In The News Today

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Few men have the virtue to resist the higher bidder.
–George Washington

Jim Sinclair’s Commentary

Look at the Financial Times online and compare it to financial TV this morning.

Chinese officials said this morning that the economic crisis has shown the weaknesses of a dollar-led global economy and that the world should look to displace the dollar, even though that may be a slow process. China may push for the IMF’s Special Drawing Right to be used as a dollar alternative.


Jim Sinclair’s Commentary

Did any thinking person anticipate anything other than this?

The ancient strategy of warfare in the Middle East once again resurfaces.

Kirkuk Bomb Kills Iraq Peace Hopes After U.S. Pullout (Update1)
By Daniel Williams

July 6 (Bloomberg) — Jamal Tahir Bakr, police chief of the Iraqi city of Kirkuk, expected the euphoria over the U.S. withdrawal from Iraqi cities to end, just not so quickly.

A car bomb blew up a city bazaar and killed 37 people on June 30, the official withdrawal date. It put an end to any illusion that the U.S. pullout, coupled with heightened control by the Iraqi police and army, would bring peace, he said.

“People were getting hypnotized by the idea that normal times were here,” Bakr said in an interview the day after the bombing. “It didn’t make any difference how much you warned them, they had it in their heads. And then the bomb. The real situation is now clear: The problems are not over.”

Too many conflicts are unresolved, Iraqis in Kirkuk say. An insurgency led by Sunni Muslims that rejects the Shiite Muslim- dominated government of Prime Minister Nuri al-Maliki persists. Kirkuk is rent by a long-running feud between the local Kurdish population and Arab Iraqis. U.S. Vice President Joseph Biden warned al-Maliki on July 3 that the U.S. might disengage from the country if it reverts to sustained violence.

Iraqi police aren’t prepared to take on the heavy burden of securing a city of 1 million people, its own officials say. There aren’t enough of them. And the region around Kirkuk, which supplies 25 percent of Iraq’s oil exports, doesn’t get enough funds from the central government for more police.


Jim Sinclair’s Commentary

Who do you believe, the financial TV host or China?

Time to re-read my lesson posted yesterday on SSCI (Super Sovereign Currency Index) use as an alternative reserve currency unit.

China officials call for displacing dollar, in time
Mon Jul 6, 2009 3:58am EDT
By Simon Rabinovitch

BEIJING (Reuters) – The financial crisis has laid bare defects in the dollar-led global economy and the world should look to displace the U.S. currency, even if that will take many years, Chinese officials said in comments published on Monday.

The push for fundamental, if gradual, reform of the international financial system comes just before the Group of Eight summit in Italy, where China’s willingness to question the dollar’s role could fuel debate.

The Special Drawing Right (SDR), a unit of account used by the International Monetary Fund, presents a viable alternative to the dollar as a global reserve currency, said Li Ruogu, chairman of the Export-Import Bank of China, a major state-run bank.

"It is a feasible plan to reform the present SDR and make it into a real settlement currency, a universally accepted ‘currency basket’ that would replace the dollar at the heart of the monetary system," Li was cited as saying in Financial News, a newspaper published by the central bank.

The People’s Bank of China made waves in March when it first suggested that the SDR, whose exchange rate is determined by a mixture of dollars, euros, sterling and yen, was better suited than any single currency to be a yardstick for global trade and a reliable store of value.


Jim Sinclair’s Commentary

Here is a small example of why any gold sold by the IMF is a non-event just like it was in the 70s.

South Korea to buy gold, expecting it to replace dollar
Bank of Korea to Buy Gold for First Time in 11 Years
From Dong-A Ilbo (East Asia Daily)
Seoul, South Korea
Saturday, July 4, 2009

The Bank of Korea has not purchased gold for 11 years but is expected to go on a gold buying spree, as the world’s central banks have bought the commodity since the global economic erupted in September last year.

A Bank of Korea official said yesterday, "The bank has begun to set up a plan to manage foreign exchange reserves for next year. It has also closely watched central banks in other nations and trends in the global gold market. Given the changing global financial environment, the bank’s management plan is critical."

According to experts, the comment implies that the bank plans to buy gold soon. Korea has the world’s sixth most foreign exchange reserves but ranks just 56th in gold holdings.

China, which has the world’s largest foreign exchange reserves, has secretly bought 454 tons of gold over the past six years. This has intensified global competition to obtain more gold.

The amount of gold bought by China over the period is 32 times larger than the Bank of Korea’s gold reserves. The world’s central banks have rushed to buy gold, since they believe the metal will replace the greenback when the dollar’s status as the world’s leading currency weakens.

