Posted at 2:45 PM (CST) by & filed under USAWatchdog.com.

By Greg Hunter’s USAWatchdog.com  (Early Sunday Release)

Dear CIGAs,

Mexican retail mogul Hugo Salinas-Price is worried about the common man and the upcoming currency calamity that is approaching the globe.  Salinas-Price says, “It certainly isn’t getting better when you have some intellectuals going so crazy as to say they want to ban cash.  We can’t go too much further along this road.  This is utter madness.  We’re not supposed to use cash anymore?  Salinas Price goes on to say, “If we have these lunatics running things, it can’t get any better.  We have people running things that have forgotten about what motivates the common man. . . . I want people to have silver because it is going to protect them.”

Why does the common man need the protection of precious metals?  Salinas-Price says, “I just read today the global debt is $200 trillion, and it’s grown from the last crisis in 2008.  Something has to happen to take care of that debt.  Either it’s going to be repudiated or it’s going to be inflated away, or it’s going to be paid with taxation. . . . We are headed over Niagara Falls.”

Salinas-Price, 83 years old and a billionaire, warns currencies can suffer huge inflation risks.  Since the mid 1970’s, Salinas-Price points out the peso exchange rate has plunged compared to the U.S. dollar.  Salinas-Price says, “From 1976 to date, from 12.50 pesos (to $1 US) we are now at 15,100 pesos (to $1 US) and going further down.  Savings can become worthless, and that’s what I tell people.  Don’t save money that is going to devalue.  This inflation that is going on that is presently debt that is like a cloud that is up there.  When it begins to liquidate, it’s going to be pouring down.  People will be rushing around trying to buy things.  The money is going to be worthless because in a liquidation, what can you buy with all this water (fiat money) that is coming down.  As long as it is up there in credit, it’s okay.  It’s up there in the cloud, but if it begins to liquidate, watch out.”

So, is Salinas-Price predicting the same huge devaluation for the U.S. dollar as what has happened to the Mexican peso?  Salinas-Price contends, “Same cause, same effect.  It is absolutely unavoidable.  That’s why I have been urging people to have silver and gold.”

Salinas-Price is trying to implement an idea involving silver coins that just might save the common man.  Salinas-Price goes on to explain, “It is a silver coin that is given a monetary value by a quote and not by stamping the number on the coin. . . . It would receive a quote from the Treasury (not a central bank).  Don’t give it to the Fed, give it to the Treasury.  Then you are saving in silver money which makes it 10 times or 100 times more attractive.  When this takes place–boom, it’s going to change the whole thing.  It’s going to shake up the world.”

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Posted at 9:25 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Felix wisely adopts the GOTS method, and wins the approval of his friends.

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FBI: researcher admitted to hacking plane in-flight, causing it to “climb”
Chris Roberts "overwrote code" on Thrust Management Computer, according to affidavit.
by Cyrus Farivar – May 16, 2015 3:30pm ADT

A newly-published search warrant application shows that an aviation computer security researcher told the FBI that he briefly took control of at least one commercial airliner. The warrant, which was filed in a federal court in New York state, was first published Friday by APTN, a Canadian news site.

According to the affidavit for the warrant application, the researcher, Chris Roberts, told the FBI that he:

connected to other systems on the airplane network after he exploited/gained access to, or "hacked" the [in-flight entertainment] system. He stated that he then overwrote code on the airplane’s Thrust Management Computer while aboard a flight. He stated that he successfully commanded the system he had accessed to issue the climb command. He stated that he thereby caused one of the airplane engines to climb resulting in a lateral or sideways movement of the plane during one of these flights. He also stated that he used Vortex software after compromising/exploiting or "hacking" the airplane’s networks. He used the software to monitor traffic from the cockpit system.

Roberts did not immediately respond to Ars’ request for comment, but he told Wired on Friday that this paragraph was taken out of context.

United’s move comes three days after FBI detained white hat hacker for 4 hours.

"It would appear from what I’ve seen that the federal guys took one paragraph out of a lot of discussions and a lot of meetings and notes and just chose that one as opposed to plenty of others," he said, declining to elaborate further.

As Ars previously reported, Roberts was detained and questioned by the FBI in April 2015 after he landed on a United Airlines flight from Denver, Colorado to Syracuse, New York.

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Jim Sinclair’s Commentary

You think the Germans have a good memory?

Germans Buying Mass Gold
May 14, 2015

Buying gold is typically what you see when the economy is not doing very well, since gold is a standard, and it’s often a sign that people are worried about their economic future. The World Gold Council reported that Germans are actually buying gold at massive rates, with the demand for total gold bar and coins jumping 20 percent in the first quarter of 2015. For Germany, it is unusual for gold to be a hot commodity, especially right now since the economy of Germany is really strong right now. Even Europe has regained economic momentum within the last few months, which is outpacing the United States economy currently.

The gold sales are rising dramatically because the European Central Bank is going to be purchasing $1.3 trillion in bonds, which is driving inflation fears. The citizens consider this to be central bank money printing, and it is worrying people that the prices will be going up on nearly everything. There is also worries because of Greece and the never-ending crisis there, and the tensions between Russia and Ukraine also are sparking worries.

Global demand for gold bars and coins went down 10 percent during the first quarter in other parts of the world, so the enthusiasm is not being shared by people outside of Germany and the European areas. American demand for the gold bars decreased by 12 percent as the Feds are getting ready to raise the interest rates sometime between June and September. Gold has gone up 3.5 percent in 2015 to $1,225 a troy ounce. In 2011, gold was at an all-time high at $1,900, so there is definitely a calm down in America in terms of buying gold or economic worries.

There is a lot of global reckless monetary policy going on right now, which means that the demand for gold will likely increase both in America and abroad. For now though, it appears that Germans are really worried about inflation, buying up the gold to ensure they have assets for when the currency drops in value.

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Posted at 9:47 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Mr. Williams shares the following with us.

