Jim Sinclair’s Commentary
The international lender of last resort remains the last resort.
Hyperinflation in the form of currency induced cost push inflation is here and growing. That is the reason releasing oil on the market only greases the wheels of energy cost.
Fed Extends Lending Program for Central Banks
By LUCA DI LEO
JUNE 29, 2011, 5:50 A.M. ET
WASHINGTON—The Federal Reserve, amid persistent worries about Europe’s sovereign debt crisis, last week quietly approved the extension of a crisis-lending program that allows the European Central Bank to tap the U.S. for dollars, Federal Reserve Bank of St. Louis President James Bullard said.
The Fed’s dollar-lending agreements with the ECB—as well as the central banks of England, Canada, Japan and Switzerland—were scheduled to expire Aug. 1. The Fed and other central banks haven’t yet disclosed renewal of the agreements, known as swap lines.
Fed officials voted to extend the program, which was first launched during the financial crisis, at their latest Federal Open Market Committee meeting June 21-22, Mr. Bullard said in an interview Tuesday.
Under the agreement, the Fed can lend an unlimited amount of dollars to foreign central banks for a fee, and they in turn lend them to local commercial banks. The program was launched during the crisis because many foreign banks, especially those in Europe, had trouble tapping short-term dollar loans in credit markets, yet they needed access to dollars to fund their holdings of mortgage bonds and other U.S.-dollar-denominated debt.
The Fed says it takes no risk in these swap lines because foreign central banks, not the commercial banks, are obligated to return the dollars. At the height of the financial crisis, foreign central banks tapped the Fed for more than $600 billion of these loans.
Jim Sinclair’s Commentary
If you are broke, you’re broke. Pretending you are solvent when you are broke as a nation brings on hyperinflation.
Ron Paul: U.S. should declare ‘bankruptcy’
By Charles Riley @CNNMoney June 28, 2011: 12:55 PM ET
NEW YORK (CNNMoney) — How should the United States deal with its growing debt problem? Ron Paul thinks declaring "bankruptcy" might be a good idea.
The Texas congressman and Republican presidential candidate was discussing Greece’s fiscal trouble with Iowa radio host Jan Mickelson on Monday when he was asked, "If bankruptcy is the cure for Greece, is it also the cure for the United States?"
"Absolutely," Paul replied.
Of course, sovereign nations can’t declare bankruptcy the same way a corporation might. Instead, the government would be unable to fulfill its obligations, and would stop making payments on its debt, resulting in a default.
Greece is currently embroiled in a debate over how to pare back its social programs and government spending to secure another bailout for paying its debts.
Paul said social programs — medical care and other benefits — have pushed Greece to the edge, and the United States should take note.
"The big message there is the fact that the people who are seeing they are losing their benefits and their free medical care and all, are rioting in the streets," Paul said. "That is the problem, and we are not immune from that."
Jim Sinclair’s Commentary
You have to love these guys. The banksters and their OTC derivatives broke the place, but Iceland said "Stuff You" to the Banksters.
Iceland Declares Independence from International Banks
By Bill Wilson
Iceland is free. And it will remain so, so long as her people wish to remain autonomous of the foreign domination of her would-be masters — in this case, international bankers.
On April 9, the fiercely independent people of island-nation defeated a referendum that would have bailed out the UK and the Netherlands who had covered the deposits of British and Dutch investors who had lost funds in Icesave bank in 2008.
At the time of the bank’s failure, Iceland refused to cover the losses. But the UK and Netherlands nonetheless have demanded that Iceland repay them for the “loan” as a condition for admission into the European Union.
In response, the Icelandic people have told Europe to go pound sand. The final vote was 103,207 to 69,462, or 58.9 percent to 39.7 percent. “Taxpayers should not be responsible for paying the debts of a private institution,” said Sigriur Andersen, a spokeswoman for the Advice group that opposed the bailout.
A similar referendum in 2009 on the issue, although with harsher terms, found 93.2 percent of the Icelandic electorate rejecting a proposal to guarantee the deposits of foreign investors who had funds in the Icelandic bank. The referendum was invoked when President Olafur Ragnur Grimmson vetoed legislation the Althingi, Iceland’s parliament, had passed to pay back the British and Dutch.
Jim Sinclair’s Commentary
Taking on more debt is the solution to the Debt Problem? Don’t sell your gold with this type of reasoning running the show.
IMF urges US lawmakers to raise $14.3B debt limit
By CHRISTOPHER S. RUGABER – AP Economics Writer | AP – 3 hrs ago
WASHINGTON (AP) — The International Monetary Fund urged U.S. lawmakers Wednesday to raise America’s borrowing limit. It warned that inaction could lead to a spike in interest rates that would harm the U.S. economy and world financial markets.
The debt limit is the amount the government can borrow to help finance its operations. The United States reached its $14.3 trillion borrowing limit in May. It is at risk of defaulting on its debt if it doesn’t raise that limit by Aug. 2. President Barack Obama and Republican lawmakers have been at odds on a plan to raise it.
The borrowing limit should be increased "expeditiously to avoid a severe shock to the economy and world financial markets," the IMF said in its annual report on the U.S. economy. Republicans are insisting on substantial spending cuts before they agree to an increase, including cuts in Medicare. Democrats say they want any deal to include some tax increases.
The IMF also warned in its annual report that rising U.S. budget deficits pose a risk to the economy. But it advocates a long-term strategy for reducing those deficits, not steep immediate cuts or tax increases. Cutting the deficit too quickly could slow the weak U.S. recovery, the fund said.
The U.S. economy will grow this year and next but at a weak pace, the IMF forecasts. The fund projects the economy will expand 2.5 percent this year and 2.7 percent in 2012. Consumers are still paying off debts, which will reduce their buying power. And budget cuts at the federal, state and local levels will also reduce demand.
