In The News Today

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Dear CIGAs,

Do you really want to know what came out of the G20? Read below.

China positioning its currency for a run at world supremacy
By Don Lee 
April 3, 2009


In a series of what might be called baby steps, Chinese officials recently have moved to globalize the yuan and promote its influence overseas, with Shanghai designated as command central.

Since last December, China has signed deals with six countries, including South Korea, Malaysia and most recently Argentina, for currency swaps that would inject Chinese money into foreign banking systems. That would allow foreign companies to pay for goods they import from China in yuan, bypassing the dollar — the currency that dominates international trade and finance, including foreign exchange reserves.

Beijing is also taking initiatives to use the yuan, also known as the renminbi, to settle trade accounts between some Chinese provinces and neighboring states, starting with Hong Kong.

"The central bank has set promoting the renminbi for payment settlements as the main task for this year’s work," said Shi Lei, an analyst in the global financial markets section at Bank of China in Beijing.

China is also spreading the yuan’s influence in Asia by making loans and investments in other countries, as well as through its many tourists who carry loads of Chinese currency abroad. In Cambodia, where the dollar has long dominated, a tour guide in Angkor Wat recently asked visitors if they could pay him in yuan.

Meanwhile, Chinese officials have called attention to the risks of an international monetary system that relies on the dollar, which many analysts have begun to see as unstable because of heavy deficit spending embraced by Washington to combat the recession.


Jim Sinclair’s Commentary

The G20 is going to fix all the secondary fallout from this? What are you smoking?

Bankruptcy Filings by Businesses Increase 78% in First Quarter
By Bill Rochelle

April 3 (Bloomberg) — Bankruptcy filings by larger companies liquidating or reorganizing in Chapter 11 in the first quarter rose 78 percent from the same period a year earlier and almost tripled from 2007 as the U.S. was mired in the 15th month of a recession.

Almost 131,000 bankruptcies of all types were filed in March, the most for any month since 2005, when Congress erected barriers to individuals looking to rid themselves of debt.

Filings increased 9.2 percent in March over February, according to data compiled by Automated Access to Court Electronic Records, a service of Jupiter ESources LLC in Oklahoma City. March bankruptcies rose 38 percent from a year earlier and 79 percent from 2007.

The surge of filings in March “suggest that earlier estimates of 1.4 million to 1.5 million cases in 2009 should be revised to somewhere in the 1.5 million to 1.6 million range,” said Mike Bickford, president of AACER, a bankruptcy data and management service. If Bickford’s high estimate proves correct, 2009 filings would exceed 2008 by about 45 percent.

Public companies filing for bankruptcy or reorganization through March 31 had a combined $101 billion in debt, according to a report earlier this week by That’s almost ninefold higher than the $11.7 billion in the same period last year.


Jim Sinclair’s Commentary

You often ask what event has the potential of throwing all the spin right against the wall in terms of disturbing the social order. Here it is.

$1 trillion hit to pensions could cost taxpayers, workers
Published: Friday, April 3, 2009 at 10:15 a.m. 
Last Modified: Friday, April 3, 2009 at 10:15 a.m.

SANTA FE, N.M. — Massive investment losses sustained by public pension funds are pressuring state lawmakers from New Mexico to New York to spend more taxpayer money to shore up their programs, boost the retirement age for newly hired government workers and seek more from employee paychecks.

Pensions need $270 billion in additional contributions over the next four years, and more than $100 billion annually for two decades hence, according to the Center for Retirement Research at Boston College.

The pension trouble is just one more economic challenge for states. Income and sales tax collections are dropping fast as unemployment rises. Jobless benefits funds are running dry, requiring federal borrowing. And because of substantial budget holes, states are cutting back on a wide range of services, including child care subsidies for low-income families and aid to public schools, and in some cases laying off workers.

But as bad as the budget picture looks, it is dwarfed by the size of the gaps in states’ pensions, which have collectively lost at least $1 trillion as financial markets swooned over the past year. Public pensions cover about 14 million state and local employees and paid out almost $163 billion to seven million retirees in 2006-2007, according to the Census Bureau.

Because pensions involve long-term obligations and investments, there’s no immediate risk that states will be unable to pay retiree benefits. But replenishing pensions could squeeze states for years to come, forcing lawmakers and governors to juggle their spending priorities — pitting pensions against schools, colleges, health care, prisons and other government services.


Jim Sinclair’s Commentary

Add to this Dr. Doom, the means of production, the knowledge of how to, and delivery systems. Now how much of that can you move or protect.

