Posts Categorized: General Editorial

Posted by & filed under General Editorial.

Thomas Jefferson, the author of America’s Declaration of Independence, understood the threat posed by central banks:

“The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution… Bankers are more dangerous than standing armies… [and] If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.”

Jim Sinclair’s Commentary

I am willing to bet you will never hear a word about the base crime, OTC derivatives. Maybe Washington Mutual will get a coat of white wash like all the “Brothers of the Dark Side.”

Feds investigate failure of Washington Mutual
The Associated Press
Wednesday, October 15, 2008

SEATTLE: Federal authorities said Wednesday they have opened an investigation into the failure of Washington Mutual Inc., the largest U.S. bank failure.

U.S. Attorney Jeff Sullivan said in a statement that the FBI, the Federal Deposit Insurance Corp., the IRS and the Securities and Exchange Commission have created a task force to look into the thrift’s failure. He asked anyone with information to contact authorities through a tip line, or to email the FBI’s Seattle office.

Sullivan said that “given the significant losses to investors, employees and our community, it is fully appropriate that we scrutinize the activities of the bank, its leaders and others to determine if any federal laws were violated.”

Seattle-based WaMu ran into trouble giving loans to people with poor credit repayment histories during the housing boom. As talk of the 119-year-old thrift’s instability spread and its credit was downgraded, people began pulling their money out – leaving WaMu without enough cash to meet its obligations.

It filed for bankruptcy protection and was sold last month in a $1.9 billion fire sale to JPMorgan Chase & Co., one of the biggest banking companies in the U.S.

More…

Jim Sinclair’s Commentary

Still comfortable in your money market accounts, retirement accounts and bank CDs? If you are then you are brain dead.

Globex Puts Freeze on Term Deposits
16 October 2008
By Jessica Bachman / Staff Writer

In a sign that the liquidity crisis is becoming more acute for Russian lenders, Bank Globex, one of the industry’s medium-sized players, has blocked early withdrawals from fixed-term deposit accounts for five days.

The announcement raised immediate concerns about whether the bank’s move was even legal.

Emil Aliyev, vice president of Globex, said the measure was introduced after a spike in demand for early withdrawals of term deposits, “with many depositors explaining that they urgently wanted to transfer their money to VTB and Sberbank,” Interfax reported. Both VTB and Sberbank are state controlled.

Garegin Tosunyan, president of the Association of Russian Banks, said the Globex decision, while severe, was “the correct action to take.”

“When panic strikes, the banks need to take measures,” Tosunyan said. “You need to pour cold water over people’s head and say, ‘Look, enough; let’s stop panicking now.'”

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Jim Sinclair’s Commentary

Not every Nobel Laureate in Economics is an impractical academic egg head.

Some (maybe only two) really know what is going on and have no problems expressing themselves.

Dr. Brenner understands the Federal Reserve Gold Certificate Ratio modernized and revitalized. I am proud to say that he and I speak on such matters.

Canada has many resources that even it does not realize.

Hi, Jim and Dear Friends,

“Legally, the devaluation of the dollar is not called a “default.” But that’s what it is.” — Reuven Brenner

Reuven Brenner has written a wonderful article called, “How we got here”. He speaks on the whole sordid OTC mess, the decoupling of fiat money from gold, the history of international monetary policy, currencies, treasuries, interest rates, the great depression and the inevitable return of some form of the gold standard.

You may read the entire article attached below and at the link provided here:

http://www.canada.com/story.html?id=851901

All the best,
Mark

How we got here
The current financial crisis stems from the decision to divorce our currencies from a reliable standard of value
Reuven Brenner ,  Financial Post
Published: Wednesday, October 01, 2008

Gold is hovering again around $900, commodity prices are on the rise, and the U. S. dollar is back to its downward trend of the last few years. This isn’t a surprise.

The $700-billion bail-out plan is mum about the dollar — a big mistake (reflected in the immediate currency/gold price movements), since the Fed’s mismanagement of the dollar as a reserve currency contributed to the present mess. The signals were all there for the Fed to see. Yet academic fads blinded it. How did we get here? More important: how to get out? Take a deep breath.

Abruptly, in 1971, the world moved from fixed to floating exchange rates without in-depth debate. Under a fixed exchange rate anchored in gold, 5% interest in London or 5% in NY reflects the same returns. Money, whether the dollar or the pound, anchors pricing. Coca Cola knows that in pricing its beverages and selling them around the world, or in issuing U. S. dollar denominated debt, it faces no exchange rate risk. The company is neither inadvertently drawn in the exchange rate business nor does it need to hedge and pay fees to avoid being in that business.

