In The News Today

Posted at 2:40 PM (CST) by & filed under In The News.

Dear CIGAs,

There is NO practical method, NONE, that can drain the international liquidity being produced by Quantitative Easing. That is the key to what the future, incontrovertibly, holds for the US dollar, gold and you. There simply is no question whatsoever.

Gold is headed to Alf’s number on Armstrong’s schedule and will not be diverted by any force on the planet.

The monetary expansion you can’t drain will drain the life out of the US dollar. This alone guarantees hyperinflation, yet the Western sheeple just keep plodding towards the cliff of no return.

China fears bond crisis as it slams quantitative easing
China has given its clearest warning to date that emergency monetary stimulus by Western governments risks setting off worldwide inflation and undermining global bond markets.
By Ambrose Evans-Pritchard
Last Updated: 1:13PM BST 07 May 2009

"A policy mistake made by some major central bank may bring inflation risks to the whole world," said the People’s Central Bank in its quarterly report.

"As more and more economies are adopting unconventional monetary policies, such as quantitative easing (QE), major currencies’ devaluation risks may rise," it said. The bank fears a "big consolidation" in the bond markets, clearly anxious that interest yields will surge as western states try to exit their QE experiment.

Simon Derrick, currency chief at the Bank of New York Mellon, said the report is the latest sign that China is losing patience with the US and aims to diversify part its $1.95 trillion (£1.3 trillion) foreign reserves away from US Treasuries and other dollar securities.

"There is a significant shift taking place in China. They are concerned about the stability of the global financial system so they are not going to sell US bonds they already have. But they are still accumulating $40bn of fresh reserves each month, and they are going to be much more careful where they invest it," he said.

Hans Redeker, head of currencies at BNP Paribas, said China is switching into hard assets. "They want to buy production rights to raw materials and gain access to resources such as oil, water, and metals. They know they can’t keep buying bonds," he said

Premier Wen Jiabao left no doubt at the Communist Party summit in March that China is irked by Washington’s response to the credit crunch, suspecting that the US is engaging in a stealth default on its debt by driving down the dollar. "We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets. To speak truthfully, I do indeed have some worries," he said.

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Jim Sinclair’s Commentary

The bigger picture is not the brighter picture.

US unemployment hits 25-year high
Fri, 08 May 2009 14:27:24 GMT

A US government report says the US economy lost 539,000 jobs in April, catapulting the unemployment rate to 8.9 percent — its highest point in a generation.

The Labor Department’s report on Friday signaled that the relentless pace of job losses was starting to level off slightly.

Estimates had projected the April job losses to rise to 590,000 against March which witnessed hemorrhages of 699,000 jobs.

Some economists say that the better-than-expected data hints that the recession is bottoming out and economic activities are expected to gradually recover toward the end of the year, Reuters reported.

"It’s a confirmation that we’re in the early stages of a turn," the New York Times quoted Ethan Harris, co-head of United States economic research at Barclays Capital, as saying.

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Jim Sinclair’s Commentary

Who said we are becoming more transparent? Flog that idiot!

“Ladies and Gentlemen:

TOCOM  launched their Next Generation System on May 7th and with it stopped releasing the Open Interest by Member data required to report on the daily net position changes for the seven historically largest TOCOM paper gold and silver short manipulators, and STDJ.  To see the various categories of data that will be reported by the exchange from this day forward please go to the new TOCOM website (link below) and click on the Market Data link at the top left of the page:

http://www.tocom.or.jp/news/index.html

Jim Sinclair’s Commentary

Do you recall that in the recently posted Ron Paul/Bernanke exchange much fuss was made by the Chairman over the ongoing review of the Fed by the Inspector General? Now listen to her depth of knowledge concerning Fed activity.

Fed Inspector General Knows Roughly Nothing About The Fed
05/ 8/09 09:05 AM

The inspector general tasked with overseeing and auditing the Federal Reserve knows pretty much nothing about what the Fed is doing. That’s the conclusion that comes from watching the exchange Tuesday between Rep. Alan Grayson (D-Fla.) and inspector general Elizabeth A. Coleman.

Coleman could not tell Grayson what kind of losses the Fed has so far suffered on its $2 trillion portfolio, which has greatly expanded since September.

She appeared unaware that the Fed engages in trillions of dollars in off-balance-sheet exchanges.

She is not investigating the role of the Fed in allowing the collapse of Lehman Brothers.

She did not know where the Fed has invested its $2 trillion on the liability side of the balance sheet. "I do not know. We have not looked at that specific area at this particular point on," she said.

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Jim Sinclair’s Commentary

This speaks for itself.

The Big Lie: Stress Test Optimism Just Wall St. Propaganda, Former Bank Regulator Says
Posted May 08, 2009 12:12pm EDT by Aaron Task

Results of the stress test brought a collective sigh of relief from Washington D.C. to Wall Street Friday, and stocks were rallying again on a growing sense the financial crisis has past.

Don’t you believe it, says William Black, an Associate Professor of Economics and Law at the University of Missouri – Kansas City.

