In The News Today

Posted at 7:44 PM (CST) by & filed under In The News.

Thought For This Evening

I have never heard so much noise by so many vocal people who have no idea what they are talking about.

This phenomena at this time is extremely dangerous. That noise is both inside and outside of our community.

QE is not a choice. It is the only tool the Fed has left. Austerity at this time would prove to be more dangerous than QE.

The new good guys and gals elected those with the tendency to select austerity as a solution are as dangerous as the other side.

This situation has all the earmarks of a short fuse that has been set in motion by mistake, and few realize it. For years I have been telling you that there is NO PRACTICAL SOLUTION to the total of all the mistakes that have been made since Roosevelt, in a depression, started it all.


Thought For The Day

The ultimate proof of a bull market is the increase of margin rates.

They are a professional tool to cover shorts and dictated by the board of directors of the exchange, which means floor traders.


Jim Sinclair’s Commentary

Quantitative easing is the monetization of debt. It can take many forms from guaranteeing other obligations to outright purchase of Treasury instruments.

The one trillion dollar Euro Rescue Program is without any doubt as big a QE program as Bernanke proposes. When will the fools that call themselves experts learn anything? When will our community truly understand what is happening now?

The following is a definition of merit from Wikipedia.

Monetizing debt

In many countries the government has assigned exclusive power to issue or print its national currency to independently operated central banks. For example, in the USA the independently owned and operated Federal Reserve banks do this.[1] Such governments thereby disavow the overly convenient ‘slippery slope’ option of paying their bills by printing new currency. They must instead pay with currency already in circulation, or elsefinance deficits by issuing new bonds, and selling them to the public or to their central bank so as to acquire the necessary money. For the bonds to end up in the central bank it must conduct an open market purchase. This action increases the monetary base through the money creation process. This process of financing government spending is called monetizing the debt.[2] Monetizing debt is thus a two step process where the government issues debt to finance its spending and the central bank purchases the debt from the public. The public is left with an increased supply of base money.


Jim Sinclair’s Commentary

There are times when everything around you is so totally FUBAR that one has to have a change of pace.

The world has finally lost whatever remained of its mind.

The geniuses on Financial TV have solutions infinitely more dangerous in present time than QE over time.


Jim Sinclair’s Commentary

What makes anybody think that the solution to Ireland will be any different from the Greek solution?

Should Ireland appeal because of the attack of the OTC derivative, credit default swaps, to the trillion dollar euro rescue fund then a single currency will be buying its own debt.

That is defined as QE in Euroland


Jim Sinclair`s Commentary

The US Treasury must raise money by selling bonds.

The Chinese took two shots at the US Treasury market today. That was their first wrong play. That tactic raises, not lowers the need for QE, the Fed buying of Treasury paper.

QE to infinity is the only the US Fed policy available now and will be the policy of the entire Western World before this chapter closes.

California’s unemployment fund has deficit of $10.3 billion
By Dale Kasler | The Sacramento Bee

California businesses already pay some of the highest unemployment taxes in the country – and the tab is likely to increase.

The recession and the Legislature’s decision years ago to raise benefits have drained the state unemployment insurance fund, which now has a estimated $10.3 billion deficit.

The nonpartisan Legislative Analyst’s Office, in a recent report titled "California’s Other Budget Deficit," said the state will probably need to raise unemployment taxes on employers as well as reduce benefits to bring the fund back in balance.

Raising the tax would require a two-thirds vote in both houses of the Legislature and might be politically impossible. Gov.-elect Jerry Brown has promised not to raise taxes without voter approval.

But pressure is growing on Sacramento to fix the system soon – whether it wants to or not. California has borrowed about $8.5 billion from the federal government to keep benefits flowing, and the repayment obligations are coming due.


Jim Sinclair’s Commentary

What does this mean to a non interest bearing checking account? It might be very interesting for those that are holding funds for USA expenses. I will get back to you.

Certainly this is MOPE and meat for maintaining confidence in the financial system. It however will only end up costing the FDIC big time.

FDIC Approves Temporary Unlimited Deposit Insurance Coverage for Noninterest-Bearing Transaction Accounts

November 9, 2010

The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today approved a final rule to implement section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Section 343 provides temporary unlimited coverage for noninterest-bearing transaction accounts. This separate coverage will become effective on December 31, 2010, and will end on December 31, 2012.

The final rule revises the FDIC’s deposit insurance regulations to include noninterest-bearing transaction accounts as a new temporary deposit insurance account category. All funds held in such accounts are fully insured, without limit, and this coverage is separate from, and in addition to, the coverage provided to depositors for other accounts at an insured depository institution.

Noninterest-bearing accounts, as defined in the Dodd-Frank Act, include only traditional, noninterest-bearing demand deposit (or checking) accounts that allow for an unlimited number of transfers and withdrawals at any time, whether held by a business, individual or other type of depositor.

The new temporary provision for unlimited coverage of deposit insurance for noninterest-bearing transaction accounts is similar to the FDIC’s Transaction Account Guarantee Program (TAGP) but differs significantly in the definition of "noninterest-bearing transaction account." The TAGP, which expires December 31, 2010, includes low-interest NOW (negotiable order of withdrawal) accounts and Interest on Lawyer Trust Accounts (IOLTAs). The final rule expressly states that NOW and IOLTA accounts are not covered under the Dodd-Frank Act definition of noninterest-bearing transaction accounts and do not qualify for temporary unlimited coverage.



Jim Sinclair’s Commentary

This is war.

NYSE Mid-Day Update

China signaled its intention to drain excess cash from its financial system by unexpectedly raising the yield on bills at a central bank auction and announcing new rules to curb hot money inflows. Anecdotally, a ratings agency in China downgraded the U.S. to A+ from AA with a negative outlook because of QE2.