In The News Today

Posted at 6:06 PM (CST) by & filed under In The News.

While the government struggles to save one crumbling enterprise at the expense of the crumbling of another, it accelerates the process of juggling debts, switching losses, piling loans on loans, mortgaging the future and the future’s future. As things grow worse, the government protects itself not by contracting this process, but by expanding it.
–Ayn Rand, 1974

Dear CIGAs,

I am certainly an economic animal and 71.

With all respect to my beloved Barbara, I think Christine Lagarde of the IMF is very cute.

I think Barbara would not object. She was and always respected a class operation.


Jim Sinclair’s Commentary

This is exactly why rescue funds will not run out when with the push of a computer button you can create as much as you need and more.

Deutsche Bank: Worst of Global Crisis Yet to Come as Rescue Cash Runs Out
Wednesday, April 18, 2012 12:13 PM

The worst may be yet to come in the global financial crisis as the central bank spending that kept defaults low runs out, according to Deutsche Bank AG.

Credit-default swap prices imply that four or more European nations may suffer so-called credit events such as having to restructure their debt, strategists led by Jim Reid and Nick Burns said in a note. The Markit iTraxx SovX Western Europe Index of contracts on 15 governments including Spain and Italy jumped 26 percent in the past month as the region’s crisis flared up.

“If these implied defaults come vaguely close to being realized then the next five years of corporate and financial defaults could easily be worse than the last five relatively calm years,” the analysts in London said.

“Much may eventually depend on how much money-printing can be tolerated as we are very close to being maxed out fiscally.”

Default rates stayed in line with historical norms between 2007 and 2011 because of the “unprecedented intervention” of European and U.S. policy makers, the analysts wrote in the report.



Jim Sinclair’s Commentary

QE is monetary stimulation on steroids just in case you have forgotten.

This is a good short explanation. The longer the explanation the less accurate it is

Quantitative easing
From Wikipedia, the free encyclopedia

Quantitative easing (QE) is an unconventional[1][2] monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective. A central bank buys financial assets to inject a pre-determined quantity of money into the economy. This is distinguished from the more usual policy of buying or selling government bonds to keep market interest rates at a specified target value. A central bank implements quantitative easing by purchasing financial assets from banks and other private sector businesses with new electronically created money.[3][4][5][6]This action increases the excess reserves of the banks, and also raises the prices of the financial assets bought, which lowers their yield.[7]

Expansionary monetary policy typically involves the central bank buying short-term government bonds in order to lower short-term market interest rates (using a combination of standing lending facilities[8][9] and open market operations).[10][11][12][13] However, when short-term interest rates are either at, or close to, zero, normal monetary policy can no longer lower interest rates. Quantitative easing may then be used by the monetary authorities to further stimulate the economy by purchasing assets of longer maturity than only short-term government bonds, and thereby lowering longer-term interest rates further out on the yield curve.[14][15]


Jim Sinclair’s Commentary

Whatever is required by weak Euroland members will be supplied.

QE to infinity is debt monetization to infinity and is as sure as death and taxes. This is just another reason why.

Spanish Banks Gorging on Sovereign Bonds Shifts Risk
By Yalman Onaran – Apr 17, 2012 4:01 PM MT

Spanish, Italian and Portuguese banks are loading up on bonds issued by their own governments, a move that shifts more of the risk of sovereign default to European taxpayers from private creditors.

Holdings of Spanish government debt by lenders based in the country jumped 26 percent in two months, to 220 billion euros ($289 billion) at the end of January, data from Spain’s treasury show. Italian banks increased ownership of their nation’s sovereign bonds by 31 percent to 267 billion euros in the three months ended in February, according to Bank of Italy data.

German and French banks, meanwhile, have cut holdings of those countries’ bonds, as well as Irish and Greek debt, by as much as 50 percent since 2010 in some cases. That leaves domestic firms on the hook for a restructuring such as Greece’s last month and their main financier, the European Central Bank, facing losses. Like Greece, governments would have to rescue their lenders with funds borrowed from the European Union.

