Silver

Despite failing to hold the $10.60 level last week, the silver technicals remain positive. The weekly MACD should see a cross over next week or the week after. This heavily used indicator should bring many momentum traders back into silver. $10.60 remains upside resistance but if we can break this decisively expect a brief pause at $11.39 but from there its straight to $13.66. The $10 range remains good support on the downside.

Silver in USD weekly (click on chart for larger view)



Gold

The $825 range remains strong resistance for gold. However, like silver, the MACD set up is extremely bullish. The cross over for gold likely to occur very soon. MACD cross overs from very low levels supported uptrending RSI and declining price is one of the most bullish technical set ups you can have. It is my view that gold will break resistance at $825 this week and head to $880 immediately. If the range breakout occurs we should see a retest of the all time highs of $1034 before Christmas.

Gold in USD weekly (click on chart for larger view)



Gold in Australian dollars

It is not widely publicised but gold is hitting record highs against the Euro, Swiss franc, South African Rand, Canadian dollar, British pound, NZ dollar and the Australian dollar. In fact year to date gold is up 29% in Australian dollar terms. Given stocks are down 40-50% over the same period gold is a stand out. Whilst a rise in the Australian dollar could limit the near term upside the technical picture is still very constructive. We have tested and failed at the $1300 resistance several times in recent weeks. With a good support now at $1226 I believe the next move up will break this resistance and move quickly to $1415.


Gold in AUD weekly (click on chart for larger view

By Paul Mladjenovic

It has been an incredible year loaded with surprises but I think that the next few years will surprise even more. Whenever I feel certain about something coming, I ‘m glad to put it in print. In 2004, I had successfully forecast many economic events such as the housing bubble popping and the credit crisis among other events. Current economic conditions and political outcomes have laid the groundwork for more events that we should be prepared for. All of these events combine to create a “Financial Vortex” that will hit us in the coming years.

First of all, be aware of what current conditions will help lay the groundwork for this financial vortex. They are:

America’s debt load. The U.S. government has now $12 trillion in debt. Consumers and businesses are drowning in debt. America’s gross domestic product (GDP) is about $13 trillion yet its total debt is over $44 trillion.
Derivatives. Derivatives are complicated, arcane and risky securities that now total about $500 trillion. That makes this market ten times greater than the dollar value of the world economy which is just under $50 trillion.
Unfunded Liabilities. The current future tally of the unfunded liabilities of Social Security, Medicare and Medicaid is nearly $99 trillion.
Growth of government. The expansion of the government’s involvement in the economy is (and will be) massive. Taxes, regulations, controls, spending, etc. at all levels of government (both domestic and international) will be problematic by an order of magnitude that the private sector will not be able to tolerate.
Think about it for a moment. The past few months have shown us what a few trillion in bad debt and derivatives can do to the market. The Dow is down several thousand points in the past few months and is down nearly 40% since hitting its all-time high in October 2007 of 14,164.53. What will happen to the stock market when many multi-trillions of debt, derivatives and unfunded liabilities start hitting us like a powerful vortex in the coming years? The economy is extraordinarily weak right now and it would not take much to see millions of hard-working folks get devastated. It is time to prepare. America needs to know what is coming. Some of these events are now unavoidable so being fore-warned and getting prepared is crucial.

Here are my forecasts for what I believe is coming during the next few years:

1. You will see an inflationary depression that will be evident by 2010.
Maybe I’ll be off a few months either way but an inflationary depression is almost guaranteed. Why? The latest batch of elected officials see government intervention as either a moral good or a necessary evil. The most likely policy initiatives that we will see in the coming months will be government controls, increased taxes and extraordinary “money” creation (inflating the money supply). In fact we have (and will) see trillions of new dollars will flood the economy in the coming months. This will probably cause the stock market and some economic indicators to rise and give the illusion of economic health during early 2009. This will cause many commentators to proclaim that we are coming out of the current recession. People will think that government intervention worked. Typically, government intervention only alleviates some of the symptoms in the short-term while postponing the problem(s) toward the long-term. Right now many commentators are calling the current economic environment “deflationary” but it is massive de-leveraging by huge financial entities that are selling off everything from stocks to commodities to accrue cash and stave off bankruptcy. As trillions of dollars flood into the economy, that condition will change. If they report the statistics properly, then we will see a contracting economy (measured by GDP) coupled with rising prices. A good example of this is Venezuela where that economy is struggling while their inflation rate is currently over 36% (as of October 2008). The government, in an attempt to revive consumption and job creation will increase the money supply by an order of magnitude never seen before in this country. Seeing the inflation rate soar to 20% and beyond during 2010 (or 2011) is a solid bet.

