demonstrate, our ongoing economic and financial crisis is not merely a “normal” business cycle Recession, but a System-Threatening Crisis.  Indeed, we have entered into a Depression. (see below)

It is thus another Naïve and False Assumption that the Official Figures accurately reflect the state of the Economy and Markets – – for example, that the current Recession is merely a normal “business cycle” phenomenon.

Making matters worse, Investors and citizens-at-large are misled by Official Statistics which have been gimmicked, as shadowstats.com demonstrates.  All of the following Genuine Numbers are calculated by shadowstats.com, which calculates them according to traditional methods used in the 1980s, and early 1990s, before The Political Adjustments currently being utilized began.

Consider the following Real Numbers from shadowstats:

U.S. Consumer Price Inflation (CPI) actually averaged about 11% annualized for much of 2008, rather than the 5% to 6% figures, which have been reported as Official Statistics.  Thus, the consumer must cope with diminished purchasing power and the threat or reality of job loss.

Though Official Figures show CPI dropping to 0% in early 2009, the Real early 2009 numbers reveal that CPI was still about 6% annualized. (June 17, 2009 shadowstats.com Report)

U.S. Unemployment has (according to Official Numbers) been ranging 4% to 6% from 1995 to 2007, spiking “only” to about just under 7% in late 2008 and 8% in early 2009.  In fact, Real U.S. Unemployment in 2009 now about 20% and is still increasing! (shadowstats.com) Thus the consumer (70% of U.S. GDP, we reiterate) is increasingly unemployed, under-employed, and indebted.

As well, the Delusion of Economic Growth claimed by Official Statistics is just that – – a Delusion.  Real GDP growth has been negative since 2004.  Indeed, in early 2009 GDP “growth” is a negative 5%. (shadowstats.com) Thus the consumer is faced with a deteriorating economy, as well as diminishing job prospects and purchasing power.

As well, the 2008 U.S, Federal Deficit, rather than being about $1 trillion as reported officially, is over $5 trillion if one includes Social Security and Medicare.  And, if downstream-unfunded U.S. obligations are included, the U.S. National Debt is about $66 trillion and rising!

Knowing these Real Numbers facilitated Deepcaster’s recommending “Opportunities in the Impending Perfect Storm” – – the title of his early September, 2008 (pre-Crash) Article warning of the impending Crash (available in the Articles Cache at http://www.deepcaster.com) and his making five short (and subsequently quite profitable) recommendations to subscribers at about that time.

To consider Deepcaster’s Strategy for Profit and Protection read “Opportunities & Threats In Derivatives Shocker” (5/29/09) in the ‘Articles by Deepcaster’ cache at http://www.deepcaster.com.

Attitudes of The Fed/Treasury/BIS Toward Intervention

The positive attitude of the leaders of the U.S. Treasury and the U.S. Federal Reserve concerning manipulation of markets and public perceptions is quite revealing – – see Deepcaster’s July, 2008 Letter for details.

To understand the motives for Fed and Cartel Policies and actions consider:

A Brief Anatomy of the “U.S.” Federal Reserve

An excellent analysis of the defects of the “U.S.” Federal Reserve – – so far as the United States’ National Interest (and the interest of investors around the world) is concerned – – is well documented in G. Edward Griffin’s superb book, The Creature From Jekyll Island:  A Second Look at the Federal Reserve).

Indeed, the Profit Motive lies behind Fed Actions.  Even the most causal student of Economic History knows that the United States’ Federal Reserve system, or “The Fed” as it is called, is not a U.S. government owned or controlled entity.

Various international private banks, several of which are headquartered in Europe, own “shares” in the “United States” Fed. Moreover, this “United States” Fed leads a Cartel of Central and Private Banks* who collectively intervene in a wide variety of markets, as Deepcaster demonstrates here. All this is obviously quite financially incestuous.