“The more banks stop cross-border lending, the more the ECB steps in to do the financing,” said Guntram Wolff, deputy director of Bruegel, a Brussels-based research institute. “So the exposure of the core countries to the periphery is shifting from the private to the public sector.”


Jim Sinclair’s Commentary

From this time to today great civilizations have destroyed themselves in the same way. Coin clipping was the first event of political economics. Today it is debt monetization. To some there is a greater meaning in this.

Gobekli Tepe: The World’s First Temple?
Predating Stonehenge by 6,000 years, Turkey’s stunning Gobekli Tepe upends the conventional view of the rise of civilization
By Andrew Curry
Photographs by Berthold Steinhilber
Smithsonian magazine, November 2008


Six miles from Urfa, an ancient city in southeastern Turkey, Klaus Schmidt has made one of the most startling archaeological discoveries of our time: massive carved stones about 11,000 years old, crafted and arranged by prehistoric people who had not yet developed metal tools or even pottery. The megaliths predate Stonehenge by some 6,000 years. The place is called Gobekli Tepe, and Schmidt, a German archaeologist who has been working here more than a decade, is convinced it’s the site of the world’s oldest temple.

"Guten Morgen," he says at 5:20 a.m. when his van picks me up at my hotel in Urfa. Thirty minutes later, the van reaches the foot of a grassy hill and parks next to strands of barbed wire. We follow a knot of workmen up the hill to rectangular pits shaded by a corrugated steel roof—the main excavation site. In the pits, standing stones, or pillars, are arranged in circles. Beyond, on the hillside, are four other rings of partially excavated pillars. Each ring has a roughly similar layout: in the center are two large stone T-shaped pillars encircled by slightly smaller stones facing inward. The tallest pillars tower 16 feet and, Schmidt says, weigh between seven and ten tons. As we walk among them, I see that some are blank, while others are elaborately carved: foxes, lions, scorpions and vultures abound, twisting and crawling on the pillars’ broad sides.

Schmidt points to the great stone rings, one of them 65 feet across. "This is the first human-built holy place," he says.

From this perch 1,000 feet above the valley, we can see to the horizon in nearly every direction. Schmidt, 53, asks me to imagine what the landscape would have looked like 11,000 years ago, before centuries of intensive farming and settlement turned it into the nearly featureless brown expanse it is today.


Jim Sinclair’s Commentary

By definition each step forward for the Yuan moves towards a reserve currency of choice, and is inherently a step backwards for the US dollar as a reserve currency of choice.

However, this extremely important development means nothing whatsoever to MOPE of MSM.

Barclays, Standard Chartered Back London Bid for Yuan Hub
By Emma Charlton and Fion Li – Apr 18, 2012 1:44 AM ET

London is seeking to become a hub for yuan trade and investment in an initiative backed by Bank of China Ltd., Barclays Plc (BARC), Deutsche Bank AG (DBK), HSBC Holdings Plc (HSBA) and Standard Chartered Plc. (STAN)

Institutions in the U.K. capital currently have more than 109 billion yuan ($17 billion) of customer and interbank deposits in the Chinese currency and that is “growing strongly,” according to a policy paper by research firm Bourse Consult released today.

Chancellor of the Exchequer George Osborne pushed the case for London to become an offshore center for yuan trade as closer financial ties with the world’s second-largest economy may help buffer Britain’s economy against the sovereign-debt crisis in Europe. China doubled the yuan’s trading band and allowed banks to hold dollar short positions this week, steps seen as paving the way for a convertible currency.

“London is making a push to become the second offshore yuan market,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “This is likely to occur wherever local markets need the offshore yuan business to boost their status. At the same time it will offer China a platform to expand the international use of the currency, preferably in time zones other than its own.”


Jim Sinclair’s Commentary

As a follow up to yesterday’s revelation concerning the degree of derivative risk each and every one of us has, please review the following offering from the Green Hornet.

Wall Street owns Washington and Main Street is damned to hell. QE to infinity, which is debt monetization to infinity, is as sure as death and taxes.

