Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

A comment on today’s Treasury plans for financing private investments in defunct OTC derivatives:

"Giving money and power to government is like giving whiskey and car keys to teenage boys."
— P.J. O’Rourke, Civil Libertarian

Jim Sinclair’s Commentary

Sorry Paul, There is no practical solution

Having paid out OTC derivative winners to the tune of $9.5 trillion, it is too late to erase the mess. That could only have been done prior to Lehman being flushed on purpose. After Lehman went, ALL the dominoes fell.

Sorry, Paul Krugman, you are right on almost everything with one exception: There is no practical solution as it all has gone too far. The winners are too lopsided now versus the losers on the OTC derivative and are protected by contract law.

Keep in mind that an OTC derivative is an unfunded special performance contract.

Under the law the ONLY way to cancel contracts is the US government declaring by Presidential Order an Economic Emergency, an act he will not do. An Economic Emergency Declaration is when there is no solution, and is considered a Draconian surrender to circumstances.

G-20 Must Freeze The $1.5 Quadrillion Derivatives Bubble As The First Step To World Economic Recovery
By Webster Tarpley
3-22-9

(Highlights from the article)

"That cause is unquestionably the $1.5 quadrillion derivatives bubble. Derivatives have provoked the downfall of Bear Stearns, Countrywide, Northern Rock, Lehman Brothers, AIG, Merrill Lynch, and Wachovia, and most other institutions which have succumbed. Derivatives have made J.P. Morgan Chase, Bank of America, Citibank, Wells Fargo, Bank of New York Mellon, Deutsche Bank, Société Générale, Barclays, RBS, and money center banks of the world into Zombie Banks."

"Krugman is right: "zombie ideas" rule Obama’s Washington. The Fed’s TALF amounts to subsidies for securitization, meaning more derivatives. The derivatives bailout was pioneered by Gordon Brown, Alistair Darling, and Mervyn King in the case of Northern Rock. These efforts are doomed to costly futility. The $1.5 quadrillion derivatives bubble is comparable to the black holes of astrophysics, those artifacts of gravity collapse which will irresistably suck in all matter that comes near them. It compares to a world GDP of a mere $55 trillion, itself a figure inflated by financial speculation."

"The derivatives are the black holes of financial engineering, and can easily consume all the physical wealth and all the money in the world, and still be bankrupt. Gordon Brown’s demand of $500 billion for the IMF is enough to bankrupt several nations, but pitifully inadequate to deal with the derivatives. They can only be dealt with by re-regulation — a quick freeze, leading to extinction and permanent illegality. We reject Brown’s IMF world derivatives dictatorship."

"Derivatives pose the question of fictitious capital — financial instruments created outside of the realm of production, and which destroy production. In 1931-2, fictitious capital appeared as tens of billions of dollars of reparations imposed on Germany, plus the war debts owed byBritain and France to the United States. These debts strangled world production and world trade. Bankers and statesmen tried desperately to maintain these debt structures. But US President Herbert Hoover proposed the Hoover Moratorium of 1931-1932, a temporary freeze on all these payments. The Lausanne Conference of June 1932 was the last chance to wipe out the debt permanently. But the Lausanne Conference failed to act decisively, and passed the buck. By the end of 1932, there was near-universal default on reparations and war debts anyway. And by January 1933, Hitler had seized power. We urge the London G-20 to defend world civilization against derivatives. It is time to lift the crushing weight of derivatives from the backs of humanity before the world economy and the major nations collapse into irreversible chaos and war, as seen during the 1930s."

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Despair over financial policy
March 21, 2009, 7:12 am

The Geithner plan has now been leaked in detail. It’s exactly the plan that was widely analyzed — and found wanting — a couple of weeks ago. The zombie ideas have won.

The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.

To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad — I mean misunderstood — assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.

But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem.

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Jim Sinclair’s Commentary

OTC derivatives bury two credit unions.

