A New Financial System Free from Wall Street and the City of London?

The Ukrainian crisis? It is basically the opposite of what the media and politicians keep repeating both in the US and Europe. They say that the so-called International community have isolated Russia and Vladimir Putin.

In fact it is the real sponsors of the coup d’état and the violence in Ukraine who are isolated not only morally but also strategically.

And it is Putin, the first leader who resisted and defeated the strategy of world domination, who is enjoying the enthusiastic support of his people and the growing admiration of the world. The well financed media and politicians do not want to hear this, but this is the reality. Without exaggeration, one can compare this resistance to that against Napoleon and Hitler…

Only few know precisely how dangerous the situation has been. How close to a real war.

The incompetent representatives of the ‘international community’ lost any sense of reality and deployed the weapons of social destabilization, armed insurrection, assassination by snipers, a fascist March on Kiev reminiscent of Mussolini’s March on Rome, targeting of the Russian population.

They intended to give Russia the Libya treatment, and they did not make a secret of it.

After the assurances given by George H W Bush to Mikhail Gorbachev that NATO couldn’t be used for a push toward East, successive US governments did exactly that. Their objective is to surround Russia. With the smiling hypocrisy of hyenas, they made clear that there was no alternative but to surrender to the military power and propaganda capabilities of NATO.

No compromise, no negotiations. Or better when negotiations took place like on Feb 21, the neo-Nazi gangs in Kiev were incited to escalate the armed violence and take over the Parliament and Government buildings, beating and intimidating whoever did not agree.

The Western “diplomats” immediately recognized the neo-Nazi coup d’état as the legitimate government. Yatsenyuk, the candidate of Victoria Nuland, declared himself Prime Minister while members of the parliament were brutally beaten in the street, their houses invaded and violated, their families terrorized… to ensure their support for the democratic process…

These criminal politicians even pushed the situation close to a real nuclear war. Putin made clear that Russia — which had lost a large percentage of its population in the war against Nazism and accepted to see Moscow in flames in order to defeat the superior forces of Napoleon — was not going to surrender. That moment was more dangerous than the 1962 Cuban missile crisis. Putin called their bluff… Then, while the Crimean (and not only Crimean) population asked for protection against the NATO-supported armed gangs, the propaganda machine went into full speed in the West, but it was too late. In this sense Putin not only saved Russia, but gave a chance to the whole of Europe… like in WWII

The fascist armed insurrection and the Kiev coup were not simply a war against Russia, they were also a war against Europe. Not the EU bureaucracy in Brussels, whose loyalty lies with the big financial institutions, but the Europe of the various countries reduced to misery and despair by austerity measures and the economic looting of Wall Street and the city of London.

Ukraine has been destabilized in order to make sure that Europe would be in a perennial war with Russia.

In fact, both, the interests of Europe and that of Russia, lie in a common economic plan for the development of the whole area. This is what was proposed by Putin and by several leaders such as former German chancellors Helmut Kohl and Gerhard Schroeder. This is exactly what had to be prevented with the Victoria Nuland $5 billion ‘to help democracy.’ And now, despite all the noises and rhetoric, this is the most obvious direction to go.

The most important point to understand is that this war and looting policy is not in the interest of the Europeans or even of the Americans.

This is the big secret that now cannot be covered anymore. The governments of the US and the European countries are NOT independent entities, they are not sovereign. They do not have the will or even the ability to act on behalf of their people. They are controlled by powerful banking interests. They have been taken over by two financial centers that do not care for the real economy. They pursue only speculation and looting.

In response on March 4th the economic adviser to Putin, Sergey Glazyev declared openly that if the financial vultures persisted, Russia would create on the spot an independent financial system which is separate from that of the US Dollar.

Glazyev explained to the vampires:

‘We have wonderful economic and trade relations with our Southern and Eastern partners. We will find a way not just to eliminate our dependence on the US but also profit from these sanctions….If sanctions are applied against Russia’s state structures we will have to move into other currencies and create our own settlement system. We will be forced to recognize the impossibility of repayment of the loans that the US banks gave to Russian state structures. Indeed, sanctions are a double-edged weapon, and if the US chooses to freeze our assets, then our equities and liabilities in dollars will also be frozen…’

This strategy is known as the Financial Nuclear Option. It could lead to the end of the predatory looting system of Wall Street.

The ‘Southern and Eastern partners’ Glazyev is talking about are clearly the members of the BRICS, Brazil, Russia, India, China, South Africa, the sane part of the world economy, the future.

And it is exactly what the official spokesman of the Kremlin, Dmitry Peskov indicated in an interview to the BBC:

“Sanctions against Russia could be the final trigger that will force many countries to create a new independent financial system based on the real economy. The world is changing rapidly. How many civilizations grew and died in the course of history? Who will be able to resist the pressure of dying systems and indicate to the people the road toward the future?”

The possibility of a new financial system independent from the collapsing dollar empire, as consequence of anti Russia sanctions was also emphasized by an authoritative the Russian media including RT. (See:http://rt.com/op-edge/russia-switches-to-brics-sanctions-357/)


…Western sanctions might push Russia to deepen cooperation with BRICS states, in particular, to strengthen its ties with China, which will possibly turn out to be a big catastrophe for the US and the EU some time later.

