A few months back I theorized the rest of the world led by a Chinese/Russian alliance might let loose with a "truth bomb" or a series of them. It is clear the U.S. has been on a pathway in the desire to start a war. We have pressed in Syria and the Ukraine but so far to no avail. From the standpoint of the U.S., it is my opinion that a war is "necessary" to point at and blame for the financial collapse surely coming because in no way can "policy" be blamed.
The upcoming month of June will be a telling one as the situation in Greece comes to possibly a final head. Tiny Greece is important for several reasons. The first and most obvious, they are certainly a firing pin for the derivatives market. Should they default, what will it be called? Somehow, some way, a Greek default cannot be classified as one because a cascade of failures will immediately follow. Financially, Greece can take the Western financial system down all on its own.
Next, Greece is also a member of NATO, what will they do when the current economic and financial sanctions on Russia run out? Will they vote to extend the sanctions or vote in their own interest against them? Or, will they accept financial help and the cash flow from the proposed natural gas pipeline? A lesser question is what will happen to their EU status? Will they quit, get kicked out or remain as a black sheep in a dirty family?
I ask these questions again because Greece now says they will run out of money on June 5th. They have already pilfered pension funds and sequestered local agency monies, while pleading for the previously pledged but so far withheld aid. Atop this and more important are the sanctions on Russia due to end also in June. June is a very pivotal month!
To this point, the Chinese and Russians have been patient but firm dealing with the U.S.. Russia has warned about arming western Ukraine and placing firepower on Russia’s borders. China has sternly warned the U.S. regarding the disputed islands in the South Sea, a near spark incident was avoided last week. My point is this, the U.S. has been pushing while Russia and China have stood their ground. How long this can go on without some sort of "accident" morphing into conflict is questionable. As an example are the recent events surrounding the Spratly islands in the South China Sea http://www.firstpost.com/world/u-s-china-clash-over-disputed-south-china-sea-reuters-2248272.html, can the U.S. really push China in their own back yard? China and Russia are fully aware of the U.S. falling further and further into a weakened position in many ways, time is running out before a financial collapse and they know a wounded animal often strikes in desperation. They must in my opinion do something very soon to neutralize the U.S. or face the reality of fighting.
As I began with, I believe the only form of neutralization is some sort of "truth bomb" or a series of them. How best can this be done? I believe it must and will be done "financially", let me explain. If the ROW can neuter the U.S. financially, they will seriously hamper U.S. efforts to make war. As a side note, "the truth" will also take most all public support away for making war. I believe the process may have begun this past week.
While you may react with "oh it’s just propaganda" because of the source, Pravda posted an article over the weekend speculating China will very soon announce their gold reserves. The article http://english.pravda.ru/business/finance/15-05-2015/130611-china_gold_dollar-0/ speculates China has amassed 30,000 tons of gold. This may or may not be true, but I can easily prove 10,000 tons just on the back of a napkin. Whether the number is 10,000, 30,000, more or somewhere in between is moot in my opinion because it is MORE than the U.S. "claims" to have. It would also call into question "where" exactly all of this gold came from. As I have written before, China need not ask for an "audit" of Western gold, should they provide audited numbers, market participants will make the connection themselves.
I believe there are several questions needing to be asked. Is this a "30,000 ton bluff" by Russia? I don’t think so but if it is, what is the upside? Would Russia really throw this figure out publicly without clearing it with Beijing? Would China really bluff about how much gold they have? My opinion is no, they would not. I have said all along I believed China would announce their holdings probably this year. If this is the "pre pre announcement", it is a very big number and one I believe only as an opening salvo. Should China themselves make this announcement, please understand the "golden nuclear bomb" this would actually be. The financial system of the West will be destroyed overnight!
Before going any further, let me put a few of the various dots on the table. First and maybe what they were waiting for, the Western credit markets have had two very big convulsions in the last 10 days, these flash crashes have occurred as nearly all liquidity was briefly lost. While speaking of liquidity, this seems to be drying up across the board including the equity markets as volume has gone comatose. U.S. economic numbers are unmistakably weak and recession will be known by the end of June or early July. Another classic sign of illiquidity is the shortage of collateral available to the shadow banking systems in both the U.S. and in Europe,. A "margin call" to a system undercapitalized and under collateralized is a deadly recipe.
We also saw a story last week where several of the larger ETF’s have contracted for rather large credit lines to use in a "market event" causing mass liquidations. This is an entire story in itself and a humorous one at that! What makes the ETF’s believe their financial institution will be left standing and able to lend during a panic? And even if standing, during bad times the old saying goes …"credit lines are made to be pulled"! Worst of all, if they actually do use the credit lines because their various investments cannot be sold, won’t this ultimately injure remaining shareholders and make those who panicked first …the best? And especially if their investments do not immediately snap back, they will be required to sell more and at lower prices just to pay the loans (if they get them) down! Very poor "preparations" if you ask me.
Other dots include, the AIIB, an alternative clearing system to SWIFT, currency hubs all over the world, physical metals exchanges and even the ABX which plans to arbitrage between Eastern and Western markets. China has very rapidly recreated the "old silk road" trading route which includes both Iran and Greece, both sticking points in the side of the West.
I believe the Sino/Ruso alliance now sees weaknesses in the West, it is exactly what Sun Tzu would look for. The economy is slowing, liquidity is drying up and leverage is maxed out. Volatility has now struck the all important credit markets of which are relied on to support the West’s way of life. What is next? I believe an announcement of China’s holdings will only be the beginning and put the U.S. on her heels as to our holdings. Next, and I mentioned this previously, I would not be shocked if Edward Snowden has done a data dump similar to what was feared with Mr. Assange of Wikileaks.
We already know of so many and various "dirty deals" which banks have pleaded guilty to, "proof" of Western deceit will be believed because of all the fines and "non" admissions of guilt already paid and entered. In essence, it very well may be the East pulls the curtain back on the Wizard of OZ! A data dump by the Russians and Chinese regarding the finances of the West (including a lack of gold), how markets are rigged and economic numbers "created", along with information regarding various false flags and the misdirection of the public would go a long way. The "questions" are numerous and may have a starting date of 9/10/01 when Donald Rumsfeld announced the Pentagon’s "missing" $2.3 trillion …which was never spoken of again after the following horrific day.
Much, if not everything has a paper trail to it. Enron’s misdeeds and hollow derivatives were conveniently washed away the following day as well as any paper trail to the "world bonds" issued during the Reagan years …and cashed in within the two weeks following 911. Nearly everything since then still has a paper trail attached to it, should Russia/China have the ability to expose and prove some of it, our financial system will be toast!
In the event of a little sunlight touching Western "dirties", currencies and bonds will be smoked along with of course the precious Dow Jones. An exposure would effectively cripple us financially, torpedo public support and effectively make it very difficult for the U.S. to run around the world further swinging a bat and stirring up war. In essence, an exposure would take the ability to point blame elsewhere off the table …and the past policy itself will finally eat the blame it deserves!
Bill Holter, for the Holter/Sinclair collaboration
Bill Holter writes and is partnered with Jim Sinclair at the newly formed Holter/Sinclair collaboration.
Prior, he wrote for Miles Franklin from 2012-15. Bill worked as a retail stockbroker for 23 years, including 12 as a branch manager at A.G. Edwards. He left Wall Street in late 2006 to avoid potential liabilities related to management of paper assets. In retirement he and his family moved to Costa Rica where he lived until 2011 when he moved back to the United States. Bill was a well-known contributor to the Gold Anti-Trust Action Committee (GATA) commentaries from 2007-present.