2. Unemployment in the private sector will soar into double-digits by 2010.
As the recession morphs into a depression and as the government grows partly as a “solution” to economic difficulties, the increased burdens of government (taxes, controls, spending, etc.) will grow to burdensome levels for both consumers and businesses. Government spending on unemployment benefits and “make work” projects will soar to address the large job losses in the private sector. Right now you should re-assess your job, your company and your industry to see if you are at risk.

3. More state and municipal governments will be federal bailout candidates.
I forecast this condition many months ago in my national seminars but recently this became headline news so it’s not such a great forecast new.. California and New York State are already seeking taxpayer money from the Federal government. However, we will see much more of this. During 1995-2008, many state and local governments over-extended themselves. Because they thought that good times (and housing booms) would last indefinitely, they took on more spending and more borrowing. Many of these jurisdictions will be forced into either spending cuts, higher taxes or both. Some will be forced into bankruptcy. Because of these events, there will be some areas that will experience social unrest due to difficult financial conditions.

4. Commodities will be in the next leg of their long-term bull market starting in 2009.
Commodities such as oil, grains, precious metals, etc. had a great upleg in early 2008 and then had a brutal correction during the second half. Although much of it is attributed to deflation and “demand destruction”, these conditions are short-lived. Why? Two basic reasons; shortages (supply destruction) and rising inflation. Since government policy makers will make every effort to avert an economic contraction, they will flood the economy with inflation and renewed government spending. Economic policy decision-makers at the federal level think that “increased consumption” is the key to economic growth because they are influenced by the Keynesian school of economics. The world hasn’t figured out yet that John Maynard Keynes’ policies are flawed and dangerous. The bottom line is that conditions are ripe for commodities to resume their bull market and reach new highs during 2009-2010. As an offshoot of this, you will also see conflicts across the globe tied to natural resources as countries with growing populations need more food, water, etc.

5. We will see oil hit $200 as Peak oil becomes obvious to all during 2009-2012.
Don’t be fooled by the recent drop in oil from $147 in the summer of 2008 to $50 during November 2008. The recent data from the world energy market indicates that oil depletion (“supply destruction”) is far more severe than the recent headlines blaring the misleading condition of “demand destruction”. The most severe energy crisis in history is in my mind an unavoidable certainty during the next few years. America needs to go full-bore toward energy independence since we will have no choice. This energy crisis will be very difficult to get through and will cause tremendous social and economic difficulty.

6. International conflicts over natural resources will hit the headlines during 2009-12.
As governments across the globe seek to address the wants needs of their growing populations, there will be aggressive competition for the world’s limited resources. Natural resources will be seen as strategic as well as economic. National and economic security for America will be a vital concern.

Now you can see why I refer to it as a “Financial Vortex”. We pray for our country and we hope to get through this with a minimum of suffering but it behooves all of us to be ready. It is better to prepare for problems that may occur than to ignore reality and be set up for pain. Although the Financial Vortex conference will be held in New Jersey on December 6, 2008, let me share with you a few of the strategies that will be covered that day:

Buy gold and silver bullion. Yes…there have been physical shortages reported but that shouldn’t stop you from getting some for your portfolio. Precious metals retain their value during a period of economic uncertainty and rising inflation.
Keep a cash cushion. Have money set aside in a safe venue such as a treasury money market fund. This is not for long-term purposes since inflation will be a major issue; it is there for an emergency fund for day-to-day needs.
Shift your retirement portfolio into stocks and ETFs tied to “human need” such as food, water, energy, etc. These companies and sect ors will have a better time surviving the coming years than other sectors that are problematic such as real estate, financials and cyclicals (such as autos and other “big ticket” items). I believe that much of the conventional stock market will get slammed.
The Financial Vortex is coming. Millions will be blindsided but those that prepare will survive and even thrive. I am doing my conference primarily because I want people to be safe and do those things that will ensure greater financial security. It is also why experts such as David Morgan, Jay Taylor and Roger Wiegand will join me that day so that people can get specifics on what to expect and how to prosper. The bottom line is that it is better to be safe than sorry.

By Ambrose Evans-Pritchard

Citigroup says gold could rise above $2,000 next year as world unravels
Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup.

