Money 2012

Economic Collapse Update: Acceleration In Autumn

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By Giordano Bruno
Neithercorp Press – 09/29/2010
Our current economy is a shell game. A grand fraud designed to siphon more and more tangible wealth (not fiat wealth) from the average person and transport it post-haste into the silk lined pockets of a corporate banking minority. The goal? To reduce the self sufficiency of American citizens to the point of total fiscal and social dependence on the top 1% richest men in the world. Conspiracy theory? Not in the slightest. Just a cold hard fact of history. “Feudalism” is, sadly, rampant in the annals of human culture. Anyone who believes that our modern era is somehow different is simply fooling themselves. Elitists seek power over others, they always have and they always will, and, the most efficient way to gain control over the lives of the masses is through engineered imbalances in economy.
Every time you hear the term “bailout”, or “quantitative easing”, just think “wealth transference”. Every dollar that is printed from thin air by the private Federal Reserve and handed to a globalist entity like Goldman Sachs or AIG through our Treasury represents yet another dollar of debt (and another percentage of interest) that you, the U.S. taxpayer, and your children, are expected to eventually pay for without ever seeing any benefits. Right now, at this very moment, you and your descendents for generations to come are being enslaved by forcefully imposed usury. Our country has been “volunteered” for a financial debasement on a scale that dwarfs the Great Depression or even the Weimar catastrophe. We ignore this reality at our peril.
Since the initial meltdown began in 2008, we have seen two and a half years of stall tactics and skewed statistics designed to prolong total collapse while central banks position themselves for optimal gain. Simultaneously, the concrete underlying factors of our economy, including employment and purchasing power, have gone down the tubes. True, the system was an illusion long before its many flaws were openly revealed, and it needs to be dissolved, but should it be dissolved to the advantage of the elites who designed its flaws in the first place, and to the detriment of the rest of us? I think not…
Today, as Autumn 2010 begins to settle upon us, many notable and even dire trends are beginning to break the surface of the water and circle the sinking wreckage of our financial system. I believe these factors signal an extreme acceleration in the possibility of “trigger events”, which we have discussed in previous articles, and herald a new dynamic, a process that will directly contribute to a final breakdown of the present system. Let’s examine these trends now…
Dow Bubble Until November Elections?
If you look back at the history of economic collapses across the world, you’ll find a strange and ironic constant preceding most breakdowns; the disproportionate values of stocks and securities when compared to actual profits and consumer activity. The Great Depression saw record breaking rallies in the Dow and relentless financial propaganda claiming recovery was imminent just before total derailment. In many cases, investor confidence seems to be most heightened just before a brutal plunge. Perhaps it’s the power of reactionary denial, or maybe it’s the increase in false data supplied by establishment economic goon squads.
September has seen a very uncharacteristic stock rally, especially considering the fact that U.S. poverty levels are now at a 15 year high:

http://www.nytimes.com/2010/09/17/us/17poverty.html?_r=1
Food Stamp usage has hit a record high every month for the past 18 months:
http://www.zerohedge.com/article/food-stamp-usage-hits-18-sequential-record-high-408-million

The income gap between the very rich and the very poor has hit a record high:
http://www.huffingtonpost.com/2010/09/28/income-gap-widens-census-_n_741386.html

Consumers have cut back on their credit use for 23 consecutive months:
http://www.usatoday.com/money/economy/2010-09-08-consumer-credit_N.htm
Median household incomes fell in 34 states last year, the worst income depletion since the Great Depression, according to Census data released this month:
http://www.bloomberg.com/news/2010-09-28/michigan-florida-lead-34-states-with-drop-in-median-income-census-says.html
Stock Market volume has been dismal, down in some cases by 50% (which would explain how the Dow has been so easily pumped up):
http://www.businessinsider.com/today-on-wall-street-horrible-volume-layoff-news-and-another-crash-2010-9