- It Is Beginning to Look a Lot Like a "New" Recession 
- Down in First-Quarter 2015, Industrial Production Just Tumbled into the Second-Quarter 
- Longest String of Monthly Production Declines and Worst Annual and Quarterly Activity Since the Collapse 
- April PPI Plunge Was Statistically-Warped Nonsense 
- Downside Revisions to 2013 and 2014 Industrial Production and GDP Suggested by Benchmark Revisions to Durable Goods Orders

"No. 719: April Production, PPI, Durable-Goods Benchmark, Consumer Update " 
Web-page: http://www.shadowstats.com

 

UMich Consumer Sentiment Crashes As Surging Gas Prices Trump Stock Record Highs
Tyler Durden on 05/15/2015 10:06 -0400

Soaring gas prices dueled with soaring stock prices to leave University of Michigan Consumer Sentiment and it appears the former won. Printing at the weakest level since Oct 2014, UMich dropped to 88.6 (vs 95.9 expectations). This is thebiggest miss on record.. and biggest MoM drop since Dec 2012. Both current conditons and expectations plunged despite surges in inflation expectations. Higher income expectations are starting to plunge – at their lowest in 7 months – andhousehold finances are seenas the worst since July 2014. And finally, the survey’s spokspersonsays that respondents showed "concern over employment."

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In case you needed to understand what drives Consumer Sentiment (or perhaps exactly who UMich is actually surveying), here is the following….

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Higher gas prices crush confidence… and stocks don’t matter

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So You Want To Fight The Central Banks? Then Short Treasury’s
Tyler Durden on 05/15/2015 14:09 -0400

Following the great financial crisis in which capitalism was almost wiped out due to too much debt, a funny thing happened on the path to recovery (paved with some $57 trillion in even more debt) – Quantiative Easing, that deus ex conceived by central bankers as the miracle tool that would fix the world, stopped working. And it stopped working for a very simple reason.

As central banks have scrambled to push risk assets ever higher in hopes of creating that elusive Keynesian inflationary "trickle down", they are limited in the security they can buy. In fact, most can only purchase government treasurys, which they have done en masse. This is known as QE.

According to BofA calculations, central banks now own $22 trillion in "assets" -almost entirely in the form of government debt (an amount greater than the GDP of the US and Japan combined) – which they have to buy in order to create the balance sheet liability, reserves, which primary dealers and the world’s commercial banking system use to bid up risky assets.

Furthermore, according to Citigroup, the amount of debt monetizations in 2015 will be the greatest in history: so great is the scramble to reflate that central banks around the globe (most recently the BOJ’s expanded QE and the ECB’s brand new Q€) that the money printing academics have now gone all in.

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As the chart above shows, the global financial situation is so grotesque, central banks will monetize all net debt issuance around the entire world just to push everyone into the riskiest of assets: stocks.

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US Farmers In "Dire Straits": JPM Warns Of Imminent Liquidity Crunch
Tyler Durden on 05/15/2015 14:35 -0400

Despite the government’s ‘advice’ to young debt-laden students, the tragedy of the American farmer continues with worryingly pessimistic views on the future of the industry. With farmland prices falling for the first time in almost 30 years, credit conditions are weakening dramatically and the Kansas City Fed warns that persistently low crop prices and high input costs reduced profit margins and increased concerns about future loan repayment capacity, and JPMorgan concludes, the industry is currently in dire straits with the potential for a liquidity crunch for farmers into 2016.

Not so long ago, US farmland – whose prices were until recently rising exponentially – was considered by many to be the next asset bubble. Then, almost overnight, the fairytale ended, and as reported in February, US farmland saw its first price drop since 1986.

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Looking ahead, very few bankers expect price appreciation and more than a quarter of survey respondents expect cropland values to decline further in the next three months.

And now, The Kansas City Fed warns that Agricultural credit conditions are worsening rapidly…

Credit conditions in the Federal Reserve’s Tenth District weakened as farm income declined further in the first quarter of 2015. Persistently low crop prices and high input costs reduced profit margins and increased concerns about future loan repayment capacity. Funds were available to meet historically high loan demand, but loan repayment rates dropped considerably. Although profit margins in the livestock industry have remained stable, most bankers do not expect farm income or credit conditions to improve in the next three months.

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Russia targets ‘undesirable’ foreign organisations

Russia plans to introduce new powers to prosecute foreigners whose activities are seen as "undesirable" on national security grounds.

Russian MPs have backed a bill to ban "undesirable" foreign non-governmental organisations (NGOs) or firms.

The draft leaves the definition of "undesirable" open to interpretation.

Under an existing 2012 law, foreign-funded Russian NGOs linked to politics must register as "foreign agents". The label has connotations of spying.

A party loyal to President Vladimir Putin drafted the new law. His supporters dominate both houses of parliament.

The text going through the Duma – Russia’s lower house – says it will be up to Russian prosecutors and the foreign ministry to decide if a foreign organisation or firm is "undesirable".

A foreigner declared "undesirable" could face a fine of up to 500,000 roubles (£6,343; $10,000) and up to six years in jail.

The bill passed a second reading in the Duma on Friday. It still requires a third reading, then approval by the upper house (Federation Council) and President Putin to become law. In most cases that is a formality.

The legislation comes amid frosty relations between Russia and the West, characterised by sanctions and counter-sanctions over Russia’s involvement in the Ukraine conflict.

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US Industrial Production Weakens For 5th Month – Longest Streak Since Great Recession
Submitted by Tyler Durden on 05/15/2015 09:26 -0400

On the heels of the weakest print since May 2009 in March, April Industrial Production printed -0.3% (against expectations of a bounce to -0.03% from -0.64% – which was revised higher). This is the 5th monthly drop in a row – the longest streak since the Great Recession. This is the 2nd weakest YoY print, at a mere +1.93%, since Feb 2010. To add to the pain, Capacity Utlization missed expectations falling to its lowest since Jan 2014 (falling the most YoY since Dec 2009) and Manufacturing production was unchanged.

Worst streak of monthly drops since 2009…

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2nd weakest YoY print since Feb 2010…

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And Capacity Utilization plunged to its lowest since Jan 2014… with the biggest YoY decline since Dec 2009

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Someone Is Lying: Job Optimism Plummets To Levels Unseen Since Financial Crisis
Tyler Durden on 05/15/2015 10:21 -0400

The percentage of respondents to University of Michigan’s Consumer Sentiment Survey that "think they (or their spouse) will lose their job over the next 5 years" soared to its highest since March 2009.