The bank has said nothing officially, simply saying, "We have made no decision on the purchase of gold and cannot say if we have considered it." It will finalize by November its plan to manage foreign exchange reserves for 2010, but experts forecast that the bank will have no choice but to buy gold soon.


Jim Sinclair’s Commentary

Of all the dark Western developments that we have the OTC derivative manufacturers and distributors to thank for, this is a big one.

Pensions: why there are dark clouds hanging over your sunset years
By Paul Gosling
Monday, 6 July 2009

I hope you enjoy your job: the chances are you will be doing it for many years longer than you once assumed.

Many of us — probably most — can forget about finishing work at the traditional retirement ages of 60 or 65. Working into our 70s is much more likely.

There are several reasons why old age is now unlikely to be a period of wealth and leisure.

The most important is that employers are cutting-back on their commitments to staff pensions by closing final salary schemes — in which employees are paid a pension of an agreed percentage of their last year’s pay.

Instead, an increasing number of employers only commit to paying a defined contribution to their staff’s pension fund. The risk lies with employees, who are expected to top-up the fund to get a decent pension.


Jim Sinclair’s Commentary

All CIGAs know this has been going on behind the scenes. If the media put light on the growing support of this it would destroy the Fed if followed through with.

Calls Grow to Increase Stimulus Spending
JULY 6, 2009

WASHINGTON — Vice President Joe Biden said the Obama administration "misread how bad the economy was" and didn’t foresee unemployment levels nearing double digits, in comments likely to intensify calls for the administration to do more to counter job losses.

Some economists are pressing the White House to enact a second round of stimulus spending or find some other way to avert a prolonged job and wage slump. But the White House is in a tough spot. Officials want to give the $787 billion stimulus package passed in February time to work — only 10% of the spending is out the door so far — and there is little appetite in Congress, particularly among Republicans, for spending more money at a time of record deficits.

The gloomy job picture threatens any economic recovery. The unemployment rate hit 9.5% last month, figures released last week show, and many now expect it to stay high for a long time, eventually reaching double digits. At the same time, wage growth is slumping. People facing unemployment or wage cuts are less able or willing to spend the money needed to stimulate the economy.

Already, job losses are hindering recovery in the housing market as foreclosures among people with good credit who have been laid off compound the problems with risky mortgages that triggered the sector’s implosion.

"They’re in a bind because the recovery package is just starting to generate positive benefits but, to the extent we know something about the future, unemployment is too high and is going to stay high for a long period," said Lawrence Mishel, president of the Economic Policy Institute, a left-leaning Washington think tank. "When we hit 10% unemployment, which we will within months…even those who don’t lose a job will be affected by the squeeze on wage growth, furloughs and the cutbacks in [retirement] plans," he said.


Jim Sinclair’s Commentary

Turn the Fed into a regulator while reducing the Fed’s absolute power over monetary affairs. Increase the Administration’s power of monetary affairs via legislative oversight.

The Chairman becomes a puppet.

This goes against the independent owners of the Fed and might just cause a war between King Makers.

This is very dangerous behind the door stuff.

Steve: Fed, Help Us
Steve Forbes, 07.06.09, 06:00 AM EDT

Steve Forbes discusses the prospect of the Federal Reserve getting more responsibilities, and why it doesn’t need any more.

The Obama administration wants to enhance the regulatory powers of the Federal Reserve. That’s a mistake. The Fed has all the power it needs to help the American consumer and the global economy. The Fed needs to stop buying government debt and start focusing on what matters.

Cash in the banking system is not the problem, so the Fed buying Treasuries won’t solve anything. The Fed should be aggressively buying mortgage-backed securities, packages of credit card loans, car loans and other kinds of credit, as it promised to do last year. The Fed’s balance sheet has shrunk since December, indicating an appallingly timid response in the face of the crisis. The Fed doesn’t have to balloon its balance sheet when it purchases these consumer credit packages, but it does have to pump hundreds of millions of dollars into the system to get credit flowing again.

In terms of regulation, it is a bit ironic they’re still going to put new powers in the Federal Reserve–an agency that didn’t exercise proper oversight over the banking system and whose lousy monetary policy in 2003 and 2004 made the bubble possible. The Fed doesn’t need new powers, it needs to clean up the mess it created.


Jim Sinclair’s Commentary

The real question is will the Fed maintain absolute control over monetary policy.

The administration wants QE at an infinite level. Bernanke is willing but reluctant.

The showdown between the private owners of the Fed and this Administration and its King Makers is at hand. I wager on the Administration and its King Makers in this fire fight.