These International Bankers, acting through their “U.S.” Fed, profit both by creating money out of “thin air” and by collecting “interest” from U.S. Taxpayers on the Treasury Securities it has bought with U.S. Dollars (Federal Reserve Notes) it has created out of thin air. The Dean of the Newsletter Writers, Richard Russell, eloquently describes all this:

“I still can’t get over the whole Federal Reserve racket.

Consider the following – – let’s take a situation where the U.S. government needs money. The U.S. doesn’t just issue United States Notes, which, of course it could. These notes would be dollars backed by the full faith and credit of the United States. No, the U.S. doesn’t issue dollars straight out of the U.S. Treasury.

This is what the U.S. does – – it issues Treasury Bonds. The U.S. then sells these bonds to the Fed. The Fed buys the bonds. Wait, how does the Fed pay for the bonds? The Fed simply creates money “out of thin air” (book-keeping entry) with which it buys the bonds. The money that the Fed creates from nowhere then goes to the U.S. The Fed holds the U.S. bonds, and the unbelievable irony is that the U.S. then pays interest on the very bonds that the U.S. itself issued. (With great profit to the private owners of The Fed – – Ed. Note) The mind boggles.

The damnable result is that the Fed effectively controls the U.S. money supply. The Fed is …not even a branch of the U.S. government. The Fed is not mentioned in the Constitution of the United States. No Constitutional amendment was ever created or voted on to accept the Fed. The Constitutionality of the Federal Reserve has never come before the Supreme Court. The Fed is a private bank that keeps the U.S. forever in debt – – or I should say in increasing debt along with ever rising interest payments.

How did the Fed get away with this outrage? A tiny secretive group of bankers sneaked through a bill in 1913 at a time when many in Congress were absent. Those who were there and voted for the bill didn’t realize (as so often happens) what they were voting for (shades of the shameful 2002 vote to hand over to President Bush the power to decide on war with Iraq).”

                                 Richard Russell, “Richards Remarks,” dowtheoryletters.com, March 27 2007

After President Wilson signed the Federal Reserve Act into law in 1913, he reportedly said, “I am a most unhappy man, I have unwittingly ruined my country…a great industrial nation is now controlled by its system of credit…the growth of the nation, therefore, and all of our activities are in the hands of a few men…”

Insightful economic forecaster Ian Gordon notes several negative consequences of the nearly 100-year reign of The Fed, consequences with which we cope today.

“Since its inception in 1913, the Federal Reserve Board has been responsible for almost 95% devaluation of the U.S. Dollar. All this has been achieved through its ability to continually inflate the money supply.

And, between 1985 and 2005, the Federal Reserve Board has increased the money supply by five times. This extraordinary money creation is merely the catalyst for debt creation. In a fiat money system, money is debt…there is absolutely no way this money can ever be repaid except by continued inflation. But, now that the credit bubble is blown up, inflation is no longer an option; bankruptcy looms.”

 “The Federal Reserve…What Has It Done For You Lately?”
 Ian Gordon, December 29, 2007 (www.axisoflogic.com)

[Historical note:  recall that President Kennedy was unhappy with Fed policy and therefore caused U.S. Notes to be printed by the U.S. Treasury as Constitutionally Authorized and as a substitute for Federal Reserve Notes.  The issuance of these Notes ceased shortly after President Kennedy’s assassination.]

The one conclusion that one can make from the foregoing is that the failure to take account of the power, force and pervasiveness of Fed-led Cartel Manipulations (i.e. The Interventionals) is an invitation to financial and investment suicide.

The Interventional Regime – Motive, Causes and Consequences

But The Interventional Regime is showing increasing signs of stress which are reflected in accelerating Derivatives Creation, and thus in Increasing Systemic Risk.  The $592 trillion plus OTC Derivatives Colossus (see www.bis.org, path:  statistics-derivatives-Table19 and following) on which the Interventional Regime is built is increasingly subject to counterparty defaults and to Darkly Liquid OTC Derivatives turning illiquid (resulting, inter alia, in the ongoing credit freeze-up) among many symptoms.

