April 28 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth Lewis lost the support of the largest U.S. pension fund as an analyst said the bank needs as much as $70 billion of capital.

The California Public Employees’ Retirement System said it will vote against Lewis and all 18 directors at the annual meeting tomorrow in the bank’s hometown of Charlotte, North Carolina. The lender needs $60 billion to $70 billion, according to Friedman, Billings, Ramsey Group Inc. analyst Paul Miller, who cited stress tests performed by his firm.

Bank of America should consider converting preferred shares to common stock, including $27 billion in private hands “as soon as possible,” Miller wrote in a note to clients today. Miller said his firm’s versions of the stress tests were “somewhat tougher” than those performed by U.S. regulators...

Comment:

"The recent stock market rally was sparked by encouraging $3 Billion earnings from Citigroup and Bank of America. Less than a month later we learn THEY NOW NEED $70 BILLION???? How long before citizens and the markets wake up and realize what is really going on here. Very soon we will all discover the emperor has no clothes.

Got gold?

The big run up in silver prices yesterday in the thinly traded Asian market and the subsequent Comex session turn around is such a common playbook. With options expiry yesterday JP Morgan et al couldn't let the $13 strike finish in the money so the Comex (sorry CRIMEX) price closed right below that level. Thursday 30th is the first notice day for the May silver futures contract so expect another big take down in price to enable the manipulating investment banks to cover their shorts at the expense of unsuspecting traders who actually believe we have free markets.

Long time silver investors will be well used to this volatility. Newer investors don't be spooked, the price will recover once the notice period has cleared. Silver is technically set up for a big move within 6 months so please hold on.......

For your interest here are the key dates for the next few months. Follow the pump and dump playboook yourself, you will amazed.

April 27 Comex May gold options expiry
April 27 Comex May silver options expiry
April 27 Comex May copper options expiry
April 27 Comex May aluminum options expiry
April 28 Comex April gold futures last trading day
April 28 Comex April silver futures last trading day
April 28 Comex May miNY silver futures last trading day
April 28 Comex April copper futures last trading day
April 28 Comex May miNY copper futures last trading day
April 28 Comex April aluminum futures last trading day
April 28 Nymex April platinum futures last trading day
April 28 Nymex April palladium futures last trading day
April 28 Nymex May Asian gold futures last trading day
April 28 Nymex May Asian platinum futures last trading day
April 28 Nymex May Asian palladium futures last trading day
April 30 Comex May gold futures first notice day
April 30 Comex May silver futures first notice day
April 30 Comex May copper futures first notice day
April 30 Comex May aluminum futures first notice day
April 30 Nymex May platinum futures first notice day
April 30 Nymex May palladium futures first notice day
May 20 Nymex June platinum options expiry
May 26 Comex June gold options expiry
May 26 Comex June silver options expiry
May 26 Comex June copper options expiry
May 26 Comex June aluminum options expiry
May 27 Comex May gold futures last trading day
May 27 Comex June miNY gold futures last trading day
May 27 Comex May silver futures last trading day
May 27 Comex May copper futures last trading day
May 27 Comex June miNY copper futures last trading day
May 27 Comex May aluminum futures last trading day
May 27 Nymex May platinum futures last trading day
May 27 Nymex May palladium futures last trading day
May 27 Nymex June Asian gold futures last trading day
May 27 Nymex June Asian platinum futures last trading day
May 27 Nymex June Asian palladium futures last trading day
May 29 Comex June gold futures first notice day
May 29 Comex June silver futures first notice day
May 29 Comex June copper futures first notice day
May 29 Comex June aluminum futures first notice day
May 29 Nymex June platinum futures first notice day
May 29 Nymex June palladium futures first notice day
June 17 Nymex July platinum options expiry
June 25 Comex July gold options expiry
June 25 Comex July silver options expiry
June 25 Comex July copper options expiry
June 25 Comex July aluminum options expiry
June 26 Comex June gold futures last trading day
June 26 Comex June silver futures last trading day
June 26 Comex July miNY silver futures last trading day
June 26 Comex June copper futures last trading day
June 26 Comex July miNY copper futures last trading day
June 26 Comex June aluminum futures last trading day
June 26 Nymex June platinum futures last trading day
June 26 Nymex June palladium futures last trading day
June 26 Nymex July Asian gold futures last trading day
June 26 Nymex July Asian platinum futures last trading day
June 26 Nymex July Asian palladium futures last trading day
June 30 Comex July gold futures first notice day
June 30 Comex July silver futures first notice day
June 30 Comex July copper futures first notice day
June 30 Comex July aluminum futures first notice day
June 30 Nymex July platinum futures first notice day
June 30 Nymex July palladium futures first notice day
July 15 Nymex August platinum options expiry
July 28 Comex August gold options expiry
July 28 Comex August silver options expiry
July 28 Comex August copper options expiry
July 28 Comex August aluminum options expiry
July 29 Comex July gold futures last trading day
July 29 Comex August miNY gold futures last trading day
July 29 Comex July silver futures last trading day
July 29 Comex July copper futures last trading day
July 29 Comex August miNY copper futures last trading day
July 29 Comex July aluminum futures last trading day
July 29 Nymex July platinum futures last trading day
July 29 Nymex July palladium futures last trading day
July 29 Nymex August Asian gold futures last trading day
July 29 Nymex August Asian platinum futures last trading day
July 29 Nymex August Asian palladium futures last trading day
July 31 Comex August gold futures first notice day
July 31 Comex August silver futures first notice day
July 31 Comex August copper futures first notice day
July 31 Comex August aluminum futures first notice day
July 31 Nymex August platinum futures first notice day
July 31 Nymex August palladium futures first notice day
Aug. 19 Nymex September platinum options expiry
Aug. 26 Comex September gold options expiry
Aug. 26 Comex September silver options expiry
Aug. 26 Comex September copper options expiry
Aug. 26 Comex September aluminum options expiry
Aug. 27 Comex August gold futures last trading day
Aug. 27 Comex August silver futures last trading day
Aug. 27 Comex September miNY silver futures last trading day
Aug. 27 Comex August copper futures last trading day
Aug. 27 Comex September miNY copper futures last trading day
Aug. 27 Comex August aluminum futures last trading day
Aug. 27 Nymex August platinum futures last trading day
Aug. 27 Nymex August palladium futures last trading day
Aug. 27 Nymex September Asian gold futures last trading day
Aug. 27 Nymex September Asian platinum futures last trading day
Aug. 27 Nymex September Asian palladium futures last trading day
Aug. 31 Comex September gold futures first notice day
Aug. 31 Comex September silver futures first notice day
Aug. 31 Comex September copper futures first notice day
Aug. 31 Comex September aluminum futures first notice day
Aug. 31 Nymex September platinum futures first notice day
Aug. 31 Nymex September palladium futures first notice day
Sept. 16 Nymex October platinum options expiry
Sept. 24 Comex October gold options expiry

from LeMetropole

The much touted "stress test" of the U.S. banking system is nothing but a PR sham and in reality, completely meaningless. The "worst case scenario used is a 3+% drop in GDP, and a 10% unemployment rate. If real GDP and unemployment numbers were ever offered up, my guess is that we already have had a minimum 5% contraction in GDP and true unemployment is approaching 13-15%. The stress test only addresses "tier one capital", my question is this, what about all the "off balance sheet" crapola that surely renders these reckless banks insolvent? No, really, I WANT TO KNOW! By trying to control and manipulate ALL markets, these banks have taken $ trillions upon $ trillions worth of fraudulent transactions on (and according to their accounting, off) their books. They are walking corpses that cannot be saved.

On books, off books, what is this crap!? If you enter into a transaction, is it not still a transaction whether you "account" for it or not? Are you not responsible to perform on the contract, no matter how you account for it? I did business my entire life on a handshake, I never had "off balance sheet" business because A DEAL IS A DEAL. Period. Even if it was a bad deal, it was still a deal and I would learn a lesson but still perform.

The "originator", the biggest abuser, the teacher if you will, for off balance sheet shenanigans, IS the U.S. government. They have used fraudulent accounting for nearly 50 years. The have used a fraudulent currency for nearly 40 years, invoking the "never pay" model. And now they are providing a stress test for the banks? How quaint, how brazen of them. I believe that the biggest stress test of all time will be imposed on the U.S. Treasury and Federal Reserve very soon by Mother Nature (the markets). The Dollar has completed it's short covering rally, it has made no headway since last November. The Treasury market has retraced all of it's gains since the "quantitative easing" announced by the Fed in mid March. The 10 year has moved up from sub 2.5% to an even 3% in the span of 6 weeks, a move higher from here should accelerate this move. The equity market is at a moment of truth, in that it's momentum has also stalled but it must continue higher in order to "prove" all the talk of "green shoots" and to spur consumer spending and confidence.

Should ANY of these markets fail, the jig will be up for the other 2. Should the Dollar collapse, it will spur Treasury selling and thus higher interest rates. Should Treasuries collapse, the laughable "bottom" in real estate will be proven to be false, and thus will spur further negative sentiment and consumer retrenchment. Should stocks collapse, well, you will have pension shortfalls, even more consumer retrenchment, in short, a "depressionary environment". But here is the "big enchilada", it is the government who will be most harshly affected by this market imposed stress test. Uncle Sam cannot afford higher rates, the debt service alone will kill him. He cannot afford a lower exchange rate currency because this will spook foreigners into a "bank run", nor can he afford a lower equity market as that will expose the invalid "stimulus plans" and spook the entire world.

