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Friday, June 1, 2012

Sell It All: Recipe for Catastrophe?

Genesis Commentary Intro - Chuck Missler

Petrus Romanus with Tom Horn and Cris Putnam

The Real Banking Crisis....

Here we go again. Back in July 2011 we wrote an article entitled "The Real Banking Crisis" where we discussed the increasing instability of the Eurozone banks suffering from depositor bank runs. Since that time (and two LTRO infusions and numerous bailouts later), Eurozone banks, as represented by the Euro Stoxx Banks Index, have fallen more than 50% from their July 2011 levels and are now in the midst of yet another breakdown led by the abysmal situation currently unfolding in Greece and Spain.

Source: Bloomberg

On Wednesday, May 16th, it was reported that Greek depositors withdrew as much as €1.2 billion from their local Greek banks on the preceding Monday and Tuesday alone, representing 0.75% of total deposits.1 Reports suggest that as much as €700 million was withdrawn the week before. Greek depositors have now withdrawn €3 billion from their banking system since the country's elections on May 6th, seemingly emptying what was left of the liquidity remaining within the Greek banking system.2According to Reuters, the Greek banks had already collectively borrowed €73.4 billion from the ECB and €54 billion from the Bank of Greece as of the end of January 2012 - which is equivalent to approximately 77% of the Greek banking system's €165 billion in household and business deposits held at the end of March.3 The recent escalation in withdrawals has forced the Greek banks to draw on an €18 billion emergency fund (released on May 28th), which if depleted, will leave the country with a cushion of a mere €3 billion.4 It's now down to the wire. Greece is essentially €21 billion away from a complete banking collapse, or alternatively, another large-scale bailout from the European Central Bank (ECB).

The way this is unfolding probably doesn't surprise anyone, but the time it has taken for the remaining Greek depositors to withdraw their money is certainly perplexing to us. Official records suggest that the Greek banks only lost a third of their deposits between January 2010 and March 2012, which begs the question of why the Greek banks have had to borrow so much capital from the ECB in the meantime.5Nonetheless, we are finally past the tipping point where Greek depositors have had enough, and the past two weeks have perfectly illustrated how quickly a determined bank run can propel a country back into crisis mode. The numbers above suggest there really isn't much of a banking system left in Greece at all, and at this point no sane person or corporation would willingly continue to hold deposits within a Greek bank unless they had no other choice.

The fact remains that here we are, in May 2012, and Greece is right back in the exact same predicament it was in before its March 2012 bailout. Before the bailout, Greece had approximately €368 billion of debt outstanding, and its government bond yields were trading above 35%.6 On March 9th, the authorities arranged for private investors to forgive more than €100 billion of that debt, and launched a €130 billion rescue package that prompted Nicolas Sarkozy to exclaim that the Greek debt crisis had finally been solved.7 Today, a mere two months later, Greece is back up to almost €400 billion in total debt outstanding (more than it had pre-bailout), and its sovereign bond yields are back above 29%. It's as if the March bailout never happened… and if you remember, that lauded Greek bailout back in March represented the largest sovereign restructuring in history. It is now safe to assume that that record will be surpassed in short order. It's either that, or Greece is out of the Eurozone and back on the drachma - hence the renewed bank run among Greek depositors.

Meanwhile, in Spain, bank depositors have been pulling money out of the recently nationalized Bankia bank, which is the fourth largest bank in the country. Depositors reportedly withdrew €1 billion during the week of May 7th alone, prompting shares of Bankia to fall 29% in one day.8 The Bankia run coincided with Moody's issuance of a sweeping downgrade of 16 Spanish banks, a move that was prompted over concerns related to the Spanish banks' €300+ billion exposure to domestic real estate loans, half of which are believed to be delinquent.9 The Spanish authorities were quick to deny the Bankia run, with Fernando JimĂ©nez Latorre, secretary of state for the economy stating, "It is not true that there has been an exit of deposits at this time from Bankia… there is no concern about a possible flight of deposits, as there is no reason for it."10 Funny then that the Spanish government had to promptly launch a €9 billion bailout for Bankia the following Wednesday, May 24th, an amount which has since increased to a total of €19 billion to fund the ailing bank.11 Deny, deny some more… panic, inject capital - this is the typical government approach to bank runs, but the bailouts are happening faster now, and the numbers are getting larger.