Clearly, The Cartel has created a Financial System subject to ever-greater Systemic Risk.  Why?

Harry Schultz, one of the Eminence Grises of the Financial Newsletter writing fraternity, puts the question well, in the quote which begins this article.

Harry concludes by advocating that we all try to shrink less “relative to the herd” so that we hold our position.  Part of the strategy for shrinking less, according to Harry, is “it will, over 10 years, involve moving in and out of investments as price action will be very dramatic.  Buy and hold will not work in any area, including gold.”  HS Letter, April 27, 2008.

Indeed, Deepcaster has been sounding the theme that the “Buy and Hold Strategy Increasingly Fails” since the inception of Deepcaster’s newsletter several years ago.

But Deepcaster is not satisfied with a strategy which merely accepts “shrinking less” as a goal.

Thus, Deepcaster has developed a strategy for coping with and profiting from not only Cartel Intervention in the Precious Metals Market but also the “Shrinking Assets” problem.  That strategy can best be employed in the Precious Metals Sector, with Gold and Silver bullion and shares.  It is entitled “Defeating The Cartel…With Profit” and was published on 3/28/08 and can be found in the Articles Cache at www.deepcaster.com.

Since the cornerstone of The Cartel’s power lies in maintaining the legitimacy of their Fiat Currencies and Treasury Securities, the last thing they want is to have Gold, Silver and Tangible Assets held by investors to increasingly be seen as the Ultimate Stores and Measures of Value.  Thus they will continue Takedown attempts of Gold and Silver prices.

Deepcaster must issue a Word of Caution here: The paper based edifice of increasing Fiat Currencies, OTC Derivatives and the Repo Intervention is not indefinitely sustainable. It will inevitably collapse, and that is why the evidence increasingly indicates that The Cartel has begun to plan and implement its ominous ‘End Game’ described below.

Cautions for Investors and Traders Regarding Interventions

Stock-Markets / Market ManipulationJul 11, 2009 – 07:06 AM

By: DeepCaster_LLC

Stock-Markets

Continues from Part1 – Banking Cartels Engineered Financial Crisis Endgame
We issue a word of caution to our readers.  So long as The Cartel is in a very active interventional mode (e.g. as in taking down the price of Gold and Silver) do not be lured into thinking that the periodic up spikes in the prices of Gold and Silver necessarily present a “breakout” or a buying opportunity.  As a practical matter, technical breakouts are sometimes a lure designed to suck in more “longs” prior to a subsequent deeper Takedown.

Nonetheless, it is essential to study the Fundamentals and Technicals even though the Interventionals can override the Fundamentals and Technicals.  One must study the Fundamentals not only for all the usual reasons but also because Fundamentals somewhat constrain the timing and effectiveness of Interventions by The Cartel.

Similarly, one should study the Technicals for all the usual reasons and, in addition, because it is in The Cartel’s interest to make its actions seem technically plausible in order to continue to “run mainly under the radar.”  It is not in The Cartel’s interest to make its Interventions any more visible than they already are.  Indeed, there is powerful evidence that The Cartel often uses and/or helps create technical patterns which lure certain investors (such as hard asset investors) into getting “off sides” before Cartel actions such as taking down the price of Gold or Silver.

Thus one primary Deepcaster goal is to identify approximate interim bottoms of Gold, Silver, Oil and other sectors, through the use of Fundamentals, Technicals, and Interventionals, and thus to help readers profit from their inevitable resurgence and ascendance to new heights. For example, Deepcaster’s profitable recommendations displayed at www.deepcaster.com were facilitated by attention to the Interventionals, as well as Fundamentals and Technicals.

Significant and Increasing Systemic Threats Via Derivatives

(See Deepcaster’s December, 2008 Letter at http://www.deepcaster.com and click on the ‘Latest Letter’ cache for details.)

