Thoughts on Real Gold:

Traditional testing in the past has been by density calculation (mass divided by volume), but tungsten-lead alloys can be created that almost perfectly match the density of gold or silver, thereby rendering that test useless. Additionally, surface testing with acid chemicals or surface x-ray fluorescence is also an invalid test because in these situations, the outer surface layer of the counterfeit bars remains pure gold or silver, it’s only the center core of the bar that’s been removed and replaced with tungsten or lead/ tungsten alloy.

Jim Sinclair’s Commentary

Bailouts as a solution to economic problems are best explained by the picture below.

Jim Sinclair’s Commentary

In a bi-election year or at all? You have to be kidding.

US needs plan to tame debt soon, experts say
Mon Dec 14, 2009 5:20pm EST
By Andy Sullivan

WASHINGTON, Dec 14 (Reuters) – The U.S. government must craft a plan next year to get its ballooning debt under control or face possible panic in financial markets, a bipartisan panel of budget experts said in a report on Monday.

Though the government should hold off on immediate tax hikes and spending cuts to avoid harming the fragile economic recovery, it will need to make such painful changes by 2012 in order to keep debt at a manageable 60 percent of GDP by 2018, according to the Peterson-Pew Commission on Budget Reform.

Without action, investors could lose confidence in the United States, driving down the dollar and forcing up interest rates, said the former lawmakers and budget officials who crafted the report. That could cause a sharp decrease in the country’s standard of living.

"We will be less free if we don’t tackle this," said Jim Nussle, a Republican member of the commission who earlier served as a White House budget director and chairman of the budget committee in the U.S. House of Representatives.

The 34-member commission published its report as Congress was poised to raise the debt limit from its current $12.1 trillion level to allow the government to continue operating.

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Jim Sinclair’s Commentary

What is the difference between hidden losses as below, failure in the US to mark down commercial loans to true value or marking up crap OTC derivative paper to show profits as a gift from FASB?

The answer is nothing but geography. The financial problem is still planetary

This is the Peanut Brittle Recovery, smoke, MOPE and mirrors.

ECB orders Austria to nationalise Hypo bank, fearing domino crisis
Austria has nationalised the Carinthian lender Hypo Group after it ran into trouble on hidden losses in Eastern Europe, offering a stark reminder that Europe’s banks are not yet out of the woods.
By Ambrose Evans-Pritchard
Published: 6:46PM GMT 14 Dec 2009

Finance minister Josef Pröll said the government had been forced by fast-moving events to take a 100pc stake in the bank, Austria’s sixth biggest lender with assets of €42bn (£38bn).

"The risk situation of this bank has created an enormous threat to Austria, to its future as a financial centre, and to the whole economic region in recent days and weeks," he said, speaking after a 14-hour emergency session overnight on Sunday.

Chancellor Werner Faymann sought to calm the fury of Austrian citizens and opposition leaders, saying there would have been "catastrophic consequences" if the bank had been allowed to fail.

Austria’s press said that Mr Faymann was under intense pressure from Jean-Claude Trichet, the head of the European Central Bank, who feared a "domino-effect" that would undermine other banks and damage Austria’s sovereign rating.

Samir Patel from the consultancy BH2, who advised clients this Autumn to prepare for a Balkan storm, said the Hypo rescue was unlikely to prove an isolated event. "We see this as the beginning. Things are still getting worse in the Balkans," he said.

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Jim Sinclair’s Commentary

Now we are selecting sides. This is not a welcomed development.

Syria will defend Iran if Israel attacks
Monday, December 14, 2009 Israel Today Staff

If Israel does attack Iran’s nuclear facilities, it will undoubtedly result in a regional war after Iran and Syria signed a mutual defense agreement on Sunday.

Kuwaiti media reported that the agreement was signed at the weekend while Iranian Defense Minister Ahmad Vahidi was visiting Damascus.

Speaking to Syrian media, Vahidi said the agreement was a strong deterrent to an Israeli strike on his country’s nuclear facilities. Vahidi said that in addition to a Syrian response, Iran would retaliate for any strike on its nuclear facilities by firing ballistic missiles at Israel’s nuclear facilities.

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Jim Sinclair’s Commentary

If we needed a fancy name for this economic situation it would not be a Cinderella Economy, or the Plateau of Prosperity, but the Peanut Brittle Recovery.

