Jim’s Mailbox

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Gold is for saving. Currency is for transactions.
–CIGA Patrick

 

The prudent mariners are already getting out of the system now, but it’s the clueless landlubbers that will drown in the sea of red ink these criminals have created.
–CIGA Rico

 

Dear Jim,

Australia with its major mining industry is moving away from the US dollar.

Every one of these initiatives chips away at the all important contract settlement role of the US dollar.

Sorry, Mates, Strictly Business: Australia Wants To Cut Out US Dollar In Trade With China
By Ryan Villarreal | March 29 2013 7:42 PM

Australia is seeking to bypass trading in U.S. dollars with China in a deal that will be the focus of Prime Minister Julia Gillard’s trip to Beijing next week.

Trade with China, Australia’s primary trading partner, totaled $120 billion in the last fiscal year. China buys nearly one-third of Australian exports.

“The value of such a deal would be substantial for exporters to China, especially those that import a lot from China, like mining companies, as it would remove business constraints including exchange-rate risks and transaction costs,” said Australia’s former ambassador to China, Geoff Raby, according to the Australian.

The Australian government has made no secret of its aims to shift away trade from the U.S. dollar, the world’s primary reserve currency used in international commerce.

A government report titled, “Australia in the Asian Century,” discusses Canberra’s efforts to establish direct trading between the Australian dollar and the Chinese renminbi, or RMB, also referred to as the yuan. It also pushes for increasing the prominence of the RMB as a global reserve currency.

More…

 

 

Jim Sinclair’s Commentary

CIGA Bill is correct. If the fools that have attacked Cyprus persist then it is the start of an avalanche that will destroy confidence in fiat currency, the fractional reserve system and central banks. What are the central bankers terrified of? My answer is the mountain of old OTC derivatives coming home to roost.

The only logical action you can take is to get out of the system to the largest degree possible.

Jim,

The FDIC-BOE directive states that some other way besides taxpayer bailouts are needed to maintain “financial stability.” The 15-page, 10 December 2012, FDIC-BOE document is called “Resolving Globally Active, Systemically Important, Financial Institutions.” (http://www.fdic.gov/about/srac/2012/gsifi.pdf)

“Title II of the Dodd-Frank Act provides the FDIC with new powers to resolve SIFIs( systemically important, financial institutions) by establishing the orderly liquidation authority (OLA). “The FDIC and BOE are anticipating that the next financial collapse will be on a grander scale than either the taxpayers or Congress is willing to underwrite. The deposits would be provided for by exchanging or converting a sufficient amount of the unsecured debt from the “original creditors (the depositors) of the failed company into equity (stock). “In the U.S., “the new equity would become capital in one or more newly formed operating entities”  “ thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm.”  You would be able to sell the stock if you could find a person to buy stock in a failed bank.

No exceptions are indicated for “insured deposits” in the U.S.  The deposits that were protected by FDIC insurance, meaning those under $250,000, are not noted as exceptions for “insured deposits” in the U.S. This can hardly be an oversight, since it is the FDIC that is issuing the directive.

See the detail references below for the actual sections of the document in the attachment.

CIGA Bill

pg ii report pg 2 pdf

Executive summary

“The financial crisis that began in 2007 has driven home the importance of an orderly resolution process for globally active, systemically important, financial institutions (G-SIFIs). “ 

“In the U.S., the strategy has been developed in the context of the powers provided by the Dodd-Frank Act of 2010. Such a strategy would apply a single receivership at the top-tier holding company, assign losses to shareholders and unsecured creditors of the holding company, and transfer sound operating subsidiaries to a new solvent entity or entities”

pg 14 report pg 17 pdf

Conclusion

64  In both the U.S. and the U.K., legislative reforms already made or planned in response to the financial crisis provide new powers for resolving failed or failing G-SIFIs. The FDIC and the Bank of England have developed resolution strategies that take control of the failed company at the top of the group, impose losses on shareholders and unsecured creditors (the depositors) —not on taxpayers—and remove top management and hold them accountable for their actions.

pg 1 report pg 4 pdf

2 The goal is to produce resolution strategies that could be implemented for the failure of one or more of the largest financial institutions with extensive activities in our respective jurisdictions. These resolution strategies should maintain systemically important operations and contain threats to financial stability. They should also assign losses to shareholders and unsecured creditors in the group, thereby avoiding the need for a bailout by taxpayers. These strategies should be sufficiently robust to manage the challenges of cross-border implementation and to the operational challenges of execution.