Security of Pakistan’s nuclear weapons
By Hari Sud
Column: Abroad View

Published: April 03, 2009

Toronto, ON, Canada, — In the midst of all the turmoil in Pakistan, who is watching the country’s nuclear weapons? It is a declared intention of Osama bin Laden’s al-Qaida terrorist group to acquire nuclear weapons. Are Pakistan’s nuclear weapons within their reach?

All the terrorists would have to do is bribe a few guards, kill any who could not be bribed, and get away – if not with a full-blown nuclear weapon, then at least with enough nuclear material to set off a dirty bomb.

Thanks to the links between Pakistan’s intelligence service and terrorist elements, it is no longer possible to distinguish friend from foe. The Taliban have been reorganized, trained and sheltered by Pakistan’s intelligence agency. They have been bold enough to mount terror operations in Islamabad, Lahore, Karachi and other big cities.

Over the past eight years, new recruits and new Taliban leaders in association with al-Qaida have started waging war with Pakistani forces. Their grievances include Pakistan’s cooperation with NATO and the United States. After killing a large number of Pakistani troops in frontier provinces, the Pakistani Taliban has forced the civilian government to permit the practice of ancient Islamic Sharia law there.

The Taliban’s objective is to split the Pashto-speaking frontier provinces from Pakistan and join them with Pashto-speaking areas in Afghanistan to create a nation called Pashtunistan. The bombings in recent months and the daring attack on a police academy near Lahore were designed to avenge the excesses of Pakistani forces in the frontier area. Slowly the Taliban are moving to achieve their objective. Today Sharia law, tomorrow a separate homeland and later full nationhood.



Jim Sinclair’s Commentary

In a universal game of liar’s poker, an honest man had but one choice to make.

This speaks ill of any opportunity of recovery before abomination.

Hold on to your gold lifeline as all finance is a lie. The world is broken. The system is smashed. The OTC derivatives have done their dirty work.

You do not sign off on an audit for one reason only. It is a fraud.

Jonathan Weil, Honest Man Emerges From Muck of Banking Crisis
April 2, 2009.

Relevant excerpts:

Remember this man’s name: Charles Bowsher. He’s one of the few people leaving the banking crisis behind with his reputation enhanced.

Bowsher, who was comptroller general of the U.S. from 1981 to 1996, had a simple reason for resigning last week as chairman of the Federal Home Loan Bank System’s Office of Finance. He didn’t want to put his name on the banks’ combined financial statements, because he was uncomfortable vouching for them. Bowsher, 77, had held the post since April 2007.

“I was not comfortable as an audit-committee member in signing off on the financial statements, after I became aware of the standards and processes for valuing the mortgage-backed securities,” Bowsher told me.

Bowsher told me he was concerned, in part, with the methods used for determining when losses on hard-to-value securities should be included in banks’ earnings and regulatory capital. The way the accounting rules work, as long as such losses can be labeled “temporary,” they don’t count in net income.

The FASB’s rules on this subject, which have never been well defined, are now in flux. Today, after caving in to pressure by the banking industry and members of Congress, the Financial Accounting Standards Board is set to vote on a plan to relax its rules on mark-to-market accounting, so that companies can disregard market prices and ignore losses on their securities indefinitely.

While that wouldn’t make the banks any healthier, it would make their numbers look prettier. The FHLBanks have been among the most vocal lobbyists pressing for the change.

Bowsher said the process of valuing such assets was fraught with doubt already. “Now if you think about it, the FASB might be changing the whole thing, and everybody might mark their assets up,” he said. “Who wants to be part of that?”

Full article…

Jim Sinclair’s Commentary

The US Fed and now the US Treasury have taken the 5th Amendment.

You might consider this the new world order as transparency has now expired.

Don’t throw away your lifeline.

Watchdogs: Treasury won’t disclose bank bailout details
By Chris Adams | McClatchy Newspapers

WASHINGTON — The massive programs designed to rescue the nation’s financial sector are operating without adequate oversight, with vague goals and limited disclosure of their details to the taxpayers who are paying for them, government watchdogs told a Senate panel Tuesday.

The Troubled Asset Relief Program, or TARP, was launched in the midst of last fall’s collapse of the nation’s banking system and is designed to get loans flowing to businesses and individuals.

But "without a clearer explanation" about parts of the program, "it is not possible to exercise meaningful oversight over Treasury’s actions," said Elizabeth Warren, a Harvard Law School professor who leads a special congressional oversight panel monitoring the TARP program. Her comments came in a Senate Finance Committee hearing on the bailout program.