The current "remedies" virtually guarantee a lower Dollar and higher interest rates, the correct remedies (necessary almost 10 years ago) will result in the same, a collapsed currency and a debt market with few bids. In short, this credit contraction is now becoming a self fulfilling prophecy. Tax revenue is imploding while at the same time they decided to spend like drunken sailors. This is rapidly becoming a sovereign bankruptcy that will spread faster than swine flu. Upon further thought, the real stress test will be how we, as individuals and family units, cope with the conditions thrust upon us. The past rewarded those who were blatantly reckless, now, even those who were prudent and played by the rules will get swept away by this perfect, man made storm. Only those that understand the difference between real money and fake fiat will stand a chance to survive and thrive as the paper promises get swept away. Quite stressful to say the least.

China called Sunday for reform of the global currency system, dominated by the dollar, which it said is the root cause of the global financial crisis. "We should attach great importance to reform of the international monetary system," Chinese Vice Finance Minister Li Yong told the spring IMF/World Bank Development Committee meeting in Washington. A "flawed international monetary system is the institutional root cause of the crisis and a major defect in the current international economic governance structure," Li said, according to a statement.

"Accordingly, we should improve the regulatory mechanism for reserve currency issuance, maintain the relative stability of exchange rates of major reserve currencies and promote a diverse and sound international currency system." As the world's main reserve currency, US dollars account for most governments' foreign exchange reserves and are used to set international market prices for oil, gold and other currencies. As the issuer of the key reserve currency, the United States also pays less for products and can borrow more easily. Li did not name the dollar but in late March the People's Bank of China Governor Zhou Xiaochuan said he wanted to replace the US unit which has served as the world's reserve currency since World War II. "The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," Zhou said, suggesting the International Monetary Fund could play a greater role. Zhou's remarks sparked uproar and concern since China has the world's largest forex reserves at 1.9 trillion dollars. China became the world's top holder of US Treasury bonds last September, and currently holds around 800 billion dollars, according to official US data. Beijing has voiced increasing concern over its massive exposure to the US dollar as the global crisis has steadily deepened but after some tense exchanges, the issue appears to have eased in recent weeks…

-

by Mike Whitney

Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing prices is gaining speed. The moratorium was initiated in January to give Obama's anti-foreclosure program---which is a combination of mortgage modifications and refinancing---a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it's clear now that the program will fall well-short of its objective.

In March, housing prices accelerated on the downside indicating bigger adjustments dead-ahead. Trend-lines are steeper now than ever before--nearly perpendicular. Housing prices are not falling, they're crashing and crashing hard. Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time creating another cascade of foreclosures. Market analysts predict there will be 5 MILLION MORE FORECLOSURES BETWEEN NOW AND 2011. It's a disaster bigger than Katrina. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. 40 percent of delinquent homeowners have already vacated their homes. There's nothing Obama can do to make them stay. Worse still, only 30 percent of foreclosures have been relisted for sale suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?

600,000 "DISAPPEARED HOMES?"

Here's a excerpt from the SF Gate explaining the mystery:

"Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory." ("Banks aren't Selling Many Foreclosed Homes" SF Gate)

If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They'd also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. One thing is certain, 600,000 "disappeared" homes means that housing prices have a lot farther to fall and that an even larger segment of the banking system is underwater.

Here is more on the story from Mr. Mortgage "California Foreclosures About to Soar...Again"

"Are you ready to see the future? Ten’s of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season...Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days....The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium."

JP Morgan Chase, Wells Fargo and Fannie Mae have all stepped up their foreclosure activity in recent weeks. Delinquencies have skyrocketed foreshadowing more price-slashing into the foreseeable future. According to the Wall Street Journal:

"Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can't meet their loan payments, up from about 1.7 million in 2008." (Ruth Simon, "The housing crisis is about to take center stage once again" Wall Street Journal)

Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards. The next leg down in housing will be excruciating; every sector will feel the pain. Obama's $75 billion mortgage rescue plan is a mere pittance; it won't reduce the principle on mortgages and it won't stop the bleeding. Policymakers have decided they've done enough and are refusing to help. They don't see the tsunami looming in front of them plain as day. The housing market is going under and it's going to drag a good part of the broader economy along with it. Stocks, too.

Insider Selling Jumps to Highest Level Since ‘07 as Stocks Gain

April 24 (Bloomberg) -- Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market.

... While the Standard & Poor’s 500 Index climbed 26 percent from a 12-year low on March 9, CEOs, directors and senior officers at U.S. companies sold $353 million of equities this month, or 8.3 times more than they bought, data compiled by Washington Service, a Bethesda, Maryland-based research firm, show. That’s a warning sign because insiders usually have more information about their companies’ prospects than anyone else, according to William Stone at PNC Financial Services Group Inc.

“They should know more than outsiders would, so you could take it as a signal that there is something wrong if they’re selling,” said Stone, chief investment strategist at PNC’s wealth management unit, which oversees $110 billion in Philadelphia. “Whether it’s a sustainable rebound is still in question. I’d prefer they were buying.”

Insiders Sell

Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 mostly institutional clients.

That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the 17-month bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992, data going back more than 20 years show. That drop preceded a 2.4 percent slide in the S&P 500 in August 1992....

The S&P 500 has rallied 26 percent over 32 trading days, the sharpest rally since 1938, as speculation increased that the longest contraction since World War II will soon end....

Bullionmark comment: Pump and dump? Good for CEO's to offload stock before the "big event". Good for the banks as they can raise much needed capital by offloading crappy paper on to newly bullish investors and good for the government as the stock market creates the illusion that all will be well in the economy soon. Don't be fooled this is a suckers rally.

China Added 454 Tons of Gold to Reserves Since 2003 (Update1)

April 24 (Bloomberg) -- China has added 454 metric tons of gold to its reserves since 2003 through domestic purchases and refining scrap, the official Xinhua News reported, citing Hu Xiaolian, head of the State Administration of Foreign Exchange.

Total gold reserves now stand at 1,054 tons, it said. The country has the world’s biggest foreign-exchange reserves at $1.95 trillion as of March 31, according to data compiled by Bloomberg. The foreign exchange reserves were $286 billion at the end of December 2002.

Got gold?

Since the Chinese put a new global reserve currency on the table at the G20 summit which created $250 billion in new IMF Special Drawing Rights, discussion of the new currency has increased, and the logic of putting precious metals into this basket is clear.

Gold and silver have been used as money for several millennium because even the most artful alchemist has failed to find a way to manufacture precious metals. Over recent centuries, fiat or paper money collapses have always been followed by a reversion to gold and silver. Why should it be different this time?

Money supply inflation

Global governments are expanding money supply as though there is no tomorrow. Only yesterday, the British government unveiled plans to borrow more in the next two years than in the previous 300 years of its history, including two world wars and the creation of the welfare state.

It is clear that a day of reckoning is coming for the fiat or paper currencies of the world whose governments have lost all reason in their desperate pursuit of a magic bullet to solve the global financial crisis. Printing money is the last resort of bankrupt governments.

If we go back to the South Sea Bubble of the early 1700s in France, there is the first example of modern times, with paper replacing gold until a mammoth inflation sent the government scurrying back to precious metals. The revolution came later.

Or in ancient times, the Roman emperor Nero debased the currency and so did his successors and with it fell the Roman Empire.

But an orderly exchange of fiat currency for precious metals is perfectly possible, and the Chinese proposals for a new reserve currency have suggested using the commodities model suggested by Keynes in the 30s.

Stiglitz support

Nobel Prize winner Joseph Stiglitz is the latest economist to back a new global reserve currency, although he does not detail a role for gold and silver.

However, precious metals should be at the heart of a new global currency, partly to give it credibility as something really different to combining several paper currencies, and also because of the discipline of a fixed supply of precious metals that will stop governments from devaluing and inflating away people’s money.

Will this happen as a result of informed debate? Probably not. The historical precedent is for a crisis followed by a reversion to gold and silver at prices far higher than those seen before the crisis

WSJ: BofA CEO Lewis testifies to NY AG that Bernanke, Paulson wanted Merrill losses kept quiet
http://finance.yahoo.com/news/WSJ-BofA-CEO-says-was-told-to-apf
-15006709.html?sec=topStories&pos=3&asset=&ccode=

A few comments from LeMetropole provide good insight into this amazing story....

Blackmail?

To all, so today we hear that Ken Lewis, CEO of Bank of America was told by Ben Bernanke and Hank Paulson to shut up about the "material adverse change" that took place at Merrill Lynch before their merger. I would call this "blackmail", but then again, who am I anyway, I think Gold is money so I must be a whacko. Mr. Lewis has testified under oath (whatever that means) that he was told to remain silent about Merrill, otherwise his board of directors would be disbanded and the management team would be fired. Appalling yes, but does this surprise you?

