Posted at 3:11 PM (CST) by & filed under In The News.

Dear Friends,

Lets never forget to honor our fallen heroes, even if the war they fight is total madness.

They took an oath to serve, and do so at the command of their officers bravely and selflessly.

God Bless them and theirs forever.

Jim

Click here to view article (Warning: graphic)…

 

Jim Sinclair’s Commentary

Finally the message given here on JSMineset, "CONSEQUENCES" is being picked up by others. The message will now spread and communicate.

CONSEQUENCES" cannot be voided by any method. They will occur.

The Coming Consequences of Banking Fraud
September 09, 2009
J. S. Kim

The Double Dip Recession, or the “W” shaped recovery that a minority of economists, such as Joseph Stiglitz, is now stating as a strong possible outcome of this current rally, should not be discussed in the realm of economics but rather in the more apropos realm of financial fraud. The fact that the upleg of the “W” shaped recovery that is occurring now will inevitably crumble in spectacular fashion will not be a result of any free market principle, but rather the direct consequence of a fraudulent scheme executed by an elite global financial oligarchy, otherwise known as Central Banks. If the mission of this current manufactured leg-up in Western stock markets was to fool the world into believing that global economies are recovering, then clearly, up until this point, the mission has been a resounding success. For those unfamiliar with the term “blowback”, it’s a CIA term that was first used in March 1954 to describe the unintended consequences of US government international activities kept secret from the American people.

Though this term has primarily been used to describe the consequences of covert military operations, “blowback” is an appropriate term to use to describe the coming consequences of banking fraud because the US government, US Federal Reserve, Wall Street, the US Treasury, and the Exchange Stabilization Fund have all engaged in domestic and international financial and monetary transactions that have been kept secret from the world, and that will have severe and negative consequences in the not so distant future. In fact, I predict that the blowback of these activities will not only exceed, but far exceed, the fallout the world experienced in 2008 at the prior apex of this current crisis. Most people today can not even fathom how bad the situation will become primarily because of all the secrecy that the banksters have engaged in – in US Treasury markets, the gold markets, the US dollar markets, agriculture commodities, stock markets, and financial markets – in hiding reality from the people.

In an article I wrote three months ago, on June 10, 2009, titled, “Can Rising Stock Markets Serve as a Confirmation of a Crashing Economy?”, I stated, “Whether I am right or wrong about US markets tanking by summer’s end/fall’s beginning, if [we] position [our] investment assets based upon an understanding of the fraudulent monetary system, [we] can still continue to create wealth.” While true, I was a bit early in raising the proposition of a stock market correction the month before; I amended my prediction in June upon realizing the breadth of the manipulation schemes occurring in Western stock markets. In today’s markets, only a complete investment novice would try to predict market behavior without accounting for the massive government intervention schemes and forays into stock markets as well as the computerized manipulation of daily trading volume. One of the main reasons, but not the only one, that I amended my target for the end of this rally this past June to the fall season is the fact that fall normally marks the return of much higher daily trading volume from the traditional summer lulls. Thus, it is a much more difficult proposition for Central Banks and computerized trading programs to manipulate a continued rise in stock markets in the face of higher daily trading volumes.

However, should daily trading volume remain surprisingly low or muted this fall, as is also a possibility, I have no doubt that this market rise can persist for an extended period longer before these false gains are eventually flushed away (but, of course, not before all US financial executives have had ample time to exit their positions quietly). In fact, the development of this false rally was the main topic of my article. The other scenario, one that includes a significant rise in daily trading volumes that trigger the start of a second massive decline in Western stock markets, would not surprise me either. It’s just a matter of observing the signs that forecast the waning efficacy of the fraudulent stimulus of Western markets (or for this matter, the fraudulent stimulus of Chinese stock markets too).

Remember that it is only the timing of this decline that I am uncertain of, but I am very certain that a significant decline of a shocking nature is coming. The last time I issued an adamant warning of a similar nature was on April 23, 2008, when again, the only issue about a market crash was timing, though the US S&P 500 index peaked just 18 business days after I wrote that article and proceeded to fall by more than 50%.

To truly gain more clarity regarding this recent Western stock market rally, consider a hypothetical scenario in which a person was kept ignorant of any action in the US stock markets for the entire previous six months. Instead, imagine that he or she was given the task of predicting US market behavior over the past six month period solely based upon cold, hard US financial and economic data stripped bare of any of the media-slanted headlines that perpetually spin bad economic data as positive or “less bad” than it truly is. Based upon the economic data produced from the last six months, what do you think this person would conclude? That stock markets have soared during this time or that they had crashed?

Of course, factor in the plethora of evidence about numerous PPT interventions to “save” markets during this time, and the strong US stock market rally no longer seems so illogical. But strip away any evidence of free-market manipulation and interference and in the face of true, undistorted economic data, our current market rally would be enormously puzzling. And this point alone should be sufficient to tell you how this rally will end. The inevitable conclusion of this rally isn’t just about the unsustainability of the massive bailout programs implemented by global Central Banks that have engineered this current market rally out of thin air, but its manifestation should trigger an investigation into the outright fraud committed by Wall Street, banking institutions, and Central Banks that has been aided and abetted by financial journalists.

For example, consider the following stories:

Demographers recently reported that Florida, the state known as the “mecca” for wealthy retirees in America, suffered its first population decline last year in more than 60 years, an event that delineates the collapse in wealth of American retirees and an event that is likely to repeat this year.

At the end of this past July, one of the largest ports in America, Long Beach, reported that the 20% year-over-year cargo business decline is among the sharpest since the Great Depression. This is not a trend specific to Long Beach. “It’s phenomenal how much things fell away even since December,” said Paul Bingham, managing director of global trade and transportation for IHS Global Insight, the business research firm that monitors North America’s biggest ports for the National Retail Federation.

As of September 4, 2009, shadowstats.com reported that unemployment in the US is now near 21% and is showing no signs of improving any time soon (when factoring in discouraged workers, part-time workers that can’t find full-time work, unemployed workers that have fallen off the unemployment roll, etc.). In fact, yesterday, Manpower’s Employment Outlook Survey reported that US employers’ hiring plans for the upcoming fourth quarter dropped to the lowest level in the history of its survey which dates back to 1962.

On August 15th, when BB&T (BBT) purchased failed US bank Colonial Bank, it wrote down Colonial Bank’s loans and real estate collateral by 37% and Colonial Bank’s construction loans by 67%. Yes, 67%! The severe markdowns of Colonial Bank’s assets should have set off warnings akin to a five-alarm fire among the financial media, but it did not, for the media increasingly caters to the interests of the elite bankers of this world at the cost of truth and freedom. If there are several things we can deduce from Colonial Bank’s failure, it is the following.

Though the Federal Deposit Insurance Corporation (FDIC) refuses to disclose the names of the banks on its “watch list”, it can be safe to assume that a bank just does not go bankrupt overnight and that the process of going bankrupt can be predicted many months in advance by personnel with access to a bank’s financial statements and knowledge of its true financial condition. In fact, various newspaper articles reported that Colonial Bank was in negotiations with the FDIC as early as March, 2009, yet not one time, did the FDIC force Colonial Bank to come clean regarding its true financial health before it finally shuttered the bank five months later.

The fact that the FDIC is spotting massive trouble in the American banking system and covering it up should be massively worrisome to Americans. Because revelations regarding the truth about a US bank’s health only seem to occur after it fails, the favored handling of American banks with kid gloves by the FDIC should immediately beg the question, “How many more US banks are legitimately bankrupt today and just operating on fumes?”

Personally, I would not be surprised if sometime within the next six months, a considerably larger US bank failure causes a massive ripple effect of much greater consequence. Banks that are currently struggling with unreported and covered-up deepening problems of loan delinquencies such as Wells Fargo (WFC), may be among the large banks that are candidates for future bankruptcy despite the public categorization of such institutions in the “too-big-to-fail” category. Unfortunately, Wells Fargo, from a political standpoint, does not have the “most favored bank” status of a Citigroup (C) or JP Morgan (JPM), two institutions deserving of bankruptcy but clearly favored by the US Federal Reserve and the US government.

When one considers the fact that all government or state produced economic statistics have been massively distorted towards the side of optimism and away from reality throughout this global financial crisis, one should be even more worried when the occasional sparse negative statistic is reported, for it is likely that these statistics too are misrepresenting the truth. Thus, in the face of all negative news that points to zero foundation and zero economic structural improvements, how has a multi-month stock market rally been able to spread across Asia, Europe and the US? Again, the answer is fraud, and thus should be analyzed through the prism of fraud and not the false prism of “economics”. There is no “economics” behind this latest global stock market rally, only fraud.

For many weeks in August, just four stocks accounted for as much as 40% of composite volume on the NYSE: Citigroup, Bank of America (BAC), Freddie Mac (FRE) and Fannie Mae (FNM). In early 2007, Citigroup, Fannie Mae and Freddie Mac accounted for roughly 1% -3% of NYSE volume, a far cry from its recent 35%+ collective weight of the composite NYSE volume. Remember that this huge volume anomaly persisted not just for one day but for weeks on end during August. If Citigroup, Bank of America, Fannie Mae and Freddie Mac were a pharmaceutical collective that just discovered a cure for cancer and AIDS, then such volume anomalies would make sense. However, such massive trading volumes, as a percent of composite volume for the entire NYSE index, makes zero sense for companies, that for all intents and purposes, are on government bailout lifelines. It makes no sense, that is, unless massive free-market intervention is occurring in an attempt to save these firms.

Again, when viewed through the “fraud prism”, such activity makes complete sense. It is obvious that the “Rise of the Machines” has created markets that are now dominated by computerized high frequency trading programs that can execute trades as quickly as 0.5 milliseconds and have as their sole purpose the creation of short-term market distortions driven by statistical arbitrage that can be used to game the system and cheat their clients. Though this link describes how this scheme works in commodity markets for those that have been following the New York Stock Exchange, the use of high frequency trading programs to game the system at the expense of the retail investor has been glaringly obvious especially in the trading behavior exhibited this past summer.