Either the BLS’ workers are lying, or the government’s data on jobs is ‘misleading’

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According to UMich Curtin:

CURTIN: TRADE GAP’S INFLUENCE ON JOBS BIGGEST SENTIMENT RISK

And worse still:

CURTIN: MAJORITY OF DECLINES THIS SIZE OCCURED IN RECESSIONS

But do not worry:

CURTIN SAYS DOESN’T EXPECT CONSUMER SPENDING TO RETRENCH

Though he offered no actual reason for his expectation…

Charts: Bloomberg

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Posted at 3:35 PM (CST) by & filed under In The News.

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Jim Sinclair’s Commentary

Mr. Williams shares the following with us.

- In the Context of Downside Benchmark Revisions, Headline Nominal April Retail Sales Were Unchanged for the Month
- Net of Ongoing Revision Shenanigans in Monthly Seasonal-Adjustments, Nominal April Retail Sales Actually Fell by About 0.4% (-0.4%)
- No Rebound Suggested in Second-Quarter Real Retail Sales
- Slowing Annual Sales Growth Moved Deeper into Recession Territory

"No. 718: April Nominal Retail Sales, Consumer Liquidity " 
Web-page: http://www.shadowstats.com

Seymour Hersh Rages: "I Am Not Backing Off Anything I Said", Slams Establishment Media
Tyler Durden on 05/14/2015 13:27 -0400

Authored by Isaac Chotiner, originally posted at Slate.com,

In a blockbuster 10,000-word story for the London Review of Books this week, longtime New Yorker investigative journalist Seymour Hersh called into question the official account of the American raid that killed Osama Bin Laden, and argued that what is arguably seen as the apex of Barack Obama’s presidency is actually built on a lie.

Hersh’s piece claims that Bin Laden was being held prisoner by the Pakistani military and intelligence service (the ISI), who were using him as a means to control Taliban and al-Qaida elements, and hoping to use him as leverage in their relationship with the United States. According to Hersh, who relied largely on an anonymous intelligence source, the Obama administration found out that Pakistan had Bin Laden, and eventually convinced Pakistani military leaders to allow a raid on the compound where Bin Laden was being held. The plan, Hersh writes, was to say publicly that Bin Laden was killed not in the raid but in a drone strike. The White House, however, supposedly broke this deal because of the political value of making the details of the raid public.

Hersh’s story has been much debated over the past several days, with many calling it into question and (a comparable few) others applauding its willingness to undercut the official narrative. NBC News and the AFP have both backed up small elements of Hersh’s story, although both outlets have also called other elements of his piece into question (and NBC later backed away from its original reporting). And no news source has supported Hersh’s largest claim—that the president lied about the raid.

I spoke to Hersh by phone this week. Here is a transcript of our conversation, which has been slightly condensed and edited for clarity.

Isaac Chotiner: If the plan until the night of the raid was to use the cover story that he had not been killed in a raid but in a drone strike, then why have the raid at all?  Why not just have the Pakistanis kill him? Why risk Obama’s presidency?

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Jim Sinclair’s Commentary

This is not a trifling side show. This is a serious threat to our food supply.

Survey: More than 40 percent of bee hives died in past year
By SETH BORENSTEIN

WASHINGTON (AP) — More than two out of five American honeybee colonies died in the past year, and surprisingly the worst die-off was in the summer, according to a federal survey.

Since April 2014, beekeepers lost 42.1 percent of their colonies, the second highest loss rate in nine years, according to an annual survey conducted by a bee partnership that includes the U.S. Department of Agriculture.

"What we’re seeing with this bee problem is just a loud signal that there’s some bad things happening with our agro-ecosystems," said study co-author Keith Delaplane at the University of Georgia. "We just happen to notice it with the honeybee because they are so easy to count."

But it’s not quite as dire as it sounds. That’s because after a colony dies, beekeepers then split their surviving colonies, start new ones, and the numbers go back up again, said Delaplane and study co-author Dennis vanEngelsdorp of the University of Maryland.

What shocked the entomologists is that is the first time they’ve noticed bees dying more in the summer than the winter, said vanEngelsdorp said. The survey found beekeepers lost 27.4 percent of their colonies this summer. That’s up from 19.8 percent the previous summer.

Seeing massive colony losses in summer is like seeing "a higher rate of flu deaths in the summer than winter," vanEngelsdorp said. "You just don’t expect colonies to die at this rate in the summer."

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The Great Silver Debate
Author : Bill Holter
Published: May 14th, 2015

Over the last weeks, a great debate has erupted regarding silver.  More to the point, Ted Butler claims JP Morgan has accumulated at least 350 million physical ounces.  Some pooh pooh this and say it is not possible while others who may believe it are scared witless because they are afraid Morgan will dump the metal and destroy the silver price.

Taking first things first and then later expanding, I believe it is possible for Morgan to have accumulated this silver.  If you look at the bleed from both COMEX and SLV inventories and add in the purported movements on the LBMA, I do believe it is possible that JPM has amassed a silver war chest.  From a “dollar” standpoint, this is only about $5 billion which wouldn’t even need to come from their equity as they have a direct pipeline to the bowels of the Fed and Treasury for credit.

To answer the question of “fear” propounding this silver will be used to destroy the market, I would first remind you that “devious” and “stupid” are two separate descriptions.  No matter what anyone believes, JP Morgan is not stupid, devious may be another matter altogether with each fine they have paid as proof.  JP Morgan has had a huge short paper position in silver for many years dating back to at least 2007 when they inherited Bear Stearns positions.  The position has been so large in fact, they could never possibly “push a button” to cover it because the metal simply never existed to cover it in a short period of time.  Any attempt to cover would have created a panic of demand and a minimum price of $100 per ounce for starters!

This leads us to one of several theories and the most obvious, JP Morgan has been amassing physical silver and is now actually a hedge against their short position as opposed to the other way around.  It makes zero sense to me that Morgan would dump a physical position because the accumulation was so difficult to acquire in the first place.  As I said above, JP Morgan is not stupid and they understand the logic of where the macroeconomics are headed.  They know the game is either inflate or die and can surely make the judgment as to whether or not they want to be net long, or short silver.  And trust me, they also know the difference between paper contracted silver and the real thing in their vaults.