So now let us take a brief look back to see how all this “Interventional Firepower” is manifested in the Markets.

Gold and Silver Market Manipulation

The profound impact of these market manipulation efforts has been most well documented regarding the price capping of the Gold and Silver markets.  For those who have any doubts whatsoever about the fact and extent of government (Central Banks) manipulation, we have (thanks to Bill Murphy, Chris Powell, and other leaders of the Gold Antitrust Action Committee – – www.gata.org) the following June, 2005 blatant admission of manipulation by the Head of the BIS (Bank for International Settlements – – i.e. the Central Bankers’ Bank) Monetary and Economic Department, W.R. White:

“…It is perhaps worth spending a minute on what is meant by Central Bank cooperation…{it includes]…last, the provision of international credits and joint
efforts to influence asset prices (especially gold and foreign exchange) in
circumstances where this might be thought useful…”

Among the many items of evidence are those cited by GATA Secretary Chris Powell in his superb article “There Are No Markets Anymore, Just Interventions,” all of which are matters of public record, and which can be found at http://www.gata.org.

Interest Rate Manipulation

Clearly the fact that Intervention occurs is amply documented, but Intervention is not limited to the Gold and Silver Markets.

Fed Chairman Bernanke’s statement in his academic paper “Zero Rate Bound Economies” can reasonably be taken as a justification for the Fed purchasing its own paper, otherwise known as monetizing the debt.  Specifically, regarding overt and continuing covert long bond purchases, the purpose of this would be to boost the 10 and 30-year bonds, and, therefore, reduce long-term interest rates.

(For details regarding interest rate manipulation see Deepcaster’s December, 2008 Letter at www.deepcaster.com and click on the ‘Latest Letter’ cache.)

Thus, what would otherwise be the markets’ “normal” reaction to the ongoing and worsening credit, subprime, and other financial crises – – dramatically rising interest rates, especially on the long end – – has been suppressed by The Cartel’s Interventional Regime.

Specific Interventions

For a full discussion of the following Interventions, see Deepcaster’s July, 2008 and December, 2008 Letters posted in the ‘Letters’ Archive at http://www.deepcaster.com:

The Spring 2006 Interventional Takedown
The August through October, 2006 Interventions
The August and September, 2007 Market Interventions.

The March 2008 Crisis-Induced Takedown of Gold & Silver

(For further details see Deepcaster’s December, 2008 Letter at www.deepcaster.com — click on the ‘Latest Letter’ cache.)

Just prior to Bear Stearns’ demise, the Fed’s March 11, 2008 establishment of a new Term Securities Lending Facility (TSLF) was merely a short-term Band-Aid for a Structural Systemic Crisis. The TLSF allowed Federal Agency and non-Agency (i.e. private entity) AAA/Aaa Residential Mortgage backed (and otherwise illiquid) securities (some of which is irretrievably illiquid “bad debt”) to be used for collateral.

Allowing questionable “illiquid” (i.e. bad) debt to be used as collateral began the significant weakening of the security and legitimacy of U.S. Treasury Securities (as reflected in Credit Default Swap Premiums) and, ultimately, the U.S. Dollar.  Moreover, it helped only Fed-favored financial institutions while further diminishing the purchasing power of the middle class and working poor.

Thus the Big Fed-favored Financial Institutions are being insulated from the consequences of their Reckless Securities and Derivatives Speculation. Result: we are in the midst of a crisis.

So the result of the TOMO and POMO “juice” injections was to create the interventionally generated 400-point Equities Rally (of Tuesday, March 11, 2008). That Fed Action turned many of the Equities Markets Technicals from down to up. But on the next two days, Wednesday & Thursday, there was no significant follow-through “bounce” – – an ominous sign indeed!  Couple that fact with the consideration that The Fed Action “provided a long-term solution for none of the aforementioned ongoing problems, one had to reasonably ask how long such a rally could last. The answer is it probably would not last.