The bank said the damage caused by the financial excesses of the last quarter century was forcing the world's authorities to take steps that had never been tried before.

This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

"They are throwing the kitchen sink at this," said Tom Fitzpatrick, the bank's chief technical strategist.

"The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.

"Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don't think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes," he said.

"This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised."

"What happens if there is a meltdown in a country like Pakistan, which is a nuclear power. People react when they have their backs to the wall. We're already seeing doubts emerge about the sovereign debts of developed AAA-rated countries, which is not something you can ignore," he said.

Gold traders are playing close attention to reports from Beijing that the China is thinking of boosting its gold reserves from 600 tonnes to nearer 4,000 tonnes to diversify away from paper currencies. "If true, this is a very material change," he said.

Mr Fitzpatrick said Britain had made a mistake selling off half its gold at the bottom of the market between 1999 to 2002. "People have started to question the value of government debt," he said.

Citigroup said the blast-off was likely to occur within two years, and possibly as soon as 2009. Gold was trading yesterday at $812 an ounce. It is well off its all-time peak of $1,030 in February but has held up much better than other commodities over the last few months – reverting to is historical role as a safe-haven store of value and a de facto currency.

Gold has tripled in value over the last seven years, vastly outperforming Wall Street and European bourses.

"The next bubble is Gold. I expect there maybe a panic into Gold and a scramble into physical gold as citizens, who are not dumb, realize that the Central Banks are engaged in a contest to print the most money, to keep the cost labor low, the employment high and to erase the Nationial debts. This will destroy the currencies, confidence and create instability".

Marc Faber November 25th 2008.

Got gold?

by Dr Jim Willie

On October 29, the US Federal Reserve cut by 50 basis points the official Fed Funds rate down to 1.0% flat. Do not expect the USFed to be done cutting rates. One week later, the entire globe of beleaguered central banks also cut their official interest rates in a parade of ignominy. They coordinated rate cuts on October 8, and again followed the USFed in early November. The important Euro CB cut by 50 basis points to the 3.25% level, surely in reluctant fashion given their firm defiant stance. The most desperate CBs are clearly England and Switzerland among the majors, and Australia and New Zealand in the second tier. The Bank of England (BOE) cut by 150 basis points unexpectedly, now at a 3.0% low level. The Swiss National Bank cut by 50 bpts with the pack, but on November 20 surprised all by cutting another full 100 bpts down to the ultra-low 0.5% level. The Reserve Bank of Australia cut by 100 bpts in October and plans to cut again this month. The Reserve Bank of New Zealand cut by 100 bpts in October and also plans further cuts. The Bank of Canada cut by 25 bpts in October and plans another 25 bpt cut in December. The Riksbank of Sweden cut by 50 bpts to 3.75% in October and plans another 25 bpt cut in December or soon afterwards. With global monetary inflation raging, and official interest rates converging to zero, the global central bankers must hang their heads in shame. THIS IS THE MOST VISIBLE, OBVIOUS, PREVALENT SIGNAL OF THEIR FAILURE.

The contained messages are four-fold:

ABSOLUTE CONTAGION: the global economy is suffering from broadly felt toxic shock due to US bonds, a process that has a few more quarters of severe crisis pathogenesis
POLICY EXTORTION: the major and secondary CB heads want to cut so that the US$ does not fall, coerced with a monetary gun at their heads
INFLATION EXPLOSION: global monetary growth has gone ballistic, no longer a priority to control, with all talk about limiting price inflation relegated to mumbling in the corner
ENDLESS RESCUES & BAILOUTS: the government sponsored bailouts are nowhere near finished, sure to be an endless parade of patchwork and stimulus with eventual climax of mortgage aid.
Just think of it. The USGovt, after a coup d’etat pulled off by Wall Street and fraudulent climax diversion of TARP funds, has yet to address the mortgage problem at all. Mortgage aid in meaningful and necessary terms is actively avoided, since it must come with a price tag up to $2000 billion in the United States alone. The nationalization of the US banking, if not financial system, is highly likely to be followed by an eventual virtual nationalization of the entire mortgage system. Such a decision and desperate socialist action will be the death knell for the USDollar, if it survives to the point when such a program is enacted.