It also occurred to me, what if the short position is “used” to revalue the long position?  We have seen so many times where naked contracts were “sold sloppy and sold BIG”, what if JPM decided to actually cover their short by buying “sloppy”?  They effectively could use the short position as a springboard if you will?  What would stop them from covering the short to become flat and just keep on buying sloppy in the futures pits and running every short on the planet?  They must surely know the upside pressure is there not only technically but fundamentally because of the supply being knocked off stream by below production prices?  This is an easy trade for them if truly have built a physical long, thus making their short to unwind the “sloppier the better”!  This makes more sense to me than dumping the physical long which everyone is so afraid of.

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Jim Sinclair’s Commentary

They intend to fix it by making an official club of it.

Forex Guilty Pleas and the New York Fed’s Blinders
By Pam Martens and Russ Martens: May 14, 2015

According to high priced media real estate, JPMorgan Chase and Citigroup are set to plead guilty as soon as next week to criminal charges brought by the U.S. Justice Department for colluding with other banks in the trading of foreign currencies, known on Wall Street as Forex. Guilty pleas are also expected by Royal Bank of Scotland and Barclays, while UBS, which cooperated early on in the probe, may receive a different charge.

What has not garnered any media attention, however, is the unseemly role that the perpetually blindfolded regulator, the New York Fed, has played behind the scenes as two of the nation’s largest Wall Street banks head toward becoming admitted felons.

Since January of 2014, the head of Foreign Exchange Trading at JPMorgan Chase, Troy Rohrbaugh, has served as the Chair of the Foreign Exchange Committee – a group sponsored by the New York Fed, JPMorgan’s regulator. Before Rohrbaugh became the Chair, Citigroup’s Jeff Feig chaired the Committee.  (Feig left Citigroup last year to join Fortress Investment Group LLC.)

The New York Fed’s Foreign Exchange Committee looks like an antitrust train wreck in motion. Its members are the commercial banks and investment banks that compete in foreign exchange and yet they are meeting six to eight times a year to discuss the market and set “best practices” for themselves — while some are simultaneously under criminal investigation for “worst practices.”

A regular at the meetings is Simon Potter, the head of the Markets Group at the New York Fed, which also trades foreign currency and implements open market operations with the involvement of many of the same banks. Other New York Fed staffers also attend the meetings. The meetings rotate from the offices of the New York Fed to the offices of JPMorgan and other banks.

JPMorgan’s Troy Rohrbaugh was Chair of this New York Fed group throughout last year and is still currently chairing it, according to the most recent minutes availableand his LinkedIn profile, despite the ongoing criminal investigation of JPMorgan’s involvement in rigging foreign currency trading and its settlement of civil cases for Forex abuse brought against it in November of last year by the Commodity Futures Trading Commission, the Office of the Comptroller of the Currency and the U.K.’s Financial Conduct Authority.

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Posted at 6:21 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Maybe the Simpsons are on to something…

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US Retail Sales Hint At Recession, Weakest Since Financial Crisis
Tyler Durden on 05/13/2015 08:42 -0400

Despite bouncing back last month at the fastest pace in a year, April just printed the slowest YoY growth since Nov09 at just 0.9% (retail sales has still missed expectations for 4 of the last 5 months). Against expectations of a 0.2% MoM rise in April (considerably slower than the 0.9% pop in March), Retail Sales missed with a 0.0% change. Ex-Auto and Gas MoM also missed with a mere 0.1% gain (aghainst +0.5% exp.) but it was the control group that saw the biggest miss, printing 0.0% (against hopeful expectations of a 0.5% gain). There was widespresd weakness with outright declines in autos, furniture, gas, food, electronics (AAPL hangover), and general merchandise.

What is curious is that moments ahead of the release, sellsiders were overslling the retail print to appear far more important than it is, in hopes for a big beat. CRT strategist David Ader says in note that "Retail Sales is, oddly, perhaps more important than NFP…"

And now we get the talking down.

MoM saw a modest reveision in march save it from 5 monthly misses in a row:

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Year-over-Year retail sales growth slowest since July 2008′s slump:

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Worse, non-seasonally adjusted retail sales which however are perfectly relevant on a Y/Y basis as the same seasonal adjustment takes place every 12 months, posted their first decline since the Great Recession.

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Jim Sinclair’s Commentary

Sure as the yuan rises other currencies drop in yuan terms and that includes the Dollar.

Currency Wars Defused by China as Yuan Rally Spreads Across Asia
by Lilian Karunungan

China is helping its Asian neighbors stay out of the global currency wars.

Policy makers in the world’s biggest exporter have resisted weakening the yuan as economic growth slows, seeing exchange-rate stability as key to winning global reserve-currency status from the International Monetary Fund this year. That in turn has reduced pressure on China’s regional export rivals to keep their products competitive with weaker exchange rates, according to BlackRock Inc., the world’s largest money manager.

“We don’t expect a large depreciation of the yuan,” Joel Kim, the head of Asia-Pacific fixed income at BlackRock, which oversees $4.8 trillion, said April 21 by e-mail. He predicts Asian currencies will outperform peers in other emerging markets. “If they would do something like that, for the rest of Asia and the rest of the world it would obviously set off another round of competitive devaluation.”

Foreign-exchange traders have started to take notice. The Bloomberg JPMorgan Asia Dollar Index has strengthened 2.3 percent from an almost five-year low on March 13, while the average cost of options to sell nine Asian currencies against the dollar dropped last week to the lowest since Dec. 3 versus bullish contracts. ABN Amro Bank NV, the most accurate forecaster of Asian currencies for three straight quarters, raised its June targets for the yuan, Taiwan dollar and South Korean won last week.

March Turnaround

Taiwan and South Korea, along with Singapore, have the highest export exposure to China among Asian peers, according to Roy Teo, a Singapore-based strategist at ABN Amro. He raised his June forecast for the won by 1.8 percent to 1,100 per dollar, while increasing predictions for the yuan and the Taiwan dollar by 0.8 percent and 1.3 percent, respectively.

China’s currency will probably end the year little changed at 6.2 per dollar, compared with 6.1993 as of 9:10 a.m. London time on Wednesday, according to the median of 36 analyst estimates compiled by Bloomberg.

The yuan depreciated in the first two months of 2015 as traders speculated the People’s Bank of China would follow peers from Europe to Australia in using weaker exchange rates to support growth. The rebound began on March 3 after PBOC Deputy Governor Yi Gang said the currency “will remain very stable in the future.”