The recent bank runs in Greece and Spain are part of a broader trend that has been building for months now. Foreign depositors in the peripheral EU countries are understandably nervous and have been steadily lowering their exposure to Eurozone sovereign debt. According to JPMorgan analysts, approximately €200 billion of Italian government bonds and €80 billion of Spanish bonds have been sold by foreign investors over the past nine months, representing more than 10% of each market.12 The same can be said for foreign deposits in those countries. Citi's credit strategist Matt King recently reported that, "in Greece, Ireland, and Portugal, foreign deposits have fallen by an average of 52%, and foreign government bond holdings by an average of 33%, from their peaks."13 Spain and Italy are not immune either, with Spain having suffered €100 billion in outflows since the middle of last year (certainly more now), and Italy having lost €230 billion, representing roughly 15% of its GDP.14

As we've stated before, no matter what happens in the Eurozone, the absolute worst case scenario for the authorities is a bank run. It terrifies all involved, because they can spiral out of control faster than governments can react to stop them, save for the most Draconian measures. They also prompt banks to liquidate whatever assets they can, revealing the truth about what their "assets" are actually worth. In this environment, no one wants to find out what the market will really pay for them. We're seeing this now in Spain, where according to Bloomberg, "Many Spanish banks are avoiding property sales so they don't have to "mark to market" valuations. Instead, they're giving developers new loans to pay debt coming due to prevent defaults."15 Sound familiar? We're now at the point where a bank run in one Eurozone country could quickly seize up the entire system - not just in Greece or Spain, but throughout the entire Eurozone and beyond. Greek and Spanish banks are just like all the others; they operate with leverage ratios averaging 25x their equity capital. They are all so overleveraged that it takes very little in deposit withdrawals to cause instantaneous liquidity issues. This is why we'll likely see another ECB-induced printing program announced (with a new abbreviation, hopefully) before a broader bank run can take root. The Eurozone authorities simply cannot risk the consequences of bank runs in countries like Spain, Portugal or Italy, which are far too big to bailout for the over-stretched ECB. It's not about Greece staying or leaving the European Union anymore, it's about the bailout ability of European banking system to survive the impact of massive money transfers.

Nothing is really being solved here, and everyone knows it. We're essentially in the same place we were when the crisis erupted back in 2010, only now there's more total debt outstanding. Bank of Canada Governor Mark Carney remarked in a December 2011 speech that "the global Minsky moment has arrived", and it's now plain for all to see.16 The "Minsky moment" refers to the work of Hyman Minsky, a deceased American economist who developed theories on how debt accumulation eventually leads to financial crises. You don't have to be an economist to understand the crux of Minsky's theories. As an economy grows it takes on increasing amounts of debt. The point eventually comes when the cost of servicing that debt can no longer be met by that economy's productive capacity - that's the Minsky Moment, and we're watching it play out all over the world today. When Greek bond yields spiked back in February 2012, bond investors looking at the country's €368 billion of debt outstanding, its population of 11 million people, and its nominal GDP of $312 billion realized that it couldn't possibly work. There was no way Greece could pay the interest on its debt load. There was no way the bond market could keep pretending everything was ok, like it currently does with the UK, US and Japan… for now.

Greece clearly needs another large-scale bailout, and we think they'll get one. Greece's exit from the Eurozone represents a Lehman-like scenario to the global banking system - why wait to see what carnage it will unleash? It's always easier to print money, and printing another couple €100 billion is nothing compared to the trillions that have been printed since last November. Where this will get tense, however, is when the market acknowledges the Minsky moment in a larger EU economy, like Spain or Italy. As we go to print, Spanish bond yields are now trading back above 6.5%, signaling the market's non-confidence in the country's ability to back-stop its own banking system. Spain has a population of 47 million, a GDP of roughly $1.3 trillion, national debt of roughly $1.1 trillion, debt owed to the ECB and various bailout funds totaling €643 billion, and now, a banking system that also appears close to collapsing.17 Their Minsky Moment has already arrived, and it's simply a matter now of how the market will react to it, and how long it takes the ECB to come to Spain's rescue.

