… some experts and governments, in full cognizance of the facts, want us not to create panic and paint a picture of parched crops and a looming food crisis. This, they say, would push up food prices unnaturally, lead to hoarding and ultimately result in a situation where many more millions across the world would go hungry. And whether it is the developing world or the developed, it is those at the bottom of the pyramid who are the most affected in such scenarios.

This leads to a confusing divide between reality and government pronouncements, or even between the perspectives of government departments

For months now, the media has been reporting two distinctly, contradicting realities. One of these realities is filled with record crops and plentiful supply, and the other is filled agricultural devastation and ruin. It has been a mad, frustrating experience to read about agricultural disasters and horrendous crop losses in virtually every state combined with predictions of a US record harvest, sometimes in the same article.

A Reality of record crops and plentiful supply

The accepted, “official” reality is found in USDA crop and WASDE reports. Here, the United States Department of Agriculture is projecting the largest US soy crop on record, at 3.3 billion bushels, and the second-largest corn crop at 12.9 billion bushels.

Below are the government' s numbers for US soybean production by state. The USDA is expecting record high soybean yields across the Midwest in 2009, leading to production numbers significantly higher than the 5 year average. The large increase estimated between the August and November also indicates that the USDA doesn' t believe crops suffered much damage during the fall harvest.

Since the United States is the leading exporter of corn and soybeans, producing 40 percent of the global corn crop and 38 percent of all soybeans, the USDA's production numbers have an enormous impact on the global supply/demand picture.

A Reality of Agricultural Devastation and Ruin

In this reality, the US farmers have suffered the worst harvest season ever seen. For those who have not been following my blog or developments in the agricultural world, below are a few of extracts, in chronological order, showing the full extent of the devastation experienced by farmers during 2009' s hellish harvest season. (to keep this short, I have limited it to 2 extracts per state)

[Iowa, June 29]

"I'd say this year is one of the most unusual years we've had in the last 20 years," said Don Fry, executive director of the Des Moines County USDA Farm Services Agency. "Because it seems like it rains every second or third day, the ground is constantly kept wet. We've heard a lot of reports from people with wet spots turning up in fields that they and their parents ... don't ever remember being a wet spot."

The combination of constant rain and cool temperatures this spring kept farm fields saturated, making planting difficult and hampering crop growth. Also, frequent rains have rinsed a portion of nitrogen fertilizers from fields and hindered the application of herbicides, all of which cuts into yields, Kester said.

"This spring has just been a terrible struggle," Kester said. "Anybody that mowed hay within the last three weeks probably lost their hay crop because it got wet."

[Nebraska, July 3]

Lethal heat, hailstones as big as baseballs, rain seemingly without end and tornadoes, some reported to be a quarter- to a half-mile wide. After a relatively placid May, Nebraska's weather went from meek to mad in June.

“I don't know where that switch in the sky is, but it turned on,” said Ken Dewey, an applied climatologist with the University of Nebraska-Lincoln.
…
“It rained somewhere in Nebraska every day of the month,” Dutcher said. For 25 of those days, some part of the state got more than an inch of rain; for seven of those days, some part received more than 3 inches.

The Panhandle received so much rain, damage reports could end up showing that 1,000 miles of roadway were washed out, according to the Nebraska Emergency Management Agency.

Widespread hail was reported across the state, with one rancher telling the National Weather Service that he found dead animals along the road. In the far western Panhandle, it hailed so much that the roads had to be plowed, as hail reached 6 to 8 inches deep.
…
According to the federal Farm Service Agency, some 750,000 acres of crops were damaged and a small percentage destroyed.

[Maine, July 25]

This has been a bad year for dairy farmers: Milk prices have plummeted and rain has prevented them from getting onto their fields to harvest hay. Fertilizer they applied simply washed away in the rain.

The longer hay grows without a cutting, the poorer the nutritional quality and the more money farmers will spend this winter to supplement it. Cornfields are rotting without enough sun or heat to ripen the plants.

"The season is lost," Julie Marie Bickford of the Maine Dairy Industry Association said Friday. "With milk prices so low and this feed disaster on top of it, farmers are like deer in the headlights."
…
Hay and corn are critical components of livestock feed, Bickford said. "This stunted corn and alfalfa is forcing farmers to purchase grain and feeds. That is a very bad situation. Prices are extremely high because of the Midwest floods earlier this year. Maine's farmers couldn't come up with a worse situation in their worst dreams."

On Thursday, a 75-year-old former dairy farmer visited the Wright Place in Clinton. He recalled delivering glass bottles of milk and told Brian Wright that he never remembered a rainier summer.

"This is unreal," Wright said.

[Wisconsin, July 28]

For Kevin Leahy, it' s a total loss. He doubts any of his 600 acres — of what used to resemble corn — north of Shullsburg will be harvested.
…
Kamps was at home during the storm and knew his crops would be in trouble when the oak leaves around his house started falling to the ground. The wind blew a drift of hail more than 2 feet high in front of his patio door, he said.

“It was like a big sand blaster,” Kamps said. “I' ve seen damage before but not near so widespread and so major. This took everything we had.”

[Iowa, August 4]

When hail decimated crops near Lawler and Waucoma in June, it was the worst Iowa State University Extension field agronomist Brian Lang had ever seen.

Until July 24.

"I've never really seen bad hailed corn at tassel state and I've never seen it this bad, this widespread," Lang said. "There were 400,000 acres damaged with 10 percent totally destroyed. Even for the crop that didn't get hurt too much, this came at the worst possible time, tasseling."
…
"I've never seen a hail storm this big," said Julie Vulk, Farm Service Agency executive director in Winneshiek County and interim director in Fayette County. "It's just hard to wrap your brain around it."

Vulk estimated that 50 percent of farmers don't have insurance.

[Iowa was then hit by another devastating hail storm on August 9]

[New York, Aug 14]

WEST WINFIELD - A panel of political representatives and aides sat for over three hours at a rally Friday in Mount Markham Middle School gym as over 200 upstate New York dairy farmers pleaded for action on a range of issues crippling their industry.

One after another dairy farmers and others involved in the industry took a microphone to berate county, state and federal representatives from throughout the region.

Some were brought to tears describing their inability to make a living, a few simply screamed in frustration and others demanded answers. But the dire situation facing the men and women speaking was painfully clear.

“We are in a disaster,” declared Ken Dibbell, of Chenango County.
…
“The people who feed the nation can' t feed themselves,” Gretchen Maine, a dairy farmer from Waterville, “what' s wrong this picture.”
…
The time frames for both solutions seemed in contrast from farmers need for help, with many emotionally explaining they have either already abandon businesses or are on the brink.

“I don' t think they get the message yet,” Tewksbury said, referring politicians unaware of the uncharacteristic display of emotions from prideful farmers. They don' t have until 2010. They have the next couple of months to decide if they can stay in business, he said.

[Texas, August 14]

Texas state climatologist John Nielsen-Gammon said Friday that at least nine of the 254 counties in Texas — the nation's most drought-stricken state — are suffering through their driest conditions since modern record-keeping began in 1895.

Making matters worse are the relentless 100-degree days across the southern portion of Texas that has been under drought conditions since September 2007.

The impact has been felt most by farmers and ranchers in the nation's No. 2 agriculture-producing state. Texas officials estimate statewide crop and livestock losses from the drought at $3.6 billion.

"We've had some dry spells, but not as bad as this," said Rod Santa Ana with the Texas AgriLife Extension Service. "It hurts bad. A lot of these cotton fields didn't even come up. It's just bare ground. You'd never know cotton was even planted there."

[Wyoming, August 21]

That's little comfort to David Kane, a rancher near Sheridan, Wyo., who said the grasshoppers on his ranch are the worst they've been in more than 20 years. Kane already sold off part of his herd because the pests ate his cows' food.

"They're devastating," Kane said. "They were so bad here on the ranch that we sprayed our meadows because the second-cutting of alfalfa wouldn't green up because they were eating it as fast as it was trying to grow."

[Wyoming, September 10]

The Big Horn Basin dry bean harvest is beginning, but cool, rainy weather and diseases have taken tolls on yield.

Mike Moore, manager of the University of Wyoming Seed Certification Service, said his agency is just starting windrow inspections, and some fields are not doing well.

“It' s sort of tough out there right now,” he said. The only area that seems less affected by disease is the far southern end of the Big Horn Basin, Moore said. His inspectors have found blight and mold around Powell, Byron, Emblem and Burlington.

“It doesn' t look like location is going to allow you to escape it,” he said.

[Texas, September 23]

Bruce Wetzel has been a farmer in Sherman all his life, learning from his father back in the 1960's.

He's seen all the ups and downs of producing wheat and corn in Texoma, and he says this was one of the worst years for corn.
…
"All the rain we got back in April and May, we got 20 inches of rain in a two week period there, really just damaged our corn. Our corn just never quite recovered from too much water,” said Wetzel.

Wetzel says he lost about 50% of his wheat and corn crops this harvest season, a trend that farmers are experiencing across Texoma.

[New Jersey, September 26]

"The rains have just killed me this year," said Tucker Gant, 51, a vegetable and fruit farmer in Elk, who estimates his total losses this year at nearly $220,000.
…
"Nobody has ever seen rain as drastic as this year, even talking to old-time farmers," said Grasso, a third-generation farmer who estimates losses so far at roughly $50,000.
…
"It's never been that bad as far as I can remember," said Gant, pointing to water pooling in a field as he drove his pickup truck along a bumpy dirt trail toward 35 acres of barley overrun by tall weeds. "I have never seen water lay there more than two days. It should have been harvested, but you can't harvest weeds taller than barley."

[North Dakota, October 5]

North Dakota`s wet spring and summer is being followed by a wet and snowy fall.

Two snowstorms have already turned the ground in much of the state white, and while the early snows will melt before winter sets in, many farmers may not get row crops harvested before the seasons change again, unless Mother Nature provides them with some dry weather.

In North Dakota, it`s common to see autumn snow coat the state`s sunflower and corn crops, but acres and acres of soybeans covered in white is an unusual sight. October snowstorms have stopped many of the state`s combines right in their tracks, delaying the harvest of many late season crops.
…
Precipitation totals in some areas of North Dakota have already surpassed yearly averages, but farmers are more concerned about wet weather damaging the condition of the soybean crop than corn and sunflowers.

[Louisiana, October 8]

Three weeks of heavy rains are threatening northeastern Louisiana's soybean, sweet potato and cotton crops, some of which have already shown significant deterioration in the fields.

"It's killing us," said Ouachita Parish producer Gary Mathes. "We cut some beans a week ago that we had to sell at a salvage price of $3 a bushel."
…
"We fought a short corn crop, but we had one heck of a bean crop and the rain is taking it away from us," Mathes said.

Venoy Kinnaird said his farm has been drenched by about 20 inches of rain since Sept. 12.

"I've got some beans that I won't cut; they're not salvageable," Kinnaird said. "And I've got some sweet potatoes that are halfway out of the ground. Cotton has taken a terrible hit, too, even though we don't have that much planted around here this year.

"We're absolutely waterlogged. What's really bad is we're coming off of a disaster last fall."

[Nebraska, Minnesota, October 12]

Weekend snow may have dealt a heavy blow to prospects for soybean harvest in Nebraska and other nearby states.

Weather adversity could shave as much as 200 million to 300 million bushels from expectations for a 3.25 billion bushel crop nationally, a Nebraska soybean official said Monday.

"Our part of the country got snow," said Victor Bohuslavsky of the Nebraska Soybean Board Monday. "And I talked to people in Minnesota this morning and they hadn't hardly started harvest and they were blasted with snow."

[Louisiana, October 17]

Northeastern Louisiana farmers finally saw the sun Friday afternoon, but it might be too late to save the bulk of the soybean, cotton and sweet potato crops.

"It's pitiful," said Caldwell Parish producer Drew Keahey. "I think it's going to be worse than last year."
…
But some parishes, like Morehouse, have received more than 30 inches of rain since Sept. 12, literally drowning crops that were mature and ready for harvest when the rain began.
…
Soybeans may have suffered the most, producers said.

"There will be a lot of beans that never come out of the field," Keahey said.

[Northern Kansas, October 16]

Harvest so far has been about as awful as the new Bob Dylan Christmas album.

Typically USDA's November yield forecasts increase, but this is not a typical year, as freezing weather has dinged yields and caused major crop quality problems.

A colleague of mine sent me some snapshots of an Iowa farm that had seven inches of snow last Saturday. Northern Kansas had over 10 inches of snow.


.

[Mississippi, October 21]

Corn will suffer from quality issues. Soybeans will have significant quality and yield losses if harvested. Rice will suffer quality and yield losses with much of the crop is on the ground. Cotton crop will suffer yield and quality losses and cottonseed will have essentially no value.
…
Bolstering this is a fact-sheet released the week of Oct. 12 by Delta Council. The release says, “Large areas of the Mississippi Delta have received 15 to 20 inches of rain over the last 30 days with many areas receiving 25 to 40 inches of rainfall over the past 60 days since Aug. 15. In places this is anywhere from 400 to over 600 percent of normal.”

The Delta Council release also quotes Steve Martin, interim head of the Delta Research and Extension Center (DREC) in Stoneville, Miss.: “Crop conditions are rapidly deteriorating. The USDA weather service at Stoneville reports that October has seen the second highest level of rainfall ever recorded (record was set in 1941).

[Illinois, November 2]

The autumn monsoons are hard to figure, said Benjamin Sittrell, a meteorologist for the National Weather Service office in suburban St. Louis.

"Typically during the late-year period, it's our driest portion of the year," Sittrell said. "To see such astronomically high amounts of precipitation, where we got several inches above the previous record levels, is very abnormal.

Sittrell said thousands of acres of farmland are under water, particularly in the flat areas of southern and western Illinois, where the Illinois, Ohio and Kaskaskia rivers are among several that are flooding.

[Arkansas, November 4]

On Monday and Tuesday, Gus Wilson, Chicot County Extension staff chairman for the University of Arkansas Division of Agriculture, made the rounds, visiting farmers and getting a first-hand look at what record rain has left of crops in the state' s southeasternmost county.
…
“It' s bleak,” Wilson said. “It' s going to really hurt these poor Delta counties because here, agriculture is all that we' ve got.”

Earlier this season, the harvest outlook was promising.

“In September, I was pretty happy with what I was seeing in the fields,” he said. “Now we are going to be lucky to make half a crop compared to the last couple of years, all because of the weather.”

“Seven or eight weeks ago, we were looking at 1,100- to 1,200-pound cotton” lint yield per acre, Wilson said. “Now we' re 500 to 600 pounds.”

The soybeans are just as bad. Back in September, “we had a good soybean crop. The yield was there,” he said. “We have lost at least 60 percent to 80 percent due to the weather.”

“Our rice is going to be half,” Wilson said.
…
“This is the worst I' ve ever seen and I' ve been a county agent for eight years and around farming all my life,” Wilson said.

[Alabama, Georgia, north Florida, November 6]

Alabama Commissioner of Agriculture Ron Sparks is calling it a “potential crisis” — the rainy weather conditions throughout most of September and October that have frustrated growers who were eyeing pretty good cotton, peanut, soybean and corn crops.

The same holds true for producers in Georgia and north Florida, where harvest has been delayed by almost continuous rainfall, during what is usually the driest months of the year.

“Prior to September, many producers were expecting to harvest a bumper crop and were very optimistic for the upcoming harvest season,” says Sparks. “Uncommon and unfavorable precipitation during September and October have degraded various crops and caused poor harvesting conditions, which caused the harvest to be behind schedule by around four to six weeks.”

The major crops affected by the recent rainfall are cotton, soybeans, corn and peanuts, says the Commissioner. “Reports indicate that our state is in dire need of dry weather within the next two weeks, which may eliminate a potential state disaster [Area was then hit by 5+ inches of rains from Topical Storm Ida],” he said in early November. “Producers are already suffering from heavy September and October rainfall and dry conditions will not eliminate damage that has already taken place to crops across the state. Many producers are experiencing a sharp decrease in crop yield, lower grading, and crop damage from recent rainfall.”
…
“The bottom line is that Alabama producers are uncertain as to what the commodity markets will bring forth and where agriculture in our state is going,” says Sparks. “The recent weather conditions over the past two months will definitely have a negative impact on Alabama' s crop harvest.”
…
William Birdsong, agronomist at the Wiregrass Research and Extension Center in southwest Alabama, reported that wet and rainy conditions continued to delay harvest for row crops. Cotton yields and lint quality continued to suffer as a result of the wet conditions, he said. Less than 5 percent had been harvested in his area, and this could go down as the worst crop in years if the rain does not subside.

[Alabama, November 10]

What had started as a good season for cotton could be a complete loss for some farmers if heavy rains hit fields before harvest, said Richard Petcher, agent with the Alabama Cooperative Extension Service.

"It's been a 30 percent loss so far in southwest Alabama, and more rain could make it 40 to 50 percent," Petcher said Monday. "Some fields are already a 100 percent loss."

Financial damage from Ida could be in the millions of dollars for Alabama farmers, he said. Rains have delayed harvests by about three weeks affecting not only cotton but also leaving some peanut crops vulnerable to early frosts.

"The majority of the cotton crop is still in the fields," he said. "Peanuts are about 60 percent harvested. There's been concern about rain, but now it's almost panic."

Soybeans have also been hurt by rain, with crops rotting and sprouting in the fields, Petcher said.

[Illinois, November 12]

"I've been doing this for 30 years and I've never seen a year like this," said Ron Waldschmidt, a vice president with farm equipment dealer A.C. McCartney in Wataga, Illinois.

"It's not unusual in any given year to have wet conditions, or maybe a variety that tends to mold, or maybe the moisture is a little bit high. But this year, you've got it all," he said.

[Arkansas, November 12]

On Nov. 4, Gus Wilson took a sample of soybeans with 100 percent damage.

“It was the first time I' ve seen that,” says the Chicot County, Ark., Extension staff chair. “The situation here is bad, bleak. We' ll be lucky to make half the crop we' ve made in the last three to four years. That' s strictly due to the weather.”

Chicot County in extreme southeast Arkansas has caught huge rains all fall. Now, watching crops deteriorate, Wilson says he' s not seen “a group of growers who' ve been more discouraged. Those who were planning to plant wheat may be out of luck. If there' s wheat planted and emerged in Chicot County, I don' t know where it' s at.”
…
Faced with a seemingly unceasing deluge in 2009, veteran farmers are struggling to come up with a similar year in the past.

“My father is 82 years old and he' s farmed 55 to 60 years,” says Wilson. “He says this is the worst harvest season he' s ever seen. Out of his career, he said only one year comes close — he can' t remember if it was in the late 1950s or early 1960s.

[Virginia, November 17]

Last week's torrential rainfalls have caused damage and delays to some Virginia farm crops, but the extent of losses is unknown, some agriculture experts said yesterday.

Several crops that were recently planted or still in the fields were hurt by the widespread, three-day deluge, including winter wheat, barley and soybeans, said Molly Payne Pugh, executive director of the Virginia Grain Producers Association.