On March 18, the spokesperson for the Kremlin, Dmitry Peskov, stated that Russia would switch to new partners in case of economic sanctions being imposed by the European Union and the United States. He highlighted that the modern world isn’t unipolar and Russia has strong ties with other states as well, though Russia wants to remain in good relations with its Western partners, especially with the EU due to the volume of trade and joint projects.

Those “new partners” are not really new since Russia has been closely interconnected with them for almost 13 years. This is all about the so-called BRICS organization, consisting of Brazil, Russia, India, China and South Africa. BRICS represents 42 percent of the world’s population and about a quarter of the world’s economy, which means that this bloc of states is an important global actor.

The BRICS countries are like-minded in regard to supporting the principles of international law, the central role of the UN Security Council and the principles of the non-use of force in international relations; this is why they are so actively performing in the sphere of settling regional conflicts. However, the cooperation between Brazil, Russia, India, China and South Africa goes beyond political aspects and is also demonstrated by dynamic trade and multiple projects in different areas.

Today, in total, there are more than 20 formats of cooperation within the BRICS which are being developing. For example, in February the member-states came to an agreement about 11 possible projects of scientific and technical cooperation, from aeronautics to bio- and nanotechnology.

In order to modernize the global economic system, at the center of which stand the US and the EU, the leaders of Brazil, Russia, India, China and South Africa have created the BRICS Stock Alliance and are creating their own development bank to finance large infrastructure projects. On the whole, despite fierce criticism of BRICS as an organization with no future, it is developing and increasing cooperation with its members and, in fact, BRICS is showing pretty good results.

With the suspension of Russia’s participation in G8 and the strengthening of economic sanctions against Russia, specific industries may be targeted, including limits on imported commodities.

While the West seeks to hit Russia hard, it is important to notice that Russia is ready to switch to other markets, including BRICS, with a view to expanding its trade.

Credit to Global Research

Turkey downs Syria military jet 'in airspace violation'

Turkish forces have shot down a Syrian military jet they say was violating their airspace despite warnings.

Turkey's Prime Minister Recep Tayyip Erdogan warned such action by Syria merited a "heavy response".

But Syria accused Turkey of "blatant aggression", saying the plane had been over Syrian territory at the time.

The incident reportedly occurred in an area where Syrian rebels and government forces have been fighting for control of a border crossing.

Turkey and Syria - once allies - share more than 500 miles (800km) of border.
 

A state-owned Turkish news agency carried pictures it said showed the Syrian jet being shot down

Turkey has broadly sided with the rebels in Syria's war since October 2011.

Turkish forces launched artillery strikes on Syrian targets in late 2012 after the Syrians shot down a Turkish jet.

However, the BBC's James Reynolds in Istanbul says neither side is interested in a direct, sustained conflict.

'Ignored warnings'

Speaking at a rally of supporters, Mr Erdogan congratulated the air force on its actions on Sunday.

"A Syrian plane violated our airspace. Our F-16s took off and hit this plane. Why? because if you violate my airspace, our slap after this will be hard," he said.

A Syrian military source, quoted by state television, said Turkish air defences had shot down a Syrian jet as it attacked rebels on Syrian territory - an act of "blatant aggression".

The Syrian Observatory for Human Rights - a UK-based activist group - said initial reports from the area suggested the plane came down on the Syrian side of the border.

"Turkish air defences targeted a Syrian fighter-bomber as it struck areas of the northern province of Latakia. The plane caught fire and crashed in Syrian territory," the Observatory said.

According to one report, the plane's pilot was able to eject.

In a media statement on the incident, the Turkish General Staff said two Syrian military jets were involved, and that they had been "warned four times that they were approaching Turkish airspace".

One of the Syrian MiGs turned back, it said.

"But the second Syrian jet entered Turkish airspace in the Camli Hill Border Outpost area in Yayladag, Hatay at 1313 (local time) in spite of the warnings. It then turned westwards and continued flying in our airspace for a distance of 1.5km," the statement said.

"At this point one of two Turkish F-16s flying Combat Air Patrol in the region fired a missile at the Syrian jet in accordance with the rules of engagement at 1314. Hit, the Syrian jet fell in the vicinity of Kesab on Syrian soil 1,200m south of the border."


Credit to BBC

Russian troops may be massing to invade Ukraine, says White House

Russian forces gathering on the border with eastern Ukraine may be poised to invade, the White House warned on Sunday, as the government in Kiev said that the prospect of war with Moscow was continuing to grow after the annexation of Crimea.

Speaking after Nato's top commander in Europe voiced alarm about the size and preparedness of the Russian troop buildup, President Barack Obama's deputy national security adviser, Tony Blinken, said President Vladimir Putin may indeed be readying further action.

“It's deeply concerning to see the Russian troop buildup on the border,” Blinken told CNN. “It creates the potential for incidents, for instability. It's likely that what they're trying to do is intimidate the Ukrainians. It's possible that they're preparing to move in.”

