Question of the Day:

Is it intentional or serendipity that the Bernanke reappointment is announced on the same day news of the Federal Reserve losing their fight in a Freedom of Information action to release the details of their financial dealings with the OTC derivative decimated financial industry is released?

If it is intentional to show confidence in central bank management by the Administration, what can be done for the necessary many encores?

 

Jim Sinclair’s Commentary

This is first of many states holding lawn sales. What a hell of a disgrace all this is.

Thank you manufacturers and distributors of OTC derivatives.

California puts on a garage sale to raise funds
Richard Procter, Chronicle Sacramento Bureau
Tuesday, August 25, 2009

(08-25) 15:29 PDT Sacramento — Most weekend garage sales don’t offer over 500 used vehicles – but then again, most garage sales aren’t put on by the state of California.

State officials on Tuesday kicked off what has been dubbed "The Great California Garage Sale" – by posting surplus state property on eBay and Craigslist.

The internet sales will be accompanied by a warehouse sale in Sacramento on Thursday and Friday at the California Department of General Service’s Surplus Property Warehouse.

Among the 20 items listed on eBay (seller: great-ca-garage-sale) are 15 vehicles autographed by Gov. Arnold Schwarzenegger. Rather than sign identical vehicles, the governor signed a variety of 12 different car models.

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Jim Sinclair’s Commentary

Trader Dan: It looks like you might be right.

This article is unbelievable but it was carried by Reuters.

This is totally nuts!

Cash for Refrigerators’ Debuts in Fall. Really.
Tue Aug 25, 2009 10:03am EDT
By Joe Walsh

Before heading home to face the anger at the now infamous health care "town halls," Congress rushed through an extension to what was then considered a popular program: Cash for Clunkers. Then, like much of the August break, Cash for Clunkers went sideways as critics picked apart the program’s weaknesses, consumers stopped showing up with so many clunkers, and dealers started making noise about something as simple as when they might actually get the rebate money that the government promised.

So, what do you do when you have a poorly-conceived and ill-managed project winding down (Clunkers expires at 8 p.m. eastern on August 24)? Kick off another one, even more poorly thought out, and gloss it with an equally catchy name: Cash for Refrigerators. Beginning in the fall, consumers will have access – through existing state-level energy efficiency incentive programs – $300 million in stimulus funds made available as rebates for energy efficient appliances.

So far, so good. If a consumer is out buying an appliance to replace an existing or broken-down one, it is better that they choose an energy efficient model. But, what about special incentive program purchases? Who is the buyer and why are they buying?

The answer is that the most well-educated and most discerning consumers become aware of and make use of special rebate programs for energy efficient appliances. These are not impulse buyers. Some may actually be committed to greening their kitchen and just waiting for the right incentive push, but I doubt it. In other words, my perception is that most of the $300 million will go to middle-class households that already may have a relatively efficient refrigerator, like Clunkers, it won’t get at the really dreadful stuff in use in the lowest income households.

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Jim Sinclair’s Commentary

With the USDX down from above 120 to 78 and change, people are now waking up.

Undermined faith in the US dollar means a currency event which develops into hyperinflation.

"There has been a lot of disappointment with the way the U.S. credit crisis was handled," says Claire Dissaux, managing director of global economics and strategy for Millennium Global Investments Ltd., a London investment firm specializing in currencies. "The dollar’s loss of influence is a steady and long-term trend."

"In a new twist to an old refrain among economists, who have long worried about the effects of growing U.S. debt, they say that the huge liabilities the U.S. is taking on to dig its way out of crisis could ultimately undermine faith in the dollar."

As Budget Deficit Grows, So Do Doubts on Dollar
By NEIL SHAH

LONDON — The U.S. economy may be showing signs of recovering from the financial crisis, but the jury is still out on the future of the U.S. dollar.

While many analysts expect the dollar to strengthen in coming months as the crisis fades and the U.S. economy turns toward growth, a growing chorus of investors is expressing concern about the longer-term outlook for the greenback.

In a new twist to an old refrain among economists, who have long worried about the effects of growing U.S. debt, they say that the huge liabilities the U.S. is taking on to dig its way out of crisis could ultimately undermine faith in the dollar.

"There has been a lot of disappointment with the way the U.S. credit crisis was handled," says Claire Dissaux, managing director of global economics and strategy for Millennium Global Investments Ltd., a London investment firm specializing in currencies. "The dollar’s loss of influence is a steady and long-term trend."

On Tuesday, the Obama administration added fuel to concerns about the dollar, saying the U.S. will run a cumulative budget deficit of $9 trillion over the next 10 years, $2 trillion more than it had previously projected.

