Jim’s Mailbox

Posted at 2:29 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

According to the author this action was unprecedented. Please share your thoughts on this.

Best regards,
CIGA Ruchir

Hit With Big Withdrawals, Fed Sells Assets, Borrows Cash
By Lee Adler Nov 07, 2011 8:10 am

The Fed’s action was not only a direct contradiction of its stated policy, but it ran counter to Bernanke’s penchant for telegraphing every important move the Fed makes. What’s up?

The Fed was hit with withdrawals of $83.3 billion last Wednesday, the largest withdrawals from its deposit accounts that were not associated with quarterly tax payments since February 2009, and $7 billion of that was the net cash transferred to the US Treasury from its note and bond sales less outlays.

The Fed still had to meet the other $76 billion. These transactions were revealed in the Fed’s weekly H.4.1 report. The Fed was apparently forced to take extraordinary measures to fund these withdrawals. These included the outright sale of nearly $24 billion in its Treasury note and bond holdings from the System Open Market Account (SOMA). As a result, the Fed’s SOMA fell to $2.611 trillion, some $43 billion below the Fed’s stated target of $2.654 trillion.

Prior to last week, it had not strayed from the target by more than $7 billion since June. The Fed’s action was not only a direct contradiction of its stated policy, but it was done without warning or explanation. It ran counter to Federal Reserve Chairman Ben Bernanke’s penchant for telegraphing every important move the Fed makes so that the banking/speculating organizations can front-run it. The Fed took another unusual and virtually unprecedented action to fund these massive withdrawals. It borrowed $43 billion from foreign central banks (FCBs) through reverse repurchase agreements (reverse repos, or RRPs).



Jim Sinclair’s Commentary

Yra’s conclusions are sound. Gold will re-enter the system, about that there is no question.

My conclusions is that a virtual reserve currency will be created that is tradable by central banks only. It will be a super virtual average of all major trading currencies with gold attached by a world sort of M3 against gold, as a price, held in the implied guarantee and/or currency.

The bullish outcome on gold as an end game is a cause of the intact gold trend fought so hard from $248 to present day by media MOPE.

Notes From Underground: When I have Something to Say Sir I Am Going to Say It Now! (Phil Ochs)
By Yra

“The news item from the G-20 about Germany not willing to pledge its GOLD reserves to guarantee the EFSF leads me to believe that the use of GOLD to backstop DEBT is on the table. The U.S. has the largest GOLD RESERVES with Germany second and the IMF third. Yes, IMF rules presently prevent the use of its GOLD for collateral but with the G-20 seeking to become more relevant in the current CREDIT CRISIS it would not surprise me if the IMF HEAD Christine Lagarde didn’t find a way to utilize her legal background and circumvent the rules.

If the IMF leveraged it GOLD horde the market may see it as bearish as it may resolve the immediate crisis but ultimately the monetization of the world’s GOLD would lead to a bullish outcome; when and at what price we will let the market tell us? This view may be a fantasy but the German decision to deny Europe its GOLD holdings mean that discussions are taking place. Oh and Italy is also in the Top 10 of GOLD holdings.

When it comes to Europe and finance it is similar to the movie “BANG THE DRUM SLOWLY.” The veteran ball players entice the rookies into a card game called TEGWAR (THE EXCITING GAME WITHOUT ANY RULES). That seems to sum up the international financial system, especially Europe.”




Financial leadership? Where?

The show is akin to the “Keystone Cops.”


Italy at breaking point, Merkel calls for “new Europe”

Once a nation defaults, the wolf pack will find its next victim regardless of the number of emergency meetings and/or suggestions of various official super committees. Germany is the key. If the German people turn inward by withdrawing from the Euro zone, trade barriers will likely reemerge and social tension will rise. There’s far more at stake here than whether or not Greece, Italy, Spain, et. al. will be able to pay their bills. This is the message being sent by the Euro and gold.

Headline: Italy at breaking point, Merkel calls for “new Europe”

ROME/BERLIN (Reuters) – Italian borrowing costs reached breaking point on Wednesday after Prime Minister Silvio Berlusconi’s insistence on elections instead of an interim government opened the way to prolonged instability and delays to economic reform.

Italian 10-year bond yields shot above the 7 percent level that is widely deemed unsustainable, reflecting investors’ concerns that they may not get their money back and prompting German Chancellor Angela Merkel to issue a call to arms.

Merkel said Europe’s plight was now so “unpleasant” that deep structural reforms were needed quickly, warning the rest of the world would not wait. “That will mean more Europe, not less Europe,” she told a conference in Berlin.

She called for changes in EU treaties after French President Nicolas Sarkozy advocated a two-speed Europe in which euro zone countries accelerate and deepen integration while an expanding group outside the currency bloc stayed more loosely connected — a signal that some members may have to quit the euro if the entire structure is not to crumble.

Source: finance.yahoo.com