Thousands of Russian troops held a military exercise near the border even before Putin last week formally annexed Ukraine's southern Crimea region following a referendum – condemned as illegal by western governments – that endorsed unification with Russia.

General Philip Breedlove, Nato's supreme allied commander in Europe, said earlier on Sunday that the Russian military force gathered near the Ukrainian border was “very, very sizeable and very, very ready” and could even pose a threat to Moldova, on the other side of the country.

Andriy Deshchytsia, Ukraine's acting foreign minister, said the chances of all-out war between his government and Moscow “are growing”, adding: “The situation is becoming even more explosive than it was a week ago.”

Deshchytsia told ABC News: “We are ready to respond. The Ukraine government is trying to use all the peaceful diplomatic means … to stop Russians, but the people are also ready to defend their homeland.

“At this moment, when Russian troops would be invading the eastern region,” Deshchytsia went on, “it would be difficult for us to ask people who live there not to respond on this military invasion”.

Moldova's President Nicolae Timofti warned Putin last week against considering the annexation of Transnistria.


Credit to The Guardian

Detroit Plans Mass Water Shutoffs To 164,938 Residents

(Steve Pardo) The Detroit Water and Sewerage Department has a message for Detroit residents and companies more than 60 days late on their water bills: We’re coming for you.

With more than half of the city’s customers behind on payments, the department is gearing up for an aggressive campaign to shut off service to 1,500-3,000 delinquent accounts weekly, said Darryl Latimer, the department’s deputy director.

Including businesses, schools and commercial buildings, there are 323,900 Detroit water and sewerage accounts; 164,938 were overdue for a total of $175 million as of March 6. Residential accounts total 296,115; 154,229 were delinquent for a total of $91.7 million.

The department halts cutoffs through the winter because of complications associated with freezing temperatures, such as damaged pipes. But this spring, a new contractor has been hired to target those who are more than two months behind or who owe more than $150 — twice the average monthly bill of $75.

The department says it’s now ready to “catch up” with cutoffs halted because of the unusually harsh winter weather. DWSD is looking to show there are consequences associated with not paying water bills, Latimer said.

“Not everyone is in the situation where they can’t afford to pay,” he said. “It’s just that the utility bill is the last bill people choose to pay because there isn’t any threat of being out of service.”

People pay up more when they see the department out cutting off water to neighbors, and the statistics bear that out, officials said. In July, for example, before contractors started on the shutoffs, the department cut off 1,566 customers. That month, it collected $149,000 in water bills.

Extra contractors started working on cutoffs last summer. Attheir peak in October — before cold weather caused a halt to the disconnects — 3,700 cutoffs occurred. The department collected more than $350,000 in overdue bills that month. That number of cutoffs translated to more than double for warm weather months compared to last year.

“We’re trying to shift the behavioral payment patterns of our customer base right now,” said Constance Williams-Levye, DWSD commercial operations specialist. “And so aggressively we’ll have a team of contractors coming in, in addition to our field teams.”

Up to 20 additional contractor crews are expected to be employed working on the cutoffs, DWSD officials said.

The department bills monthly and sends out notices when bills are overdue. When an account is more than 60 days late, a notice goes out saying service could be cut, Latimer said.

Residents don’t necessarily have to move out but Latimer said there were instances, in the case of households with children, where the department of social services will come in and say the kids will be removed from the home if water is not restored.

“Usually folks will then come in and make some kind of arrangement,” Latimer said.

Department officials say the initiative is unrelated to Detroit’s bankruptcy restructuring and is simply a renewed effort to remedy a longstanding problem. The fear of being stuck with Detroit’s delinquencies, however, has kept suburban leaders from embracing a regional water authority proposed by Emergency Manager Kevyn Orr.

Macomb County Executive Mark Hackel said the department should have started being more assertive in its collections years ago.

“It’s all about the management responsibility,” Hackel said. “If they’re just getting around to it now, what were they doing before? Collections are just part of a system that’s been neglected for years.”

On Monday, the department is scheduled to send mailings to thousands of customers warning if their overdue water balances aren’t paid, the bill would be considered a property tax lien and could result in foreclosure.

Communities pay a combination of a fixed amount per month as well as an amount for every thousand cubic feet of water — or every 7,480 gallons. Detroit residents, on average, pay about 25 percent less than suburban water customers.

The department also is tightening a policy that allows customers to make multiple partial payments on overdue accounts. That creates a situation in which some go in and out of delinquency status, Latimer said. Plans call for allowing an overdue customer only one payment arrangement per year.


Credit to Govslaves.info- See more at: http://govtslaves.info/detroit-plans-mass-water-shutoffs-164938-residents/#sthash.XI8AHhgD.dpuf

2,000 out of 18,000 Ukrainian Troops to Leave Crimea

MOSCOW, March 22 (RIA Novosti) - Less than 2,000 of Ukrainian troops serving in Crimea decided to leave the peninsula for Ukraine, the Russian Defense Ministry said on Saturday.