Without a doubt, the most counterintuitive aspect of the Greece/Eurozone debacle has been its impact on the price of gold. Gold is now back below $1600 for the third time since August 2011; each time has coincided with severe banking stress within Greece and the broader Eurozone. Some pundits have suggested that various European banks are selling gold to raise liquidity, and this would make sense if the Eurozone banks had gold to sell, but we cannot find any evidence of large physical sellers out of Europe. Also, ever since the unlimited US-dollar SWAP agreement was launched in November 2011, USD liquidity has not been the key issue in Europe - rising sovereign bond yields and deposit withdrawals have. On the contrary, the selling pressure in gold once again appears to be expressed primarily through the futures markets, which are highly levered and rarely involve any physical transactions involving actual bullion. The futures market sell-off also appears to be waning now, since the European banking crisis has provided central banks with a politically-palatable excuse to take action if it deteriorates any further.

The recent gold price has been particularly frustrating given the continuation of bullish demand trends out of China. China posted another record Hong Kong gold import number in March of 62.9 tonnes. Gold imports into China have now totaled 135.5 metric tonnes between January and March 2012, representing a 600% increase over the same period last year.18 We don't have to connect the dots here - China is stockpiling the precious metal while investors in the West scratch their heads wondering why the spot price is so low.

Source: UBS, Bloomberg

Non-G6 central banks have also continued to accumulate physical gold, with the latest reports revealing another 70 tonnes of gold purchases completed in March and April by the central banks of Philippines, Turkey, Mexico, Kazakhstan, Ukraine and Sri Lanka.19 We won't bore you with the exercise of annualizing those numbers and comparing them to the annual global mine supply, but suffice it to say that the fundamentals still remain firmly intact. It's now simply a matter of improving sentiment towards gold in the West, and if the current banking crisis in Europe gets any worse, or if we see another large-scale policy response, it will likely happen on its own accord.

Although the last eight months have not played out the way we would have expected for gold, they have played out the way we envisioned for the banks. The question now is how long this can go on for, and how long gold can remain under pressure in a banking crisis that has the potential to spread beyond Greece and Spain? So much now rests on the policy responses fashioned by the US Fed and ECB, and just as much also rests on what's left of European citizens' confidence in their local banking institutions. Neither of these things can be precisely measured or predicted, but we continue to firmly believe that depositors in Greece and Spain will choose gold over drachmas or pesetas if they have the foresight and are given the freedom to act accordingly. The number one reason we have always believed gold should be owned, and why we believe it will go higher, is people's growing distrust of the banking system - and we are now there. We will wait and see how the summer develops, and keep our attention firmly focused of the second phase of the bank run now spreading across southern Europe.

Sprott Asset Management

Russian Military to Hold Over 1,000 Drills between June and October

The Russian Armed Forces will conduct over 1,000 command-and-staff and tactical exercises during the summer training period from June to November this year, the Defense Ministry said.

The summer training will focus on improving interoperability of all branches of the Armed Forces and efficient use of automated battlefield management systems, the ministry said in a statement on Thursday.

The training will be carried out on average 2-3 times a week with the emphasis on weapons proficiency and driving skills.

The training period will culminate with the Kavkaz-2012 large-scale strategic exercises in southern Russia and North Caucasus, which would also involve Abkhaz and South Ossetian military units.

In addition, Russia will hold about 50 joint military exercises with foreign countries, including the Slavic Commonwealth – 2012 with Ukraine and Belarus, the INDRA-2012 with India and the Selenga with Mongolia.

The Russian Navy will traditionally take part in RIMPAC, FRUKUS, Northern Eagle and Blackseafor international naval drills.

RIA Novosti

Turk: This will be worse than Lehman

In a interview for King world news James Turk said:

The global financial situation is really starting to spin out of control, Eric. It won't be long now before the Federal Reserve, ECB, Bank of Japan and Bank of England start more QE in an attempt to keep global stock markets from imploding and causing another Lehman Brothers collapse.”