The ironic part of this huge scam that has merely just re-inflated another massive stock market bubble is that the segment of the public that is so easily angered by government bailouts, billion dollar bonus plans for Wall Street executives and the chicanery of JP Morgan and Goldman Sachs (GS) (and justifiably so), are the very same people that so passively accept the mountain of lies that passes for financial reporting today (inexplicably so). It is ironic that this same collective of people, instead of rejecting this mountain of lies, continues to listen to their financial advisers at global commercial investment firms, even though these advisers are the same group of people that miserably failed to see the crash that started in the spring of 2008, when the factors behind the pullback back then was just as clear as the factors behind the future pullback that will occur in the near future. It is ironic that this same group of people continues to support, participate and fund a system that cares only about using their clients’ money to lie, cheat and steal from them when a simple withdrawal of funds from the system is the antidote to ignorance-induced paralysis that will once again create massive crisis-induced losses in the future. Pulling one’s money from one’s current firm and switching to another firm that participates in this web of lies and deceit is not a solution either.

It is ironic that it is the same group of people that so readily accepts the Western media’s correct analysis of China’s stock market as a huge bubble through the lens of Austrian economic principles that simultaneously rejects any similar notion as applicable to US or UK stock markets, and instead, readily embraces heavily flawed and unsound Keynesian economic principles when evaluating Western stock markets. It is ironic that the same group of people that foolishly equates being “American” with blind support of the US stock market (i.e. “being bearish on the US market is un-American!”) is also completely ignorant of both the massive fraud that is perpetrated in US stock markets as well as the tenets of the US Constitution that sound great objections and warnings to the ruinous and foolish monetary policies that are implemented by bankers as their “solution” to our current economic crisis. And finally, the greatest irony of all is that the anger that brews inside those that have been tragically hurt by this crisis can coexist with the failure to recognize that it matters not in America if the President has the last name Clinton, Bush or Obama – that monetary and fiscal agenda inside the US for the last 17 years has not wavered nor changed one iota during this period of time because it was not these men that have been in charge of the economy but the men that manufactured these men’s rise to power and that control the US Federal Reserve and the world’s Central Banks, and thus the global monetary policy.

If one can not see the connection between Presidents, Prime Ministers and the banking families that rule Central Banks, one merely needs to open up a newspaper and follow their lives after they leave government office. It is not just a coincidence that ex-British Prime Minister Tony Blair, after leaving office, took a part-time consulting job with JP Morgan’s Jamie Dimon that reportedly pays him $5 million per year as well as another well-paid consulting position with Zurich Financial Services. In office, Mr. Blair was a consultant to the banking oligarchs in secret; out of office, he is free to be a consultant publicly. And one can be certain that current UK Prime Minister Gordon Brown and US President Barack Obama will be offered very considerable salaries and fees by the world’s top financial oligarchs as thanks for their current and past service to them once they leave office as well (especially Gordon Brown, for selling out his countrymen and selling more than half of England’s bank reserves to ensure that the financial oligarchs could maintain the US dollar as the de-facto international currency for 10 additional more years than it deserved to hold this status).

In the end, what is the most frustrating facet of these huge con games executed by the financial oligarchs is that the group of people that this article is most intended to help is often the group of people that will take most offense to this article and most steadfastly refuse to see the truth. Instead, they will only realize the truth when the economic future unfolds to the blueprint of those of us the media labels as “gloom and doomers” because we base our predictions on reality instead of fantasy and lies. Instead of labeling us as “gloom and doomers”, if the media at large ever conducted an unbiased analysis of the predictions of the “gloom and doomers” for the past 3 years, they would discover that the “gloom and doomers” have been spectacularly accurate in the majority of their calls while the financial demagogues they continually fawn over (that only serve the interests of the bankers) have been spectacularly wrong in the vast majority of their predictions. Yet, those that serve the international banking cartel with glowing and rosy predictions of economic recovery never suffer the negative consequences of being wrong all the time as the mass media all too happily continues to provide the largest public platform and the loudest voices to these people. Perhaps, if it is accurate to label “gloom and doomers” as realists, then one should label the optimists that make their calls based upon perpetrated fraud as banking shills and cogs in the investing machine, for their societal contribution of greatest significance is an opiate cocktail for the masses that is a mixture of deceit and lies mixed with unbridled optimism.

As they often say that life imitates art, I close my article today with a speech from the film “V for Vendetta” that is frighteningly relevant if you listen to this speech with a critical ear and replace the references to the war on terror in this speech with the current war the bankster fraudsters are committing against the people. A sound money backed by precious metals, can be the people’s liberation from this war. Anything that falls short of such a solution will be just another scam in an already long line of scams, of a solution sold to the masses, that in reality, is no solution at all.

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Jim Sinclair’s Commentary

What the original plaintiff seems not to have done, Fox News has.

Fox News appeals ruling for U.S. Fed over bailout
Wed Sep 9, 2009 7:05pm EDT
Friday, 28 Aug 2009 11:46pm EDT

* Different judge ruled for Bloomberg News in similar case

NEW YORK, Sept 9 (Reuters) – Fox News Network LLC on Wednesday appealed a U.S. judge’s decision not to force the U.S. Federal Reserve to reveal the names of participants in its emergency lending programs.

The news network, part of Rupert Murdoch’s News Corp. (NWSA.O) filed with the 2nd U.S. Circuit Court of Appeals seeking to over turn a July 30 ruling by U.S. District Judge Hellerstein that denied the network’s Freedom of Information Act (FOIA) request of the U.S. central bank.

In a similar case in late August, the chief district judge of the same court – the U.S. Court for the Southern District of New York – ruled for Bloomberg News and ordered the Fed to release the names and amounts

Chief District Judge Loretta Preska ruled in favor of Bloomberg News and against the Fed saying the central bank had to release the names of the banks that participated in its emergency lending programs.

The Fed appealed Preska’s ruling and now both cases are before the 2d Circuit.

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Jim Sinclair’s Commentary

Here is a cheat sheet on how to react to market data releases in a 1932 or hyperinflation type equity market rally:

Weak data = Fed ease, stocks rally
Consensus data = lower volatility, stocks rally
Strong data = economy strengthening, stocks rally
Bank loses $4bln = bad news out of the way, stocks rally
Oil spikes = great for energy companies, stocks rally
Oil drops = great for the consumer, stocks rally
Dollar plunges = great for multinationals, stocks rally
Dollar spikes = lowers inflation, stocks rally
Inflation spikes = will inflate all assets, stocks rally
Inflation drops = improves earnings quality, stocks rally

Thanks to CIGA Udoran.

 

Jim Sinclair’s Commentary

We have dropped to the lowest levels possible.

The translation of this is bankers want international financial leaders to intervene to stop FASB from requiring fair valuation of assets that banks carry so they can continue to overvalue (falsify) their assets.

There is no hope.

Bankers Want G-20 to Rein in FASB, IASB
WASHINGTON, D.C. 
(SEPTEMBER 10, 2009)

The American Bankers Association has written to Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke asking them to raise accounting issues at the upcoming G-20 meeting in Pittsburgh in order to curb efforts by standard-setters to expand mark-to-market accounting to loans and debt instruments.

In the letter, ABA president and CEO Edward Yingling claimed that the mark-to-market accounting changes proposed by the Financial Accounting Standards Board and the International Accounting Standards Board are at odds with the changes recommended by the G-20 in a statement last week.

“Most experts, including banking leaders, believe that repairs are needed to the accounting model, particularly in the area of provisioning for loan losses,” wrote Yingling. However, he argued that the FASB and IASB proposals go too far and “would undermine the G-20’s efforts to strengthen the financial system.”

The FASB and the IASB are proposing to increase the use of mark-to-market measurements in accounting for loans and debt securities. The IASB is scheduled to finalize its rules by the end of 2009, and FASB is scheduled to issue final rules in the second half of 2010.

Yingling argued that an expansion of mark-to-market accounting would lead to reduced lending, changes in the product types available to customers, an increased cost of capital to the banking system, and higher cost of credit to borrowers.

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Thoughts of the Day:

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1. This morning around 8am an interviewer asked a talking head "In the cold reasoning of Wall Street why do we care?" concerning those who purchased Lehman paper from their local banks only to find out that their saving were totally wiped out.

That approach simply explain the heart of the problem. Wall Street, the Banksters and Federal Agencies simply so not care. They never cared and they never will care. It is a form of "the public be damned," and they have been.

2. I refer you back to one of Martin Armstrong’s best lessons. The article he wrote is titled "How all systems can collapse overnight." This is exactly how the dollar will behave. It will move lower, slowly with on balance decline and inter-day or inter-week rallies. The weight on price will grow and grow and then the bottom will fall out. This will happen as a product of loss of confidence both in economic and political leadership.

The coming winter is going to be very difficult on the US dollar. Be prepared!

Regards,
Jim

 

Jim Sinclair’s Commentary

I find reviews of this type of development to be depressing.

It is enough to say what you see is what you get for a long time to come.

The MOPE will not agree, but that is the purpose of Management of Perception Economics, an economic theory.

U.S. Foreclosure Filings Top 300,000 for Sixth Straight Month
By Daniel Taub

Sept. 10 (Bloomberg) — Foreclosure filings in the U.S. exceeded 300,000 for the sixth straight month as job losses that boosted the unemployment rate to a 26-year high left many homeowners unable to keep up with their mortgage payments.

A total of 358,471 properties received a default or auction notice or were seized last month, according to data provider RealtyTrac Inc. That’s up 18 percent from a year earlier, and down 0.5 percent from July, the Irvine, California-based company said in a statement. One in 357 households received a filing.

Foreclosures rose from a year earlier as companies cut payrolls by 216,000 workers last month, boosting the U.S. jobless rate to 9.7 percent, according to Labor Department data released last week. The rise in unemployment is having a bigger impact than an effort by the U.S. government and banks to modify mortgages and prevent foreclosures, said Morris A. Davis, an assistant real-estate professor at the Wisconsin School of Business.