What would you do? Remain silent? Cancel the deal? I know what I would have done, I would announce the piece of crap Merrill had become, cancel the deal so my shareholders didn't get left holding the "bag of pooh", and then simply resign. How could you wake up and go to work in the morning knowing you just shafted your shareholders over a blackmail? How could you remain silent? Was his silence going to save the system? No, it can't be saved because "it is what it is", the debt, derivatives, mal investment, etc., were all already in place, NOTHING could reverse that. If the system was so close to collapsing just a few months ago, how far away can we be now?

So, as for Mr. Bank of America, either he is a spineless buffoon that threw his shareholders under a steamroller, or he lacks the moral values to tell the truth no matter what the consequences, even if they included losing your job. Maybe he was afraid of becoming Mr. "Freddie Mac" and turning up as a suicide. Who knows? The point here is the confidence (lack of) this instills in foreigners with investments in the U.S.

Supposing Mr. Lewis is telling the truth, this means that Paulson and Bernanke are both "blackmailers" and liars. They told us umpteen times that the "banking system is solid", the "system is sound". WHO to believe? I think they are ALL full of $#I+!!! The system is busted, the banks are broke, the Dollar has ZERO intrinsic value, and the Treasury has become the biggest beggar in the history of the world. And now we get the stress test results? Yeah, I can't wait to see these morsels of truth and wisdom!

This can of worms that Mr. Lewis has opened has huge ramifications, most importantly one of CREDIBILITY. I can only guess what my thoughts would have been as a child growing up in the 60's, the Sec. of the Treasury and Fed Chairman lied and blackmailed someone? So what if Merrill went down, they are only one Investment house, you mean the system is THAT fragile? This is the world's biggest debtor trying to hide JUST how weak, debilitated, and fragile the whole situation has become. One can only hope that foreigners go deaf, dumb, and blind for few a weeks since it is they, that Treasury relies on so heavily to fund our debt.

From today forward, it is now clear that ANYTHING can happen at ANYTIME. Everything is not what it seems to be, nothing is real in the financial world, and everything is worth nothing. As it turns out, the economy, real estate, and stock markets were all propped up and "Bulled" by borrowed money and dirty tricks. The entire "fiat" bull run has been bull shit, and to think we EVER questioned Gold ownership. No wonder we have been told on a daily basis that Gold is a "barbarous relic" and has no use. So they lied to us, what's the big deal? They will lie to us again tomorrow, ...and your point is? Clearly, things aren't what they used to be, now I sound like my parents. Sorry for the rant, I do feel much better though!

-----------------------------------

Bof A and the DYKE!

The revelation that Bank of America was forced to buy Merrill Lynch is the nail in the coffin, the straw that broke the camels back, the beginning of the end...how many more sayings do you we need??!!

There are no more fingers to stick in the dyke!

This revelation is HUGE on so many fronts I can't even begin. First of all Bank of America will be sued by EVERY SHAREHOLDER for accepting this deal, not disclosing the "material information", falsely promoting the deal to the public and hiding the truth. The Treasury and the Federal Reserve will be investigated for illegally forcing the merger without any congressional approval or ANY PUBLIC DISCLOSURE....

AND THEY HAVE BEEN LYING TO THE PEOPLE FOR MONTHS THAT WE WERE AT THE BOTTOM AND THE BANKS ARE FINE!

Bank of America will likely see a "Run"on the bank" within the next few weeks as the liability from this is incalculable!

It's about to get VERY UGLY out there!

--------------------------------------------

Andrew Cuomo's Smoking Gun

New York State Attorney General has unleashed a letter today which could well lead to an avalanche of lawsuits against, Bank of America, Ken Lewis and the BAC board, John Thain, Henry Paulson, the U.S. Treasury and Ben Bernanke et al at the Fed.

If you read through Mr. Cuomo's letter, there can no question in anyone's mind that Lewis, Paulson and Bernanke are guilty of committing fraud. This must be a serious issue because when it was being exposed on CNBC, CNBC quickly cut away just as Ken Lewis was telling Erin Burnett that he was told to keep his mouth shut.

At issue is whether or not Henry Paulson and Ben Bernanke, along with staff members wholly and severally at the Treasury Department and the Federal Reserve, forced Ken Lewis and the board at BAC to complete its merger with Merrill Lynch, despite Ken Lewis' decision that the financial condition of MER at the time of the merger agreement had been fraudulently misrepesented, covered up and had materially changed.

It would appear from a close reading of the letter sent from Andrew Cuomo to Government officials listed, that Ken Lewis was going to invoke a Material Adverse Change clause, due to a substantial deterioration in the assets of Merrill Lynch which appear to have been covered up during merger negotiations (i.e. hidden from sight during the due diligence process), in order to either abort or substantially renegotiate the terms of the BAC/MER shotgun wedding. Here is what the MAC clause is all about:

"THE MATERIAL ADVERSE CHANGE CLAUSE (MAC) as a closing condition has achieved permanent status as one of the most highly negotiated parts of acquisition agreements. The basic premise underlying a MAC is that the purchaser should receive the benefit of the bargain. In practice, a MAC included within the closing conditions of an acquisition agreement provides purchasers with an "out" in the event of unforeseen material adverse business or economic changes affecting or involving the target company or assets between the execution of the definitive acquisition agreement and the consummation of the transaction"

Please read the Cuomo letter in its entirety, as it contains statements and accusations from both Lewis and Paulson that are both accusatory of each other and self-incriminating. Here is just one snippet:

"Bank of America's attempt to exit the merger came to a halt on December 21, 2008. That day, Lewis informed Secretary Paulson that Bank of America still wanted to exit the merger agreement. According to Lewis, Secretary Paulson then advised Lewis that, if Bank of America invoked the MAC, its management and board would be replaced" page 2.

There is much more in that letter which can be used to go after every person listed above. Bernanke has denied making any of the statements contained in that letter. My bet would be that Bernanke is now on record lying.

At the very least, all the people listed above will subject to massive lawsuits by Bank of America shareholders. Hopefully Mr. Cuomo will prove to be more forthright than his predecessor, Eliot Spitzer who used his attacks on Wall Street to launch his bid for Governor of New York, and will use this as an opportunity to pursue justice for all the parties involved, not the least of which is the U.S. Taxpayer.

Here is the letter from Mr. Cuomo:

http://zerohedge.blogspot.com/2009/04/cuomo-letter-exposing-paulsons-and.html

------------------------------------------------

This Cuomo thing is getting gooooood

This is a postcard perfect example of what happens when rats are trapped in a corner - they turn on each other:

Paulson Contradicts Bernanke, Blames Bernanke For Lewis Threat

"Hank Paulson admitted to Andrew Cuomo that he threatened to oust Ken Lewis and the Bank of America board if Bank of America invoked a Material Adverse Change (MAC) clause to block the deal, Cuomo says. Paulson also added, however, that he made this threat at the request of Ben Bernanke"

http://www.businessinsider.com/henry-blodget-paulson-contradicts-bernanke-blames-bernanke-for-lewis-threat-2009-4

Ken Lewis Shafted Bank Of America Shareholders To Save His Job (BAC)

http://www.businessinsider.com/henry-blodget-ken-lewis-shafted-bank-of-america-shareholders-to-save-his-job-2009-4
I think the media is either being told to not report all of this, or they are vastly underestimating the seriousness of what Cuomo has unleashed today. This is going to be epic entertainment watching this unfold.

--------------------------------------------------------------

The cover of the latest Time magazine includes the headline story -- THE NEW FRUGALITY. The story is about Americans cutting back everywhere and in everything. Personally, I think the frugality trend is just starting. Right now, I don't think most people view the current recession as a major economic phenomenon. I think the public impression is that the government "won't let it happen," and that the government will stabilize the economy by the end of the year. The public reads about the trillions of dollars the Fed and the Treasury are spending, and it believes what we are going through is just a deeper version of the recessions that have plagued the US since WW II.

I've thought all along that the steadily rising rate of unemployment and loss of income will be the surprises of this bear market. Unemployment will produce a downward spiral of negative growth in the US. When an individual or a family leader is laid off, the full impact of a loss of income hits the unit. They will immediately cut back in every area possible -- doctor's visits, dentistry, meds, clothes, automobiles, travel, vacations, expensive colleges, food, entertainment, etc. This sets off a "downward spiral." It's a spiral that only halts with exhaustion.

-----------------------------------------------

Most Americans still cannot fathom what lies ahead … still believing that once the correction is over, life will go back like it has been for so long. Don’t think so. Years ago it was my contention that the standard of living in America would go down by 35%. I am sticking with that notion.

from LeMetropole cafe

Profit taking? That's what we are being told today is all about in the stock market. Technically, the MACD lines are about to crossover to the downside as a result of two weeks or more of sluggish momentum. Fundamentally, (you know, the real meat and potatoes of investing) could not be worse on a global basis for equity investing. As I mentioned last week, I smell smoke billowing from the back rooms of financial institutions. What has happened, (and been happening for at least 10 years) is that the government has meddled in the markets for so long and to such a degree that the "gears" if you will, are no longer aligned properly nor even running in the same directions.

