Dear CIGAs,
The Formula has sharks teeth in it.
Phase two of this crisis will tear the veil of MOPE away, showing that the creation of tons of funny money for the financial industry only clouded the sheeple’s vision of the continuing downward spiral of the Formula. No practical solution exists when OTC derivatives melt down to the real economy.
Hyperinflation, as a currency event, is on the horizon.
What has billions of dollars of profit for the kings of OTC derivatives done for the states or the one out of ten US citizens without a job?
State tax revenues will be off by 50% or more before this is over.
There are only 106 days left.
State Tax Revenues Across U.S. Experience Largest Decline on Record, New Rockefeller Institute Report Shows
"Taxes collected by the 50 states dropped by 11.7 percent overall during the first quarter of 2009, compared to the same period a year earlier – the largest such decline in the 46 years for which quarterly data are available, according to the latest report on state finances from the Rockefeller Institute of Government."
Full First-Quarter 2009 Report on All 50 States Reveals Sharpest Revenue Drop in the 46 Years for Which Quarterly Data Are Available
Albany, N.Y. — Taxes collected by the 50 states dropped by 11.7 percent overall during the first quarter of 2009, compared to the same period a year earlier – the largest such decline in the 46 years for which quarterly data are available, according to the latest report on state finances from the Rockefeller Institute of Government.
Overall state tax revenues fell to the lowest first-quarter level since 2005, according to the Institute. The decline in personal income tax was particularly sharp, with an unprecedented decline of 17.5 percent, as the weakened economy continued to hammer state budgets. Forty-five of the 50 states experienced revenue drop-offs.
All regions of the country saw declines in total state tax collections, with the Far West seeing the largest decline at 16 percent. Only the Rocky Mountain and Plains regions saw single-digit declines at 5 percent and 6 percent, respectively.
Jim Sinclair’s Commentary
Of course China will lead India in gold consumption.
What I find strange is an organization called a Gold Council still thinks Asia primarily buys gold for jewellery.
Asia buys gold as jewellery that trades by weight in grams with practically no value for artistry.
Would someone tell this Gold Council that Asia’s gold demand is from the bank owner of that gold.
That is simply their way.
Travel via Dubai and look at the gold seller stores, their clients, and get an education.
China May Overtake India in Gold Demand, Council Says
By Sophie Leung
July 24 (Bloomberg) — China may overtake India to become the world’s top gold consumer this year, the World Gold Council said, as the nation became the first of the major economies to rebound from the global recession.
Jewelry demand in China expanded in the first quarter while dropping in India, Marcus Grubb, a managing director at the London-based council, said today at a conference in Hong Kong. Chinese gold demand will keep rising, he said.
China’s economy grew 7.9 percent in the second quarter after a 4 trillion yuan ($586 billion) stimulus package spurred record lending and consumption. India’s gold purchases slumped 54 percent in the six months ended June after a decline in the rupee pushed up the cost of owning bullion, cooling demand from housewives and jewelers, the Bombay Bullion Association said.
“There is a possibility that China might overtake India as the world’s largest gold consumer this year,” Hou Huimin, deputy head of the China Gold Association, said by phone from Beijing today. “India’s gold consumption is reportedly dropping this year due to the financial crisis.”
Total demand from India in the first quarter fell 83 percent to 17.7 metric tons, from 107.2 tons a year earlier, according to figures from the World Gold Council. Purchases in China rose 1.8 percent to 105.2 tons from 103.3 tons. Total Chinese demand for gold was six times that of India in the first quarter, the council said in May.
![clip_image002[1]](http://jsmineset.com/wp-content/uploads/2009/07/clip-image00212.jpg "clip_image002[1]")
Jim Sinclair’s Commentary
All of a sudden FASB is sorry for their sin of total capitulation to the previous Administration’s pressure.
This is going to hit the financial companies hard, most of whom cannot stand the light of day on their fabricated balance sheets.
FASB Considering Requiring All Financial Assets Be Marked at Fair Values
July 24, 2009
Edward Harrison
This is a huge deal. FASB is considering requiring all financial assets be valued at fair values on balance sheets. Hat tip Andrew. Bloomberg reports(notice my highlighting in bold):
The scope of the FASB’s initiative, which has received almost no attention in the press, is massive. All financial assets would have to be recorded at fair value on the balance sheet each quarter, under the board’s tentative plan.
This would mean an end to asset classifications such as held for investment, held to maturity and held for sale, along with their differing balance-sheet treatments. Most loans, for example, probably would be presented on the balance sheet at cost, with a line item below showing accumulated change in fair value, and then a net fair-value figure below that. For lenders, rule changes could mean faster recognition of loan losses, resulting in lower earnings and book values.
