In The News Today

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Dear CIGAs,

Jim Sinclair’s Commentary

What you do not read in the US press or hear on Bloomberg TV is the Germans who have experienced the Weimar Republic and know how it works and firmly believe the US is taking the world directly there again.

The Germans are 100% correct.

The Germans are painted in the GB and US media as intransigents not pulling their weight, and obstructionists in the planetary bailing out plan. Therefore they are seen as the enemy of an economic recovery.

This opens the opportunity for China to take a center position as the nation most likely to pull out first among those anxious at the G 20 for any lifeline.

Brown snubbed over tax
Germans wreck ‘global new deal’
From The Sunday Times

March 29, 2009

GORDON BROWN’S carefully laid plans for a G20 deal on worldwide tax cuts have been scuppered by an eve-of-summit ambush by European leaders.

Angela Merkel, the German chancellor, last night led the assault on the prime minister’s “global new deal” for a $2 trillion-plus fiscal stimulus to end the recession.

“I will not let anyone tell me that we must spend more money,” she said.

The Spanish finance minister, Pedro Solbes, also dismissed new cash being pledged at Thursday’s London summit.

“In these conditions I and the rest of my colleagues from the eurozone believe there is no room for new fiscal stimulus plans,” he said.

Nicolas Sarkozy, the French president, has insisted that “radical reform” of capitalism is more important than tax cutting.



im Sinclair’s Commentary

Do you get the idea that everything around us is coming apart at the seams? You know that Wagoner knows what is contained in the Motors bailout plan.

The G 20 and big claims for the gathering is breaking down into opposing teams, all opposing the USA and GB.

Rick Wagoner, G.M. Chief, Is Said to Be Resigning
Published: March 29, 2009

DETROIT — The chairman and chief executive of General Motors, Rick Wagoner, resigned Sunday as part of a broad agreement with the Obama administration to funnel more government aid to the ailing auto giant, according to people close to the decision.

Mr. Wagoner, who has served as G.M.’s top executive since 2000, agreed to step down after it was requested by the president’s auto task force, these people said.

G.M. had no immediate comment on the sudden development, which came on the eve of Mr. Obama’s announcement on Monday that is to detail his rescue plans for G.M., Chrysler and the larger American auto industry.

But people in the company said G.M. would issue a statement on Mr. Wagoner after the president unveiled his plan in Washington.


Jim Sinclair’s Commentary

Gold is no longer an investment. Gold is no longer a portfolio item. Gold is certainly not a trading vehicle. Gold is your lifeline and I mean that literally.

The Quiet Coup

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
by Simon Johnson

ONE THING YOU learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you. Typically, your “clients” come in only after private capital has abandoned them, after regional trading-bloc partners have been unable to throw a strong enough lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union have fallen through. You’re never at the top of anyone’s dance card.

The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear. I should know; I pressed painful changes on many foreign officials during my time there as chief economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia, South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had failed.

Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.

But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.


Jim Sinclair’s Commentary

China tells the US and GB to "stuff it," re-lecturing the G 20. Sounds like a battle to me.

China Chastises West in Leadership Bid Before G-20 (Update1)
By Li Yanping and Kevin Hamlin

March 27 (Bloomberg) — China is scolding the world before the Group of 20 meeting next week, telling the largest countries to spend more on stimulus and fix their financial supervision.

Central bank Governor Zhou Xiaochuan yesterday lambasted governments that failed to emulate China’s “decisive” action to spur economic growth. Earlier this week he suggested creating a new international reserve currency to rival the dollar.

Evidence that China’s 4 trillion yuan ($585 billion) stimulus package is taking effect is emboldening the nation’s leaders to dictate their vision for a new world economic and financial order. Premier Wen Jiabao said this month he was worried about the value of China’s $740 billion in U.S. Treasury holdings and asked for a guarantee of their safety.

“China can stand up and say, ‘Our policies have worked, we have stabilized our economy first,’” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. “China is positioning itself to have a much more significant role and influence at this G-20 meeting than it has at any other international forum in the past.”

