In The News Today

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"The limits of tyrants are prescribed by the endurance of those whom they oppress."
–Fredrick Douglass, August 4, 1857

Jim Sinclair’s Commentary

Here is a rock and hard place. The dollar is becoming less acceptable as a reserve currency because of all the QE.

A failure to apply QE at warp speed will result in the 30 year US Treasury breaking its 28 year uptrend line. That will send rates into the stratosphere and then China’s treasury instruments into the trash heap. QE must continue. The uptrend line will break harder on the downside in November of 2009.

China sells US bonds to ‘show concern’
Jun 17 04:20 AM US/Eastern

A decision by China to reduce its US Treasury holdings suggests concern about the US attitude towards its economic woes, Chinese economists were quoted as saying in state media Wednesday.

The remarks, coming after US data showed a modest decline in Chinese investments in US government bonds, were in contrast to an earlier statement in Beijing which had said the recent sell-off was a routine transaction.

"China is implying to the US, more or less, that it should adopt a more pragmatic and responsible attitude to maintain the stability of the dollar," He Maochun, a political scientist at Tsinghua University, told the Global Times.

According to US Treasury data issued Monday, Beijing owned 763.5 billion dollars in US securities in April, down from 767.9 billion dollars in March.

It was the first month since June 2008 that Beijing failed to purchase more US T-bills.

Zhang Bin, a researcher at the Chinese Academy of Social Sciences, said China’s move showed a more cautious attitude.


Jim Sinclair’s Commentary

I could not have said this better. The dollar will not survive this Fall and will fall sharply this winter.

"US officials wanted to attend Yekaterinburg as observers. They were told no. It is a word that Americans will hear much more in the future."

Washington is unable to call all the shots
Financial Times
By Michael Hudson
Published: June 15 2009 03:00 | Last updated: June 15 2009 03:00

Challenging the American empire will be the focus of meetings in Yekaterinburg, Russia, today and tomorrow for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other leaders of the six-nation Shanghai Co-operation Organisation. The alliance comprises Russia, China, Kazakhstan, Tajiki-stan, Kyrgyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia.

The attendees (who will be joined on Tuesday by Brazil for trade discussions) have assured American diplomats that dismantling the US financial and military hegemony is not their aim. They simply want to discuss mutual aid – but in a way that has no role for the US or for the dollar as a vehicle for trade among these countries.

The meeting is an opportunity for China, Russia and India to "build an increasingly multipolar world order", as Mr Medvedev put it in a St Petersburg speech this month. What he meant was this: we have reached our limit in subsidising the US military encirclement of Eurasia while also allowing the US to appropriate our exports, companies and real estate in exchange for paper money of questionable worth.

An "artificially maintained unipolar system", Mr Medvedev said, was based on "one big centre of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks".

Keen observers of America, if not effective managers of their own economies, these countries argue that the root of the global financial crisis is that the US makes too little and spends too much. Especially upsetting is US military expenditure – such as military aid to Georgia or the presence in the oil-rich Middle East and central Asia – using money that foreign central banks recycle.


Jim Sinclair’s Commentary

You ask what is next from a person screaming for attention, lacking all his paddles in the water and seemingly being ignored by the public? A shot at Hawaii that misses hopefully.

North Korea may fire a missile toward Hawaii
By HYUNG-JIN KIM, Associated Press Writer
Thu Jun 18, 7:48 am ET

SEOUL, South Korea – North Korea may fire a long-range ballistic missile toward Hawaii in early July, a Japanese news report said Thursday, as Russia and China urged the regime to return to international disarmament talks on its rogue nuclear program.

The missile, believed to be a Taepodong-2 with a range of up to 4,000 miles (6,500 kilometers), would be launched from North Korea’s Dongchang-ni site on the northwestern coast, said the Yomiuri daily, Japan’s top-selling newspaper. It cited an analysis by the Japanese Defense Ministry and intelligence gathered by U.S. reconnaissance satellites.

The missile launch could come between July 4 and 8, the paper said.

While the newspaper speculated the Taepodong-2 could fly over Japan and toward Hawaii, it said the missile would not be able to hit Hawaii’s main islands, which are about 4,500 miles (7,200 kilometers) from the Korean peninsula.

A spokesman for the Japanese Defense Ministry declined to comment on the report. South Korea’s Defense Ministry and the National Intelligence Service — the country’s main spy agency — said they could not confirm it.


Jim Sinclair’s Commentary

Now here is an example of World Class closing of the barn door after the horses have left. Who are they kidding?

Standard & Poor’s Cuts Ratings On 22 Banks
6/17/2009 1:36 PM ET

(RTTNews) – Credit ratings agency Standard & Poor’s lowered its ratings and revised its outlooks on 22 U.S. banks on Wednesday, citing concerns that operating conditions will be less favorable than they were in the past due to volatile financial markets during credit cycles and tighter regulatory supervision.

Standard & Poor’s also said the changes reflect its ongoing broad-ranging reassessment of industry risk for U.S. financial institutions. The agency indicated that the banking industry is now in a transition period and will likely undergo material structural changes.

Further, the agency said its overall assessment of the industry includes expectations that loan losses are likely to continue to increase and could rise beyond current expectations.

Standard & Poor’s credit analyst Rodrigo Quintanilla said, "We believe the banking industry is undergoing a structural transformation that may include radical changes with permanent repercussions."

"Financial institutions are now shedding balance-sheet risk and altering funding profiles and strategies for the marketplace’s new reality," Quintanilla added. "Such a transition period justifies lower ratings as industry players implement changes."


Jim Sinclair’s Commentary

Actually, I am amazed that something as correct and intelligent as this is entertained by the dullest people on the planet.

I smell politics and pressure on the Fed to ramp up QE without waiting for a second crisis.

Ron Paul’s "Fed Transparency" Bill Gets Majority House Support
Posted Jun 12, 2009
From The Business Insider, June 12, 2009:

The US House of Representative has joined the Cult of Paul.

Ron Paul, the famously anti-Federal Reserve Congressman from Texas has got 221 of his colleagues to sign onto a bill (via Zero Hedge) that would require a fresh, outside audit of the Federal Reserve. That’s more than enough to get the bill out of the House, though it now faces the more adult and deliberative House of LordsSenate, who are likely to have less interest in such seditious shenanigans.

The first Senate co-sponsor is rumored to be Jim DeMint of South Carolina, a favorite among the hard right and a possible Presidential candidate.