Dear CIGAs,
This morning GM sent out pink slips to 1000 dealers. That is an economic disaster for 1000 dealers. This really bad news is released as a positive accomplishment. The s**t canned dealers have no recourse as all they can sue is Bad Company GM with so little assets that it is practically litigation proof.
Chrysler has 44,000 vehicles on closed dealer’s lots.
This morning some of the 12 insurance companies that have applied for a Federal bailout (also known as TARP funds) were approved. All that means is they are really in bad financial shape. This news was also released as a good thing. Sure it is good if you like hyperinflation as TARP is one of the fodders for this development.
Is there any question out there why the Chinese want a guarantee on their Federal Treasury instruments?
Jim Sinclair’s Commentary
Rather than being less of a problem, Pakistan has been made more dangerous by the surge strategy.
This is exactly what extremists want. It falls perfectly into their aggressive strategy by alienating the displaced against the Pakistan Government on the basis of pain and suffering.
The West simply does not understand.
Jim Sinclair’s Commentary
The gold link is inherent and workable in the Federal Reserve Gold Certificate Ratio, modernized and revitalized as I have presented to you. It is coming!
China stirs a pot of gold
By John Browne
This week, based on indicators of improving Chinese manufacturing activity, commodity and stock markets surged in the Pacific Rim. It appears that China’s recession-fighting policies are being judged successful. The 41% rally in Chinese stocks in 2009 from the 2008 lows dwarfs the single-digit rallies in the US and Europe. With Western economies still sluggish, eyes are turning eastward for solutions to the global economic riddle. As such, recent hints at the direction of Chinese monetary policy should be closely regarded.
At the recent Group of 20 London meetings, China called for a new international monetary order with a gold link. This was followed by the sudden disclosure that China had used part of its huge gold output to boost its own reserves by some 600 metric tons, a 75% increase in total holdings since 2003. In his first 100 days in office, President Barack Obama’s administration has injected nearly US$40 billion each day into US economy. Given the inflationary impact that such a torrent of new cash will spark, it is logical that the Chinese hedge its $1 trillion position with a more reliable store of value.
International money continues to flood towards the Chinese economic sphere, leaving the "old" industrial economies of America and Europe out in the cold. The cause is quite simple: the economies of America and China are mirror images of each other. The China-centric countries are producer-dominated and America is consumer-dominated. Over time, this dichotomy is producing massive shifts in global wealth.
For a century, American administrations have relied on the inflationary powers of paper money to finance consumer growth. The fact that the US dollar is the world’s reserve currency enabled this scheme to persist for longer than would have been tolerated otherwise. The "stimulus and bailout agenda of George W Bush and Obama is the same practice on overdrive. While driving the country further into debt, it also ensures that it will be progressively less competitive in the global economy.
Jim Sinclair’s Commentary
Hyperinflation is national bankruptcy for restructuring under a new political system. Sounds like a plan to me.
Many would have said that the banking system could not go broke, that motors could not go broke and that insurance companies could not go broke, but they all did, are being hyper-inflated to look functional, and reorganized into a different system.
If this is the case, then why not the government as well?
Now do you see why the Chinese want guarantees?
Obama Says U.S. Long-Term Debt Load ‘Unsustainable’ (Update2)
By Roger Runningen and Hans Nichols
May 14 (Bloomberg) — President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.
“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”
Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”
Earlier this week, the Obama administration revised its own budget estimates and raised the projected deficit for this year to a record $1.84 trillion, up 5 percent from the February estimate. The revision for the 2010 fiscal year estimated the deficit at $1.26 trillion, up 7.4 percent from the February figure. The White House Office of Management and Budget also projected next year’s budget will end up at $3.59 trillion, compared with the $3.55 trillion it estimated previously.
Two weeks ago, the president proposed $17 billion in budget cuts, with plans to eliminate or reduce 121 federal programs. Republicans ridiculed the amount, saying that it represented one-half of 1 percent of the entire budget. They noted that Obama is seeking an $81 billion increase in other spending.