This is not the case with floating exchange rates. Every global business -no matter what it sells or buys and how it finances itself — is in the currency business. Unless companies buy complex derivatives to insure that they stay in their own lines of business, currency fluctuations cause volatility in their costs and revenues. Financing companies becomes more expensive, resulting in a contraction of the non-financial sector and a large expansion of the financial one compared to a world adhering to anchored fixed exchange rates. The fact that national aggregates count the financial sector’s expansion as increased well-being just shows how meaningless such measures are. The expansion measures the cost of adapting to bad monetary policy, which could have been avoided.

It has been a mistake to say that floating means “laissez-faire” for currencies. The main role of money is to be a trusted anchor for pricing. People’s holding of cash as a “store of value” has always been insignificant. As to a medium of exchange: it fulfills this function properly only when people trust its stability. When the dollar plunges in terms of other currencies by 40% to 60% within few years, and when street vendors in emerging countries refuse dollar bills or accept it at deep discounts, as now happens, it becomes less of a medium of exchange. True, the dollar remains the reserve currency of choice because other countries mismanage their currency too. But relying on the mistakes of strangers is not a good policy. People want to understand that a promise to be paid 5% on U. S. Treasury represents 5% in their own currency too– rather than, suddenly, minus 10%. When this happens, everyone speaks the same standard monetary language. When this is not the case, then it is gobbledygook to discuss what’s “real” and what’s not; what’s floating and what not; and what clauses one must add to contracts to be reasonably protected.

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Posted by & filed under General Editorial.

Jim,

This was published on the McClathy website. Their motto is ‘Truth to Power’. They tell it like it is and I found this article on the Yahoo news today.

CIGA Marty

New intelligence report says Pakistan is ‘on the edge’
By Jonathan S. Landay and John Walcott | McClatchy Newspapers

WASHINGTON – A growing al Qaida -backed insurgency, combined with the Pakistani army’s reluctance to launch an all-out crackdown, political infighting and energy and food shortages are plunging America’s key ally in the war on terror deeper into turmoil and violence, says a soon-to-be completed U.S. intelligence assessment.

A U.S. official who participated in drafting the top secret National Intelligence Estimate said it portrays the situation in Pakistan as “very bad.” Another official called the draft “very bleak,” and said it describesPakistan as being “on the edge.”

The first official summarized the estimate’s conclusions about the state of Pakistan as: “no money, no energy, no government.”

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Dear Jim,

Here are a few SFR (single family residence) statistics from a mortgage banker friend of mine. This information is focused on California, but you can probably get the general US message.

  • Foreclosures made up 47% of all CA SFR sales in August 08, up from 9% in August 07
  • Median CA SFR price was $350,000 in 8/08 down 40% from $590,000 in 8/07
  • 2008 SFR unit sales are on pace for 490,000 units, up from 313,000 in 2007
  • Current unsold inventory sits at 6.7 months VS 10.6 months in 8/07
  • New SFR permits are down 53% so far this year
  • Single family construction loans are now 12.5% delinquent, and condos 16.5%

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Dear Jim,

I have had many people ask me about how ETF’s work. They often ask detailed questions about what happens to their ETF in scenario A, or scenario B. The answer is that all ETF’s work differently, and how they work is laid out in the legal language in the individual prospectus for each ETF.

Therefore, if JSMineset readers are interested in investing in ETF’s, they should read the prospectus closely and think about the implications of the legal structure. If they do not understand the consequences of the legal structure, they should hire a good securities lawyer to read and analyze the documents for them. We are not lawyers, and we do not want to get into the business of dispensing free legal advice to people. In our opinion, if you buy an ETF instrument you should know what you are buying.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Jim,

Did you know that Trichet is a mining engineer by training, and presumably has some knowledge of gold?

Could we be heading back to a gold standard or a reasonable facsimile in the near future?

Even Trichet is getting in the act.

It will not be long now, Jim. It is all happening as you said it would. I will profit from this, but I’m pretty sad about it.

David Duval

Trichet Calls for Return to the `Discipline’ of Bretton Woods
By John Fraher and Gabi Thesing

Oct. 15 (Bloomberg) — European Central Bank President Jean- Claude Trichet said officials reshaping the world’s financial system should try to return to the “discipline” that governed markets in the decades after World War II.