The unbridled monetary inflation is a powerful bull market signal for gold, once asset prices stabilize. Monetary explosion always pushes gold upward in price, but this time much money is directed into a multi-channeled black hole. Today, yet another program was announced, finally to enable more lending capital to banks. They have been starved to date, drained in order to supply the corrupt Wall Street conmen in charge. The coordinated interest rate cuts reveal the strong impact of Competing Currency Devaluation. Foreigners wish to avoid further aggravation to their economies from even lower domestic currency exchange rates. They inflict higher prices upon their economies. Later, foreign governments will order their reserves and sovereign wealth funds to dump USTBonds in order to bolster their domestic currencies, the great counter-attack. The USEconomy has a worse problem to fix by an order of magnitude. My view is that the powerful US ailments are not fixable, since the financial engineering is too deeply rooted and the manufacturing industrial base has been removed in several stages over a 25-year period. Besides, the credit derivatives loom like a series of hidden bombs whose fuses intersect in the dark.

THE FRANCHISE OF CENTRAL BANKING HAS FAILED, AND GRAND RATE CUTS CONFIRM THIS NOTION EMPHATICALLY!!! THE COLLECTION OF CONCLUSIONS ADDS UP TO ONE POWERFUL FORECAST: GOLD & SILVER PRICES WILL RISE 10-FOLD IN THE NEXT FEW YEARS. SOON THE CLUTCH WILL BE RELEASED AND THE 10000 RPMS ENGAGE THE ECONOMIC TRANSMISSION TO PRODUCE PRICE SKIDMARKS. Ignore for now the paper price heavy-handed influence, which in my view will suddenly disappear in a volcano of controversy and tumult! The US paper system has falsified the entire global pricing structure. Instead of price discovery, we have been subjected to price controls and tyranny. Next comes the counter-attack.

Lost faith in USFed has finally come. Chairman Bernanke has learned the hard way that usage of the printing press is not the boasted solution. He is sending good money after bad, redeeming criminal fraud, endorsing checks for a broken system, and creating numerous delivery channels into a vast black hole. The US Federal Reserve has accomplished a bizarre feat. They have made short-term lending virtually free, but offer a yield over 3% on long-term bonds. So US banks are deeply engaged in a queer carry trade. US banks borrow short and lend to the USGovt long, and thus exploit the steep USTreasury yield curve. The US banks are trying to liquefy from this perverse mechanism, using incredibly large volumes of money. In the process, the USFed balance sheet is testing whether it can grow a tree to the sky. The USGovt has contributed to the ugly mountain of rancid paper with bad precedent after bad precedent, from poorly written deals. No private investor in right mind would step forward to help an ailing industrial or financial firm on the absurd blockheaded terms established by the USGovt. A record setting 25% of high-powered money, as in bank assets, that the USFed has provided, actually sit idle as excess reserves. Hence, money velocity has sharply dropped, typical of a recession. Failure has many symptoms. The USEconomy aggregates are falling off a cliff in unison.

Europe has entered a recession, but the US has entered disintegration, while England is close behind with a galloping leap off the Dover Cliffs. Kenneth Clark is a highly respected former conservative Chancellor of the Exchequer (finance minister) from 1993 to 1997 in England. He delivered an urgent warning for a “catastrophic crisis [that will be] far worse than anything that has occurred in my lifetime” for Great Britain. Clarke even slammed Gordon Brown as having received undue credit for his role in attempting to shore up the global economy. He warned policymakers should beware of a “full-blown depression will have on public finances” for its effect. A major error has been committed by both the US & UK. Neither nation has succeeded in passing on lower interest rates to home loans, and repayment plans are not happening in volume. The elite in both the US & UK are protecting their bankers, but killing the system in the process. Housing prices are careening downward, while job losses mount in large numbers, in both nations. The death of the AngloSphere is nigh, as status of debtor nations comes soon with all its penalties. A simple move to cut rates does nothing to address insolvency of both banks and households. This basic truism is totally lost on clownish inept US & UK economists and bankers. They both built an economy atop a housing bubble, blessed it, and encouraged the debt orgy process, only to see the entire system melt down. This was fully forecasted during the last two years by the Hat Trick Letter.

A VERY QUEER ANOMALY

We are working toward a nasty climax of historic proportions. Notice that the USTreasury Bill has an artificially high price, with staggering huge volume, which is backwards. This condition defies Mother Economic Nature. Notice that gold has an artificially low price on the paper contracts, with staggering huge demand for physical metal, which is also backwards. This condition defies Mother Economic Nature.