The Federal Government has now had to bailout three large credit unions, making the American taxpayer responsible for the backing over $30 billion in bonds while at the same time managing $50 billion worth of troubled assets inherited from the same institutions:
http://online.wsj.com/article/SB10001424052748703499604575512254063682236.html?mod=WSJ_hpp_LEFTWhatsNewsCollection
Moody’s has (finally) lowered the Illinois debt rating from stable to negative, and California is now asking Wall Street banks like Goldman Sachs and JP Morgan for $5 billion dollars in cash just so their state government can continue to operate for the rest of the year:
http://chicagobreakingbusiness.com/2010/09/moodys-lowers-outlook-on-illinois-to-negative.html
http://www.bloomberg.com/news/2010-09-27/california-may-seek-5-billion-from-wall-street-lockyer-says.html
Most disturbing is new Federal Reserve data revealing that foreign central banks are dumping record levels of U.S. Agency debt. Agency Bonds support government funded organizations like Fannie Mae, Freddie Mac, Sallie Mae, etc. This means that this autumn there will be an even more pronounced destabilization of the mortgage giants, and we will have to foot an even greater bill as the Treasury continues their endless bailout with increasing amounts of fiat capital. Foreign banks recently dumped $57 billion worth of Agency debt all at once! Some analysts, like Jim Sinclair, believe this heralds a major proliferation in quantitative easing by the Fed (more than they have openly forecast), and a severe debasement of the dollar in the near term. I tend to agree…
http://jsmineset.com/2010/09/23/foreign-central-banks-net-sellers-of-us-agency-debt/
With all of these factors and hundreds more widely visible to anyone who wants to see them, how is it possible for the Dow to sustain its current upward trend? Witchcraft? The point is, when there is such an incomprehensible discrepancy between real market data and illogical market behavior, it is often a sign of a bubble; one that is dangerously close to failure.
Some believe that the market is being propped up by elements of the Treasury and the Fed until the end of November elections. The Dow is definitely being manipulated this month, but I’m not so sure it will last until November. An economic panic could serve several purposes so close to voting time, including easier promotion of scapegoats in order to rush otherwise ill conceived legislation. The move towards trade conflict with China is a good example…
Trade War With China?
Well, we’ve been warning about this since 2008, and now its here. Open economic animosity between the U.S. and China to the point of trade decoupling. Six months ago this still seemed for many like a remote if not impossible scenario. This month, it is now a stark reality. The speed at which elements of our government are implementing trade and currency legislation against China, and the rate at which China has begun to meld into ASEAN to counter U.S. import duties, is astonishing, even to me:
http://www.reuters.com/article/idUSTRE68L5K120100924
The House Ways and Means Committee has already approved a bill which could lead to trade penalties on Chinese goods if it meets equal success in the Senate, which is quite possible in the looming shadow of November elections:

http://www.cnbc.com/id/39342833
The bill, however, appears mainly for show, especially in light of the fact that the U.S. is already slapping duties on an increasing number of Chinese goods, like copper tubing and steel pipe, without “committee approval”:
http://www.reuters.com/article/idUSTRE68Q4IK20100927
Chinese credit rating agency, Dagong Global, has also been denied status as a Nationally Recognized Statistical Rating Organization (NRSRO) by the SEC on thin grounds:
http://english.peopledaily.com.cn/90001/90778/90859/7150960.html
The Chinese have accused the SEC of bias, which is understandable. Apparently, the SEC is content to have agencies like Moody’s continue to give the AAA stamp to every security in the U.S. no matter how toxic and worthless, and would rather not have a third party around to gum up the works.
The trade war has already commenced while mainstream economists are still hoping out loud that America will be saved by increasing its exports to China! The disconnection between what the media reports and what is obviously happening is absolutely incredible!
A trade war with China, though, is in fact far preferable to the next likely step in this volatile process; a currency war.
The justification presented by the Obama Administration for the sudden increase in hairy chest beating on the trade deficit with China has been the now widely debated Yuan appreciation issue. China has recently de-pegged its currency from the dollar and appreciation has occurred, however, a substantial trade imbalance persists. Some analysts and government officials claim that a minimum 20% valuation of the Yuan is necessary in order to bring greater import/export equilibrium with the West. The Chinese have been accused of deliberately undervaluing their currency to the detriment of the rest of the world in order to prop up their own economy during the height of the global credit crisis. They have even been accused of direct responsibility for the financial meltdown itself. At least, that’s the official story. Here’s the REAL story…
The Yuan has been undervalued on the world market for a long time, this is no secret. The Chinese have indeed enjoyed an incredible export advantage over the U.S.; also no secret. However, who was it that initiated this trade advantage in the first place? It was not the Chinese, but corporate globalist interests in the U.S. and Europe that encouraged the freezing of the Yuan and outsourcing of American industry into cheap labor markets in order to increase profit margins while at the same time weakening U.S. infrastructure. Wage slaves making cheap Nikes and Levis sold for incredible markups across the Pacific to label obsessed Americans; does no one remember the 80’s and 90’s?
Our trade deficit has surged non-stop from 1990 to the present day, and all of a sudden our government is concerned? Why did they not slap China with broader trade duties ten years ago? Or even three years ago? Why is it so urgent that the Yuan appreciate over 20% now? Is it just a coincidence that we are bringing the anvil down on China only after they have positioned themselves to effectively flush our currency without looking back?
Interestingly, the exponential spike in our export imbalance starting around 1991-1992 coincided almost exactly with the Federal Reserve interest rate cut from 1990 to 1994.


This bar was lowered even further in 2001-2003 when the Fed cut rates to an insane 1%, which led to the infamous mortgage and derivatives bubble. While trade deficits and a 70% consumer based system rotted the American economy from the outside-in, the housing market collapse and resulting credit crisis rotted it from the inside-out. What this means is, either the U.S. has somehow been subject to a “perfect storm” of fiscal debacles that have positioned us for an amazingly thorough collapse, or, corporate interests and the Federal Reserve (same difference) deliberately took actions which gutted our country. As we have shown in many previous articles, the evidence dictates that the latter cause is most viable.
Where does a currency war with China play into all this? Yuan appreciation is the end game. In 2007, China publicly suggested that U.S. trade pressure will result in retaliation, up to and including a devastating dump of their Treasury Reserves that would result in the collapse of the Greenback:
http://www.telegraph.co.uk/finance/markets/2813630/China-threatens-nuclear-option-of-dollar-sales.html
That was back before the recession/depression had even hit full steam, and rhetoric against the Yuan was minimal. Today, the downturn is rolling ahead full bore and the rhetoric against the Yuan is nearing fever pitch! Chinese Premier Wen Jiabao stated this past week that a 20% Yuan valuation would trigger severe job losses and social instability, putting his country at risk. That is to say, the Chinese are presenting this (falsely) as a matter of life and death for them, a situation that requires an extreme response if escalation occurs:
http://www.bloomberg.com/news/2010-09-22/wen-says-investment-structure-is-main-cause-of-trade-imbalance-with-u-s-.html
Some U.S. business leaders have spoken out against pressure on the Yuan, pointing out that China holds all the cards if a currency war is initiated:
http://www.bloomberg.com/news/2010-09-27/yuan-legislation-in-u-s-congress-may-prompt-retaliation-businesses-say.html