Jim Sinclair’s Commentary
The following is a detailed and fully explanatory subscription service of the unaltered economic indicators, without which you really cannot know what is happening business-wise.
- April CPI-U Annual Deflation of 0.7% versus SGS-Alternate Estimate of 6.7% Inflation
- Seasonal Factors Mask Rising Monthly Energy Costs
- Peak-to-April Industrial Production Is Down a Depression-Like 16%
http://www.shadowstats.com/
Jim Sinclair’s Commentary
According the London Telegraph:
“It’s a sham. The banks are insolvent."
Geithner enriches speculators in "sham" bank bail-outs
13/05/2009 | By Ambrose Evans-Pritchard in Doha | finance
“It’s a sham. The banks are insolvent. The US government is trying to sedate the public because they are down to the last $100bn (£66bn) of the $700bn TARP funds.
"We’re going to see a catastrophic increase in the number of LBO’s (leveraged buyouts) going into default because they’re knee-deep in debt and no solution exists since they can’t refinance.”
“The US government has thrown 29pc of GDP at this crisis compared to 8pc in the early 1930s. The Fed’s balance sheet has risen from $900bn to $2.7 trillion to bail out the system. America has to do it because the only way out is to debase the currency, but that is going to lead to some very high inflation three years down the road,”
Jim Sinclair’s Commentary
This is exactly what the Taliban wants to see happen. The present strategy is handing Pakistan to the Taliban gift wrapped.
Pakistan’s Taliban Fight Threatens Key Economic Zone
MAY 15, 2009, 8:20 A.M. ET
By DAVID ROMAN
Pakistan’s widening fight against the Taliban is threatening key areas for the country’s economy, potentially turning a long-running dispute into an economic and fiscal crisis.
While foreign investors have shied away from Pakistan for months due to political turmoil and security concerns, the economy has so far avoided recession in the global downturn and Karachi shares have gained this year. But with recent advances, Islamic militants can now harass Pakistan’s economic heartland, potentially causing significant damage to government finances.
This could dry up the country’s already meager tax revenues, sending Islamabad back to the International Monetary Fund and other donors for another bailout, some analysts say.
The Taliban have long been a factor in Pakistan’s lawless tribal areas bordering Afghanistan, but this area is of little economic importance. More recent moves into the North West Frontier Province, accounting for 10% of the country’s economy, are more serious.
"If the Pakistanis lose control of the NWFP, then these areas will become a mini-Afghanistan," said Kamran Bokhari, director of the Middle East and South Asia department at global intelligence company Stratfor. "Then the core of Pakistan becomes vulnerable."
Jim Sinclair’s Commentary
Gold is global. The Crimex (COMEX) is local. Global will squash local.
Survey: Over Two-Thirds of Chinese Economists Favor Gold Over US Bonds
By CSC staff, Shanghai, Published: March 02,2009
In a survey of major Chinese economists, more than two-thirds are reportedly bearish on the prospect of China increasing its holdings of US government bonds, and believe instead the nation should putting more of its hard-earned into gold.
According to a China Business News survey of 70 Chinese economists (including one foreign economist), the exact figure is 71.4% anti-bonds and pro-gold.
The use of China’s huge foreign exchange reserve is a topic of concern and controversy. The remaining 28.6% of those polled believe China should continue to buy U.S. Treasury bonds.38.6% think that China should not continue to buy, but also should not to sell US bonds.32.8% believe that China should unload the bonds, 22.8% of whom think we should have a slight sell-off, while 10% think China should drop them like a bad habit.
All this is against a backdrop of China surpassing Japan to become America’s largest US bond holder and of the ever-widening global financial kerfuffle.
The survey also brings to light the question of whether China’s gold reserves should be increased. Recent gold futures prices broke through US$1000/ounce, making gold the most outstanding asset in the financial turmoil. One economist thinks China’s current gold reserve of 600 tons is an unnecessary load and that the opportunity should be grasped to sell off a bunch of it at a good price.