"As of March 21, less than 2,000 out of 18,000 Ukrainian servicemen staying on the territory of the Republic of Crimea decided to go to Ukraine," the ministry said in a statement.

Those willing to continue their service in the Ukrainian armed forces will be provided with transport to carry their families and belongings to the Ukrainian territory.

A total of 147 military units in Crimea have hoisted Russian flags instead of Ukrainian and applied to join the Russian armed forces.

"St. Andrew's flags of the Russian Navy have been raised on 54 out of 67 vessels of the Ukrainian Navy, including eight warships and one submarine," the defense ministry said.

Ukraine's only submarine, the Zaporizhzhia, joined the Russian Black Sea Fleet earlier on Saturday and will be soon relocated to its base.

Russian President Vladimir Putin signed a decree on Friday to ratify the treaty providing for the reunification of the Crimean Peninsula with Russia.
Leaders in the predominantly Russian-ethnic republic refused to recognize the legitimacy of the government in Kiev that came to power amid often violent protests last month, instead seeking reunification with Russia.

Credit to RIA Novosti

Putin, Xi Jinping and Obama Are Tightening the Noose Around America’s Neck

Two-thirds of the American Death Alliance are pictured here. Who is missing?

Every journalist, if they write long enough, will experience the “I told you so” experience. Many who have written about the travails of President Obama must experience this feeling on a near-daily basis. This man has had his finger in seemingly every pie that has served to degrade the lives of all middle class Americans. Rather than run through the litany of transgressions, please allow me to ask you one question:

Can you name even on legitimate thing that Obama has done which has served to improve the status of the American people?

It is my hope that nobody will believe the words that are written on this page. Please take the time to click on the hypertext links, ponder the data you come across and form your own conclusions. I am issuing this cautionary note because I believe that there is no hiding Obama’s deliberate complicity in the intentional military and economic demise of this country. I do ask, however, that you spare me the rhetoric that he is a puppet for the bankers’ statements. I already know that. However, Obama is the only real visible manifestation of this plot to take down America. So until we have some names and addresses of the banker brain trust, and can legitimately hope to be able to effect arrests, we need to focus on the one target that we can immediately bring to justice in order to slow down this plot against the people of this country. And slow it down is all we can reasonable hope to do.

Obama’s Danger to America Was Identified Before He Was Elected!

What would you say if it were known that there was at least one prominent American politician and one Russian media outlet that accurately foretold the present crisis we find ourselves in over Ukraine if we elected Obama as President?

How would you like to have been that prominent American politician that predicted Putin would invade Ukraine because he would be encouraged by Obama’s “indecision” and “moral equivalence” and would possibly become the flash point for World War III?

It turns out there was such a prediction and the person making it was mocked. Her statements were labeled as “strange” and representative of a “far-fetched scenario”. The person who made these stunningly accurate predictions was none other than Sarah Palin, and these statements were made during the Presidential campaign of 2008. Palin warned America about Obama and what would happen in Ukraine, and we would not listen.

The Russian Media Also Told the World What Was Coming

Was this just a lucky guess by Palin, or have there been other observers capable of foreseeing our current situation?

Some Russians apparently agreed with Palin on the possibility of Ukraine becoming a flash point if Obama were to be elected instead of McCain. Investment Watch obtained a Russian media statement,and by using Google Translator, produced evidence that the Russians were predicting a Putin invasion of Crimea if Obama was elected. The Russian article also appeared in 2008.

Obama Has Left a Paper Trail Regarding His Ukrainian Intentions

Perhaps this contingent of the Russian media and Sarah Palin were wise to the fact that, then-Senator Obama, in 2005, participated in what became known as the creation of the second phase of the Budapest Document. The document intentionally weakened Ukraine, in 2005, at Obama’s urging, and was a major player in strongly encouraging, almost requiring, Ukraine to destroy its conventional weapons stockpiles as well. Therefore, Obama has helped to create the present crisis. It is likely that Obama was playing a well-defined role in weakening Ukraine in order to create the present crisis. By the way, the Budapest Document called for international protection of Ukraine, from invasion. if Ukraine disarmed. By protection, I mean military protection. The document did not provide for “sanctions”  that Obama is presently employing which bans Russian officials from attending Disneyworld! And why isn’t the media asking Obama about these events?

My Sarah Palin Moment

In the past two weeks, I have revealed how an advisor to the Russian Parliament, through Facebook and a Russian media outlet described, with maps, Putin’s intentions to eventually occupy all of the former Soviet Union’s Eastern European countries as well as reacquire Alaska. Like Palin, I have heard descriptors such as “strange” and a “far-fetched scenario”. The criticism of my accuracy is unimportant, the fact that so many are blind to the dangers that this poses to the collective futures of all Americans, is vitally important.

This is where it is critical that all readers do some homework. Take a moment and review the abovementioned article and then review the second referenced article listed immediately below.

In a previous article, it was demonstrated that Russia controls a vast portion of the energy needs of our NATO partners consisting of Germany, Italy and France and the majority of the gas flows through Ukraine. It is important to click to this link to see a summary of how Putin controls the entire chessboard of Europe (see the map which is available in the referenced link). The same article discussed how Russia would use this advantage to negate and eventually destroy the NATO alliance. Without NATO there is no defense of American interests in Europe and probably the Middle East.

