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Monetization of USTreasurys In Isolation
Jim Willie CB
Jim Willie CB is the editor of the "Hat Trick Letter"
Aug 21, 2009

Note by 4God: this is part of a larger article that can be accessed in its entirety @:
http://www.321gold.com/editorials/willie/willie082109.html

USTREASURY MONETIZATION

Monetization of USTreasurys is occurring in a profound blatant fashion. Such action infuriates the Chinese creditors, while at the same time creates a huge rift between the US Federal Reserve and the USDept Treasury. The rift is political and will come to a head when Chairman Bernanke is due for renewal of his post in a few months. China exerts its constant pressure on the USFed to end the Quantitative Easing efforts. Like doctors, they wish to apply a tourniquet to a gaping leg wound that bleeds a red river onto the pavement. The term is a funny euphemism, a sophisticated economist term for Heavy Duty Money Printing that results in destruction of a currency if not kept under control. The USDollar stewards are NOT demonstrating control, discipline, or even anything remotely resembling honesty or integrity. The USDept Treasury wants to continue funding the federal deficit, and for yucks, add any and every conceivable new program onto the books while the federal insolvent bankruptcy makes marginal additions not so noticeable.

The USFed engages in almost immediately permanent operations to snag the primary dealer USTreasurys gatherings bid at auction, for a simple shell game shuffle. The USFed engages in a sneakier but still obvious hidden bidder game with foreign central banks. They use USDollar Swap Facilities (with gargantuan funds) and bid heavily on the USTreasurys, evidence being the ‘Indirect Bid’ component. If not for the USFed buying most of the USTreasurys issued, the long-term interest rates would be rising quickly and with alarm. If not for the USFed heavy buying, the USDollar would be doing a swan dive off a cliff into rough waters. As has been claimed in past work, the USGovt stewards of the wrecked buck can save the USTreasury or save the USDollar, but not both. Their monetization efforts here and abroad indicate a clear intention to save the USTreasury Bond. They put the USDollar at grave risk. The Weimar Territory lies directly ahead!

USDOLLAR DELAYS INEVITABLE CRASH

The USDollar remains firmly stuck at the cliff’s edge. It cannot recover, as the 80 level offers stiff resistance. The Powerz seem to prevent the breakdown but they cannot engineer a rally for recovery with any gusto. Two notable technical factors bear importance. The downtrendline is becoming clear, which worked to make the 80 level more stubborn. Also, the moving average crossover that occurred in early June still casts a dark cloud over the entire USDollar trading. The US$ DX index is stuck in a bear market, unable to bounce, and now is running out of time. Resolution is demanded. A key point must be mentioned. We are fast in the land of the non-linear, where discontinuous events occur, and disjointed price movements are highly likely. The ground from under the currency market is shifting in an unstable fashion. See the British Pound Sterling in the last week. It has jumped up and fallen down by 200 basis points in several days. Even the Euro has shown unstable movement. That is akin to a hanging lamp in your study, or a displayed chandelier in the living room, and see it shift to and fro in grand swings. Something big is coming and soon. All billboards scream it!!



The evidence of futility in a USDollar potential to recover is shown in the same daily chart, but with only three months shown. Faced with a likely breakdown, the USGovt engineered a small GDP decline two weeks ago in the statistical laboratories. A minus 0.1% advance on the Q2 economic growth sounded great at the time, if one believes it. On an annual basis, viewing Q2 versus last year’s second quarter, nothing has improved. The sequential approach used by the USGovt stat-rats lends itself well to finagles and gimmicks. They look at Q2 versus Q1, load in the nonsensical adjustments, and multiply by four in a laughable indefensible exercise. Just a week later, the European Union announced its GDP for Q2 was also a minus 0.1%, only to sidetrack the wondrous USDollar bounce. So the USEconomy is not going to lead the world out of the recession. Anyone who thinks that is a patented moron. The site of the implosion damage is never the foundation for the next recovery. Ground Zero was Wall Street, lest one forget. The Chinese financial market is actually leading the US market on directional turns. Sadly and tragically, the USDollar is stuck in mud, running out of time, awaiting a meat cleaver by foreign creditors. The August Hat Trick Letter report on gold & currency is to be posted this weekend. It contains some very surprising information on the cash intermediary currency market. A deep USDollar devaluation comes!!!