“The foreclosure numbers are largely unemployment related,” Davis, a former Federal Reserve Board economist, said in an interview. “As long as 15 million Americans are unemployed, record foreclosures will continue.”

Foreclosures aren’t abating even as demand is returning to the U.S. housing market after a three-year slump. The number of contracts to buy previously owned homes rose more than forecast in July and increased for a record sixth consecutive month, while mortgage buyer Freddie Mac said the average price rose 1.7 percent in the second quarter.

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Jim Sinclair’s Commentary

Is the UN saying no to the US crack cocaine finance? China has.

The dollar is going to experience a very cold winter.

UN Says New Currency Is Needed to Fix Broken ‘Confidence Game’
By Jonathan Tirone

Sept. 7 (Bloomberg) — The dollar’s role in international trade should be reduced by establishing a new currency to protect emerging markets from the “confidence game” of financial speculation, the United Nations said.

UN countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade and Development said today in a report.

China, India, Brazil and Russia this year called for a replacement to the dollar as the main reserve currency after the financial crisis sparked by the collapse of the U.S. mortgage market led to the worst global recession since World War II. China, the world’s largest holder of dollar reserves, said a supranational currency such as the International Monetary Fund’s special drawing rights, or SDRs, may add stability.

“There’s a much better chance of achieving a stable pattern of exchange rates in a multilaterally-agreed framework for exchange-rate management,” Heiner Flassbeck, co-author of the report and a UNCTAD director, said in an interview from Geneva. “An initiative equivalent to Bretton Woods or the European Monetary System is needed.”

The 1944 Bretton Woods agreement created the modern global economic system and institutions including the IMF and World Bank.

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Jim Sinclair’s Commentary

What is really happening is an exponential growth in Hebrew fundamentalism in Israel.

This group is primarily made up of Israeli army members in active duty from the settlements. They see the defense of Israel as a religious duty.

Yesterday a major error was made by Israeli military leaders which was broadcast by BBC news. The military said that this fundamentalism was unacceptable and that "We (the military) control their spirit."

Now that was world class stupid when addressing fundamentally religious people threatened by Iran who are in uniform with guns.

Netanyahu draws fire in Israel over secret trip
Thu Sep 10, 2009 7:49am EDT
By Jeffrey Heller

JERUSALEM (Reuters) – Prime Minister Benjamin Netanyahu drew the wrath of Israel’s most influential newspapers on Thursday over what they described as lies issued by his office about a secret flight to Russia.

Netanyahu’s first major media fiasco since taking office six months ago began with a simple question many Israelis, using their leader’s nickname, asked on Monday: Where’s Bibi?

Explaining why he had disappeared from public view for a day, a statement issued on Monday by the prime minister’s office quoted his military attache as saying that Netanyahu had visited a security installation in Israel.

Israeli media reported he had toured a facility belonging to the Mossad intelligence agency.

But on Wednesday, Israeli daily Yedioth Ahronoth reported that Netanyahu had, in fact, flown secretly to Moscow to voice concern over the possible sale of Russian anti-aircraft missiles to Iran.

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Jim Sinclair’s Commentary

This could be the left hand not knowing what the right hand is doing. It is a tad stupid when you might wish some life to remain in the US dollar.

China condemns US tariffs on steel pipes

BEIJING — China on Thursday condemned a US decision to slap tariffs on steel pipes from the mainland, as US President Barack Obama mulled whether to also curb tire imports from the Asian giant.

The twin disputes are a litmus test for Obama’s trade policy with Beijing, and are coming to the forefront ahead of his highly anticipated first presidential visit to China set for November.

In July, Obama laid out his vision of "cooperation, not confrontation" between Washington and Beijing, saying the relationship would "shape the 21st century" — but the thorny trade issues could throw a spanner in the works.

The US Commerce Department said Wednesday it had made a preliminary decision to impose duties of as much as 31 percent on Chinese carbon or alloy tubular steel products used in oil and gas wells, following claims they were backed by unfair subsidies.

That announcement drew a quick and angry response from Beijing.

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Jim Sinclair’s Commentary

Here is an unusual approach to take in conversations with your banker who can control the future of the US dollar.

U.S. Says China Violated Trade Law
Tariffs Imposed as Subsidies to Pipe Makers Called Illegal
By Peter Whoriskey
Washington Post Staff Writer
Thursday, September 10, 2009

In one of the largest U.S.-China trade cases ever, the U.S. Commerce Department has issued a preliminary finding that Chinese steel pipe producers have received government subsidies in violation of trade law, helping them overrun the competition.

The volume of steel pipes imported from China more than tripled between 2006 and 2008, rising from $632 million to $2.6 billion, according to the Commerce Department.

The subsidies from the Chinese government allowed the firms to overwhelm their U.S. rivals, according to six U.S. companies that filed the complaint along with the United Steelworkers union. The companies alleged that their Chinese rivals received discounts on raw materials and loans from government-owned firms.

To even the playing field, the Commerce Department has ordered that tariffs ranging from an estimated 11 percent to 31 percent be imposed on the steel pipes from China.

The steel pipes at issue in the case are those used primarily by the oil and gas industry. They are known as "oil country tubular goods." By dollar volume of imports in the industry, the case represents the largest U.S.-China trade case ever, attorneys said.

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Jim Sinclair’s Commentary

Deficits count even though in the light of other problems it might seem small. I never thought I would say that about $36 billion.

July trade deficit climbs 16.3 pct to $32 billion
By MARTIN CRUTSINGER , 09.10.09, 08:58 AM EDT clip_image003

WASHINGTON — The U.S. trade deficit shot up in July to the highest level in six months as a surge in shipments of foreign oil and autos pushed imports up by a record amount.

The Commerce Department said Thursday that the trade deficit rose 16.3 percent to $32 billion in July, much larger than the $27.4 billion imbalance that economists had expected. It was the largest imbalance since January and the percentage increase was the biggest in more than a decade.

Imports rose 4.7 percent, the largest monthly advance on records that go back to 1992, while exports edged up a smaller 2.2 percent. Both gains provided evidence that the most severe recession since World War II was beginning to lose its grip on the global economy.

The increase in imports pushed them to a total of $159.6 billion in July and marked the second consecutive monthly gain after imports had fallen for 10 straight months as demand in the United States plummeted in the midst of the prolonged recession.

The rebound in July included a 21.5 percent spike in imports of autos and auto parts, a gain that reflected in part a rebound in production at U.S. auto plants owned by General Motors and Chrysler. Those companies had curtailed production in May and June as they struggled to emerge from bankruptcy protection. Both companies as well as foreign automakers with plants in the United States make use of foreign-made auto parts in their U.S. manufacturing operations.

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Jim Sinclair’s Commentary

Pension fund failure or payment restructuring will have a major impact on the Social Order and therefore CONFIDENCE.

State employees face changes to pensions: System is financially unsustainable
By Marc Kovac

COLUMBUS — State lawmakers will have to decide whether to increase retirement ages, require greater contributions from public employees and employers and/or decrease cost-of-living adjustments for pension payments.

That’s after a state panel heard recommendations Wednesday from Ohio’s five public employee retirement systems for dealing with the economic downturn.

The groups, representing police officers and firefighters, teachers and school employees and other public workers, have been hit hard by stock market declines. The separate boards that oversee each have outlined recommendations for reducing costs and ensuring adequate funds to cover retiree obligations in years to come.

“These are not easy decisions that we’re going to be dealing with,” said Rep. Todd Book, a Democrat from McDermott, who serves as chairman of the Ohio Retirement Study Council. “… We cannot invest our way out of this situation.”

The Ohio Retirement Study Council, which includes six lawmakers and three citizen voting members appointed by the governor, heard the recommendations during a meeting that lasted several hours Wednesday at the Statehouse.

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Jim Sinclair’s Commentary

This is a natural course of action when your capital is depleted – reduce your guarantees by 50%.

FDIC Proposes Six-Month Extension for Debt Guarantees (Update2)
By Rebecca Christie

Sept. 9 (Bloomberg) — The Federal Deposit Insurance Corp. proposed a six-month, emergency-only extension to its debt guarantee program as regulators move to wean companies from federal aid approved at the height of last year’s credit crisis.

The five-member FDIC board today unanimously approved seeking comment for 15 days on extending the program. The FDIC now guarantees eligible debt issued before the scheduled Oct. 31 expiration by banks that get agency approval and pay a fee.

“It has been a successful program but we would like to end it,” FDIC Chairman Sheila Bair said at a Washington meeting. Credit markets are recovering and she doesn’t expect banks to need further access to the program, meaning the agency should now seek input whether to go “cold turkey” or offer an emergency mechanism for a final six months, she said.

Bankers have pressed the FDIC to spell out how it will end the program, which Federal Reserve Chairman Ben S. Bernanke has said was instrumental in keeping markets stable during the worst of the 2008 financial crisis. The program is part of the Temporary Liquidity Guarantee Program; a portion for business checking accounts was extended in August for six months.

“The point here is to allow for an orderly transition out of a government-backed system,” said Robert Strand, a senior economist at the American Bankers Association in Washington, in a telephone interview yesterday. The ABA had asked the FDIC to “worry about the cutoff points and the suddenness” of ending the guarantees, to make sure closing down the program doesn’t roil markets, he said.

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Jim Sinclair’s Commentary

If anyone should know it is the maker and the shaker.

Another financial crisis inevitable: Greenspan
Wed Sep 9, 2009 7:42am EDT

LONDON (Reuters) – Another global financial crisis is inevitable because human nature always reverts to "speculative excesses" during a period of sustained prosperity, former U.S. Federal Reserve Chairman Alan Greenspan said.

"The crisis will happen again but it will be different," he told BBC Two’s "The Love of Money" television series.

"That is the unquenchable capability of human beings when confronted with long periods of prosperity to presume that that will continue," he said.

Greenspan, speaking to the BBC to mark the first anniversary of the fall of U.S. investment bank Lehman Brothers, said Britain will be hit worse than the U.S. by the subsequent worldwide financial crisis and global recession because it has a globally-focused economy.