"There is definitely going to be damage," Pugh said. "I don't have a good feel for how much yet. Right now, we are assessing."

[Mississippi, November 23]

On the dashboard of his truck, Allen C. Evans III, a farmer near Clarksdale, has a sheaf of receipts from the grain elevator, showing the damage levels of each load of soybeans: 39.9 percent, 67.9 percent, 51.8 percent. A born fretter, he is afraid to call, he said, to find out the final reckoning of the disastrous season.

"You're just kind of walking around like a zombie," Mr. Evans said, "saying, never could I have guessed that the best crop I've ever raised in my entire life - the one I never worried about - of all the crops to have taken away from us, how can this be the one?"

In the Delta, those elevator receipts have become talismans of the times. Michael Patterson, who helps pay for his farming with the proceeds from his grain hauling company, displayed one showing a farmer who brought in 1,110 bushels of soybeans, but got paid for 11. The rest were damaged.

That farmer was distraught, Mr. Patterson said.

“You don' t want to be the generation,” he said, “that loses the family farm.”

These two realities can' t coexist!

Farmers can' t be going bankrupt across the US thanks to the worst harvest season ever seen while at the same time producing the USDA's Biggest Crop Ever! Someone is lying, and evidence supports the farmer' s story.

Adverse weather conditions across the globe

American farmers weren' t alone in their suffering this year. Abnormal weather has ruined crops around the world in 2009:

1) The worst drought in half a century has turned Argentina's once-fertile soil to dust and pushed the country into a state of emergency. The country's wheat yield for 2009 was 8.7 million metric tons, down from 16.3 million in 2008.

2) Australia is suffering the longest running and most severe drought on the planet. November temperature records were broken all over eastern Australia, and lower wheat yields than expected were reported, leading to production estimate cuts. Profarmer Australia has cut their Australian wheat production estimate by 1 MMT to 20.9 MMT, and Commonwealth Bank of Australia reduced their estimate by 0.7 MMT to 21.6 MMT (USDA's current estimate is, of course, is an insane 23.5 MMT).

3) Northern China was hit by worst drought in 50 years. Chinese wheat production was predicted to be down 10% "In A Best Case Scenario". The sustained drought lead to water and food shortages in June for more than 1.37 million people in northwest China's Ningxia Hui Region. Chinese corn production is expected to shrink at least 10%, with shortages developing by spring-summer of 2010.

4) The Middle East and Central Asia are suffering from the worst droughts in recent history, and food grain production has dropped to some of the lowest levels in decades. Total wheat production in the wider drought-affected region is currently estimated to have declined by at least 22 percent in 2009.

5) Wind, rain, and hail ruined India' s spring wheat crop. Following failed wheat harvest, India then experienced the driest monsoon in 37 years. In terms of affected area, India' s drought was the worst since 1918. Farmers who could no longer irrigate crops now feared nothing would be left to drink. Millions of poor villagers across southern India are facing an imminent food shortage following months of intense drought and recent devastating floods.

6) Etc…

Financial crisis worsens drop in crop production

On top of the worldwide abnormal weather, the low commodity prices and lack of credit caused by the financial crisis harmed production. The lack of credit curbed farmers' ability to buy seeds and fertilizers limiting production, and low prices at the end of 2008 discouraged the planting of new crops in 2009. In Kansas for example, farmers seeded nine million acres, the smallest planting for half a century.

Between the effects of the financial crisis and the abnormal weather experienced across the globe, the idea that 2009/10 saw record harvests of anything is pure fantasy.

US Soybeans Supply and Demand

Analyzing U.S. soybeans supply and demand reveals how bad the situation is. The US is the biggest producer and exporter of soybeans, and, when America runns out of soybeans, it will create panic.

Below are the latest figures from the USDA. Highlighted in red are the problem numbers which need serious adjustment to reflect reality.

No beginning stocks of US Soybean

By the end of August, grain movement in the US came to a virtual standstill, with farmers sold out of soybeans. Those few soybean end-users (ie: feedmakers and poultry producers) which caught short were forced to pay prices as high as they paid at the very height of the bull market in 2008.

The struggle to secure quick-delivery soybeans in the US cash markets sent soybean futures into intense backwardation (backwardation is when cash prices are higher than future prices). Desperate Midwest crushers were bidding up to $2.72 a bushel over CBOT September futures contracts to acquire scarce soybean supplies. Some processors in the heart of the Midwest soy belt grew so desperate for soybeans to crush that they paid to transport some of the early harvest from the Mississippi River Delta northward to Illinois.

The chart below shows the backwardation of soybean futures on August 28. Notice the huge price gap between promises to September and November contracts. Notice the even larger gap between cash prices and September futures.



Finally, at the end of 2008/09, these was a huge about of amount of soybean sales outstanding, 2,216,016 MT, which were rolled over into the 2009/10 crop year. This means the exporters couldn't find enough soybeans to make good on the 36,069,606 MT of soybeans they sold last year. Basically, the US ran out of soybeans in August 2009, and the beginning stock of US soybeans should be considered zero for 2009/10.

Real number for US Soybean Production

The graphic below shows 2008 Soybean Production by country, which should be an accurate representation of where they were grown in 2009.



The next graph also shows 2008 Soybean Production with soybean producing counties declared disaster areas in 2009 highlighted in red, which should provide be an accurate representation of how badly production was effected this year. Keep in mind that

1) Many counties that weren' t declared disaster areas based on the USDA' s requirement of 30% damage, still suffered 10 to 20 percent losses.

2) Many counties which were declared disaster areas (in red) suffered crop losses far worst than 30 percent.

Based on USDA' s disaster declarations and reports of horrendous crop losses, a realistic estimate of US soybean production would be below 2007/08 soybean production at around 70 MMT (Million Metric Tons).



Real number for US Soybean exports

The chart below showing outstanding soybean export sales shows what is wrong with the USDA' s export estimates for 2009/10.




Outstanding soybean export sales represent the amount of soybeans that have been sold but not yet exported. At any point in time, it is possible to buy "old crop" soybeans (already harvested) or "new crop" soybeans (which will be harvested next year). Outstanding soybean export sales rise until harvest and then go down as soybeans start being exported.


Predicting total 2009/10 exports using outstanding export sales data

On average, total soybean exports for the last eight years has been 3.6 times the peak in outstanding export sales.

If the pattern from the last eight years holds true, 2009/10's peak outstanding export sales of 19 MMT implies total exports of roughly 70 MMT for 2009/10.

US Soybean Supply and Demand catastrophically out of balance

The table below shows the USDA Numbers compared to more realistic estimates.

Of course a negative ending stock isn' t possible. This just means that the US will run out of soybeans before next September. The process is well under way.

The chart below shows US monthly soybean exports for the last year, and, again, the problem is obvious.


The US exported over 7 MMT of soybeans in November! Furthermore, since the US exported 3.7 MMT in the first two weeks of December, the rate of exports isn' t slowing down. At this rate the US soybean supplies will start running critically low around March/April.

Economic Pandemonium

The true financial crisis begins when the world realizes that there are couple months food supply missing from 2010. The last two years were a gentle, mild preview of the real thing.

Total Panic

The sudden, shocking discovery that food supplies are running out will produce total panic. The reaction will inventory building — hoarding —at all levels. Major food producing nation will export bans (India has already banned food exports). Producers, Middlemen, And Households will rush the acquire supplies. All this hoarding will wrosen the crisis by throwing supply and demand further out of balance: export bans cut supply available on international market and inventory building increases demand. Food prices will more than double.

Central bank exodus from the dollar

With one out of eight Americans on food stamps, foreign central banks are subsidizing US food consumption by funding the US government with their treasury purchases. Once the food crisis begins next year, they will be faced with the choice:

1) Continue subsidizing US food consumptions as triple digit food inflation ravages their economy and their people starve.
2) Dump their treasury holdings onto the market to rapidly appreciate their currencies, lowering the cost of food imports and preventing widespread domestic starvation.

Not much of choice. China, for example, will drop the dollar peg without a second thought to prevent triple digit food inflation from damaging its economy and causing widespread of social unrest. Chinese exporters will be badly hurt, but that will be a small cost if it can keep food prices down.

In India, the government is ALREADY under pressure to selloff the country' s $270 billion in forex reserves.

Food prices are rising faster than any other commodity and food prices hit the poor the most.

While overall inflation is just 3 per cent, food prices are rising at unforgivable 17.7 per cent. Prices of rice and wheat have gone up in double digits in one year (10 per cent).
…
Perhaps the most surprising is that while food prices are rising, the government seems to be doing nothing, although it is fortunate to have many policy options at hand.

One option is to release food grain stocks [which unfortunately, DON' T EXIST], say analysts. They argue why should wheat and rice prices rise when India has near record stocks of food grains.
…
The second option that the government has to reduce the inflation in potatoes, onions and pulses is to use some of India's enormous reserves of foreign exchange to import these food items so crucial for the poor.

India today has $270 billion in forex reserves. A small fraction of this could be used to import food and help the poorest.

“But the dollar can' t collapse because there is no alternative to the US dollar for a reserve currency…”

I love the "there is no alternative to the US dollar for a reserve currency" argument. Every time I hear it, I imagine someone standing on the deck of the Titanic on the night of April 14, 1912, and declaring, "This boat can't possibly sink because there aren't enough lifeboats!"

The lack of viable alternatives doesn't mean the dollar can't sink, it simply means that when it does go down, it will result in a tragedy of epic proportions which will be remembered for centuries to come.

Political Fallout of 2010 Food Panic

While a food crisis was unavoidable to some extent because of the abnormal weather and financial crisis, the total panic which will soon grip world agricultural markets is a creation of the USDA and its fictitious production estimates. If not for the USDA's interference, food prices would have risen in the first half of 2009 in anticipation of the 2009/10 shortage. The United States Department of Agriculture, has caused incalculable damage to the world economy by encouraging overconsumption of rapidly diminishing food supplies.

Once the 2010 Food Crisis starts, confidence in the US government will be shattered as a result of the USDA' s faulty estimates. The starvation and misery caused by higher food prices will also create a lot of anger…

Insolvent Midwestern banks

With failed crops, farmers across the Midwest are bankrupt, and so are their banks. This is especially important considering that the FDIC is out of money. Every bank failure is now being financed with the immediate sale of treasuries.

Whether the US choose to bail out Midwest banks with billions of emergency aid for bankrupt farmers or finances the FDIC takeover of their banks, the outcome will be the same. The enormous quantity of debt which the US will need to sell to finance emergency aid and resolve bank failures in the Midwest will pressure an already collapsing market for US treasuries.

Panic selling of distressed debt

When the dollar starts rapidly losing value, the flaw in the whole “hold to maturity strategy” will be revealed. Financial institutions around the world will realize that the dollar will lose all value years before their toxic assets ever have the chance to mature. They will then begin dumping trillions of toxic US debt at firesale prices, simply to escape the dollar's devaluation.

Self-reinforcing Breakdown of derivative markets and US financial system

Short term treasuries function as the collateral backing derivative markets and US financial system. When the dollar and treasuries start falling in value with exit of foreign central banks, investors will lose confidence in that collateral and start withdrawing from derivative markets. This will result in a flood of new treasuries coming onto the market as collateral is liquidated, causing further loss of confidence, and so on.

To image how this damaging dynamic would work, take a look at the Portfolio Allocation of PIMCO Commodity Real Ret Strat C Fund (PCRCX). PCRCX is a commodity fund which uses derivatives to gain its exposure to commodities.
PIMCO Commodity Real Ret Strat C Fund (PCRCX) Portfolio Allocation
Track portfolio allocation change of PIMCO Commodity Real Ret Strat C fund (PCRCX)

Most Recent Top 10 Holdings in PIMCO Commodity Real Ret Strat C Fund (PCRCX)

It is easy to see why, with the treasury market breaking down, investors will question the wisdom of investing in a fund that has over 76% of its assets in US bonds. Investors will start withdrawing their money from the fund, and PCRCX will have to sell treasuries into a market already filled with only sellers. This “run on the bank” dynamic will gain steam until it leads to the collapse of derivative markets and the US financial system.

The use of a single asset class as collateral for an entire financial system is idiotic. There is no such thing as liquidity of investment for the community as a whole.

derivative casino will be bankrupt

derivatives are essentially bets (about future value of commodities, currencies, bonds, etc). Like gambling at casinos, to make money in derivative markets requires meeting two conditions:

1) Being on the winning side of the bet.
2) Being able to collect on the bet.

The point here is that it doesn't matter how many chips are won if the casino goes bankrupt before they can be traded in.

There is about $14 Trillion collateral behind listed/OTC derivative markets, and this collateral is invested in short term dollar-denominated debt. As the dollar and credit markets collapse, this collateral will lose all value (the equivalent of a casino going bankrupt). Investors trying to collect on profitable bets (ie: call options on gold) will find their derivative contracts backed by insolvent counterparties and worthless debt.

Warped perception of risk

Right now, the entire commodity derivative market is built on the idea of no default risk. This is to say, investor are now taking default risks very seriously in the credit markets (after experiencing horrible loses due to financial crisis), but these concerns over counterparty solvency are completely absent in commodity derivatives. When the the dollar, treasuries and derative markets start collapsing, concerned investors will start wondering who is on the other side of their commodity investments, and they will be horrified at what they find out.

Deflationary panic in commodity markets

The biggest sellers of commodity IOUs are insolvent institutions desperate for funding. They are taking advantage of the warped perception of risk to raise capital cheaply. For example, investors in commodity derivatives will be thrilled to learn that completely-insolvent, taxpayer-bailed-out AIG Financial Product is a key player in commodity derivatives.

AIG Financial Products and it subsidiary Banque AIG have been key players in the development of commodities as an asset class and has been active in this space since 1991. AIG Financial Products provides clients with a full suite of commodity offerings, including OTC derivatives on both individual commodities and commodity indices, structured products, and bespoke commodity investment solutions. As the creator of a leading benchmark for commodities investing, the Dow Jones - AIG Commodity IndexSM, AIG Financial Products helped spearhead the rapid growth of commodity-based investment in recent years and as of the end of the third quarter of 2006, there was an estimated $30 billion tracking the DJ-AIGCI.

Insolvent institutions like AIGFP have been very active and creative in selling all kinds of commodity investments to anyone foolish enough to buy them. Take for example commodity linked structured notes being sold to retail investors, banks, and commodity funds.

Retail and institutional investors alike are piling into commodity-linked structured notes according to the firm MTN-I, even as overall sales of structured notes declined.

Sales of commodity-linked notes rose to $15.8 billion over the first half of 2008, up from $7.8 billion over the same period a year ago, according to MTN-I…
…
About 77% of all commodity-linked structured notes sold so far this year were issued by investment banks. MTN-I's research showed Deutsche Bank leading sales in the first half of 2008, with 59% of all sales. Barclays was second with 13% and Credit Suisse third with 5%. Merrill Lynch, across various entities, represented a little over 5% of sales.
…
Typically structured notes are unsecured, which puts buyers at risk if issuers go into bankruptcy. That wasn't a concern of most institutional investors until the events of this fall. The bankruptcy of Lehman Brothers, however, quickly left buyers on the hook and possibly unable to recoup their capital.

Other troubled financial institutions that have issued commodity structured notes include insurance giant American International Group (AIG), UBS AG (UBS), Morgan Stanley (MS) and French bank Dexia (HIB4.BE).

AIG Financial Products Corp is also actively involved in commodity ETFs. From the prospectus of DJ-AIGCI:

(Who in their right mind would buy an AIG-backed commodity ETF?)

ETFS Agriculture DJ-AIGCI

Investment objective

ETFS Agriculture DJ-AIGCISM (AIGA) is designed to track the DJ-AIG Agriculture Sub-IndexSM and pays a capitalised interest return which cumulates daily. The Sub-Index is an "excess return" index and the interest component combines to give a total return investment.
…
AIGA is backed by matching Commodity Contracts purchased from AIG Financial Products Corp. (AIG-FP) whose payment obligations are guaranteed by American International Group, Inc (AIG) and backed 100% by collateral held by the collateral manager BNY Mellon in a separate account and adjusted daily.

As investors realize who is on the other side of their investments, it will lead to a deflationary panic in commodity markets, with all but the most trusted commodity investments being abandoned. Insolvent institutions like AIG will lose a critical source of funding and, more importantly, investment demand, instead of being absorbed by the IOUs of insolvent institutions, will flow directly into physical commodities, driving up prices.

The Federal Reserve will print trillions

If the treasury market collapses, the government will lose the ability to sell debt to fund itself, which isn' t an option. To preventing such a collapse, the Federal Reserve will have to make purchases in the trillions despite already having run out of room on its balance sheet, which means it will have to print money. A massive expansion of the Fed' s balance sheet at a time of when inflation is spiraling out of control will destroy all confidence in the dollar, worsening the currency crisis.

What life looks like during hyperinflation

Below is an extract from Paper Money by "Adam Smith," covering Germany's hyperinflation in 1923, which offers a good account of what life looks like during hyperinflation.

The German Hyperinflation, 1923

Before World War I Germany was a prosperous country, with a gold-backed currency, expanding industry, and world leadership in optics, chemicals, and machinery. The German Mark, the British shilling, the French franc, and the Italian lira all had about equal value, and all were exchanged four or five to the dollar. That was in 1914. In 1923, at the most fevered moment of the German hyperinflation, the exchange rate between the dollar and the Mark was one trillion Marks to one dollar, and a wheelbarrow full of money would not even buy a newspaper. Most Germans were taken by surprise by the financial tornado.

"My father was a lawyer," says Walter Levy, an internationally known German-born oil consultant in New York, "and he had taken out an insurance policy in 1903, and every month he had made the payments faithfully. It was a 20-year policy, and when it came due, he cashed it in and bought a single loaf of bread."

…
More than inflation, the Germans feared unemployment. In 1919 Communists had tried to take over, and severe unemployment might give the Communists another chance. The great German industrial combines -- Krupp, Thyssen, Farben, Stinnes -- condoned the inflation and survived it well. A cheaper Mark, they reasoned, would make German goods cheap and easy to export, and they needed the export earnings to buy raw materials abroad. Inflation kept everyone working.

So the printing presses ran, and once they began to run, they were hard to stop. The price increases began to be dizzying. Menus in cafes could not be revised quickly enough. A student at Freiburg University ordered a cup of coffee at a cafe. The price on the menu was 5,000 Marks. He had two cups. When the bill came, it was for 14,000 Marks. "If you want to save money," he was told, "and you want two cups of coffee, you should order them both at the same time."

The presses of the Reichsbank could not keep up though they ran through the night. Individual cities and states began to issue their own money. …

The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items -- bric-a-brac, soap, hairpins. The law-abiding country crumbled into petty thievery. Copper pipes and brass armatures weren't safe. Gasoline was siphoned from cars. People bought things they didn't need and used them to barter -- a pair of shoes for a shirt, some crockery for coffee. Berlin had a "witches' Sabbath" atmosphere. Prostitutes of both sexes roamed the streets. Cocaine was the fashionable drug. In the cabarets the newly rich and their foreign friends could dance and spend money. Other reports noted that not all the young people had a bad time. Their parents had taught them to work and save, and that was clearly wrong, so they could spend money, enjoy themselves, and flout the old.