Oh excuse me, toxic assets did it.

Recall my suggestions to those in credit unions? Nothing has changed.

US Seizes Two Major Credit Unions
By MARCY GORDON

The National Credit Union Administration said it has taken over and put into conservatorship the two corporate credit unions, U.S. Central Federal Credit Union, based in Lenexa, Kan., and Western Corporate Federal Credit Union, in San Dimas, Calif. U.S. Central has about $34 billion in assets while Western Corporate, known as WesCorp, has an estimated $23 billion in assets.

A conservatorship enables the government to operate a financial institution. Corporate credit unions provide financing and investment services to the much larger population of retail credit unions. Some of the 28 corporate credit unions in the U.S. have sustained steep losses on paper from the depressed value of the mortgage-linked securities they hold.

The NCUA, which oversees some 7,800 federally insured credit unions, said it "will continue to take any and all steps necessary to preserve a well-functioning system of corporate credit unions and to protect the assets of (retail credit unions) and their members during the … financial market dislocation."

The financial services provided by the two corporate credit unions "will continue uninterrupted" and there will be no direct impact on the 90 million members of retail credit unions nationwide, the NCUA said in a news release.

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Jim Sinclair’s Commentary

The Treasury will fix nothing by planning to make soft loans to finance one trillion dollars worth of OTC derivative purchases.

The dirt will certainly be in the details of the financing that you will never see.

This is creative (as in creative accounting) if nothing else and it is nothing else.

Geithner Relies on Investors for $1 Trillion Plan
By Rebecca Christie and Robert Schmidt

March 23 (Bloomberg) — The Obama administration unveiled its plan to remove toxic assets from the books of the nation’s banks, betting that it can revive the U.S. financial system without resorting to outright nationalization.

The plan is aimed at financing as much as $1 trillion in purchases of illiquid real-estate assets, using $75 billion to $100 billion of the Treasury’s remaining bank-rescue funds. The Public-Private Investment Program will also rely on Federal Reserve financing and Federal Deposit Insurance Corp. debt guarantees, the Treasury said in a statement in Washington.

Barely two months after President Barack Obama took office, he and Treasury Secretary Timothy Geithner are staking much of the new administration’s economic credibility on the theory that removing the devalued loans and securities from banks’ balance sheets will help them start lending again and resuscitate the economy.

The Standard & Poor’s 500 Stock Index rose 4.4 percent to 802.43 at 12:42 p.m. in New York, and the S&P 500 Financials Index jumped 9.3 percent. Yields on benchmark 10-year Treasury notes were little changed at 2.65 percent.

Because the program depends on private investors stepping up, it may be weeks or months before it’s clear whether the approach will work. “You will start to see this buying up the assets” shortly after private asset managers are chosen by May, Austan Goolsbee, a member of the White House Council of Economic Advisers, said in an interview with Bloomberg Television.

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Jim Sinclair’s Commentary

The French get it!

French unions delay decision and vow more action
Friday, March 20, 2009
By Tamora Vidaillet

French unions said on Friday they would keep up pressure on President Nicolas Sarkozy after up to 3 million people joined protests over the economic crisis.

But the unions held off deciding on a possible new round of strikes until a meeting planned for March 30.

The turnout at a day of rallies and demonstrations in cities across France on Thursday was the largest at any protest since Sarkozy’s election in May 2007. The demonstrators challenged the government’s response to the crisis.

Representatives from eight unions told a news conference that while they had yet to decide on how they would proceed, they were united in their will to make their voices heard.

"What counts in today’s message is the affirmation by all unions that there will be a united follow-up to yesterday’s movement," said Maryse Dumas, second-in-charge at the powerful CGT trade union.

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Jim Sinclair’s Commentary

Oh yeah, here are some more OTC derivatives to bail out.

You think they did not securitize commercial real estate?