Countries, smarting from the near collapse of the banking system, will struggle to match their stated desire for increased regulation with their other stated need for free global trade.

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Jim Sinclair’s Commentary

The apparently dumbest barrister in history said when making his case against the individual that removed the Flash Trading System from Goldman was that, "This system in the wrong hands could be used to manipulate markets." Of course, the assumption he hoped for was that Goldman would be considered the right hands and would never contemplate doing such a terrible thing.

It will be interesting to see what the Madoff effect will be on the SEC as they review (if the SEC can understand the systems) the real purpose of all the systems – to cheat.

These varied systems apply as much to gold and silver as it does to general equities.

SEC Probes Manipulation by ‘Advanced Trading Systems’ (Update1)
By David Scheer

Sept. 10 (Bloomberg) — The U.S. Securities and Exchange Commission is “rigorously” investigating whether traders are using technology to manipulate markets, the agency’s enforcement and inspections chiefs said today.

The regulator is probing suspected “market manipulation based on complex use of technology and advanced trading systems,” said SEC Enforcement Director Robert Khuzami and acting examinations director John Walsh in testimony prepared for a Senate Banking Committee hearing. They said the inquiry is among a list of active cases, also including unspecified Ponzi schemes, hedge-fund abuses and insider trading.

SEC spokesman Kevin Callahan said he couldn’t immediately comment beyond the testimony.

Lawmakers including U.S. Senator Charles Schumer have pressed the SEC to ban so-called flash trading, which gives firms a split-second advantage in viewing stock-trading requests. The agency said today it will consider proposing a ban at a Sept. 17 meeting.

Federal prosecutors also drew attention to potential abuses of automated trading in July, when they said software allegedly stolen from Goldman Sachs Group Inc. by a former programmer might be used to “manipulate markets.”

Computer-program trading represented almost 27 percent of volume on the New York Stock Exchange in the last week of August, according to the NYSE’s most recent report. Goldman Sachs, Morgan Stanley, Barclays Capital Inc., Bank of America Corp.’s Merrill Lynch subsidiary and Deutsche Bank AG’s securities unit accounted for the most volume, the data show.

More…

 

Jim Sinclair’s Commentary

MOPE dictates what you have no practical means to do you state you do not choose to do at this time and into the future.

Fed’s Kohn says no exit for extended period
Thu Sep 10, 2009 4:15pm EDT

WASHINGTON, Sept 10 (Reuters) – Federal Reserve Vice Chairman Donald Kohn said on Thursday the U.S. central bank was developing tools to remove its extremely loose monetary policy, but this exit would not happen at all soon.

"Any combination of these tools, in addition to the payment of interest on reserves, may prove very valuable when the time comes to tighten the stance of monetary policy," Kohn said in remarks prepared in discussion of a paper presented earlier on Thursday at the Brookings Institution.

"As the FOMC has said, that time is not likely to come for an extended period," he said, referring to the policy-setting Federal Open Market Committee.

The paper, on the Fed’s track record since the failure of Lehman Brothers this time last year, noted that the Fed’s massive expansion of its balance sheet would not lead to inflation due to its ability to pay interest on reserves that are held with it by commercial banks.

(Reporting by Alister Bull, Editing by Andrew Hay )

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Posted at 2:43 PM (CST) by & filed under Jim's Mailbox.

Trade Deficit Worsens
By CIGA Eric

An economy with structural deficits (consumes more than it produces) will show an increased trade deficit as the economy improves. This will only serve to further weaken the dollar. Gold is now entering the sweet spot.

Click charts to enlarge

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Dear Mr. Sinclair,

We know the issues with ETF’s. This company ETFs Securities just launched a new gold ETF that holds the bullion in Switzerland and claims more stringent audit rules and daily bar listings.

More legitimate than GLD?  Who knows – as you often state, nothing replaces metal in hand. Maybe they are attempting to capitalize on the out of favor status of GLD. Either way it represents at least a bit of additional gold demand. It will be interesting to watch how this competes with GLD.

http://www.etfsecurities.com/msl/etfs_physical_gold_us.asp

Best Regards,
CIGA Marc

 

Jim,

Federal Debt Held by Foreign & International Investors (FDHBFIN) and the Equilibrium Price (FDHBFIN/OZ)

CIGA Eric

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Hi Jim,

I guess there was no rush after all!

Best,
CIGA Bernie

US to start purchases of ‘toxic assets’ next month

WASHINGTON (AFP) – US authorities will launch a much-delayed program to buy up "toxic assets" in the banking system by early October, a Treasury official said.

"The dollars will start to be invested later this month (or) early next month," said an official who asked not to be identified.

The purchase of these assets was the original purpose of the 700-billion-dollarTroubled Asset Relief Program passed by Congress last year, but officials backed away from this idea at the time because of problems in pricing the assets.

More…

Hi Jim,

Below is the latest Gold Currency Index daily chart. It is continuing to consolidate that recent breakout as gold battles the $1,000 level.  The material breakdown in the US dollar (chart also below) should provide gold with the fuel to take out this psychological resistance. It’s getting interesting…

Best,
CIGA Erik
Prometheus Market Insight
http://www.prometheusmi.com

Click charts to enlarge

usd_weekly

 gci

Jim,

The greatest tragedy of economic fraud!

CIGA Marc

U.S. poverty rate hits 11-year high as recession bites
Thu Sep 10, 2009 4:35pm EDT
By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. poverty rate hit its highest level in 11 years in 2008 as the worst recession since the Great Depression threw millions of Americans out of work, a government report showed on Thursday.

The Census Bureau said the poverty rate — the percentage of people living in poverty — jumped to 13.2 percent, the highest level since 1997, from 12.5 percent in 2007.

About 39.8 million Americans were living in poverty, up from 37.3 million in 2007.

Despite signs the economy was showing signs of crawling out the slump that started in December 2007, the poverty rate would rise gain this year and beyond 2010 as unemployment would stay elevated for a while, analysts and the government warned.

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Posted at 2:30 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Judging from some of the emails I have been receiving, the feds and their gold capping efforts have already unsettled many of gold’s friends. Please note – the bullion banks can attempt to stuff the price of gold back below $1,000 but without a strong rally in the US Dollar, they are spitting in the wind as the fundamentals are arrayed against them.

I am reminded of an old movie named Beau Geste, in which the defenders of a fort are reduced to stuffing the bodies of their fallen soldiers into the ports in order to convince their enemies that the fort is still well manned and ably defended, where the truth was that their situation was dire indeed. Bluff and bravado are what the bullion banks rely on. If longs will not run all their efforts will go for naught.

Gold is not going to be held down by these crafty schemers indefinitely due to the simple fact that the Forex markets are far too large for any one entity to give a sustained push to a currency in a direction that is contrary to the supply/demand factors affecting that particular currency. Economics 101 has not been suspended just because the feds and their crony pals at Goldman and Morgan would wish it otherwise. The world is awash in Dollars and the supply is only going to continue to increase. Even if demand were to remain constant (which it will not), that is insufficient to absorb the excess supply meaning that price must fall. As the Dollar falls, gold will continue higher, capping efforts of the feds notwithstanding. Honest money is yet going to rule the day unless one can change human nature with a mere sweep of the hand. Investors worldwide, and governments worldwide, are slowly but surely coming to grips with what US spending profligacy is doing to its currency and are voting with their feet.

Technically, gold has been able to attract buyers above $980. The longer it can hold near that level, the better the chances become that $1,000 will give way.

Also, the strong rally in the HUI is very encouraging as it has fought avid buying above the 400 level, which was the former high and now seems to be serving as strong technical support. That is promising for the bullish cause and is no doubt serving to unnerve some of the weaker shorts.

Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

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Posted at 3:26 PM (CST) by & filed under In The News.

"If I am right, the next financial crisis, when it comes, stands to make the last two years look like a ‘warm up’"
–Stephen, a city insider, writing in the latest BBC City Diaries

Dear CIGAs,

Here is a thought to consider:

Sumotomo yesterday proudly announced it is hedging its gold production here and now.

Barrick yesterday proudly announced it is covering all its hedges here and now.

It sounds like a buyer and seller found each other for some part of the Barrick short of gold position.

 

Jim Sinclair’s Commentary

Remember all the MOPE and fanfare on this "HAMP"?

Treasury: Millions more foreclosures coming
Official says a strong housing market is crucial for the economy
updated 3:11 p.m. ET, Wed., Sept . 9, 2009

WASHINGTON – Only 12 percent of U.S. homeowners eligible for loan modifications under the Obama administration’s housing rescue plan have had their mortgages reworked, and millions more foreclosures are coming, the Treasury Department said on Wednesday.

A Treasury report showed 360,165 people had their monthly paymentsclip_image002 reduced through August, up from 235,247 through July, but a senior Treasury official conceded much more must be done to soften the impact of a severe and prolonged housing crisis.

Treasury has begun releasing monthly reports on the loan modificationclip_image002[1] program, called the Home Affordable Modification Program or HAMP.

Treasury has begun releasing monthly reports on the loan modification program, called the Home Affordable Modification Program or HAMP.

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Jim Sinclair’s Commentary

Let’s hear another round of applause for the OTC derivative manufacturers and distributors that brought about this disaster and are still plying their trade everywhere except China.

Job openings down 50% from the peak in 2007
6 unemployed people for every available position
By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) – The number of open jobs fell 50% over the past two years to a seasonally adjusted 2.4 million in July, the lowest in the brief history of the data, the Labor Department reported Wednesday.

The job opening rate fell to a record-low 1.8% in July.

Job openings track the demand for labor, the flip side of the unemployment rate, which measures the supply of labor.

In July, there were 6.05 unemployed people for every job opening, according to the most recent data on labor turnover. In December 2007, when the recession began, there were 1.72 unemployed people for every job opening.

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Jim Sinclair’s Commentary

And now a word from the allies of the West, Pakistan.

