In The News Today

Posted at 6:06 PM (CST) by & filed under In The News.

Dear CIGAs,

The G8 is yesterday. Brics are today. There is no desire or means to stop the hyperinflation on its way because of quantitative easing.

G8 Can’t Stop Future Inflation
JUNE 14, 2009…3:22 AM

There are many mysteries to life.  One of them is NOT how we got in this economic mess.  Anyone looking at the history of finance can see that credit bubbles always lead to crashes that we call ‘depressions’.  And that using credit to finance wars is the #1 way of creating a credit bubble.  All nations don’t need to go to war, to create a global credit bubble.  Generally speaking, when major global empires go to war, they create global credit bubbles if they refuse to tax their imperial core to pay for wars.  And generally speaking, no empire ever dares to tax the populace at home, for international wars.  So they create immense amounts of credit based on future taxes.

The problem with all this is, if a major empire doesn’t tax its populace while going to war, if these wars never end or take forever to end like the Vietnam War or the Cold War, these quickly build up immense mountains of IOUs.  So, this weekend, the G8 nations are meeting yet again, in desperation, trying to figure out how to have the pre-2008 status quo while changing nothing essential.  Let’s look at some of the news stories before we visit the Bank of International Settlements:

Bank Rescue Costs EU States $5.3 Trillion, More Than German GDP –

European governments have approved $5.3 trillion of aid, more than the annual gross domestic product of Germany, to support banks during the credit crunch, according to a European Union document.

Germany, the world’s #2 or #3 world trade profit center, next to Japan and China, is floundering.  This trio of nations depends very much on the US sucking down manufactured goods.  This keeps them afloat.  This has dried up nearly to $0 profits over the cost of importing raw materials.  Throwing $5.3 trillion down the rabbit hole to keep the European banking and trade system going is an immense sacrifice and one that may not pay off, as far as Germany is concerned.

The U.K. pledged 781.2 billion euros ($1.1 trillion) to restore confidence in its lenders, the most of any of the 27 EU members, according to a May 26 document prepared by officials from the European Commission, the European Central Bank and member states and obtained by Bloomberg News. Denmark, where 13 of the country’s 140 banks were bailed out by the central bank or bought by rivals last year, committed 593.9 billion euros.

The measures, designed to save banks and revive economic growth, surpass Germany’s $3.3 trillion economy, the region’s biggest. They also helped to widen the Euro area’s budget deficit to the most in three years in 2008. The commission, the EU’s executive arm, is seeking to create the first EU-wide agencies with rule-making powers to monitor risk in the economy after the crisis led to $460 billion of losses and writedowns across the continent, according to data compiled by Bloomberg.


Jim Sinclair’s Commentary

2012 is coming up faster than you think. Are you ready for the 2nd coming of the leveraged debt disaster?

Recovery? You have to be kidding. It must be inflated away. There is no other political possibility. The high yield bond market equals the junk bond market

This is primarily an American problem. Think of the dollar impact.

That worrying wall of debt
By Vipal Monga
Published June 5, 2009 at 11:59 AM

The leveraged loan market got accustomed to big numbers over the past decade. There’s $3.6 trillion, the amount of leveraged loans made since 2000, according to Thomson Reuters’ Loan Pricing Corp. There’s 735-fold, the amount of growth between 2003 and 2007 in the volume of collateralized loan obligations — the funds that helped fuel the loan market’s surge after the tech and telecom bust of 2001. And there’s $375 billion, the amount of bank debt used to fund leveraged buyouts completed between 2005 and 2007.

But right now, the leveraged loan market is fixated on one number: $430 billion, the amount in leveraged loans due to mature between 2012 and 2014. Despite the big numbers of the past, this might be simply too big. Indeed, the $430 billion figure is already worrying lenders, borrowers and loan-market investors alike as they struggle with the possibility that a large portion of those loans will neither be repaid nor refinanced, raising the specter of a wave of defaults among the debt-fueled LBO borrowers of 2005 through 2007.

“People are in a panic about it right now,” says one lawyer who specializes in corporate finance. “There’s not enough capacity to refinance this.”