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Jim Sinclair’s Commentary

These are the same people that are going to run GM and your health program.

Stimulus Checks Mistakenly Sent to 1,700 Inmates, Federal Agency Says

The inspector general’s office for the Social Security Administration is looking into the problem as part of its broader audit on stimulus spending. The Social Security Administration acknowledged the $425,000 glitch following a report that nearly two-dozen inmates in Massachusetts had wrongly received the $250 stimulus checks.

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Jim Sinclair

Last week on CNN radio:

http://thewallstreetshuffle.com/podcasts/082109-Seg2.mp3 ^[5]

 

Jim Sinclair’s Commentary

And so it continues on all fronts.

People I employ have reliable internet and computer access deep in the bush.

Tanzania stabilizes Internet infrastructure
Rebecca Wanjiku 
25.08.2009 kl 17:46 | IDG News Service

Tanzania has become the first beneficiary of the Internet infrastructure project led by AfriNIC, aimed at improving resilience to distributed denial of service attacks by setting up copies of root servers.

Tanzania has become the first beneficiary of the Internet infrastructure project led by AfriNIC, aimed at improving resilience to distributed denial of service attacks by setting up copies of root servers.

The Tanzania Internet Exchange (TIX) point has received a copy of the "K" DNS root server operated by RIPE NCC, the regional Internet registry in Europe. The root server is expected to improve scalability and resilience in case of DDoS attack, and reduce the delay in data passing between clients and servers.

"I am very happy AfriNIC plays a very active role, even in areas outside their core task to develop Internet infrastructure and human capacity in Africa — the partnership with AfriNIC made the project a lot easier," said Frank Habicht, TIX manager.

The root server will improve Internet stability in Tanzania by ensuring any external disruptions do not affect local Internet users and that all users connecting via the exchange point can share information faster.

Tanzania is the fifth African country to get a root server; Kenya has two, South Africa has three, Egypt has three and there is one in Cape Verde island.

"This deployment is very critical as it helps to address the issue of "access" in Tanzania, and it is an important milestone towards our objective to contribute more to the Internet infrastructure development in our region. We are looking forward to more deployments of this kind in the coming months," stated Adiel Akplogan, CEO, AfriNIC.

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Jim Sinclair’s Commentary

Concerning the conscience of wall street:

"To expect any consideration from Bankers is like trying to move the wolves of the Ukraine to pity in the middle of winter."
–Honore de Balzac

 

Jim Sinclair’s Commentary

The FDIC must be bailed out. That is all there is to it. How it is done can be creative but it has to be done.

In 2003 when discussing this inevitable development I suggested that the insured depositors will eventually be paid in non-marketable short term treasury instruments, not cash.

U.S. regulators prep defenses to survive bank crisis
Tue Aug 25, 2009 12:39pm EDT
By Karey Wutkowski

WASHINGTON (Reuters) – U.S. regulators are set to buttress their defenses this week against a slew of sick banks still facing closure and the risks to the dwindling fund that protects depositors.

The Federal Deposit Insurance Corp has been looking at expanding the pool of potential bidders for distressed banks, providing some capital relief for troubled assets that will soon be brought back onto banks’ books, and charging further industry premiums to replenish the insurance fund.

All of these moves are geared to get the banking industry, and the agency charged with ensuring the industry’s safety, through a financial crunch that is coming to a head.

"We’re working through this problem. We’re not at the beginning, we’re not at the end," said James Chessen, chief economist for the American Bankers Association. "We’re in the middle and it’s painful."

Regulators have shuttered 81 banks so far this year, compared with 25 last year, and three in 2007. Analysts say the wave of failures is far from over. Richard Bove of Rochdale Securities said on Sunday that 150 to 200 more U.S. banks will fail in the current banking crisis, which started with a dramatic fall in housing prices that sent the economy into a recession and caused many borrowers to default on their loans.

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Jim Sinclair’s Commentary

Were we not just recently lied to concerning the improving condition of the housing market?

U.S. Home Prices Tumble 6.1% on Surging Foreclosures
By Kathleen M. Howley

Aug. 25 (Bloomberg) — U.S. home prices fell 6.1 percent in the second quarter from a year earlier as a record number of foreclosures eroded the value of real estate.

The rate of decline slowed from the first quarter’s 7.1 percent drop, according to a report today from the Federal Housing Finance Agency. Measured monthly, prices rose 0.5 percent in June after a 0.6 percent monthly gain in May, the Washington-based agency said.