Noting that TARP passed Congress six months ago, Warren said that her group has repeatedly called on the Treasury Department to provide a clear strategy for the program — and that "the absence of such a vision hampers effective oversight."

Although she has asked Treasury to explain its strategy, "Congress and the American public have no clear answer to that question."


Jim Sinclair’s Commentary

Getting a straight story from FASB is becoming impossible. It seems that the FASB caved on permanently impaired assets (totally worthless paper) but held back some on mark to market. You need to be a CPA PhD to figure this one out. I know such a person and will keep up the effort to get you a straight answer.

Under New Accounting Rule, Toxic Assets May Be Revalued
By Binyamin Appelbaum and Zachary A. Goldfarb
Washington Post Staff Writers
Friday, April 3, 2009; A15

The board that sets U.S. accounting rules voted yesterday to let financial firms report higher values for some troubled assets, a controversial step likely to increase some banks’ reported earnings but also heighten suspicions that the companies are concealing problems.

The move by the Financial Accounting Standards Board was made with unusual speed under intense pressure from Congress and the financial industry, which have argued that the old rules exacerbated the financial crisis by forcing banks to overstate expected losses.

But the decision to ease what are known as mark-to-market requirements has raised concerns among some financial experts who warn that it will become harder for banks and investors to agree on what the troubled assets are actually worth and thus discourage their sale. The ability of financial firms to sell assets to investors is considered essential for an economic revival because this could restore the major source of funding for bank lending to consumers and businesses.


Jim Sinclair’s Commentary

The G20 has fixed everything. I feel they have not fixed anything and only added another $1 trillion in monetary inflation. God help us all in this emotional world of hyper-spin.

One in 10 Americans gets help to buy food
Fri Apr 3, 2009 1:41am BST

WASHINGTON (Reuters) – A record 32.2 million people — one in every 10 Americans — received food stamps at the latest count, the government said on Thursday, a reflection of the recession now in its 16th month.

Food stamps, the major U.S. anti-hunger program, help poor people buy groceries. The average benefit was $112.82 per person in January.

The January figure marks the third time in five months that enrollment set a record.

"A weakened economy means that many more individuals are turning to SNAP/Food Stamps," said the Food Research and Action Center, an anti-hunger group, using the acronym for the renamed food stamp program, the Supplemental Nutrition Assistance Program.

The U.S. unemployment rate was 8.1 percent in February, the highest in 25 years. New claims for jobless benefits totaled 669,000 last week, the highest in 26 years, the government said on Thursday.


Jim Sinclair’s Commentary

As more people get food coupons and the jobless fall off the unemployment benefits time out, it is only predictable that crime will rise, first in anger directed at the illegal and legally employed immigrants. This is the extreme of just that.

Gunman kills up to 13 hostages, some 26 others injured in U.S.
22:33 03/ 04/ 2009

NEW YORK, April 3 (RIA Novosti) – At least 13 people were killed and another 26 injured when a gunman stormed an immigration centre in Binghamton, near New York, American media reported.

CNN said that the one of the gunmen, who was armed with a high-powered rifle, had been killed by police. It also said two hand guns were recovered from the scene.

David Paterson, the governor of New York, told CNN "that there are fatalities. We are monitoring the situation and I have directed the State Police to assist the Binghamton Police Department, in any way, they can."

Eyewitnesses earlier told a CNN reporter that police had taken two Asian men, who were both handcuffed, out of the American Civic Association building, which is currently surrounded by police snipers. The men have been taken to a local detention center.

Sky News said that FBI negotiators and SWAT teams had entered the building, 140 miles from New York, and freed 20 hostages. However, around 40 hostages are reported to still being held hostage.


G20 – Lies, damned lies and Gordon Brown lies

Gordon Brown has really surpassed himself in creative alchemy. He has turned $100 billion of G20 new commitments into $5 trillion of air!

Gordon Brown has really surpassed himself in creative alchemy. He has turned $100 billion of G20 new commitments into $5 trillion of air!

Take $100 billion of committed new money, add $500 billion of already committed money, add non-committed but discussed amounts of $500 billion and you present a headline lie of $1.1. trillion. But it gets worse, Gordon Brown then claims the largest fiscal stimulus in history of $5 trillion. This is another lie. The $5 trillion contains no new funds but only the IMF’s estimate of the rise in the G20’s government borrowings between 2008 and 2010.

Poor Benjamin Disraeli is turning in his grave when he hears these lies. (The phrase,”lies damned lies and statistics” originates from the former UK prime minister).