Pakistani Scientist Cites Help to Iran
Official Aid for Nuclear Program Claimed
By R. Jeffrey Smith
Washington Post Staff Writer 
Wednesday, September 9, 2009

The creator of Pakistan’s nuclear weapons program boasted in a recent television interview that he and other senior Pakistani officials, eager to see Iran develop nuclear weapons, years ago guided that country to a proven network of suppliers and helped advance its covert efforts.

A.Q. Khan, whom Washington considers the world’s most ambitious proliferator of nuclear weapons technology, told a television interviewer in Karachi, Pakistan, that if Iran succeeds in "acquiring nuclear technology, we will be a strong bloc in the region to counter international pressure. Iran’s nuclear capability will neutralize Israel’s power."

Although Khan has previously claimed nationalist and religious justifications for helping to spread sensitive technology, several experts said his latest statement was an unusually direct claim of broad, official Pakistani support for an Iranian nuclear weapon.

The interview with Khan was broadcast Aug. 31 by Aaj News Television. A translation of his remarks — describing covert purchases by Iran of equipment through Pakistan’s "reliable" suppliers in Dubai, in the United Arab Emirates — was prepared by the Director of National Intelligence’s Open Source Center and posted Tuesday on Secrecy News, a blog of the Federation of American Scientists.

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Jim Sinclair’s Commentary

The Chinese have a plan in place for every aspect of their economic program.

A strong external currency when they have depleted their dollar position will buy more necessaries at discounted prices.

China Moves to Internationalize Currency
By Heda Bayron
Hong Kong
08 September 2009

China says it will sell $880 million worth of yuan-denominated bonds in Hong Kong, in what analysts say is a first step toward widening the use of the currency outside the country.

Starting September 28, investors in Hong Kong will be able to buy bonds issued by the Chinese government. It marks the first time that the Chinese government is borrowing money offshore and paying it back in its own currency.

The Chinese finance ministry says the bond is meant to encourage acceptance of the yuan in international transactions and to encourage Chinese companies to tap the territory’s debt market.

Kevin Lai, an economist at the Daiwa Institute of Research in Hong Kong, says it is a step toward gradually widening the use of the yuan, or renminbi, outside China. Currently, the currency cannot be traded freely outside the country, and its exchange rate is restricted to a narrow trading band.

"The next step will be to increase renminbi liquidity regionally, and in the end a step toward internationalizing the renminbi…. The renminbi has to be fully convertible at some stage," Lai explained. "Building a bond center, or increase bond issuances for renminbi is just one of those steps."

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Jim Sinclair’s Commentary

Into Gold. That is an interesting comment.

China Raises the Money-Printing Alarm
Published: Tuesday, 8 Sep 2009 | 4:40 PM ET

At a conference in Lake Como, Italy, a leading Chinese economic spokesman—Cheng Siwei—criticized Ben Bernanke’s loose monetary policy. “If they keep printing money to buy bonds it will lead to inflation,” said Cheng, “and after a year or two the dollar will fall hard.” Cheng went on to say that China was diversifying its roughly $700 billion of U.S. foreign-exchange reserves into gold. “Gold is definitely an alternative, but when we buy, the price goes up,” he said. “We have to do it carefully so as not to stimulate the market.”

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Jim Sinclair’s Commentary

Greenspan, the old devil, is harking back to his Ayn Rand history.

Gold Rally Signals Move Away From Currencies, Greenspan Says 
By Millie Munshi and Veronica Navarro Espinosa

Sept. 9 (Bloomberg) — Gold prices that jumped above $1,000 an ounce this week are signaling that investors are buying metals to hedge against declines in currencies, former Federal Reserve Chairman Alan Greenspan said.

The gains are “strictly a monetary phenomenon,” Greenspan said today at an investment conference in New York. Rising prices of precious metals and other commodities are “an indication of a very early stage of an endeavor to move away from paper currencies,” he said.

The price of gold has jumped 13 percent this year as rising government debt coupled with declines in the dollar spurred demand for the metal as a haven. Silver, platinum and palladium also gained.

“What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment,” Greenspan said.

Yesterday, gold futures for December delivery touched $1,009.70 an ounce on the Comex division of the New York Mercantile Exchange, the highest for a most-active contract since March 18, 2008. The metal touched a record $1,033.90 an ounce on March 17, 2008. As of 9:42 a.m., gold traded at $988.

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Jim Sinclair’s Commentary

These are the same people that want to run your health care.

Taxpayers Unlikely to Recover GM, Chrysler Investment (Update2)
By John Hughes

Sept. 9 (Bloomberg) — U.S. taxpayers are unlikely to recover their $81 billion investment in General Motors Co. and Chrysler Group LLC and were “left in the dark” on specifics of a decision to aid automakers, a congressional panel said.

The Treasury Department should consider placing its GM and Chrysler ownership stakes into an independent trust to prevent “political pressure and government interference,” the Congressional Oversight Panel said in a report today.

“Even if no direct conflict exists, a trust could prevent the use or appearance of political influence in the government’s ownership,” the panel concluded.

The report didn’t estimate how much of taxpayers’ aid to the auto industry will be recovered. The panel said GM stock would need “highly optimistic” returns in order for the full investment to be repaid.

The panel, which oversees the U.S. government’s $700 billion Troubled Asset Relief Program, raised questions about the Obama administration’s transparency in aiding automakers and challenged the Treasury Department to make more disclosures about company decisions and the government’s future role.

More…

Posted at 3:08 PM (CST) by & filed under Jim's Mailbox.

Jim,

Watch how spin handles $1000 gold. Notice how often the negative side of holding gold is suggested. Fear is a powerful motivator.

The media outlets are often nothing more than conduits of spin that supports positioned money. The COT F&O table reveals positioned money in gold and silver as aggressively short. The bullion banks are leaning hard on price in the paper market. Reinforcement of fear attempts to trigger a selling cascade. Marginal outflows in the USDX, however, imply that any fear based selling cascade in gold and silver will be short-lived.

CIGA Eric

Click charts to enlarge

COT FO UDX CS COT Table

Posted at 5:50 AM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

Here are some points of interest from a technical perspective in the gold chart…

Note that this is a weekly chart.

1. All of the major moving averages are moving upward – the long term trend is solidly higher.

2. The broad based triangular consolidation pattern that has been in effect since early this year has been decidedly broken to the upside with further follow through coming so far this week

3. The weekly RSI, which has been in the same consolidation mode as the underlying metal, has also broken out of its pattern to the upside and has breached the 60 level.

4. Note the heavy red line near the 1003 level and you can see the significance of a WEEKLY close above this level. That has never yet been accomplished. When it does gold will test the all time high near $1030. A breach of that and $1200 comes into play. Any guesses as to why the feds are attempting to fight the price rise? They too can read price charts…

5. Ideal technical behavior would be for gold to hold support on any price retracements above the downsloping trendline that marked the upper boundary of the 9 month long consolidation pattern this year

6. Failure at this level would send it back into the triangle and would not signify any damage to the uptrend but would spell a further period of price consolidation as the market attempts to adjust to the current price levels. Keep in mind that anything above $900 is still a lofty level in the minds of many players and particularly end users who need time to see how demand fares near these current levels.

7. Only a downside breach of $860 would threaten the friendly chart picture and give the deflationist argument any credibility. It is evident that gold is dismissing that view.

Click chart to enlarge in PDF format

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Posted at 8:45 PM (CST) by & filed under General Editorial.

Dear CIGAs,

I stood in Barrick’s head office with the then President Oliphant and another top executive. I had gone to Barrick to make them a cash offer for Kabanga Nickel.

Oliphant asked me what I thought about their hedge program. I told him at $305 Barrick was in trouble and at $354.90 he was in trouble.

Since then Mr. Oilphant has resigned as president of Barrick.

The other executive, still with the company, knows I am telling the absolute truth. I could have saved Barrick all these billions, but that is life.

Now listen to me: Gold is going to $1224, then to $1650 and after that to Alf’s numbers.

Another point I wish to make is that some say Jim knows gold, but that is it. Those people are so very, very wrong!

Barrick Announces Plan to Eliminate Gold Hedges
September 8, 2009 4:53 PM ET

Barrick Gold Corporation (NYSE: ABX)(TSX: ABX) announced today that it has entered into an agreement with a syndicate of underwriters, led by RBC Capital Markets, Morgan Stanley & Co. Incorporated, J.P. Morgan Securities Inc. and Scotia Capital Inc., for a bought deal public offering for gross proceeds of approximately $3.0 billion representing 81.2 million common shares of Barrick at a price of $36.95 per share.

Barrick intends to use $1.9 billion of the net proceeds to eliminate all of its fixed priced (non-participating) gold contracts (the "Gold Hedges") within the next 12 months and approximately $1.0 billion to eliminate a portion of its floating spot price (fully participating) gold contracts (the "Floating Contracts"). A $5.6 billion charge to earnings will be recorded in the third quarter as a result of a change in accounting treatment for the contracts.

More…

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=MW&date=20090908&id=10372575

Posted at 6:58 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Wasn’t it Chairman Greenspan that praised OTC derivatives in public testimony as transmuting risk from the few to the many when in fact it turned out to be from the few to the fewer? He also testified that regulation of OTC derivatives was not required.

The Fed Can’t Monitor ‘Systemic Risk’
That’s like asking a thief to police himself.
By PETER J. WALLISON

Using the financial crisis as a pretext, the Obama administration is determined to enact massive financial regulatory reforms this year. But the centerpiece of its proposal—putting the Fed in charge of regulating or monitoring systemic risk—is a serious error.

The problem is the Fed itself can create systemic risk. Many scholars, for example, have argued that by keeping interest rates too low for too long the Fed created the housing bubble that gave us the current mortgage meltdown, financial crisis and recession.

Regardless of whether one believes this analysis, it is not difficult to see that a Fed focused on preventing deflation in the wake of the dot-com bubble’s collapse in the early 2000s might ignore the sharp rise in housing prices that later gave us a bubble.

There is also the so-called Greenspan put. That’s a term that refers to investors taking greater risks than they otherwise would because they believed the Fed would protect them by flooding the financial system with liquidity in the event of a downturn. If there really was a Greenspan put, it has now been supplanted by a "Bernanke put."

