Nothing Left But The Stench

Sadly, this evening I must report that the Bull Shit Detector has seized up and exploded. Perhaps it was old, and it was time. Or perhaps, it was wave after wave of Bull Shit today that simply overwhelmed it and forced self destruction. My hopes rest with Renuzit for there is nothing left but the stench.

I have made every effort, over the past 10 weeks, to counsel all whose eyes gaze upon this script, that owning Gold and Silver during this upheaval in the World Financial System is both prudent and wise. Owning the Precious Metals is not for the feint of heart. You need nerves of steel and a really nice pillow. The Precious Metals are the "ride of a lifetime". If you didn't like roller coasters as a kid, this may be a ride to avoid. The highs on this ride can be pretty high, the lows deep and frightening. Huge profits and harrowing losses. And for those with the convictions to white knuckle the ride to its destination, the personal satisfaction of knowing that you have conquered both greed and fear. Because it will be those brave enough to endure the "ride" that will find themselves on top as all the naysayers look up from far below.

Today was not as low as many may fear or believe. The declines over the past three days will, when looking back, represent one of the greatest fake outs in the history of Bull Markets. This is a classic Bear Trap being set on the boobs that man the soon to be terminal black boxes that have disrupted this Secular Gold Bull Market one too many times now. These program traders are about to receive a strong dose of the truth and it is going to leave their little black boxes in smoking ruins.

Today, once again, US Government statisticians dished up another heaping helping of Bull Shit for the delusional wizards of Wall Street to swallow whole. And it tasted so good, they asked for another giving new meaning to "shit eatin' grin".

Today's GDP number was pure Bull Shit refined and derived with the aid of the Bull Shit inflation numbers consumers have been laughing at for months. The US Government will stop at nothing in their deceptions used in a vain effort to convince Americans that nothing is wrong with the economy, and that "things just aren't as bad as they seem". Is that a chours of "Bull Shit" that I hear rising from the streets of America? Listen closely, I think it is...

US logs better but still weak growth; far from being out of the woods
In fact, a closer look behind the 0.9 percent increase in the gross domestic product during the January-to-March period revealed much caution on the part of consumers who have been clobbered by the housing, credit and financial debacles.

"What emerges is a picture of an economy that's gasping for air," said Bernard Baumohl, managing director of the Economic Outlook Group.

When exports and business' inventories are removed and imports are added in, economic activity actually contracted at a 0.1 percent pace in the first quarter, the worst showing in more than 16 years. That figure underscores consumers' disinclination to spend vigorously.
http://biz.yahoo.com/ap/080529/economy.html

News Release: Gross Domestic Product (GDP) and Corporate Profits
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

There is one simple fact about "growth" in the US Economy: 70% of it comes from the American consumer. There is also one simple fact about GDP: it is a backwards looking statistic. "Growth", real or contrived, in Q1 2008 is all water under the bridge. Q1 GDP says little to nothing about growth in the current quarter or future quarters. The bottom line is that the Fed and the US Government are desperate in their efforts to keep the "recession tag" from being hung on the US Economy. Everybody and their uncle knows the US Economy is in a recession, the problem is nobody wants to admit it.

Americans are addicted to credit. From the halls of Congress, to the lowest Joe on the street, "buying on credit" IS OUR WAY OF LIFE. Without credit there is no "economic boom" the past 25 years. Credit is now disappearing for many Americans, and their way of life with it. And the US Economy is going down the drain with the American consumer. SEVENTY PERCENT of US GDP comes from the American consumer, the rest from what industry remains and government spending. Credit for Americans, American businesses, and soon the American Government is evaporating like the lakes in the drought parched South Eastern US. Without credit, there is no growth in America any more. The addicts are going Cold Turkey, and the withdrawals are not going to be pretty.

Oil falls after Energy Department says surprise drop in supplies due to temporary factors
NEW YORK (AP) -- Oil prices fell sharply Thursday after the Energy Department reported unexpected declines in crude oil supplies last week but said the drop was due to temporary delays in unloading oil tankers along the Gulf Coast.