“Perhaps what we need is to go back to the first Bretton Woods, to go back to discipline,” Trichet said after giving a speech at the Economic Club of New York yesterday. “It’s absolutely clear that financial markets need discipline: macroeconomic discipline, monetary discipline, market discipline.’

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Dear David,

I have written many notes on the Federal Reserve Gold Certificate Ratio, modernized and revitalized, which will serve to meet the needs of discipline in a floating system. It is going to happen but not yet.

Jim

Posted by & filed under General Editorial.

Current LIBOR Rate

LIBOR is an abbreviation for the “London Interbank Offered Rate,” and is the interest rate offered by a specific group of London banks for U.S. dollar deposits of a stated maturity. LIBOR is used as a base index for setting rates of some adjustable rate financial instruments, including Adjustable Rate Mortgages (ARM’s)

Today’s LIBOR Interest Rates are listed below and updated daily:

LIBOR – 1 Yr  4.131%  -0.038%
LIBOR – 6 Mo  4.376%  -0.018%
LIBOR – 3 Mo  4.750%  -0.002%
LIBOR – 1 Mo  4.560%  -0.027%
Treasury – 30 Yr  4.14%  0.05%
Treasury – 10 Yr  3.84%  0.12%
Fed Prime Rate  4.50%  0.00%

as of 14-Oct-08 09:32 ET
sources: DTN, Federal Reserve
© theFinancials.com

Posted by & filed under General Editorial.

Dear Jim,

The government likes to sell us on the idea that we are not in a recession. Even establishment figures like Paul Volcker say we are now in a recession. This is obvious to any observer. The recession could be a long and difficult one which I and many other observers will call a depression. At least 2 or 3 years of difficult economic times lie ahead.

In such times leverage in the world and the standard of living in the developed countries will decline. People will become more rational, and less egocentric.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Former Fed chief says U.S. now in recession

SINGAPORE (Reuters) – Former Federal Reserve Chairman Paul Volcker said on Tuesday the U.S. housing sector faced more losses and the economy was in recession even as authorities moved to stabilize the financial system.

Volcker said the priority for U.S. authorities in the credit crisis was to stabilize the financial system even though that meant heavy government intrusion.

“The first priority is to stabilize the financial system. It is necessary even though the cost involved is heavy government intrusion in markets that should be private,” he said in a speech at a seminar in Singapore.
“House prices in the U.S. are still declining. There are still more losses to come there. The economy, I believe, is in recession.”

Volcker is chairman of the board of trustees of the Group of 30, an international body composed of central bank governors, leading economists and private financial sector experts.

He is credited for battling double-digit inflation that flared in the 1970s.

More…

Dear Monty,

I always agree with the revered Volcker. He is one of the few that hasn’t spoken with the standard forked tongue.

You really think the hoard of Greenwich and Toronto hedgies will lose their egocentric character? You must expect them all to get bird flu, naturally or otherwise.

Your thoughts call for a review of the Formula.

Click here to review the Formula

All the best,
Jim

Dear Jim;

Today David Rosenberg, chief North American economist for Merrill Lynch, made a few very important points for all investors. Rosenberg has distinguished himself by being by far the most realistic US economist of any major investment bank. He was calling for a difficult economic period in the US months ago.

He agrees with me that we are currently seeing depression like activity in the US economy. His point today is one that you and I have often made, but he has Merrill Lynch and Bank of America listening to him.

He points out that over the next few years, the supply of gold will grow at a much slower rate than the amount of any fiat currency. He points out that the monetary base is growing at the rate of 19% per year, and when you add to that the swap lines that the US will institute to loosen up the world banking transactions, the growth rate will be much higher. He goes on to say, “the supply of gold is going to be rising at a much slower rate than the growth of fiat currencies, and likely buy a huge margin.” Thus, as an alternative to depreciating currencies, gold is a very a very attractive investment vehicle. He further states,” If gold, in real terms, were to retest its old glory highs of the early 1980’s, it would end up testing $2,000 an ounce”.

Over time, the wiser of the big investment company economists are starting to endorse what you and your website have long stated. With money supply exploding as it currently is, the massive amounts of money that have been created by many countries in Europe and North America (especially the US) will force currencies down and gold up. It is a simple example of the law of supply and demand.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

My Dear Friend Monty,

Amen to that Brother.

Respectfully yours,
Jim

Posted by & filed under General Editorial.