What they have done, has been to run around putting out fires and managing perceptions without ever considering the longer term consequences. The beauty of capitalism is (was) that it is a "self correcting system", if you make a bad investment, you lose. You go out of business and learn a lesson. Capital will always seek the undervalued and exit the overcrowded, this is the most basic tenet of a free market. When you artificially entice, prod, or even (GOD FORBID!) manipulate markets, you create "mal investment" that shouldn't (wouldn't) normally exist. Investing is always "weighed" or tempered with risk in mind. RISK, is what the world forgot to factor in while "things were good".

In my opinion, risk was masked, hidden, and delayed by the Fed , Treasury, and the administrations in general since 1988 when Pres. Reagan formed the "Working Group on Financial Markets" otherwise known as the Plunge Protection Team. Since the 1987, the U.S. economy has been forbidden from having a real recession that would have cleaned out bad debt and mal investments. Instead, the bad debt was allowed to pile up like a garbage dump that finally reached its boundaries. We could have avoided the current situation had the 1991, 1997, or 2001 recessions been allowed to run a natural course, they were not and now the Piper will get paid no matter what the government wants.

Had markets been left alone to reward the smart and kill the ill informed and ignorant, 2003-2007 could never have happened. After the tech bubble blew up, the Fed HAD to have another debt bubble because they feared the current outcome (debt contraction). The current situation has been postponed for so long and to such an extent that the problem is now far, far, bigger than the Treasury, Fed, and all other world Central banks and Treasuries combined by a factor of at least 10. I know you have heard me say this before but, had the price of Gold been allowed to move freely and not been suppressed all these years, the alarms would have sounded as far back as 1996 about the over issuance of money and credit.

As stated many times before, we will have a new currency, probably very soon. This will amount to a devaluation of all fiat paper versus real goods. All the lies, manipulations, managed perceptions and expectations will be accounted for in one fell swoop. The scales will be balanced, and assets, liabilities, production, consumption, and yes, even money, will all be completely revalued to reflect "the new reality". Once the creators of fiat lose their "power" to obfuscate values, reality will return. I believe that every human being that has used fiat currency will be shocked to some extent as to where some of these new values level out at.

We have heard all sorts of projected numbers for the future "Dollar" price of Gold, Sinclair $1,650, Bill Murphy $3,000-$5,000, Alf Fields $6,000-$10,000. If we are going down the road of fiat destruction as I think we are, ANY Dollar price will make no sense whatsoever. Just look at Zimbabwe, $10 billion for a loaf of bread, what does an ounce of Gold cost, $10 trillion? The point is, the "Fiat masters" are losing the system and we are watching it first hand. If I had any cash left, I would surely invest in a "Zero factory" since 0's will be the most commonly used number in all of history (can you imagine the demand?). Think about it, multiple 0's will follow a number for the price of all sorts of common goods and a single, lonely 0 will be used for what once had been the foundation of society, PAPER. I know this sounds a little off the wall, but what value do you put on a currency when it is no longer accepted? Yes, that's right ZERO!

from LeMetroploe cafe

Since the start of 2009, Chinese M2 money supply has taken off like a rocket. As of March 2009, Chinese M2 is growing 26% year over year.

In comparison to the US money creation which is going down a derivative rathole, Chinese money creation is going towards the purchase of real assets. According to the latest from Gary Dorsch, http://www.kitco.com/ind/dorsch/apr152009.html , China bought 3.86 million tons of soybeans in March, up 66% from a year earlier, and the 2nd highest monthly amount ever. After checking the futures market for soybeans, I noticed that this market is pretty close to complete backwardation.

The action in copper is even more impressive. Again, according to Gary Dorsch, Chinese copper imports are up 71% to 451,000 tons in the first two months of this year from a year ago. As we know, the price of copper has been on a tear this year, up over 50%. A case could be made that this is due to the buying by the Chinese.

I have been tracking the copper futures prices for years. An amazing incident just occurred. About one week ago, I noticed that the price of the April 09 contract exceeded the May 09 contract - a minor partial backwardation for copper. On Friday 4/17/09, the copper market jumped into almost complete backwardation over one or two trading days at most. I have never seen a market jump into almost complete backwardation so fast. Enclosed is the pricing for copper from the WSJ.

http://online.wsj.com/mdc/public/page/2_3023-fut_metal-futures.html?mod=topnav_2_3000

It appears that China is thinking long term and stocking up on strategic metals and other commodities. Rather than just watching fiat currencies go up in a puff of smoke, China is buying strategic metals and commodities. With almost $2 trillion in foreign currency reserves, China could be buying these commodities for a long time. The question becomes, what is the next strategic commodity that China will start buying?

Other than oil which China is stocking up on, what could be more strategic than silver? If you want to fly a plane, high performance silver bearings are used in the jet engine. If you want to operate a car, over 40 silver tipped switches are used to start the engine, activate the power brakes, steering, windows, etc. You will need silver in the printed circuit boards to control the operation of planes, cars, electrical appliances, security systems, cell phones, telecommunication networks, solar panels, water purification, nano technology, biomedical applications etc. The critical uses for silver seem almost endless, especially because the price of silver is currently so inexpensive.

Let's assume the U. S. Geological Survey is correct with the world's total proven silver reserves of 270,000 tons. There is approx. 15 years left of silver at current mining rates. If you are thinking long term and you are China, why would you not start purchasing silver for strategic purposes right now? The Chinese have already started purchasing copper and soybeans. If you want to manufacture for the next 20 to 30 years, the near term purchase of silver over a considerable length of time would make sense.

from LeMetropole cafe

I cannot emphasize this enough. The collapse in the U.S. Treasury’s financial condition is accelerating much faster than I thought would happen. While everyone is worried about higher taxes, the exact opposite is occurring. Personal and corporate tax receipts are plummeting. Corporate profits have vanished faster than any time in American history; profits are not coming back any time soon. With continuing claims hitting new highs, with commercial and residential foreclosures hitting new highs and with credit card delinquencies hitting new highs, it is simply not credible to believe that there will be any improvement in the financial condition of the U.S. consumer anytime soon. U-6 unemployment has gone from 9.1% to 15.6% in one year. Consumers continue to deleverage and banks refuse to lend to anyone with less than stellar credit. Meanwhile, social welfare payments and financial institutional bailouts are accelerating. Last week Goldman raised financing needs of the Treasury to $3.25T for this year.

The Federal Reserve’s response of monetizing the debt is something I predicted. This is accelerating as fast as the deficit expands. This is what happened in the Weimar Republic (no political will to raise taxes yet a political decision to accelerate spending to keep the labor force from rebelling). I have been expecting a currency collapse for more than a year. I was early on my prediction of the Internet Bubble collapsing and the housing market collapsing also. In the end the fundamentals mattered. The most important emerging trend which I can identify currently is the collapse of the condition of the U.S. Federal Reserve’s Balance Sheet and the cash flow requirements of the U.S. Treasury. IMHO Operation Green Shoots is a concerted and intentional effort spearheaded by Larry Summers (Harvard Behavioral Finance) to convince everyone that the worst is over. In essence he is attempting to start the third bubble of the decade. They have encouraged banks to report fraudulent earnings by forcing a change in FASB. Operation Green Shoots is based on spin and not reality; therefore, it sprouts will wither shortly. Caveat Emptor!

Bank of America last night continued the earnings "fairy tale" of US banks. With free money from the government, front row seat at the market manipulation table and right to record toxic crap assets at any value they like with the changes to mark to market accounting rules.......how could BoA, Citigroup, Goldman Sachs, JP Morgan et al not make money (on paper only)? Funny how each of these banks are owners of the private institution that bailed them out.....The Federal Reserve....and have former executives running the US Treasury. This cartel arrangement stinks. The sooner we see the abolition of the Fed, bankruptcy of their member banks and removal of corrupt "Government Sachs" employees in Treasury the sooner we will see real economic recovery.

Comments from LeMetropole Cafe suggest the recent fairy tale may be about to end...

We know that using very aggressive (e.g. unrealistically low loan loss reserves) and several other one-time or questionable accounting tricks, that Bank of America's reported profit of $4.2 billion is an utter and complete fairy tale, if not outright fraud. Once the 10-Q is filed, I'll be able to go thru and recreate BAC's earnings using realistic accounting assumptions and stripping out one-timers. The question I have, in the context of BAC CEO Ken Lewis expressing disgust on CNBC that BAC stock is down 23% today, DOES KEN LEWIS REALLY TRULY BELIEVE THE NUMBERS HE HAS SIGNED OFF ON TODAY? If the answer is yes, he is the epitome of managerial incompetence OR the world's biggest liar...


There's definitely really bad news of some sort coming our way. The insurance companies are getting destroyed relative to the banks today. Also, the last time the dollar rallied in a big way alongside gold/silver, the stock markets tanked, and 1/3 mo T-bill yields approached zero was late last December/early January. This tells me there is some kind of de-leveraging occurring by funds globally, as they are dumping crap assets, need to buy dollars in order to make payments on their dollar-based liabilities, and running to safety. Probably one of the reasons the Fed did currency swaps with England and Europe recently.

The Turner Radio Network has obtained "stress test" results for the top 19 Banks in the USA.