Leaders of the 20 largest industrial and developing nations meet in London on April 2 to look for ways to alleviate the global financial crisis and strengthen international regulation. The World Bank this month said the global economy will probably shrink for the first time since World War II.


Jim Sinclair’s Commentary

Dean Harry Schultz has commented before that monetary systems can start this way.

State considers return to gold, silver dollars
Proposed bill slams Fed, allows payments in precious metals

A bill being considered in the Montana Legislature blasts the Federal Reserve’s role in America’s money policy and permits the state to conduct business in gold and silver instead of the Fed’s legal tender notes.

Montana H.B. 639, sponsored by State Rep. Bob Wagner, R-Harrison, doesn’t require the state or citizens to conduct business in gold or silver, but it does require the state to calculate certain transactions in both the current legal tender system and in an electronic gold currency. It further mandates that the state must accept payments in gold or silver for various fees and purchases.

While Wagner was unavailable for comment, the bill’s language clearly alleges the nation’s current financial system, with its reliance on the private Federal Reserve system for money supply, is a danger to American freedom.


Jim Sinclair’s Commentary

China challenges the USA for leadership of the G 20.

The G 20 is setting up for the first major battle for leadership since the US took that position. It has less to do with saving anything. It is the Advent of Sino Signature Leadership sure to come now or very soon. The sun has set on the US dollar at the hand of Greenspan and now Greenspan’s bagged man, Bernanke. The Sun has set on Capitalism as we enter Liberal Facism.

The SDR is not a super currency but a hopeless sow’s ear.

Please keep firmly in mind that the SDR is not a new device or a super currency. It is a failed idea of 1969. A bag of currency backed by swaps making up failed currencies is a failed bag of currency. Add to the failed bag, Russia and China’s currency and unless you drop the dollar, yen and pound, you produce a larger soggy bag of paper which can serve the world only by increasing monetary inflation

China insists on financial system overhaul

MEDELLIN, Colombia (AFP) — Chinese Central Bank Governor Zhou Xiaochuan again urged for international financial reform in the face of the global economic crisis.

Speaking at an Inter-American Development Bank meeting in the northwestern Colombian city of Medellin, Zhou said that current fiscal and monetary measures were useless if the international financial system is not overhauled.

He said financial reform and measures for international development banks like the International Monetary Fund (IMF) and the World Bank would likely be discussed at the upcoming G20 summit of developing and industrialized nations on Thursday in London.

"Up to now we have participated in some working groups which focus on coordinating effort to overcome the negative impact of the financial crisis," Zhou said.

"The second (effort) is maybe financial sector reform, including regulatory reform, and I think we also expect there may be some reform agenda for international financial institutions, including the Fund, the Bank and other development banks."


Jim Sinclair’s Commentary

Interesting approach with gold added. It depends on how and how much. Otherwise, it is still a bag of paper.

UPDATE 1-Russia wants rouble, yuan, gold in SDR basket
Sat Mar 28, 2009 8:27am EDT

MOSCOW, March 28 (Reuters) – Russia supports expanding the IMF’s Special Drawing Rights (SDR) to include the rouble, the yuan and gold, but sees no chance of the G20 Summit accepting a new reserve currency, a Kremlin aide said on Saturday, agencies reported.

"It would be logical for the set of currencies (that make up the SDR) to be expanded, and it could include other currencies, including the rouble, the yuan and perhaps others," state RIA news agency reported the Kremlin’s senior economic aide Arkady Dvorkovich as saying.

China this week caused a stir ahead of the April 2 Group of 20 meeting of rich and emerging economies when it suggested the world move towards greater use of the International Monetary Fund’s Special Drawing Rights, created by the IMF in 1969 as an international reserve asset.

G20 leaders have made clear that for now the dollar’s status as the dominant reserve unit remains, but the idea of creating a new reserve currency system based on SDRs has not entirely been knocked down.

Dvorkovich said he sees no chance of the G20 accepting a new reserve currency next month, but his comments suggest the issue will be in the spotlight at the meeting, where world leaders will discuss ways to combat the global economic crisis.