Defaulting Commercial Properties Hit Banks on Vacancy-Rate Rise
By Ari Levy and Daniel Taub

March 23 (Bloomberg) — U.S. banks, battered by record losses from the worst housing slump since the Great Depression, now must weather increasing loan delinquencies from owners of skyscrapers and shopping malls.

The country’s 10 biggest banks have $327.6 billion in commercial mortgages, which face a wave of defaults as office vacancies grow and retailers and casinos go bankrupt. A projected tripling in the default rate would result in losses of about 7 percent of total unpaid balances, according to estimates from analysts at research firm Reis Inc.

Commercial property prices are down almost 20 percent in the past year, and with the global recession worsening, there’s “significant stress” in the market, said William Schwartz, a credit analyst at DBRS Inc. in New York. Moody’s Investors Service is reviewing the financial strength ratings of 23 regional lenders, as “these losses are likely to meaningfully weaken the capital position of many banks in 2009,” said Managing Director Robert Young in New York.

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Jim Sinclair’s Commentary

There is no line in the sand of where a state goes from being capable to failed. It is a process all media has to spin, or so it appears.

Where Pakistan is concerned the process has gone beyond repair.

Pakistan is a FUBAR Taliban state.

Pakistan ‘perilously close’ to being failed state

NEW DELHI (AFP) — Pakistan is "perilously close" to becoming a failed state and is already "pretty dysfunctional," a senior Indian government official has said.

Home Minister P. Chidambaram also voiced fears that the rise of the Taliban in neighbouring Pakistan could have a spillover effect on India.

"I do not think it (Pakistan) is a failed state but if it does not arrest the decline, it is perilously close to becoming one," he said in an interview on India’s CNN-IBN network to be aired late Monday.

"It is pretty dysfunctional today," Chidambaram said.

Asked if India has a stake in ensuring stable civilian rule in Pakistan, he replied: "Of course a stable civilian democratic government means that we know who we are dealing with and there are checks and balances."

He added that the rise of the Taliban in Pakistan "will encourage fundamentalists in India to imitate them, and number two the Taliban could become a sponsor of terror in India."

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Jim Sinclair’s Commentary

The entire Federal Reserve and Treasury program in terms of the predictable result is described below:

"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."
–Thomas Jefferson

Some might say that financiers work, but today’s crowd is better described as scheming. That cannot be considered work in terms of Jeffersonian Democracy.

Nothing has taken place by chance since Lehman’s flushing.

Gold is very much a part of the plan.

The results of the flushing of Lehman could have been accurately predicted by my dog Mia.

Jim Sinclair’s Commentary

This is so true that it is not in the least bit funny. It is so sad that we accept that all our elected officials and CEOs of major companies are devout criminals without any redeeming human value.

What else is there to say?

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Jim Sinclair’s Commentary

Not that it will make any difference, but deluging the gatekeepers with our disdain for their lack of consideration of the level playing field seems appropriate. Lack of the uptick rule favors the few at the cost to the many due to a strong and over financed lobby. It is another wrong so lightly taken.

Dear Mr. Rivera,

Thank you for your comment on the uptick rule. The Commission has announced that it will consider proposals relating to short sale price tests at an open meeting scheduled for April 8, 2009. The meeting will be webcast from the SEC’s website at www.sec.gov/news/openmeetings.shtml.

Should the Commission vote to publish a proposal for comment, a comment file for the rulemaking will be created once the proposal is published by the Commission. Your comment will be placed in that file.

Sincerely,
Adam P. Knapp

Office of Investor Education and Advocacy
U.S. Securities and Exchange Commission
(202) 551-6551

 

Jim Sinclair’s Commentary

Auto companies that refuse to discount their inventory to cost or below, but choose rather to store (all of them) in hard times and wait for an economic pickup that will not come in later 2009 are not worthy of being called business people.

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Jim Sinclair’s Commentary

The innocence of the banksters?

This is just too wrong.

Toxic assets are OTC derivatives on real estate mortgages, credit cards, auto loans, or basically anything securitized.