"It’s in the interest of the financial community to send this propaganda out," Black says. "It’s remarkable not that they do it but that it still works."

In other words, this isn’t the first time we’ve been told "the crisis is over" and that "banks are well capitalized" – and probably won’t be the last.

The professor and former financial regulator foresees another wave of foreclosures and future bank losses of more than $2.5 trillion vs. the government’s $599 billion estimate.

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Jim Sinclair’s Commentary

Does anyone know where we can get an application for the Federal Bailout of some of our CIGAs out there that have been reporting layoffs across the board? This is just so wrong!

Fannie Mae asks Treasury for aid

US mortgage finance firm Fannie Mae has asked the Treasury for another $19bn (£12.6bn), as it announced a loss for the first three months of 2009.

It is the second time that Fannie Mae has requested government aid in recent months. It received $15.2bn in March.

The Treasury has made available funds of $200bn each to Fannie Mae and fellow mortgage giant Freddie Mac.

Fannie Mae reported a loss of $23.2bn, but it was smaller than the $25.2bn loss it made in the previous quarter.

The firm said the loss was driven by credit-related expenses of $20.9bn.

It also took a $5.7bn loss on mortgage securities.

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Jim Sinclair’s Commentary

Cities raid cash from residents by increasing real estate taxes and fees as they go broke, further pushing the formula in high 6th gear.

State may raid cash from cities, county
By Kurtis Alexander
Posted: 05/08/2009 01:30:14 AM PDT

SANTA CRUZ — Call it a threat or a grim reality. Whatever it is, it’s not being welcomed at city halls across California.

The governor’s office suggested this week that if the May 19 budget-reform measures are rejected by voters, the state will have to borrow $2 billion from cities and counties.

The proposal, which comes as polls show little hope for the ballot measures, is being met with horror by local governments that face red ink of their own.

"Our budget gap is so big it’s beyond anything we could have imagined already," said Santa Cruz City Manager Dick Wilson. "If the state adds this additional burden, it’s overwhelming. … It’s appalling beyond words."

Under the state proposal, the city of Santa Cruz could be forced to hand over as much as $1.6 million next year, adding to an existing hole of $6.5 million. With a total budget of $75 million, the city is already having to make concessions — like giving up operation of two museums and a community center and asking employees to take pay cuts — which Wilson said would become more severe should the city lose more money.

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Jim Sinclair’s Commentary

Eliot Spitzer and his article have been hitting the Fed hard.

New York Federal Reserve’s Friedman Resigns Post Immediately
By Scott Lanman

May 7 (Bloomberg) — Stephen Friedman, chairman of the New York Federal Reserve Bank’s board of directors, resigned from his position effective immediately to avoid the appearance of a conflict of interest.

Friedman, a retired chairman and current member of Goldman Sachs Group Inc.’s board, had been granted a waiver to keep serving after Goldman Sachs became a bank holding company in September, a change that would have normally barred Friedman from serving as a director appointed to represent the public. Last month, he planned to depart at the end of the year.

“Although I have been in compliance with the rules, my public service-motivated continuation on the Reserve Bank Board is being mischaracterized as improper,” Friedman said in a letter to Fed officials, posted on the New York Fed’s Web site. “The Federal Reserve System has important work to do and does not need this distraction.”

Denis Hughes, the board’s deputy chair, will take over the chairman’s duties, the New York Fed said in a statement. Friedman led the search committee for the bank’s new president after Timothy Geithner’s departure to become Treasury Secretary. The New York Fed appointed William Dudley, a former Goldman economist, as president in January.

Thomas Baxter, general counsel of the New York Fed, said in the Fed’s statement that regarding Friedman’s purchases of Goldman shares in December and January, “it is my view that these purchases did not violate any Federal Reserve statute, rule or policy.”

The New York Fed posted the announcement on its Web site today.

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Jim Sinclair’s Commentary

Click the following links to view Part 1 and Part 2 of the video.

http://www.cnbc.com/id/15840232?play=1&video=1116537475

http://www.cnbc.com/id/15840232?play=1&video=1116546525

The New York Fed is the most powerful financial institution you’ve never heard of. Look who’s running it.
By Eliot Spitzer
Posted Wednesday, May 6, 2009, at 12:29 PM ET

The kerfuffle about current New York Federal Reserve Bank Chairman Stephen Friedman’s purchase of some Goldman stock while the Fed was involved in reviewing major decisions about Goldman’s future-well-covered by the Wall Street Journal here and here-raises a fundamental question about Wall Street’s corruption. Just as the millions in AIG bonuses obscured the much more significant issue of the $70 billion-plus in conduit payments authorized by the N.Y. Fed to AIG’s counterparties, the small issue of Friedman’s stock purchase raises very serious issues about the competence and composition of the Federal Reserve of New York, which is the most powerful financial institution most Americans know nothing about.