 Pg2 report pg5 pdf

11 A resolution strategy for a failed or failing G-SIFI should assign losses to shareholders and unsecured creditors, and hold management responsible for the failure of the firm. The strategy should provide continuity of the critical services that the institution provides within the financial system and to the real economy, thereby minimizing systemic risk. The strategy should also enable a prompt transition of the firm’s ongoing operations to full private ownership and control without taxpayer support.

Given the cross-border nature of G-SIFIs, the resolution strategy should ensure financial stability concerns are addressed across all jurisdictions in which the firm operates. To be successful, such an approach will require close cooperation between home and foreign authorities.

Pg 3 report pg6 pdf

13 An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities”. “—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution. “-

14  – In the U.S., these powers had already become available under the Dodd-Frank Act.

15  – Title I of the Dodd-Frank Act requires each G-SIFI to periodically submit to the FDIC and the Federal Reserve a resolution plan that must address the company’s plans for its rapid and orderly resolution under the U.S. Bankruptcy Code.

Pg 4 report pg7 pdf 16 Title II of the Dodd-Frank Act provides the FDIC with new powers to resolve SIFIs by establishing the orderly liquidation authority (OLA). Under the OLA, the FDIC may be appointed receiver for any U.S. financial company that meets specified criteria, including being in default or in danger of default, and whose resolution under the U.S. Bankruptcy Code (or other relevant insolvency process) would likely create systemic instability.3 Title II requires that the losses of any financial company placed into receivership will not be borne by taxpayers, but by common and preferred stockholders, debt holders, and other unsecured creditors, and that management responsible for the condition of the financial company will be replaced.

Click here to read the full report…

 

Gold is for saving. Currency is for transactions.
–CIGA Patrick

 

The prudent mariners are already getting out of the system now, but it’s the clueless landlubbers that will drown in the sea of red ink these criminals have created.
–CIGA Rico

 

 

 

 

Dear Jim,

Australia with its major mining industry is moving away from the US dollar.

Every one of these initiatives chips away at the all important contract settlement role of the US dollar.

Sorry, Mates, Strictly Business: Australia Wants To Cut Out US Dollar In Trade With China
By Ryan Villarreal | March 29 2013 7:42 PM

Australia is seeking to bypass trading in U.S. dollars with China in a deal that will be the focus of Prime Minister Julia Gillard’s trip to Beijing next week.

Trade with China, Australia’s primary trading partner, totaled $120 billion in the last fiscal year. China buys nearly one-third of Australian exports.

“The value of such a deal would be substantial for exporters to China, especially those that import a lot from China, like mining companies, as it would remove business constraints including exchange-rate risks and transaction costs,” said Australia’s former ambassador to China, Geoff Raby, according to the Australian.

The Australian government has made no secret of its aims to shift away trade from the U.S. dollar, the world’s primary reserve currency used in international commerce.

A government report titled, “Australia in the Asian Century,” discusses Canberra’s efforts to establish direct trading between the Australian dollar and the Chinese renminbi, or RMB, also referred to as the yuan. It also pushes for increasing the prominence of the RMB as a global reserve currency.

More…

 

 

 

 

 

Jim Sinclair’s Commentary

CIGA Bill is correct. If the fools that have attacked Cyprus persist then it is the start of an avalanche that will destroy confidence in fiat currency, the fractional reserve system and central banks. What are the central bankers terrified of? My answer is the mountain of old OTC derivatives coming home to roost.

The only logical action you can take is to get out of the system to the largest degree possible.