Whomever they quote here is either a pawn, dope, or bankster.

Note how careful the interviewee is when he called a real estate loan "the makings of" and stops there. The media is feeding the public with a con-job that would make AIG and Madoff proud.

What this article would infer is that the banksters are not responsible, while in fact, this is ALL the doing of the OTC derivative manufacturers and distributor banksters. The modern name for these parasitic scoundrels is BANKSTERS.

So What’s A Toxic Asset?
A Closer Look At The Financial Black Holes That Are Clogging Up The Nation’s Credit Flow
March 23, 2009

(CBS)  The Obama administration rolled out a plan Monday that could facilitate the purchase of up to $1 trillion worth of toxic assets from struggling banks in an effort to clean up their balance sheets and get them to start lending again.

So what exactly are these toxic assets, which have caused such huge problems in our financial system?

Every time you see foreclosure signs littering neighborhoods, you’re probably looking at the makings of a toxic asset, reports CBS News correspondent Bianca Solorzano.

"Toxic assets are the ones that nobody wants to touch because they’re just considered too dangerous," Doug Rediker, of New America Foundation, told CBS News.

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Jim Sinclair’s Commentary

Please note the Formula takes you through to this point when there is no further international lenders and the US must (as is the case now) turn inwards on itself to raise capital. The beard right now is the Fed buying Treasury debt.

Soon there may be nobody left to lend to America
Irwin Stelzer
From The Sunday Times
March 22, 2009

Anyone who thought Ben Bernanke and his Federal Reserve Board colleagues were out of ammunition received a rude, or pleasant, shock last week. Rude, if you worry that a few extra trillions sloshing around the economy might one day trigger a wave of inflation; pleasant, if you worry that the economy is sinking fast, and the Obama administration and Congress haven’t a clue what to do about it.

The Fed plans to buy $300 billion of Treasury IOUs in the next six months (more to come if needed), pour $1.45 trillion into the mortgage market, and keep interest rates close to zero for “an extended period”. There’s more in the Fed’s “do whatever it takes” arsenal if these steps don’t bring interest rates down so people can borrow more cheaply to buy houses, cars and other durable goods. But so far, so good: interest rates on 30-year mortgages fell below 5%. Whether that will encourage enough creditworthy borrowers to sop up the huge inventory of unsold homes, much less trigger new construction, is difficult t

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Jim Sinclair’s Commentary

There is ONE simple cause of this crisis and that is OTC derivatives. This presentation is yet another in the long line of STRATEGIC DENIAL.

By refusal to face the real problem there will be no solution at all. The result of this denial is hyper-inflation.

The result of hyper inflation is that Alf Fields will be more correct on gold than I will be at my $1650 projection prior to January 14th 2011. My target will probably come a lot prior to that date.

My Plan for Bad Bank Assets
The private sector will set prices. Taxpayers will share in any upside.
By TIMOTHY GEITHNER

The American economy and much of the world now face extraordinary challenges, and confronting these challenges will continue to require extraordinary actions.

No crisis like this has a simple or single cause, but as a nation we borrowed too much and let our financial system take on irresponsible levels of risk. Those decisions have caused enormous suffering, and much of the damage has fallen on ordinary Americans and small-business owners who were careful and responsible. This is fundamentally unfair, and Americans are justifiably angry and frustrated.

The depth of public anger and the gravity of this crisis require that every policy we take be held to the most serious test: whether it gets our financial system back to the business of providing credit to working families and viable businesses, and helps prevent future crises.

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Jim Sinclair’s Commentary

The newest acronym you need to add to your vocabulary is TBTF – Too Big To FAIL.

Everything TBTF so far has been bailed out directly or indirectly.

Everything TBTF will be bailed out directly or indirectly.

The final solution will be the dissolution of the US dollar. There is no other possibility.