The publisher Leopold Ullstein wrote: "People just didn't understand what was happening. All the economic theory they had been taught didn't provide for the phenomenon. There was a feeling of utter dependence on anonymous powers -- almost as a primitive people believed in magic -- that somebody must be in the know, and that this small group of 'somebodies' must be a conspiracy."

When the 1,000-billion Mark note came out, few bothered to collect the change when they spent it. By November 1923, with one dollar equal to one trillion Marks, the breakdown was complete. The currency had lost meaning.

…
But although the country functioned again, the savings were never restored, nor were the values of hard work and decency that had accompanied the savings. There was a different temper in the country, a temper that Hitler would later exploit with diabolical talent. Thomas Mann wrote: "The market woman who without batting an eyelash demanded 100 million for an egg lost the capacity for surprise. And nothing that has happened since has been insane or cruel enough to surprise her."

With the currency went many of the lifetime plans of average citizens. It was the custom for the bride to bring some money to a marriage; many marriages were called off. Widows dependent on insurance found themselves destitute. People who had worked a lifetime found that their pensions would not buy one cup of coffee.

Pearl Buck, the American writer who became famous for her novels of China, was in Germany in 1923. She wrote later: "The cities were still there, the houses not yet bombed and in ruins, but the victims were millions of people. They had lost their fortunes, their savings; they were dazed and inflation-shocked and did not understand how it had happened to them and who the foe was who had defeated them. Yet they had lost their self-assurance, their feeling that they themselves could be the masters of their own lives if only they worked hard enough; and lost, too, were the old values of morals, of ethics, of decency."

The death of the “US consumer”

The famous “US consumer” has been the driving force of the global economy for decades. This ends in 2010, as the dollar' s collapse will wipe out America' s purchasing power.

US Economic Disintegration

70% of the US economy is consumer spending, with at least 20% of it directly tied to commercial retail real estate. Less than 10% of our economy is related to the production of basic goods and services. This style of economy cannot handle a pull back in consumer spending.

America is facing a terrifying future. As the dollar loses most of its value, America' s savings will be wiped out. The US service economy will disintegrate as consumer spending in real terms (ie: gold or other stable currencies) drops like a rock, bringing unemployment to levels exceeding the great depression. Public health services/programs will be cut back, as individuals will have no savings/credit/income to pay for medical care.

What has already happened in the last year offers a good preview of what to expect in the next:

'tent cities' are growing all around the country
California is experiencing a meltdown
Police cars are being repossessed due to falling tax revenues
Major retailers, hotel chains, and theme parks are going bankrupt
Loan quality at American banks is the worst in at least a quarter century and is deteriorating at the fastest pace ever
The victims of this financial disaster don' t have the money to bury their loved ones.
US states have started printing their own currencies
Recession has put a major strain on social security trust fund
US Contract law torn apart

Given the food shortage in 2010, there is also the potential for famine in the US

The US will not fall alone

With the free falling dollar spreading doubt about all paper currencies, and countries with weak financial health will join the US in hyperinflation. Two countries which will follow the US into economic oblivion are Britain and Japan

Britain is probably the only country worse off than the US, and they know it. Privately, something close to desperation is starting to develop inside government, with cabinet ministers being quoted as saying things such as. "The banks are f***ed, we're f***ed, the country's f***ed." The last time Britain built up this much debt was when it was fighting half of Europe.

Japan meanwhile is facing a demographic collapse and its debt to GDP is approaching 200%. The dollar' s collapse is going to wipe out the value of Japan's foreign reserves and destroy the country' s largest export market (the US), heavily damaging the economy. The yen, like the pound and dollar, will not survive.


Financially Surviving 2010

Here is some investment advice for surviving the 2010 Food Crisis.

Avoid all commodity futures!

DO NOT BUY agricultural futures! While it might be tempting to buy futures contract for soybeans and other agricultural commodities, this is a mistake. Look at the backwardation which happened at the end of August this year: shortage sent cash price of soybeans over $13 while futures contracts hovered around $11. Futures contracts missed out on most of the price spike by nearly 25%.

The 2010 Food Crisis will send futures into permanent backwardation. In other words, shortages will send cash prices into steep backwardation, and then, when the dollar and treasuries collapse, defaults fears will cause that backwardation to grow. Fears that CME might collapse could easily lead futures to trade at a fraction of the commodities they track.

Avoid all other derivatives

It is impossible to hedge against the dollar' s fall with derivatives! Since global derivatives markets operate on the assumption of the continued stable value of the dollar and short term US debt, Using derivatives to bet against the dollar is NOT a good idea. The panic in 2010 will see the majority of derivatives end up worthless.

Avoid all US debt

The biggest buyers of US debt, foreign central banks, are about to become the biggest sellers. Get out while you still can!

Avoid all investments dependent on US consumer

The dollar' s collapse will rob US consumers of all purchasing power, and any investment depend on US consumption will lose most of its value.

Avoid investments in oil (at least for the next year)

While I am bullish on oil for the long term, there are several reasons to be underweight oil in the near term:

1) There is a supply glut (volumes of oil products stored at sea have risen to more than 90 million barrels.)
2) The dollar' s collapse wipe out a huge amount of demand for oil. While demand from emerging economies like India and China will replace this lost demand, it will take in one to two years.
3) Higher food prices will hurt demand for everything else, including oil.
4) There is a very high the entire Strategic Petroleum Reserve will hit the market next year after the treasury market collapses and the US government is desperate for cash.

Investments in oil won' t be complete disaster as the dollar' s collapse will generate a lot of demand for “real” assets, but I expect oil to be the worst performing commodity in 2010.

Avoid Margin Accounts

If your broker fails, you are virtually guaranteed to be left with nothing.

Invest in Physical gold

With the Gold Market already Reaching The Breaking Point, the 2010 Food Crisis is guaranteed to trigger a gold banking crisis. Those who own physical gold (and not some paper derivative) will do well.

Invest in agriculture sector

Anything (non-derivative) related to agriculture is going to have a good year. The stocks of fertilizer and seed producers should do well for example.

The best investment in agriculture is to buy farmland in countries which don' t subsidies their agricultural sector (subsidies for their booming agriculture sector is the first thing cash-strapped governments will cut).

I have moved to Russia and am setting up a fund to invest in Russian agriculture. Russia is the only country with a significantly underdeveloped agricultural sector, as the world fertilizer consumption graph below suggests. Please Email me if you are interested.



Invest In commodity producers

Commodities will have a great year next year as the dollar collapse. Agricultural commodities will be the best performing and oil will be the worst. Everything else should fall somewhere in between. Commodities not consumed in the US but heavily consumed in China, like coal, will do best.

Invest in service sector of emerging economies

America' s lost purchasing power will be transfer to nations exporting nations with large foreign reserves. Investments in the service sector of places like Russia, China, Brazil, India, etc should do well.

Invest in the debt of stable currencies

For the short term, I would stick with short term debt (in stable currencies) or, better yet, gold. However, after the 2010 Food Crisis begins, interests rates around the world will jump significantly in response to spiking food prices, and this will probably be a good opportunity to acquire long term bonds at attractive rates (in stable currencies like the yuan, ruble, etc).

Conclusion

There is no precedence for the panic and chaos that will occur next year. The global food supply/demand picture has NEVER been so out of balance. The 2010 food crisis will rearrange economic, financial, and political order of the world, and those who aren' t prepared will suffer terrible losses…

Numismaster reports that CFTC Gets Facts of Bullion Manipulation.

(emphasis mine) [my comment]

CFTC Gets Facts of Bullion Manipulation
By Patrick A. Heller
March 30, 2010

Last Thursday, the Commodity Futures Trading Commission held hearings on the possible imposition of commodity futures and options trading limits in the precious metals markets. Each of the five commissioners plus two CFTC staff members made presentations. In addition, 14 outside parties accepted invitations to make presentations.

This hearing came about in part because of long-term complaints from organizations such as the Gold Anti-Trust Action Committee and individual analysts such as Ted Butler, Reg Howe, James Turk, Frank Veneroso and Adrian Douglas that the gold and silver commodity markets have been subject to blatant extensive price suppression manipulation by the U.S. government and its trading partners.

Among the outsiders making presentations at this hearing were Bill Murphy, in his capacity as chairman of GATA, and Harvey Organ, an individual investor.

Murphy was advised to expect a strict time limit of five minutes for his presentation, even though the CFTC chairman Gary Gensler had the option to allow more time. In order to provide the maximum documentation possible into the official written record of these proceedings, Murphy raced through his 6-1/2 minute oral presentation in just five minutes. It was not a graceful presentation, but Murphy introduced a lot information into the record that the CFTC can no longer pretend not to know.

After his formal remarks, Murphy was asked by commissioner Bart Chilton if he could provide some specific instances where such manipulation had occurred. This was the opening for Murphy to introduce a bombshell.

In November 2009, Andrew Maguire, a former Goldman Sachs silver trader in that firm's London office, had contacted the CFTC Enforcement Division to report the illegal manipulation of the silver market by traders at JPMorgan Chase. He described how the JPMorgan Chase silver traders bragged openly about their actions, including how they gave a signal to the market in advance so that other traders could make a profit during the price suppressions.

Maguire had a series of e-mails with Eliud Ramirez of the CFTC Enforcement Division explaining how the manipulations were tied to the Bureau of Labor Statistics monthly release of non-farm payroll figures and other recurring events. On Feb. 3, 2010, Maguire sent an e-mail to Ramirez and commissioner Chilton saying that he had observed the JPMorgan Chase signal that the price of silver would be knocked down upon the announcement of the non-farm payroll report at 8:30 a.m. on Feb. 5. Maguire then sent them e-mails on Feb. 5 as this suppression was in process, pointing out that it would not be possible for him to have such accurate advance information about this development if the markets were not controlled by JPMorgan Chase.

Maguire asked to be invited to speak at the CFTC hearings this past Thursday. When he was not invited, he contacted Adrian Douglas, another director of GATA, on March 23 to supply this information to be made public at the CFTC hearings. Murphy filled Maguire's request in response to Chilton's question asking for specific instances of price manipulation. When I saw him Saturday, Murphy told me that the CFTC commissioners all went pale as he described exactly how the CFTC was provided this detailed information about silver price manipulation but had not yet done anything about it.

During Harvey Organ's presentation, a question came up about whether large short positions on the London Bullion Market Exchange also reflected efforts to suppress gold and silver prices. Adrian Douglas was permitted to address the hearing on this issue, a subject he has studied extensively. Douglas pointed out that the huge volume of trading levels in the London market (averaging $22 billion per day) could not possibly be settled by delivery of physical metals. To this point, the commissioners asked Jeffrey Christian, one of the other speakers who runs CPM Group — one of the most respected precious metals consultancies, whether Douglas's contention that the London gold and silver markets could not be settled by delivery of physical metal for all the contracts. Christian rejects the concept that the gold and silver markets are manipulated, but he did confirm Douglas's analysis.

In effect, the commissioners were told that almost all of the trading activities on the London exchange were merely settled by paper for paper, not for physical metals as the exchange supposedly requires. Further, the commissioners were told that it was impossible for the London exchange to ever deliver all the gold and silver owed to the owners of contracts.

After the hearing, GATA publicly released copies of Maguire's e-mails with the CFTC. Murphy also revealed that Maguire had recorded all of his telephone conversations with the CFTC without asking for their permission to do so. This is legal to do in Britain, but such recordings cannot legally be provided to other parties. GATA is currently working to ensure that these recorded conversations can be legally released to the public.

This past Saturday, Murphy addressed a full room with his Numismatic Theatre presentation at the American Numismatic Association convention in Fort Worth. There, he shared much of the breaking information he provided to the CFTC commissioners. Little did we know at the time, but at about then Andrew Maguire's car, in which his wife and he were riding, was struck by a hit-and-run driver. Both Maguire a nd his wife were briefly hospitalized. The police eventually arrested the other driver. The Maguires may be considered more than lucky. There are other past would-be whistle blowers about the manipulation in gold and silver markets that died in unusual accidents before they were able to bring forth their evidence.

Curiously, the live television broadcast of the CFTC hearing suffered a technical failure right as Murphy was set to begin his testimony. This was corrected right after Murphy was finished. At the same time, at least one live voice broadcast failed during Murphy's presentation. Coincidence?

Now that this information about silver price manipulation and about the massive shortage of physical gold and silver on the London exchange is part of the official record, I expect huge fallout. Remember, after the five men were arrested for breaking into the Democratic headquarters in Watergate in June 1972, it took more than two years for President Nixon to resign. I don't think it will take anywhere near this long for last Thursday's revelations to blow back against the U.S. government and the U.S. dollar. Once the public realizes the extent of the manipulation, gold and silver prices are likely to skyrocket.

I think this hearing will be the beginning of the end for those trying to suppress gold and silver prices. If you would like to view what happened yourself, please check the video clips listed below.

The Huffington Post reports that It's Ponzimonium in the Gold Market.

It's Ponzimonium in the Gold Market
Posted: March 31, 2010 10:13 AM
Nathan Lewis

We've had a string of amazing revelations recently regarding the world's precious metals market. This is important stuff for anyone (like me) who holds gold as a means to avoid currency turmoil and counterparty risk.

(My earlier post on shenanigans at the Comex gold market.)

This news has been actively suppressed in the mainstream media.

The Commodity Futures Trading Commission, a U.S. government regulatory agency, held hearings in Washington D.C. in late March regarding position limits in the futures market.

People involved in the markets have known/suspected for years that they have been manipulated by certain large entities, notably JP Morgan and Goldman Sachs.

Analysts like silver maven, Ted Butler, hedge fund giant, Eric Sprott, and the Gold Anti-Trust Action Committee (GATA) have been collecting evidence of this manipulation for years.

These hearings were supposed to be a non-event [which is why I didn't blog about them]. However, despite the media lock-down, the word is getting out.

The CFTC, like the SEC, is a conflicted agency. Some people, notably Chairman Gary Gensler and Commissioner Bart Chilton, seem to want to clean up the sleaze, fraud and corruption.

The CFTC even invited GATA's Bill Murphy and Adrian Douglas to make statements. Would you be surprised to learn that the cameras had a "technical malfunction" during Bill Murphy's statement, which magically righted itself immediately after he finished?

After the hearing, according to Douglas, Murphy was contacted by several major media outlets for more interviews. Within 24 hours, all the interviews were canceled. All of them.

You can follow the links above to see the research that Butler, Sprott and GATA have done over the years. That was only one part of the emerging story.

The second part is the appearance of London metals trader and now whistleblower Andrew Maguire, who understands JP Morgan's manipulation scheme inside and out.

Maguire understands the process so well that he was able to describe it to the CFTC's Bart Chilton on the phone in real time. As in: "in a few minutes, they are going to do this, and then they will do that."

Listen to an extended interview with Maguire and GATA's Adrian Douglas on King World News here.

Maguire has taken some personal risks to tell all this in public. In fact, almost immediately after his initial statements, he was run over by a car while walking down the street. The driver sped away, nearly running over some other pedestrians in his haste to escape. Fortunately, Maguire survived the hit-and-run "accident" with minor injuries. What a coincidence.

The third item was during the question-and-answer session at the CFTC hearings. GATA's Adrian Douglas.

For many years, people assumed that the London Bullion Market Association (LBMA), the world's largest gold market, was a simple bullion market. Cash for gold. However, just in the past few months, more people are realizing that there is actually very little gold within the LBMA system.

Even long-time gold specialists like Maguire have been amazed to learn that there is no gold corresponding to the vast "gold deposits" at the major LBMA banks.

During the CFTC hearings, Jeffrey Christian of CPM Group apparently informed us that the LBMA banks actually have about a hundred times more gold deposits than actual gold bullion.


This means that there are thousands of clients -- Asian and Middle Eastern governments and sovereign wealth funds among them -- who think they own hundreds of billions and perhaps trillions of dollars of gold bullion, and are being charged storage fees on that fantasy bullion, but they really own unsecured gold loans to the banks at a negative interest rate.

There is nothing new about this. Morgan Stanley paid several million dollars in 2007 to settle claims that it had charged 22,000 clients for storage fees on silver bullion that didn't exist.

Imagine now that you are one of these people who think they own billions of dollars of gold in an LBMA bank depository. Now you find out that this gold doesn't really exist.

You would ask for delivery of your gold immediately. It would be a "run on the bank."

What about things like ETFs linked to gold? Most of them also claim, as assets, these "deposits" at the LBMA banks.

The entire gold market is complete "ponzimonium," a word popularized by the CFTC's Bart Chilton.

LBMA Bullion Market Ponzi Scheme





PR Newswire reports that gold/silver short squeeze could be imminent.

Silver Short Squeeze Could Be Imminent
FORT LEE, N.J., April 3 /PRNewswire/ -- The National Inflation Association today issued a silver update to its http://inflation.us/ members:

...
On February 3rd, Andrew Maguire wrote Eliud Ramirez, a senior investigator for the CFTC's Enforcement Division, giving him the "heads up" for a "manipulative event" signaled for February 5th. He warned the CFTC that JP Morgan was about to manipulate down the price of silver after the release of non-farm payroll data on February 5th. Andrew said that the takedown would happen regardless of if employment was better or worse than expected and the price of silver would be flushed to below $15 per ounce. During the next couple of days, silver was crushed from $16.17 per ounce down to a low of $14.62 per ounce.

Despite all of the evidence given by Andrew Maguire to the CFTC of gold and silver manipulation, Andrew wasn't allowed to speak at last week's CFTC hearing on limiting gold and silver positions held by banks like JP Morgan. Bill Murphy of the Gold Anti-Trust Action Committee (GATA) was allowed to speak (within a five-minute time constraint) and present some of Andrew Maguire's evidence, but right when his presentation began there was a technical failure of the live television broadcast, which was mysteriously fixed as soon as he was done speaking. Bill Murphy was scheduled for several mainstream media television interviews after the CFTC hearings, but they were all abruptly cancelled at once.

A couple of days after the CFTC meeting, Andrew Maguire and his wife were involved in a bizarre hit-and-run car accident in London where a second car coming out of a side street struck their vehicle, which resulted in a police chase using helicopters and patrol cars before the suspect was nabbed. Andrew and his wife were released from the hospital with minor injuries. (NIA does not believe in conspiracy theories but when you consider that this is a potential multi-trillion dollar fraud that could bring down the world's financial system, it really makes you think.)

The silver market provides a window into what is happening in the gold market. Because the silver market is very small and its short position is so concentrated, its price is easier to manipulate than gold, but the same manipulation is taking place in gold on a much larger but less noticeable scale. In our opinion, the CFTC is under pressure not to do anything about the manipulation because the lower gold and silver prices are, the stronger the U.S. dollar appears to be. If we saw an explosion to the upside in gold and silver prices, it would result in a complete loss of confidence in the U.S. dollar.