These puts may or may not be real, but there is no doubt that the Fed has the power to create incentives for greater risk taking. In other words, simply by doing its job to stabilize the economy, the Fed can create the risk-taking mindset that many blame for the current crisis.

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Jim Sinclair’s Commentary

If these charges actually reach the dock, they are in fact charges against Paulson and the Federal Reserve Chairman in the form of Merrill executives.

New York Nears Charges on Merrill Deal
BY DAN FITZPATRICK

New York state’s attorney general, Andrew Cuomo, moved closer Tuesday to filing securities-fraud charges against Bank of America Corp. executives, citing at least four "failures" to tell shareholders material information related to the bank’s takeover of Merrill Lynch & Co.

The warning came in a Tuesday letter to the Charlotte, N.C., bank from David Markowitz, the chief of Mr. Cuomo’s investor-protection bureau, who demanded more information about conversations deemed privileged by Bank of America officials. Mr. Markowitz accused the bank of "indiscriminate …

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Jim Sinclair’s Commentary

More and more people are realizing that the entire economic problem the planet has was and is still being caused by the manufacture and distribution of OTC derivatives.

The Chinese just said NO to this crack cocaine of Western finance.

Please read the following.

“Systemic Risk Laundering” — Financial Crisis Root Causes — Part II
Submitted by Scott Cleland on Tue, 2009-09-08 09:27

How could American taxpayers get stuck with a multi-trillion dollar tab that they weren’t even aware that they were running up? How could that huge tab still be allowed to run up unchecked today? For the Financial Crisis Inquiry Commission, the sad answer is one of the biggest root causes of last fall’s devastating financial crisis and one of the biggest continuing systemic risks to the financial system and the economic recovery. 

A decade ago, in what may prove to be the most expensive bipartisan legislative mistake in U.S. history, a bipartisan policy became law that effectively ensured that no Federal regulator had oversight or enforcement jurisdiction over derivative financial instruments. The Commodity Futures Modernization Act of 2000 (CFMA) created “legal certainty for excluded derivative transactions.” That law allowed a shadow derivative overlay system to be built literally on top of the public financial system, with none of the inherent accountability of the underlying financial system.  In other words, a deliberate bipartisan U.S. government policy change a decade ago unwittingly created an unaccountable “black hole” market that sucked enormous value out of public markets, (Bear Stearns, Lehman, AIG, Fannie, Freddie, securitized sub-prime mortgages, etc.) while laundering the risk to the U.S. taxpayer.

Simply, in fostering an unaccountable marketplace that derived all its real value from public markets, the Government fostered systemic risk laundering from the unaccountable to the accountable, which ultimately left the U.S. taxpayer holding the bag. More specifically, with no accountability to fairly represent or disclose risk, too many did not. Too many figured out that they could launder huge financial risk with impunity, because most public investors assumed someone somewhere was ensuring that these derivative instruments were fairly represented, disclosed, and accountable. Oops!

The origin of this monumental bipartisan blunder was a shockingly poor understanding of what free markets fundamentally require to work efficiently, i.e. confidence in: the enforceability of property rights and contracts; the competent policing against fraud and bad actors; and the free flow of necessary market information. For all practical purposes, the offending CFMA provision perversely redefined the word “free” in free-market to mean “unaccountable.” More specifically, the provision also systematically abandoned the implicit social contract that underlies the American free market system — “with freedom comes responsibility” — and re-interpreted “free” to mean freedom from accountability. Freedom from accountability is heaven on earth for fraudsters and bad actors. A decade of widespread freedom from accountability disgorged the totally dysfunctional marketplace of last year, which in turn required the Government to flood the market with trillions in capital, bailouts and guarantees to mop up this historic mess of systemically laundered risk.

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Jim Sinclair’s Commentary

Financial rescue plans declared successful by G20. More international cooperation to be had says Fed Bank President, Rube Goldberg.

All hail the Federal Reserve because the Federal Reserve needs hailing.

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Jim Sinclair’s Commentary

Why did Lehman Brothers executives say “Impacts all financial institutions”? The answer is the bankruptcy impact on the international chain of OTC derivatives.

Please don’t say that the people below did not understands this.

Calling these people stupid is in itself world class stupid. I wish to hell that I did not understand this stuff. Sitting at the local watering hole banging down a few beers and a shot or two while watching 24 would be much easier.

What the hell good is all this knowledge if you can’t change a damn thing?

Missing Lehman Lesson of Shakeout Means Too Big Banks May Fail
By Bob Ivry, Christine Harper and Mark Pittman

Sept. 8 (Bloomberg) — The warning was ominous: “Massive global wealth destruction.”

That’s what Lehman Brothers Holdings Inc. executives predicted before they filed the biggest bankruptcy in U.S. history. “Impacts all financial institutions,” read one bullet point in a confidential memo prepared for government officials obtained by Bloomberg News. “Retail investors/retirees assets are devastated.”

The message didn’t get through. Two dozen of the world’s most powerful bankers, brought together by Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Bank of New York President Timothy F. Geithner the weekend of Sept. 13, 2008, to devise a rescue plan for Lehman, were too busy saving themselves to see the larger threat

“The discussion among the CEOs was ‘How do we prevent the next firm from going under?’” former Merrill Lynch & Co. Chief Executive Officer John A. Thain, who cut a deal to sell his company that weekend, said in an interview. “There should have been much more discussion about the impact directly on the markets if Lehman went bankrupt.”

While everyone assembled at the New York Fed was aware that unbridled subprime-mortgage lending and the packaging of such inferior loans into investment vehicles such as collateralized- debt obligations had pushed the financial system to the breaking point, what the bankers missed almost destroyed them — and the rest of the global economy.

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Jim Sinclair’s Commentary

What a screwing these guys are going to get. You think they might have learned.

Advantage, my ass. Simply mine lower grades, you meat heads.

Sumitomo Metal Mining Makes Hedge Deals For Gold Output

TOKYO (Dow Jones)–Sumitomo Metal Mining Co. Ltd. (5713.TO) said Tuesday it

has made hedge trading deals for as long as five years for its gold output from

two mines to take advantage of recent high gold prices.

The Japanese nonferrous metal supplier said it has contracted to sell 48% of the 7.5 tons a year output from its mine in Kagoshima Prefecture, southern Japan at $700-$1,700 per troy ounce through June 2012.

At its Pogo mine in Alaska, Sumitomo contracted to sell 28% of a set amount of its take at $750-$1,850 per troy ounce and the remaining 72% at $750-$1,700 through December 2014.

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Jim Sinclair’s Commentary

Now here is a MOPE masterpiece. Going forward, sure.

Going back there are a millions times this number that they can’t do a damn thing about.

NY Fed: Banks To Clear Over 90% Of Swap Trades
September 08, 2009: 12:01 PM ET
By Jacob Bunge

CHICAGO -(Dow Jones)- Fifteen dealer banks on Tuesday told the Federal Reserve Bank of New York that they plan to centrally clear more than 90% of their interest rate and credit derivatives trades by the end of the year.

Banks will also begin submitting monthly reports to the New York Fed detailing new transactions and outstanding trades in over-the-counter markets, representatives of the so-called G15 firms wrote in a Tuesday letter.

"These targets will push major dealers to accelerate their progress," New York Fed President William Dudley said. "We also expect them to work with central counterparties to rapidly expand the universe of eligible products and to continue to increase clearing levels beyond these initial targets."

Members of the G15 banks include Goldman Sachs & Co. (GS), JP Morgan Chase ( JPM), Credit Suisse (CS) and Deutsche Bank (DB1.XE). Clearinghouse operators are also working to include buy-side market participants like hedge funds.

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Jim Sinclair’s Commentary

The maxim of MOPE is never to disturb the social order.

Well, here is something that will launch the social order into orbit.

Pension fund deficit widens again

The state of UK defined-benefit pension funds started to worsen again in August, according to the Pension Protection Fund (PPF).

The shortfall in the 7,400 defined- benefit schemes, including final-salary pensions, widened from £158.1bn at the end of July to £173.2bn a month later.

The level has fluctuated in recent months but remains considerably worse than a year earlier.

Many employers have closed final-salary schemes because of funding shortages.

Initially, these schemes were closed to new members, but more recently existing members have been told that their retirement savings will be frozen at the current level.

The latest to join the list of businesses doing so are construction and civil engineering company Costain, and Whitbread, which owns Costa Coffee and Premier Inns.

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Jim Sinclair’s Commentary

Don’t buy into the MOPE concept for one moment. China has a damn good reason for their actions. That you can be sure of.

These OTC derivative dealers have broken every financial system on the planet and simply will not stop.

When COT or OTC derivative dealers believe they can muscle around major Asian countries they are in for more trouble than they can believe.

Nick Deak cost the Chinese a lot of money in the late 70s. He found out.

China backs efforts to break oil contracts
By Robert Cookson and Xi Chen in Hong Kong
Published: September 7 2009 18:24 | Last updated: September 7 2009 18:24

China delivered a blow to some of the world’s biggest investment banks on Monday as it declared its support for legal efforts by some state-owned companies that want to break loss-making oil derivatives contracts with foreign institutions.

The state-owned Assets Supervision and Administration Commission of the State Council said it was investigating a number of derivatives deals and would help companies find ways to “minimise losses”.

The move is the latest by Beijing to clamp down on the over-the-counter derivatives market after a number of state companies made disastrous bets on commodity prices and foreign exchange movements, losing billions of dollars.

But it will be greeted with dismay by foreign financial institutions, already reeling from a July decision by China’s banking regulator that sought to prevent state-owned enterprises from accessing the overseas derivatives market through domestic intermediaries.

Andy Xie, an independent economist based in Shanghai, said the moves “pretty much kill this business,” adding that the lion’s share of profits enjoyed by US and European banks in China came from derivatives deals with state-owned companies.

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Jim Sinclair’s Commentary

Numbers to remember as they all will be surpassed.

Today’s inflation dollar adjusted battle is but at $500 gold of the 70s.