The stress tests were conducted to determine how well, if at all, the top 19 banks in the USA could withstand further or future economic hardship.

When the tests were completed, regulators within the Treasury and inside the Federal Reserve began bickering with each other as to whether or not the test results should be made public. That bickering continues to this very day as evidenced by this "main stream media" report.

The Turner Radio Network has obtained the stress test results. They are very bad. The most salient points from the stress tests appear below.

1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.

2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans.

3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.

4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.

5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks.

6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital!

7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts!

The debt crisis is much greater than the government has reported. The FDIC`s "Problem List" of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.

Put bluntly, the entire US Banking System is in complete and total collapse.

By J.S. Kim

In the past three years, while banks all over the world and Wall Street were imploding, while some $40-$50 trillion of capital was being destroyed in global stock markets, one financial market kept growing. That market is the financial derivatives market.

According to the Bank for International Settlements [BIS], the global Over the Counter [OTC] derivatives market has grown almost 65% from $414.8 trillion in December, 2006 to $683.7 trillion in June of 2008. On the BIS's own website, there are no updated figures for the notional derivatives market since June 2008, so we can likely assume, with some margin of safety, that this market has now grown to more than $700 trillion. Comparatively speaking, the total market cap of all major global stock markets is approximately $30 trillion.

Before I discuss how financial products could grow more than 65% during a time period when financial companies were imploding all over the world, let's review the definition of a derivative, because this will explain how this market of financial products keeps becoming more valuable at a time when the value of many capital assets are sinking like a rock in an ocean.

According to Wikipedia:

Derivatives are financial contracts, or financial instruments, whose values are derived from the value of something else (known as the underlying). The underlying value on which a derivative is based can be an asset (e.g., commodities, equities (stocks), residential mortgages, commercial real estate, loans, bonds), an index (e.g., interest rates, exchange rates, stock market indices, consumer price index [CPI] -- see inflation derivatives), weather conditions, or other items. Credit derivatives are based on loans, bonds or other forms of credit. The main types of derivatives are forwards, futures, options, and swaps.

Because the value of a derivative is contingent on the value of the underlying, the notional value of derivatives is recorded off the balance sheet of an institution, although the market value of derivatives is recorded on the balance sheet. Over-the-counter [OTC] derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. The OTC derivative market is the largest market for derivatives, and is largely unregulated with respect to disclosure of information between the parties, since the OTC market is made up of banks and other highly sophisticated parties, such as hedge funds...Because OTC derivatives are not traded on an exchange, there is no central counterparty. Therefore, they are subject to counterparty risk, like an ordinary contract, since each counterparty relies on the other to perform.

There are two key phrases to note in the above explanation of the financial derivatives markets-

The notional value of derivatives is recorded OFF the balance sheet of an institution, although the market value of derivatives is recorded ON the balance sheet; and
OTC derivatives are not traded on an exchange, there is no central counterparty. Therefore, they are subject to counterparty risk, like an ordinary contract, since each counterparty relies on the other to perform.
As I've noted before, the $700 trillion global derivatives market is the notional value of this market, not the market value of these derivatives. The Bank for International Settlements compiles the notional value of this market worldwide from reported figures by Central Banks of the G10 countries and Switzerland. Thus, if the off-balance sheet assets of major international banks are growing so rapidly in the form of their notional values of their held financial derivative products, how can so many of these banks be in trouble?

The answer, quite simply, is that the market value of these derivatives is nowhere near the notional values of these derivatives maintained and reported by these banks, and that the global derivatives market is in serious trouble. Because derivative products are subject to counterparty risks as well, this means that the failure of one major financial institution could cause the evaporation of assets for many other financial institutions that have derivative products with exposure to that one financial institution. In other words, when the notional values of a good percent of these financial derivative products start evaporating into thin air, and they will, it will have a negative domino effect on the balance sheet of not just one major financial institution, but many.

Of course, when FASB suspended mark-to-market accounting rules recently, major international banks were allowed to re-value some of their derivative products closer to their notional value on their books to pad their balance sheets. Due to this change in accounting law, I can almost guarantee you that before market open Friday, Citigroup will announce better than expected financial results as they carried huge amounts of illiquid mortgages and financial derivatives on their balance sheets. [Editor's note: Article was written prior to earnings announcement on 4/17/09]

Though many people argue that only the market value of these derivatives, and not their notional values, is ultimately important, this would have only been valid if FASB hadn't suspended mark-to-market accounting rules. The types of derivative products most likely to continue to blow up are Credit Default Swaps [CDS], and indeed, it was AIG's exposure to Credit Default Swaps that caused it to collapse.

In reality, the market value of financial derivatives is only a fraction of its $700 trillion notional value; however the reality is that the potential losses from bad Credit Default Swaps can also be much more than their notional value. For example, consider a scenario where Company ABC underwrites a CDS in which they will receive $100,000 of payments from Company X in return for guaranteeing a $1,000,000 bond issued by Company Z. If all goes well, and the bond performs, then company ABC makes $100,000 in profit. However, if company Z fails, then Company ABC may now have to pay Company X $1,000,000. This is a scenario in which the losses from financial derivative products can be very real and very large. Though many analysts harp on the fact that the $700+ trillion notional figure of the derivative market is not real, it is not realistic either to only consider the much smaller market value of these derivatives as the above example illustrates.

Since it is now likely that the balance sheets of many financial institutions have been quickly "nursed back to health" by returning the book value of OTC financial derivative products to some fantasyland notional value versus their true market value, the collapse of the notional value of the $700+ trillion derivative market will indeed have future devastating consequences for global economies

www.GoldForecaster.com

“You can fool all of the people some of the time and some of the people all of the time, but you can’t fool all of the people all of the time, but you can give it a good go and discredit the rest who won’t be fooled!” If it doesn’t go like that maybe it should?

The issue of Money.

Many are still digesting the outcomes of the G-20 meeting in London. So a thought occurred to me. If I went to my bank and asked, “May I have another loan? Oh, I know I am terribly over-borrowed already, but could you lend me my entire year’s income on top of my present loans?” He would ask me, “against what collateral?” I would say, “none!” His reply would likely not come from the best of English. Now I tell him that, “I am your only client and say no and you’ll go bust as well as me.” Then he might smile and hail me as his financial savior too?

Isn’t that what the issue of $1 trillion on top of the $12 trillion already issued as guarantees, ‘quantitative easing’ and the like [equivalent to the entire production of the U.S. in one year] really is? Just think of it, where is the money coming from? What collateral is being given, what repayment terms. It is simply another tranche of the huge mountain of I.O.U.’s already given, but this time to lift the lesser developed nations out of a potential Depression.

Confidence restored?

Let’s face it, the financial system has broken down and still has not been repaired. Yes, steps are underway and are trying to restore the system. Yes, the banking system is being checked to ensure it will be healthy, but something else has not been repaired and remains structurally damaged. “Confidence!” Without this no matter what mechanics are applied the repairs won’t work. And we are not talking about professionals in finance becoming confident, we are talking about the drivers of the global economies, the consumers. Unless he is confident going forward he will not spend freely again, he will save, reduce debt, remove his vulnerability to his lifestyle being reduced again. At the moment the repairs to the system are starting at the top not at the bottom. You may reply but homeowners are receiving assistance and seeing a reduction in the threats to their homes. This may be true, but what we are talking about here is the full restoration of confidence so that the consumer will buy houses again, they will go out and finance cars again, without that sneaky feeling that he could see them foreclosed on or repossessed. Until that happens don’t expect much improvement in the overall national or international economies.

Will the present issues of mountains of money restore confidence? Only to some extent and that with such caution, that a retreat into fear can be sparked in just a day to a week. After all, confidence in the banking system has been badly mauled in the last 18 months and presently still stands on the edge of a precipice.

Can fear produce confidence?

How can the system speed up the process? Through a different kind of fear! With very few choices in the hands of governments and central banks the most obvious way forward is an unpleasant one. If the consumer is made to believe that his income will rise because of inflation and his savings further decimated by inflation, he will stop saving and start spending if only to gain value through the rising prices that his house and perhaps his car will enjoy through inflation. That would be a quicker process, moving at the same speed as inflation.

We don’t advocate this path at all, but there has to be a policy of saving what can be saved and letting go of that which cannot be saved and savers will be the victims as their wealth is erased. [That is unless they switch to precious metal now and shield themselves from inflation? We do expect to see this happen, but sad to say, most investors just don’t know gold and silver] Until the powers that be accept that the system is structurally faulty and rectify this, the path ahead will not be just.

Such a course will produce convincing benefits. The consumer would see the burden of debt drop as inflation pushed his income up and that sufficient for him to repay debt quicker. Institutional debt would face the same outcome enabling the system to produce a larger after-tax, cash flow and lowering of debt ratios. Yes, it would be tough on those who live on past savings, unless they hold these in the unprintable precious metals. Unfortunately the dangers are so vivid that this may well be taken as collateral damage, as was the case in the past.