Dear Friends,

To answer the deluge of question today breaking over me like Hurricane Katrina:

If this disaster was under control there would not be three financial giants speaking so far today. Actually I want another Nobel Laureate, Dr. Brenner, to stand up and be counted.

Iceland’s collapse is no small event. It is not something meaningless that cannot be applied to a broke giant like the USA whose debt to non US entities are enormous problem from banks to government.

This morning the stock market in Iceland, after a three day stop, opened up down 77%. The Krona is in the tank.

The very few in Iceland that survived their crisis are those that, against all advice from every corner, held gold. They are sound and solvent. When this happens to a country their distribution means melts down. Then it is a rush to buy everything you will need for a minimum of 90 days, maybe much longer.

Gold was up $20 in non-US hours, but got mauled by intervention to the negatives and is now slightly higher regardless of the US dollar’s nature.

Think about the load of garbage suggestion that Europe has more problems than the US. That is an Urban Legend without substance. You will see!

This window dressing has 21 days to go because it is more political than it is economic.

That does not mean the Exchange Stabilization fund is non-existent except as an order from the Secretary of the USA to his preferred brokerage firm to sell gold in the paper market. That broker does not even try to hide their actions in either the gold market or equity index related vehicles. The second Goldman appears, every local jumps to whatever side they proudly demonstrated. Such a position of ego usually occurs only at or near the end of that Financial God’s fame.

Those of you that erroneously think this can never end have never lived through this before. I have lived here for 50 years and am well aware of how the ultimate currency acts.

Gold is insurance against bailouts, busted banks, money market funds like Reserve Funds which have missed their promised payback today, conflagration in the OTC credit default and other varieties of credit derivatives, enormous and unprecedented flood of newly and electronically created US dollars everywhere.

I told you about that lady that I felt so bad about 8 days ago. She sounded quite mature. Her total wealth is in a Reserve Money Market Fund. She was told they would pay her back in eight days. That was yesterday and NO repayment was made.

Please read this publication before calling me. Please use the search engine provided here before calling me. Please make an effort to research your question using other tools before calling me.

You are giving me ever-deepening battle fatigue so I have to pull back. I have no other choice. 90% of the questions asked have already been answered here in detail repeatedly.

The same callers who need their hands held are tiring me. To be honest, constant whining by the same people is starting to piss me off.

Everything you see done is more of exactly the same thing that caused this problem. It is certainly coddling the real criminals that caused all this.

If you really buy the crap that anything other than freedom of markets to do their thing and truthful valuation of items on any concerned party’s balance sheet can fix the problem, you are too damn dumb for me to help you.

If you believe that governments are bigger than the currency markets or the ultimate insurance currency, gold, what are you doing owning gold? Please do me, the market and yourself a favor and go away.

Now I am going to call this mature lady and give her the less than good news. Gold would have done a lot more for her than a Treasury instrument money market fund that was in all probability up to the greedy eyeballs in OTC derivatives.

Gold will trade at $1200 and $1650 on or before January 14th, 2011. It does not become more of a reality if you call me to hear me say it. Yes, I am 100% in gold and will grow as additional funds become available to me. The difference between you and I is that I stand on my bank as it is underground.

Regards,
Jim

Posted by & filed under General Editorial.

Dear CIGAs,

The following are the respective LIBOR rates. To view the daily updated rates, click the link at the top of the home page.

Current LIBOR Rate

LIBOR is an abbreviation for the “London Interbank Offered Rate,” and is the interest rate offered by a specific group of London banks for U.S. dollar deposits of a stated maturity. LIBOR is used as a base index for setting rates of some adjustable rate financial instruments, including Adjustable Rate Mortgages (ARM’s)

Today’s LIBOR Interest Rates are listed below and updated daily:

LIBOR – 1 Yr  4.131%  -0.038%
LIBOR – 6 Mo  4.376%  -0.018%
LIBOR – 3 Mo  4.750%  -0.002%
LIBOR – 1 Mo  4.560%  -0.027%
Treasury – 30 Yr  4.14%  0.05%
Treasury – 10 Yr  3.84%  0.12%
Fed Prime Rate  4.50%  0.00%

as of 14-Oct-08 09:32 ET
sources: DTN, Federal Reserve
© theFinancials.com

Posted by & filed under General Editorial.