In sum, at that time, if one considered only the Fundamentals and Technicals, Gold and Silver prices should have skyrocketed.

However, The Cartel Interventions stopped that rocket.

All this occurred against the backdrop of Gold’s hitting $1000. Had Gold broken out conclusively over $1000 that would have generated even more interest in it.  And with Crude Oil and Silver also at record highs, the Fed-led Cartel would truly be at a crisis point in terms of their legitimacy as financial market and monetary managers.

Thus the conclusion was foregone – – these Interventions succeeded in dramatically taking down Gold and Silver in the next very few days.

It is not hard to see to see the motivation for these Takedowns.  The power of the Fed-led Cartel of Key Central Banks (and allied Major Financial Institutions) depends on continuing legitimacy of their “paper” including first and foremost their Treasury Securities and Fiat Currencies.

Increasing Gold, Silver, Crude Oil and other Tangible Commodities prices threaten this Power because they compete for legitimacy as Stores and Measures of Value with The Cartel’s paper.  Therefore, we can expect The Cartel to continue to attack Gold, Silver, Crude Oil and the Other Strategic Commodities with a vengeance. The main question is, can they continue to succeed?  That depends on whether the Fundamentals will overwhelm Cartel attempts at market manipulation.

In addressing that question, consider the “Rule” that ‘The Biggest Player in the Market makes the Market Price.’  The Cartel’s multi-trillion dollar Derivatives Positions make it The Biggest Player in the aforementioned Markets.

 But, for sure, the countervailing consideration is the ever-more-bullish Fundamentals.

June 2008:  The Cartel Catalyzes a Volatility Fog to Mask Interventions and Worsening Fundamentals

But it is also certainly not in The Cartel’s interest to have its Interventional Market Rigging “Game” revealed.  That explains why it is increasingly apparent that The Cartel uses a variety of techniques (e.g. “lures”) including catalyzing Volatility “Fogs” to mask its Interventions.

See the December, 2008 letter for further details.

“Earned” Liquidity versus “Borrowed” Liquidity

A key point is that the Fed/Treasury Actions of 2008 are not long-term fixes. The reason this is not a long-term fix is that it “fixes” a liquidity problem in a way that allows insolvent or nearly insolvent financial institutions to have liquidity that would allow certain normal but often deleterious operations (i.e. the continuation of even more lending based on borrowed liquidity).  Deepcaster has previously demonstrated the perils inherent in an economy relying on “borrowed liquidity” (i.e. debt) rather than “earned liquidity” (i.e. savings) – see Deepcaster’s January, 2008 Letter.

Thus, the “borrowed liquidity “cure” is worse than the disease. Thus, what The Fed has given us is a flawed Financial Band-Aid, and only a Band-Aid for the Big Boys at that.

We must not forget another fundamental factor which demonstrates that The Fed Actions are neither a long-term, nor an adequate, remedy.

“This Fed injection does nothing for households. And it is households that will determine if we avert depression or not. Consumer spending is 70 percent of GDP. Households need the money, and they can’t get it. Credit card companies are cutting lines. Banks are raising lending standards. House values are dropping below outstanding mortgage and home equity debts. Incomes can’t keep up. Jobs are shrinking. Trickle down won’t work. We need trickle up this time. The Fed’s          announced plan today is to monetize bad debt from Wall Street banks, to accept their securities baked by bad loans in exchange for cash.  This in lieu of a drastic         further drop in interest rates. Once again, save Wall Street and to blazes with households. Because they are not doing a thing here for households, this plan will fail. Households get more inflation and that is it. Wall Street gets a free ride.  Somebody ought to be arrested. What a heist. Of course Spitzer can’t do anything. He’s preoccupied.” (emphasis added)

Robert McHugh, Tuesday, March 11, 2008 Briefing

And there is yet another structural problem which is a fundamental contributor to The Crises and which will cause The Crises to continue for months at least. At the urging of those pushing a misunderstood “free market” ideology, the Glass-Stegall Act (which separated the commercial banking from the securities business) was repealed in 1999. That Act was passed in 1933 in the midst of The Great Depression to prevent securities speculation from further destroying bank capital and shrinking deposits.