This is absolutely true. The problem is that the elites in our government fueling this conflict are well aware that China can and likely will begin a T-bond dump that will implode our currency. They know that China has absolutely no incentive to increase imports from the United States while it holds all the industrial capability necessary to supply itself with needed goods and a solidified ASEAN trading bloc to support its expansion. They also know full well that tariffs and trade embargos in the midst of economic meltdown tend to inflame retaliation and lead to even greater collapse, just as the Smoot – Hawley Tariff Act did in 1930, right before the Great Depression spiraled out of control.
A trade/currency war is EXACTLY what global banks want, in order to remove the dollar as the world reserve currency, create panic and desperation in the American populace, and to introduce the SDR (along with a stronger Yuan as a component) as the only workable security capable of holding together international commerce.
America: The Villain?
Are the Chinese aware of this plan? I believe that elements of the Chinese government and its central bank have been clued in all along. Why else would China, an export based economy for decades, abruptly decide to drastically reposition itself as a consumer hub at the center of an Asian trading bloc, all in the span of three years? I don’t think many mainstream analysts realize how radical this Chinese metamorphosis has been, and how significant it really is. The move seems unprecedented and almost irrational, unless you are a Chinese financial official cognizant of a plan to unseat American primacy. Then, a rush to detach from the U.S. makes perfect sense.
Remember, China began cross-border Yuan exchange programs as well as “Yuan Bond” programs in 2007/2008, meaning they intended to revalue their currency before the severity of the crisis was fully known to most of the world. The Chinese have been preparing for a move away from the dollar all along. Why else would they do this unless they knew the U.S. consumer would not recover, that their exports would continue to suffer far into the future, and that the Federal Reserve would continue to create Everest sized mountains of fiat money from thin air?
If banking elements of China are working in concert with other central banks to force the U.S. into “global harmonization” under the IMF, it means this entire trade war state of affairs, all the accusations and cross-accusations, all the talking points and debates, every facet of the issue that has burgeoned so far this season, is one fantastic charade!
What’s the point? While China is being built up as the villain of our American economic collapse fairy tail instead of the global banks, America is being built up as the villain for the rest of the world. Already, China is feeding talking points into the mainstream that paint the U.S. as a kind of stampeding single minded monster trying to dominate at the expense of logic (take special note that ASEAN is being overtly used as a collective moniker in this article, similar to the EU):

http://english.peopledaily.com.cn/90001/90780/91343/7150375.html
The problem is, there is some root truth to the indictment. What this new political fulcrum leaves out though is that America is not the culprit, at least not in the traditional sense. It is the big stick used by the culprit (central bankers) to beat the rest of the planet into submission. The lies of tomorrow’s history books are being written today, as American “excess”, capitalism, hegemony, selfishness, and sovereignty are quietly being introduced as the cause of all sorrows overseas.
Most of Europe under the G20 has opted out of any involvement in the U.S./China currency dispute, and with good reason. The EU will not associate itself with the trigger event that will lead to the end of the dollar and the chaos that will follow in global markets:
http://www.reuters.com/article/idUSTRE68P1F220100926?pageNumber=2
That is an honor reserved for America alone. What better way to destroy the concept of sovereignty than to tarnish and villainize forever the image of the one country in the world universally symbolic as the “land of the free”?
Gold Is Money Again…Must Be Time For A Collapse…

Finally, we get to the biggest development this fall; the so far unstoppable juggernaut of gold and silver.
Gold is breaking records weekly, sometimes daily, now rushing past the $1300 an ounce mark without batting an eye. Not long ago I predicted gold would hit the $1350 to $1400 mark by this winter, but it seems I may have underestimated the precious metal. $1500 is not out of the question in the next three months, especially if trade laws are passed against China before elections.
Silver has passed the $21 an ounce mark but is still highly undervalued in my opinion. I suspect that we could see a rapid increase in physical silver, akin to a “short squeeze”, before the year is out.
What is driving the new gold rush? MSM economists are apparently at a loss for words (which is rare). Gold criticism and uneducated skepticism has fallen silent lately. It’s hard to argue with the $1300 an ounce gold. Pundits are still bewildered at gold’s success, especially since they rely on disingenuous CPI and inflation data from the Federal Reserve and the government to make their deductions. This has led them to assume that an excessive sense of “fear” has pervaded markets and created a bubble in gold. They can’t seem to grasp that the bubble is not in gold, but in fiat currencies and the stock market, and this is why gold is on the rise.
Central Banks, primarily in Asia, are snatching up gold weekly. We all know about China’s unparalleled gold buying, but there are many other countries turning to PM’s as well. Thailand has apparently been buying gold in large quantities under the radar, improving their reserves by as much as 20%:
http://gata.org/node/9002
South Korea has been “under pressure” to diversify into gold because of their lack of defense against global devaluation in top currencies:
http://www.businessweek.com/news/2010-08-25/bank-of-korea-under-pressure-to-buy-gold-oh-says.html