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Jim Sinclair’s Commentary

This is a form of two elements meeting as in nuclear fusion.

Liquidity drought could spark market bloodbath, warns IIF
Evaporating liquidity and higher US interest rates will cause huge market swings with potentially catastrophic consequences, Institute of International Finance warns
By Szu Ping Chan
6:41PM BST 04 May 2015

Investors face a “painful” adjustment in a world of evaporating liquidity and higher US interest rates that will trigger huge market swings with potentially catastrophic consequences, the Institute of International Finance has warned.

Timothy Adams, the chief executive of the IIF, which represents the world’s biggest banks, described liquidity as the “top issue” at high level meetings of central bankers, chief executives and other financial institutions.

He warned that the raft of regulation introduced in the wake of the 2008 crisis could potentially cause market gyrations larger than last October’s “flash crash” in US Treasuries.

While Mr Adams supports tougher rules that have made the banks more resilient, he said a complex web of regulatory reform may have left banks less able to respond to the next crisis.

“There’s just less capacity for making markets,” he said. “Officials will say: we expect some volatility and this was part of this broader scheme of regulatory reform. But for the private sector there is this issue of: is the total effect of all of these various regulatory changes likely to produce outcomes larger than each individual regulatory reform and its consequences?

"The cumulative unintended could end up being much larger than the one-off intended – we just don’t know.”

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Jim Sinclair’s Commentary

I think the worm has turned!

ETF companies boost bank credit lines amid liquidity concern
NEW YORK | By Ashley Lau and Michael Flaherty

The biggest providers of exchange-traded funds, which have been funneling billions of investor dollars into some little-traded corners of the bond market, are bolstering bank credit lines for cash to tap in the event of a market meltdown.

Vanguard Group, Guggenheim Investments and First Trust are among U.S. fund companies that have lined up new bank guarantees or expanded ones they already had, recent company filings show.

The measures come as the Federal Reserve and other U.S. regulators express concern about the ability of fund managers to withstand a wave of investor redemptions in the event of another financial crisis. They have pointed particularly to fixed-income ETFs, which tend to track less liquid markets such as high yield corporate bonds or bank loans.

"You want to have measures in place in case there are high volumes of redemption so you can meet those redemptions without severely impacting the liquidity of the underlying securities," said Ryan Issakainen, exchange-traded fund strategist at First Trust. The company has increased a credit line it has set up to $80 million at the end of last year, the most recent reporting period, from what was originally a $20 million line in early 2013. The line is shared by two of its ETFs and two mutual funds with a combined $645 million in assets.

Under the Wall Street reform act known as Dodd-Frank, banks have been shedding their bond inventories, resulting in less liquidity in fixed-income markets. Because there are fewer bonds available for trading, a huge selloff in the bond markets could worsen the effect of a liquidity mismatch in bond ETFs.

Vanguard, the second-largest U.S. ETF provider, lined up its first committed bank line of credit last year and now has a $2.89 billion facility backed by multiple banks and accessible to all of Vanguard’s funds, covering some $3 trillion in assets, the Pennsylvania-based fund company told Reuters. The new setup is to "make sure that funds will be available in time of market stress when the banks themselves may have liquidity concerns," Vanguard said.

The issue for ETFs is this: When investors sell fund shares and there aren’t enough ETF buyers in the market, the ETF manager in many cases will need to immediately sell shares of the underlying securities in the fund to meet those redemptions. But a sudden selloff of an ETF in an illiquid market could cause the manager to have to dump those securities at any price, causing their share prices to collapse. With a line of credit, fund managers could instead meet redemptions and take their time to sell some securities.

"These funds offer daily or even intraday liquidity to investors while holding assets that are hard to sell immediately, thus making the funds vulnerable to liquidity risk," U.S. Federal Reserve Vice Chair Stanley Fischer said in a speech in March in Germany, pointing directly to ETFs and saying they have mushroomed in size while tracking indexes of "relatively illiquid" assets.

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Jim Sinclair’s Commentary

What is not broke?

Chicago "Junking" Triggers $2.2 Billion Payment, Deepening Financial Crisis
Tyler Durden on 05/13/2015 07:49 -0400

In early March, we discussed the rather deplorable state of Illinois’ public pension plans which, we noted, are underfunded by some 60%. On a statewide basis, making up the deficit would cost around $22,000 per household, which gives you an idea of the cost to taxpayers of the grossly underfunded pension liabilities.

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A month later, we pointed out the fact that spreads between Chicago’s muni bonds and USTs had blown out to the tune of 60bps as mayor Rahm Emanuel’s re-election became more assured. We also highlighted a WSJ graphic showing that when it comes to unfunded public worker pension liabilities per person, nobody does it like Chicago.

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The situation worsened materially last Friday when the Illinois Supreme Court struck down a pension reform law that aimed at closing the state’s $105 billion hole.

Via The Chicago Tribune:

The Illinois Supreme Court on Friday unanimously ruled unconstitutional a landmark state pension law that aimed to scale back government worker benefits to erase a massive $105 billion retirement system debt, sending lawmakers and the new governor back to the negotiating table to try to solve the pressing financial issue.

The ruling also reverberated at City Hall, imperiling a similar law Mayor Rahm Emanuel pushed through to shore up two of the four city worker retirement funds and making it more difficult for him to find fixes for police, fire and teacher pension funds that are short billions of dollars.

That ruling, it turns out, would be the death knell for Chicago’s credit rating, at least as far as Moody’s is concerned. Citing “expected growth in the city’s highly elevated unfunded pension liabilities,” the rating agency cut the city to junk at Ba1. This is bad news for Chicago for a number of reasons, not the least of which is the fact that Emanuel was looking to refi nearly a billion dollars in floating rate debt into fixed rate notes and borrow another $200 million to pay off the related swaps — clearly this will now be far more difficult. The ratings agency’s actions also given creditors accelerated payment rights, meaning the city could be on the hook for some $2.2 billion in principal and interest on its outstanding liabilities.

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Rot Of Empire: Moody’s Downgrades Chicago To Junk Bond Status
May 13, 2015

It’s doubtful that Warren Buffet’s Moody’s Investor Services will face the same wrath from Obama that Obama inflicted on S&P after S&P downgraded the U.S. Government debt rating from triple-A to double-A.   After all,  Warren Buffet owns Obama.