The USTreasurys, given the staggering high volume, should be valued lower. The gold bullion, with its staggering high demand, should be valued higher. Something must break, and break soon. Regard these two anomalies as temporary distress symptoms of ass-backward price mechanisms. The natural tendencies of man, full of human emotions like vengeance and retribution, will soon be unleashed to correct the PHONY HIGH USTBILL PRICE AND PHONY LOW GOLD PRICE. All kinds of key evidence points to a COMEX default in December, discussed in the November Gold & Currency Report. The keys are in the Open Interest, which for gold is collapsing. But the December OI is holding up at relatively high levels. The interpretation from Mr Market, who is a distant cousin of Mother Economic Nature, is “The paper gold market is flawed, and people want no part of it. What physical gold becomes available is being grabbed immediately.”

Further hints are offered by the Chinese, who announced a stimulus plan worth over $500 billion. They will use their USTBonds before they are trashed. The next phase is feeding off the USTreasury much like a dead elephant. However, the signature event must come first. THE COMEX GOLD MUST BE VANQUISHED. This is the Achilles Heel to the USDollar.

ATTACK OF COMEX GOLD & SILVER
Powerful foreign entities are preparing a massive major assault on the US financial corruption, at key spots. All signs seem to point to the gold futures contracts traded at the COMEX and NYMEX, whose prices are routinely suppressed by a high volume of uneconomic short contracts by two to four banks. The COMEX is a division of the New York Mercantile Exchange. A highly leveraged sequence is soon to be unleashed, one that should bring back thoughts of asymmetric attack. Think small cost of a weapon, heavy damage to costly equipment. Something big comes to the gold market, with big angry players! If successful, severe damage will be done to the USDollar. Their goal is to kill the COMEX gold market, the key location for gold price suppression. Major Russian, Chinese, Arab, and European bankers and billionaires are angry beyond words. The giant portion of gold vaulted resides in Central Europe. A plan is in place. The key here and now is COMEX gold futures contracts, where many big players are demanding delivery for their December contracts. North American investment houses have also targeting them for delivery demands. With newly energized Russia & China building their gold treasures, with Arabs turning from distrusted Western paper and more toward gold & silver, look for the new players to offer support to the primary thrust attacks. If successful, it will be a defining moment in US financial history. The first delivery notice for the December gold contract is given on November 28.

Recall that Russians and Arabs each have severe damage done to the crude oil price and petro revenues. The futures contract games conducted by US price systems and Wall Street tactics used against hedge funds are largely responsible. Russians and Arabs are angry. Their financial markets are in turmoil, their economies are disrupted, their property markets are in disarray. Furthermore, Russians and Arabs own a large amount of acquired gold, whose value is also pushed down by corrupt US paper mechanisms. The Persian Gulf lusts to put in place a gold trading center of world repute. A brutal powerful trap has been set, to be executed upon the paper engineers without mercy. If you have noticed the facial expression on some Wall Street heads, like Paulson, change in the last few weeks, this is one reason why. They have no shame in confiscation of Congressional funds. But they dread presiding over a failed pricing system for gold, and dread the prospect of being unmasked, not to mention bankrupted. Keep the focus on the JPMorgan garbage can, where the illegal futures contracts are stored, the very same contracts that are never marked to market on their balance sheet. A COMEX blowup reveals their grotesque distortion of market forces, underpinned by gold and USTreasurys. More details are provided in the November Hat Trick Letter report, like the movement by the Chinese and Iranians to vastly increase their gold reserves.

Veteran warhorse Max Keiser, has a video worth watching. See his video (CLICK HERE). He discusses the upcoming COMEX default for the December gold futures contract. He believes that in its wake, the gold price will rise suddenly to $2000 per ounce, perhaps in a single day. The main impetus in his view for the breakdown is pressure exerted by Russia, in his view. He describes their motive. Russia is very angry over the oil price, down 60% from its peak, driven largely by liquidations from Wall Street targeting of hedge funds. Russia regards the paper game to be out of control. Russia has suffered from both reduced energy revenues from export sales, and notable currency decline in their ruble exchange rate. Financial markets, banks, and corporations have suffered in Russia as a result, prompting a severe reaction by Putin and Medvedev. These are not guys known to take ambushes and sucker punches well without a response.