Bangladesh recently bought 10 tons of the hedge metal. Nepal has announced a revamping of gold reserves, and, most importantly, they have publicized a desire to use their new gold reserves to back their currency!
http://www.commodityonline.com/news/Nepal-move-to-boost-gold-market-32052-3-1.html?utm_source=twitterfeed&utm_medium=twitter
So gold is money again? I would be ecstatic about this, if it weren’t for the proposition that a Treasury dump is in the wings. The dollar index has plummeted over the past week, and the Yen and Euro have gained considerably in opposition. I doubt that we will ever see another upward correction in the dollar like the one we saw this summer. Temporary increases in the Greenback’s value seem to have little effect on gold’s rise, however, and a full decoupling appears close at hand. Even the wild gyrations of the Dow lately have had little consequence on PM’s, yet another sign that the world is turning towards commodities as the only solid protection for savings.
Reports are coming in from the EU that banks are halting gold sales that have been operating for over a decade:
http://edition.cnn.com/2010/BUSINESS/09/27/eu.central.banks.gold.ft/index.html
That means sources of physical gold are beginning to dry up. This is becoming evident in the disconnection between physical gold values, and gold stocks. Physical values have far surpassed those of their paper counterparts. As demand grows and supply wanes, we could even see a complete decoupling of ETF values versus physical. This is already happening in some countries, like Vietnam, where the national currency and even the dollar are no longer trusted, and physical is trading at prices hundreds of dollars above set market value, something that could just as easily happen in the U.S.
One ember of stability in all this disaster is the strength of gold and silver as alternative currencies. In my recent article ‘Real World Solutions To Economic Tyranny’, I talked about the possibility of an “alternative economy” based on PM’s and created one community at a time, independent from our current fraudulent system, which could protect the Liberty Movement from collapse. Luckily, it seems others have had the same idea! Here is an article and video featuring G. Edward Griffin discussing the Idaho State Silver Gem Act, introduced by Representative Phil Hart, which would promote the use of silver as a designated alternative currency in the state (special thanks to Cassandra Anderson for sending me this link):
http://www.morphcity.com/home/84-silver-shines-as-an-economic-solution
The Fall Setup
If I was to compare the movements of the economic collapse to a chess game, I would say that the pieces are now in place this fall for a checkmate maneuver. Watch for increased tensions with China in October and November, followed by actual legislation sparking detrimental retaliatory actions. Also keep an eye on the dollar as it continues what looks to be its final decline.
Will we see a trigger event before the end of 2010? I predicted this much last year. My hope is that I was mistaken and that 2010 only represents a staging period for the inevitable deterioration further down the road, giving as many people as possible the extra time to prepare. As you can see though from the available information, this winter could be very unsettling. Hold fast, keep educating family and friends, continue preparations, and try to become as independent from this diseased economy as possible. Build meaningful community around you. Provide for yourself and others what the corrupt system will not, and remain free. It doesn’t sound like much, but it is truly one of the greatest contributions you can make towards a better tomorrow.


Basel III: The Global Banks at The Edge of The Precipice. Trillions of "Toxic Waste" in the Global Banking System

by Matthias Chang

Global Research, September 20, 2010

- 2010-09-19

The Global Too Big To Fail Banks are so precarious that literally anything can trigger a collapse in the coming months.
I have read recent commentaries on Basel III posted to various renowned websites and financial publication, but they missed (or deliberately misled) the underlying message of the proposals, the implementation of which will be delayed till 2017 and some till 2019.

Basel III is pure spin and its timing was to assuage the deep-seated fears that there are no solutions in sight to save the fiat money system and fractional reserve banking.