In the sixties through the eighties debt re-scheduling was used in the same way to the point where such bad debt was written off and ceased to be a threat to the banks. A similar path can be followed speeded up by inflation. Toxic assets will have to be “contained” until that process is well underway, emasculating such toxicity. As inflation scythes it way through debt [and the mountains of debt we now see with the lenders of last resort have never been seen before] so confidence [likely misplaced] will be restored as the threats hanging over the consumer diminish.

So the printing of money serves a dual role.

Restore the system [if only in the short-term].
Pressure the consumer into spending again. Remember the target remains the consumer, so that inflation must encourage spending out of both fear and the preservation of value.
However, the entire experience of the last two years will not be erased. The system has broken down and can’t be fixed in this way. All the moves to date simply restore the system to a workable one. Genuine confidence, the sort that inspires hope in the future, has gone. What is most concerning is the way the market is receiving bad news in dribs and drabs. We are aware that another $500 billion in write-downs is on the way and that the process of new liquidity flowing to trouble spots is usually inefficient, so we must expect more shocks to the system. But that takes away a bit more confidence each time and belittles any efforts made to repair the system. Can a resuscitation of confidence take place in this environment?

The consumer driven growth has been found to be wanting. It engendered a “Live now, Pay later” attitude, which has now become “lived once, now paying”. And in the current environment the consumer doesn’t harbor dreams of wealth beyond his means, he is in survival mode. How can one get the system right without the traumas that usually attend system reformation? Only if the short-term answers have produced an environment that takes away the traumas at the lowest common denominator of consumer, the blue collar worker level. In the Depression he was revived through infrastructural spending where he would simply be paid to work, even if that work produced few goods. In China the government has instituted massive infrastructural projects to keep workers busy and paid. This process must be on-going until confidence is restored, but across the entire world!

Effective Reformation?

One economy from history, millenniums ago, had laws that had debt written off every seven years, with property being returned to it original owners every fifty years. This prevented the building of banking and property empires and spread wealth more evenly through the nation, bringing integration to that society that made it survive and prosper on a broad front. In that economic system there was no mass production, no mass distribution system and no unemployment because of that.

But there is little will to change the current system into anything that produces that sort of result. The focus is now on to get our consumer driven system with its financial empires, restored to what it was. This implies it will remain vulnerable to what it has already experienced.

Change investing?

Consequently, wise investors have to take precautions against the potential damage they may suffer. Leveraged investing with time limits will be seen as what it is, gambling! More and more, investments will be fully paid for up-front and short-term investments relying on short-term results will be seen as unacceptably risky. The prudence of investments in assets that are at the same time assets and cash, such as gold and silver, will come firmly back into fashion and institutional portfolios.

We cannot emphasize enough the dangers of the inflation that lies ahead! Gold and Silver have yet to have their day!

By Dominic Frisby

Armstrong: "I know too much"

27 February 2007 is not a date that stands out. It is not indelibly imprinted on the minds of millions; it does not carry the pain or notoriety of 9-11; unlike 'Black Wednesday', it has not been nicknamed Nor, like 31 August 1997, The Day Diana Died, did it send a nation into mourning.

Yet the repercussions of this day are, quite simply, enormous. They may be felt for decades, and possibly mark the beginning of the next Great Depression. For this was the day the greatest credit bubble in history peaked and popped.

And one man predicted this turn as far back as the 1970s. He is Martin Armstrong.

What's more, another one of his turn dates is coming this weekend …

Martin Armstrong's story reads like a thriller. He was a globe-trotting and extremely contrarian investment manager, who in the late 1990s was accused of misappropriating Japanese investors of some $700 million in some kind of Ponzi scheme.

It appears that, like Nick Leeson, the money was lost on bad bets in the currency markets and losses were being concealed, though Armstrong said he did not authorise the trades. Nevertheless, he was indicted in 1999 and ordered by Judge Richard Owen to turn over gold bars and antiquities, which he is said to have bought with his firm's money, as well as computers and documents.

Armstrong delivered four of the five computers sought, eight of the 11 requested boxes of documents and gold coins worth $1.1 million. The receiver said assets worth about $15 million were missing; Armstrong insisted that was all he had. Judge Owen – revisiting the order every 18 months - held him on contempt of court for some seven years, some kind of record for time in prison without trial. Nevertheless, Owen repeatedly held that Mr. Armstrong was motivated by greed and was awaiting his release from jail to retrieve the $15 million that the government said was missing.

Mr. Armstrong's years in jail for civil contempt match the sentence of six-and-a-half to eight years that he would have received if he had been convicted of all 24 criminal counts of securities fraud, commodities fraud and wire fraud. But in late 2006, after appeal, Judge Owen was removed from the case. In 2007, after a period in solitary, Armstrong faced trial, pleaded guilty and is now serving a prison sentence for a further five years.

Armstrong's unique 'economic confidence model'
What makes Armstrong's story exceptional is his astonishing economic confidence model, which he developed in the 1970s and 80s.

Looking back at centuries of economic data, Armstrong identified a long-term business cycle of 309.6 years, which is broken down into six waves of 51.6 years – roughly the same duration as Russian economist Nikolai Kondratiev 's more famous cycle. Armstrong's 51.6 year wave breaks down into a further six waves of 8.6 years, which break down into a further three individual waves of different duration.



What many will find interesting is that the total number of days in one 8.6 year cycle is 3141 – or Pi times 1000. Hence the model is also known as the 'Pi Cycle'.

The next chart shows the key wave dates of the recent past and near future.



Let's look at some of these turn dates and see what happened. 2007.15 equates to 27 February 2007 (That is .15 of the year). The chart below shows the Dow Jones US Financials – an index of the major stocks relating to banking, insurance, real estate and financial services.



You can see he's nailed the turn to the day.

1987.8 equates to 19 October 1987. The next chart shows the Dow during the stock market crash of 1987. You can see Armstrong again nailed the low to the day.



Not precisely to the day, but to within a fortnight, 1989.95 (December 89) saw the highs in the Nikkei, 2007.



2000.7 (September 2000) saw the turn down in the S&P (September 2000), while 2002.85 (Octover-November 2002) saw the post crash lows.



1998.55 coincided with Russian debt default and the longtTerm capital management crisis, 1994.25 saw an intermediate S&P low. More recently we had 2008.225 (23 March 2008). That caught the turn in the dollar that surprised just about everyone – myself included – especially those who thought the dollar's collapse was imminent.



Some will say that it's easy to look back at history, attach an arbitrary pattern after the event, then call it a 'cycle', but you cannot deny that Armstrong's calls have been astonishing.

In fact, his forecasting abilities and imprisonment have made him a cult figure among conspiracy theorists. He claimed to have developed a 32,000-variable super-computer based on his economic model, with "perhaps the largest economic database in the world". In fact, some claim the CIA and Chinese wanted this very computer model and the reason he was held in prison for so long without trial was that he refused to hand it over. Armstrong himself commented, "I know too much".

The next big turning point: this weekend
Nevertheless, of note to all investors, is that there is another Armstrong turn date coming on 2009.3, or 19-20 April. What we have to figure out is which market is going to turn.

Armstrong once advised Canadian technical analyst Ross Clark that markets which were trending the strongest going into a cyclic turn point would be the most likely to reverse. "It is the concentration of capital that creates booms and the subsequent busts."

So we have to ask ourselves which market fits this bill. Could this bounce in the stock or commodity markets run out of steam? It's possible. This year might be yet another when you should sell in May and go away. If we get a big rally into the weekend, perhaps we should look to sell.

But I must say, I think this rally may have further to go. Could gold turn back up? Again, I see a low for gold coming in the summer – although $840-$850, if it gets there, is an obvious place to make a low. Could it signal the long-awaited end of the US bond market? Perhaps we'll see some turn in the currency markets. The yen could turn back up… or the pound could turn back down. As I write this, I can't see a market that's showing any signs of exhaustion.

My bet is that we'll either see another major bankruptcy – perhaps a corporation such as GM, or even a country (Ireland?) – or we'll see some kind of turn in the currency markets.

I should stress this is only a secondary turn date. There are plenty of examples in the past where nothing of any significance has happened at these junctures. In other words, they do not always work. But the outcome of this weekend, 19-20 April, bears watching with interest.

William Black, associate professor of Economics and Law at the University of Missouri, Kansas City

He was a deputy director at the Federal Savings and Loan Insurance Corp. during the thrift crisis of the 1980s. He believes that unless the current administration changes course dramatically, it will destroy the Obama presidency. The Bush administration was worse but they are out of town. He says we have failed bankers giving advice to failed regulators on how to deal with failed assets. The current economic team of Geithner and Summers were important architects of the problems. The PPIP program is worse than a lie with Geithner pandering to the interests of a few select group of banks. He is flouting the law that requires quick corrective action to deal with insolvencies. His plan essentially perpetuates zombie banks by mispricing toxic assets that were mispriced to the borrower and mispriced by the lender, and which only served the unfaithful lending agent. The IndyMac, Bear Stearns and Lehman situations tell us the real losses will be roughly 50-80 cents on the dollars. Most of America's biggest banks are insolvent. The government does not want to admit the depth of the problem because it would place some of the biggest financials into receivership. The people running these banks are some of the best connected in Washington. The big international institutions need to be broken into smaller units that can be managed effectively. We don't necessarily need new regulations but folks who will enforce the ones already on the books. We need to return to a system that takes the competitive advantage away from the cheats.