Half of auto suppliers facing bankruptcy
By ED BRAYTON 3/23/09 6:36 AM

Automotive News reports on a new study that concludes that half of all U.S. auto supply companies potentially face bankruptcy in 2009, with devastating results for the American economy:

More than half of the top U.S. auto parts suppliers could file for bankruptcy protection in 2009 with at least one million job losses, according to a study by global consultants A.T. Kearney.

Those suppliers, which ship parts directly to automakers, are pressured from above by production cuts by the automakers and from below by increasingly fragile companies that supply them with components, the study found.

Four major suppliers declared bankruptcy in 2008. The Treasury Department established a $5 billion fund to help auto suppliers last week, but that was far short of the $18.5 billion the industry was seeking.

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Jim Sinclair’s Commentary

Inheriting a Narco State south of the border is overshadowed by all the other shadows created in the last 8 years.

There is no question that oil production has peaked even if there is no peak yet in oil production from avowed enemies of the West. That is to say that the enemies with oil production seem too continually grow.

Mexican Drug Cartel Violence Spills Over, Alarming U.S.

TUCSON — Sgt. David Azuelo stepped gingerly over the specks of blood on the floor, took note of the bullet hole through the bedroom skylight, raised an eyebrow at the lack of furniture in the ranch-style house and turned to his squad of detectives investigating one of the latest home invasions in this southern Arizona city.

A 21-year-old man had been pistol-whipped throughout the house, the gun discharging at one point, as the attackers demanded money, the victim reported. His wife had been bathing their 3-month-old son when the intruders arrived.

“At least they didn’t put the gun in the baby’s mouth like we’ve seen before,” Sergeant Azuelo said. That same afternoon this month, his squad was called to the scene of another home invasion, one involving the abduction of a 14-year-old boy.

This city, an hour’s drive north of the Mexican border, is coping with a wave of drug crime the police suspect is tied to the bloody battles between Mexico’s drug cartels and the efforts to stamp them out.

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Posted by & filed under In The News.

Dear Friends:

The Federal Reserve moves to self financing by buying tons of US Treasury instruments in a clear message that:

  • Inflation = Good
  • Deflation = Bad

Therefore:

  • Higher price of Gold = Good
  • Lower price of Gold = Bad

Which also infers that:

  • Higher dollar = Bad
  • Lower dollar = Good.

This simple formula seems to be too complex for the talking heads who seem to have a difficult time making simple adjustments to their broadcasts, such as no smiling when reporting the Dow is down 500 points or now looking incredulous when reporting gold isup $1.

Fed quantitative easing via financing themselves put a floor under gold. When you have a floor under a market it will seek the ceiling.

The first floor temporary ceiling is at $1224. After that look to $1650 followed b y Alf’s numbers.

Bank crisis spawns new kind of gold rush
2009 recession and banking crisis has set off a rush to invest in gold and other precious metals at unprecedented levels
DAVID PARKINSON
From Friday’s Globe and Mail
March 20, 2009 at 1:00 AM EDT

In 1897, at the height of a major U.S. recession and banking crisis, a gold discovery on the Klondike River in Yukon Territory triggered one of the biggest gold rushes ever seen. Now, more than a century later, history is – sort of – repeating itself.

No, the world’s downtrodden aren’t beating a frenzied path to a harsh, remote swath of the Canadian north this time around. But the 2009 recession and banking crisis has set off a rush to invest in gold and other precious metals at unprecedented levels – a move that has tightened the global supply/demand picture and helped push prices to record highs. And increasingly, they are opting for the tangible comfort of physical gold – actual gold bars and coins that they can cling to in troubled times.

“When the banking crisis hit [last fall], we saw an avalanche of demand,” said James DiGeorgia, a Florida-based coin and precious metals dealer and editor of the Gold & Energy Advisor newsletter. “People are scared to death that all this debt [being taken on by governments] is going to debase the [U.S.] dollar and other currencies around the world.”