THE PROBLEM

The major global banks are all under-capitalised and this was all too apparent when Lehman Bros. collapsed. Banks were borrowing so much and so recklessly to play at the global casino that when the bets went sour, they were staring at a black-hole in the $trillions. In fact the banks are all insolvent.

The problem was compounded when the central bankers (all are corrupt without exception) and regulators turned a blind eye to how bankers defined what constituted “capital” so as to circumvent the need to maintain the capital ratio.


THE BASEL III SOLUTION

At its 12 September 2010 meeting, the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, announced a substantial strengthening of existing capital requirements and fully endorsed the agreements it reached on 26 July 2010.

These capital reforms, together with the introduction of a global liquidity standard, deliver on the core of the global financial reform agenda and will be presented to the Seoul G20 Leaders summit in November.

The Committee’s package of reforms will increase the minimum common equity requirement from 2% to 4.5%.

In addition, banks will be required to hold a capital conservation buffer of 2.5% to withstand future periods of stress bringing the total common equity requirements to 7%.

This reinforces the stronger definition of capital agreed by Governors and Heads of Supervision in July and the higher capital requirements for trading, derivative and securitisation activities to be introduced at the end of 2011.

Increased capital requirements
Under the agreements reached, the minimum requirement for common equity, the highest form of loss absorbing capital, will be raised from the current 2% level, before the application of regulatory adjustments, to 4.5% after the application of stricter adjustments.

This will be phased in by 1 January 2015.

The Tier 1 capital requirement, which includes common equity and other qualifying financial instruments based on stricter criteria, will increase from 4% to 6% over the same period.

The Group of Governors and Heads of Supervision also agreed that the capital conservation buffer above the regulatory minimum requirement be calibrated at 2.5% and be met with common equity, after the application of deductions.

The purpose of the conservation buffer is to ensure that banks maintain a buffer of capital that can be used to absorb losses during periods of financial and economic stress.

While banks are allowed to draw on the buffer during such periods of stress, the closer their regulatory capital ratios approach the minimum requirement, the greater the constraints on earnings distributions.

This framework will reinforce the objective of sound supervision and bank governance and address the collective action problem that has prevented some banks from curtailing distributions such as discretionary bonuses and high dividends, even in the face of deteriorating capital positions.

A countercyclical buffer within a range of 0% - 2.5% of common equity or other fully loss absorbing capital will be implemented according to national circumstances.

The purpose of the countercyclical buffer is to achieve the broader macroprudential goal of protecting the banking sector from periods of excess aggregate credit growth.

For any given country, this buffer will only be in effect when there is excess credit growth that is resulting in a system wide build up of risk.

The countercyclical buffer, when in effect, would be introduced as an extension of the conservation buffer range.

These capital requirements are supplemented by a non-risk-based leverage ratio that will serve as a backstop to the risk-based measures described above.

In July, Governors and Heads of Supervision agreed to test a minimum Tier 1 leverage ratio of 3% during the parallel run period.

Based on the results of the parallel run period, any final adjustments would be carried out in the first half of 2017 with a view to migrating to a Pillar 1 treatment on 1 January 2018 based on appropriate review and calibration.

Systemically important banks should have loss absorbing capacity beyond the standards announced today and work continues on this issue in the Financial Stability Board and relevant Basel Committee work streams. [1]

THE LOOPHOLE & ADMISSION OF INSOLVENCY

Since the onset of the crisis, banks have already undertaken substantial efforts to raise their capital levels.

However, preliminary results of the Committee’s comprehensive quantitative impact study show that as of the end of 2009, large banks will need, in the aggregate, a significant amount of additional capital to meet these new requirements.

Smaller banks, which are particularly important for lending to the SME sector, for the most part already meet these higher standards.

The Governors and Heads of Supervision also agreed on transitional arrangements for implementing the new standards.

These will help ensure that the banking sector can meet the higher capital standards through reasonable earnings retention and capital raising, while still supporting lending to the economy.


THE IRON CLAD CONFIRMATION THAT BANKS ARE IN DEEP SHITS

Please read all the passages which I have highlighted in bold in the above paragraphs. If the banks were at all material times adequately capitalised and the central bankers in collusion with these banksters and fraudsters were prevented from manipulations, there would not be any need for Basel III regulations.