Jim Sinclair’s Commentary

The key point of the story is dead wrong.

The nuance here, not seen as you would have to be a floor trader to know, is that the borrowers of gold for delivery would not be the COMEX but rather the short who then remains short but now to the ECB, still at risk to price.

The Default would have to be first the member, then the exchange itself, then the total assets of all members individually.


This may be the most well read article on the web and the least understood.

Most, if not all of the expert commentary and this article is dead wrong.

Did the ECB Save COMEX from Gold Default?
April 02, 2009

On Tuesday morning, gold derivatives dealers, who had sold short in the face of a fast rising gold price, faced a serious predicament. Some 27,000 + contracts, representing about 15% of the April COMEX gold futures contracts remained open. Technically, short sellers are required to give “notice” of delivery to long buyers. However, in reality, buyers are the ones who control the amount of gold to be delivered. They “demand” delivery of physical gold by holding futures contracts past the expiration date. This time, long buyers were demanding in droves.

In normal times, very few people do this. Only about 1% or less of gold contracts must be delivered. The lack of delivery demand allows the casino-like world of paper gold futures contracts to operate. Very few short sellers actually expect or intend to deliver real gold. They are, mostly, merely playing with paper. It was amazing, therefore, when March 30, 2009 came and passed, and so many people stood for delivery, refusing to part with their long gold futures positions.

On Tuesday, March 31st, Deutsche Bank (DB) amazed everyone even more, by delivering a massive 850,000 ounces, or 8500 contracts worth of the yellow metal. By the close of business, even after this massive delivery, about 15,050 April contracts, or 1.5 million ounces, still remained to be delivered. Most of these, of course, are unlikely to be the obligations of Deutsche Bank. But, the fact that this particular bank turned out to be one of the biggest short sellers of gold, is a surprise. Most people presumed that the big COMEX gold short sellers are HSBC (HBC) and/or JP Morgan Chase (JPM). That may be true. However, it is abundantly clear that they are not the only game in town.

Closely connected institutions, it seems, do not have to worry about acting irresponsibly, in taking on more obligations than they can fulfill. Mysteriously, on the very same day that gold was due to be delivered to COMEX long buyers, at almost the very same moment that Deutsche Bank was giving notice of its deliveries, the ECB happened to have “sold” 35.5 tons, or a total of 1,141,351 ounces of gold, on March 31, 2009. Convenient, isn’t it? Deutsche Bank had to deliver 850,000 ounces of physical gold on that day, and miraculously, the gold appeared out of nowhere.

The announcement of the ECB sale was made, as usual, dryly, without further comment. There was little more than a notation of a sale, as if it were a meaningless blip in the daily activity of the central bank. But, it was anything but meaningless. It may have saved a major clearing member of the COMEX futures exchange from defaulting on a huge derivatives position. We don’t know who the buyer(s) was, but we don’t leave our common sense at home. The ECB simply states that 35.5 tons were sold, and doesn’t name any names. Common sense, logic and reason tells us that the buyer was Deutsche Bank, and that the European Central Bank probably saved the bank and COMEX from a huge problem. What about the balance, above 850,000 ounces? What will happen to that? I am willing to bet that Deutsche Bank will use it, in June, to close out remaining short positions, or that it will be sold into the market, at an opportune time, if it hasn’t already been sold on Tuesday, to try to control the inevitable rise of the price of gold.

Circumstantial evidence has always been a powerful force in the law. It allows police, investigators, lawyers and judges to ferret out the truth. Circumstantial evidence is admissible in any court of law to prove a fact. It is used all the time, both when we initiate investigations, and once we seek indictments and convictions. We do this because we deal in a corrupt world, filled with suspicious actions and lies, and the circumstances are often suspicious enough to give rise to a strong inference that something is amiss. Most of the time, when the direct evidence is insufficient to prove a case beyond a reasonable doubt, or even by a preponderance of direct evidence, circumstantial evidence fills the void, and gives us the conviction. We even admit evidence of the circumstances to prove murder cases. In light of that, it certainly seems appropriate to use circumstantial evidence in evaluating possible regulatory violations. The size and timing of the delivery of Deutsche Bank’s COMEX obligation is suspicious, to say the least, when taken in conjunction with the size and timing of the ECB’s gold sale. It is circumstantial evidence that the gold used by Deutsche Bank to deliver and fulfill its COMEX obligations, came directly or indirectly, from the ECB.


Jim Sinclair’s Commentary

The following is from John Williams’ by subscription

SGS-Alternate Unemployment Rate at 19.8%

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