Is the panic justified?

Standing where we are today, it certainly seems as though the looming maturities will break upon an already fragile market, causing further damage and potentially extending the crisis. But just how serious a threat the maturities pose is an open question. Markets are dynamic, ever-evolving systems, and it’s virtually certain the conditions that exist today will have changed substantially, even fundamentally, tomorrow. As Alexander Gendzier, capital markets lawyer at Jones Day, says, “2012 is a couple of lifetimes from where we are today.”


Jim Sinclair’s Commentary

The New England theme park has a new theme, and that is the GM/Chrysler theme of “Belly Up.” It certainly can’t be an embarrassment today. They asked Washington for TARP money but it was discovered they were a bunch of Republicans and therefore deemed too small to matter. Thanks to CIGA Ken for the cartoon.


Theme park firm Six Flags files for bankruptcy
Sun Jun 14, 2009 11:25am EDT

CHICAGO (Reuters) – Six Flags Inc, the world’s largest regional theme park company, said on Saturday it filed for bankruptcy protection.

The New York-based company operates amusement parks across the United States, Canada and Mexico.

Six Flags said it filed for Chapter 11 protection with the unanimous support of its lenders’ steering committee.

The plan will result in a deleveraging of the company’s balance sheet by about $1.8 billion, as well as the elimination of more than $300 million in preferred stock obligations.

“The current management team inherited a $2.4 billion debt load that cannot be sustained, particularly in these challenging financial markets,” Mark Shapiro, the chief executive of Six Flags, said in a news release.


Jim Sinclair’s Commentary

To those members of the public who insist they can trade Gold and low cap Gold shares to insure themselves in this crisis, may you break even when the dealings are done in your Zero Sum Game

Royal Canadian Mint Fears ‘Run’ On Gold
by Eric deCarbonnel

AFP reports that mounties to probe Canada’s missing gold.
(emphasis mine) [my comment]

Mounties to probe Canada’s missing gold
June 10, 2009

OTTAWA (AFP) — The Canadian government is investigating the disappearance of an amount of gold and precious metals from the Royal Canadian Mint and has asked the federal police to probe a possible heist.

Minister of State for Transport Rob Merrifield said Tuesday he called in the Royal Canadian Mounted Police (RCMP) to conduct a “full investigation.”

External auditors had been ordered to investigate a discrepancy between the mint’s 2008 financial accounting of its precious metal holdings and its actual stockpile. Many had expected the audit would point to sloppy bookkeeping.

The investigation was ordered after mint officials said the audit would not be able to reconcile the discrepancy.

“As soon as they instructed me this morning that it looked like the audit wasn’t going to tell us everything we need to know and be able to rectify the numbers, I thought it was important to bring the RCMP in,” Merrifield said.


Jim Sinclair’s Commentary

No regime change in Iran will slow growing tensions.

Poll: Half of Israelis back bombing if needed to stop Iran nukes

JERUSALEM (CNN) — Roughly half of Israelis support bombing Iran’s nuclear facilities if international efforts fail to stop the Islamic republic from developing nuclear weapons, according to a Hebrew University poll released Sunday.

Some 52 percent of Israelis say the country should bomb Iran’s nuclear reactor, while 35 percent are against, the poll found. The margin of error in the poll of Israelis is 4.5 percentage points.

Palestinians are somewhat more evenly divided, with 43 percent saying a nuclear Iran would be good for the Arab world and 33 percent saying it would be bad, according to the Palestinian Center for Policy and Survey Research in Ramallah, which conducted the poll along with Hebrew University. The margin of error for the Palestinian sample is 3 percentage points.

Hebrew University released the poll shortly before Israel’s Prime Minister Benjamin Netanyahu was due to make what he called a major speech to lay out his plan for the country’s peace and security.

“We want to achieve peace with the Palestinians and with the countries of the Arab world, while attempting to reach maximum understanding with the United States and our friends around the world,” Netanyahu said on June 7 in announcing the speech. “My aspiration is to achieve a stable peace that rests on a solid foundation of security for the State of Israel and its citizens.”