In saying this, I am not in anyway conceding that even with these new requirements, the banks will be adequately capitalised.

The simple truth is that as long as the derivative casino is still running and banks are allowed to continue their off balance sheet activities, nothing will be resolved.

The 2 tables below tell the whole story:




Source: Basel iii Compliance Professionals Association (B iii CPA)


How can the ultimate capital requirement of 8 percent be adequate when leverage under Basel III is still allowed at the astronomical rate of 33:1?

In the second table, and it is a no brainer to conclude that the banking crisis (if we are lucky) may be “resolved” by 2015 but it is most likely that it can be only resolved by 2017/2018 .

This is an express admission that all banks would require such a long transition period to comply with the new requirements!

The stark reality is that the Too Big To Fail Banks do not have the ability and or the means to raise capital at this critical juncture.

To use an analogy, the banking patient will be in Intensive Care until 2017, which is rather optimistic for the projection implies that the patient may be able to recover.

It is my view that Basel III is pure spin and is intended to convey the impression that the central bankers and regulators have things under control. This is a big lie!

I have said in my earlier article that the FED through QEI purchased toxic assets from the banks and part of the monies were used to shore up the reserves and part to purchase treasuries (to give an illusion of better quality assets in banks’ balance sheet).

There are so much more, $trillions more of toxic waste that no amount of QE (quantitative easing) can remove them. This situation does not even take into consideration the toxic waste in SPVs – the off balance sheet mumbo jumbos. The FED and Accounting Bodies have suspended accounting and regulatory rules that have enabled the banks to hide such toxic waste in SPVs and not having to account for them in the banks’ balance sheet.

LIFE SUPPORT

QEI has merely enable the Too Big To Fail Banks to continue some form of banking activities thus deceiving the public that they are solvent and prevent a bank run.

But the central bankers cannot have the cake and eat it as well. In trying to shore up public confidence in banks with the introduction of Basel III, they have inadvertently let the cat out of the bag and as the above two tables show, the banks are all insolvent.

Additionally, whatever reserves that have been accumulated are insufficient to stimulate further lending, because the banks have reached their limits under the fractional reserve system.  This is the reason for the contraction of credit and not as one commentator has postulated that Basel III would “contract credit”.

Two burdens are weighing down on the banks:

1)    inadequate capital to meet liabilities (borrowings); and

2)    inadequate reserves under fractional reserve banking.

  
This is a big mess!

THE CONFIDENCE GAME

At this moment, I cannot give a precise time-line as to how long the FED and the global central banks can prolong the confidence game, hoodwinking the public and sovereign creditors that all is well.

When confidence in banks evaporates for whatever reasons, the consequences will be ugly and there will be massive social upheavals across the globe.

The first indication that the game is up is when US treasuries are increasingly purchased by the FED to make up for the shortfalls by foreign creditors and to finance the ballooning US deficits.

All of a sudden, some entities may start to get real nervous and unload the treasuries, and the FED steps in to shore up treasuries. Then, the tipping point is reached and Hell breaks loose!

China is also part of this confidence game.

But, contrary to IMF and other renowned economists who are betting on China’s and Asia’s so-called economic strengths, I take the view that when US treasuries collapse, faith in all fiat monies will likewise evaporate and there will be massive capital flight to commodities, especially gold, silver and oil.

Asian stock markets will be devastated and there will be volatile gyrations in currency values.

Therefore, it is utter lunacy and recklessness for the Malaysian central bank (Bank Negara) and the government to even consider allowing the ringgit to be traded.

When confidence in dollar assets vaporises, China will be caught right in the middle. The third and final phase of the Global Financial Tsunami will devastate Asian economies and with it, the greatest depression in history will ensue.

Time Line?

Between now and anytime in 2011.

At the latest, 2012.

God help us.            

The Money Masters
How International Bankers Gained Control of America