Dear CIGAs,

To sum up today:

Once again the exact economic actions that caused former market bubbles, today’s credit crisis (that is made up of massive legal financial fabrications) and enormous injections of US dollars into the world monetary system by the Fed (Helicopter Drop) were taken.

The FASB has once again allowed egregious financial fabrication in the valuing of OTC derivatives outrageously far away from the reality of their true worthless value.

The injection of dollars into the world monetary system, assuming you understand the mechanism of swaps, and the number that non US central banks said was going to be utilized ($2 trillion NOW) is monetary stimulation faster and larger by orders of magnitude than any monetary action in the history of economics, even when adjusted for inflation.

If you do the same things but to a factor of ten you might get CONSEQUENCES times 100, but hey, it might fool the world for 22 more days.

Posted by & filed under General Editorial.

Dear CIGAs,

I am in shock. the American Banker’s Association is not satisfied. They want to go back to “computer model only” valuation for market-less OTC derivatives which have been and will continue to be a total cartoon.

FASB gave them back an enormous break by allowing significant fabrication of values and still that is not enough.

When in the history of the USA did they fall to such organized lows? Why should they have any laws or rules over anything at all if they can be adjusted or as above cancelled altogether when inconvenient to the big wigs.

Is this what you call the WILD WEST?

Bankers group asks SEC to overide FASB on fair value rules
American Bankers Association sends letter advocating reliance on internal estimates rather than market pricing
October 13, 2008 3:22 PM ET

(Reuters)-The American Bankers Association on Monday asked the U.S. Securities and Exchange Commission to override U.S. accounting rule-makers’ new guidelines on mark-to-market accounting, saying they still rely too heavily on distressed asset values.

The staff of the Financial Accounting Standards Board released guidance on Friday intended to formalize a Sept. 30 joint clarification from the SEC and FASB which said that banks could rely on internal estimates, rather than currently deeply discounted market prices, to value assets in illiquid markets.

In a letter to SEC Chairman Christopher Cox, the American Bankers Association said FASB’s guidance was “circular” and “refuses to recognize the realities of the current situation” by requiring companies to still evaluate liquidity risk in their calculations.

“Given the importance of this issue, the impact it has on the crisis in the financial markets, and the seeming inability of the FASB to address in a meaningful way the problems of using fair value in dysfunctional markets, we believe it is necessary for the SEC to use its statutory authority to step in and override the guidance issued by FASB,” Edward Yingling, president and CEO of the American Bankers Association, said in the letter.

The FASB staff’s guidelines, titled “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” differed slightly from the original Sept. 30 statement. The changes reflected concerns raised in more than 90 comment letters sent to FASB last week on the change.

More…

Jim Sinclair’s Commentary

The last paragraph says it all.

“A physical shortage demonstrated by the “ballistic” demand for coins in the past few months has probably driven rates higher, but the fact many people have gold in their accounts is probably an even bigger factor, Mr. Norman suggested. Investors are likely allocating their bullion, which means it is physically set aside in a vault with their name on it. If the bank holding it fails, it can still be collected because the gold cannot be lent out.”

Hoarding pushes gold leasing rates up
Price spike forecast as banks stockpile bullion
Jonathan Ratner, Canwest News Service
Published: Friday, October 10, 2008

The cost of borrowing gold has surged to its highest level since May 2001 as central banks appear to be hoarding the precious metal.

The one-month lease rate for gold has soared more than threefold, to 2.68 per cent, in just more than a week and the parabolic move — symbolic of the expanding reach of the credit crunch — has experts labelling it another bullish sign for bullion. Prices continue to hover around $900 U.S. an ounce after rising 22 per cent in the past year.

“This (the lease rate for gold) usually precedes a sharp move in the gold price,” said Steven Isenberg, chief executive officer of Toronto-based M Partners. The cost of borrowing gold rose dramatically in March 2001, on signs that central banks were making less bullion available to speculators, mining companies and jewellers. This helped gold rally more than 12 per cent in the following two months.

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Jim Sinclair’s Commentary

  1. Small correction, 2nd line should read Fed Reserve via unlimited off balance sheet arrangements called swaps provides dollars for European Nations to inject.
  2. Small correction, 2nd line should not read capital, but rather “dollars.”
  3. Small correction, 3rd line. The US Treasury, at the current rate of $50 billion per tranche, has the ability to do the same, just a hell of a lot less via the Bailout Bill.
  4. Small correction, 4th and 5th line. The article failed to mention that foreign investors so far in needy financial entities in the US have been royally screwed.
  5. Small correction 6th, 7th, 8th and 9th line. Too much reference to the 1929 Crash makes any further Dow index declines quite disturbing to the masses. This is a spin failure that could be quite costly.