 Still Not Convinced?

To this point, a case has been made that Putin will destroy our military alliances through controlling much of the energy needs of our NATO partners. However, this might be a secondary point in terms of America’s final destination.

Whoever the Chinese military supports, Russia or America, the winner will emerge from the coming conflict. On this front, there is very disturbing news coming out China last Friday. As reported in the Wall Street Journal late last week, the Russians and the Chinese have reached an energy deal which will make China the biggest importer of Russian gas.  

Putin has bought off the Chinese by making them partners in their energy business. Obama has offered nothing of substance to the Chinese except more worthless paper money. The Russian state gas giant OAO Gazprom revealed the development of a 30-year supply deal with the Chinese to give them a piece of their European gas market from which China has been losing business.

America will soon stand alone!

This agreement is to be fully in place by the end of this year. In 2018, the agreement will be fully operationalized. The only way out of this mess is through a war. The United States has no observable leverage. The old axiom has come into play: If you control a large portion of a country’s energy needs, you control its politics and ultimately its military.

If the world’s energy is going to be dominated by Russia and Putin is committed to undermining the Petrodollar as the world’s reserve currency, then what future does the dollar have? Will it be hyperinflation resulting in economic collapse which will culminate in martial law?

Meanwhile, Obama is taking our military levels down to 1940 levels. Why? Stupidity or treason?  Are you feeling that noose tightening around your neck?

Conclusion

If we allow Obama to neuter our military, we will soon lose the capacity to defend ourselves. Does anyone still think that a currency collapse, followed by martial law, is so far-fetched in light of the present economic crisis?

Are Putin, Xi Jinping and Obama all playing for the same team, namely, the banksters?

Credit to Common Sense

Interpreting Putin's Decision

 

People around the world were astounded by Vladimir Putin’srapid decision to annex Crimea in response to the latter’s referendum to secede from Ukraine and join Russia, which Kiev and the West view as illegal. The decision also drew worldwide criticism and vehement condemnation by the West and Ukraine, and triggered a second wave of economic sanctions from the United States, and soon afterwards Europe. Relations between Russia and the West are at their chilliest since the end of the Cold War.

So why has Putin risked Russia’s economic welfare and political space to swallow Crimea, push Ukraine out, and alienate the entire Western world? Is Putin “in another world” as German Chancellor Angela Merkel claimed he is? In my opinion, there are at least two considerations behind Putin’s decision.

The first is the realist, geo-political consideration. In Putin’s world, since the collapse of the former Soviet Union, Russia has lost nearly one fourth of its geography, one half of its population, and more than half of its GDP. Among the “lost” territories are those that are strategically important or militarily advanced, such as Ukraine and the Baltic states. With the eastward expansion of NATO, and the integration of former Soviet satellite states and republics in Eastern Europe and the Baltics into Europe, the traditional buffer zone between Russia and the West is increasingly squeezed and Russia’s space for strategic maneuvering becomes smaller with each year. When Russia craved for entry into the West, this might not have been particularly worrisome or embarrassing for Moscow. But since Russian leaders decided long ago that joining the West was neither particularly helpful to Russia’s political standing nor particularly attractive in terms of economic gains, it has begun to view the expansion of the West at its own strategic expense as both ill-intentioned and threatening.

Ukraine holds a unique position in Russia’s geo-strategic consideration. First, it is crucial territory in the passage of Russia’s oil exports to Europe. Each year more than one third of the oil Russia ships to Europe travels via the Ukraine pipeline. Second, Crimea gives Russia’s Black Sea Fleet access to the Black Sea. If the pro-West Kiev government were to have decided to end its lease to the Russian naval base in Crimea, Russia would have lost its strategic gateway to the Black Sea and the Mediterranean Sea. Third, Ukraine is deemed the most crucial member of Russia’s Eurasia Union project, an economic and strategic plan to closely connect Russia, Belarus, Ukraine, and Central Asia. If all goes according to plan, this union will integrate these former Soviet republics and now independent countries economically, politically, and diplomatically with Russia, and go some way to restoring the glory of the Soviet empire at its peak. The “coup d’état” in Kiev and the political orientation of the new government put all these things in jeopardy, if Russia remains disinterested and passive.

The second consideration is more psychological in nature.Following the end of Cold War, embracing the West was the first priority of Russian foreign policy. But to Moscow’s dismay, it found that the West still harbored strong reservations and considerable distrust. Years spent courting and wooing provided little of what Russia craved most: equal membership in the West and economic prosperity. Though Russia became part of the exclusive G8, it never enjoyed the full status and say of the other seven members, always remaining an “other.” Economically, the shock remedy proposed by the West and faithfully implemented by Boris Yeltsin didn’t bring the expected economic benefit. Instead, it took Russia’s economy into freefall, leaving the average Russian worse off than before. Russia’s look West ended in humiliation and disaster.

