PREPARE FOR RARE DAMAGE OF TAIL EVENTS
In the probability world, a tail event is described as an occurrence far out in the small numbers of probability, extended on the tail of the curve of likelihood. In the quality control domain, the battle cry used to be Six Sigma, meaning the tolerated defect rate goal would be six standard errors, a rate in no way achievable. A quick check of the probability tables unmasks the lofty goal as one defect part off the assembly line in every 1.013 billion items. That is Six Sigma on the normal bell-shaped curve. However, in the world of phony finagled finance, such rare events are indeed occurring. The modern world has never seen such grotesque charred ramparts posing as financial structures, badly beset by the insolvency caused by the natural sequence of broken asset bubbles, aggravated by absent industry. In fact, the entire fiat currency system, where money is nothing but redefined debt, is an abomination destined for the ruin we see on such a tragic widespread level. The modern world has never seen such grotesque housing disasters, the dream of home ownership turned upside down, one quarter of American households owing more than the value of their homes. In fact, the entire housing dependence devised by Greenspan, where the USEconomy would lean not on industry but on rising home equity, serves as the calling card of central bank heresy. The heresy continues with the high priest ZIRP and bishop QE. Of course it ended in tears. The modern world has never seen such grotesque quicksand in sovereign debt for so many major nations. This goes far beyond Greece, Ireland, and Portugal, the symbols of small fry nations that few nations will make deep sacrifice for. In fact, as the sovereign debt spreads, it has become clear that Italy, Spain, France, and many other nations suffer from the sinking pressures that national securitized debt brings. As the sovereign debt loses value, the banking system sheds reserves valuation and goes insolvent, the credit engines stall, the economy falls into recession, the labor force loses jobs, the spending patterns falter, and the nation goes into a failure mode. See the Cauchy distribution in the graphic, which when the degrees of freedom grow unbounded, approaches the Gaussian normal.
Some important tail events of rare type are coming. Any attempts to control a Greek Govt Bond default will be fraught with high risk and deep peril. The equal necessity to control a default for Ireland and Portugal will be made obvious. The extension to Italian and Spanish Govt Bond losses in collateral damage will be obvious. The implications to Credit Default Swaps must also be handled, not possible in the same fraudulent manner as before with redefinitions and denied insurance awards. The contagion of vanished equity in the banking system will spread to London, New York, and Germany, in whose nations numerous banks will fail. It will be extremely difficult for the USDollar to ward off such powerful storm damage, and remain as the global reserve currency. Some distant maritime voices might regard my claims as premature and far-fetched, but their preoccupation with gold basis has left their voices mere reverberant richochets in the hinterland. The academic voices seem out of touch with trends, the loud laps on the rocks from waves of inflation hardly recognized for their damage from the remote seacoast. They seem unable to foresee the new found land that is forming in the East, divorced from the USDollar.
IRAN SANCTIONS BACKFIRE INTO ISOLATION
In the last two weekly articles, the backfire was described regarding Iran sanctions, the response from the emerging economies, and the harmful effects of foreign nations grappling with defense from the uncontrollable unbridled unending printing of phony money. The USGovt actions have galvanized a response, led not by Iran but by China. The raft of bilateral accords juiced by currency swap agreements has provided a significant buoyancy in the global trade framework, a highly complex system. It dictates the flow of USDollars in obvious ways, but it also dictates the formation of reserve banking systems in more subtle ways. In 2007, when Brazil and China announced a swap facility to bypass the USDollar in trade settlement, the Jackass took notice like a prairie dog raising his head with erect spine. In 2010, when Russia and China announced a swap facility to bypass the USDollar in trade settlement, the Jackass took notice again. The big trade winds were changing direction. The extreme importance of trade and banking interwoven should not be overlooked, as often done by the clueless cast of US economists. So when in the last month, Japan and China announced a swap facility to bypass the USDollar in trade settlement, the Jackass concluded that the end was near for the waterlogged American financial fortress. These are two primary Asian powerhouses, who with South Korea form the core strength of the entire East.
The USDollar might not be attacked on several front with harsh assaults so much as it will be relegated into irrelevance, as the USDollar will be ignored and left to defend itself in the open fields where wolves and dragons roam wild. Note the parallel to the COMEX, which as a market will also be relegated into irrelevance, as the precious metals will be traded elsewhere, in markets where private accounts are not stolen. Entire Compliance Departments have forbidden usage of the COMEX as of January, due to outlaws overrunning the floors. As the USEconomy is isolated, it will be compelled to bid up whatever foreign currency is required to purchase commodities and finished products. In reaction, the USDollar will fall in value.
In April 2010, a conference took place in the United Arab Emirates among a couple hundred billionaires, sheiks, and other royalty. They decided to embrace the Chinese Protectorate plan for the Persian Gulf, and to accept Russian oversight in the region. Without the Asian offset to the American aggression, no stability is remotely achievable. That event served as a clear signal that the sunset shadows for the USDollar were soon to encounter reality. The process would clearly require a couple years, but the writing was on the wall. Much critical structural work would be required to complete, as trade, banking, currency, and gold management has become far more complex and integrated for the array of professors to comprehend. Not sure such developments are detectable in the maritimes, especially in academic outhouses or local taverns. Furthermore, the actual Dollar Kill Switch had to be devised, with confirmed connection to the OPEC oil trade. My source has informed me that the switch is finally in place and ready. Recent events show the East walking toward the switch. The numerous defiant gestures by China, Iran, Russia, India, and Japan paint the billboard in big bold letters. The workaround of the USDollar is moving fast apace. A confirmation occurred just last week when the Saudis and Chinese announced a joint project for a refinery to be built on the Red Sea. The Saudis in effect were tipping their hat to the Chinese, and again were turning their backs on the Untied States. The signals are abundantly clear. What we are witnessing is the end of the Petro-Dollar in slow steps. The steps are unmistakable to those who study the interwoven nature of global finance. They are easily overlooked by those who operate within the dome of perceptions controlled by the American apparatus, and are locked in mental gibberish ensconced in gold basis. The crowning blow might have been announced this week, as India will pay for Iranian oil in gold bullion. The news invites many questions. Apparently, the Turkish intermediary will not be needed. Gold for oil sounds like a historical point in time.
Backfire extends to Europe, where the absence of Iranian oil supply will cause some extreme problems. The shortages are soon to be acute, word coming from a German source with great contacts in the middle of the mix. He wrote this morning, "The Persians are cutting off oil shipments to Europe, effective immediately, which will kill Greece, Italy, and the other Club Med deadbeats. The West with their sanctions led by the Americans screwed itself royally. The Asians and others are dis-engaging from the Western banks as fast as they can. Expect to see more wild fluctuations in the Gold and Silver prices continue. Until this week, the Gold forces did not know how weak the Anglos already are. They have hardly any firepower left." Difficult decisions will be made toward the USGovt leadership. It is shaky. It is lacking integrity. The nation is smeared by the splatter of fraud. Its markets are propped by the heavy hand of daily interventions. Its economic data is laughed at as a fantasy. Its elite are given huge grants without global approval. Its central bank makes decisions unilaterally, without conferring with USGovt creditors. The foreign anger is ripe. The motive to seek alternatives is at high pitch. Big changes are in progress, pushed along ironically by the USGovt itself. If their spokesmen insists on the many major global trade participants to take sides, the crew in WashingtonDC might be in for a shock, colored by isolation. The real loser will eventually be the USDollar, whose Petro-Dollar defacto standard is being washed away by central bank liquidity and leadership arrogance. The US financial body resembles a pig adorned with lipstick with each passing day.