The board said financial instruments on the liabilities side of the balance sheet also would have to be recorded at fair-market values, though there could be exceptions for a company’s own debt or a bank’s customer deposits.
The FASB’s approach is tougher on banks than the path taken by the London-based International Accounting Standards Board, which last week issued a proposal that would let companies continue carrying many financial assets at historical cost, including loans and debt securities. The two boards are scheduled to meet tomorrow in London to discuss their contrasting plans.
Jim Sinclair’s Commentary
While the Money Bunnies and F-TV are high fiving over the equities markets and the earnings of the financially bailed out institutions, consider that all of that has been accomplished by printing tons of funny money.
U.S. Economy: Another Crack Opening Up?
July 24, 2009
Michael Panzner
You see plenty of reports nowadays suggesting that financial Armageddon has been avoided. Meanwhile, "experts" in Washington and on Wall Street congratulate each other on their apparent success in preventing the crisis flood waters from breaching the financial system’s levee walls.
In reality, all they’ve really done is plugged some of the initial gaps with funny money-filled sandbags — just as a raft of other holes are beginning to open up. That’s the thing about bursting credit bubbles: every time you think you’ve turned back the tide, more red ink suddenly starts flowing through the cracks.
What’s more, these bubbling breaches aren’t necessarily seen by those in charge as the spearheads of deadly surges to come. In many respects, in fact, that describes the miscalculation that occurred with Lehman Brothers.
Now, according to Dow Jones Newswires columnists Donna Childs and Sameer Bhatia, writing in CIT Poses Lehman-Like Risk," we may be poised to see it happen once again.
The implications of the capital crisis of CIT Group Inc. (CIT) fill 24-hour news coverage and yet credit default swaps are near record lows and the markets appear calm, a peculiar disconnect given the events that followed Lehman Brothers’ bankruptcy. What gives?
The century-old lender narrowly avoided a bankruptcy filing this week when it obtained $3 billion in loan commitments from its bondholders. Tuesday, documents filed with the Securities and Exchange Commission laid out steps that it will take to avoid bankruptcy, though it warned that any misstep likely would lead to a Chapter 11 filing. Who has correctly gauged the risk CIT poses to institutions, markets and the economy – the media, the markets or the government?
Jim Sinclair’s Commentary
106 days of some degree of CONFIDENCE left.
Bernanke and the Lobbies: Confidence Illusion
July 23, 2009
"At the same time, Bernanke and the lobbyists talk about the importance of consumer confidence for the recovery. But how can you expect anyone to have confidence enough to spend and borrow when so many people have been so badly treated by the financial sector in recent years?
By Simon Johnson
Ben Bernanke is opposed to the creation of a new Consumer Financial Protection Agency. Disregarding his organization’s disappointing track record in this regard, he claims that the Fed can handle this issue perfectly well going forward.
He thus adds his voice to the cacophony of financial sector lobbyists favoring the status quo.
At the same time, Bernanke and the lobbyists talk about the importance of consumer confidence for the recovery. But how can you expect anyone to have confidence enough to spend and borrow when so many people have been so badly treated by the financial sector in recent years?
What happens when there is a scare regarding food contamination in the US or globally? People buy less of that kind of food until the government assures them that (1) we know understand the cause of the problem, and (2) it will not happen again.
Word has got around that many financial products are not safe – as well as the idea that the debt levels encouraged by the finance industry are not always healthy. Consumers are going to be more careful and, if there is no way to reassure them fully, they may be excessively careful.
Jim Sinclair’s Commentary
When you read about all the high fives concerning the profit success of bailed out financial firms and supposed victories over their own mistakes, remember there are still more than a quadrillion reasons (OTC Derivatives) to be terrified about and the other non-Chinese major customers for US Treasuries could be tapped out.
Revisit investment strategy
Published: July 22 2009 16:58 | Last updated: July 22 2009 17:25
Last week’s visit by Tim Geithner, US Treasury secretary, to Jeddah and Abu Dhabi highlighted the importance of Arab Gulf countries to the United States. The six countries of the Gulf Co-operation Council have come to rival China when it comes to financing the US current account deficit.
However, this year two changes to the status quo have emerged: first, Gulf countries are likely to have much reduced surpluses and less money to spend; and second, by dint of printing money, the Fed has emerged as a third major customer for US securities alongside oil exporters and Asian manufacturers.
Jim Sinclair’s Commentary
The key element here is not the selling of US dollar instruments, but a momentum drop in buying of US Treasury instruments while offloading dollar instruments by purchasing assets internationally in dollars and funding projects from manufacturing to mining raw material worldwide.
This trumps the idiots that proclaim China has no way out of the dollar and therefore must support it. That’s total nonsense of the MOPErs.