Roger Lowenstein interviewed me for my career review in Forbes in December of 2001.

Derivatives Lobby Has U.S. Regulators on the Run
By Roger Lowenstein Apr 17, 2012 7:01 PM ET

The derivatives industry is squeezing Washington like a python. Desperate to control the tone and thrust of derivatives regulation, industry lobbyists have been swarming over the Commodity Futures Trading Commission and the Securities and Exchange Commission, each of which is writing derivatives rules as mandated by the Dodd-Frank reform law.

In case their lobbying falls short, the industry — largely dealer banks and commodities firms — has been pushing legislation that would pre-empt the rulemaking process and tie the agencies’ hands. So far, no fewer than 10 such derivatives bills have been introduced in the House; two have passed and several more have cleared committee.

Not satisfied with that, influential lawmakers have been not so subtly warning regulators to go easy on derivatives. This is incredibly intimidating: Congress controls the agencies’ budgets, and the increase in workload mandated by Dodd-Frank leaves them woefully short on funds.

And should a derivatives rule unpalatable to the dealers somehow survive this Beltway obstacle course, the agencies face an explicit threat of a lawsuit. This has had a chilling effect. As Bart Chilton, a CFTC commissioner, told me, regulators fear there is “litigation lurking around every corner and down every hallway.”

Power Play

The subtext of this power play is, of course, the 2008 financial crash, in which derivatives played an important role. Look no further than American International Group Inc.’s notorious mortgage-insurance contracts, which triggered the run of financial bailouts. Or the synthetic collateralized debt obligations that multiplied the market’s exposure to subprime mortgages.


Jim Sinclair’s Commentary

Surprise, surprise. Financial TV seems to not have any interest in this.

IMF tells US to sort out debt, quickly
By Andrew Beatty (AFP) – 23 hours ago

WASHINGTON — The International Monetary Fund issued a clarion call to bickering US politicians Tuesday, urging them to solve the country’s debt problems before a still-vulnerable economy is tipped over the brink.

In a hallmark semi-annual report, the Washington-based fund warned policymakers on the other side of the US capital that, while the world’s largest economy is improving, they invite trouble by not addressing a looming debt crisis.

"The first priority for US authorities is to agree on and commit to a credible fiscal policy agenda that places debt on a sustainable track over the medium term," the IMF said.

So far the United States has avoided the type of debt crisis that has ravaged Europe — with the dollar’s safe-haven status and moderate growth providing a sizable safety net even as agencies have downgraded the country’s credit rating.

But with Washington hurtling toward November presidential polls, and with the country’s politicians gripped by a culture of permanent campaigning, time may be running out to find a solution.


Jim Sinclair’s Commentary

Whatever Spanish banks require they will get from the ECB via swaps from the US Fed. Be assured of QE to infinity under the camouflage of ever-renewed swaps.

Bad loans at Spanish banks hit 18-year record

Non-performing loans at Spanish banks rose to an 18-year high of 8.16% in February from 7.91% in December, reaching a total of €143.82B. The latest figures contrast with a rate that was below 1% in the years prior to the collapse of the property market in 2008, and will only exacerbate fears that the banks, if not the government, will need a bailout. (Source – MarketWatch)

Jim Sinclair’s Commentary

Spain will get everything it needs after 50 summit meeting among euro leaders and 5000 denials.

The same is true for Italy and Portugal.

"Not if, but when" for Spanish bailout, experts believe
By Luke Baker
BRUSSELS | Wed Apr 18, 2012 5:54am EDT

(Reuters) – Economic experts watching Spain don’t know how much money will be needed or precisely when, but some are near certain that Madrid will eventually seek a multi-billion euro bailout for its banks, and perhaps even for the state itself.

Prime Minister Mariano Rajoy has repeatedly said Spain doesn’t need or want an international bailout, and the European Union, which along with the IMF has already rescued Greece, Ireland and Portugal, also dismisses such talk.

