Jim Sinclair’s Commentary
Four so far this week.
Bank Closing Information – May 14, 2010
These links contain useful information for the customers and vendors of these closed banks.
Midwest Bank & Trust Company, Elmwood Park, IL
Southwest Community Bank, Springfield, MO
New Liberty Bank, Plymouth, MI
Satilla Community Bank, St. Marys, GA
Jim Sinclair’s Commentary
The risk is not the euro. It is whatever the target of the CDS OTC derivative gang is at any time.
This statement only complicates the situation and assists the problems of the euro.
Volcker Sees Euro ‘Disintegration’ Risk From Greece (Update1)
By Simon Clark
May 14 (Bloomberg) — Former Federal Reserve Chairman Paul Volcker said he’s concerned that the euro area may break up after the Greek fiscal crisis that sparked an unprecedented bailout by the region’s members.
“You have the great problem of a potential disintegration of the euro,” Volcker, 82, said in a speech in London yesterday. “The essential element of discipline in economic policy and in fiscal policy that was hoped for” has “so far not been rewarded in some countries.”
European leaders pledged a rescue package of almost $1 trillion this week to counter a mounting debt crisis and restore confidence in the currency. Former U.S. Treasury Secretary John Snow said this week the euro may need a common fiscal policy to survive, a comment echoed by Norman Lamont, who was U.K. finance minister when Britain opted out from the euro in 1992.
“Will economic and financial distress finally be resolved by looking toward more integration in a closely integrated Europe, politically as well as economically?” said Volcker, who chairs President Barack Obama’s Economic Recovery Advisory Board. “I do have my hopes, as a believer in the euro.”
The aid package also involved the European Central Bank, which intervened in debt markets after a rout in bonds across the euro region’s periphery. The European Commission in Brussels said it would “strengthen” its deficit oversight and “align national budget and policy planning” under a system of economic policy coordination.
Jim Sinclair’s Commentary
There is no country or currency that can survive the wrath of an attack on their debt, the foundation of value, by credit default swaps. None.
Furthermore, all major currencies will all be attacked over the next 24 months.
Greece Considering Legal Action Against U.S. Banks
By Timothy R. Homan
May 15 (Bloomberg) — Greece is considering taking legal action against U.S. investment banks that might have contributed to the country’s debt crisis, Prime Minister George Papandreou said.
“I wouldn’t rule out that this may be a recourse,” Papandreou said, in response to questions about the role of U.S. banks in the crisis, in an interview on CNN’s “Fareed Zakaria GPS.” The program, scheduled to air tomorrow, was taped on May 13. Neither Papandreou nor Zakaria mentioned any banks by name.
U.S. stocks fell and the euro slumped on concern that Europe wouldn’t be able to contain the debt crisis stemming from Greece. The Standard & Poor’s 500 Index declined 1.9 percent yesterday, while the euro fell below $1.24 for the first time since November 2008.
Papandreou said the decision on whether to go after U.S. banks will be made after a Greek parliamentary investigation into the cause of the crisis.
“Greece will look into the past and see how things went,” Papandreou said. “There are similar investigations going on in other countries and in the United States. This is where I think, yes, the financial sector, I hear the words fraud and lack of transparency. So yes, yes, there is great responsibility here.”
Jim Sinclair’s Commentary
This fear has been in the marketplace all last week. Publishing on it only accelerates it.
Morgan Stanley fears German exit from EMU
Morgan Stanley has warned that the Greek debt crisis is setting off a chain of events that may prompt German withdrawal from the eurozone, with grim implications for investors caught off-guard.
By Ambrose Evans-Pritchard
Published: 6:12PM BST 15 Apr 2010
"The backstop package for Greece and the ECB’s climb-down on its collateral rules set a bad precedent for other euro area states and make it more likely that the euro area degenerates into a zone of fiscal profligacy, currency weakness, and higher inflationary pressures over time," said Joachim Fels, head of research, in a note to clients.
The US bank said a bail-out for Greece may be necessary to avoid a crisis for Europe’s financial system, but warned that it also "sows the seeds for potentially even bigger problems further down the road".
Mr Fels said weak states cannot easily leave EMU because they would pay a stiff penalty in higher rates, would be stuck with euro debt contracts, and might need controls to stem capital flight. It is a different calculus for Germany, which would see lower rates and might view EMU exit as the only way to ensure monetary stability.
"Obviously, we have not reached the end game yet. However, with the latest developments, such a break-up scenario has clearly become more likely. The risk is far from negligible and the consequences for financial markets would be very severe. Investors ignore the break-up risk at their peril," he said.
Jürgen Stark, the European Central Bank’s chief economist, vowed on Thursday to resist pressure to help spendthrift governments out of their troubles by resorting to easy money. "Let me stress that any call to reduce the real value of public debt through higher inflation will be firmly opposed by the ECB," he said.