But recall that Moody’s did not downgrade Enron to junk status until Enron hit the wall. While I’m not suggesting that Chicago will hit the wall anytime in the next few weeks, it does suggest that the White House is probably evaluating bail-out ideas.

I’m not sure how Obama thinks he can smooth this one by all Federal taxpayers outside of the State of Illinois (which itself is running something like an admitted $21 billion budget deficit).  But, then again, something like 45% of registered Democrats have expressed voting support for a criminal (Hillary Clinton), so anything is possible in this Orwellian paradise.

Here’s a summary of Moody’s downgrade “rationale:”

The Ba1 rating on Chicago’s GO debt incorporates expected growth in the city’s highly elevated unfunded pension liabilities. Based on the Illinois Supreme Court’s May 8 overturning of the statute that governs the State of Illinois’ (A3 negative) pensions, we believe that the city’s options for curbing growth in its own unfunded pension liabilities have narrowed considerably. Whether or not the current statutes that govern Chicago’s pension plans stand, we expect the costs of servicing Chicago’s unfunded liabilities will grow, placing significant strain on the city’s financial operations absent commensurate growth in revenue and/or reductions in other expenditures.

Our negative outlook reflects our expectation that Chicago’s credit challenges will continue, both in the near term and in the long term. Immediate credit challenges include potential draws on liquidity associated with rating triggers embedded in the city’s letters of credit (LOCs), standby bond purchase agreement (SBPA), lines of credit, direct bank loans, and swaps [Oops – banks can and should pull the plug].  The current rating actions give the counterparties of these transactions the option to immediately demand up to $2.2 billion in accelerated principal and accrued interest and associated termination fees.

Chicago, like Detroit before it, is emblematic of the Rot of Empire.  Large industrial-based cities have been gutted by modern day Robber Barons who have moved the bulk of America’s industrial base to cheap-labor eastern hemisphere domains.   These large Rust-Belt metropolitan areas are collapsing under the weight massive budget deficits and catastrophically underfunded public employee pension funds.

I would hazard an educated guess that if Moody’s has determined that Chicago is regarded as below investment grade, the stark reality is that Chicago is likely on the verge of collapse barring some likely smoke-filled back room deals cut between Obama and his former puppet-master, Rahm Emanuel (Mayor of Chicago).

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I Bet You Didn’t Even Notice It?
Author : Bill Holter
Published: May 11th, 2015

All hell broke out in the credit markets during the overnight hours last Thursday morning, I’ll bet you didn’t even notice it.  Before getting into the meat of this piece, it is important to understand “what’s important”.  The press constantly harps on the “Dow Jones this or the S+P that”.  People come home from work and turn on their TV’s to see what “the market” did.  Others have their smart phones or computers at work set to display the stock markets to keep themselves informed.

I am going to tell you, the stock market(s) are merely a side show to the grand Big Top circus of the credit markets.  This is true in the U.S., all of Europe and Asia, it is true everywhere.  This is the case because the credit (bond) markets are so much larger than the equity markets.  The world revolves around credit.  Everything revolves around credit.  Our daily lives will be turned upside down when the credit markets seize up, and yes, I said “when”, not “if”.

Without a fully functioning credit market, distribution will break down, real estate markets will cease to exist except for cash purchases or barters.  Companies will cease to exist because their access to money to run their companies will be nonexistent.  Amongst many other “effects”, cash or currencies themselves will also be affected.  All currencies everywhere on the planet are a function of, backed or supported by, and actually exist solely as a result of functioning credit markets.  The saying goes, “money makes the world go ’round”, this is not true today.  Today, “credit makes the world go ’round”!

With the above as an understanding, what happened last Wednesday night/Thursday morning in the wee hours was terrifying.  Globally the credit markets began to melt down!    This was a global event and almost ALL credits were being sold.  To put this in perspective, German bond yields went from .59% to over .76%, this was nearly a 30% rise in yields …within hours.  Remember, Germany is considered THE safest credit in Europe.  The 10 year bund was yielding under .05% just two weeks ago, the yield had risen more than 15 fold!

Within hours of the U.S. market opening, the central banks of the world had stepped in and brought yields back to mostly unchanged.  Can you imagine how much capital had to be deployed?  Of course, much of this was done via derivatives but what was the end result?  More derivatives outstanding and the central banks have again levered their balance sheets further to save the day.  The intraday losses on both credit and their derivatives must have been staggering, had yields not returned to unchanged, this could have torpedoed the entire system.

What is my point here?  First, the movements in terms of capital were huge.  Intraday, literally trillions were won and lost.  If the central banks had not stepped in and yields ended the day at their highs, many losers would have been more insolvent than they probably already are.  As I have been saying for several months, I believe there are dead bodies out there, only the financial coroners will not issue death certificates.  In other words, …insolvencies are being hidden!

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A foundation of BAD credit is no foundation at all!
Author : Bill Holter
Published: May 12th, 2015

That didn’t take long did it?  I of course am speaking of the second overnight and global meltdown of the credit markets …in the last four business days!  Before getting into this topic which I believe will soon be seen in retrospect and by historians far into the future as “THE” trigger event.  The second piece I sent out yesterday “I bet you didn’t even notice it” was written over the weekend, I planned to send it out for Tuesday’s reading.  After sending it to Jim Sinclair to see what he thought, he strongly urged me to get that piece out for Monday.  Had I not followed his advice, yesterday’s piece would have been a day late, and old news by the time it went public.  So, I am eating a bit of humble pie here, the first fruit has already fallen from the seed of our partnership!

Just as we saw last Wed. night/Thurs. wee hours, credit markets again melted down overnight.  The following charts clearly illustrate this.

Bonds…

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Charts: Bloomberg

…But wait, just as last Thursday, credit again reversed so, …no harm no foul?

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It is so important you understand “what” is happening and have an idea of “why”.  Let me tackle the what part first,  We are witnessing sovereign bonds and their yields move in wider standard deviations than most commodities ever do.  When you hear the word “commodity” you should think “risky risky” because they have wild moves limit up and limit down, it’s the way the game is played and should be expected.