NIA believes the precious metals markets are currently being artificially suppressed by paper gold and silver that doesn't physically exist. At last week's CFTC hearings, Jeffrey Christian of the CPM Group admitted that banks have leveraged their physical bullion by 100 to 1. This means for every 100 ounces of paper gold/silver that trade, there could be as little as 1 ounce of physical gold/silver in the vaults backing it. However, Mr. Christian sees no problem with this because he says "it has been persistently that way for decades" and there are "any number of mechanisms allowing for cash settlements."

What Mr. Christian fails to realize is that most investors around the world holding paper gold/silver believe they own physical gold/silver. There will come a time when these investors don't want cash settlements in U.S. dollars, but they will want the physical precious metals themselves. When investors around the globe eventually call for physical delivery of their precious metals, NIA believes it will result in the biggest short squeeze in the history of all commodities.

Howestreet reports about "New Dynamic" in the Gold Market.

A "New Dynamic" in the Gold Market

April 1, 2010 — The shorts in gold — and particularly the shorts in silver — felt some pain today. Gold climbed $11.80 to close on the Comex at $1125.10, a 1.1% gain for the day. Silver did nearly twice as well, up 2.1% for the day and ending at $17.876, the highest in ten weeks. The gold/silver ratio fell to 62.9 from 63.6 the day before.

Now that the downward pressure put on gold and silver prices by the gold cartel for option expiry and quarter-end window dressing is behind us, it is no surprise that the precious metals have jumped higher. Physical demand — which is always the major driver of the gold price in the long-run — remains strong, as evidenced by high premiums pretty much everywhere.

The big news that has now begun influencing the market is the stunning revelation by GATA at a Commodity Futures Trading Commission (CFTC) hearing last week about the London whistle-blower who had explained to the CFTC how JP Morgan Chase has been manipulating/capping precious metal prices. In a shocking parallel to the inaction by the SEC after receiving warnings from Harry Markopolos about the Madoff ponzi, the CFTC has apparently been sitting on this information.

The whistle-blower, Andrew Maguire, is an experienced precious metal trader in London. In this riveting interview on King World News with GATA director, Adrian Douglas, Maguire describes a "new dynamic" impacting gold. Specifically, there is a huge short position in the market. But there is even more.

The CFTC hearing confirmed what GATA has been saying all along, that the gold market is being manipulated. To achieve this manipulation, the gold cartel has accumulated a huge short position. Importantly, the hearing confirmed that the gold cartel's huge short positions are 'naked', meaning that these positions are not hedged. More to the point, the CFTC hearing revealed that there is 100-times more paper-gold outstanding than physical gold.

The market is now starting to absorb the significance of what GATA has uncovered over the years and summarized succinctly in its prophetic announcement in The Wall Street Journal more than two years ago, seven weeks before the collapse of Bear Stearns and the start of the present financial crisis: "The objective of this manipulation is to conceal the mismanagement of the U.S. dollar so that it might retain its function as the world's reserve currency. But to suppress the price of gold is to disable the barometer of the international financial system so that all markets may be more easily manipulated. This manipulation has been a primary cause of the catastrophic excesses in the markets that now threaten the whole world."

The revelations from the CFTC hearing are earth-shaking, and indeed a "new dynamic" has emerged. The gold cartel now has a big target painted on its forehead. One can never predict the future, but it seems to me that as this news about the gold cartel's huge naked short position spreads, two things will happen.

It is inevitable that the big traders and hedge funds will push the naked shorts to the wall by asking for physical metal. We could therefore see more hedge funds switching out of GLD like Greenlight Capital did last summer, which leads to the second likely outcome. If we get a squeeze on the naked shorts, the sky is the limit for precious metal prices.

The gold cartel may not yet be finished, and won't be until the unholy Wall Street-D.C. axis is dismantled. But the gold cartel is on its way out.

Over the past ten years, the gold cartel has staged a controlled retreat. It has been fighting the advancing gold price with propaganda, paper short sales and the occasional dishoarding of physical metal from central bank vaults and more recently, the IMF. This retreat is I suspect about to turn into a rout, which means the upside potential for the precious metals is huge.

Commodity Online asks will fraud lift gold prices to $10,000/ounce?

Will fraud lift gold prices to $10,000/ounce?
Published on: April 03, 2010 at 16:20
By Geena Paul

NEW YORK (Commodity Online): After the sub-prime catastrophe in banking and realty sector, which led to the global recession in 2008-09, it is the turn of bullion markets now.

'FRAUD', that is the one word which comes to any investor's mind when s/he reads about the Commodity Futures Trading Commission (CFTC) hearing on manipulations in bullion market by gold cartels.

So, the small and clean investors have been short-changed by big cartels during the past many years, especially during the recent boom time in bullion markets. Otherwise, how will you explain the biggest boom in paper gold (Exchange Traded Funds, ETFs) in the recent past with hardly any gold available in the market.

In fact, there is no gold left in this world if all the Gold ETFs ask for physical delivery. And, if that happens only god knows what will be the gold prices in the coming months — $10000 per ounce? Maybe, even more. Because, price of a commodity which is not available at all can go up to any level due to the sheer fact that it is not there in the market. [This is also true with agricultural commodities. The panic created by a shortage of gold or food is like nothing else, and we will experience both this summer.]

Now read about the Commodity Futures Trading Commission (CFTC) hearing last week about a London whistle-blower who had explained to the CFTC how JP Morgan Chase has been manipulating/capping precious metal prices. In a shocking parallel to the inaction by the US Securities and Exchange Commission (SEC) after receiving warnings from Harry Markopolos about the Madoff ponzi, the CFTC has apparently been sitting on the information on gold cartels.

Did you visit the websites of GATA and CFTC this week? If you do, you can see a lot of articles and responses from investors who have been keenly watching the developments in bullion market.

The whistle-blower in this biggest gold fraud was Andrew Maguire, an experienced precious metal trader in London. In an riveting interview (which is available on the internet all over the world) with GATA director, Adrian Douglas, Maguire describes a new dynamic impacting gold. The fact is that, there is a huge short position in the market.

The CFTC hearing confirmed what GATA has been saying all along, that the gold market is being manipulated. And, how? The gold cartel has accumulated a huge short position and the huge short positions are 'naked', which means these positions are not hedged. There is 100-times more paper-gold outstanding than physical gold. You must be saying Oh, My God! Then wait, there is more to it.

Sub-prime crisis was peanuts before this scam. The bullion market is now slowly taking in the impact of these revelations. The result is, there will be no gold in the market. Because, if people ask for physical delivery of gold for their ETFs, who will give all the gold. THERE IS NO GOLD! And the price of gold can be $5,000 per ounce, $10,000 or may be even more. Who can predict the value of a commodity which is not there is the market?

Gold ETFs are nothing but paper

Commodity Online reports that fraud will spoil the image of ETFs.

Gold ETFs: prudent investment or paper dream?
By Geena Paul

LONDON (Commodity Online): Almost all market and bullion analysts in the recent years harped on a new investment option — the Gold Exchange-Traded Funds (ETFs). Till a decade ago, there were no easy options to invest in gold like the equities market. Realising this, innovative people brought out the gold ETFs to make gold investment easy for investors. The development of the gold ETF market in 2003 changed the way people invested in bullion.

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But when the gold ETFs came into the market, nobody anticipated a fraud will spoil the image of ETFs within 10 years of its existence. So, last week, when the Commodity Futures Trading Commission (CFTC) heard a case regarding manipulations in bullion market by gold cartels, the gold ETF scam hit the investors like a bolt from the blue.

Now, the gold ETFs' image is at stake. Soon, investors are set to question the credibility of the gold ETFs. The reason is the facts emerged during the CFTC hearing.

The whistle-blower in this biggest gold fraud was Andrew Maguire, an experienced precious metal trader in London. In an riveting interview (which is available on the internet all over the world) with GATA director, Adrian Douglas, Maguire describes a new dynamic impacting gold. The fact is that, there is a huge short position in the market.

The CFTC hearing confirmed what GATA has been saying all along, that the gold market is being manipulated. And, how? The gold cartel has accumulated a huge short position and the huge short positions are 'naked', which means these positions are not hedged. There is 100-times more paper-gold outstanding than physical gold.

So, if you are buying ETFs, be sure that there is no gold guarantee for your piece of paper which offers you the ownership of some specific quantity of the yellow metal. In reality, it is just a piece of paper which you bought paying huge sums.

Recently, the World Gold Council reported that the world's total gold ETF market grew 85% relative to 2008.

During the hearing Adrian Douglas of GATA said: I would just like to make a comment. We are talking about the futures market hedging the physical market. But if we look at the physical market, the LBMA, it trades 20 million ozs of gold per day on a net basis which is 22 billion dollars. That's 5.4 Trillion dollars per year. That is half the size of the US economy. If you take the gross amount it is about one and a half times the US economy; that is not trading 100% backed metal; it's trading on a fractional reserve basis. And you can tell that from the LBMA's website because they trade in "unallocated" accounts. And if you look at their definition of an "unallocated account" they say that you are an "unsecured creditor". Well, if it's "unallocated" and you buy one hundred tonnes of gold even if you don't have the serial numbers you should still have one hundred tonnes of gold, so how can you be an unsecured creditor? Well, that's because its fractional reserve accounting, and you can't trade that much gold, it doesn't exist in the world. So the people who are hedging these positions on the LBMA, it's essentially paper hedging paper.

Bart Chilton uses the expression "Stop the Ponzimonium" and this is a Ponzi Scheme. Because gold is a unique commodity and people have mentioned this, it is left in the vaults and it is not consumed. So this means that most people trust the bullion banks to hold their gold and they trade it on a ledger entry. So one of the issues we have got to address here is the size of the LBMA and the OTC markets because of the positions which are supposedly backing these positions which are hedges, but it is essentially paper backing paper.

So the giant Ponzi trading of gold ledger entries can be sustained only if there is never a liquidity crisis in the real physical market. If someone asks for gold and there isn't any the default would trigger the biggest "bank run" and default in history. This is, of course, why the Central Banks lease their gold or sell it outright to the bullion banks when they are squeezed by high demand for real physical gold that can not be met from their own stocks.

Investing Contrarian reports that the world's largest fraud.

The world Largest Fraud: 5.5 Trillion? Time you stood up.
By Contrarian

The Gold and Silver Manipulation spanning decades (going back well back into 1980s) has now taken mammoth proportions, one that could bankrupt not just a few banks but entire countries along with their central banks. Prime in this network are the Bank of England and the FED reserve who have been caught on the wrong side.
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For the first time now, the CFTC (The regulator) has a whistle blower testimony to make a legal move against the cartel of JPM and other trader network. In an incredible audio interview, the London based former Metals trader, Andrew Maguire, chronicled the silver manipulation, Trade by Trade in his running commentary to CFTC. This testimony is being ignored and being pushed under the carpet. Am yet to see main stream coverage of this mammoth fraud clinically and brilliantly uncovered by Andre Maguire, who is now a marked man for the cartel. He already has been involved in a Hit and Run case where a speeding car almost took him down. What is even more interesting, the driver has been caught and yet his testimony is still not being published. Why did he do it? Who paid him to do it? None of the details have emerged.

But for those who are on the Internet and can help in letting this be know to all, this is that interview and must be downloaded and kept for records. No one knows when the King Wold News website will be taken down which brought us this interview with Andrew and Adrian. We have already had one extraordinary attack on the website couple of days back through a coordinated DOS attack.

King World News today received more detail about yesterday's attack on its Internet site, which happened soon after the posting of Eric King's half-hour interview with GATA Chairman Bill Murphy, board member Adrian Douglas, and your secretary/treasurer about last week's hearing of the U.S. Commodity Futures Trading Commission.

The major Internet hosting company that maintains the King World News site reported to King World News: "Your hosting account is the target of a distributed denial of service attack. To protect the network resources, we have temporarily placed your Web site behind a network filter. Once the attack has ended, service will be restored to normal. ... Computers were attacking your account."

Those who have not heard the interview of Andrw Maguire, please do listen to this bombshell and make your judgement on why it is not being given the importance in US justice department. This man while guilty along with the others had the nerve to stand up to the cartel.

The century biggest Fraud revealed

At a point within the interview Adrian Douglas makes the point that the Gold Market in LBMA (London Metals Exchange) is to the tune of $5.5 Trillion. And that is Gold contracts cleared only in London. Imagine COMEX when added to those volumes. We are talking of a market which is more than the economy of China and nearly 60% of US economy.

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The important point note is that the market is not made of Physical Gold but paper contracts exchanged in the form of Futures trades. This gives us the illusion of Price discovery and allows the players in the market to control and manipulate Gold and Silver Prices at will.

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Let me address the cartel if ever they come across my writing: Truth will come out. Your days are counted. You will be taken down.

Every reader of this should make your own judgments on the sequence of extraordinary events that have occurred from Jan 2010 to March 2010 including the Andre Maguire Testimony, his near Death, CFTC hearing going blank at critical times, and most importantly the forced ignorance of this mammoth Fraud which is being ignored by Main Stream even to the point of not having the desire to look one level deeper into all the Mire and dirt in the Precious metal markets.

Media Blackout of CFTC hearings
Timiacono.com reports that Gold, Silver, the CFTC & Conspiracy Theories.

Gold, Silver, the CFTC & Conspiracy Theories
On April 1, 2010, in Article of the Week, Commodities, by Tim

Not being much of a conspiracy theorist, last week's hearing by the CFTC (Commodities Futures Trading Commission) on futures market trading for metals was a subject of some interest to me, but the news flow since that time has been rather remarkable — if for no other reason that none of the news seems to be flowing in the mainstream media.

In fact, a search at the Wall Street Journal on "Gensler" (CFTC Chairman Gary Gensler would surely be included in any report) produces only this one item from before the hearing.



You'd think that, if a news organization that normally finds time to report on the most arcane of financial market goings-on saw fit to publish a story before the hearing was held, they'd also figure it was worthwhile to let their readers know what happened at the hearing.

Apparently not.

The one story($) that the search did turn up quickly gets to the heart of the argument against imposing position size limits for metals markets — the real question that the hearing was attempting to answer:

Imposing new speculative trading limits on metals futures contracts is unwarranted and could have an adverse impact on U.S. markets, some exchange and bank officials will tell the Commodity Futures Trading Commission Thursday.

Later in the story they mention that GATA (Gold Anti-Trust Action Committee) chairman Bill Murphy was planning to speak though, curiously, they failed to mention him by name and then, even more curiously, they followed this mention up with almost three times as many words bashing those, like Murphy, who allege manipulation in these markets.

One of the staunchest believers in the allegations of gold manipulation—the chairman of the Gold Anti-Trust Action Committee—will testify as well.

But others, including the CME's Mr. LaSala and John J. Lothian, a commodity trading advisor, futures broker and the head of a well-known markets newsletter, will urge the CFTC not to pay attention to arguments that there has been manipulation.

"Those who believe gold and silver markets are manipulated to keep prices low are nothing more than politically opportunistic rent seekers in my book," Mr. Lothian planned to say. "They are parasites on the body public profiting from selling fear and seeking political change that will benefit their world view and related market position."

Now, that's some stunningly unbalanced reporting on a subject that, admittedly, anybody anywhere near Wall Street probably doesn't want to contemplate — that markets are rigged. But, in the broader scheme of things, wouldn't it be better to just let "those crazy gold bugs" have their day and be discredited once and for all if they really are as nutty as the WSJ would have us believe?

Well, if you read the Wall Street Journal, you'll never know what happened at the hearing and whether the CFTC paid any attention to them, but, if you look elsewhere, you'll read about all kinds of interesting developments during and after the meeting.

Here's a partial list:

GATA's evidence of silver and gold manipulation at CFTC hearing — Mineweb
CFTC Gets Facts of Bullion Manipulation — Numismaster
JP Morgan Chase Caught Manipulating Gold & Silver Market — Firedog Lake
Whistleblower Speaks Out On JP Morgan Market Manipulation — Jesse's Cafe
Former Goldman Analyst Confirms LMBA Gold Market Is "Paper Gold" Ponzi — Zero Hedge
Whistleblower in Silver Manipulation Struck by Hit and Run Car In London — Jesse's Cafe
King World Interview with Andrew Maguire the Silver Market 'Whistleblower' — Jesse's Cafe
King Interview With GATA On The Biggest Gold Manipulation Story Disclosed — Zero Hedge

Now, of all the sources above, the Mineweb story is probably the most mainstream and they had a few interesting observations and conclusions:

Some observers feel that the Gold Anti Trust Association (GATA's) long held views on a conspiracy by some major banks and government entities to manipulate precious metals prices are off-target, but the latest evidence produced by GATA chairman Bill Murphy in open testimony at the CFTC hearing is compelling assuming the source material is accurate.

The evidence came in the form of a series of emails, and accompanying commentary, from a London metals trader, Andrew Maguire, who contacted GATA on March 23^rd regarding alleged rigging of the precious metals markets by JP Morgan among others, through shorting the markets around key economic data releases, describing in detail how this is achieved. Maguire, Murphy contends, informed the CFTC enforcement division of this market manipulation ahead of the release of farm payroll data in February this year and set out not only how the manipulation would be achieved two days in advance, but also sent real time emails to the CFTC investigators as the alleged manipulation was taking place. According to Murphy the metals prices followed the scenario precisely — something which he felt could not be predicted without prior knowledge of the manipulation of the markets by major players with huge financial clout.

Now, why couldn't the Wall Street Journal report something like that?

It seems to be a rather important development and one that anyone even remotely related to the gold and silver market would surely be interested in.

For the first time ever, a whistleblower has stepped forward citing specifics of a market rigging as it was occurring in real time.

Now, there were more than a few strange goings on at the hearing, one of which was that the video feed went dead just as Bill Murphy was about to detail the Maguire story for the CFTC. Here's the video (that no one was able to see at the time) in which Murphy details Maguire's charges that massive short positions by HSBC and JP Morgan aimed out flushing out longs occur regularly and predictably, in a coordinated fashion.




The fact that whistleblower Maguire was struck by a hit and run driver in London the next day adds to the intrigue. He was apparently not injured badly as he was able to do an interview with Eric King a couple days later in which he sounds completely sane (see link from above).

Of course, the case that the "gold bugs" should be ignored wasn't helped by Jeff Christian of the CPM Group clumsily defending the current system and, in the process, essentially, admitting that there is little or no actual precious metal backing the trading in London — that it's strictly a "paper market", which, to most people makes no sense.

How can you have "price discovery" on a futures market when few of the sellers have anything to sell?
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You'd think there's something in here that the Wall Street Journal would have found newsworthy.

Reuters filed this report after the conclusion of the hearing and they too failed to mention anything other than opposition to any idea of position limits in metal markets. A Google News search on "Gensler" confirms the virtual blackout by the mainstream news media, the only source of information coming from, well, blogs just like mine.

You'd think the mainstream media would at least acknowledge that something happened.

