By Thomas Henning
It was Amshell Rothschild who said that if he could control the money, he didn't care what other laws were passed.
Money is a store of value and medium of exchange. Given the inflationary flooding of the system with fiat currencies and the volatility of the currency markets, money is rapidly diminishing in those two functions.
The central bank Bilderboyz have indeed succeeded in controlling the money through the creation of massive unpayable debt. In so doing, they've undermined the value of money and rendered the banking system insolvent. In the process of controlling the money and the banking system, the Bilderboyz have wrecked the very money and system that they were trying to control. Now as the debt is imploding, they control nothing. What irony.
Stay with the broad view and discount all of the prattle about the Dollar. This prattle presupposes that there is a viable banking structure. This is not the case.
To expand: The Dollar is fiat garbage, but so are the other fiat currencies to a varying degree. It's only a question of relative stench. This is why gold has broken out upward against all currencies. Almost all of these fiat currencies and attendant banking systems suffer from the terminal cancer of unsustainable debt, which is imploding. Note the fun and games being played by the insolvent British banks; Spain is el-busto too. It's a cinch that this is only the tip of the iceberg.
What is happening here is an implosion of the world's banking system due to debt default. As the defaults are accelerating, the central banking fools are trying to hold the hustle together by flooding the busted system with money, thus debasing the money and the system that they're trying to control even more. As the present debt implosion has been accelerating, bank lending and credit have been seizing up. This is called the "credit crunch." Banking insolvency, which will be followed by deflation, is the result. In addition, this is the beginning of the end of the socialist free lunch, because declining tax receipts will not finance that free lunch.
In sum, when the banking system goes, the Bilderboyz' control goes. These boys know it, which is why the futile money flood is being pumped. That's the only thing that they know how to do, inflate. Inflation is their lifeblood.
The savvy player has been anticipating this whole banking system implosion. The implosion has started, and the next step is to recognize that the busted banking system is a fait accompli and to realize that all of the dynamics of the Dollar, stock market, etc., is but the process of implosion. The savvy player must profit from the process and in so doing prepare for the next epoch as the present one implodes. Survival will be the object. Let's look at the process.
The gold complex is in a cyclic bull market having bottomed in 2000. The complex has legged up to the 2006 peak, consolidated and has recently broken out starting the next upleg within the cycle. The favored wave count is illustrated in the Monthly XAU chart, which suggests that the III wave is evolving. Weasel words: there is an alternate count that suggests another major downleg that could last a few months. While I can't rule this alternate count out, I do give it a minimal chance. To clear up this question, I'd say closes above XAU 196, spot gold above 850, would confirm the uptrend and pretty much rule out the alternate count.
At any rate, continue to use the "KISS" principle: Keep It Simple Stupid, and stay with the main cyclic uptrend following some simple major moving averages and, when they begin to lose momentum, start scaling out of your position on a fractional basis. Don't get cute and overtrade. You'll lose your position.
Meanwhile, the Dollar is in a solid downtrend as the inverse Yen has started its next upcycle. The favored wave count and bullish MACD configuration is illustrated. This technical picture rules out any sustained uptrend by the Dollar.
The carry trade is unwinding, which is why the Yen is strong. The hedge fund hustlers are suffering a case of the shorts, which is why they are trying to unwind the carry trade. Fat chance.
The bond market is locked in a trading range as shown in the Monthly Bond chart. My favorite count suggests that the upward/sideways move is terminal, but not quite ready to crack downward. The bonds have been used supposedly as a safe haven as the debt implosion has evolved.
Near term, a close below 109 would be strong evidence that the bonds are done, but a higher sell level will probably develop before this lateral move is done. Stay tuned.
The stock market is under severe distribution in the terminal phase of a bull cycle that started in 1982.
The internal studies have deteriorated to the point that they look like the stock car demolition derby on Saturday night.
From a Dow's theory viewpoint, after the Transports failed to confirm a new Dow high in October as illustrated by the comparative trend lines, the Industrials confirmed the breakdown by the Transports below the August lows. While this is very bearish in the extreme, the Dow's downside confirmation was marginal and not "clean," as illustrated by the Daily Dow Industrial/Transport chart. However, it's still very bearish.
Near term, the market has become very oversold and has put in a low on November 26th and an upside rally has evolved.
Best call: the recent decline was a #4 correction within a larger uptrend and the near-term upmove that started on November 26th is the complementary terminal 5th wave. These moves are usually called "tag-on" rallies. They commonly start suddenly, look impressive, end suddenly, and the following moves down are usually smashes.
While the form of this uptrend remains to be seen, closes below the late November lows of Dow 12,743.44, Transports 4366.60, would confirm the Dow's Theory breakdown, which suggests that a bear cycle having a life expectancy of about a decade has started.
In sum, the Dollar is in a cyclic decline as the Yen carry trade is unwinding, the gold is in a cyclic uptrend, and the busted stock market needs a downside break below the recent November lows to confirm a Dow's Theory breakdown that would suggest the start of a cyclic bear market. Not pretty.
The whole international central bank Ponzi scheme hustle is busted. At this stage, it's only a matter of watching the mortally wounded beast thrash and to profit from the process of its death. The beast needs inflation as nourishment. Deflation is the poison, a silver bullet to the central banks inflationary beast's heart. As deflation is beginning to evolve via the credit crunch, the beast's asset base, which is margined at a gazillion to one, is beginning to implode.
For sake of perspective, it must be understood that when a sovereign nation abdicates its money control to a central bank, it abdicates its sovereignty to that central bank. The central bank cares not one wit about the nationalistic sovereignty of a nation, only to its bottom line. Thus the nation ceases to exist as a nationalistic sovereign entity as the birds of a feather, central banks, flock together to strip the various nations' assets. Hence it becomes totally within character that the present British Prime Minister sold off half of Britain's gold supply at the "Brown Bottom" a few years ago. Thus with the relinquishing of the money control, sovereignty is relinquished and the various nations are nothing but vague phantasms.
Obviously, the various heads of state are nothing but international bankers. Given that there is a massive international banking financial structure, to assume that this financial structure is going to allow a gaggle of in-hock, cell-phone-babbling, credit-card-maxers, who get up at four A.M. before black Friday to buy plastic junk, to have any influence in electing a head of state, is outrageously ludicrous. The banking clan always owns both sides.
Fed-babblers frustratingly moan and groan about what the Fed and other central banks are doing. They operate on a false assumption that the various central banks are loyal to their respective countries. Any central bank is only loyal to its self-survival to keep collecting vigorish from the stupid debt slaves and to maintain control over those slaves on a national or international basis. Any attempt to counter this force is an exercise in windmill waving.
However, take heart, the game is imploding. The mortally wounded beast is thrashing as the debt is imploding because the beast has been shot in the heart with a credit crunch, which is the start of deflation--the latest kick being the real estate paper where they're playing a game of "pass the trash." Wait until the credit card and derivative hustle hits.
The name of the game is to stand back, let the beast thrash, and make money.
Editor's Note: Thomas Henning's articles appear regularly in The Bull & Bear Financial Report print and online editions.
