Dark Skinny

Nobody I know really understands the vastness or the complexity of the Derivatives Market. But the evidence appears to be that the dollar, amidst much reverse spin from the US government corridors, is squirming and hurting bad. But how is this possible with the dollar so strong now ? Read the following explanation from the financialsense.com website, and watch the clock carefully - something nasty is coming.

In the cited article, Kirby wrote: “What folks need to understand is that the global OTC derivatives market, measured in tens or hundreds of Trillions, is virtually all US Dollar denominated. Its SYSTEMIC failure, which is now occurring, requires US Dollar balances to clear (settle) the trades (bets). This has created the paradoxical global demand for US Dollars, the currency of a country that is fundamentally bankrupt. By rationing credit to hedge funds that were naturally levered and ‘long commodities’ (institutions like JP Morgan routinely took the other sides of their customers commodities bets, ruining institutions like natural gas player Amaranth), and propping up the balance sheets of those who were short commodities [such as] the Banks. The Federal Reserve led cabal of Central Bankers have ENGINEERED the collapse in commodities prices while creating the illusion (of a perverse USDollar rally). The engineered collapse of the commodities complex became necessary in the eyes of monetary elites because the rush for tangibles and corresponding repudiation of fiat money was becoming manic, as so CLEARLY evidenced by the emerging shortages of precious metals, gold and silver bullion.” My rejoinder is that the crude oil price, and many commodity prices, have come down right before the election, just like in autumn 2006, a perception we share.

Kirby went on to conclude that “We are CLEARLY going to HYPERINFLATE!!!!” He steadfastly contradicts shallow assertions that deflation will dominate the scene. Anyone observing the money supply acceleration in recent weeks can easily see this, yet deflationists seem unable to observe the human response in desperation. We two have frequent debates between ourselves, whether USTreasury Bond default will occur or else a big Reflation Episode. It is possible both will occur. These exchanges will contribute toward a key section in the upcoming November Hat Trick Letter on the weekend of November 9. A topic raging lately between us has been the failures to deliver USTreasurys. This extraordinary phenomenon highlights the extreme mountain of toxic bond (in)securities spewed worldwide by the corrupted US financial sector, but it also highlights the questionable legitimacy of USTreasury Bonds. One should remember that over $2000 billion in counterfeit USTreasury Bonds was probably buried under the World Trade Tower rubble one dark September day in 2001. The traded volume of USTBonds was recorded to be over $2 trillion above official issuance in USTBonds. So maybe we are seeing a redux of counterfeit issuance of USTBonds in order to satisfy unprecedented demand. By the way, USTreasury management is done, and accounting is done, almost like a money laundering operation, handled by JPMorgan. The rise, burial, and revival of supply are all conducted under the convenient accounting rules permitted by national security agencies.

Could the failures to deliver USTreasurys, as shown in the alarming graphic below, be a precursor to actual default? We will see. Kirby maintains a period of tremendous hyper-inflation is coming. My forecast is for a possible USTreasury default, as conditions grow out of control, and economic disintegration catches the nation by surprise. The collapse of General Motors could trigger a profound change in perception concerning the effective implementation of USGovt and Wall Street bailouts and rescues. Either way, disruptions like never seen before are on the horizon. The settlement failures bring into question the integrity of the USTreasurys as a legitimate market. Their counterfeit from more supply than issuance is well documented, and rings like a loud echo to the naked stock shorting chapter of US financial markets.