Thousand Dollar Gold
Published: Tuesday, 8 Sep 2009 | 12:12 PM ET
By: Ariel Nelson, Giovanny Moreano

With gold futures rallying above the $1,000-psychological mark this morning, here is a look at how bullion has traded in the past thirty years:

Intraday Levels

Comex gold for December delivery hit an intraday high of $1,009.7 per troy ounce this morning, its highest level since 3/18/2008

The highest intraday price for gold was reached on 3/17/08, when gold futures traded as high as $1,033.9

Gold future prices have crossed above the $1,000-mark only 6 times in their trading history (including today)

Intraday Levels

Comex gold futures have closed above $1,000 an ounce only 3 times since they started trading

The highest close for gold on its trading history was reached on 3/18/2008, when it closed at $1,004.3

In 2009, the highest close for gold was reached on 2/20/2009, when gold futures closed at $1,002.2

The lowest close for gold in 2009 was reached on 1/15/2009, when gold futures closed at $807.3

Since its lowest close this year, the price of gold is up about 24%

Year-to-date, gold prices are up nearly 13%

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Jim Sinclair’s Commentary

OK, I am human. It bothers me that JSMineset gets no credit from these copy cats.

When $1650 happens this bunch will all be saying on F-TV, "As I told you…" Of course they all fudge it $50 one way or another.

Next they will be predicting on or before January 16th, 2011, a two day fudge.

Hell, they even got it for free as these cheapskates Simon Lagres would not pay for one compendium to help defray the huge cost of the site. I pay for them to steal my stuff!

Hedge fund eyes gold at $1,600, sells equities
Tue Sep 8, 2009 12:52pm EDT
By Laurence Fletcher

LONDON (Reuters) – The price of gold could rise as high as $1,600 an ounce as investors opt for assets with lasting value rather than volatile currencies, says one hedge fund manager who has increased his exposure to the precious metal.

"All the fundamentals are in place. If it breaks last year’s high it can go to $1,200 to $1,400 quite quickly," Pedro de Noronha, managing partner of Noster Capital told Reuters in an interview on Tuesday.

Spot gold rose through the psychologically significant barrier of $1,000 an ounce on Tuesday — its highest since March 2008 when it hit a record $1,030.80.

The precious metal was helped by a weaker dollar and expectations that government measures to revive economic growth will boost demand for basic resources.

"If you adjust the gold price for inflation, to retest the early 80s highs gold would need to be at $1,600. I don’t think this figure is inconceivable, especially given the fundamentals that are behind this move in gold," de Noronha said.

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Jim Sinclair’s Commentary

There is no more dangerous geopolitical problem on the planet than Pakistan.

Now that the surge photo-op is over, the Taliban will be retuning while the Pak nuclear arsenal is made more deadly.

Pakistan’s Dr. Boom is out so he may be selling nukes on the internet AGAIN.

Pakistan Seeks Additional Nuclear-Weapon Capabilities, Analysts Assert
Tuesday, Sept. 8, 2009

Pakistan is seeking to build better nuclear weapons and developing new missiles suitable for carrying nuclear warheads, Robert Norris of the Natural Resources Defense Council and Hans Kristensen of the Federation of American Scientists wrote in the latest edition of the Bulletin of the Atomic Scientists (see GSN, May 29).

Islamabad continues to build new nuclear devices, expanding its stockpile to between 70 and 90 warheads, the analysts wrote in the Bulletin’s "Nuclear Notebook." As of early last year, the nation had generated 2,000 kilograms of highly enriched uranium and 90 kilograms of weapon-grade plutonium; the supply could power between 80 and 130 warheads, but the South Asian state is unlikely to have weaponized all of its fissile material, says the report.

"Following the example of other nations that have developed nuclear weapons, Pakistan is improving its weapon designs, moving beyond its first-generation nuclear weapons that relied on HEU," the assessment states.

A new chemical separation site and two new plutonium production reactors, still unfinished, would "provide the Pakistani military with several options: fabricating weapons that use plutonium cores; mixing plutonium with HEU to make composite cores; and/or using tritium to ‘boost’ warheads’ yield," the report states.

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Jim Sinclair’s Commentary

Let the gold banks play their game with the gold price at $1000.

The price of gold is going to $1224 and then $1650 before it is off to Alf’s numbers.

China Admits Gold’s Monetary Role: Time to Buy
September 08, 2009
Kristjan Velbri

From Dr. Zhou Xiaochuan, Governor of the People’s Bank of China, writing in The Alchemist (issue 36, 2004):

Gold is a commodity that combines the attributes of a currency, financial commodity and general commodity. Despite the declining function of gold as currency in the world, the activeness and development of investment activities with gold as the target indicates that gold still has a strong financial nature and remains an indispensable investment tool. In major financial centers in the world, the gold market, together with the money market, securities market and FX market, constitutes the main part of the financial market.

Fresh winds of optimism for gold and silver investors are blowing from China. For about a month now, the Chinese state television has been openly promoting gold and silver as an investment and a store of wealth. Not long ago, the Chinese announced that they had been “secretly” buying gold – starting from 2003 they had bought over 600 metric tons of gold, bringing the gold to cash reserve ratio from 1.3% to 1.7%.

Of course, the Chinese are awfully good at smoke and mirrors and so it is not clear whether the numbers that were published back in spring are the real numbers. The real gold purchases could in theory be much greater than the Chinese officials are publicly admitting, especially as the free export and import of gold (and silver) is not allowed in China. There is no way to confirm the numbers because the Chinese central bank has been buying locally mined gold only.

What is interesting is that China is the biggest gold miner in the world, overtaking South Africa who was the world leader for over a century as China’s gold production reached 270 (metric) tonnes in 2007. As the export of gold from China is very difficult and the industrial demand for gold very limited inside China, the most likely buyers are the People’s Bank of China, Chinese sovereign wealth funds and to a small degree the Chinese public.

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Jim Sinclair’s Commentary

With the way these guys have screwed everyone this seems only logical

Spending on personal security perk for CEOs is skyrocketing

By Del Jones, USA TODAY

Companies have been slashing almost every cost imaginable to survive the recession, yet they are spending more than ever to calm CEOs who fear for their personal safety.

Starbucks, which has laid off workers, closed stores and switched from whole to 2% milk to save pennies a gallon, bumped its spending to $511,079 last year on the personal and home security of CEO Howard Schultz. FedEx, which quit matching employee 401(k) contributions, spent $595,875 on the security of CEO Fred Smith. Walt Disney spent $645,368 for CEO Robert Iger; Occidental Petroleum spent $575,407 for Ray Irani; and McKesson spent $401,706 for John Hammergren.

Be it paranoia or prudence, corporate spending on CEO safekeeping is escalating in the face of painful cutbacks, and not by a little. The median spending on personal and home security for CEOs at the 100 largest publicly traded companies was $65,348 in 2008, up 123% from $29,291 in 2007, according to executive compensation research firm Equilar. Ten companies alone spent a total of $4.6 million on CEO security in 2008, 40% more than the 10 biggest spenders of 2007.

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Jim Sinclair’s Commentary

Always trust the government to run businesses well.

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Jim Sinclair’s Commentary

My beloved son in law, Giancarlo, the son in law you pray for but rarely get, has made a keen political observation.

Of course, he is a traditional Italian gentleman so there might be some subjective prejudice but the conclusion here seems quite valid to me.

"For the American everything is business, he looks far and his attention is not distracted.

The Canadian is a little “distant” and a little naïve as well…

The Italian and the French… they are looking only at her, well you guess!

I must say Berlusconi got a better jacket…"

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Jim Sinclair’s Commentary

The gold banks can play any game they want, but no force on the planet can make a silk purse out of a pigs ear, aka the US Dollar.

The following is courtesy of CIGA "The Gordon"

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Jim Sinclair’s Commentary

There is no way to stop the manufacturers and distributors of these toxic items but to say they are wagers, non enforceable and we will not allow our country to be decimated like you have decimated every other financial system on the planet.

Prior to Lehman this was an option that would have caused trouble, but only a fraction of the trouble still to come.

China is going to do it. Your insurance is only one thing, and that is Gold!

China’s SOEs May Terminate Commodities Contracts
08-28 22:37 Caijing

Any such move would be a major blow to investment banks which service commodities hedging operations for Chinese SOEs on the international market.

(Caijing.com.cn) China’s state-owned enterprises may unilaterally terminate commodities contracts as they try to cut massive losses from financial derivatives, an industry source told Caijing on August 28. 

According to the source, China’s State-owned Assets Supervision and Administration Commission (SASAC) has sent notice to six foreign financial institutions informing them that several state-owned enterprise will reserve the right to default on commodities contracts signed with those institutions.

Keith Noyes, an official with the International Swaps and Derivatives Association, a trade organization, confirmed that he is aware of the matter, but provided no further comment.

Foreign brokerages usually work through their Hong Kong operations to sign over-the-counter derivative hedging contracts, according to an investment banker whose firm is involved in the business. Hong Kong and Singapore usually serve as venues for arbitration over such transactions.

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Jim Sinclair’s Commentary

It has been hard to understand how any stockholder can simply sit by while these things happen

Commerzbank Sued for $49 Million by 72 Bankers Over Bonuses

By Lindsay Fortado and Jann Bettinga

Sept. 8 (Bloomberg) — Seventy-two former Dresdner Kleinwort bankers sued Commerzbank AG claiming about 34 million euros ($49 million) in unpaid bonuses and interest.

The former bankers at Dresdner Kleinwort, the German investment bank that was taken over by Commerzbank in January, filed the lawsuit in London’s High Court today. The suit claims the bankers, some of which still work for Frankfurt-based Commerzbank, were paid a tenth of the amount they’re owed in bonuses under a contract with Dresdner Kleinwort.

Commerzbank, which has tapped Germany for 18.2 billion euros of capital, withheld bonuses and severance pay for Dresdner executives after taking control of Dresdner Kleinwort in January. More than a dozen lawsuits have been filed against the bank in London and Frankfurt over unpaid bonus and severance.