In its weekly inventory report, the department's Energy Information Administration said crude oil inventories fell 8.8 million barrels last week, while gasoline supplies fell 3.2 million barrels. Analysts surveyed by energy research firm Platts had expected slight increases in supplies of both.

But the EIA also offered a rare explanatory note on the Gulf Coast tanker problems. Gulf ports have closed many times in recent months due to fog, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

The ONLY fog is between the ears of US Government statisticians. Here before you now is one gargantuan pile of pure 100% Bull Shit. "...a rare explanatory note...", just when you thought you'd heard everything.

In Washington, meanwhile, the Commodity Futures Trading Commission revealed that it is six months into a wide-ranging investigation of U.S. oil markets, with a focus on possible price manipulation. The CFTC also announced a handful of initiatives designed to increase transparency of the energy futures markets.

The commission said it started the probe in December and was publicizing the investigation "because of today's unprecedented market conditions."

Disclosure of the investigation may have contributed to oil's declines, analysts said.
http://biz.yahoo.com/ap/080529/oil_prices.html


You can rest comfortably knowing that there is unlikely a similar probe by the blind CFTC into "price manipulations" in the Gold and Silver markets. What a joke! Anything to try and steer people away from the truth. Any first year economics student, or produce clerk for that matter, knows that the price of Oil is skyrocketing because the US Dollar is backed by nothing more than 100% BULL SHIT. The mere suggestion that Oil prices are declining because demand is falling in the US is BULL SHIT as well. It's a bigger World today than it was just 10 years ago. The competition for the World's resources is becoming fierce. The monster we fight today in higher Oil prices was created unconstitutionally by the US Congress in 1913. That monster is the US Federal Reserve. And if there needs to be an investigation of anything in this country, it is this criminal entity that is robbing Americans of their wealth every minute of the day. And that monster may soon be on life support...

Fed to keep making bank loans available to ease credit stresses
WASHINGTON (AP) -- The Federal Reserve announced Thursday that it will make a fresh batch of short-term cash loans available to squeezed banks as part of an ongoing effort to ease stressed credit markets.

The Fed said it will conduct three auctions in June, with each one making $75 billion available in short-term cash loans. Banks can bid for a slice of the available funds. It would mark the latest round in a program that the Fed launched in December to help banks overcome credit problems so they will keep lending to customers.

The new round of auctions will be conducted on June 2, June 16 and June 30.

The smooth flow of credit is the economy's lifeblood. It enables people to finance big-ticket purchases, such as homes and cars, and helps businesses expand operations and hire workers.

Wanting to avert a broader panic that could endanger the entire U.S. financial system, the Fed has taken a number of extraordinary actions to provide relief. In its broadest extension of lending authority since the 1930s, the central bank agreed to temporarily let investment firms obtain emergency loans directly from the Fed, a privilege that only commercial banks had been granted.

The central bank is expected to focus more on these and other efforts to help banks and investment firms overcome any credit problems as it winds down an aggressive rate-cutting campaign that started last September.
http://biz.yahoo.com/ap/080529/fed_credit_crisis.html?.v=4

But isn't the credit crisis over? Only for the naive and those that sure wish it was. The credit crisis is FAR from over and may soon be about to explode and destroy the US Economy for the next two generations. Few realize or understand what the Fed has undertaken and given away with these loan/auctions they are promoting every other week since December. The Fed has pushed this country to the brink of complete economic collapse, and nobody wants to tell the story, or expose the truth. Fortunately Gary North does, and he has done so with the following insightful and alarming essay. Why has big financial media ignored this story?

Bernanke's Nightmare Chart
by Gary North

The Federal Reserve System on December 17 began a unique experiment: debt swaps with large commercial banks. The FED is now swapping at face value highly marketable U.S. Treasury securities in exchange for discounted mortgages. Nothing like this has ever been attempted before. It represents an innovation in central bank policy. It is called the Term Auction Facility (TAF). The initial offer was for $20 billion in swaps.