As far as the dollar is concerned, it is secondary and maybe not even that to the intentions of taking control away from the Fed.

Make the Fed a regulator, not an absolute power over monetary policy which can unseat an administration. Remember who appointed Bernanke and therefore where Bernanke came from.

Maybe there is no compromise in this fire fight.

Will Bernanke keep his job?
Obama will have to make a big decision: Whether to reappoint the Fed chair. Bernanke has detractors on the Hill. Right now at least, odds are he’ll hang on.
By Jennifer Liberto, senior writer
Last Updated: July 6, 2009: 11:22 AM ET

WASHINGTON ( — In the next six months, President Obama faces one of his biggest and most important decisions about the economy.

Should Federal Reserve Chairman Ben Bernanke keep his job?

Bernanke’s term comes to an end on Jan. 31. Obama will either reappoint or replace him. And the president has been coy about his leanings.

Last month, Obama offered a strong defense of Bernanke, saying he has done a "fine job." At the same time, Obama acknowledged that the Fed had missed key aspects of the financial crisis, saying it "didn’t do everything that needed to be done."

As the nation slogs through the recession — now in its 20th month — the role of the central bank’s chief has never been more important.

The Fed is charged with examining bank soundness, as well as checking the cost and availability of money and credit in the economy. Lately, given the more than $1 trillion the Fed has printed to get the markets moving, there’s a renewed focus on watching for signs of inflation.


Jim Sinclair’s Commentary

The process is accelerating as we discussed. Apparently, it will not be silenced.

Calls grow to supplant dollar as global currency
France joins China, India and Russia in calling for a new reserve standard on the eve of the G8 summit
Karim Bardeesy

From Monday’s Globe and Mail Last updated on Monday, Jul. 06, 2009 09:51AM EDT

The call to find an alternative to the U.S dollar as the global reserve currency is gaining momentum as France joined calls by China, India and Russia for a review of the world’s currency practices.

French Finance Minister Christine Lagarde challenged the dollar’s supremacy “in a world that has changed because of the crisis and the growing role of emerging countries.”

The questioning of the U.S. dollar as the key currency for central banks by a leader of a major European economy gives renewed life to the issue at this week’s Group of Eight summit meeting in L’Aquila, Italy. The U.S. dollar has long served as the dominant medium of exchange, and tends to dominate the official money reserves that countries hold through their governments and at their central banks.

In the first quarter of 2009, 65 per cent of the world’s allocated foreign exchange holdings were held in U.S. dollars, according to the International Monetary Fund. That’s the highest in seven quarters.

The push for an alternative is being driven in large part by concern over the weakened state of the U.S. economy.

The country is forecasting fiscal deficits for the next decade.

That’s leading large holders of U.S. debt such as China to worry that the U.S. dollar may not be as safe as it once was. In addition, the dollar has been volatile on international currency markets, and the U.S. is running ongoing trade deficits.


Jim Sinclair’s Commentary

Those that support, no demand, an alternative to the US dollar are turning up the volume.

Bloomberg and all the key financial TV stations are broadcasted everywhere in the world.

Non US principles are taking offense to the US media’s unbridled MOPE and SPIN.

Dollar’s Days of Dominance Are Over
July 05, 2009

While it may not constitute the final “nail in the coffin”, India commemorated the 4th of July by joining China and Russia in announcing they were seeking “alternatives” to the U.S. dollar (as “reserve currency”). With yet one more “prop” removed from the gangrenous greenback, this left only the submissive Japanese as the last major holder of U.S. dollars who strongly supports its continued status.

Bloomberg reported Saturday that the economic advisor to Indian Prime Minister Manmohan Singh has publicly and explicitly recommended that India reduce the U.S. dollar component of its currency reserves. “The major part of India reserves [totaling $264 billion] is in U.S. dollars – that is something that’s a problem for us,” said Suresh Tendulkar.

These remarks come only one day after China’s former Vice Premier, Zeng Peiyan stated, “There should be a system to maintain the stability of the major reserve currencies.”

Several comments need to be made with reference to this remark. First, China commonly uses “voices” of those associated to but not in the government to indirectly reveal its thoughts on issues. Thus the fact that Zeng is a former Vice Premier should not be taken to mean that his remark is not indicative of the position of the Chinese government.

Second, there were two subtleties which should cause Americans (and the Obama regime) serious concern. First, Zeng spoke of “major reserve currencies” – making it explicitly clear that he (and China) no longer consider the dollar the sole “reserve currency” today. The other point to ponder is Zeng’s reference of a “system to maintain stability” in currency markets. The U.S. dollar was that system.