“Dresdner Bank was fully entitled to take the actions it did in relation to Dresdner Kleinwort employees’ discretionary bonuses in light of the marked deterioration in the investment bank’s performance in the months of November and December 2008,” Commerzbank said in an e-mailed statement. “The bank will be defending these claims vigorously in the courts.”

Eight of the bankers claim to be owed more than one million euros for work they did last year, according to the lawsuit. The largest individual claim was by Jonathan Powell, seeking 1.67 million euros.

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Jim Sinclair’s Commentary

Going forward CDS can be standardized and cleared with improved but not fool proof financial protection. Going backwards on the well over one Quadrillion OTC derivatives, it is hopeless.

Hopeless occurred the day Lehman got flushed.

CDS Dealers Agree to Clear 80% of Eligible Trades in October
By Shannon D. Harrington

Sept. 8 (Bloomberg) — Wall Street banks including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Barclays Plc committed to process 80 percent of all eligible credit-default-swap trades starting in October through clearinghouses designed to prevent a chain of dealer defaults.

The banks also agreed to clear 70 percent of new eligible interest-rate derivatives trades starting in December, according to a letter to regulators that was signed by 15 firms and released today by the Federal Reserve Bank of New York.

Regulators have been pressing for much of the existing $592 trillion market in over-the-counter derivatives trades to be moved to clearinghouses to reduce risk to the financial system.

The push by the Fed and other regulators for greater regulation of the OTC markets follows the collapse last September of Lehman Brothers Holdings Inc., one of the largest credit-swaps dealers, and the U.S. rescue of American International Group Inc. after it made bad bets on mortgage- linked securities using credit-default swaps. Both are based in New York.

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Jim Sinclair’s Commentary

These people are running GM? Here comes the Volt!

Post office closures threat adds to property market woe
By Alan Rappeport in New York
Published: September 8 2009 03:00 | Last updated: September 8 2009 03:00

The possible closing of more than 400 post offices across the US in an effort to cut costs could further dent the struggling commercial property market as rising retail vacancies continue to weigh on prices.

The US postal service has said it is placing 413 of its 37,000 retail locations under review for "consolidation" as it faces a record loss of $6bn (£3.7bn) this year. The mail carrier has seen a dramatic drop in package volume owing to cost-conscious Americans cutting back in favour of cheap alternatives such as e-mail.

"At the end of the day, it’s just more retail space that’s going to be available that’s going to put pressure on already embattled landlords," said Victor Calanog, director of research at Reis, property research company.

The US postal service operates the biggest retail network in the country, but now faces an overhang of excess capacity because mail volume is on pace to be down by 10 to 12 per cent this year. The US government accountability office warned in May that the postal service, which has a $1.5bn cash shortfall, should "take action now rather than hoping that mail volume will revive sufficiently when the economy recovers".

Greg Frey, a spokesman for the US postal service, said that closing offices was the only choice with revenues projected to be down by more than 7 per cent this year. Of the properties facing closure, the US postal service rents about half of them and owns the rest, meaning that it will be forced to break leases or sell space while the commercial property market is plunging.

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Jim Sinclair’s Commentary

Now tell me if my statement of a global desire for an alternative Super Sovereign Currency was correct or over the top.

Keep in mind an alternative is not a replacement, but seriously injures dollar momentum buying resulting today in lower prices.

UN wants new global currency to replace dollar
The dollar should be replaced with a global currency, the United Nations has said, proposing the biggest overhaul of the world’s monetary system since the Second World War.
By Edmund Conway, Economics Editor
Published: 6:45PM BST 07 Sep 2009

In a radical report, the UN Conference on Trade and Development (UNCTAD) has said the system of currencies and capital rules which binds the world economy is not working properly, and was largely responsible for the financial and economic crises.

It added that the present system, under which the dollar acts as the world’s reserve currency , should be subject to a wholesale reconsideration.

Although a number of countries, including China and Russia, have suggested replacing the dollar as the world’s reserve currency, the UNCTAD report is the first time a major multinational institution has posited such a suggestion.

In essence, the report calls for a new Bretton Woods-style system of managed international exchange rates, meaning central banks would be forced to intervene and either support or push down their currencies depending on how the rest of the world economy is behaving.

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Jim Sinclair’s Commentary

As the understanding grows that all of this, without exception, takes its birth in the massive OTC pile of junk with no practical solution post Lehman, gold becomes even more popular.

I can take comfort that I have been a good teacher.

Gold Is Still the Opportunity of a Lifetime
September 07, 2009
Andy Sutton

Last October was a pretty brutal time to be in the prognostication business. I had just called Gold the opportunity of a lifetime at the end of August at a price of around $800/ounce. By the time late October came around, the price had fallen to around $725 and the catcalls had begun in earnest. The Keynesian Kakistocracy was out in full force, hurling insults so rich and humorous that I felt compelled to write some of them down. Now a year later it is time to do another quick review and probably set myself up for yet another barrage of hate mail if the price of Gold doesn’t immediately set a course for Mars.

Yes, we are one year removed from that column and Gold is up 25% in dollar terms at nearly $1000/ounce. Detractors will quickly point out Gold’s inability to land and stick above the $1000 level. In return, I will point at the Dollar’s failed rally to 90 as measured by the USDX. Detractors will point to a lack of interest and dividends from investing in Gold. I will point out that Gold is not an investment; it is money. However, for those who insist on comparing Gold to stocks, I will point out that in the year since the last article, Gold is up 25% while the Dow Jones Industrials are down 19%. Detractors will point out the new bull market in stocks. I’ll counter with the fact that stocks are merely in the middle of a countertrend rally within a bear market while Gold’s correction last year was a countertrend move within a bull market. Detractors will point to the save-haven status of the Dollar during times of economic distress. I’ll counter with the fact that Congress has ensured that the Dollar will die of nearly two trillion cuts – in FY 2009 alone. Must we really continue this?

So on the anniversary of the beginning of the first in extremis phase of the financial crisis, we’re going to look at two of the many developing situations that should give us pause when considering the stability of our financial structures despite all the positive rhetoric and hopefully compel us to consider how to adequately protect ourselves.

China’s stop-loss

Last week, China released some rather earthshaking news that was barely reported by the diligent media here in the US. And where it was reported, the significance was completely glossed over or even ignored. The Chinese Government gave a directive to its state banks to cut their losses on commodity related derivatives, many of which are tied to NY and London banks. In doing so, the Chinese government is in essence saying it no longer respects the validity of these specific performance contracts, pointing out that without performance, there is nothing special about the contracts. This is tantamount to a shot across the bow. The commodities portion of the total notional value of all OTC derivatives as of December 2008 is rather small at .75% of the total. Telling Wall Street to take a long walk off a short pier in this instance will probably not destroy the financial system in and of itself, but it will certainly give the bailout boys a hint of what could happen if the Chinese et al (think BRIC) start backing out of other more important areas such as interest rate swaps which were nearly 55% of the total notional value. (Data courtesy of BIS)

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Jim Sinclair’s Commentary

All events of hyperinflation have been the product of a loss of confidence in the currency in question.

The US dollar exists as a functional entity backed by confidence.

Nobody Liking Dollar Deficits Makes Rogoff Favorite (Update1) 
By Ye Xie and Bo Nielsen

Sept. 8 (Bloomberg) — For the first time in at least two years, deficits are starting to matter to currency investors, and that may be bad news for the dollar.

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Jim Sinclair’s Commentary

Almost every day the Chinese are buying metals, materials and energy utilizing US dollars.

Where are all the talking heads today yelling that China is dollar bound?

Silly pinheads.

Chinese Firm Offers to Buy Australia’s Energy Metals
By ROSS KELLY

SYDNEY — China Guangdong Nuclear Power Holding Co., or CGNPH, Tuesday offered 83.6 million Australian dollars (US$71.6 million) for control of Energy Metals Ltd., adding to a wave of Chinese investment in Australia’s natural resources.

State-owned CGNPH’s offer to buy 70% of the operator of the proposed Bigrlyi uranium project in Australia’s Northern Territory also signals China’s first significant corporate move into one of the world’s biggest uranium producing nations.

The offer comes amid a low point in relations between China and Australia following the detainment last month of four employees of Anglo-Australian mining giant Rio Tinto Ltd., including Australian citizen Stern Hu, on charges of bribery and infringing on state secrets. It also comes as disquiet grows among some politicians and commentators about the amount of Chinese investment in Australia’s mining sector.

Also Tuesday, China Railways Materials Commercial Corp. proposed to take substantial stakes of around 12% in two Australian iron ore juniors, United Minerals Ltd. and FerrAus Ltd.

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Jim Sinclair’s Commentary

More Labor Day news.

Job outlook hits worst-ever level
Employers’ hiring plans at lowest point in Manpower survey’s history
Sep 8, 2009, 12:01 a.m. EST

By Andrea Coombes, MarketWatch

SAN FRANCISCO (MarketWatch) — Employers’ hiring plans for the upcoming fourth quarter dropped to their lowest level in the history of Manpower’s Employment Outlook Survey, which started in 1962.

A net -3% of employers said they’ll hire in the fourth quarter, down from -2% in the third quarter, on a seasonally adjusted basis, according to the Milwaukee-based firm’s survey of more than 28,000 employers. Before this year, the survey’s previous low point was a net 1% hiring outlook for the third quarter of 1982.

A year ago, a seasonally adjusted net 9% of firms said they would hire in the fourth quarter. The Manpower survey measures the percentage of firms planning to hire minus those intending layoffs. Manpower doesn’t measure the number of jobs. The survey’s margin of error is +/- 0.49%.

There was one positive sign in the survey: 69% of employers said they planned no change in their hiring plans, up from 67% in the third quarter and 59% in the fourth quarter a year ago (those figures are not seasonally adjusted).

That’s "a very high number for our outlook survey," said Jonas Prising, president of the Americas for Manpower. That figure generally hovers at 55% or 56% in a strong economy, he said, noting that the higher figure currently signifies a high degree of stability, and "that is a precursor to growth, he said.

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