FDIC Boosts 2010 Budget, Staff as Bank Failures Rise (Update1)
By Alison Vekshin

Dec. 15 (Bloomberg) — The Federal Deposit Insurance Corp., overseeing the dissolution of failed banks at the fastest pace in 17 years, today boosted its 2010 budget 56 percent to $4 billion to manage further shutdowns.

The total budget will increase from $2.6 billion and the budget for handling bank failures doubles to $2.5 billion from $1.3 billion this year, according to a budget proposal the FDIC board approved in Washington. The agency staff will increase to 8,653 next year from 7,010 for this year.

The budget “will ensure that we are prepared to handle an ever-larger number of bank failures next year, if that becomes necessary, and to provide regulatory oversight for an even larger number of troubled institutions,” FDIC Chairman Sheila Bair said in a statement.

Bank failures have climbed to 133 this year, the most since 1992, as soured commercial-real estate loans and mortgage defaults hobbled U.S. lenders. The agency has hired staff to handle the surge, which pushed the deposit insurance fund to an $8.2 billion deficit in the third quarter.

The additional 1,643 FDIC staff will include 1,559 temporary workers and 84 permanent employees, with a majority of positions added to the division that handles bank failures.

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Jim Sinclair’s Commentary

MOPE at full speed applauds factory production which is inflation related and downgrades inflation by the usual arguments.

Markets react accordingly with a stronger dollar and therefore gold, having risen from its early morning low, retraced some of the gains.

U.S. Economy: Production Picks Up, Producer Costs Rise on Fuel
By Bob Willis

Dec. 15 (Bloomberg) — Factories in the U.S. churned out more goods in November than anticipated, extending a rebound in manufacturing that will give the world’s largest economy a lift into 2010.

Production climbed 0.8 percent, the fourth gain in the past five months, the Federal Reserve said today in Washington. Another report showed wholesale prices climbed 1.8 percent in November, also exceeding the median estimate of economists surveyed by Bloomberg News, as fuel costs climbed.    

Last month’s jump in producer prices was led by a 6.9 percent gain in fuel costs, which account for about 75 percent of the overall gain, the Labor Department said. Prices have since retreated, with crude oil on the New York Mercantile Exchange averaging $73.40 a barrel in the first two weeks of December compared with $78.14 last month.

Exceeds Forecast

Economists forecast prices would rise 0.8 percent, according to the median projection in a Bloomberg survey.

Excluding food and fuel, so-called core prices increased 0.5 percent, also exceeding the median estimate of economists surveyed and followed a 0.6 percent drop in November that was the biggest decrease in three years.

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Jim Sinclair’s Commentary

Pakistan, the cornerstone of the Afghanistan strategy, as defined last week.

Rebuffing U.S., Pakistan Balks at Crackdown
By JANE PERLEZ
Published: December 14, 2009

ISLAMABAD, Pakistan — Demands by the United States for Pakistan to crack down on the strongest Taliban warrior in Afghanistan, Siraj Haqqani, whose fighters pose the biggest threat to American forces, have been rebuffed by the Pakistani military, according to Pakistani military officials and diplomats.

The Obama administration wants Pakistan to turn on Mr. Haqqani, a longtime asset of Pakistan’s spy agency who uses the tribal area of North Waziristan as his sanctuary. But, the officials said, Pakistan views the entreaties as contrary to its interests in Afghanistan beyond the timetable of President Obama’s surge, which envisions reducing American forces beginning in mid-2011.

The demands, first made by senior American officials before President Obama’s Afghanistan speech and repeated many times since, were renewed in a written message delivered in recent days by the United States Embassy to the head of the Pakistani military, Gen. Ashfaq Parvez Kayani, according to American officials. Gen. David H. Petraeus followed up on Monday during a visit to Islamabad.

The demands have been accompanied by strong suggestions that if the Pakistanis cannot take care of the problem, including dismantling the Taliban leadership based in Quetta, Pakistan, then the Americans will by resorting to broader and more frequent drone strikes in Pakistan.

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Jim Sinclair’s Commentary

Think where the USA would be if true unemployment at 17.5% and Shawdowstats inflation rates had been used by Moody’s.

Spain might look very good.

Moody’s has compiled a 1970s-style ‘Misery’ index. But instead of showing inflation and unemployment rates, it shows the fiscal deficit and the unemployment rate.  On that basis, Spain, followed by Latvia, Lithuania, Ireland, Greece and the UK are the gloomiest Moody’s-rated sovereigns in the world. The US is eighth — just after Iceland.

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