Jesses Cross Roads Cafe reports about "The Biggest Fraud in the World".

30 March 2010
King World Interview with Andrew Maguire 'the Silver Market Whistleblower'

"The Biggest Fraud in the World"

I do not know what to think about this, except to just offer it up to you for your own information.

I am disappointed, however, that only the blogs, and almost no one in the mainstream media, have bothered to cover this story and to speak to the principals, and to either debunk them, support them, or even consider what they have to say.

This really is like the Harry Markopolos story, trying to get a hearing on the Madoff ponzi scheme, and being repeatedly ignored, intimidated, and discouraged in every way possible by the establishment, and even fearing for his life.

Even if this is a mistake, a hoax, some conspiracy, it deserves a proper hearing and an airing in the public. Ignoring it raises even more questions, and serious concerns about the integrity of the US markets. If instead of a proper airing there are only the smears, and disinformation, and the usual sly ad hominem attacks, or even worse, I will begin to believe that it is true.

King World News Interview with Andrew Maguire and Adrian Douglas

I cannot believe that testimony is being completely ignored. I do not understand why this is a 'national security' issue. It seems just too bizarre to me.

Do people inside the trade know something that we don't know? Are these fellows frauds or just mistaken? Is this a hoax? Part of some conspiracy?

Or is this something coming right at us, that will end up hurting the public once again, as the rampant fraud in the financial markets has done so thoroughly.

If there is something going on then it is time to bring it out into the open. If it is national security concern, or more properly the national interest, because it involves the US banking industry, how long do they think they can keep this sort of thing quiet?

If this is something else, why is it not aired, investigated, and nipped in the bud?

I am trying to keep an open mind on this, but it is not being made any easier by what looks like a curtain of silence while the stories and counter-moves are prepared.

I was disappointed that in the interview they never seemed to discuss the hit and run car incident.

I don't want to speculate or get paranoid on this but its not easy. We deserve to know the truth.

Note at night: I have now listened to this tape five times, carefully. It is a bombshell. This has to be dealt with, one way or the other. Bring it out into the light of day, and let the facts be known. This is either the equivalent of the fictionalized testimony on the order of the Salem Witch trials, or one of the most damning accusations of malfeasance in office against quasi-governmental agencies, and probably US officials, since Teapot Dome.

Giving the mainstream media the benefit of the doubt, they are afraid to touch it because it is radioactive. They will wait on the sidelines until something happens. And the strategy seems to be to stonewall, and hope it goes away. The American public is nortoriously fickle and if not reminded of it will move on to the next shiny thing, the next controversy of any type.

But the coverup is always the first mistake of a government in approaching a breaking scandal. But they never seem to learn. You deal with it up front and early. It was not the actual burglary at the Watergate that brought down the government, and took American into its 'long national agony.' It was, and always is, the coverup.

Marke Trap reports that Manipulating Gold (GLD) and Silver (SLV).

Manipulating Gold (GLD) and Silver (SLV): A Criminal Naked Short Position that Could Wreck the Economy
By Mark Mitchell, Published: April 2nd, 2010 3:04 PM PDT

Everyone from U.S. Senators to prominent hedge fund managers say that criminal naked short sellers had a hand in the financial collapse of 2008, but the regulators aren't listening. Not a single criminal has been prosecuted. Indeed, the regulators continue to allow the miscreants to manipulate the markets — not just the stock markets, but also the markets for corporate bonds, derivatives, U.S. Treasuries, and all manner of commodities — even when the regulators are provided with indisputable evidence of a massive crime in progress. They could easily fix the flaws in the settlement system that allow much of the manipulation to occur, but they refrain from doing so either because they are too captured by the miscreants or too cowed by the possible consequences of throwing the lights on what may be an enormous confidence game.

So I am inclined to say that it is hopeless. Everyone loves an optimist — but, yes, it is hopeless. We are like the audience in one of those cheesy horror flicks — yell and scream all you like, but the dumb blonde is still going to walk into that room and get hacked to pieces. Except that it is not a movie. It is real. And it's not just the dumb blonde who is going to get slaughtered. It is all of us. It is our economy. It is our standard of living. It is our financial system — the lifeblood of the nation.

The latest case of regulatory indolence was recently exposed by Andrew Maguire, a successful metals trader and whistleblower who went to the Commodity Futures Trading Commission with data that strongly suggested that a small number of criminal short sellers had rigged the markets for silver and gold. Maguire not only provided the regulators with a Dummies' guide to how the manipulation generally worked, but also warned them of a specific crime — a dramatic take-down of the gold [SPDR Gold Trust (NYSE:GLD)] and silver [iShares Silver Trust (NYSE:SLV)] markets — that he said would occur at an exact time on a specific date in the near future. That is, Maguire told the regulators that a massive crime was about to happen, and the crime happened precisely as he predicted it would.

With Maguire's warning, the regulators were able to watch a crime unfold, right before their eyes, in real time. Then the regulators thanked Maguire by saying, in essence, "you're a nuisance, go away." This is not just appalling, but scary, because the criminal activity that Maguire exposed is much bigger than the Madoff Ponzi scheme, and more likely to result in serious damage to the American economy. Indeed, there is a strong case to be made that our national security is at stake. As Maguire stated in a recent interview with King World radio, the manipulators have likely created a massive naked short position that can easily be exploited by foreign entities who might see financial or even political gain in eviscerating the dollar.

...
After that, Maguire sent several more emails detailing manipulation of the gold and silver markets. He received no replies. So he wrote a final email, providing still more evidence in support of his case and stating: "I have honored my commitment to assist you and keep any information we discuss private, however if you are going to ignore my information I will deem that commitment to have expired."

To that email, a CFTC official finally replied: "I have received and reviewed your email communications. Thank you so very much for your observations." That was it. Thanks a lot and goodbye. No follow up questions. No acknowledgement that a crime had occurred. No apparent interest whatsoever.

Maguire was understandably peeved. As he said in his radio interview, "I kept a live commentary going on that entire scenario. How they were going to flush it down below 15, how it then went down below 15, and how then they were putting big block offers hitting all the bids to stop it getting back through the technical level of 15 so as not to trigger covering by the shorts and inviting longs to get long again. To me, you don't get any better than that, how could anyone predict that unless they knew what was going to happen, not just saying it's going to move in one direction, but it's going to move in one direction then another direction — all in a matter of minutes."

Not long after the massive crime took place, the CFTC held a public hearing on manipulation of the metals markets. Maguire was specifically barred from participating. He told King World radio that he believed one CFTC official, Bart Childers, wanted him to attend the hearing, but Childers is a lone "Elliot Ness" crime fighter working in an agency that is dominated by the feckless and the corrupt. "There are a lot of people at CFTC wanting to look the other way," Maguire said.

However, the hearing (a partial transcript and video of which can be found at the excellent financial blog Zero Hedge) did yield an interesting piece of information. In the course of answering an unrelated question, Jeffrey Christian, a former Goldman Sachs (GS) staffer who is now the head of a metals trading firm called CPM Group, stated that "precious metals...trade in the multiples of a hundred times the underlying physical..." (the italics belong to me and a lot of other people whose eyes popped out of their heads when they heard this). [red belongs to me]

What Christian was saying is that every ounce of gold or silver is being sold 100 times. This would not be problematic if we were speaking of some dusty market in Central Asia with rows of traders' stalls wherein some commodity (such as gold, silver, radios or Kalashnikovs) were being sold and resold in rapid-fire succession: there, our sensibilities about scarcity, value, and price discovery would actually grip reality. Here, however, we are talking of markets where the distinction between reality and representation has become as blurry as the last round of a game of musical chairs, enabling some sellers to offload paper IOUs promising eventual delivery of silver and gold — promises that would be impossible to keep if some small segment of the buyers were to demand delivery of the real thing.

This is quite similar to the naked short selling of stocks, where traders sell stock that does not exist, but enter IOUs in their computers, and then "fail to deliver" what they have promised. It is hard to distinguish this from fraud (notwithstanding the Efficient Market Hypothesis of financial theory, which maintains, essentially, that it shouldn't matter). Christian, the fellow who inadvertently revealed the massive naked short positions in gold and silver, said that he didn't see this as a problem because "there are any number of mechanisms for cash settlement," and "almost all of these short positions are in fact hedges..."

This is slightly absurd. Later in his testimony, Christian himself said that it was "exactly right" to say that the hedges are nothing more than hedges of "paper on paper" — a particular sort of merry-go-around where one IOU is settled by another IOU, with these IOUs outnumbering real gold and silver by multiples of a hundred times.

As for the notion that cash settlement solves the problem, Maguire noted in his radio interview that cash settlement "is the very definition of default. If somebody wants to buy gold and silver and instead they're given cash, that is a default." In addition, "there are people who will not want cash — Chinese, Vietnamese, Russians — people looking for the metal, they will want to take it, and that will cause a default on the Comex [the metals exchange] because the Comex will be drained...that was the word that was used by several people making testimony [at the CFTC meeting], that the Comex would be drained..."

Maguire added: "What's going to happen, if you're an Asian trader, or a non-Western trader, who has no loyalty, or doesn't care about homeland security or anything else, who says, now wait a minute, if I can establish in my mind that there is 100 ounces of paper gold, paper silver for example, for each ounce of real silver, than I have a naked short situation here that I can squeeze and they can go on the spot market which is basically a foreign exchange transaction, short dollar, long silver to any amount they want — billions, trillions — whatever they want, and they can take this market, squeeze this market, and blow it up..."

In other words, the problem isn't just that criminal naked short sellers manipulate the metals market downwards. It is that they have created a condition where a foreign entity can merely demand delivery of real metal to induce a massive "squeeze" that sends the price of metals skyrocketing, putting huge downward pressure on the dollar. Meanwhile, says Maguire, with prices rising, "for 100 customers who show up there is only one guy who is going to get his gold or silver and there's 99 who will be disappointed, so without any new money coming into the market, just asking for that gold and silver will create a default."

"There are no prisoners taken in this kind of environment," Maguire added. "All they need to establish is that it is naked, and by the admission of [former Goldman staffer] Christian at the meeting...we have a definition of physical actually being paper...They get that in their heads and its locked, it's a done deal, then we don't have to wait...there is a profit to be made here, and there is nothing [anybody] can do about it because it's a foreign exchange transaction, and there are no limits on a foreign exchange transaction, and obviously foreign exchange transactions are coming to light, there [is talk] of manipulation..."

Indeed, Maguire says that he has received phone calls from wealthy individuals in Asia looking for the go ahead to exploit the naked short position. "The only question they have in their mind is can we establish that this is a naked short position, that's the only thing they had to clarify, it's become clear, it is now clear [that the naked short position is massive], and no doubt they do their own due diligence, but basically [the naked short position] has been admitted at the only metals meeting [the CFTC hearing] that we've ever had..."

Maguire says that the naked short selling scam is in the trillions of dollars, making it by far the biggest financial fraud in history. He calls it "financial terrorism" and accuses the naked short sellers of "treason" for putting national security at risk. It might be hard to believe that foreign entities are plotting to crush the U.S. economy, and perhaps they are not, but there is no doubt that loopholes in the clearing and settlement system — not just for metals, but also stocks, bonds, Treasuries, and derivatives — could quite easily be exploited by any foreign entity desiring to do harm to the U.S. economy. The only dispute is whether such a desire exists.

Maguire and Adrian Douglas of GATA, an organization that lobbies against manipulation of the metals market, took their concerns to the mainstream media and had a number interviews scheduled. However, every one of those interviews were suddenly cancelled. This is not surprising. The mainstream media has consistently shied away from stories about illegal naked short selling and market manipulation, partly because the media outlets are captured by the powers that be on Wall Street, and partly because investigative journalism is now viewed as an anachronism — a time-consuming effort that might have been suited to Woodward and Bernstein back in the 70s, but not to the downsized news rooms tasked with churning out tepid and meaningless "he said, she said" mimeographs for a population of readers who (so it is said) want their "news" fast, and don't care a whit for in-depth reporting.

Meanwhile, just as the stock manipulators have engaged in a coordinated effort — deploying threats, ruthless smear campaigns, and slick lobbying — to keep their crimes out of the spotlight, so too will the gold and silver manipulators. Adrian Douglas of GATA notes that at the precise moment he began to speak at the CFTC meeting, the video camera recording the event experienced "technical problems" — problems that were fixed at the precise moment when Douglas stopped talking. Douglas concedes that this might have been a coincidence, but when this sort of thing happens often enough, a little healthy paranoia is probably a good thing. That said, everyone loves an optimist, so I'll say the camera really went kaput.

But...ack...another coincidence: The day after Maguire gave his radio interview, he was the victim of a hit and run collision. Somebody sped out of a side alley at top speed, smashed into Maguire's car, and then tried to escape. A high-speed chase ensued, and the perpetrator was caught by police. The British press has reported that this might have been an assassination attempt, or a threat, but as yet there has been no word from the police. Maguire was injured, but not seriously. Let's be optimistic, and say this was an accident — assassinations and threats only happen in the movies.

But...ack...another coincidence: Shortly before somebody crashed into Maguire's car, the CFTC caught on fire. This fire happened to be located in the one small basement room where gold and silver trading data and other pertinent documents were kept. The CFTC claims that its investigation of metals manipulation, for what it was, did not burn. So maybe it was just an accident. Maybe some eager CFTC regulators were down there smoking cigarettes. Maybe it was stress. Maybe they'll keep investigating. Maybe they'll bust the criminals.

Maybe, just maybe...yes, everyone loves an optimist, so let me make this clear — the horror show that is our regulatory system is going to have a happy ending. There will be no massacre. The financial system will be just fine...really...maybe... or maybe not.

* * * * * * * *

Update: Another coincidence: GATA reported recently that there has been an attack on the King World website — the website that contains the radio interview of Maguire and his emails to the CFTC. This was an apparent attempt to shut down the website and prevent the scandal from being exposed further. The Internet company that hosts the King World website reported to King World the following: Your hosting account is the target of a distributed denial of service attack...Computers were attacking your account."

My reaction: Gold manipulation has been officially confirmed by the CFTC hearings held on March 25.


Amazing set of revelations

1) For the first time ever, a whistleblower, Andrew Maguire, has stepped forward, providing specifics of a gold/silver market rigging by JPMorgan as it was occurring in real time.

2) There is no gold corresponding to the vast "gold deposits" at the major LBMA banks. During the CFTC hearings, Jeffrey Christian of CPM Group (one of the most respected precious metals consultancies) stated that "precious metals...trade in the multiples of a hundred times the underlying physical..."

3) Almost all of the trading activities on the London exchange were merely settled by paper for paper, not for physical metals as the exchange supposedly requires.

4) There are thousands of clients (Asian and Middle Eastern governments, sovereign wealth funds, etc) who think they own hundreds of billions and perhaps trillions of dollars of gold bullion, and are being charged storage fees on that fantasy bullion, but what they really own unsecured gold loans to the banks at a negative interest rate.

5) It is impossible for the London exchange to ever deliver all the gold and silver owed to the owners of contracts.


Unbelievable "coincidences" surrounding CFTC hearings

1) The live television broadcast of the CFTC hearing suffered a technical failure right as Murphy was set to begin his testimony. This was corrected right after Murphy was finished.

2) At least one live voice broadcast (radio) failed during Murphy's presentation.

3) After the hearing, Murphy was contacted by several major media outlets for more interviews. Within 24 hours, all the interviews were canceled. All of them.

4) The day after Maguire gave his radio interview, he was the victim of a hit and runcollision. Somebody sped out of a side alley at top speed, smashed into Maguire's car, and then tried to escape. A high-speed chase ensued, and the perpetrator was caught by police. Although the British press has reported that this might have been an assassination attempt or a threat, there has been no word from the police.

5) Shortly before somebody crashed into Maguire's car, the CFTC caught on fire. This fire happened to be located in the one small basement room where gold and silver trading data and other pertinent documents were kept.

6) A few days after the CFTC caught on fire, there was an DOS (denial of service) attack on the King World website which contains the radio interview of Maguire and his emails to the CFTC.


Virtual blackout by the mainstream news media

1) Only the blogs, and almost no one in the mainstream media, are covering the relevations of the CFTC hearings.

2) At the Wall Street Journal, a search on "Gensler" (CFTC Chairman Gary Gensler would surely be included in any report) produces only one item from before the hearing. Readers of the Wall Street Journal will never hear what happened at the hearing and whether the CFTC paid any attention to them.

3) The few mainstream stories that do cover the CFTC hearings are unnaturally one sided, failing to mention anything other than opposition to any idea of position limits in metal markets

4) A Google News search on "Gensler" confirms the virtual blackout by the mainstream news media.

5) The media's strategy seems to be to stonewall and hope scandal goes away.


Implications

1) This is a scandal of monumentous proportions. As the articles above put it:

"Sub-prime crisis was peanuts before this scam."

"This is a potential multi-trillion dollar fraud that could bring down the world's financial system."

'FRAUD', that is the one word which comes to any investor's mind when s/he reads about the Commodity Futures Trading Commission (CFTC) hearing on manipulations in bullion market by gold cartels

"It is a bombshell. This has to be dealt with, one way or the other. Bring it out into the light of day, and let the facts be known. This is either the equivalent of the fictionalized testimony on the order of the Salem Witch trials, or one of the most damning accusations of malfeasance in office against quasi-governmental agencies, and probably US officials, since Teapot Dome. "


2) As the significance of the CFTC hearings' revelations sink in, it will create a gold rush and dollar panic, resulting in the biggest short squeeze in the history of all commodities. (See *****Preview of 2010's Gold Rush And Dollar Panic*****)

3) The upward explosion in gold prices will result in a complete loss of confidence in the U.S. dollar.


Conclusion: Last October, I wrote about the Gold Market Reaching The Breaking Point. Well now we are there.

1) Consider this a final warning about the gold market. You aren't going to get much, if any, further confirmation of gold market fraud before it is too late. I would be amazed, especially considering recent relevations, if the gold market manages to make it passed June intact.

2) If you wondering how it will all end, I believe there will be a big "financial freeze". Checking accounts, money market accounts, brokerage accounts, etc... everything will become inaccessible.

The New York Times article below about the 1987 market crash should give an idea what will happen when the settlement process breaks down in gold and other commodities.

October 2, 1988
The Day the Nation's Cash Pipeline Almost Ran Dry
By KURT EICHENWALD

LAST Oct. 20, a day after the nation's financial markets collapsed, Goldman, Sachs & Company and Kidder, Peabody & Company found themselves short of cash by a total of more than $1.5 billion, according to people close to the firms.

The shortfall resolved later in the day was not the result of trading losses or poor business strategy, but of failures in a behind-the-scenes process that attracted little attention until the crash.

The process, known as clearing and settlement, is the linchpin of the financial system, the mechanism for the transfer of money among brokerage firms, their customers, the stock and commodities exchanges and the banks. Through it, cash is shifted from buyer to seller when trades are made. Money is also transferred among a myriad of commodity and options accounts to adjust for changing requirements for margins, which are essentially deposits on futures and options contracts. The amount of money required fluctuates with the value of the account.