Prices fell in June in four of nine U.S. regions covered by the report as banks seized real estate from delinquent borrowers. About 4.3 percent of U.S. homes, or one in 25 properties, were in foreclosure in the second quarter, according to an Aug. 20 report from the Mortgage Bankers Association in Washington. That’s the most in three decades of data.

“Foreclosures have a tangible negative impact on prices,” Gleb Nechayev, a senior economist at CBRE/Torto Wheaton Research in Boston, said in an interview before the price index was released. “It’s very stressful not just for individual households, but for whole neighborhoods.”

Today’s report measures percentage changes in values using repeat data on individual properties. It doesn’t provide specific dollar figures.

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Jim Sinclair’s Commentary

Here is today’s double talk, MOPE and media drivel comment and prediction award.

Recovery won’t improve unemployment
Optimism about the economy may be growing, but don’t expect that to mean job growth, too
By Jia Lynn Yang, writer
Last Updated: August 25, 2009: 1:44 PM ET

NEW YORK (Fortune) — The mood regarding the U.S. economy may be inching, ever so slowly, toward optimism. But don’t expect to see much improvement on the jobs front anytime soon. The economy’s following a script for a jobless recovery, and unemployment is likely to stay high, if not get slightly worse.

The Congressional Budget Office painted a worsening picture for joblessness on Tuesday: The CBO sees unemployment peaking at 10.4% next year from an average of 9.3% this year, before it falls to 9.1% in 2011.

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Jim Sinclair’s Commentary

This morning "Money Bunny" Courtney D. of Bloomberg fame outlined the bearish case for the Pound Sterling:

1. Economic conditions are not improving.
2. Great Britain will find trouble selling its ever increasing debt.

That sounds to me like a double dip depression just like what the US is facing.

RI gov to shut down state government for 12 days
Aug 24, 8:03 PM (ET)
By RAY HENRY

PROVIDENCE, R.I. (AP) – Rhode Island will shut down its state government for 12 days and hopes to trim millions of dollars in funding for local governments under a plan Gov. Don Carcieri outlined Monday to balance a budget hammered by surging unemployment and plummeting tax revenue.

The shutdown will force 81 percent of the roughly 13,550-member state work force, excluding its college system, to stay home a dozen days without pay before the start of the new fiscal year in July.

The closures come as the worst recession in decades has eliminated hundreds of millions of dollars in tax collections and pushed unemployment to 12.7 percent, the second-highest jobless rate in the nation behind Michigan.

Carcieri predicted the state’s fiscal future could grow even bleaker.

"There are going to be inconveniences for the public, and there are going to be sacrifices, as I said, for state employees," Carcieri said at a Statehouse news conference. "These steps right now are unavoidable if the state is to live within its budget, live within its means."

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Jim Sinclair’s Commentary

Maybe we can make this professor the "Run on Banks" Czar.

What if you had more than the FDIC guaranteed amount? How about the rescuer needs a fast rescue?

“"There is no reason to run to the bank," said Joydeep Bhattacharya, a professor of economics at Iowa State University, who has studied bank panics.”

Vantus Bank told: Sell or fold

Vantus Bank is at risk of becoming the first bank in Iowa to fail as a result of the current recession and rising bad loans.

The Sioux City bank has received notice from federal regulators that its plan to increase its capital was unacceptable. The bank must be sold or liquidated by Sept. 30, a filing with the U.S. Securities and Exchange Commission showed.

If it closes, Vantus Bank, founded in 1923, would be the first Iowa bank since 2000 to fail.

Vantus was the 22nd largest of Iowa’s approximately 400 banks in terms of total assets at the end of the first quarter. It has 13 locations in Iowa, including Ankeny, Johnston and West Des Moines, as well as Sioux City.

The bank’s problems stem from loans that went bad, including those to Regency Homes, the state’s largest homebuilder before it collapsed last year, and to Des Moines developer Bob Knapp for the Equitable Building renovation.

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Jim Sinclair’s Commentary

Here comes China in the G8 category!

Bash that F-TV? F-TV will attack the figures.

China edges ahead of Germany in race to be ‘world export champion’
By Ralph Atkins in Frankfurt
Published: August 25 2009 03:00 | Last updated: August 25 2009 03:00

Chinese exports narrowly edged ahead of those from Germany in the first six months of the year, new figures showed yesterday, in a fresh sign that Germany’s status as the world’s leading exporter is at risk.

China exported goods worth $521.7bn in the first six months of this year, while Germany’s total was $521.6bn, the Geneva-based World Trade Organisation reported.