Since 1999, the Banking and Securities businesses have become increasingly merged, with today’s disastrous results being quite apparent. [Note: truly “free” markets mean markets that have better regulations, not “no regulation” – – Freedom of choice requires a structure which provides meaningful alternatives. To enhance freedom one needs to improve a structure, not abolish it. A basic philosophical point, thanks for which we owe to the philosopher Immanuel Kant.]

Recent Interventions and Evidence

Recent Covert Interventions in the Gold, Silver, Equities and Bond Markets have been quite dramatic as well.  Indeed, evidence for Cartel Interventions in many Markets becomes ever stronger.  Consider…

Silver:  Noted Silver analyst Ted Butler has compiled evidence that two large banks (both Primary Dealers for The Fed) are manipulating (downward) the price of Silver and are being protected by the supposed government watchdog group CFTC (Commodity Futures Trading Commission):

(For details see Deepcaster’s December, 2008 Letter at www.deepcaster.com and click on the ‘Latest Letter’ cache.)

Consider also…

The Bond Market: Some pundits claim the multi-trillion dollar Bond Market is “too big to manipulate.”  But Deepcaster notes that the BIS reports there are a $418 trillion in Dark OTC Interest Rate Contracts Outstanding and further notes that the Biggest Player in the Market typically makes Market Price. (For details see Deepcaster’s December, 2008 Letter at http://www.deepcaster.com and click on the ‘Latest Letter’ cache for details.)

Cartel Intervention is the only explanation, is it not, that while the Credit Default Swaps Market attributes (via its premiums) a record-high risk-of-loss to U.S. Treasuries, the actual interest rates on U.S. Treasury Notes and Bonds has dropped to record lows.

And consider the following sensible comment posted at LeMetropoleCafe:

“It is absolutely inconceivable that the bonds are rallying (disappearing yields) due to a ‘safe haven flow of funds’ when their risk of default is being assessed at an all-time high!!!  What is wrong with this picture???…

The December 1, 2008 Interventions and Precious Metals Takedowns

One could reasonably claim the Interventions of December 1, 2008 “Take the Cake.”

One would expect that that day’s news that it was officially confirmed that the U.S. had been in a recession for a year coupled with the ongoing agony of the Big Three Automakers and laid off workers, and the news that the Taxpayers’ “Bill” for the Bailouts, loans, guarantees, etc., totaled $7.7 trillion according to Bloomberg, would substantially take down the Equities Markets.  But what is utterly inexplicable (absent Intervention) is that that very day in December the price of Gold was taken down nearly $50!  Only Cartel Intervention can explain such a development!

II.  INDIRECT MANIPULATION

The other major form of government (including agency) market manipulation can most accurately be called indirect.  It consists of “massaging” or hiding various statistical measures and data to create results that suit the manipulator’s (usually, whatever Presidential Administration has power at a given time) preferences, insofar as it’s political, economic, or financial or market goals are concerned.   It is the U.S. Federal Reserve Bank’s (a privately owned “national” bank) and the United States government agencies’ generation of “creative statistics” on which we focus here.

Refer to the beginning of this Article to consider today’s massaged government and agency data in comparison with today’s data calculated the “old fashioned way” (i.e. sans contemporary statistical gimmickry).

III.   SYSTEMIC RISKS

On the Brink of a Cartel-Facilitated Systemic Meltdown

The August, 2007 credit freeze-up and the Fed’s bailouts of August 17 & September 18, 2007, mid-March 2008 and August through November, 2008 illustrate just how increasingly close to the brink of a Systemic Meltdown we are.

See the December, 2008 Letter at http://www.deepcaster.com for details regarding how Prophetic words indeed!