“But let's call QE what is really is, which of course is ‘money printing’. And clearly, while all that new money won't solve the problem of bank and government insolvency, Eric, you can be sure it will do one thing -- it will send gold higher.

The likelihood of more money printing may in fact be one reason that gold and the mining shares are starting to hold their own. In other words, gold and the mining shares have been generally rising -- or at least, only going down a little -- when the overall stock market is dropping....

King World news

Shiveluch volcano powerful ash explosions, plumes reaching 7-10 km altitude

Shiveluch volcano continues to be very active, with a growing lava dome and occasional large ash explosions. A strong eruption that produced an ash plume that rose to 6 km altitude occurred on 29 May, Russian scientists from KVERT report. According to a Itar-Tass news entry, the plume eventually reached 7.3 km and the eruption followed an increase of seismic activity.
Another, probably stronger eruption seems to have occurred on 30 May. An ash plume from Shiveluch volcano was detected at 10 km altitude on satellite data (Tokyo VAAC). 

Since the volcano is very remote, its eruptions pose little danger to people on the ground, but the ash plumes they produce are a hazard to aircraft en route from N-America to Japan and are closely monitored by satellite.

Volcano Discovery

Maryland student admits eating housemate's heart, and part of brain

Hours after his family members alerted police to a human head and two hands they discovered stashed in metal tins, a Maryland man admitted killing his housemate, cutting him up, then eating his heart and part of his brain, authorities said.

Alexander Kinyua, 21, was being held without bail at the Harford County Detention Center after being charged with first-degree murder, first-degree assault and second-degree assault. Calls to his public defender Friday morning were not immediately returned.

Suspect in Canada body parts probe described as 'creepy' and a kitten-killer

His roommate, Kujoe Bonsafo Agyei-Kodie, had left his Joppatowne home six days earlier for an apparent early morning jog. Wearing a T-shirt and shorts, he left his wallet, cell phone and identification at home.

On Tuesday, Antony Kinyua -- Alexander Kinyua's father -- called a Harford County detective assigned to the missing person's case and told him about his other son's gruesome discovery.

Miami mother: My son 'is no zombie'

According to the charging document, the other son explained to the detective how he had come across two metal tins covered by a blanket in the basement laundry room of Agyei-Kodie's Joppatowne residence. He opened the tins and found the head and hands.

The brother said he "confronted (Alexander Kinyua), who denied the remains were human," then went upstairs to get his father, the detective said in the charging document. When the father and son returned to the basement, "the items he observed were gone and ... Alex Kinyua was cleaning the container he observed them in."

Two Harford County detectives later arrived on the scene and discovered the head and hands on the home's main floor.

Reports: Miami 'zombie' attacker may have been using 'bath salts'

"He admitted to killing our missing person, Mr. Kodie, and cutting him up with a knife," Harford County Sheriff Jesse Bane told reporters Thursday. "He further stated that he consumed Mr. Kodie's internal organs -- specifically his heart and portions of his brain."

The suspect told detectives to go to the parking lot of the nearby Town Baptist Church, where they could -- and did -- find the rest of Agyei-Kodie's remains in a dumpster.

The missing person's report filed Saturday described the 37-year-old Agyei-Kodie as "very intelligent." He had earned multiple master's degrees from schools in Ghana and was also a graduate student at Morgan State University, even though he wasn't taking classes there at the time of his death.

Kinyua was affiliated with the same state university in Baltimore. The engineering student was one of 175 people showcased in an August 2011 symposium run by the prestigious Los Alamos National Laboratory. His study focused on the cost-effectiveness and productivity of "comfort control" systems regulating heating, ventilation and air conditioning.


Spain may speed up European Union 'banking union' and New World Order

Do you see they produce a problem in order to bring the solution that will set more controls.... and as always blame other people.
Amid all they get the money and the power.

We are running to the New World order that the Bible says and a world dictator.

The US has joined ranks with EU officials exploring ways to pump eurozone money directly into Spain's troubled banks instead of having to further burden the state budget.

"We were talking about the possibility that the banks, not only Spain's but also in other countries who need it, could access funds directly without intervention from the governments and without conditions," said Spanish deputy PM Soraya Saenz de Santamaria after meeting US finance minister Timothy Geithner in Washington on Thursday (31 May).