Data from the World Gold Council show that while demand for gold for industrial, dental and jewellery purposes fell 10 per cent in 2008, net purchases of physical gold for investment purposes jumped 64 per cent to 1,091 tonnes. In the fourth quarter – as the U.S. banking crisis reached new depths – net gold investment volumes surged 182 per cent from a year earlier. As a result of the boom in investment demand, overall gold demand rose 4 per cent last year, further widening the annual supply shortfall in the gold market.

“These dramatic retail investment inflows reflect the extreme uncertainty that surrounds the global economy and financial system,” the World Gold Council said. “In an environment where investors are more concerned about the loss of capital than they are about the return on capital, the absence of default risk or counterparty risk has been a key attraction for gold.”

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Jim Sinclair’s Commentary

The felonious game is over.

The handwriting is no longer on the wall, it is now in neon lights 100 feet high.

The pressure against naked shorting is picking up speed. You never would have seen this in the last 8 years. Look for criminal charges of fraud soon against the practitioner. Only the most dense hedge fund manager can fail to see the jig is up on this convenient and previously profitable crime.

Now old fails to delivers are an invitation akin to a sign on the hedge fund door saying "Arrest me please!"

Check your own investments to see the "Fails to Deliver."
http://failurestodeliver.com

In a year or so you will be able to check the location of the dense hedge fund manager:
http://www.felonspy.com/search.html

Naked Short Sales Hint Fraud in Bringing Down Lehman
By Gary Matsumoto

March 19 (Bloomberg) — The biggest bankruptcy in history might have been avoided if Wall Street had been prevented from practicing one of its darkest arts.

As Lehman Brothers Holdings Inc. struggled to survive last year, as many as 32.8 million shares in the company were sold and not delivered to buyers on time as of Sept. 11, according to data compiled by the Securities and Exchange Commission and Bloomberg. That was a more than 57-fold increase over the prior year’s peak of 567,518 failed trades on July 30.

The SEC has linked such so-called fails-to-deliver to naked short selling, a strategy that can be used to manipulate markets. A fail-to-deliver is a trade that doesn’t settle within three days.

“We had another word for this in Brooklyn,” said Harvey Pitt, a former SEC chairman. “The word was ‘fraud.’”

While the commission’s Enforcement Complaint Center received about 5,000 complaints about naked short-selling from January 2007 to June 2008, none led to enforcement actions, according to a report filed yesterday by David Kotz, the agency’s inspector general.

The way the SEC processes complaints hinders its ability to respond, the report said.

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Jim Sinclair’s Commentary

Your first reaction to Fed and Treasury intentions might be "Are these guys nuts?"

The better question is what do they know that the general populous does not?

The answer to that is the entire mountain of OTC derivatives is falling down.

The premise concerning external floating dollars is reasonable.

Fed Planning 15-Fold Increase In US Monetary Base
by Eric deCarbonnel

The fed is planning moves that would more than double its balance-sheet assets by September to $4.5 trillion from $1.9 trillion. Whether expressing approval or concern over the fed’s intentions, most commentators fail to understand the real magnitude of the projected expansion of the US monetary base because they don’t take into account the amount of dollars circulating abroad.

At least 70 percent of all US currency is held outside the country, and this means the US monetary base is considerably smaller than the fed’s overall balance sheet. Take, for example, the true US domestic money supply at the beginning of September 2008, before the fed started its quantitative easing. From the Federal Reserve’s website, we know that currency in circulation was 833 Billion. This translates as 583 Billion dollars circulating abroad (70 percent), and 250 Billion dollars circulating domestically (30 percent). Since the bank reserve balances held with Federal Reserve Banks were 12 billion, that gives us a 262 Billion domestic monetary base as of September 2008. Now compare that to the projected US domestic monetary base for September 2009 which is 3,818 billion (4,500 billion – 583 billion (dollars circulating abroad) – 99 billion (other fed liabilities not part of the money supply)). The fed’s planned balance sheet expansion results in a 15-fold increase in the base money supply.