The Fed’s “Cure” Worsens the Disease

The Systemic Solution

Allowing the International Economy to be based on a Fiat Reserve Currency is unsustainable.  No Fiat Currency Regime in the history of the world has ever survived indefinitely.

So The Systemic Solution is apparent.  We outline it as follows:

1) Re-link the world’s Reserve Currency (the U.S. Dollar) to Gold and Silver, the Monetary Metals which are both stores and measures of value, tangible value.

Failure to re-link currencies to Gold and Silver will allow a continuing massive and unsustainable inflation of the money supply by the Fed-led Cartel* of Central Bankers.  Unless such re-linking to Gold and Silver is accomplished the U.S. Dollar is likely doomed in the long-run, with severely negative consequences.

Money supply inflation ultimately leads to price inflation and the continuing extraordinary rate of increase in the money supply, (as a number of commentators have pointed out) is leading us down the path to a Hyperinflationary Depression.  (c.f. shadowstats.com).  And, more ominously, it is leading us to an attempt to implement The Cartel “End Game” (see June 2007 Letter “Profiting From the Push to Denationalize Currencies and Deconstruct Nations” at www.deepcaster.com.).

But the private for-profit U.S. Federal Reserve and its Cartel Allies are not likely to give up their Fiat Currency and “un-backed” Treasury Securities that easily – – they are the source of its power.  The Fed and associated International Financial Allies will strenuously resist.  Thus,

2) Legendary investor Jim Rogers recently neatly expressed The Solution to the problem of The Fed:  “The Fed should be abolished and Chairman Bernanke should resign.”  (March, 2008, CNBC)

An excellent idea.  Indeed, The Fed is a private for-profit group of International Banks, whose main motivation is in providing profits for, and protecting the interests of, The International Bankers Cartel and favored institutions and parasites, not in serving the needs of U.S. citizens (or most citizens of other countries for that matter).

  1. To replace The Fed, and in order to protect ordinary citizens interests, the U.S. Congress should create a genuinely National Bank under the auspices of the U.S. Treasury Department as authorized by the U.S. Constitution.  That truly National Bank should be the money issuer for the United States, not the private for-profit Cartel of International Bankers known as The Fed. Note that the nonprofit grouphttp://www.carryingcapacity.org is conducting an “Abolish The Fed; U.S. Treasury Instead’ campaign.

This is not such a radical idea.  President Kennedy caused U.S. Notes to be issued late in his presidency as a replacement for Federal Reserve Notes.  [He was killed a few months after the issuance was started and the U.S. Notes subsequently disappeared from the market.]

The Cartel End Game

We are facing at an international crisis of unprecedented proportion.  It is also clear to Deepcaster that those who run the Fed-led Cartel cannot be so stupid as to not know where their hyperinflation of the money supply (according to shadowstats.com M3, as of the June 12, 2009 Report, was increasing at an annual rate of about 7.5% which is nearly a ten year doubling time!), and other bubble-crisis-creating policies are leading us.

Thus if The Cartel leaders know what they are doing what is their End Game? For details regarding The Cartel End Game see “Investor Advantage: Revisiting the Cartel’s ‘End Game’” (3/6/09).

The Solution – – A Strategy for Investors & Traders

A major premise of The Strategy is that one can certainly remain a Hard Assets Partisan while at the same time insulating oneself from future Takedowns.  The following points provide an outline of The Strategy (particularly as applied to the Gold and Silver Markets) and are designed to help avoid such unpleasantness, or even possible financial ruin, in the future, as well as to profit along the way:

  1. Recognize that The Cartel is still Potent, as difficult as that may be psychologically for Deepcaster and other Hard Asset Partisans to acknowledge.  The Cartel is still the Biggest Player in many markets and, if the timing and market context are propitious, the Biggest Player makes Market Price.  In addition, The Cartel has the advantage of de facto controlling the structure and regulation of various marketplaces and that is a tremendous advantage; just as the Hunt Brothers years ago discovered much to their dismay and misfortune, when they tried to corner the Silver Market.
  2. Accumulate Hard Assets near the Interim Bottoms of Cartel- induced Takedowns.
  3. In order to know when one is near the bottom of a Cartel-generated takedown, it is essential to take account of the Interventionals as well as the Technicals and Fundamentals.
  4. For example, regarding Gold & Silver, near such Interim Bottoms, accumulate a combination of the Physical Commodity (Deepcaster prefers “low premium to melt” bullion coins) and well-managed Juniors with large reserves.  (Deepcaster provides a list of such Junior Candidates in our December 20, 2007 Alert “A Strategy for Profiting from Cartel Intervention” available in the Alerts Cache at www.deepcaster.com.)  The “Physical” and “Juniors” are for holding for the long-term as a Core Position.
  5. Then, to the extent one wishes to speculate on the next “long” move, one should buy the major producers or long-term options on them.  These latter positions are for ultimate liquidation at the next Interim Top and are not for holding for the long-term.
  6. Indeed, there will be a time when The Cartel price capping is ineffective and Gold & Silver make record moves upward.  The benefit of this Strategy is that one will likely be long in one’s speculative positions when this happens.
  7. Near the next Interim Top, liquidate the long options and majors.  Again, in order to know when we are close to the next Interim Top, it is essential to monitor the Interventionals, as well as Fundamentals and Technicals.
  8. At that Top, sell short or buy puts on Majors.  We re-emphasize the Majors as preferred vehicles for trading positions because such positions are more liquid and tend to be quite responsive to Cartel moves.
  9. At the next Interim Bottom, cover your shorts and liquidate your puts and go long again to begin the process all over again.  We emphasize that it is essential to consider the Interventionals as well as the Fundamentals and Technicals in order to determine the approximate Interim Tops and Bottoms.
  10. Finally, Hard Assets Partisans have the opportunity to become involved in Political Action to diminish the power of the Central Banker Cartel.  It is truly outrageous that the average unsuspecting citizen, and prospective retiree, can and does put his hard won assets in Tangible Assets only to have those assets effectively de-valued by Cartel Takedowns.  This is extremely injurious to many average citizens in many countries who are saving for the rainy day or retirement and have their retirement and/or reserves effectively taken from them.  In order to help prevent this and similar outrages, we recommend taking three steps:
  1. Become involved in the movement to abolish the U.S. Federal Reserve (a private for-profit Cartel of International Banks) as Deepcaster, Presidential candidate Rep. Ron Paul, and legendary investor Jim Rogers, all have advocated.
  2. Join the Gold AntiTrust Action Committee which works to eliminate the manipulation of the Gold and Silver markets (www.gata.org).  GATA is a non-profit organization which makes a great contribution by gathering evidence regarding the suppression of prices of Gold, Silver and other commodities.
  3. Work to defeat The Cartel ‘End Game.’  Deepcaster has laid out the evidence regarding the Ominous Cartel “End Game.”  Clearly The Cartel is sacrificing the U.S. Dollar to prop up international financial institutions and to maintain its power.  But this sacrifice cannot continue forever.

“Federal prosecutors accused a guy named Sergey Aleynikov of stealing proprietary “black box” computer codes from Goldman. The assistant U.S. attorney in charge of the case said the following in court: “The bank (Goldman) has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate the market in unfair ways.”

What was Goldman doing with a program that could “manipulate the market in unfair ways”?

The answer: It was using it to manipulate the market.”

John Crudele: Influence is in the bag for ‘Government Sachs’
John Crudele, New York Post, Thursday, July 7, 2009

Best regards,
Deepcaster
July 10, 2009

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About usachinanukewar

For nation shall rise against nation, and kingdom against kingdom: and there shall be famines, and pestilences, and earthquakes, in divers places.
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