Sovereign notes and bonds are (were) the opposite.  They are THE bedrock of the entire financial system.  They are “supposed to be safe”.  They are supposed to be for widows and orphans.  Sovereign credits are THE core to nearly all retirement funds on the planet.  If everything else fails, it is this sector, government bonds, which should stand tall and stave off the failure of retirement plans.  The action over the last week is anything but bedrock or “stable”, in fact, it is volatility in the bond markets that are endangering everything financial; suffice it to say “a foundation of BAD credit is not foundation at all”!

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The Bottom Is In!
Author : Bill Holter
Published: November 17th, 2014

This past Friday was a near carbon copy of the previous Friday for the precious metals.  Both were “outside reversal” days where the overnight and morning sessions were quite weak, only to bottom and then reverse to the upside strongly on very heavy volume by the day’s end.  First, this type of action is almost unheard of for precious metals and has happened only a handful of times over the last 15-20 years.  Also, both reversals were quite large from the day’s early lows to their final closes, the range was 3-4% which obliterated the long held “2% rule”.  We have now seen this twice in exactly 6 trading days and both were on a Friday.

I want to emphasize “FRIDAY” and put it in capital letters to boot.  Friday is the end of the week where there is no trading over the weekend.  (It is also the most important day to chartists where the charts cut off and print a close for the weekly period.)   Once business closes on Friday, participants are basically frozen in their position until Monday morning …or until the market reopens.  Market participants obviously know this and either position themselves accordingly or square their books going into weekends, it has been this way since the beginning of markets.  That said and as you know, I am a believer that we will see a system wide “re set” and this will in most all likelihood occur over a weekend.

I wasn’t sure when sitting down to write this how I’d structure it, meaning give you evidence and lead to a conclusion or the reverse?  My conclusion is that we have hit a precious metals BOTTOM and are now reversing, the worst is over in my opinion!  I must confess, I called a bottom 2 days after the low in June of 2013, some 16 months ago …which stood as correct until 2 weeks ago… I was wrong.  I did not in any way believe the $1,180 level in gold would be broken, it was.  That level was broken the day after the last FOMC meeting when 7 days’ worth of global production was sold at 12:30 AM on the COMEX.  Clearly this sale was meant to “break the charts” and break the spirits of any remaining PM bulls.  It did break the charts and sentiment along with it.  I actually saw a bullish/bearish sentiment reading this past week at “0″ bulls, I can’t remember where I saw it but I can tell you in 30 years I have never seen this before in any market.

OK, here is what I see and what leads me to believe we now have a hard bottom in.  We had the two consecutive reversal Fridays and both on very big volume.  These can be considered “impulse waves” if you will.  The previous week’s raid occurred just as the GOFO lease rates were again going negative (an impossibility in any normal market scenario).  Since then, the GOFO rates have gone further negative and have now seen two (possibly three, we will know on Monday?) record negative consecutive days.  GOFO rates should never be negative yet they are more negative than any time since 2001 when the gold bull market began.  Negative lease rates mean that the real metal is scarce which a direct contradiction to dropping prices is.  I will say this, while the COMEX can create 7 days’ worth of paper gold and sell it while everyone is sleeping to “make” price, they cannot create real gold out of thin air to satisfy real leasing needs.  What I am saying is this, rates in the “real” market show gold as very scarce, NOT plentiful as price would suggest.

Another anomaly occurred this past Thursday and Friday.  Scotia was served 920 Nov. COMEX gold contracts on Thursday and another 462 Friday.  This is VERY strange and can only be explained as “someone either needs or wants gold…NOW!”  I say “now” because the November month is historically a very small delivery month, there are only a few days left and there were only 33 contracts open prior to these 920, and 462 being served.  This represents 92,000 ounces of gold, almost three tons and 46,200 ounces or nearly 1 1/2 tons.  In a contract that is going off the board in short order, for what possible reason would this ever be done?  Who is the ultimate buyer and why now?  We can’t know “who?” we can only speculate on “why now?” but we do know one thing for an absolute.  Someone is desperate for gold and has to have it immediately!  I have never seen anything like this in the COMEX metals in the last 15 years happen even once …but back to back day’s smacks of something really different!  Stay tuned as I plan to write more about this anomaly and the GOFO backwardation in my next piece.

Other pieces to the puzzle include very high open interest for Dec. silver, still contracted for more than 7 ounces for each ounce represented in registered inventory.  Interestingly, the bullish consensus on the dollar has never ever been higher than it is right now, everyone has moved to one side of the boat.  Russia announced a doubling of their purchases over the last three months to 55 gold tons while China is averaging nearly this amount weekly …and India looks to again be ramping up purchases.  We also have seen a rampage in Europe, particularly Germany where silver demand has recently been voracious.  So much so that many mints have gone “back order” including the U.S. mint suspending the sales of Silver Eagles.  Anecdotally, I would also like to mention the premiums on U.S. Gold Liberty coins has risen dramatically over the last two weeks, so much so that they now actually cost more than when gold itself was $30-$40 higher.  I understand, “they don’t make these anymore” but dealers are being forced to raise what they will pay owners to entice product.  NONE of this is the action of a market where the thought process is “get me out now!”

As a backdrop, we still need to hear from the G-20 and what was decided there along with the Swiss vote at the end of the month and also the “nuisance” factor of ISIS announcing they will create their own currencies …made of gold and silver.  We already know the APEC/G-20 meetings have respectively shown little U.S. respect as President Obama was pictured far from the center and (I mean no disrespect) between two women…followed by Mr. Putin being isolated by his lonesome for the G-20 photo.   I bring this up because China/Russia obviously knows the game of proper diplomacy, I can see no way a U.S. president would ever be treated like this unless something was afoot and close to being made public (I wrote about this in my “G-20 Massacre” article last week).  As for the treatment of Mr. Putin who now says he will leave the summit early, do the G-7 members really believe there is an upside to poking “the bear”?

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Posted at 5:59 PM (CST) by & filed under USAWatchdog.com.