"The treasury secretary indicated that we are working in the same direction and that we must find a solution for the banks," she added.

Meanwhile, an International Monetary Fund official at a conference in Brussels on Thursday also pressed for "decisive steps" in what is now generically being called a "banking union."

"Such steps would involve providing banking support from a common resource pool independent from national sources, sooner rather than later," IMF deputy chief Nemat Shafik said, a month before an EU summit where leaders are set to discuss the way forward for the eurozone, including the possibility of a banking union.

European Central Bank (ECB) chief Mario Draghi, one of the architects of the eurozone plan, on Thursday told EU parliamentarians in Brussels that the euro set-up in its current form was "unsustainable."

"The next step ... is to clarify what is the vision a certain number of years from now. The sooner this is specified, the better it is."

In Draghi's view, a banking union would need to be supervised centrally, guarantee deposits for the banks' customers and set up a joint bail-out fund banks would contribute to.

Draghi also criticised the handling of Bankia, a major Spanish bank bailed-out by the state, whose total bill is still unclear after having been revised several times.

"There is a first assessment, then a second, a third, a fourth,” Draghi said. "This is the worst possible way of doing things. Everyone ends up doing the right thing, but at the highest cost."

A similar sense of urgency in reforming the eurozone architecture was given by Italy's central bank governor, Ignazio Visco, who that same day in Rome said: "There are now growing doubts among international investors about governments' cohesion in guiding the reform of European governance and even their ability to ensure the survival of the single currency."

Italy, as well as Spain, has seen its borrowing costs rise not only due to national economic problems, but also due to market fears that Greece may leave the eurozone.

Italian Prime Minister Mario Monti on Thursday urged Germany to reconsider its opposition to having common defences in order to shield Italy and Spain from contagion, while EU economics commissioner Olli Rehn called for "a much upgraded common capacity to contain common contagion."

Germany's fears of increased inflation were undermined by the latest eurozone statistics, which showed that inflation decreased to 2.4 percent in May from 2.6 percent in April on average in the euro area.

In Germany, inflation fell even more - to 1.9 percent in May compared to 2.1 percent the month before. The ECB's target is to keep inflation around 2 percent.


Iran detects, contains Israeli "spy virus Flame"

TEHRAN - Iranian cyber experts have detected and contained a complicated Israeli spy virus,the Kayhan daily reported on Thursday.

A computer virus which is known as "Flame" has targeted Iran's oil industry, the report said,adding that, however, Iranian experts have been able to detect and contain it.

The head of Information Technology Organization of Iran said Wednesday that the country'sexperts had managed to produce anti- virus software that could spot and remove the newlydetected computer virus "Flame," the Press TV reported.

Ali Hakim Javadi said that the indigenous anti-virus software had been capable of detecting thevirus and cleaning up the infected computers, said the report.

He said that the malware was different from other viruses and was more destructive thanStuxnet.

Internet security service provider Kaspersky on Monday announced the discovery of a seriouscyber threat. The malicious program "Flame," is being used as a cyber weapon attackingseveral countries, according to the company. Iran is among the countries that have beenaffected.

Flame "is designed to carry out cyber espionage. It can steal valuable information, includingbut not limited to computer display contents, information about targeted systems, stored files,contact data and even audio conversations," according to a press release from Kaspersky. "The complexity and functionality of the newly discovered malicious program exceed those ofall other cyber menaces known to date."

In the statement, Kaspersky said that "Flame" shared some features with Stuxnet, like sameprinter vulnerability and USB infection method.

Commenting on a just-revealed virus that has targeted computers in Iran, Israeli Vice PrimeMinister Moshe Ya'alon said on Tuesday that his country is capable of employing cyberwarfare means against Iran.

"Anyone who sees the Iranian threat as a significant threat -- it's reasonable (to assume) thathe will take various steps, including these, to harm it," Ya'alon said, according to the Ha' aretzdaily.

"Israel was blessed as being a country rich with high-tech, these tools that we take pride inopen up all kinds of opportunities for us," he said.