262 Billion = US monetary base as of September 2008 (minus dollars held abroad)
3,818 Billion = projected US monetary base in September 2009 (minus dollars held abroad)

3,818 Billion / 262 Billion = 15-Fold Increase in US monetary base

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Jim Sinclair’s Commentary

A Plan finally, but not much of a Final Plan.

An economy wrecked by over leveraging (borrowing) on fraudulent paper will now be saved by providing low cost leverage (borrowing) to buy fraudulent paper. Are these people intelligent or what?

Treasury’s toxic asset plan could cost $1 trillion
Geithner releases initial outlines of proposal to be unveiled on Monday

WASHINGTON – The Obama administration’s latest attempt to tackle the banking crisis and get loans flowing to families and businesses rely on a new government entity, the Public Investment Corp. to help purchase as much as $1 trillion in toxic assets on banks’ books.

The plan that Treasury Secretary Timothy Geithner intends to announce Monday aims to use the resources of the $700 billion bank bailout fund, the Federal Reserve and the Federal Deposit Insurance Corp.

The initiative will seek to entice private investors, including big hedge funds, to participate by offering billions of dollars in low-interest loans to finance the purchases and also sharing risks if the assets fall further in value.

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Jim Sinclair’s Commentary

This will not take 10 years nor will it take 10 months. It is here and now!

Gregg: ‘This country will go bankrupt’

Posted: 10:53 AM ET
March 22, 2009

WASHINGTON (CNN) – Even though he was almost a member of the new Obama administration, New Hampshire Republican Judd Gregg Sunday slammed President Obama’s approach to handling the country’s fiscal outlook.

“The practical implications of this is bankruptcy for the United States,” Gregg said of the Obama’s administration’s recently released budget blueprint. “There’s no other way around it. If we maintain the proposals that are in this budget over the ten-year period that this budget covers, this country will go bankrupt. People will not buy our debt, our dollar will become devalued. It is a very severe situation.”

Gregg, known as one of the keenest fiscal minds on Capitol Hill, also told CNN Chief National Correspondent John King that he thought it was “almost unconscionable” for the White House to continue with its planned course on fiscal matters with unprecedented actual and projected budget deficits in the coming years.

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Jim Sinclair’s Commentary

I love the name of the new bill, "Federal Reserve Thingy."

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Jim Sinclair’s Commentary

Toxic assets are OTC derivatives, nothing else.

Toxic Asset Plan Foresees Big Subsidies for Investors  NYT
By EDMUND L. ANDREWS, ERIC DASH and GRAHAM BOWLEY
The goal of the plan, to be announced next week, is to leverage the dwindling resources of the bailout program with money from private investors

Jim Sinclair’s Commentary

Deficits for years is Death for the dollar

New Deficit Forecast Casts Shadow on Obama Agenda  NYT
By JACKIE CALMES
New projections for the fiscal years 2010 through 2019 show deficits totaling $2.3 trillion, more than the White House’s predictions

Posted by & filed under In The News.

Dear CIGAs,

The Death of the Dollar is set in cement.

$1 trillion deficits seen for next 10 years
By ANDREW TAYLOR

WASHINGTON (AP) — President Barack Obama’s budget would generate deficits averaging almost $1 trillion a year over the next decade, according to the latest congressional estimates, significantly worse than predicted by the White House just last month.

The Congressional Budget Office figures, obtained by The Associated Press Friday, predict Obama’s budget will produce $9.3 trillion worth of red ink over 2010-2019. That’s $2.3 trillion worse than the White House predicted in its budget.

Worst of all, CBO says the deficit under Obama’s policies would never go below 4 percent of the size of the economy, figures that economists agree are unsustainable. By the end of the decade, the deficit would exceed 5 percent of gross domestic product, a dangerously high level.

The latest figures, even worse than expected by top Democrats, throw a major monkey wrench into efforts to enact Obama’s budget, which promises universal health care for all and higher spending for domestic programs like education and research into renewable energy.