By Greg Hunter’s USAWatchdog.com

Dear CIGAs,

Financial expert Egon von Greyerz says forget about making money in today’s global economy.  The primary objective should be protection and wealth preservation, and von Greyerz goes on to explain, “It’s all about risk . . . what you are looking at now is a world where risk is unprecedented.  We have bubble land.   We have bubbles in stock markets.  We have bubbles in bond markets.  We have bubbles in assets markets, such as the art market, for example.  On top of that, we have a banking system that is bankrupt.  We have country risks that are enormous, but we also have geopolitical risks.  It looks like we are in bubble land where bubbles can expand exponentially, but you cannot break the laws of science.  At some point, bubbles will burst.  You can’t buy fire insurance after the fire.  Number one, from the point of investors, is to protect yourself.”

There are plenty of problem spots such as Greece and Ukraine, but there are no bigger financial risks to the global economy than the bond bubble.  Von Greyerz contends, “The bond markets, in my view, are the biggest bubble in history.  We are looking at a $100 trillion market of debt that will never be repaid.  Most of it is issued by government that can never repay it in today’s money.  I think this autumn is going to be quite dramatic.”

Manipulation is a given in all markets.  This is what is propping up a failing global system, and it is not going to make things better.  Massive manipulation of the markets, including the gold market, will have the opposite effect, and von Greyerz says, “Of course, they are making it worse.  Manipulation is only delaying the inevitable.  Of course, they (governments and central banks) hate, hate a high gold price because high gold price is a sign of mismanagement of the economy and destruction of the value of paper money.  That’s why they are doing everything they can to keep it down.  The physical market is strong and there is constant demand, but the paper market is thin . . . and there you see the manipulation.  There’s a $10 move up and a $10 move down because they are playing with it.  It won’t last.  At the end of the day, they are going to have a much bigger problem to solve.  At one point, the gold market will totally erupt.”

What could cause the gold market to erupt?  Look no further than the bond market says von Greyerz, “I had somebody, in the last few days, say to me we should probably write off all that debt, and forget about it and write it off, but there is another side to every balance sheet.  If you write the debt off, what about all the people lending against that debt?  What about all financial institutions that are leveraged against that debt?  You are talking about government bond market of something like $60 trillion.  The total bond market worldwide is over $100 trillion.  So, if you think about that $60 trillion just in government debt, then you look at what the investors have done with that debt.  That is collateral for leveraging 3, 4, 5, 10, 20, 40, 50 times, depending on the institution, and if the values of that debt start declining and it is guaranteed to decline . . . and we haven’t even talked about the derivatives, the combination of all that, and the leverage of the implosion will be so big the world will never cope with that.”

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Posted at 11:31 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

So many things are going publicly wrong from the administration.

Snubbed: Most Gulf Arab rulers send deputies to Obama summit
Published time: May 11, 2015 19:34
Edited time: May 12, 2015 01:08

The monarchs of Saudi Arabia and Bahrain have chosen to send deputies to the US-Gulf Arab summit. With two other leaders too ill to travel, this means only the Qatari and Kuwaiti heads of state will be at the Camp David meeting later this week.

Just hours after the White House announced President Barack Obama would meet with the Saudi king Salman bin Abdulaziz Al Saud, the government in Riyadh clarified on Friday that king Salman would not be showing up in Washington after all.

Saudi foreign minister Adel al-Jubeir announced that Crown Prince Mohammed bin Nayef would head the delegation instead. He will be accompanied by the king’s son, Deputy Crown Prince Mohammed bin Salman.

In a statement from the Saudi Embassy in Washington, Jubeir said the decision was made “due to the timing of the summit, the scheduled humanitarian ceasefire in Yemen and the opening of the King Salman Center for Humanitarian Aid,” according to Reuters.

King Salman personally expressed his “regret” for his missing the summit in a phone call to Obama on Monday, the White House said in a statement. The leaders agreed to cooperate with other Gulf states in building a “collective capacity to address more effectively the range of threats facing the region.”

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Posted at 11:31 PM (CST) by & filed under Jim's Mailbox.

Jim,

Whose port do you suspect that this ship made for the Russians, failed to be released to Russia and now bought by the Chinese end up? My money is on a Naval port in Russian Crimea.

CIGA Miki

France may sell to China naval ships built for Russia
2015-05-10

During the course of a visit by the French Navy to Shanghai between May 9-15, France may try to sell its Mistral-class amphibious assault ship to China, according to Duowei News, an overseas new outlet run by overseas Chinese.

The official microblog of the PLA Navy said that the French task force visiting China consists of two warships including the Dixmude, a Mistral-class amphibious assault ship, and Aconit, a La Fayette-class frigate. Dixmude is the third and last Mistral-class vessel designed for the French navy. It is the first time for a Mistral-class amphibious assault ship to visit a Chinese port.

Russia signed a contract with France to purchase two Mistral-class amphibious assault ships but the deal was scuttled due to sanctions imposed over the Ukraine crisis, even though construction of both vessels — named the Vladivostok and, fittingly if ironically, Sevastopol — had been completed.

The French Navy is unlikely to commission the two new ships and one option choice would be to try to sell them to other potential buyers including Brazil, Canada, China, Egypt or India. Even though China already has plans to develop its own amphibious assault ship, the country may still purchase the Vladivostok and Sevastopol as models to copy.

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Jim,

Coming to your local bank soon.

Once again the world’s banksters are willing to take any and all actions necessary to squelch the populace from removing the bank deposits from the banks. A proposed tax on withdrawals is under consideration. There is no action taken by the banksters and central planners that will be confined or restricted. It’s all out war on currency collapse.

CIGA Miki

The Situation Escalates – Greece Is Now Taxing Cash Withdrawals
Submitted by Secular Investor on 05/10/2015 08:05 -0400

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The saga (or drama, if you like) in Greece is continuing and even though the country was able to make a 200M EUR interest payment to the IMF earlier this week, markets shouldn’t be too optimistic just yet as that payment is less than 5% of the total cash amount it has to pay in the next 4-5 weeks.

Indeed, Greece has just 3 days left to find 750M EUR to meet the requirement of a principal payment to the IMF which is due next Tuesday, and we consider it to be quite impossible for the country to meet this demand without finding additional sources to generate cash from.

There’s little doubt the 200M EUR was mainly funded by Athens’ radical request whereby the public agencies were ordered to wire the majority of their cash resources back to the central government in Athens. This was a very clear indication the Greek treasury was running on fumes as it could not afford to pay the salaries of government employees so there’s little hope the country will be able to repay the 750M EUR to the IMF next week without reaching a new bailout deal with its lenders.

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