Dear CIGAs,
The following is for your weekend’s entertainment, brought to you by the Dark Side.
Jim Sinclair’s Commentary
I would add but one thing to this excellent article by Greg Hunter. That item is the fact that the drop from a total amount of nominal value outstanding for OTC derivatives from 1.44 quadrillion to the present level of slightly above six hundred trillion was a product of the BIS simply changing their means of computer valuation to "Value to Maturity," another total computer value cartoon.
That means the problem that started this disaster is wholly unattended to. The situation, although papered over, is wholly unattended to.
This Time Is Different, It’s Global!
12 FEBRUARY 2010 NO COMMENT
By Greg Hunter
The recently published book called “This Time Is Different” makes the case that this financial crisis has the same basic elements as every other financial crisis since the 1300’s. Economists Kenneth Rogoff and Carmen Reinhart do a great job of researching various financial meltdowns in places like South America, Asia, Europe and the U.S. In every crisis, no matter where it took place in the last 8 centuries, people thought a big debt buildup could not end badly. The authors say “arrogance and ignorance” always pave the way to financial hell, no matter what country or what century.
But I wonder if this time really is “different?” Could this be the biggest financial crisis ever? Former Federal Reserve Chief Paul Volker called this financial meltdown the “mother of all crises.” How could he say that? Well for one, the pool of unregulated over-the-counter derivatives is enormous. There are $600 trillion worth of derivative contracts worldwideaccording to the Bank of International Settlements. In simple terms, derivatives are debt bets between two parties that are very hard to collect on. Most derivatives have no standards, no regulation and no guarantee; and there is no public market for them. They are popular because bankers make insane profits selling them. I wrote about this phenomenon in a post called “Can The Financial System Really Be Fixed? Some Say No.” Warren Buffet called derivatives “time bombs.” Buffet also said, “…derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” Today, the entire world is financially interconnected like never before because of derivatives.
One deficit record after another is being set on a regular basis in the U.S. The debt load now stands at about $12 trillion. With the recently passed debt ceiling, it will be at least $14.3 trillion by the end of the year. (There are also more than $6.2 trillion in liabilities with failed mortgage giants Fannie and Freddie that are not accounted for in the U.S. budget) America’s total debt and unfunded liabilities are in the neighborhood of $63 trillion. Many experts say America will address this huge debt problem by printing money. This will continue to devalue the dollar which is the world’s reserve currency. This could cause inflation and calamity on a global scale.
The news gets worse because just about every other industrialized country in the world is facing record deficits and liabilities. Those countries will also print money to pay off debt.
According to Yale Economics Professor Robert Shiller, we had the biggest housing boom in history in the first part of the new century. It was a first time global phenomenon. Now, the U.S. and much of the rest of the industrialized world are working through the biggest housingmeltdown in history, and it’s not yet at the bottom.
Commercial real estate is also in the process of a record setting meltdown.
Public pensions in the U.S. are a record $2 trillion in the red.
Nearly every state in the U.S. is facing record budget shortfalls.
Sovereign debt is being called into question with talk of national defaults on a scale unheard of before. Just this week, economist Dr. Mark Faber said, “…I am not interested in government or sovereign debt because all governments will eventually default, including the U.S.” Faber thinks governments will default, in part, by printing money to pay for their liabilities and debt. That prediction spells I-N-F-L-A-T-I-O-N on a global level. It is no surprise that Dr. Faber thinks gold will continue to outperform stocks.
Jim Sinclair’s Commentary
More smoke and mirrors revealed by www.ShadowStats.com.
"No. 279: January Retail Sales"
- January Retail Sales Gain Reflected Inflation and Seasonals
http://www.shadowstats.com
Jim Sinclair’s Commentary
No US military welcome means take your Toyota home?
Japan worried that Toyota woes could hurt US ties
Toyota’s woes could strain US-Japan ties as pressure builds for CEO to appear in Washington
TOKYO (AP) — As pressure intensifies for Toyota’s chief to testify before Congress about the automaker’s safety lapses, Japanese political leaders and experts worry that the problem — if handled poorly — could damage ties between the two nations.
Relations between Washington and Tokyo are already strained by a dispute between the two governments over the relocation of a key U.S. Marine base on the southern island of Okinawa.
Political tension rose a notch Thursday when a Republican in the House of Representatives said he would support issuing a subpoena to compel Toyota President Akio Toyoda to appear before congressional committees later this month to examine the company’s string of safety problems.
Toyota said Toyoda is expected to visit the U.S. in early March, but the company declined to confirm Japanese media reports that he would attend the Washington hearings. Toyota’s North American head, Yoshimi Inaba, will appear before the committees, the company said.
Even before the world’s biggest automaker announced its latest recall Tuesday of nearly 440,000 Prius and other hybrids, bringing its global total to 8.5 million vehicles for faulty gas pedals and brakes, Foreign Minister Katsuya Okada expressed concern about that the problem could become a political headache.
Prius Next Up for Recall Hysteria, Could Corolla Be Next? [Editorial]
February 10, 2010 at 2:02 pm by Jared Gall
(Excerpts from article)
The problem, it seems, is that “some 2010 model year Prius owners have reported experiencing inconsistent brake feel during slow and steady application of brakes on rough or slick road surfaces when the ABS is activated in an effort to maintain tire traction.”
Sigh.
Ladies and gentlemen, here is conclusive proof that nobody in a Prius has a freaking clue how to drive! What’s being described is, um, what ABS does. It senses individual wheels locking up and pulses those brakes. Assuming you are on a real road with real, inch-to-inch changes in coefficient of friction, that pulsing will result in real-time changes in the traction available to your tires and therefore inconsistent brake feel. Add in the fact that the Prius’s world-saving powers include a switch from regenerative braking to standard, friction-based braking, and you’ve got inconsistent brake feel. I’d guess this software upgra de Toyota is performing is going to remove every last ounce of pedal feel, making for the same complete lack of feedback during ABS operation as there is during regular braking. It seems that we’re really just trying to get these poor souls as far removed from the actual act of driving as possible. What, are they surprised, too, that turning that big round thing in front of them causes the car to change direction?!
I shouldn’t joke about that, actually. USA Today is reporting that some Corolla owners have now come forward (the brave, tormented souls that they are) with claims that their Toyotas “can wander when they drive on the highway, making it hard to stay in lanes.” Might I suggest putting down the bagel, the eyeliner, and the Danielle Steel novel? Perhaps steering with your hands, rather than your knees, might make your car more predictable.
Jim Sinclair’s Commentary
Be prepared. The Money Vultures will be circling the dollar soon.
Credit Suisse Declares the U.S. a Riskier Investment Than Indonesia
By Megan Carpentier 2/12/10 1:47 PM
Amid fears that Switzerland might come to an agreement with the United States on banking privacy and tax evasion disclosures, Credit Suisse issued a report identifying those countries it determined to have the highest risks of default on their sovereign debts. Number 16 on the list was the United States, based primarily on its 2009 budget deficits and government debt.
Countries ranked less likely to default include corruptocracy Kazakhstan, less-than-reform-minded Indonesia, the debt-ridden Philippines and violence-ridden Colombia. By comparison, U.S. Treasuries prices are up today despite a new issuance this week.