AWAKENED GOLD PRICE

The USDollar DX index has topped. Conversely, the gold price has bottomed. Each has experienced a clear vivid pronounced reversal off the extreme. Signs point to December as being a battleground month. The moving averages have begun to reverse, a more stable signal. A MACD crossover is near, which would give a billboard notice to technical traders. Beware that this is the phony paper gold price. Actual large physical gold transactions are conducted at prices in excess of $1000 per ounce. The undue influence of paper price discovery is soon to end. As the Gladiator said in the 1999 movie by the same name, to the phony emperor who usurped power, “The time will soon come to an end for you to honor yourself.” Expect severe discontinuity in the gold price in the next few months, maybe sooner. If Keiser and others are correct, and the assault on the COMEX gold succeeds to liberate its price, a gap up is assured, a big gap up, like a few hundred dollars per ounce. Now is the time to hold firm your gold and silver metal. Sell the children, but do not sell the precious metal.

by Kurt Kasun

John Maynard Keynes was the first to call gold a "barbarous relic", giving governments the right to intervene, print and distort to their hearts' content. But the day of reckoning is here. Keynesian economics has resulted in the current mess, and Austrian economics will cure it, but not overnight. Only after the world's paper currencies have reached rock bottom and nations are forced back to metals-backed currencies will the adoption of sustainable economic policies occur. We are now caught in a deflationary cycle, and the correct trade was - and is - to short the indices and buy gold. The stock market has violated every support line, and there are only plunges ahead. In addition, negative feedback loops between the financial markets and the real economy are going to wreak havoc. Deflation and the strengthening US dollar are not positive developments; declining consumer prices are only good if the decline is because of expanding supply. As for the dollar, its strength is hurting the US government, which is sure to concoct a way of squirming out of its debt obligations. It will not default, but will inflate its way out, reducing the price of its current obligations. This is why it is important to be long gold and short the market. Gold is holding up well in the current environment of asset deflation, but just wait until inflation takes hold; gold will rocket to the upside. Believe it or not, there is still too much optimism out there, an unhealthy condition in the current environment. Investment strategies that exploit this natural human desire when the evidence is for pessimism is overwhelming are required today. Optimism propels society forward and moves individuals ahead in 'normal' times. The period we are entering will be far from normal.

MOSCOW, November 24 (RIA Novosti) - A leading Russian political analyst has said the economic turmoil in the United States has confirmed his long-held view that the country is heading for collapse, and will divide into separate parts.

Professor Igor Panarin said in an interview with the respected daily Izvestia published on Monday: "The dollar is not secured by anything. The country's foreign debt has grown like an avalanche, even though in the early 1980s there was no debt. By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than 11 trillion. This is a pyramid that can only collapse."

The paper said Panarin's dire predictions for the U.S. economy, initially made at an international conference in Australia 10 years ago at a time when the economy appeared strong, have been given more credence by this year's events.

When asked when the U.S. economy would collapse, Panarin said: "It is already collapsing. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale: America will no longer be the world's financial regulator."

When asked who would replace the U.S. in regulating world markets, he said: "Two countries could assume this role: China, with its vast reserves, and Russia, which could play the role of a regulator in Eurasia."

Asked why he expected the U.S. to break up into separate parts, he said: "A whole range of reasons. Firstly, the financial problems in the U.S. will get worse. Millions of citizens there have lost their savings. Prices and unemployment are on the rise. General Motors and Ford are on the verge of collapse, and this means that whole cities will be left without work. Governors are already insistently demanding money from the federal center. Dissatisfaction is growing, and at the moment it is only being held back by the elections and the hope that Obama can work miracles. But by spring, it will be clear that there are no miracles."

He also cited the "vulnerable political setup", "lack of unified national laws", and "divisions among the elite, which have become clear in these crisis conditions."

He predicted that the U.S. will break up into six parts - the Pacific coast, with its growing Chinese population; the South, with its Hispanics; Texas, where independence movements are on the rise; the Atlantic coast, with its distinct and separate mentality; five of the poorer central states with their large Native American populations; and the northern states, where the influence from Canada is strong.

He even suggested that "we could claim Alaska - it was only granted on lease, after all."

On the fate of the U.S. dollar, he said: "In 2006 a secret agreement was reached between Canada, Mexico and the U.S. on a common Amero currency as a new monetary unit. This could signal preparations to replace the dollar. The one-hundred dollar bills that have flooded the world could be simply frozen. Under the pretext, let's say, that terrorists are forging them and they need to be checked."

When asked how Russia should react to his vision of the future, Panarin said: "Develop the ruble as a regional currency. Create a fully functioning oil exchange, trading in rubles... We must break the strings tying us to the financial Titanic, which in my view will soon sink."

Panarin, 60, is a professor at the Diplomatic Academy of the Russian Ministry of Foreign Affairs, and has authored several books on information warfare.