On April 24, an Iranian oil official said the country's experts had contained cyber attacksagainst the country's Oil Ministry.

Hamdollah Mohammadnejad, deputy minister in engineering affairs, said "Recently, fewnumber of National Iranian Oil Company (NIOC) servers were attacked by a malware, but thecyber security experts of oil industry contained it immediately."

To protect the penetration of this malware to other computers connected to these servers, theywere temporarily disconnected, said Mohammadnejad.

All the operational units of the oil industry were performing and the experts were busydetecting and identifying the cause of the problem, the official said.

On April 23, the semi-official ISNA news agency said that the virus was identified as "Viper,"which had also targeted some other Iranian industrial websites.

In October 2010, Iranian Intelligence Minister Heidar Moslehi announced that Iran haddetected and thwarted a virus aimed at infecting the country's nuclear plant system.

Iran said the computer worm, Stuxnet, had infected 30,000 IP addresses in Iran, including thepersonal computers of the staff at the country's first nuclear power plant, Bushehr. Tehran alsoclaimed that Israel and conglomerate Siemens were behind the infection of its industrial sites

China Daily

The End The Scariest economic Presentation Ever?

If Raoul Pal was some doomsday spouting windbag, writing in all caps, arbitrarily pasting together disparate charts to create 200 page slideshows, it would be easy to ignore him. He isn't. The founder of Global Macro Investor"previously co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul came to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe... Raoul Pal retired from managing client money in 2004 at the age of 36 and now lives on the Valencian coast of Spain, from where he writes." It is his writing we are concerned about, and specifically his latest presentation, which is, for lack of a better word, the most disturbing and scary forecast of the future of the world we have ever seen....

And we see a lot of those.

Consider this:
We are here...

We don’t know exactly what is to come, but we can all join the very few dots from where we are now, to the collapse of the first major bank…
With very limited room for government bailouts, we can very easily join the next dots from the first bank closure to the collapse of the whole European banking system, and then to the bankruptcy of the governments themselves.
There are almost no brakes in the system to stop this, and almost no one realises the seriousness of the situation.
The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives…
Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations
From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude.
And then do you think Japan and China would not be next?
And then do you think the US would survive unscathed?
That is the end of the fractional reserve banking system and of fiat money.
It is the big RESET.

It continues:
Bonds will be stuck at 1% in the US, Germany, UK and Japan (for this phase).
The whole bond market will be dead.
Short selling on bonds - banned
Short selling stocks – banned
CDS – banned
Short futures – banned
Put options – banned
All that is left is the Dollar and Gold

It only gets better. We use the term loosely:
We have around 6 months left of trading in Western markets to protect ourselves or make enough money to offset future losses.
Spend your time looking at the risks of custody, safekeeping, counterparty etc. Assume that no one and nothing is safe.
After that…we put on our tin helmets and hide until the new system emerges

The End Game

Russia tests next generation of intercontinental long range missile

On May 23, Russia successfully tested a new intercontinental long-range missile at the Plesetsk space center which is located in its northwestern Arkhangelsk region. According to Russia's Defense Ministry, the missile's dummy warhead landed on target at the Kura testing range on the Kamchatka peninsula.

The Intercontinental Ballistic Missile (ICBM) was fired from a mobile launcher by the Russian Missile and Space Forces.

The purpose of the launch was to test the missile's new technical features, in particular its maneuverable warheads, says Vice President of the Academy of Defense and Security, Viktor Esin.

"These warheads have a variable and unpredictable flight trajectory, so they can defeat any interceptor missile system."

Due to the new missile's high velocity and a greater number of warheads it can carry, it is more effective at penetrating missile defense systems than any of its predecessors: for example, missiles carrying 10 warheads have a better penetration capacity than a single warhead missile, so our engineers have designed a missile which can carry multiple warheads.

Our defense experts have spent a lot of time on developing missiles that can penetrate any anti-missile shields, says the Komsomolskaya Pravda's military observer Viktor Baranets.

"It is common knowledge that Russia has maneuvering ultrasonicwarheads. Now our engineers are working on expanding the capacities of these warheads and adjusting the missiles to the new missile defence systems that the US and NATO intend to deploy in Europe by 2020. By carrying out the May 23 launch, we are preparing our response to US and NATO plans."