Such export figures are closely followed in Germany, Europe’s largest economy, which has national elections next month. Sales of its industrial products have largely powered the economic growth in recent years, and throughout the economic crisis the government of Angela Merkel, chancellor, has defended strongly the country’s export-driven economic model.

Germany has long been braced for the much faster-growing Chinese economy to assume its "world export champion" title.

However, the likely value of German and Chinese exports for the full year remains uncertain and will depend heavily on exchange rate movements in coming months. A strong euro would help flatter Germany’s figure. Germany’s export businesses have also shown signs of reviving in recent months.

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Jim Sinclair’s Commentary

75 days to go

Senator warns of hyperinflation rivaling the 1980s
@ 10:04 am by Michael O’Brien
August 25, 2009

The economy could spiral into hyperinflation not seen since the early 1980s if the Federal Reserve does not tighten its monetary policy soon, Sen. Chuck Grassley (R-Iowa) warned Tuesday.

Grassley, speaking about the renomination of Federal Reserve Chairman Ben Bernanke to a second term as head of the Fed, asserted that Bernanke’s ability to hold down inflation would be the metric by which the Fed’s success would be measured.

"We won’t know for a year if he’s done a good job so far, because he shoveled money out of an airplane to save banks and the financial system," Grassley said in a conference call with Iowa reporters. "But shoveling money out of an airplane to solve problems can be inflationary — in this case, hyperinflationary — if he doesn’t start mopping up some of the money that’s out there."

Grassley, the ranking member of the Senate Finance Committee, said that inflation as a result from government spending on bailouts could result in inflation rivaling rates in 1980, when it hit a peak of 13.5 percent.

"The Fed has the ability to put money out, it’s got the ability to take money back in, and if they don’t do that, we will have hyperinflation worse than we had in 1980 and ’81," Grassley said. "And I hope he demonstrates that ability."

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Jim Sinclair’s Commentary

A fair and reasonable estimate is the US Federal deficit multiplied by 2 and US unemployment multiplied by 1.6

Unemployment, Deficits To Be Far Worse Than Stated: White House
JIM KUHNHENN | 08/25/09 11:15 AM

WASHINGTON — The federal government faces exploding deficits and mounting debt over the next decade, White House and congressional budget officials projected Tuesday in competing but similar economic forecasts.

Both the White House Office of Management and Budget and the nonpartisan Congressional Budget Office predicted the budget deficit this year would swell to nearly $1.6 trillion, a record, and far above the then-record 2008 budget deficit of $455 billion.

But while figures released by the White House foresee a cumulative $9 trillion deficit from 2010-2019, $2 trillion more than the administration estimated in May, congressional budget analysts put the 10-year figure at a lower $7.14 trillion.

One reason for the difference: The CBO projection is based on an assumption that all the tax cuts put into place in the administration of former President George W. Bush will expire on schedule by 2011 as dictated by current law. President Barack Obama’s budget baseline, however, hews to his proposal to keep the tax cuts in place for families earning less than $250,000 a year.

Beyond the 10-year forecast, the nation will face further challenges posed by rising health care costs and the aging of the population, the CBO said. "The budget remains on an unsustainable path" over the long-term and will require some combination of lower spending and higher tax revenues, it said.

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Jim Sinclair’s Commentary

Quantitative easing is the pure and simple electronic creation of money that will continue to practical infinity.

75 days to go

Goldman’s Hatzius Says Fed Balance Sheet Could Hit $4 Trillion 
By Thomas R. Keene and Liz Capo McCormick

Aug. 25 (Bloomberg) — Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc., said the Federal Reserve could double the size of the central bank’s balance sheet again if needed to support economic growth.

A rise in the balance sheet to $4 trillion is a “possibility,” Hatzius said in an interview on Bloomberg Radio in New York. “It is going to depend on not just what inflation does, but also on whether the economy does move back to a slower growth pace.”

Fed Chairman Ben S. Bernanke has cut the main U.S. interest rate to almost zero and more than doubled total assets on the central bank’s balance sheet to unclog credit markets and help meet banks’ demand for cash. Fed officials have started to phase out such programs, deciding this month to let a $300 billion program to purchase long-term Treasuries expire in October.

The size of the Federal Reserve’s balance sheet has increased to $2.02 trillion as the central bank purchased assets aimed at lowering interest rates, as of the week ended Aug. 12.

The Fed must now guide the world’s largest economy back to growth and reduce unemployment approaching 10 percent while shrinking the balance sheet to prevent a surge in inflation, Hatzius said.

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