The rate charged is about 2%. This is why the FED has cut the FedFunds rate to 2% – not to stimulate the economy directly but to make available TAF loans at low rates.

Here is how the game is played. The borrowing banks can place the borrowed Treasury debt on their books at close to face value. This looks as though the banks are meeting their capital requirements.

What is really going on? Deception on a massive scale – a fully legal deception that the U.S. government's bank auditors understand and go along with.

With this as background, let us consider the words of the Federal Reserve System as of May 2.

In addition, the Federal Open Market Committee authorized an expansion of the collateral that can be pledged in the Federal Reserve's Schedule 2 Term Securities Lending Facility (TSLF) auctions. Primary dealers may now pledge AAA/Aaa-rated asset-backed securities, in addition to already eligible residential- and commercial-mortgage-backed securities and agency collateralized mortgage obligations, beginning with the Schedule 2 TSLF auction to be announced on May 7, 2008, and to settle on May 9, 2008. The wider pool of collateral should promote improved financing conditions in a broader range of financial markets.

Deciphering the FedSpeak, we learn that the FED is swapping U.S. Treasury securities for packages of loans on just about anything. I suppose this could include cars, if the FOMC decides the asset meets its wider standards.

Consider these words: "The wider pool of collateral should promote improved financing conditions in a broader range of financial markets." Let me translate.

The wider pool of eligible capital for swaps will allow banks to convince government auditors – wink, wink – that the assets on the banks' books need not be marked to market with a discount. Therefore, the banks will not have to call in loans in order to bring their loan-to-capital ratios back into line with regulations.

HOW LONG CAN THE GAME GO ON?

It can go on for as long as the Federal Reserve System has U.S. Treasury debt to swap. As Hamlet said, "There's the rub."

In November, 2007, two weeks before the first TAF auction was held, the Federal Reserve System held about $800 billion in Treasury debt. As of May 1, it held $539 billion. "May day! May day!"

The Federal Reserve's "creative financing" to bail out banks that have invested in creatively financed mortgages has a limit. The limit is its portfolio of Treasury debt.

It took from 1914 until November 2007 for the Federal Reserve to accumulate $800 billion worth of Treasury debt. It has take from December 17 to the end of April for the FED to divest itself of $260 billion of this portfolio, a decrease of one-third. In its place, it has placed AAA- rated mortgages.

At the current swap rate, the Federal Reserve System will be out of Treasury debt in December of 2008. But by adding car loans to the list of eligible paper, the FED has guaranteed that this rate will accelerate.
http://www.lewrockwell.com/north/north624.html

Please take the time to read the entire essay at the the link above as I have paraphrased from it to get the point across. And that point is that the Fed has risked it's own destruction [not to mention the destruction of the US Economy] by implementing this "cash for trash" swap program. That, and the fact that they are now culpable in fostering bank fraud. The severity of the actions the Fed are now engaged in are beyond shocking. The whole concept is predicated on this plethora of virtually worthless credit backed securities regaining their value in the near term and being returned to the banks as sound investments. Ain't gonna happen. Rising interest rates in the long bonds will destroy that pipe dream.

Doing the quick math exposes how close the Fed is to running out of Treasury debt to swap for this trash so as to perpetuate the bank fraud that Wall Street has brazenly accepted as "the end of the credit crisis". From December 2007 through April 2008 the Fed had swapped out $260 BILLION of it's $800 BILLION Treasury debt kitty. Two more auctions in May at $75 Billion each raised the total swapped out at the end of May 2008 to $410 Billion. Now add three more $75 BILLION auctions in June and the Fed will have exhausted $635 BILLION of its $800 BILLION in Treasury debt reserves. Almost 80% of the Fed's Treasury debt that it took 93 years to accumulate will have evaporated in SIX MONTHS! Pfft, gone!

As the Federal Reserve blows thru its assets to perpetuate a collosal bank fraud, the US Congress sits silent on the sidelines oblivious to the economic madness destroying this country's future for possibly the next two generations. The credit crisis is certain to sink this country. The leadership vaccum in Washington will see to it that it remains sunk.