In The News Today

Posted at 9:08 PM (CST) by & filed under General Editorial.

Thomas Jefferson, the author of America’s Declaration of Independence, understood the threat posed by central banks:

“The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution… Bankers are more dangerous than standing armies… [and] If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.”

Jim Sinclair’s Commentary

I am willing to bet you will never hear a word about the base crime, OTC derivatives. Maybe Washington Mutual will get a coat of white wash like all the “Brothers of the Dark Side.”

Feds investigate failure of Washington Mutual
The Associated Press
Wednesday, October 15, 2008

SEATTLE: Federal authorities said Wednesday they have opened an investigation into the failure of Washington Mutual Inc., the largest U.S. bank failure.

U.S. Attorney Jeff Sullivan said in a statement that the FBI, the Federal Deposit Insurance Corp., the IRS and the Securities and Exchange Commission have created a task force to look into the thrift’s failure. He asked anyone with information to contact authorities through a tip line, or to email the FBI’s Seattle office.

Sullivan said that “given the significant losses to investors, employees and our community, it is fully appropriate that we scrutinize the activities of the bank, its leaders and others to determine if any federal laws were violated.”

Seattle-based WaMu ran into trouble giving loans to people with poor credit repayment histories during the housing boom. As talk of the 119-year-old thrift’s instability spread and its credit was downgraded, people began pulling their money out – leaving WaMu without enough cash to meet its obligations.

It filed for bankruptcy protection and was sold last month in a $1.9 billion fire sale to JPMorgan Chase & Co., one of the biggest banking companies in the U.S.


Jim Sinclair’s Commentary

Still comfortable in your money market accounts, retirement accounts and bank CDs? If you are then you are brain dead.

Globex Puts Freeze on Term Deposits
16 October 2008
By Jessica Bachman / Staff Writer

In a sign that the liquidity crisis is becoming more acute for Russian lenders, Bank Globex, one of the industry’s medium-sized players, has blocked early withdrawals from fixed-term deposit accounts for five days.

The announcement raised immediate concerns about whether the bank’s move was even legal.

Emil Aliyev, vice president of Globex, said the measure was introduced after a spike in demand for early withdrawals of term deposits, “with many depositors explaining that they urgently wanted to transfer their money to VTB and Sberbank,” Interfax reported. Both VTB and Sberbank are state controlled.

Garegin Tosunyan, president of the Association of Russian Banks, said the Globex decision, while severe, was “the correct action to take.”

“When panic strikes, the banks need to take measures,” Tosunyan said. “You need to pour cold water over people’s head and say, ‘Look, enough; let’s stop panicking now.'”


Jim Sinclair’s Commentary

Not every Nobel Laureate in Economics is an impractical academic egg head.

Some (maybe only two) really know what is going on and have no problems expressing themselves.

Dr. Brenner understands the Federal Reserve Gold Certificate Ratio modernized and revitalized. I am proud to say that he and I speak on such matters.

Canada has many resources that even it does not realize.

Hi, Jim and Dear Friends,

“Legally, the devaluation of the dollar is not called a “default.” But that’s what it is.” — Reuven Brenner

Reuven Brenner has written a wonderful article called, “How we got here”. He speaks on the whole sordid OTC mess, the decoupling of fiat money from gold, the history of international monetary policy, currencies, treasuries, interest rates, the great depression and the inevitable return of some form of the gold standard.

You may read the entire article attached below and at the link provided here:

All the best,

How we got here
The current financial crisis stems from the decision to divorce our currencies from a reliable standard of value
Reuven Brenner ,  Financial Post
Published: Wednesday, October 01, 2008

Gold is hovering again around $900, commodity prices are on the rise, and the U. S. dollar is back to its downward trend of the last few years. This isn’t a surprise.

The $700-billion bail-out plan is mum about the dollar — a big mistake (reflected in the immediate currency/gold price movements), since the Fed’s mismanagement of the dollar as a reserve currency contributed to the present mess. The signals were all there for the Fed to see. Yet academic fads blinded it. How did we get here? More important: how to get out? Take a deep breath.

Abruptly, in 1971, the world moved from fixed to floating exchange rates without in-depth debate. Under a fixed exchange rate anchored in gold, 5% interest in London or 5% in NY reflects the same returns. Money, whether the dollar or the pound, anchors pricing. Coca Cola knows that in pricing its beverages and selling them around the world, or in issuing U. S. dollar denominated debt, it faces no exchange rate risk. The company is neither inadvertently drawn in the exchange rate business nor does it need to hedge and pay fees to avoid being in that business.

This is not the case with floating exchange rates. Every global business -no matter what it sells or buys and how it finances itself — is in the currency business. Unless companies buy complex derivatives to insure that they stay in their own lines of business, currency fluctuations cause volatility in their costs and revenues. Financing companies becomes more expensive, resulting in a contraction of the non-financial sector and a large expansion of the financial one compared to a world adhering to anchored fixed exchange rates. The fact that national aggregates count the financial sector’s expansion as increased well-being just shows how meaningless such measures are. The expansion measures the cost of adapting to bad monetary policy, which could have been avoided.

It has been a mistake to say that floating means “laissez-faire” for currencies. The main role of money is to be a trusted anchor for pricing. People’s holding of cash as a “store of value” has always been insignificant. As to a medium of exchange: it fulfills this function properly only when people trust its stability. When the dollar plunges in terms of other currencies by 40% to 60% within few years, and when street vendors in emerging countries refuse dollar bills or accept it at deep discounts, as now happens, it becomes less of a medium of exchange. True, the dollar remains the reserve currency of choice because other countries mismanage their currency too. But relying on the mistakes of strangers is not a good policy. People want to understand that a promise to be paid 5% on U. S. Treasury represents 5% in their own currency too– rather than, suddenly, minus 10%. When this happens, everyone speaks the same standard monetary language. When this is not the case, then it is gobbledygook to discuss what’s “real” and what’s not; what’s floating and what not; and what clauses one must add to contracts to be reasonably protected.