But economists believe that Spanish banks will have to turn to the euro zone’s rescue fund, the European Financial Stability Facility (EFSF), for help in covering losses caused by a property market crash which has yet to end.

Likewise, investors are fretting about how Rajoy’s centre-right government can enforce deep austerity while reviving a recession-bound economy at the same time.

"They’re going to need EFSF money to recapitalize the banking sector," said Carsten Brzeski, a senior economist at ING in Brussels. "I think we’ll only see a real end to the Spanish misery if the real estate market stabilizes."


Jim Sinclair’s Commentary

Iranian Mope will not be outdone by the West.

The first casualty of any kind of war, hot or economic, is truth.

Iran foreign trade rises 45% in a month to hit new record: Report
On Line: 17 April 2012 16:57
In Print: Wednesday 18 April 2012

The volume of Iran’s foreign trade has increased 45 percent in the last month of the previous Iranian calendar year (February 20-March 19, 2012) compared to a month before.

According to the latest report issued by the Islamic Republic of Iran Customs Administration, the total volume of Iran’s foreign trade during the aforesaid period hit a new record, exceeding USD 10.924 billion.

The report added that Iranian businessmen had traded USD 7.521 billion of commodities with other countries in the Iranian month preceding the mentioned period (January 21-February 19, 2012), but the figure took a remarkable upturn the next month to hit about USD 11 billion.

In terms of weight, the Customs report noted, Iran’s foreign trade grew by 41.2 percent in the above mentioned period and reached 12.274 million tons, while a month earlier, Iran had traded 8.695 million tons of goods with other countries.

The report noted that the 45-percent increase in Iran’s foreign trade during a single month proves the failure of the economic sanctions imposed on Iran by the Western countries over Tehran’s nuclear energy program.

On April 7, Trade Promotion Organization’s deputy director for trade aid announced that non-oil exports of Iran have surged despite international sanctions imposed on the country in the previous Iranian calendar year (ended March 20) to reach almost USD 50 billion.


Jim Sinclair’s Commentary

Food stamp program participation numbers are at all time highs, however MSM and MOPE have been lauding the so-called recovery.


Jim Sinclair’s Commentary

As long as MSM and MOPE control the focus of your attention, and they do, you cannot see this.

It is as if the problems of the USA and Great Britain were relatively invisible. Therefore who attacks the euro daily? The answer is those that control MSM and MOPE.

The predictable result is that the euro will move toward Russia, China and India for commercial defense against the USA and GB. This is currency war at its best. It is long term world class dumb for the perpetrators.

The resolution of this war is the key element in today structuring of tomorrow, yet who understands it?

More U.S. cities set to enter default danger zone
By Michael Connor
April 17 | Tue Apr 17, 2012 4:43pm EDT

(Reuters) – America’s swelling ranks of fallen municipal borrowers have been blamed in the past year on ‘what-were-they-thinking’ causes, be it a Taj Mahal sewer system in Alabama or an overpriced trash incinerator in Pennsylvania’s capital city of Harrisburg.

But the next series of major cities and counties in danger of defaulting on their debt can hardly point to one single decision for their malaise. Whether it be Detroit, Miami or Providence, Rhode Island, their problems have a lot more to do with financial policies that put them on course to live well beyond their means.

Municipal defaults have shot up since 2007 and are on pace for another high year in 2012, according to Richard Lehmann, publisher of the Distressed Securities Newsletter.

Many failures will be due to local politicians’ willingness to give unionized local government workers lucrative pensions and health care benefits when times were good. For others, the housing bust was enough to destroy their real estate tax base. They almost all share the failure to prepare for a rainy day.

Now, belt tightening by state and federal governments is adding to the pain – as contributions to governments at city and county levels get squeezed. Many of the places in the worst condition are in the Northeast, Midwest, California and Florida.

The new tide of defaults may worry some investors in the $3.7 trillion municipal bond market who have so far shrugged off the fiscal crises of local governments and yield cuts in local government services.


Jim Sinclair’s Commentary

Smells like a real COVER story.