Jim Sinclair’s Commentary
This financial world is loaded with time bombs. One major device is surfacing over the balance of the year.
The financial problems of the euro are always expressed as total debt outstanding. This is nothing compared to the financial problems of the MOPEd US that are always presented as the potential State Budget Deficit for fiscal year 2010.
The Death of Paper Money
As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974.
By Ambrose Evans-Pritchard
Published: 7:05PM BST 25 Jul 2010
Ebay is offering a well-thumbed volume of "Dying of Money: Lessons of the Great German and American Inflations" at a starting bid of $699 (shipping free.. thanks a lot).
The crucial passage comes in Chapter 17 entitled "Velocity". Each big inflation — whether the early 1920s in Germany, or the Korean and Vietnam wars in the US — starts with a passive expansion of the quantity money. This sits inert for a surprisingly long time. Asset prices may go up, but latent price inflation is disguised. The effect is much like lighter fuel on a camp fire before the match is struck.
People’s willingness to hold money can change suddenly for a "psychological and spontaneous reason" , causing a spike in the velocity of money. It can occur at lightning speed, over a few weeks. The shift invariably catches economists by surprise. They wait too long to drain the excess money.
"Velocity took an almost right-angle turn upward in the summer of 1922," said Mr O Parsson. Reichsbank officials were baffled. They could not fathom why the German people had started to behave differently almost two years after the bank had already boosted the money supply. He contends that public patience snapped abruptly once people lost trust and began to "smell a government rat".
Some might smile at the Bank of England "surprise" at the recent the jump in Brtiish inflation. Across the Atlantic, Fed critics say the rise in the US monetary base from $871bn to $2,024bn in just two years is an incendiary pyre that will ignite as soon as US money velocity returns to normal.
Jim Sinclair’s Commentary
Here is the MOPE as the "Fat Cats" get ready to see the dollar back at .7200
Europe’s prospects brighten as U.S. fades
By Emily Kaiser
WASHINGTON | Sun Jul 25, 2010 3:01pm EDT
(Reuters) – What’s odd about this scenario?
German business confidence is soaring while U.S. consumer sentiment sinks.
Britain’s second-quarter economic growth was almost twice as fast as expected, the strongest in four years.
Meanwhile, economists have steadily marked down forecasts for Friday’s U.S. gross domestic product report.
What happened to Europe being the weak link in the global economic recovery?
Whatever the explanation and despite the divergence, there are signs that both regions will cool down in the second half of the year.
The U.S. "economy entered the second quarter with plenty of momentum but exited with very little," said IHS Global Insight economist Brian Bethune.
Economists polled by Reuters think U.S. growth slowed to a 2.5 percent annual rate in the second quarter, down from 2.7 percent in the first quarter and 5.6 percent in the final quarter of last year.
Jim Sinclair’s Commentary
What derivatives do not do to international investment banks litigation will.
Here is a 2 for 1.
FCIC threatens Goldman audit.
The Financial Crisis Inquiry Commission is threatening to bring in outside accountants to comb through Goldman Sachs’ (GS) systems for data on derivatives. "We have a deep level of questioning about whether we’re getting the straight scoop here and whether Goldman is working with us on information that they surely have," said Phil Angelides, the FCIC’s chairman; Goldman has said its accounting systems didn’t break out trading revenue generated strictly from derivatives, and therefore it can’t provide the requested information to the commission.