Comment:

The Corruption in the Financial System and Obama's Failure to Reform

This interview with William Black in Barron's is an articulate and reasonably detailed summary of our own view of the current crisis from an exceptionally well-informed and experienced source.

The big question in our own mind is the depth of complicity and the motivations of the government, the media and major institutions in continuing to support this financial corruption through silence or participation.

Is Obama really merely listening to the wrong advice from highly placed sources in the Democratic Party? And how sincere are they? The record of corruption in the Obama Administration in the form of conflicts of interest and tax evasion is already the smoke that warns of fire.

All good questions, more relating to the length of time to a cure rather than its essential character.

The banks must be restrained, the financial system must be reformed, before there can be a sustained economic recovery.

The United States, the world's most developed country, is scrambling to answer the question "Who will 'feed' the US?" [Answer: “no one”] years after it had asked the most populous developing country a similar question: "Who will feed China?"

Is it sensational to ask the richest country the same question that China faced more than 10 years ago? The reply is "No." This time, it is not about "grain supply", but "capital supply" and "supply of order."

An unprecedented financial crisis that originated in the US is shattering the world, without exception to any region. In response, the US has announced massive rescue plans to revive the economy, and is ready to roll out more such plans, yet leaving a big question mark as to how it will get enough money to finance those plans.

The US Congress sanctioned a $787 billion stimulus plan submitted by the Obama administration last month, which media reports said is only a small fraction of the overall plan.

The US-based San Francisco Business Times reported on Nov 26 that the US government and the Federal Reserve is harboring a huge $8.5 trillion rescue plan, or about 60 percent of the country's GDP.

US President Barack Obama is expecting a record $1.75 trillion in federal fiscal deficit this year. The fiscal figure reached a high of $459 billion last year.

This year's deficit would account for 12.3 percent of the GDP, the highest since the World War II and far exceeding the recognized 3-percent alarm level.

In addition, Obama also foresaw an average $1 trillion in deficits each year for 2010 and 2011.

Many US experts said Obama's estimate was too optimistic [Agreed], and the actual deficit would be even bigger, as the president excluded the country's liabilities in his projection.

Where does the money come from? [Answer: “printing press”]

Who will be able to provide the financial support for the enormous fiscal deficit of the US government?

The US Treasury Department estimated the US government would issue up to $2.56 trillion of treasury bonds this year, and at least $1.14 trillion more next year. [It will be far more.]

By the end of last year, outstanding treasury bonds stood at $10.7 trillion. About 29 percent, or $2.862 trillion, is held by foreign governments or investors. That means the country's reliance on overseas investors holding treasury bonds has been raised by 10 percentage points from eight years ago.

"The world simply cannot buy any more new issuance of US treasury bonds," [Agreed] said Yu Zuyao, an honorary economist with the Chinese Academy of Social Sciences (CASS), who used to head the CASS Institute of Economics.

Many countries have their own hands full, like the US, using their capital to counter the financial crisis, consolidate their financial system, and fuel their own stimulus packages to revive the real economy, even though they have some foreign exchange reserves in US dollars.

Thanks to trade surpluses, emerging economies hold a combined $5.5 trillion in forex reserves [more when sovereign wealth funds are added in], but most of the reserves have already been used to buy US treasury bonds, said Yoko Kitazawa, an expert on international affairs, in a February issue of Sekai (The World), a Japanese monthly journal.

However, trade surpluses of these regions and countries are eroding because of a collapse in global trade.

As a result, forex reserves of these regions and countries are expanding at a slower pace, or even declining. The latest forecast from the World Trade Organization said global trade may shrink by 9 percent, or more, this year.

As the largest holder of US treasury bonds and the world's second largest exporter, China had seen exports decline since November last year, with its actual use of foreign capital falling since October.

Media reports said China's forex reserves may have decreased by more than $30 billion in the first two months. China's forex reserves stood at about $1.95 trillion at the end of last year, the largest in the world.

The Xinhua-run newspaper Economic Information Daily reported this month China had liquidity of only $300 billion to $500 billion in forex reserves, citing a report from an unidentified ministry-level research institute.

Crowding out effect of US capital pool

Yang Bin, also a CASS economist, said the US was luring capital scattered all over the world to pool in the US by floating excessive treasury bonds, which could be a threat to developing countries which are crying out for capital. [The US treasury market is sucking the life out of the world economy. Capital needed to fund economic growth in developing countries is being used to bail out doomed US financial institutions via treasury sales. The sooner the treasury market and the dollar collapse, the sooner the world can begin to heal.]

Economic development in many developing countries is, to a large extent, counting on such an influx of overseas capital.

The US-based Institute for International Finance warned in January that capital flows into emerging markets are in danger of collapsing this year as a result of the financial crisis.

The association of large banks estimates that net private sector capital flows to emerging markets will be no more than $165 billion this year, which is less than half of $466 billion in 2008 and only a fifth of $930 billion in 2007.

The crisis and a global economic recession are also aggravating the world poverty. The United Nations said in a report published this month that reduced growth this year would lead to a total income loss of around $18 billion ($46 per person) for 390 million people in Sub-Saharan Africa living in extreme poverty.

The projected loss represents 20 percent of the per capita income of the poor in Africa, far exceeding the losses of developed nations.

The majority of low-income nations, or 43 out of 48, are incapable of providing a government stimulus for the poor, according to the report.

In addition, the excessive US treasury bonds, its enormous fiscal deficit, and issuance of the dollar that far exceeds the demand of the economy would drive the world nearer to inflation and a depreciating US dollar. This could be another heavy blow to the world economy in a downturn and to developing countries in particular.

Worries over dollar-denominated assets

"The immense 'US treasury bonds bubble' has not only badly weakened new demand among investors, but also put foreign investors in danger of seeing their dollar-denominated assets shrink in value," [Agreed] said Yu.

The US Treasury Department said the US government bonds held by foreign countries were down by $4.7 billion at the end of January from a month ago.

This is the first time for other countries to sell US treasury bonds since March 2007.

China's purchase of US treasury bonds decelerated. The country purchased $12.2 billion in treasury bonds in January, the smallest monthly increase since the second half of last year.

Capital is fleeing the US in January, foreign investors sold $43 billion of long-term US bonds, compared with an inflow of $34.7 billion into the country.

The US is facing a capital account deficit of $148.9 billion, if short-term bonds are included, as foreign governments and institutions became reluctant to buy more US bonds. The deficit compares to $609.9 billion in surplus for the whole of 2008.

Returns on US government bonds will be down by 2.69 percent in 2009, according to the Caijing Magazine, citing a treasury bonds index of Lehman Brothers. In 2008, returns on US government bonds were almost 14 percent.

China held US treasury bonds worth $740 billion by the end of January, about 7 percent of the total of US government bonds. In all, the country holds $1.2 trillion of dollar-denominated assets, including institutional bonds and equity investment as well.

Chinese Premier Wen Jiabao on March 13 expressed worries over the safety of these assets and called on the US to keep to its commitments and ensure the safety of such assets.

More than a week ago, however, US Federal Reserve chairman Ben Bernanke, dubbed "Helicopter Ben" for his speech about using a "helicopter drop" of money into the economy to fight deflation, actualized his threat to print more greenbacks.

He said on March 18 the Fed would purchase up to $300 billion of longer-term Treasury securities over the next six months, along with an additional $750 billion in mortgage-backed securities.

It is the first time since World War II that the Fed has bought long-term government bonds.

The Fed's decision to print more money to finance the purchase immediately led the greenback to fall against all other major currencies.

The San Francisco Business Times reported the Fed's printing press is financing about two thirds, or $5.5 trillion, of the $8.5 trillion of the US rescue money. The Fed needs no approval from the Congress to start the printing press.

Analysts said the Fed is left with no other option but to print, with the key interest rate staying at a record low of zero to 0.25 percent.

"The US is indeed capable of paying off its government bonds, but, what is the real value of bunches of dollars by the time the bonds are due," said Yang.

In a move to dispel concerns over the US extravagance in spending, the Obama administration said it aimed to halve the country's fiscal deficit to $533 billion in 2013. The goal is based, however, on optimistic estimation of a strong rebound in the US economy.

"People have every reason to doubt whether this could be possible," Yang said.

Over the next 10 years, the federal fiscal deficit is bound to swell as the government will have to address the structural problems of the US social insurance and medical insurance plans.

US economists believe that a ballooning deficit would be inevitable, regardless of the status of the US economy.

Finding a way out

China's central bank governor Zhou Xiaochuan last week suggested the creation of a super-sovereign reserve currency that is disconnected from individual nations and is able to remain stable in the long run, to avoid inherent deficiencies caused by using credit-based national currencies.

The repeated and escalating financial crisis since the collapse in 1971 of the Bretton Woods system showed the whole world may be paying more than what it gained from the current currency system, he wrote in an article.

As the world's reserve currency, about two thirds of the international trade and financial transactions are priced and settled in the US dollar. [That is a disaster waiting to happen.]