Usually, the clearing process works smoothly. But during the crash, it proved to be frighteningly fragile. Indeed, Government and market studies of the crash and interviews with Wall Street professionals show that the flow of money through the nation's markets came perilously close to gridlock on Oct. 20 because of chaos in the clearing system.

For several hours that day, bottlenecks appeared throughout the pipeline, creating potentially crippling credit squeezes for even the biggest players. Kidder and Goldman, for example, had advanced the more than $1.5 billion on behalf of customers to cover calls for more margin initiated by plummeting prices. But the firms' banks were slow to credit the firms with an equivalent sum from the customers' banks because of many delays along the line.

Moreover, the clearing process drained billions of dollars out of the markets at a time when some of that money might have been used for purchases, thus slowing the collapse. Instead, to meet their margin calls, investors had to use cash reserves, borrow or sell out their positions. That further depressed prices.

''The problems in clearing have the potential for cataclysm,'' said the chairman of one major brokerage firm who spoke on condition that he not be identified. ''Program trading and these other issues everyone is talking about could stop the markets from functioning. This other thing could cause a failure of the financial system.''

In a speech this spring, E. Gerald Corrigan, president of the Federal Reserve Bank of New York, described such a malfunction as ''the greatest threat to the stability of the financial system as a whole.''

...
Making a trade, like writing a check, has no value unless the clearing and settlement process works, backing up those transactions with cash. But while all banks clear checks in essentially the same way, the clearing systems of the various stock and commodity exchanges are a hodgepodge that do not always mesh well together.

...
Last October, the different clearing systems put conflicting demands on virtually every big market player, creating unprecedented problems for investors and for the clearing systems themselves and raising terrifying concerns about market safety.

''A major mechanical breakdown, a liquidity problem or, even worse, default in one of these systems has the potential to seriously and adversely affect all other direct and indirect participants in the system,'' said Mr. Corrigan in his speech last spring.
...

... critical questions about the crash that were raised by the Brady Commission report and other studies have not been answered: When does the financial responsibility of one player in the market begin and end? If a clearing firm or a customer defaults, is a brokerage firm or a bank left holding the bag?

With the answers unclear, experts said that future problems in the clearing system could well tie up many market players in court. ''The day that there is a default in the clearing system, everyone will be calling their lawyers, not their bankers,'' said Mr. Russo of Cadwalader, Wickersham & Taft.

As for me, I've moved to Russia and have launched a fund to Invest in Russian Black Earth farmland. I believe owning hard assets outside the US financial system is going to become very attractive in the near future. Please email me if you're interested.

What is the "cost" of federal deficits? The question is important because, since 1980s, the US government and the media have been claiming that "deficits don't matter". There are no negative consequences to massive federal overspending (such as the 2010 $1.29 trillion budget deficit). We can spend our way to prosperity.



However, common sense tells us that government deficits must have a cost. If that were not the case, we could eliminate all taxes, and run the entire government on money printing and borrowing.

WHEN DEFICITS STILL MATTERED

Prior to 1980, the world was simple and it made sense. When the government ran deficits, the Federal Reserve then would print money to pay for them. This money printing would cause inflation, and inflation would push up interest rates. The whole process was captured in the simple equation below.

Deficits = Money Printing = INFLATION = HIGHER INTEREST RATES

In the graph below, you can clearly see the link between deficits and money printing. Notice how every time the US runs a deficit (blue line) the money supply grows (yellow line).

Deficits = Money Printing


The next graph shows the link between government deficits and inflation pre1980. Notice the surges in inflation (yellow line) after each major deficit (blue line).

Deficits = INFLATION


Lastly, the graph below shows how inflation and interest rates move together.

INFLATION = HIGHER INTEREST RATES


The relationship between deficits and inflation was well understood

Try searching Google Archive News for deficit spending inflation and read any of the millions of article written before 1980. You might be surprised to see how universally the deficits/inflation link was accepted. Articles claiming "deficits don't cause inflation" were the lunatic fringe. Below are a sample of the articles stating the common sense link between deficits and inflation.

( Note: Some articles are disappearing from Google Archive News. Please let me know of any further links go dead. )

Deficits Create Inflation

Deficits Create Inflation
Spokesman-Review - Google News Archive - Jan 25, 1979

That the consumer price index is up about 9 percent from a year ago brings to mind two questions: How did we get in such a mess? And, how do we get out?

The first question IS EASY TO ANSWER. We are in a mess because the government spends more than it takes in every year and must print extra money to make up the deficit.

The second question is a little more complicated. ... No magic wands will do the trick. … the best way to solve the problem is to slow the rate of growth in the money supply. This can be accomplished ONLY BY CLOSING THE GOVERNMENT DEFICIT.
…

You And The Economy Dollar's Convertibility Into Gold Could Be

Dollar's Convertibility into Gold Could Be Restored, But...
Evening Independent - Google News Archive - Mar 12, 1980
DR. RONALD CAIROLL
…
The more money these deficits created, the lower was its value. The less it was worth, the more severe was the inflation. The law of supply and demand made this INEVITABLE.
…

Shifting Policies Have Sometimes Deepened Unemployment, Heightened inflation

Shifting Policies Have Sometimes Deepened Unemployment, Heightened inflation
Lakeland Ledger - Google News Archive - May 11, 1980
By Edward Cowan
…
In the view entertained by Jimmy Carter, Ronald Reagan, many other politicians, and many voters, EVERY DEFICIT IS INFLATIONARY. …
...
In the 1970's … inflation has been driven largely by … THE PERSISTENCE OF FEDERAL DEFICITS. …

The Old "Politics Of Inflation"

The connection between deficits and inflation is what shaped the debate about federal budget in the pre1980 era. On one hand you hand pressures from every direction for government spending, and on the other you hand the threat of inflation forcing restraint. Below are two of many articles demonstrating this painful political balancing act.

Spenders All

Spenders All
Montreal Gazette - Google News Archive - Nov 10, 1958

President Eisenhower's main declaration after the defeat of his party in the mid-term elections was that he would fight THE INFLATION THAT COMES THROUGH TOO MUCH GOVERNMENT SPENDING. He will take his stand against the spenders. "The Lord sparing me," he said, "I am going to fight this as hard as I know."

It is, in every way, a worthy declaration. But the difficulty is that his own record in office is one of big spending and heavy deficits — THE SORT OF FINANCING THAT HAS MADE FOR INFLATION. …

…
Nobody questions the sincerity of the President's declarations regarding economy. He is convinced that HEAVY GOVERNMENT SPENDING IS HELPING TO RUIN EVERYBODY'S DOLLARS. …

President Eisenhower, like the heads of so many nations in the world, finds that the pressures for spending come from so many peoples and groups that it is politically impossible to refuse them. …
…
Why is it, then, that people keep making these demands upon governments, WHEN THEY KNOW THAT THEY ARE WEAKEN THE BUYING POWER OF THEIR DOLLARS WHEN THEY DO SO?
…

The Politics Of Inflation

The Politics Of Inflation
Spokesman-Review - Google News Archive - Oct 8, 1967
JOSEPH KRAFF

WASHINGTON — Watching the last inning of the first game of the World Series, President Johnson pulled from his pocket a slip of paper showing the steady rise of interest rates over the last year.

That slip of paper expresses THE TRUE MEANING OF THE FIGHT IN THE CONGRESS OVER THE PRESIDENT'S PROPOSED TAX INCREASE. Basically, the Republicans are trying to delay action on the program to the point that assures a stiff dose of inflation certain to be blamed on the Democrats.

To understand what this is all about, it is first necessary to develop a sense of the way the country lines up around the proposal for a tax increase. The overwhelming evidence is that most of the country is bitterly against the tax rise.

The one big exception is the business community. Having been won over to the new economics in the last few years, business leaders have declared themselves almost UNANIMOUS FOR HIGHER TAXES AS AN ANTI-INFLATIONARY MEASURE.

…
They [Republicans] are beginning to tick of more in sorrow than in anger the numerous warnings they have issued to the administration on the matter of inflation. …

Behind this emphasis is an obvious tactic. The Republicans believe they can now head off a tax increase until next year. By that time it will probably be TOO LATE TO DAMP DOWN INFLATIONARY FORCES. And so Republicans are getting ready to tag the Democrats with blame for THE HEAVY DOSE OF INFLATION that is on the way.

Notice how everyone back in 1958 and 1967 knew that deficits had an immediate, real cost. There was none of this nonsense of "passing the cost to future generation". The price of federal deficit spending was pay by the dollar's loss of purchasing power over the subsequent 2 to 3 years.

In fact, the very idea of deficits "not mattering" used to be ridiculed…

Why Shouldn't We Spend?

Let's Get Rich
Why Shouldn't We Spend?
Ocala Star-Banner - Google News Archive - Jan 19, 1965
R HENRY J. TAYLOR

[This is one of the articles which has disappeared from Google Archive News. Click here to see image of article.]

If President Johnson is right (and we are safe) in all the spending he's proposing, what're we waiting for? Why don't we just double the national debt and everybody get rich?

…
Anyone can promise to speed up the printing presses and build up our debt. This brings happiness and security?

Governments that overspend FACE GLOBAL AND EPIDEMICAL FORCES from the outside that NO AMOUNT OF MYSTIC THEORY CAN AVOID OR KICK DOWNSTAIRS INTO THE DEEPFREEZE. …

AND THEN DEFICITS STOPPED MATTERING…

In 1981, the government declared that there was "no direct or indirect connection between deficits and inflation" and that deficits "don't matter".

Caught in a Riptide of Red Ink - TIME

Caught in a Riptide of Red Ink
TIME - Dec 21, 1981
By Walter Isaacson; David Beckwith; Neil MacNeil

… Weidenbaum and other Administration officials tried, somewhat implausibly, to downplay the traditional Republican view that DEFICITS LEAD TO SPIRALING PRICES. "There is no direct or indirect connection between deficits and inflation," CEA Member William Niskanen told a stunned audience at a seminar sponsored by the conservative American Enterprise Institute. The Administration's NEW CONTENTION that deficits need not inhibit business expansion seems shaky at best. …

Democrats ridiculed the Republican revisionism. Said House Budget Committee Chairman Jim Jones: "If someone in the Carter Administration had said that cumulative three-year deficits of $400 billion DON'T MATTER, Republicans would have called for his impeachment." …

With the threat of inflation declared dead, the US proceeded to run massive budget deficits…



…AND IT WORKED — MAGICALLY

After 1980, the old, common sense formula underwent a drastic change:

Deficits = Money Printing = NO INFLATION? = LOWER INTEREST RATES?

The link between deficits and inflation was broken. When the US ran massive deficits in the early 1980s, inflation fell.

Deficits = NO INFLATION?


Although the inflation and interest rates came down, the first part of the formula remained the same. The government never stopped printing money to finance its massive deficits.

Deficits = Money Printing


What did change was that this printed money stopped producing inflation and pushing up interest, as seen below in the chart below.

Money Printing = FALLING INFLATION? = LOWER INTEREST RATES?



Amazing isn't it? After 1980, no more painful budget decision making: the US could now print all the money it wanted without any inflationary consequences! Deficits stopped mattering.

THE MEDIA'S REACTION: IT'S DISINFLATION

The media reacted to the new phenomenon (of massive deficits and falling inflation) by labeling it disinflation and predicting that it would continue for a very long time.

(As for questions like WHY did interest rates enter into a thirty year downward trend or how the hell does this disinflation thing work, those questions have never been answered, either by the US government or the media.)

Disinflation Is Here To Stay

Disinflation is here to stay
Montreal Gazette - Google News Archive - Sep 11, 1984
By Hugh Anderson

What's the connection between the falling price of gold, the stable price of oil and the soaring U.S. dollar? And should you care?

The connection is summed up in A WORD YOU'RE GOING TO BE HEARING A LOT MORE FREQUENTLY IN THE ECONOMIC NEWS.

It's DISINFLATION, …

…
Until quite recently THE MAJORITY VIEW AMONG FINANCIAL EXPERTS was that the return of booming economic conditions in the U.S. would inevitably bring A POWERFUL RESURGENCE OF INFLATION ALONG WITH IT.

On this view, the 1980's were to be a rerun of the 1970s, only worse.

THINGS DON'T SEEM TO BE WORKING OUT THAT WAY…

… taking upswings and down-swings into account, INFLATION WILL PROBABLY BE IN A DOWNWARD TREND, which is the essence of what's meant by disinflation.
…

There is no official explanation to why deficits and money printing stopped causing inflation. The treasury's position on the matter is simply that "deficits don't matter." They used to cause inflation, and now they don't. Never mind that this defies all laws of economics and common sense. As the media continues to report, IT'S DISINFLATION. IT'S MAGIC.



The US government in 1981 declared "deficits don't matter" and then ran massive deficits without causing inflation. This is the equivalent of an African shaman declaring he has mystical powers and then levitating himself in a ring of fire (watch video). Confronted with governments/shamans claiming to defy the economic/physical laws of the universe, the alternatives involve believing in the magic (gravity and deficits "don't matter") or looking for the fraud.

For everyone who suspects that the government and the press are lying about deficits "not mattering", read on for an explanation that doesn't involve magic.

THE FRAUD THAT ENDED INFLATION

As mentioned above, the government never stopped printing money in the 1980s. What happened was the government's money printing stopped causing inflation. This leads to the question:

HOW DO YOU PRINT MONEY WITHOUT CAUSING INFLATION?

It is possible to print billions without causing inflation if those billions never enter the country's domestic money supply. For example, if the government prints 1 billion dollars and then that 1 billion disappears overseas, there would be no inflation because the amount of dollars in America remains unchanged. This is exactly what happened in the 1980s.


In 1986, the Fed admitted billions of dollars were disappearing overseas.

Fed admits dollars disappearing
Star-News - Google News Archive - Feb 11, 1986

WASHINGTON — A lot of U.S. greenbacks can't be accounted for.

A study has concluded that $136 billion in U.S. currency — 88 PERCENT OF THE TOTAL CIRCULATION — IS MISSING.

In a comprehensive look at personal money-handling habits, Federal Reserve Board economists concluded that individuals over age 18 are holding $18 billion in U.S. coins and cash. That is about $100 per person.

That is, however, only 12 percent of the $153.9 billion of cash supposedly in circulation. WHERE IS THE REST?

…
Other studies have speculated that as much as one-third to two-thirds of U.S. currency winds up in foreign hands. The Fed economists … speculated that a big part of the money is, indeed, being used by foreigners who would rather deal in the stable U.S. currency than in their own currencies.

"We do know that THERE ARE SOME VERY LARGE SHIPMENTS OF U.S. CURRENCY GOING OFFSHORE TO VARIOUS DESTINATIONS AROUND THE WORLD," Spindt [Federal Reserve economist] said.

THIS MONEY OFTEN ENDS UP IN AREAS WITH HIGH INFLATION RATES. In some Latin American nations, for instance, the citizens exchange local currency on the black market for dollars as a hedge against their own currency's being devalued.
…

The National Center for Policy Analysis (NCPA) explores the mystery of the missing currency and WHAT IT MEANS.

The Mystery of the Missing Currency

… when the Fed has attempted … to find out how much currency was actually circulating, some 80 percent of the currency thought to be in circulation had simply disappeared.

Efforts to locate this missing money have focused particularly on "exports" of U.S. dollars: money that HAS LEFT OUR SHORES and NOW CIRCULATES IN FOREIGN COUNTRIES. …
…
WHAT THIS MEANS

AT A MINIMUM, this suggests that THE MONEY SUPPLY IS MUCH LOWER THAN PUBLISHED DATA INDICATE. Economist Case Sprenkle of the University of Illinois argues: "Since foreign-held currency is not a medium of exchange for the issuing country, … The Federal Reserve and other central banks should ignore such increases as being BASICALLY IRRELEVANT TO DOMESTIC MONETARY CONDITIONS."

This could have important implications… It might mean that … THE HISTORICAL RELATIONSHIP BETWEEN GROWTH OF THE MONEY SUPPLY AND RATE OF INFLATION NEEDS TO BE REEVALUATED. …
Conclusion

Foreign holdings of U.S. dollars ARE A SIGNIFICANT AND GROWING PHENOMENON. They are now so large as to affect our basic understanding of THE RELATIONSHIP BETWEEN THE MONEY SUPPLY, INFLATION, INTEREST RATES AND OTHER ECONOMIC VARIABLES. …

The chart below shows how the domestic money supply stopped growing in 1980 because of the huge amount of dollars disappearing overseas. The yellow is cash outside the US, while the purple and blue are dollars in the US. (Currency in circulation = cash in wallets) (Reserve with F.R. Banks = cash held by US banks)



This flow of dollars oversea was UNNATURAL

According to Fed economists, the "disappearing dollars" were being used by foreigners wanting to deal in "the stable U.S. currency." However in 1981 (when the US declared "deficits don't matter"), the dollar had been experiencing double digit inflation since 1979, losing over 30 percent of its value. The US was a high inflation area! Why did foreigners start using the dollar right when it was on the verge of collapse?

Also, billions of dollars don't just "disappear" out of the wallets of American, popping up around the world "in areas with high inflation rates." First, no natural phenomenon (ie: tourists) could account for cash movements of this magnitude. Second, these billions moving overseas needed to be collected from the wallets of Americans. How was this done? Finally, moving billions of dollars in cash is not simple or cheap. So when "very large shipments" were going offshore in the 1980s, who was doing the shipping?

All this leads to two very important questions: where did all these "disappearing dollars" end up and how did they get there?



1) WHERE DID ALL THESE "DISAPPEARING DOLLARS" END UP?

Finding the missing dollars is not hard. The New York Times reported in 1990 that Nicaragua was using a new currency.

September 16, 1990
NICARAGUA USING A NEW CURRENCY
By MARK A. UHLIG, Special to The New York Times

MANAGUA, Nicaragua, Sept. 15 — In the bitterest days of the conflict between this country's former Sandinista leaders and American-backed rebels, all Nicaraguans shared one crucial piece of common ground: THEIR RELIANCE ON THE AMERICAN DOLLAR.

Against a background of economic sanctions and hyperinflation, Sandinistas and contra supporters alike SCRAMBLED TO CONVERT THEIR NICARAGUAN CORDOBAS TO AMERICAN CURRENCY. …

This leads to another question: Why did the Nicaraguan Cordoba collapse in the 1980s?

John Stockwell gives us the answer by describing the CIA's bloody campaign to destabilize Nicaragua beginning in 1981 (the year deficits "stopped mattering").

THE SECRET WARS OF THE CIA:
by John Stockwell
A lecture given in October, 1987

[John Stockwell was a former CIA Station Chief in Angola in 1976, working for then Director of the CIA, George Bush. He spent 13 years in the agency. He is the highest level CIA officer to testify to the Congress about his actions]
...
Nicaragua is not the biggest covert action, it is the most famous one. Afghanistan is, we spent several hundred million dollars in Afghanistan. We've spent somewhat less than that, but close, in Nicaragua....