A quasi-independent, public-private body, the New York Fed is the first among equals of the 12 regional Fed branches. Unlike the Washington Federal Reserve Board of Governors, or the other regional fed branches, the N.Y. Fed is active in the markets virtually every day, changing the critical interest rates that determine the liquidity of the markets and the profitability of banks. And, like the other regional branches, it has boundless power to examine, at will, the books of virtually any banking institution and require that wide-ranging actions be taken-from raising capital to stopping lending-to ensure the stability and soundness of the bank. Over the past year, the New York Fed has been responsible for committing trillions of dollars of taxpayer money to resuscitate the coffers of the banks it oversees.

Given the power of the N.Y. Fed, it is time to ask some very hard questions about its recent performance. The first question to ask is: Who is the New York Fed? Who exactly has been running the show? Yes, we all know that Tim Geithner was the president and CEO of the N.Y. Fed from 2003 until his ascension as treasury secretary. But who chose him for that position, and to whom did he report? The N.Y. Fed president reports to, and is chosen by, the Fed board of directors.

So who selected Geithner back in 2003? Well, the Fed board created a select committee to pick the CEO. This committee included none other than Hank Greenberg, then the chairman of AIG; John Whitehead, a former chairman of Goldman Sachs; Walter Shipley, a former chairman of Chase Manhattan Bank, now JPMorgan Chase; and Pete Peterson, a former chairman of Lehman Bros. It was not a group of typical depositors worried about the security of their savings accounts but rather one whose interest was in preserving a capital structure and way of doing business that cried out for-but did not receive-harsh examination from the N.Y. Fed.

The composition of the New York Fed’s board, which supervises the organization and current Chairman Friedman, is equally troubling. The board consists of nine individuals, three chosen by the N.Y. Fed member banks as their own representatives, three chosen by the member banks to represent the public, and three chosen by the national Fed Board of Governors to represent the public. In theory this sounds great: Six board members are "public" representatives.

So whom have the banks chosen to be the public representatives on the board during the past decade, as the crisis developed and unfolded? Dick Fuld, the former chairman of Lehman; Jeff Immelt, the chairman of GE; Gene McGrath, the chairman of Con Edison; Ronay Menschel, the chairwoman of Phipps Houses and also, not insignificantly, the wife of Richard Menschel, a former senior partner at Goldman. Whom did the Board of Governors choose as its public representatives? Steve Friedman, the former chairman of Goldman; Pete Peterson; Jerry Speyer, CEO of real estate giant Tishman Speyer; and Jerry Levin, the former chairman of Time Warner. These were the people who were supposedly representing our interests!

Of course, there have been the occasional nonfinance representatives from academia and labor. But they have been so outnumbered that their presence has done little to alter the direction of the board.

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NY Fed chair resigns amid stock purchase questions
By Kristina Cooke Kristina Cooke – Thu May 7, 8:30 pm ET

NEW YORK (Reuters) – Stephen Friedman, chairman of the New York Federal Reserve Bank’s board of directors, resigned on Thursday amid questions about his purchases of stock in his former firm, Goldman Sachs.

Friedman, a retired chairman of Goldman Sachs who has led the New York Fed’s board since January 2008, said he quit to prevent criticism about his stock buying from becoming a distraction as the Fed battles a severe U.S. recession.

"Although I have been in compliance with the rules, my public service motivated continuation on the Reserve Bank Board is being mischaracterized as improper," he said in a letter of resignation to New York Fed President William Dudley.

"The Federal Reserve System has important work to do and does not need this distraction," Friedman said.

The U.S. central bank is comprised of a seven-member Board of Governors in Washington, and 12 regional Fed banks.

Some of the regional directors are appointed by the Washington-based board. Those directors are not allowed to own shares of bank holding companies, a status that Goldman Sachs won in September to secure access to Fed lending facilities.

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Jim Sinclair’s Commentary

There is so much of this that you would have to arrest every money center banker everywhere. That has the ability to make this a watershed situation.

JPMorgan Reveals Threat of SEC Charges Over Alabama Sewer Deals
By Martin Z. Braun and William Selway

May 8 (Bloomberg) — JPMorgan Chase & Co., the biggest U.S. bank by market value, says it may be charged with violating federal securities laws for selling fixed-income financing that helped push Alabama’s most populous county to the brink of bankruptcy.

The potential sanctions by the U.S. Securities and Exchange Commission, disclosed yesterday in two sentences of a 162-page quarterly regulatory filing, relate to a series of bond and interest-rate swap sales in 2002 and 2003 for sewers in Jefferson County, which covers about 1,125 square miles including Birmingham, the state capital with more than 240,000 residents.

Since credit markets seized up in 2007, Jefferson County’s annual sewer debt payment more than doubled. At least seven former JPMorgan bankers are under scrutiny in a Justice Department criminal antitrust investigation of the sale of unregulated derivatives to local governments across the U.S., federal regulatory records show.

The SEC investigation of New York-based JPMorgan is the first by the commission to directly challenge the ways in which securities firms sell derivatives to state and local governments. Derivatives are contracts whose values are tied to assets, including stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

“The bigger the amount of money, the more temptation there is for corruption,” said Christopher “Kit” Taylor, who was executive director of the Alexandria, Virginia-based Municipal Securities Rulemaking Board, the national regulator of the municipal bond market, from 1978 to 2007.

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