China Pulling Away from American Debt?
July 24, 2009
by Kindred Winecoff
The Chinese say that they will be diversifying away from T-Bills:
This is reserve diversification in a broader sense. Instead of accumulating foreign exchange reserves and short-term financial assets, the government wants the nation to accumulate more long-term corporate real assets.”
State-owned groups, particularly in the oil and natural resources sectors, have stepped up their hunt for overseas companies and assets on sale because of the global crisis.
Of course if China stops buying T-bills it will put downward pressure on the dollar, make the servicing of our deficits more costly, and making our imports more expensive (thus making us poorer). So if the Chinese are truly diversifying away from the dollar, or away from government debt, then it could spell trouble. This is the "Great Adjustment" that economists like Nouriel Roubini have been warning about for years. This was how Chimerica was supposed to fall apart.
But the Chinese have been making these sorts of threats for years without following through, and I’ve learned over the years to never form an opinion on Chinese sturm und drang without consulting Brad Setser first. He says:
For a while in 2007 and 2008 the growth in China’s US holdings lagged its reserves. Chalk that up to diversification. The gap between China’s known US assets and its reserve growth came at a time when China was buying more “risky” US assets, like equities — and likely increasing its exposure to a host of potentially “risky” emerging economies. Or chalk it up to increased use of private fund managers, including the money market funds used by the CIC. China’s dollar holdings likely increased a bit more rapidly than the US data implies.
Jim Sinclair’s Commentary
Inefficiency or strategy?
States are broke. The Federal Budget deficit is exploding.
I think strategy.
Millions wait for delayed jobless checks
Cracks in unemployment system widen under strain of recession
By Jason DeParle
WASHINGTON – Years of state and federal neglect have hobbled the nation’s unemployment system just as a brutal recession has doubled the number of jobless Americans seeking aid.
In a program that values timeliness above all else, decisions involving more than a million applicants have been slowed, and hundreds of thousands of needy people have waited months for checks.
And with benefit funds at dangerous lows even before the recession began, states are taking on billions in debt, increasing the pressure to raise taxes or cut aid, just as either would inflict maximum pain.
Sixteen states, with exhausted funds, are now paying benefits with borrowed cash, and their number could double by the year’s end.
Call centers and Web sites have been overwhelmed, leaving frustrated workers sometimes fighting for days to file an application.
While the strained program still makes more than 80 percent of initial payments within three weeks — slightly below the standard set under federal law — cases that require individual review are especially prone to delay. Thirty-eight states are failing to make those decisions within the federal deadline.
For workers who survive a paycheck at a time, even a week’s delay can mean a missed rent payment or foregone meals.
Jim Sinclair’s Commentary
Looks like the IMF is finally giving some respect to the accomplishments of China and is therefore makings some amends.
IMF Executive Board Concludes 2009 Article IV Consultation with the People’s Republic of China
Public Information Notice (PIN) No. 09/87
July 22, 2009
On July 8, 2009, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the People’s Republic of China.1
Background
China has been hit hard by the global economic crisis, a slowdown in the real estate market, and the overhang caused by excess capacity in various industries. Exports have fallen dramatically and growth is now at its lowest point in more than a decade.
The government has responded with decisive monetary and fiscal policies, offsetting the drag from declining world demand and falling private investment. While the recovery has yet to be firmly established, recent data are encouraging and there are signs an economic turnaround is taking hold. Consumption indicators are relatively strong, industrial production appears to have bottomed out, and labor markets appear to be absorbing those workers laid off from export industries.
A long track record of fiscal discipline has driven down public debt, affording China the space needed to significantly expand fiscal support. Public infrastructure has been deployed quickly—including major infrastructure projects and efforts to rebuild following the Sichuan earthquake—and the tax burden has been reduced.
Monetary policy has also been loosened. Interest rates and reserve requirements were lowered in the latter part of 2008 and limits on credit growth were removed. This has led to an extraordinary expansion in bank lending in the first quarter, although the pace of credit growth has slowed somewhat in recent months.
Jim Sinclair’s Commentary
Ok, now what are they concerned about that immunity is required?
The next question is will inoculation be mandatory under penalty of the law?
CIGA JB says "The gov’ment is here to help ….. RUN FOREST RUN!!!!"
H1N1 vaccine makers granted immunity and other flu news
22 July, 2009 05:54:00 Kathlyn Stone
The news coverage on H1N1 is coming fast and furiously. It’s hard to keep up. Here are some of the recent developments that may have slipped under your radar.
H1N1 (swine flu) vaccine makers granted immunity from lawsuits
Just as millions of Americans are being told they should get the new H1N1 or “swine flu” vaccine when it becomes available this fall, the Department of Health and Human Services has granted vaccine makers and federal officials immunity from lawsuits that result from any new H1N1 vaccine.