Jim,

The FDIC-BOE directive states that some other way besides taxpayer bailouts are needed to maintain “financial stability.” The 15-page, 10 December 2012, FDIC-BOE document is called “Resolving Globally Active, Systemically Important, Financial Institutions.” (http://www.fdic.gov/about/srac/2012/gsifi.pdf)   

“Title II of the Dodd-Frank Act provides the FDIC with new powers to resolve SIFIs( systemically important, financial institutions) by establishing the orderly liquidation authority (OLA). “The FDIC and BOE are anticipating that the next financial collapse will be on a grander scale than either the taxpayers or Congress is willing to underwrite. The deposits would be provided for by exchanging or converting a sufficient amount of the unsecured debt from the “original creditors (the depositors) of the failed company into equity (stock). “In the U.S., “the new equity would become capital in one or more newly formed operating entities”  “ thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm.”  You would be able to sell the stock if you could find a person to buy stock in a failed bank.

No exceptions are indicated for “insured deposits” in the U.S.  The deposits that were protected by FDIC insurance, meaning those under $250,000, are not noted as exceptions for “insured deposits” in the U.S. This can hardly be an oversight, since it is the FDIC that is issuing the directive.

See the detail references below for the actual sections of the document in the attachment.

CIGA Bill

 

pg ii report pg 2 pdf

Executive summary

“The financial crisis that began in 2007 has driven home the importance of an orderly resolution process for globally active, systemically important, financial institutions (G-SIFIs). “ 

“In the U.S., the strategy has been developed in the context of the powers provided by the Dodd-Frank Act of 2010. Such a strategy would apply a single receivership at the top-tier holding company, assign losses to shareholders and unsecured creditors of the holding company, and transfer sound operating subsidiaries to a new solvent entity or entities”

pg 14 report pg 17 pdf

Conclusion

64  In both the U.S. and the U.K., legislative reforms already made or planned in response to the financial crisis provide new powers for resolving failed or failing G-SIFIs. The FDIC and the Bank of England have developed resolution strategies that take control of the failed company at the top of the group, impose losses on shareholders and unsecured creditors (the depositors) —not on taxpayers—and remove top management and hold them accountable for their actions.

pg 1 report pg 4 pdf

2 The goal is to produce resolution strategies that could be implemented for the failure of one or more of the largest financial institutions with extensive activities in our respective jurisdictions. These resolution strategies should maintain systemically important operations and contain threats to financial stability. They should also assign losses to shareholders and unsecured creditors in the group, thereby avoiding the need for a bailout by taxpayers. These strategies should be sufficiently robust to manage the challenges of cross-border implementation and to the operational challenges of execution.

 Pg2 report pg5 pdf

11 A resolution strategy for a failed or failing G-SIFI should assign losses to shareholders and unsecured creditors, and hold management responsible for the failure of the firm. The strategy should provide continuity of the critical services that the institution provides within the financial system and to the real economy, thereby minimizing systemic risk. The strategy should also enable a prompt transition of the firm’s ongoing operations to full private ownership and control without taxpayer support.

Given the cross-border nature of G-SIFIs, the resolution strategy should ensure financial stability concerns are addressed across all jurisdictions in which the firm operates. To be successful, such an approach will require close cooperation between home and foreign authorities.

Pg 3 report pg6 pdf

13 An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities”. “—thus, the highest layer of surviving bailed-in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution. “-

14  – In the U.S., these powers had already become available under the Dodd-Frank Act.

15  – Title I of the Dodd-Frank Act requires each G-SIFI to periodically submit to the FDIC and the Federal Reserve a resolution plan that must address the company’s plans for its rapid and orderly resolution under the U.S. Bankruptcy Code.

Pg 4 report pg7 pdf 16 Title II of the Dodd-Frank Act provides the FDIC with new powers to resolve SIFIs by establishing the orderly liquidation authority (OLA). Under the OLA, the FDIC may be appointed receiver for any U.S. financial company that meets specified criteria, including being in default or in danger of default, and whose resolution under the U.S. Bankruptcy Code (or other relevant insolvency process) would likely create systemic instability.3 Title II requires that the losses of any financial company placed into receivership will not be borne by taxpayers, but by common and preferred stockholders, debt holders, and other unsecured creditors, and that management responsible for the condition of the financial company will be replaced.

Click here to read the full report…