It was Putin who saved Russia from its miserable condition. He readjusted both Russia’s domestic and foreign policies, and distanced the country from the West, instead seeking opportunities to resurrect past Soviet glories. As the Russian economy improved, the West found that its time was passing. The 2008 economic crisis hit the U.S. and Europe hard and they found themselves more reliant on the emerging powers, Russia included. It is Britain, France, and even Germany who are now busy appealing to Russian oil bacons to buy more and invest more. The balance of power between Russia and the West has shifted. The small war in Georgia in the summer of 2008 only strengthened this trend and the response from the West impressed Russia greatly: Europe is rotten and the U.S. has become too weak to lead. Then came the Arab Spring and the Syria crisis. In the former case, the U.S. “led from behind,” and in the latter it was Russia that decided the course of the Syria civil war.

Russians, and especially Putin learned a hard lesson from the post-Cold War romance with the West: For all the talk of democracy and freedom, the fact remains that the strong dictate to the weak.

With Europe rotten and United States weakened, a resurgent and confident Russia will definitely not let a geo-strategically important former Soviet republic fall entirely into the West’s camp. By annexing Crimea, Putin not only secured Russia’s naval base and its strategic gateway to the Black Sea, he also sent a powerful message to Ukraine and the West: Ignore Russia’s legitimate strategic concerns at your own peril.

Credit to Zero Hedge

Horrific Judgment coming to Brazil Prophecy -Prophet Dr Owuor

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From NYC on Ukraine, Russia

James Rickards-Dollar Going to Collapse 80% or 90% or More

PROPHECY ALERT: Israel Closes All 102 Embassies "War With Iran"?

How China Imported A Record $70 Billion In Physical Gold Without Sending The Price Of Gold Soaring

A little over a month ago, we reported that following a year of record-shattering imports, China finally surpassed India as the world's largest importer of physical gold. This was hardly a surprise to anyone who has been following our coverage of the ravenous demand for gold out of China, starting in September 2011, and tracing it all the way to the present.

China's apetite for physical gold, which is further shown below focusing just on 2012 and 2013, has been estimated by Goldman to amount to over $70 billion in bilateral trade between just Hong Kong and China alone.

Yet while China's gold demand is acutely familiar one question that few have answered is just what is China doing with all thisphysical gold, aside from filling massive brand new gold vaults of course. And a far more important question: how does China's relentless buying of physical not send the price of gold into the stratosphere.

We will explain why below.

First, let's answer the question what purpose does gold serve in China's credit bubble "Minsky Moment" economy, where as we showed previously, in just the fourth quarter, some $1 trillion in bank assets (mostly NPLs and shadow loans) were created  out of thin air.

For the answer, we have to go back to our post from May of 2013 "The Bronze Swan Arrives: Is The End Of Copper Financing China's "Lehman Event"?", in which we explained how China uses commodity financing deals to mask the flow of "hot money", or the one force that has been pushing the Chinese Yuan ever higher, forcing the PBOC to not only expand the USDCNY trading band to 2% recently, but to send the currency tumbling in an attempt to reverse said hot money flows.

One thing deserves special notice: in 2013 the market focus fell almost exclusively on copper's role as a core intermediary in China Funding Deals, which subsequently was "diluted" into various other commodities after China's SAFE attempted a crack down on copper funding, which only released other commodities out of the Funding Deal woodwork. We discussed precisely this last week in "What Is The Common Theme: Iron Ore, Soybeans, Palm Oil, Rubber, Zinc, Aluminum, Gold, Copper, And Nickel?"

We emphasize the word "gold" in the previous sentence because it is what the rest of this article is about.

Let's step back for a minute for the benefit of those 99.9% of financial pundits not intimate with the highly complex concept of China Commodity Funding Deals (CCFDs), and start with a simple enough question, (and answer.)  

Just what are CCFDs?

The simple answer: a highly elaborate, if necessarily so, way to bypass official channels (i.e., all those items which comprise China's current account calculation), and using "shadow" pathways, to arbitrage the rate differential between China and the US.

As Goldman explains, there are many ways to bring hot money into China. Commodity financing deals, overinvoicing exports, and the black market are the three main channels. While it is extremely hard to estimate the relative share of each channel in facilitating the hot money inflows, one can attempt to "ballpark" the total notional amount of low cost foreign capital that has been brought into China via commodity financing deals.

While commodity financing deals are very complicated, the general idea is that arbitrageurs borrow short-term FX loans from onshore banks in the form of LC (letter of credit) to import commodities and then re-export the warrants (a document issued by logistic companies which represent the ownership of the underlying asset) to bring in the low cost foreign capital (hot money) and then circulate the whole process several times per year. As a result, the total outstanding FX loans associated with these commodity financing deals is determined by:

the volume of physical inventories that is involved

commodity prices

the number of circulations

A "simple" schematic involving a copper CCFDs saw shown here nearly a year ago, and was summarized as follows.