Secretary of Health and Human Services Kathleen Sebelius signed the document releasing vaccine and government officials from liability on July 17.
Paul Pennock, a New York plaintiff’s attorney on medical liability cases, doesn’t agree with granting immunity. He told AP: "If you’re going to ask people to do this for the common good, then let’s make sure for the common good that these people will be taken care of if something goes wrong."
Jim Sinclair’s Commentary
The near planetary desire to see dollar diversification makes every dollar rally a sell. This fact is contrary to the general internal US thinking, eluding the understanding of the sheeple and their economic spokespeople
World Prepares to Dump the Dollar
July 21, 2009 |
What do China, India, Brazil, Russia, France and Germany have in common? These countries most often can’t agree on anything. But they are united in one strange—and ominous—way. They blame the United States for wrecking the global economy. And they think the dollar is the wrecking ball.
One rock-solid, foundational belief underpins almost all economic theory in America: faith in the dollar’s unassailable status as the world’s reserve currency. Foreigners hold so many dollars that they can’t afford to stop buying them, the theory goes. Therefore the dollar’s status as the world’s reserve currency is sound. But the dollar is now coming under a concentrated attack. Are American economists about to get schooled?
Angela Merkel summed up the dollar-skeptic viewpoint last year. “Excessively cheap money in the U.S. was a driver of today’s crisis,” she told the German parliament. And America’s solution—even more cheap money—was just setting the world up for another crisis, she said. It was just a matter of time.
The irony is that America is completely blind to the catastrophe heading its way. As the economic crisis unfolded at the end of last year, investors made a mad rush out of global stock markets and into other assets. The biggest beneficiary of the panic was the one market large enough and liquid enough to handle the trillions of dollars being moved: the U.S. dollar market. This caused the dollar to surge in value.
America grossly misdiagnosed the demand for dollars as a vote of confidence in the U.S. economic system. In fact, it was primarily a case of investors looking for a place they could quickly and easily get their money in—and out.
Jim Sinclair’s Commentary
No one assumed that these programs were doing anyone a favor except the operators.
High Frequency Trading Is A Scam
The NY Times has blown the cover off the dark art known as "HFT", or "High-Frequency Trading", perhaps without knowing it.
It was July 15, and Intel, the computer chip giant, had reporting robust earnings the night before. Some investors, smelling opportunity, set out to buy shares in the semiconductor company Broadcom. (Their activities were described by an investor at a major Wall Street firm who spoke on the condition of anonymity to protect his job.) The slower traders faced a quandary: If they sought to buy a large number of shares at once, they would tip their hand and risk driving up Broadcom’s price. So, as is often the case on Wall Street, they divided their orders into dozens of small batches, hoping to cover their tracks. One second after the market opened, shares of Broadcom started changing hands at $26.20.
The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds — 0.03 seconds — in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.
In less than half a second, high-frequency traders gained a valuable insight: the hunger for Broadcom was growing. Their computers began buying up Broadcom shares and then reselling them to the slower investors at higher prices. The overall price of Broadcom began to rise.
Soon, thousands of orders began flooding the markets as high-frequency software went into high gear. Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay. The high-frequency computers quickly determined that some investors’ upper limit was $26.40. The price shot to $26.39, and high-frequency programs began offering to sell hundreds of thousands of shares.
Jim Sinclair’s Commentary
Their home office has also advised its US subs that looking to North America for a resurgence of car buying is not encouraged.
Toyota Said to Decide to Shut California Car Plant
By Alan Ohnsman and Kae Inoue
July 24 (Bloomberg) — Toyota Motor Corp. will shut a California auto-assembly plant that operated as a joint venture with General Motors Corp. for 25 years, the first time Japan’s largest carmaker has closed a factory at home or abroad, according to two people familiar with its plan.
The company will negotiate the timing of the closing with Motors Liquidation Co., an entity responsible for the disposal of the assets GM shed in bankruptcy, said the people yesterday. They declined to be identified because the information wasn’t public.
A collapse in U.S. auto sales to their lowest since 1976 has left Toyota, the world’s largest automaker, struggling to keep North American plants running at capacity and avoid factory closings and job cuts. GM in June said it would end assembly of Pontiac Vibes at New United Motor Manufacturing Inc., known as Nummi, and quit the venture as part of its reorganization.
“Without GM’s volume the plant is simply not cost effective,” said Aaron Bragman, an analyst at IHS Global Insight Inc. in Troy, Michigan. “They have other facilities that could easily accommodate the production that’s there.”
Bragman said that should the plant close, it would mark a shift for Toyota because the automaker typically doesn’t “respond to changes in the market on a short term.”
