Questions and Observations
Did the global financial meltdown come as a result of banks operating on too little capital or did the meltdown result in the evaporating of bank capital therein leaving the banking industry undercapitalized?
The airwaves would have you believe that OTC derivatives are innocent of causing any problems, but more so is the banking industry for operating on too little capital. What a crock.
How do you define a class one asset for a bank when the viability of the instrument defined as market value can be assigned by the bank with no relation to any market anywhere?
If you up value a legacy asset (broken OTC derivative) then it can no longer be a legacy asset. It might well be a class one asset based on the bank’s legal but arbitrary valuation.
Note the great news today on banking reserves. It possesses "discretion" and "country to country" consideration as well as taking the greater part of a generation to become mandatory.
Jim Sinclair’s Commentary
Remember how stupid this sounded when I told you years ago that without any doubt Central Banks would act as they did in the 70s and become buyers?
I got many crude emails about that one.
Equally so, the reaction is fierce when I suggest the the gold market now is comparable to that of October 1979 to January of 1980.
That market condition set off the great gains in gold over a short period of time in that bull market. It is preparing to happen again.
Connecting The Dots
Look at today’s dollar chart from Trader Dan and review the silver charts from both Eric and Dan from a few days ago.
As the last part of your assignment, review the blurb from Shadow Stats today below.
Now that you have done these things, consider the resemblance of the gold price now to a point just before the major launch in 1979.
Thought For The Morning
New bank reserve requirements is MOPE at the highest order.
1. The Basel agreement gives banks 9 years to comply with a 7% reserve level, practically nullifying the exercise.
2. Claims of the US already in compliance must be set along with the asset value of junk paper being decided by the banks that is free of any market consideration. That means the value of assets are grossly overstated in the reserve calculation.
3. Credit Default Derivatives, the flavor of the past 24 months, will NOT perform if called upon to at significant volume levels. They are wagers with insufficient funds behind them and no universal method to guarantee performance via financing.
Jim Sinclair’s Commentary
John’s value to you is not only in his one liners, it is his in-depth discussion of these items and the connection of the dots that I find irreplaceable.
- Protracted Economic Downturn Re-Intensifies
- Systemic Stability: "Tap-Dancing on a Land Mine"
- Risks of U.S. Dollar Instability and Systemic-Salvation Efforts Pose Severe Inflation Threat