As we reported previously citing Goldman data, the commodities that are involved in the financing deals include copper, iron ore, and to a lesser extent, nickel, zinc, aluminum, soybean, palm oil, rubber and, of course, gold. Below are the desired features of the underlying commodity:

• China is heavily reliant on the seaborne market for the commodity
• the commodity has relatively high value-to-density ratio so that the storage fee and transportation cost are relatively low
• the commodity has a long shelf life, so that the underlying value of the commodity will not depreciate significantly during the financing deal period
• the commodity has a very liquid paper market (future/forward/swap) in order to enable effective commodity price risk hedging.

Here we finally come to the topic of gold because gold is an obvious candidate for commodity financing deals, given it has a high value-to-density ratio, a well-developed paper market and very long "shelf life." Curiously iron ore is not as suitable, based on most of these metrics, and yet according to recent press reports seeking to justify the record inventories of iron ore at Chinese ports, it is precisely CCFDs that have sent physical demand for iron through the proverbial (warehouse) roof.

Gold, on the other hand, is far less discussed in the mainstream press in the context of CCFDs and yet it is precisely its role in facilitating hot money flows, perhaps far more so than copper and even iron ore combined, that is so critical for China, and explains the record amount of physical gold imports by China in the past three years.

Chinese gold financing deals are processed in a different way compared with copper financing deals, though both are aimed at facilitating low cost foreign capital inflow to China. Specifically, gold financing deals involve the physical import of gold and export of gold semi-fabricated products to bring the FX into China; as a result, China’s trade data does reflect, at least partially, the scale of China gold financing deals. In contrast, Chinese copper financing deals do not need to physically move the physical copper in and out of China as explained last year so it is not shown in trade data published by China customs.

In detail, Chinese gold financing deals includes four steps:

1. onshore gold manufacturers pay LCs to offshore7 subsidiaries and import gold from bonded warehouses or Hong Kong to mainland China – inflating import numbers
2. offshore subsidiaries borrow USD from offshore banks via collaterizing LCs they received
3. onshore manufacturers get paid by USD from offshore subsidiaries and export the gold semi-fabricated products to bonded warehouses – inflating export numbers
4. repeat step 1-3

This is shown in the chart below:

As shown above, gold financing deals should theoretically inflate China’s import and export numbers by roughly the same size. For imports, they inflate China’s total physical gold imports, but inflate exports that are mainly related to gold products, such as gold foils, plates and jewelry. Sure enough, the value of China’s imports of gold from Hong Kong has risen more than 10 fold since 2009 to roughly US$70bn by the end of 2013 while exports of gold and other products have increased by roughly the same amount (shown below). This is in line with the implication of the flow chart on Chinese gold financing deals: the deals inflate both imports and exports by roughly equal size.

Given this, that the rapid growth of the market size of gold trading between China and Hong Kong created from 2009 (less than US$5bn) to 2013 (roughly US$70bn) is most likely driven by gold financing deals.

However, a larger question remains unknown, namely that as Goldman observes, "we don’t know how many tons of physical gold are used in the deals since we don’t know the number of circulations, though we believe it is much higher than that for copper financing deals."

Recall the flowchart for copper funding deals:

1. Step 1) offshore trader A sells warrant of bonded copper (copper in China’s bonded warehouse that is exempted from VAT payment before customs declaration) or inbound copper (i.e. copper on ship in transit to bonded) to onshore party B at price X (i.e. B imports copper from A), and A is paid USD LC, issued by onshore bank D. The LC issuance is a key step that SAFE’s new policies target.
2. Step 2) onshore entity B sells and re-exports the copper by sending the warrant documentation (not the physical copper which stays in bonded warehouse ‘offshore’) to the offshore subsidiary C (N.B. B owns C), and C pays B USD or CNH cash (CNH = offshore CNY). Using the cash from C, B gets bank D to convert the USD or CNH into onshore CNY, and trader B can then use CNY as it sees fit.
3. Step 3) Offshore subsidiary C sells the warrant back to A (again, no move in physical copper which stays in bonded warehouse ‘offshore’), and A pays C USD or CNH cash with a price of X minus $10-20/t, i.e. a discount to the price sold by A to B in Step 1.
4. Step 4) Repeat Step 1-Step 3 as many times as possible,during the period of LC (usually 6 months, with range of 3-12 months). This could be 10-30 times over the course of the 6 month LC, with the limitation being the amount of time it takes to clear the paperwork. In this way, the total notional LCs issued over a particular tonne of bonded or inbound copper over the course of a year would be 10-30 times the value of the physical copper involved, depending on the LC duration.

In other words, the only limit on the amount of leverage, aka rehypothecation of copper, was limited only by letter of credit logistics (i.e. corrupt bank back office administrator efficiency), as there was absolutely no regulatory oversight and limitation on how many times the underlying commodity can be recirculated in a CCFD.... And gold is orders of magnitude higher!

Despite the uncertainty surrounding the actual leverage and recirculation of the physical, Goldman has made the following estimation:

We estimate, albeit roughly, that there are c.US$81-160 bn worth of outstanding FX loans associated with commodity financing deals – with the share of each commodity shown in Exhibit 23. To put it into context, the commodity-related outstanding FX borrowings are roughly 31% of China’s short-term FX loans (duration less than 1 year) .