Stocks Soar by 11% After Aid to Banks
The New York Times
Monday, October 13, 2008 — 4:16 PM ET

Stocks roared on Monday, erasing much of last week’s losses,
on news that European nations had injected capital into major
banks, that the Treasury was working on plans to do the same
in the United States, and that a deal for a major Japanese
bank to provide new capital to Morgan Stanley was in place.
The S.&P. 500 posted a gain of 11.6 percent, its largest
since the Great Depression, to close at 1,003.35, in
preliminary figures. The Dow industrials gained 936.42 points
to close at 9,387.61.

Read More:
http://www.nytimes.com/?emc=na

Jim Sinclair’s Commentary

The Fed is permitting world central banks to flood the world markets with dollars, offering swaps on an unlimited amount basis.

Europe and other world central banks say they are placing more than two trillion in markets.

The following is a reasonable definition of a dollar swap:

Currency swap
From Wikipedia, the free encyclopedia

A currency swap is a foreign exchange agreement between two parties to exchange a given amount of one currency for another and, after a specified period of time, to give back the original amounts swapped.

Structure:

Currency swaps can be negotiated for a variety of maturities of up to 30 years. Unlike a loan, a currency swap is not considered to be a loan by United States accounting laws and thus it is not reflected on a company’s balance sheet. A swap is considered to be a foreign exchange transaction plus an obligation to close the swap being a forward contract.

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What miracles can be brought by changing a name from loan to swap?

The Fed is giving possibly trillions of dollars to the world banks and financial entities by funding central banks around the world should they wish to call on this “not a loan, off the US balance sheet” technique.

If you supply more apples in even a neutral apple market does the price of apples not go lower?

If you supply more dollars in even a neutral dollar market does the price of dollars not go lower, especially when unlimited amounts are supplied? Unlimited to me means infinite.

An infinite supply of dollars means an infinite price for gold. Believe it or not.

Jim

Jim Sinclair’s Commentary

I always felt that people with stored food were a tad neurotic. I now apologize for that.

Icelandic Shoppers Splurge as Currency Woes Reduce Food Imports
By Chad Thomas

Oct. 13 (Bloomberg) — After a four-year spending spree, Icelanders are flooding the supermarkets one last time, stocking up on food as the collapse of the banking system threatens to cut the island off from imports.

“We have had crazy days for a week now,” said Johannes Smari Oluffsson, manager of the Bonus discount grocery store in Reykjavik’s main shopping center. “Sales have doubled.”

Bonus, a nationwide chain, has stock at its warehouse for about two weeks. After that, the shelves will start emptying unless it can get access to foreign currency, the 22-year-old manager said, standing in a walk-in fridge filled with meat products, among the few goods on sale produced locally.

Iceland’s foreign currency market has seized up after the three largest banks collapsed and the government abandoned an attempt to peg the exchange rate. Many banks won’t trade the krona and suppliers from abroad are demanding payment in advance. The government has asked banks to prioritize foreign currency transactions for essentials such as food, drugs and oil.

The crisis is already hitting clothing retailers. A short walk from Bonus in the capital’s Kringlan shopping center, Ragnhildur Anna Jonsdottir, 38, owner of the Next Plc clothing store, said she can’t get any foreign currency to pay for incoming shipments and, even if she could, the exchange rate would be prohibitively high.

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Jim Sinclair’s Commentary

This must be a result of Islamabad just realizing there are only 22 days left before the Presidential Election.

Pakistan president heads to China amid strained US ties

ISLAMABAD (AFP) – Pakistani President Asif Ali Zardari flies to China on Tuesday seeking economic investment and support for his country as its ties with the United States come under increasing strain.

Pakistan is one of China’s closest allies in Asia, with Beijing seeing the country as a counter-balance to India.

Islamabad has been a key ally of the United States in its “war on terror,” but that relationship is on rocky ground due to Pakistan’s inability to shut down Taliban and Al-Qaeda fighters based in its tribal belt.

Though the four-day visit is Zardari’s first state visit since he assumed office in September, he met US President George W. Bush in New York late last month for the UN General Assembly.

Retired army general Talat Masood told AFP that Zardari was still “learning on the job” and had a difficult diplomatic balancing act to pull off.

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