[When the U.S. doesn't like a government], they send the CIA in … TO TEAR APART THE SOCIAL AND ECONOMIC FABRIC OF THE COUNTRY…

… What we're talking about is going in and deliberately creating conditions where the farmer can't get his produce to market, where children can't go to school, where women are terrified inside their homes as well as outside their homes, where government administration and programs grind to a complete halt, where the hospitals are treating wounded people instead of sick people, where international capital is scared away and the country goes bankrupt. …

TO DESTABILIZE NICARAGUA BEGINNING IN 1981, we began funding this force of Somoza's ex-national guardsmen, calling them the contras (the counter-revolutionaries). We created this force, it did not exist until we allocated money. We've armed them, put uniforms on their backs, boots on their feet, given them camps in Honduras to live in, medical supplies, doctors, training, leadership, direction, as we've sent them in to de-stabilize Nicaragua. Under our direction they have systematically been blowing up graineries, saw mills, bridges, government offices, schools, health centers. They ambush trucks so the produce can't get to market. They raid farms and villages. The farmer has to carry a gun while he tries to plow, if he can plow at all.

If you want one example of hard proof of the CIA's involvement in this, and their approach to it, dig up `The Sabotage Manual', that they were circulating throughout Nicaragua, a comic-book type of a paper, with visual explanations of what you can do to bring a society to a halt, how you can gum up typewriters, what you can pour in a gas tank to burn up engines, what you can stuff in a sewage to stop up the sewage so it won't work, things you can do to make a society simply cease to function. [Google archive news results for "The Sabotage Manual"]

Systematically, the contras have been assassinating religious workers, teachers, health workers, elected officials, government administrators. You remember the assassination manual? that surfaced in 1984. It caused such a stir that President Reagan had to address it himself in the presidential debates with Walter Mondale. They use terror. This is a technique that they're using to traumatize the society so that it can't function.

I don't mean to abuse you with verbal violence, but you have to understand what your government and its agents are doing. They go into villages… [revolting description of CIA atrocities] …

This is nobody's propaganda. There have been over 100,000 American witnesses for peace who have gone down there and they have filmed and photographed and witnessed these atrocities immediately after they've happened, and documented 13,000 people killed this way, mostly women and children. These are the activities done by these contras. The contras are the people president Reagan calls `freedom fighters'. …

…
Part of a de-stabilization is propaganda, to dis-credit the targeted government. This one actually began under Jimmy Carter. He authorized the CIA to go in and try to make the Sandinistas look to be evil. … While they set out to build 2,500 clinics to give the country something resembling a public health policy, and access to medicines, we began to label them as totalitarian dictators, and to attack them in the press, and to work with this newspaper `La Prensa', which - it's finally come out and been admitted, in Washington - the U.S. government is funding: a propaganda arm.

[Reagan and the State dept. have] been claiming they're building a war machine that threatens the stability of Central America. Now the truth is, this small, poor country has been attacked by the world's richest country under conditions of war, for the last 5 years. Us and our army - the death they have sustained, the action they have suffered - it makes it a larger war proportionally than the Vietnam war was to the U.S. In addition to the contra activities, we've had U.S. Navy ships supervising the mining of harbors, we've sent planes in and bombed the capital, we've had U.S. military planes flying wing-tip to wing-tip over the country, photographing it, aerial reconnaissance. They don't have any missiles or jets they can send up to chase us off. We are at war with them. …

[IT WASN'T JUST NICARAGUA]
…
Now, CIA destabilizations are nothing new, they didn't begin with Nicaragua. …

…
In El Salvador specifically, … the CIA helped put together the treasury police. These are the people that haul people out at night today, and run trucks over their heads. These are the people that the Catholic church tells us, have killed something over 50,000 civilians in the last 5 years. And we have testimony before our Congress that as late as 1982, leaders of the treasury police were still on the CIA payroll.

Then you have the `Public Safety Program.' I have to take just a minute on this one because it's a very important principle involved that we must understand, if we're to understand ourselves and the world that we live in. In this one, the CIA was working with policeforces throughout Latin America for about 26 years, teaching them how to wrap up subversive networks by capturing someone and interrogating them, torturing them, and then getting names and arresting the others and going from there. Now, this was such a brutal and such a bloody operation, that Amnesty International began to complain and publish reports. Then there were United Nations hearings. Then eventually our Congress was forced to yield to international pressure and investigate it, and they found the horror that was being done, and by law they forced it to stop. YOU CAN READ THESE REPORTS -- the Amnesty International findings, and our own Congressional hearings. [Google Archive News results for "Amnesty International" cia]
…
Why does the CIA run 10,000 brutal covert actions? Why are we DESTABILIZING A THIRD OF THE COUNTRIES IN THE WORLD TODAY when there's so much instability and misery already?
…

Wikipedia explains that this bloody CIA campaign was part of the Reagan Doctrine, which involved efforts to "rollback" Soviet-backed communist governments in Africa, Asia and Latin America.

Reagan Doctrine

The Reagan Doctrine … was the centerpiece of United States foreign policy from the early 1980s until the end of the Cold War in 1991.
…
Under the Reagan Doctrine, the U.S. provided overt and covert aid to democratic guerrillas and resistance movements in an effort to "rollback" Soviet-backed communist governments IN AFRICA, ASIA AND LATIN AMERICA. …

…
U.S. role in atrocities and terrorism in Central America
…

Searching Google Archive News for atrocities cia aid confirms the timing.



So now we know where the "disappearing dollars" went and why. That leaves only the second question unanswered: How did dollars travel from inside the wallets of Americans all the way to places like Nicaragua?

2) HOW DID THEY GET THERE?

Joseph D. Douglass explains the most reasonable explanation for worldwide dollarization.

Drugs and Dollars
By Joseph D. Douglass, Jr. | Published: April 10th, 2000

… Dollarization is the process whereby THE U.S. DOLLAR BECOMES THE MEDIUM OF EXCHANGE IN A FOREIGN COUNTRY, SUPPLANTING THE COUNTRY'S NATIONAL CURRENCY. The dollar has already become the de facto currency in some of these nations…
…
At least 50 percent of the deposits in Argentina are dollars; in Bolivia the figure is 80 percent; in Colombia, the deposits have been growing steadily to at least $34 billion. Russia, reportedly, has more dollars in circulation than does the U.S. WHERE DID ALL OF THE DOLLARS IN THESE COUNTRIES COME FROM? Certainly not from tourists or businesses. Nor can counterfeiting be the main source.

Allow us to offer what our research would indicate is the most reasonable explanation: DRUG MONEY LAUNDERING. …

Karen Tandy, from the Drug Enforcement Administration, explains that BULK CURRENCY SMUGGLING is the primary method for laundering drug money.

…
Bulk Currency

THE SMUGGLING OF LARGE SUMS OF CASH across our borders CONTINUES to be the primary method used to expatriate drug proceeds from the United States. …

DEA's Congressional Testimony gives us more specifics about bulk currency smuggling.

DEA Congressional Testimony
Global Security - Sep 5, 1996

… Currently, the vast majority of OUTBOUND CURRENCY attributable to the Colombian drug lords, leaves the United States either through air cargo or outbound freighter. …

… Mexican traffickers sometimes simply smuggle BULK SHIPMENTS OF CASH across the border in vehicles. Often, the same vehicles which are used to smuggle cocaine into the United States are used to transport currency back into Mexico. …

As confirmed below by the Department of Justice, Tens of billions of dollars are smuggled out of the US each year. The amount of bulk currency smuggling going on is ENORMOUS.

National Drug Intelligence Center
January 2006
…
Mexican and Colombian DTOs transport their drug proceeds principally in bulk from drug market areas to other U.S. areas and then on to foreign destinations in an attempt to repatriate their proceeds to their home nations. Recent U.S. government analyses estimate that between $5.1 billion and $17.7 billion in wholesale drug Mexico-produced marijuana, methamphetamine, and heroin is transported out of the United States annually, presumably destined for Mexico. It is further estimated that an additional $3.2 billion to $7.2 billion generated through the wholesale distribution of cocaine and South American heroin is transported out of the United States annually…

While a large percentage of wholesale drug proceeds are transported across the U.S.-Mexico border, a significant amount is transported in bulk across the U.S.-Canada border, most likely by Asian DTOs and criminal groups. Recent U.S. government analyses estimate that between $5.2 billion and $21.2 billion generated by the wholesale distribution of Canada produced marijuana is transported out of the United States annually across the U.S.-Canada border…

When did this bulk currency smuggling start and why?

Bulk currency smuggling began in the 1980s as a result of an intensifying crackdown on "Money Laundering"

Banks intensify crackdown on Money Laundering
Daily Gazette - Google News Archive - Sep 23, 1990
By James M. Odato
…
The Bank Secrecy Act of 1970 requires banks to file a Currency Transaction Report on cash transactions of more than $10,000. Banks also must file a report if it appears a customer is trying to avoid having a CTR…

… the CTRs may have cut down on some of the laundering. Other alternatives … include SMUGGLING MONEY OUT OF THE COUNTRY. …

… FEDERAL REGULATORS BEGAN FINING BANKS HEAVILY IN THE MID-'80S. … As a result, "everybody and his brother learned what money laundering was," says Byrne.
…

Every crack down on "money laundering" increases bulk currency smuggling.

Officials take aim at drug money
Sarasota Herald-Tribune - Google News Archive - Mar 11, 1997

… since last summer … a Treasury Department order imposing a $750-per-transaction limit on 1,600 remittance shops … has won a small victory in the war on drugs … FORCING the cartels to return to crude old methods of SMUGGLING MONEY IN BULK.
…
"The order has in effect shut down the money remitters as an avenue for narcotics proceeds, forcing launderers to resort to BULK CURRENCY SHIPMENTS," Andre FLores, the chief agent of the U.S. Customs Service on Long island, said in an interview Monday. "The $750 limit is a major hurdle when you have to move $500,000."
…

The amounts of cash smuggled out of the country has continued to grow.

U.S. agents focus on stopping cash at border crossings
Island Packet - Google News Archive - Jan 28, 2006

LAREDO, Texas — … with STRICTER CONTROLS on bank accounts and wire transfers, trafficking organizations are running PILES OF CASH into Mexico, in cars, trucks, boats and airplanes, and EVEN STRAPPED TO THE BODIES OF COURIERS, federal officials said.

"We're seeing bigger amounts of cash coming across, and we're seeing deeper concealment," said Hector Mancha, assistant port director for security at Laredo. "They don't just throw it in a bag in the trunk of their car anymore."

Again, searching Google archive news for "money laundering" and "drug trafficking" cash confirms the timing.





Bulk Currency Smuggling + CIA Atrocities = DOLLARIZATION

Together, the bulk currency smuggling of narcotics profits and the Reagan Doctrine's global destabilization campaign have dollarized of large part of the world.

Dollarization and the United Narcostates of America
Jaguar Press
Saturday, October 31, 2009 at 9:33pm

…
In Afghanistan right now, THE AFGHANI AND THE DOLLAR ARE PRETTY MUCH INTERCHANGEABLE. It is astounding to American personnel stationed in Afghanistan that their US dollars are just as good as at a 7-11 back home. This isn't an accident—the illicit trade in opium HAS SINGLE-HANDEDLY INTRODUCED THE DOLLAR AS A STABLE MEDIUM OF TRANSACTION IN THE REGION. It is so prominent that Karzai's government had to pass a law requiring vendors to list their prices in the native Afghani in addition to its pricing in dollars. …

Since the coca boom of the 1980's usage has risen drastically… This vast trade … has led to mass addiction and THE VICIOUS DOLLARIZATION OF LATIN AMERICA.

… US neo-colonialist policies and practice, whether carried out by government funded groups or private corporations, developed into an efficient machine for the consumption and global exportation of cocaine starting in the 1970's, while INTRODUCING THE DOLLAR TO COCA PRODUCING REGIONS AS A REPLACEMENT FOR THEIR SOMETIMES UNSTABLE NATIONAL CURRENCIES.

In 1986, it came to light that the US government had been tacitly supporting, if not directly developing massive cartel infrastructure in Central America by funding the anti-communist Contra group in Nicaragua. Thousands of tons of cocaine were brought into the American West Coast and South and the money was used not only to attempt the violent overthrow of the Sandinista government—the revolutionary group that liberated Nicaragua from American occupation in the 1930's— BUT TO INTRODUCE THE DOLLAR TO THE ENTIRE REGION.

And while the scandal has dissipated and American influence is no longer visible, the US DOLLAR IS NOW THE STANDARD CURRENCY FOR EL SALVADOR AND PANAMA. THE DOLLAR ... IS SIMPLY THE UNOFFICIAL, DE FACTO TENDER IN THE REST OF THE REGION and the cocaine trade has only grown since then.

…
That's right, NEARLY EVERY COUNTRY IN THE AMERICAS INVOLVED IN PRODUCING, TRANSPORTING AND USING COCAINE IS USING THE US DOLLAR AS A MEDIUM FOR EXCHANGE. Michael Melvin and Jerry Ladman have researched the economic structure of coca producing regions in Vol. 23 of the Journal of Money, tracing the rise of the dollarized narcostate, "Since illicit activities like smuggling are financed with currency rather than bank deposits, many people believe that MUCH OF THE U.S. DOLLAR CURRENCY CIRCULATING IN BOLIVIA, COLOMBIA, AND PERU IS EARNED FROM ILLEGAL DRUG SALES. …

If you're in Southern California you can test it, the US dollar is valid in the cities of Mexico just south of the border. As in all other opium and coca producing states from Central Asia to Latin America we see the same symptoms of US narcocolonialism—addiction, exploitation, the dollar. There are no efforts to effectively curb hard drug abuse or to curtail the trade, quite the opposite, THE US GOVERNMENT HAS SUPPORTED THE DRUG TRADE AT MANY LEVELS.
…

The Media's KEY role in "saving the dollar"

The effort to (temporarily) save the dollar would not have possible without the media's cooperation. For example in 1984, when the U.S. Congress ordered the inhumane contra intervention be stopped, the media looked the other way while the CIA illegally continued anyway. If deficits stopped mattering, it was thanks to the media role in keeping the American people misinformed.

THE MEDIA IS FUNDAMENTALLY BROKEN

This goes way beyond issues of "liberal" or "conservative" bias. Through the use of media blackouts, smear/disinformation campaigns, and false narratives, US media shields the government from all forms of accountability.

1) MEDIA BLACKOUTS

There are entire subjects of the highest importance which are being systematically ignored by mainstream media.  These topics are so toxic, the facts so damning, that no one will touch them.  The results are total media blackouts.

Below is an example of what such a blackout looks like.

^^^^^^^^^^^^^
MEDIA BLACKOUT: CIA's role in contra drug trafficking

Google archive news results for contra drug trafficking

KEEP IN MIND WHEN READING: the CIA conducted an internal investigation that acknowledged in March 1998 that the agency had covered up Contra drug trafficking for more than a decade. Gary Webb's allegations have been proven true and have been acknowledge even by those who initially attacked them.

Newsmakingnews reports that the mighty wurlitzer plays on.

THE MIGHTY WURLITZER PLAYS ON
by Gary Webb
Chapter 14 from In the Buzzsaw edited by Kristina Borjesson

Webb was an investigative reporter for nineteen years focusing on government and private sector corruption and winning more than thirty journalism awards.  … Webb…was a reporter for the San Jose Mercury News where the "Dark Alliance" series broke in 1996.  Months later, Webb was effectively forced out of his job after the San Jose Mercury News retracted their support for his story.  He is now a consultant to the California State Legislature's Joint Audit Committee.

If we had met five years ago, you wouldn't have found a more staunch defender of the newspaper industry than me.  I'd been working at daily papers for seventeen years at that point, doing no-holds barred investigative reporting for the bulk of that time.  As far as I could tell, the beneficial powers the press theoretically exercised in our society weren't theoretical in the least.  They worked.

…
Bottom line: If there was ever a true believer, I was one. …

In seventeen years of doing this, nothing bad had happened to me.  I was never fired or threatened with dismissal if I kept looking under rocks.  I didn't get any death threats that worried me.  I was winning awards, getting raises, lecturing college classes, appearing on TV shows, and judging journalism contests.

… And then I wrote some stories that made me realize how sadly misplaced my bliss had been.  The reason I'd enjoyed such smooth sailing for so long hadn't been, as I'd assumed, because I was careful and diligent and good at my job.  It turned out to have nothing to do with it.  The truth was that, in all those years, I HADN'T WRITTEN ANYTHING IMPORTANT ENOUGH TO SUPPRESS.

In 1996, I wrote a series of stories, entitled Dark Alliance, that began this way:

For the better part of a decade, a Bay Area drug ring sold tons of cocaine to the Crips and Bloods Street Gangs of Los Angeles and funneled millions in drug profits to a Latin American guerilla army run by the U.S. Central Intelligence Agency, a Mercury News investigation has found.

This drug network opened the first pipeline between Colombia's cocaine cartels and the black neighborhoods of Los Angeles, a city now known as the "crack" capital of the world.  The cocaine that flooded in helped spark a crack explosion in urban America -- and provided the cash and connections needed for L.A.'s gangs to buy automatic weapons.

It is one of the most bizarre alliances in modern history: the union of a U.S. backed army attempting to overthrow a revolutionary socialist government and the Uzi-toting "gangstas" of Compton and South Central Los Angeles.

The three-day series was, at its heart, a short historical account of the rise and fall of a drug ring and its impact on black Los Angeles.  It attempted to explain how shadowy intelligence agencies, shady drugs and arms dealers, a political scandal, and a long-simmering Latin American civil was had crossed paths in South Central Los Angeles, leaving behind a legacy of crack use.  Most important, it challenged the widely held belief that crack use began in African American neighborhoods not for any tangible reason but mainly because of the kind of people who lived in them.  Nobody was forcing them to smoke crack, the argument went, so they only have themselves to blame.  They should just say no.

That argument never seemed to make much sense to me because DRUGS DON'T JUST APPEAR MAGICALLY ON STREET CORNERS IN BLACK NEIGHBORHOODS. Even the most rabid hustler in the ghetto can't sell what he doesn't have.  If anyone was responsible for the drug problems in a specific area, I thought, it was the people who were bringing the drugs in.

And so Dark Alliance was about them -- the three cocaine traffickers who supplied the South Central market with literally tons of pure cocaine from the early 1980s to the early 1990s.  What made the series so controversial is that two of the traffickers I named were intimately involved with a Nicaraguan paramilitary group known as the Contras, a collection of ex-military men, Cuban exiles, and mercenaries that the CIA was using to destabilize the socialist government of Nicaragua.  The series documented direct contact between the drug traffickers who were bringing the cocaine into South Central and the two Nicaraguan CIA agents who were administering the Contra project in Central America.  The evidence included sworn testimony from one of the traffickers -- now a valued government informant -- that one of the CIA agents huddled in the kitchen of a house in San Francisco with one of the traffickers and had interviewed the photographer, who confirmed its authenticity.  PRETTY CONVINCING STUFF, we thought. 

