Jim’s Mailbox

Posted at 12:47 PM (CST) by & filed under Jim's Mailbox.

Jim Sinclair’s Commentary

CIGA Pedro clearly outlines how the demise of the dollar is the demise of much more. Greenspan gave away more than anyone knows.

Gold is your only insurance policy against things we cannot control regardless of the wild fluctuation of the price. We must be our own central bank.

Inflation Inflation Everywhere and Not a Drop to Drink

At last, the doubters have nowhere to hide. The world is starkly revealed as an interconnected political economy force, and not as a disparate grouping of various nations, some authoritarian, some choosing democratically agreed upon policies, creating policy choice and thereby shaping of political outcome. Greece, Ireland, Tunisia, and now, the fulcrum of the Arab world, Egypt, stand as testimony. They are countries caught up in the machinations of a monetary policy to debase the world’s reserve currency.

All “he” wanted was some inflation, a little inflation to get America and the west out of the deflationary spiral caused by the failure of financial instruments (a.k.a. OTC Derivatives) and un-payable government debt – but he can’t get it. Everywhere it rages, but the place he wants it – home. So it erupts in global food prices and manifests itself in the attempts to bail out stone dead banks on the backs of the marginal economic player – post-destruction of the middle class. Most of the world has no savings to get through difficult times. Most of the world cannot “hedge” inflationary outcomes. Those outcomes appear quickly and change realities violently. The inflationary reality is their reality – the difference between starvation and survival. The result? Global upheaval, leading to where, we are not sure… but probably nowhere nice. Think American monetary policy was a uniquely sovereign, American affair? Think again. You are watching QE II live on television. American monetary policy and the global “race to debase” is that raging crowd you see on the television from Ireland to Greece and Egypt. It is that nascent force which Chinese leaders awake in terror, wondering what a billion plus people might do if faced with stark choices. If you can’t make the connection between the monetary policy and the political reality, you need to change the causal way you look at the world.

Nations hold dollars in reserve to meet the demands of running an economy. When debasement takes place, the marginal economic player gets hit first. This is what we see now. But there is another, geo-political aspect many are missing. The western attempts to control multiple political outcomes and a global geo-political/military order rests on the ability to finance and control that order. When the money gets degraded, the ability to finance that order goes with it. Degradation of currency inhibits foreign force projection, both militarily and politically. Nobody in Egypt believes America is capable of controlling political outcomes, as they did from Suez to Mubarak. That era has passed. It passed with the Shah of Iran, and the death of the widely despised (in Egypt) Anwar Sadat. The Mubarak intermezzo is over. In the Arab world, what happens in Egypt doesn’t stay in Egypt. The potential for “regime change” in Saudi Arabia is growing. Now we find that the financial necessity for Dollar debasement wasn’t as politically benign as people in Washington thought. Instability rages across a region that could usher in an era of global conflict.

People say, “be careful what you wish for” when you talk about the end of western hegemony, but while the political hegemony is dying by the hour, the monetary hegemony is currently intact and its results are evident. When those results swing full circle and return to the west, currency upheaval will be guaranteed. Global system breakdown, which made its debut in 2008 is now back for its main act. Money printing didn’t quite work out the way it was supposed to. This time, a rush to the security of Treasury instruments is unlikely to be the fallback position for global capital that now sees Fed monetary policy as a destructive boomerang cutting inflationary swathes across the planet… en route to its place of origin.

CIGA Pedro

 

Greetings Jim,

Gold closed slightly lower this week, reacting sharply off of the lower boundary of the uptrend from late 2008.

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We are now 26 weeks into the intermediate-term cycle following the low on July 30. Ninety percent of all Intermediate-Term Cycle Lows (ITCL) form within 23 weeks of the previous low, so Cycle Analysis (CA) indicates that the latest ITCL is imminent and could occur at any time.

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Additionally, the short-term cycle is currently within the window during which the next Short-Term Cycle Low (STCL) is likely to occur, and the setup for a confirmed STCL signal was generated on Friday as both of our CA price oscillators experienced bullish crossovers.

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The trigger for confirming this STCL signal would be a daily close above $1,346. A confirmed STCL next week would significantly increase the likelihood of the ITCL occurring as well, and a synchronized short-term and intermediate-term low would forecast a move up to new all-time highs during the next 2 to 3 months.

Best,
CIGA Erik
Prometheus Market Insight
http://www.prometheusmi.com