Experts say that the new missile combines all the know-how of Russia's Topol M, Yars and Bulava missiles and features improved technology for launching, calculating trajectories, maneuvering and hitting targets.

Space War

The head of Egypt’s Muslim Brotherhood has called on Arab forces to confront Israel

The head of Egypt’s Muslim Brotherhood has called on Arab forces to confront Israel and for the international community to pressure the “Zionist government to withdraw from the land of Palestine.”

The comments by Brotherhood General Guide Mohammed Badie came in a written statement issued May 17 to commemorate Nakba Day, when Palestinians and other Arabs mourn Israel’s creation in 1948.

The statement – the existence of which was revealed Wednesday by the Investigative Project on Terrorism blog – reminds Brotherhood followers of the movement’s decades-long “sacrifices” in efforts to destroy the Jewish state.

“On this day, like every year, the Arab and Islamic nations remember the worst catastrophe ever to befall the peoples of the world,” Badie wrote in the text, translated by The Jerusalem Post. “We demand the international community rectify the historic injustice [of 1948] and pressure the government of the Zionist entity to withdraw from the land of Palestine.”

The statement portrays the Arab revolts of the last 18 months as part of an inexorable process to “liberate” land now in the State of Israel.

“We have toppled the most repressive regimes with purpose and determination,” Badie wrote. “We have begun the era of liberation of all peoples, first of all the Palestinian people, [suffering from] the worst occupation known to man – the Zionist occupation.”

Uriya Shavit, a lecturer in Tel Aviv University’s Department for Arabic and Islamic Studies, said those acquainted with the Brotherhood’s history will find the message unsurprising.

“The idea that the Brotherhood doesn’t recognize the legitimacy of Israel, and the call to eradicate it at some point, is something the group has never denied. It’s been in Brotherhood literature from its founding in 1928 until this very day,” Shavit said.

“What they have tried to do, not just during the Arab Spring but before, is to try to reconcile the ideology of never recognizing Israel, or the 1979 Egypt- Israel peace treaty, with the understanding that if they’re to be in power, they have to be realistic,” he added. “That’s why they offer statements like ‘We realize we will have to recognize agreements signed by previous governments,’ but then always add a ‘but.’”

The Brotherhood took half of Egypt’s parliamentary seats in elections earlier this year, with even harder-line Salafis taking another quarter. The Brothers’ presidential candidate, Mohamed Mursi, barely edged former prime minister Ahmed Shafiq in firstround elections last month, and the two hopefuls will meet in a runoff ballot June 16-17.

Asked about Egypt’s peace agreement with Israel, Mursi has variously called for its revision or for putting it to referendum. Aides to the candidate have said that if elected he would not meet with Israeli officials, though his assistants might.

Badie’s Nakba Day message repeatedly cites passages from the Koran to explain political events. The Arab revolts showed popular will can topple “corrupt regimes which knelt at the feet of the Zionists,” he wrote, adding the Koranic verse, “They are those with whom thou didst make a covenant but they break their covenant every time.”

“The idea is there is no point in signing treaties with Jews – not Israelis, by the way, but Jews – because the Koran tells you just how unreliable they are,” Shavit said. “This is rhetoric even Hamas has used less in the past year, because it’s seen in the West as plain anti-Semitism, albeit in Islamic garb.”

Dan Schueftan, director of the National Security Studies Center at the University of Haifa, said the question of Palestine has always been at the forefront of Brotherhood doctrine.

“This rhetoric has little to do with the Palestinians, and a lot to do with the fact that all this land is Muslim, and Israel is therefore inherently illegitimate,” he said. “Egypt is moving from a bad situation to a much worse one. Naturally, Israel will suffer: when Egypt can’t deal with its own problems, it will deflect them at us.”

Nonetheless, he said, Israelis should watch developments in Egypt and across the region with a measure of both caution and confidence.

"I'm pessimistic and optimistic at the same time," he said. "Pessimistic about what's happening in the Arab world, but optimistic over Israel's ability to deal with it."

Jerusalem Post