At the core of the ongoing financial crisis that started in the US are the fundamental flaws of the US economic systems and the neo-liberal economic policies of US that led to tremendous trade deficit, fiscal deficit and personal credit deficit, Yu Zuyao said.

"It is not in the least a problem in US financial regulation," Yu said. "What is needed is to overhaul the US neo-liberalist system, reform the current international financial system and restore the world's economic order, otherwise, such crises will be repeated." [Agreed]

A currency is intended to serve the economy; however, Wall Street took the lead in creating a currency-focused economy that is parallel to the real economy.

The market value of US financial assets is $40 trillion to $50 trillion, but market capital has been indulged to operate in away that makes financial derivative products spiral up to more than $600 trillion in value, about 50 times the 2007 US GDP.

More than 97.5 percent of the world's capital in circulation is speculative capital and only 2.5 percent is enough to meet the demand of the real economy, said Yoko Kitazawa.

In the meantime, the US has long been a supreme power in the world.

The US-led developed countries are actually receiving $3.5 from developing countries for every dollar in aid that goes to the developing countries, Yoko Kitazawa said.

Paradoxically, as the world's largest debtor with more than 20 years of consecutive years of trade deficit, the US is witnessing, at the same time, a surplus in capital account and in capital inflows. This is a testimony to the unfairness in the international financial system and the global economic order.

"It's time to have the resolution to change it," Yang said. "It is what the financial and economic crisis has told us."

The production of real goods in the developed nations is plummeting. Even the mighty export driven economy of Japan appears to be heading lower.

Countries must begin to encourage consumption in their own economies. To do this, they ought not to be stimulating the old credit/speculation machine called the neo-liberal financial system.

Real economic growth is to be found in a broad employment and consumption, and an increase of the median wage.

This is the deep flaws in much of the third world economies, especially in Asia and Latin America. Economic health can be measured by the size and well being of the middle class in a relatively free society.

The reason is simple. Individuals can only borrow so much before they are unable to service the debt. And the greedy few can only spend so much on consumption using the wealth which the tax and financial system has delivered to them from the many.

Gaming the system so that it overtaxes the income of the many for theincreasing benefit of a few has natural limitations, unless one can enforce a type of involuntary servitude. This model has its roots far back in history, in empires like Rome, Egypt, and Sparta.

As the elite few accumulate real assets using their surplus, they will find that holding on to their wealth as the rest of society deteriorates in a downward spiral of privation can be a bit of a challenge.

Until the financial system is reformed and the economy is brought back into a balance, there will be no recovery, and the fabric of order will remain fragile.

If things continue on as they are, despite all the stimulus and fine rhetoric, the madness will once again be unleashed on the earth, and the people will wonder from whence it came, as they do each time it rises from the same sources and ravages civilization: unbridled greed, malinvestment, and corruption.

This is taken from Congressman Mcfadden’s 1934 speech. It explains why only the bankers get the money and all the bankers’ losses and debts are given to the people so as to impoverish all of us first off and then enslave us with higher taxes to pay off the debt incurred when the money was given to the bankers. It explains what Obama will do in the future. This is the blueprint that Bernanke, Geithner and Obama are following.


Roosevelt and the International Bankers

"Roosevelt did what the International Bankers ordered him to do!

"Do not deceive yourself, Mr. Chairman, or permit yourself to be deceived by others into the belief that Roosevelt's dictatorship is in any way intended to benefit the people of the United States: he is preparing to sign on the dotted line! "He is preparing to cancel the war debts by fraud!

"He is preparing to internationalize this Country and to destroy our Constitution itself in order to keep the Fed intact as a money institution for foreigners. "Mr. Chairman, I see no reason why citizens of the United States should be terrorized into surrendering their property to the International Bankers who own and control the Fed. The statement that gold would be taken from its lawful owners if they did not voluntarily surrender it, to private interests, show that there is an anarchist in our Government.

"The statement that it is necessary for the people to give their gold- the only real money- to the banks in order to protect the currency, is a statement of calculated dishonesty!

"By his unlawful usurpation of power on the night of March 5, 1933, and by his proclamation, which in my opinion was in violation of the Constitution of the United States, Roosevelt divorced the currency of the United States from gold, and the United States currency is no longer protected by gold. It is therefore sheer dishonesty to say that the people's gold is needed to protect the currency.

"Roosevelt ordered the people to give their gold to private interests- that is, to banks, and he took control of the banks so that all the gold and gold values in them, or given into them, might be handed over to the predatory International Bankers who own and control the Fed.

"Roosevelt cast his lot with the usurers. "He agreed to save the corrupt and dishonest at the expense of the people of the United States.

"He took advantage of the people's confusion and weariness and spread the dragnet over the United States to capture everything of value that was left in it. He made a great haul for the International Bankers.

"The Prime Minister of England came here for money! He came here to collect cash!

"He came here with Fed Currency and other claims against the Fed which England had bought up in all parts of the world. And he has presented them for redemption in gold.

"Mr. Chairman, I am in favor of compelling the Fed to pay their own debts. I see no reason why the general public should be forced to pay the gambling debts of the International Bankers.

Roosevelt Seizes the Gold

"By his action in closing the banks of the United States, Roosevelt seized the gold value of forty billions or more of bank deposits in the United States banks. Those deposits were deposits of gold values. By his action he has rendered them payable to the depositors in paper only, if payable at all, and the paper money he proposes to pay out to bank depositors and to the people generally in lieu of their hard earned gold values in itself, and being based on nothing into which the people can convert it the said paper money is of negligible value altogether.

"It is the money of slaves, not of free men. If the people of the United States permit it to be imposed upon them at the will of their credit masters, the next step in their downward progress will be their acceptance of orders on company stores for what they eat and wear. Their case will be similar to that of starving coal miners. They, too, will be paid with orders on Company stores for food and clothing, both of indifferent quality and be forced to live in Company-owned houses from which they may be evicted at the drop of a hat. More of them will be forced into conscript labor camps under supervision.

"At noon on the 4th of March, 1933, FDR with his hand on the Bible, took an oath to preserve, protect and defend the Constitution of the U.S. At midnight on the 5th of March, 1933, he confiscated the property of American citizens. He took the currency of the United States standard of value. He repudiated the internal debt of the Government to its own citizens. He destroyed the value of the American dollar. He released, or endeavored to release, the Fed from their contractual liability to redeem Fed currency in gold or lawful money on a parity with gold. He depreciated the value of the national currency.

"The people of the U.S. are now using unredeemable paper slips for money. The Treasury cannot redeem that paper in gold or silver. The gold and silver of the Treasury has unlawfully been given to the corrupt and dishonest Fed. And the Administration has since had the effrontery to raid the country for more gold for the private interests by telling our patriotic citizens that their gold is needed to protect the currency.

"It is not being used to protect the currency! It is being used to protect the corrupt and dishonest Fed. "The directors of these institutions have committed criminal offense against the United States Government, including the offense of making false entries on their books, and the still more serious offense of unlawfully abstracting funds from the United States Treasury! "Roosevelt's gold raid is intended to help them out of the pit they dug for themselves when they gambled away the wealth and savings of the American people.

Dictatorship

"The International Bankers set up a dictatorship here because they wanted a dictator who would protect them. They wanted a dictator who would protect them. They wanted a dictator who would issue a proclamation giving the Fed an absolute and unconditional release from their special currency in gold, or lawful money of any Fed Bank.

"Has Roosevelt relieved any other class of debtors in this country from the necessity of paying their debts? Has he made a proclamation telling the farmers that they need not pay their mortgages? Has he made a proclamation to the effect that mothers of starving children need not pay their milk bills? Has he made a proclamation relieving householders from the necessity of paying rent?

Roosevelt's Two Kinds of Laws

"Not he! He has issued one kind of proclamation only, and that is a proclamation to relieve international bankers and the foreign debtors of the United States Government.

"Mr. Chairman, the gold in the banks of this country belongs to the American people who have paper money contracts for it in the form of national currency. If the Fed cannot keep their contracts with United States citizens to redeem their paper money in gold, or lawful money, then the Fed must be taken over by the United States Government and their officers must be put on trial.

"There must be a day of reckoning. If the Fed have looted the Treasury so that the Treasury cannot redeem the United States currency for which it is liable in gold, then the Fed must be driven out of the Treasury.

"Mr. Chairman, a gold certificate is a warehouse receipt for gold in the Treasury, and the man who has a gold certificate is the actual owner of a corresponding amount of gold stacked in the Treasury subject to his order.

"Now comes Roosevelt who seeks to render the money of the United States worthless by unlawfully declaring that it may No Longer be converted into gold at the will of the holder.

"Roosevelt's next haul for the International Bankers was the reduction in the pay of all Federal employees.

"Next in order are the veterans of all wars, many of whom are aged and inform, and other sick and disabled. These men had their lives adjusted for them by acts of Congress determining the amounts of the pensions, and, while it is meant that every citizen should sacrifice himself for the good of the United States, I see no reason why those poor people, these aged Civil War Veterans and war widows and half-starved veterans of the World War, should be compelled to give up their pensions for the financial benefit of the International vultures who have looted the Treasury, bankrupted the country and traitorously delivered the United States to a foreign foe.