Putting the estimated role of gold in China's primary hot money influx pathway, at $60 billion notional, it is nearly three time greater than the well-known Copper Funding Deals, and higher than all other commodity funding deals combined!

Under what conditions would Chinese commodity financing deals take place. Goldman lists these as follows:

• the China and ex-China interest rate differential (the primary source of revenue),
• CNY future curve (CNY appreciation is a revenue, should the currency exposure be not hedged),
• the cost of commodity storage (a cost),
• the commodity market spread (the spread is the difference between the futures
• China’s capital controls remain in place (otherwise CCFD would not be necessary).

All of these components are exogenous to the commodity market, except one – the commodity market spread. This reveals an important point that financing deals are, in general, NOT independent of commodity market fundamentals. If the commodity market moves into deficit, or if the financing demand for the commodity is greater than its finite supply of above ground inventory, the commodity market spread adjusts to disincentivize financing deals by making them unprofitable (thus making the physical inventory available to the market).

Via ‘financing deals’, the positive interest rate differential between China and ex-China turns commodities such as copper from negative carry assets (holding copper incurs storage cost and financing cost) to positive carry assets (interest rate differential revenue > storage cost and financing cost). This change in the net cost of carry affects the spreads, placing upward pressure on the physical price, and downward pressure on the futures price, all else equal, making physical-future price differentials higher than they otherwise would be.

* * *

That bolded, underlined sentence is a direct segue into the second part of this article, namely how is it possible that China imports a mindblowing 1400 tons of physical, amounting to roughly $70 billion in notional, demand which under normal conditions would send the equilibrium price soaring, and yet the price not only does not go up, but in fact drops.

The answer is simple: the gold paper market.

And here is, in Goldman's own words, is an explanation of the missing link between the physical and paper markets. To be sure, this linkage has been proposed and speculated repeatedly by most, especially those who have been stunned by the seemingly relentless demand for physical without accompanying surge in prices, speculating that someone is aggressively selling into the paper futures markets to offset demand for physical.

Now we know for a fact. To wit from Goldman:

From a commodity market perspective, financing deals create excess physical demand and tighten the physical markets, using part of the profits from the CNY/USD interest rate differential to pay to hold the physical commodity. While commodity financing deals are usually neutral in terms of their commodity position owing to an offsetting commodity futures hedge, the impact of the purchasing of the physical commodity on the physical market is likely to be larger than the impact of the selling of the commodity futures on the futures market. This reflects the fact that physical inventory is much smaller than the open interest in the futures market. As well as placing upward pressure on the physical price, Chinese commodity financing deals ‘tighten’ the spread between the physical commodity price and the futures price .

Goldman concludes that "an unwind of Chinese commodity financing deals would likely result in an increase in availability of physical inventory (physical selling), and an increase in futures buying (buying back the hedge) – thereby resulting in a lower physical price than futures price, as well as resulting in a lower overall price curve (or full carry)." In other words, it would send the price of the underlying commodity lower.

We agree that this may indeed be the case for "simple" commodities like copper and iron ore, however when it comes to gold, we disagree, for the simple reason that it was in 2013, the year when Chinese physical buying hit an all time record, be it for CCFD purposes as suggested here, or otherwise, the price of gold tumbled by some 30%! In other words, it is beyond a doubt that the year in which gold-backed funding deals rose to an all time high, gold tumbled. To be sure this was not due to the surge in demand for Chinese (and global) physical. If anything, it was due to the "hedged" gold selling by China in the "paper", futures market.

And here we see precisely the power of the paper market, where it is not only China which was selling specifically to keep the price of the physical gold it was buying with reckless abandon flat or declining, but also central and commercial bank manipulation, which from a "conspiracy theory" is now an admitted fact by the highest echelons of the statist regime. and not to mention market regulators themselves.

Which answers question two: we now know that of all speculated entities who may have been selling paper gold (since one can and does create naked short positions out of thin air), it was likely none other than China which was most responsible for the tumble in price in gold in 2013 - a year in which it, and its billionaire citizens, also bought a record amount of physical gold (much of its for personal use of course - just check out thoseoverflowing private gold vaults in Shanghai.

* * *

This brings us to the speculative conclusion of this article: when we previously contemplated what the end of funding deals (which the PBOC and the China Politburo seems rather set on) may mean for the price of other commodities, we agreed with Goldman that it would be certainly negative. And yet in the case of gold, it just may be that even if China were to dump its physical to some willing 3rd party buyer, its inevitable cover of futures "hedges", i.e. buying gold in the paper market, may not only offset the physical selling, but send the price of gold back to levels seen at the end of 2012 when gold CCFDs really took off in earnest.

In other words, from a purely mechanistical standpoint, the unwind of China's shadow banking system, while negative for all non-precious metals-based commodities, may be just the gift that all those patient gold (and silver) investors have been waiting for.  This of course, excludes the impact of what the bursting of the Chinese credit bubble would do to faith in the globalized, debt-driven status quo. Add that into the picture, and into the future demand for gold, and suddenly things get really exciting.

Credit to Zero Hedge