Over the course of three days, Dark Alliance advanced five main arguments:  First, that the CIA-created Contras had been selling cocaine to finance their activities.  This was something the CIA and the major media had dismissed or denied since the mid-1980s, when a few reporters first began writing about Contra drug dealing.  Second, that the Contras had sold cocaine in the ghettos of Los Angeles and that their main customer was L.A.'s biggest crack dealer.  Third, that elements of the U.S. government knew about this drug ring's activities at the time and did little if anything to stop it.  Fourth, that because of the time period and the areas in which it operated, this drug ring played a critical role in fueling and supplying the first mass crack cocaine market in the United States.  And fifth, that the profits earned from this crack market allowed the Los Angeles-based Crips and bloods to expand into other cities and spread crack use to other black urban areas, TURNING A BAD LOCAL PROBLEM INTO A BAD NATIONAL PROBLEM.  This led to panicky federal drug laws that were locking up thousands of small-time, black crack dealers for years but never denting the crack trade.
…
Obviously this wasn't the kind of story that a reporter digs up in an afternoon.  A Nicaraguan journalist and I had been working on it exclusively for more than a year before it was published.  And despite the topic of the story, it had been tedious work.  …

… Both before and after the [1995] prison riots, some black leaders were openly suggesting that crack was part of a broad government conspiracy that has imprisoned or killed an entire generation of young black men.

IMAGINE IF THEY WERE RIGHT.  What if the US government was, in fact, involved in dumping cocaine into California -- selling  it to black gangs in South Central Los Angeles, for instance -- SPARKING THE MOST DESTRUCTIVE DRUG EPIDEMIC IN AMERICAN HISTORY?

That's what this series is about.

With the help of recently declassified documents, FBI reports, DEA undercover tapes, … we will show how a CIA-linked drug and stolen car network -- based in, of all places, the Peninsula -- provided weapons and tons of high-grade, dirt cheap cocaine to the very person who spread crack through LA and from there into the hinterlands.

…
This is also the story of how an ill-planned and oftentimes irrational foreign policy adventure -- the CIA's "secret" was in Nicaragua from 1980 to 1986 -- boomeranged back to the streets of America, in the long run doing far more damage to us than to our supposed "enemies" in Central America. 

For, as this series will show, the dumping of cocaine on LA's street gangs was the "back-end" of a covert effort to arm and equip the CIA's ragtag army of anti-Communist "Contra" guerrillas.  While this has long been solid -- if largely ignores -- evidence of a CIA-Contra-cocaine connection, no one has ever asked the question: "Where did all the cocaine go once it got here?"

Now we know.

Moreover, we have compelling evidence that the kingpins of this Bay Area cocaine ring -- men connected to the assassinated Nicaraguan dictated dictator Anastasio Somoza and his murderous National Guard -- enjoyed a unique relationship with the U.S. government that has continued to this day.

*In a meeting to discuss the memo, I recounted to my editors the sorry history of how the Contra-cocaine story had been ridiculed and marginalized by the Washington press corps in the 1980s, and that we could expect similar reactions to this series.  If they didn't want to pursue this, now was the time to pull back, before I flew down to Central America and started poking around finding drug dealers to interview.  But if we did, we needed to go full-bore on it, and devote the time and space to tell it right.  My editors agreed.  My story memo made the rounds of the other editors' offices and, as far as I know, no one objected.  I was sent to Nicaragua to do additional reporting, and the design team at Mercury Center -- the newspaper's online edition -- began mapping our a Web page.

At the end of my memo, I'd suggested to my editors that we use the Internet to help us demonstrate the story's soundness and credibility which, based on past stories critical of the CIA, was sure to come under attack by both the government and the press.
…
Since this whole subject has such a high unbelievability factor built into it, providing our backup documentation to our readers -- and the rest of the world over the Internet -- would allow them to judge the evidence for themselves.  It will also make it all the more difficult to dismiss our findings as the fantasies of a few drug dealers.

…
After four months of writing, rewriting, editing, and reediting, my editors pronounced themselves satisfied and signed off.  The first installment of  Dark Alliance appeared simultaneously on the streets and on the Web on August 18, 1996.

THE INITIAL PUBLIC REACTION WAS DEAD SILENCE. No one jumped up to deny any of it.  Nor did the news media rush to share our discoveries with others.  The stories just sat there, as if no one seemed to know what to make of them.

Admittedly, Dark Alliance was an unusual story to have appeared in a mainstream daily newspaper…  It was not an uplifting story; it was a sickening one.  The bad guys had triumphed and fled the scene unscathed, as often happens in life.  And there was very little anyone could do about it now, ten years after the fact.

So, I wasn't really surprised that my journalistic colleagues weren't pounding down the follow-up trail.  Hell, I thought it was a strange story myself.

Had it been published even a year of two earlier, it likely would have vanished without a trace at that point.  Customarily, IF THE REST OF THE NATION'S EDITORS DECIDE TO IGNORE A PARTICULAR STORY, IT QUICKLY WITHERS AND DIES, LIKE A LIGHT-STARVED PLANT. With the exception of newspapers in Seattle, some small cities in Northern California, and Albuquerque, Dark Alliance got the silent treatment big time.  NO ONE WOULD TOUCH IT.

But no one had counted on the enormous popularity of the Web site.  Almost from the moment the series appeared, the Web page was deluged with visitors from all over the world.  Students in Denmark were standing in line at their college's computer waiting to read it.  E-mails came in from Croatia, Japan, Colombia, Harlem, and Kansas City, dozens of them, day after day.  One day we had more than 1.3 million hits.  (The site eventually won several awards from computer journalism magazines.)

Once Dark Alliance became the talk of the Internet (in large part because of the technical wizardry and sharp graphics of the Web page), talk radio adopted the story and ran with it.  For the next two months, I did more than one hundred radio interviews, in which I was asked to sum up what the three-day long series said in its many thousands of words.  …

… This was about the time I realized the wind speed of the shit storm I had kicked up.

The rumbles the series was causing from black communities was unnerving a lot of people.  College students were holding protest rallies in Washington, D.C., to demand an official investigation.  Residents of South Central marched on city hall and held candlelight vigils. … Black civil rights activists were arrested outside the CIA after sealing off the agency's entrance with yellow crime scene tape.  The story was developing  a political momentum all of its own, and it was happening DESPITE A VIRTUAL NEWS BLACKOUT FROM THE MAJOR MEDIA.
…

vvvvvvvvvvvvv

The best evidence that the media is systematically blacking out certain topics is what you don't know. For example, Have you ever hear of B.C.C.I.?

^^^^^^^^^^^^^
MEDIA BLACKOUT: B.C.C.I.: The Dirtiest Bank of All

Google archive news results for "BCCI"

B.C.C.I.: The Dirtiest Bank of All

Monday, Jul. 29, 1991
B.C.C.I.: The Dirtiest Bank of All
By JONATHAN BEATY and S.C. GWYNNE NEW YORK

"I could tell you what you want to know, but I must worry about my wife and family -- they could be killed."
-- a former top B.C.C.I. officer

"We better not talk about this over the phone. We've found some bugs in offices that haven't been put there by law enforcement."
-- a Manhattan investigator probing B.C.C.I.

Bank-fraud cases are usually dry, tedious affairs. NOT THIS ONE. Nothing in the history of modern financial scandals rivals the unfolding saga of the Bank of Credit & Commerce International, the $20 billion rogue empire that regulators in 62 countries shut down early this month in a stunning global sweep. Never has a single scandal involved so much money, so many nations or so many prominent people.

Superlatives are quickly exhausted: it is THE LARGEST CORPORATE CRIMINAL ENTERPRISE EVER, THE BIGGEST PONZI SCHEME, THE MOST PERVASIVE MONEY-LAUNDERING OPERATION and financial supermarket ever created for the likes of Manuel Noriega, Ferdinand Marcos, Saddam Hussein and the Colombian drug barons. B.C.C.I. even accomplished a Stealth-like invasion of the U.S. banking industry by secretly buying First American Bankshares … whose chairman is former U.S. Defense Secretary Clark Clifford.

But B.C.C.I. is MORE THAN JUST A CRIMINAL BANK. From interviews with sources close to B.C.C.I., TIME has pieced together a portrait of a clandestine division of the bank called the "black network," which functions as a global intelligence operation and a Mafia-like enforcement squad. Operating primarily out of the bank's offices in Karachi, Pakistan, the 1,500-employee black network has used sophisticated spy equipment and techniques, along with bribery, extortion, kidnapping and even, by some accounts, murder. The black network -- so named by its own members -- stops at almost nothing to further the bank's aims the world over.

The more conventional departments of B.C.C.I. handled such services as laundering money for the drug trade and helping dictators loot their national treasuries. The black network, which is still functioning, operates a lucrative arms-trade business and transports drugs and gold. According to investigators and participants in those operations, it often works with Western and Middle Eastern intelligence agencies. The strange and still murky ties between B.C.C.I. and the intelligence agencies of several countries are so pervasive that even the White House has become entangled. As TIME reported earlier this month, the NATIONAL SECURITY COUNCIL USED B.C.C.I. TO FUNNEL MONEY FOR THE IRAN-CONTRA DEALS, and THE CIA MAINTAINED ACCOUNTS IN B.C.C.I. FOR COVERT OPERATIONS. Moreover, investigators have told TIME that the Defense Intelligence Agency has maintained a slush-fund account with B.C.C.I., apparently to pay for clandestine activities.

But the CIA may have used B.C.C.I. as more than an undercover banker: U.S. agents collaborated with the black network in several operations, according to a B.C.C.I. black-network "officer" who is now a secret U.S. government witness. Sources have told investigators that B.C.C.I. worked closely with Israel's spy agencies and other Western intelligence groups as well, especially in arms deals. The bank also maintained cozy relationships with international terrorists, say investigators who discovered suspected terrorist accounts for Libya, Syria and the Palestine Liberation Organization in B.C.C.I.'s London offices.

The bank's intelligence connections and alleged bribery of public officials around the world point to an explanation for the most persistent mystery in the B.C.C.I. scandal: why banking and law-enforcement authorities allowed the bank to spin out of control for so long.

In the U.S. investigators now say openly that the Justice Department has not only reined in its own probe of the bank but is also part of A CONCERTED CAMPAIGN TO DERAIL ANY FULL INVESTIGATION. Says Robert Morgenthau, the Manhattan district attorney, who first launched his investigations into B.C.C.I. two years ago: "We have had no cooperation from the Justice Department since we first asked for records in March 1990. In fact they are impeding our investigation, and JUSTICE DEPARTMENT REPRESENTATIVES ARE ASKING WITNESSES NOT TO COOPERATE WITH US."

… according to a former operative, SOMETIME IN THE EARLY 1980S THE BLACK NETWORK BEGAN RUNNING ITS OWN DRUGS, WEAPONS AND CURRENCY DEALS. [Again, note the timing]

…
A typical operation took place in April 1989, when a container ship from Colombia docked during the night at Karachi, Pakistan. … The crates were trucked to a "secure airport" and loaded aboard an unmarked 707 jet, where an American, believed by the black-unit members to be a CIA agent, supervised the frantic activity.

The plane then departed for Czechoslovakia… "From Czechoslovakia the 707 flew to the U.S.," said the informant... "It could have been gold. It could have been drugs. It could have been guns. We dealt in those commodities," Mustafa told U.S. authorities.


Other informants with details about the black network have come forward as the banking disaster has unfolded. "B.C.C.I. was a full-service bank," says an international arms dealer who frequently worked with the clandestine bank units. …

…
U.S. intelligence agencies were WELL AWARE OF SUCH ACTIVITIES. "B.C.C.I. played an indispensable role in facilitating deals between Israel and some Middle Eastern countries," says a former State Department official. "And when you look at the Saudi support of the contras, ask yourself who the middleman was: there was no government-to-government connection between the Saudis and Nicaragua."

As an equal-opportunity smuggler, the bank dealt in arms from many countries. "It was B.C.C.I. that financed and brokered ((Chinese)) Silkworm missiles that went to Saudi Arabia," the former official says, "and those were equipped with sophisticated Israeli guidance systems. When you couldn't use direct government transfers or national banks, B.C.C.I. was there to hot-wire the connections between Saudi Arabia, China and Israel." The bank also helped transfer North Korean Scud-B missiles to Syria, a B.C.C.I. source told TIME.

Yet the bank's arms business was benign compared with the black network's other missions … paying bribes to politicians, supplying "young beauties from Lahore," moving drugs and expediting insider business deals.

When it came to recruiting and persuading, the black network usually got its way. "We would put money in the accounts of people we wanted to seduce to work for us," says Mustafa, "or we would use terror tactics," including kidnapping and blackmail. "The Pakistanis were easy to terrorize; perhaps we might send someone his brother's hand with the rings still on it." Adds Mustafa: "We were after business cooperation or military or industrial secrets that we would use or broker, and we targeted generals, businessmen and politicians. In America it was easy: money almost always worked, and we sought out politicians known to be corruptible."

The black network was the bank's deepest secret, but rumors of its activities filtered through the bank's managerial level with chilling effectiveness. Senior bankers voice fears that they will be financially ruined or physically maimed -- even killed -- if they are found talking about B.C.C.I.'s activities. High-level bank officers know what happened to a Karachi-based protocol officer whom the black network suspected of unreliability last year. "They found he had been trying to liquidate his assets and quietly sell his house," says Mustafa. "So, first they killed his brother, and then they sent brigands to rape his wife. He fled to the U.S., where he is hiding." U.S. investigators confirm the account…

Businessmen who pursued shady deals with B.C.C.I. are just as frightened. "Look," says an arms dealer, "these people work hand in hand with the drug cartels; they can have anybody killed. I personally know one fellow who got crossed up with B.C.C.I., and he is a cripple now. A bunch of thugs beat him nearly to death, and he knows who ordered it and why. He's not about to talk." Currently the black units have focused their scrutiny and intimidation on investigators. "Our own people have been staked out or followed, and we suspect tapped telephones," says a New York law-enforcement officer.

The black unit's … primary purpose was to foster a global looting operation that bilked depositors of billions of dollars. Price Waterhouse, the accounting firm whose audit triggered the worldwide seizure of B.C.C.I. assets earlier this month, says the disarray is so extreme that the firm cannot even put together a coherent financial statement. But investigators believe $10 billion or more is missing, fully half of B.C.C.I.'s worldwide assets.

…
B.C.C.I.'s downfall was INEVITABLE because it was ESSENTIALLY A PLANETARY PONZI SCHEME, a rip-off technique pioneered by American flimflam man Charles Ponzi in 1920. B.C.C.I. gathered deposits, looted most of them, but kept enough new deposits flowing in so that there was always sufficient cash on hand to pay anyone who asked for his money. During the years of its most explosive growth in the late 1970s and mid-1980s, B.C.C.I. became a magnet for drug money, capital-flight money, tax-evading money and money from corrupt government officials. B.C.C.I. quickly gained a reputation as a bank that could move money anywhere and hide it without a trace. It was the bank that knew how to get around foreign-exchange rules and falsify letters of credit in support of smuggling. Among its alleged services:

-- In Panama, … the bank systematically helped Noriega loot the national treasury. …

-- In Iraq, B.C.C.I. became one of the principal conduits for money that Saddam Hussein skimmed from national oil revenues during the 1980s. …

-- In Guatemala the collapse of B.C.C.I. has triggered a government probe into a $30 million loan that the bank extended to the country in 1988-89. Government officials told TIME they suspect that some of the money may have gone to pay bribes to stifle a four-year-old investigation of a major B.C.C.I. client, coffee smuggler and arms merchant Munther Bilbeisi…

…
B.C.C.I.'s deposits also disappeared through the black network, which used the money to pay bribes and conduct its weapons and currency deals. According to a former officer, B.C.C.I. bought virtual control of customs officials in ports and air terminals around the world. In the U.S. millions of dollars flowed through B.C.C.I.'s Washington office, allegedly destined TO PAY OFF U.S. OFFICIALS.

The bribes and intelligence connections may offer an explanation for the STARTLING REGULATORY INACTION. The Justice Department has hindered an investigation by Massachusetts Senator John Kerry, whose Subcommittee on Terrorism, Narcotics and International Operations was the first to probe B.C.C.I.'s illegal operations. According to Kerry, the Justice Department has refused to provide documents and has blocked a deposition by a key witness, citing interference with its own investigation of B.C.C.I. To date, however, the Justice Department investigation in Washington has issued only one subpoena. "We have had a lot of difficulty getting any answers at all out of Justice," says Kerry. "We've been shuffled back and forth so many times between bureaus, trying to find somebody who was accountable. These things are very serious. What's shocking is that more energy hasn't been expended. Somebody consciously or negligently took their eyes off the ball in this investigation." According to Jack Blum, Kerry's chief investigator in 1988-89, the lack of cooperation was so pervasive and so successful in frustrating his efforts to investigate B.C.C.I. that he now says he believes it was part of a deliberate strategy. Says Blum: "There's no question in my mind that it's a calculated effort inside the Federal Government to limit the investigation. The only issue is whether it's a result of high-level corruption or IF IT'S DESIGNED TO HIDE ILLEGAL GOVERNMENT ACTIVITIES."

… the evidence of a cover-up is mounting:

-- In one of the most mysterious events in the case, B.C.C.I. bank records from Panama City relating to Noriega "disappeared" in transit to Washington while under guard by the Drug Enforcement Administration. After an internal investigation, the DEA said it had no idea what had happened to the documents.

-- Lloyd's of London, which is enmeshed in a racketeering lawsuit against B.C.C.I., has fruitlessly made offers to provide evidence of bribery and kickbacks and has made "repeated pleas" to U.S. Attorneys in Miami and New Orleans to seize B.C.C.I. records. Lloyd's accuses B.C.C.I. of taking part in smuggling operations and falsifying shipping documents. The insurance underwriters offered the results of their voluminous research into the bank's illegal activities. The Justice Department attorneys ignored the offers, Lloyd's says.

-- The U.S. Attorney General has assigned only a handful of FBI agents to its Washington grand jury investigation of B.C.C.I.'s relationship to First American Bankshares. The department's main probe of B.C.C.I. itself is being handled by a sole Assistant U.S. Attorney in Tampa, who has recently been assigned another major case. Similar understaffing is evident in a Miami grand jury probe of the relationship between B.C.C.I. and the CenTrust savings and loan, whose failure is estimated to cost taxpayers $2 billion. This may help account for the fact that A 16-MONTH INVESTIGATION HAS YIELDED NO INDICTMENTS.

…
Still to be probed, with potentially explosive results, is B.C.C.I.'s Washington office. Sources have told TIME that one of B.C.C.I.'s Washington representatives distributed millions of dollars in payoffs to U.S. officials during the past decade. If that is true, THE BANKER'S BLACK BOOK MAY BE THE SINGLE HOTTEST SOURCE SINCE DEEP THROAT IN THE WATERGATE INVESTIGATION. …