The dismal deficit figures, if they prove to be accurate, inevitably raise the prospect that Obama and his allies controlling Congress would have to consider raising taxes after the recession ends or paring back his agenda.

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Jim Sinclair’s Commentary

The American motor industry is finished. As goes Motors, so goes the USA. What a disaster has been brought on us by the OTC derivative manufacturers and distributors.

GM, Chrysler May Need Additional Aid, Rattner Says
By John Hughes

March 20 (Bloomberg) — General Motors Corp. and Chrysler LLC, which have requested as much as $21.6 billion in additional government aid, may need “considerably” more than that, said Steven Rattner, the Treasury’s chief auto adviser.

“It could be considerably higher, I won’t deny that,” Rattner said, when asked whether U.S. aid sought could rise. Rattner spoke in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” scheduled to air today.

Rattner and President Barack Obama’s auto task force are assessing proposals from GM and Chrysler and deciding whether to recommend additional aid or tip the car companies into bankruptcy. Rattner said the task force will give its “sense of direction” before March 31. Chrysler and GM have received $17.4 billion since December and requested more last month.

“What they’ve asked for depends on them achieving plans that are somewhat ambitious,” Rattner said. “Like all management teams they tend to take a reasonably, slightly perhaps, optimistic, view of their business. So it could be more, I can’t rule that out.”

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Jim Sinclair’s Commentary

Remember Jim’s Formula? Forget the dollar!

U.S. Federal Deficit Soars Past Previous Estimates
1:55 p.m. ET Friday, March 20, 2009

Deteriorating economic conditions will cause the federal deficit to soar past $1.8 trillion this year and leave the nation wallowing in a sea of red ink far deeper than the White House had previously estimated.

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Jim Sinclair’s Commentary

No, but it is the death of the US dollar.

Terence Corcoran: Is this the end of America?
Posted: March 19, 2009, 7:38 PM by NP Editor
By Terence Corcoran

U.S. law-making is riddled with slapdash, incompetence and gamesmanship

Helicopter Ben Bernanke’s Federal Reserve is dropping trillions of fresh paper dollars on the world economy, the President of the United States is cracking jokes on late night comedy shows, his energy minister is threatening a trade war over carbon emissions, his treasury secretary is dithering over a banking reform program amid rising concerns over his competence and a monumentally dysfunctional U.S. Congress is launching another public jihad against corporations and bankers.
As an aghast world — from China to Chicago and Chihuahua — watches, the circus-like U.S. political system seems to be declining into near chaos. Through it all, stock and financial markets are paralyzed. The more the policy regime does, the worse the outlook gets. The multi-ringed spectacle raises a disturbing question in many minds: Is this the end of America?

Probably not, if only because there are good reasons for optimism. The U.S. economy has pulled out of self-destructive political spirals in the past, spurred on by its business class and corporate leaders, the profit-making and market-creating people who rose above the political turmoil to once again lift the world out of financial crisis. It’s happened many times before, except for once, when it took 20 years to rise out of the Great Depression.

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Jim Sinclair’s Commentary

The next problem. Take a number.

Commercial Real Estate: The Banks’ Next Big Problem
By 24/7 WALL ST. Friday, Mar. 20, 2009

In most large American cities there are office buildings which sit half finished in their financial districts. There are still huge cranes next to some of them. If the construction on a site ended months ago, there is nothing left beyond the skyscraper skeleton and a security fence to keep vandals out.

As businesses such as law firms, investment banks, car companies and retailers cut jobs and move to less expensive offices, the commercial real estate industry is collapsing with astonishing speed. None of the unfinished buildings were erected with cash from the developers. Banks put the money up for the physical location and structure, and perhaps even the rent from tenants, as security deposits in most cases. The land is no longer worth much. The buildings are half empty or unfinished and tenants are leaving, and, in many cases, defaulting on their leases. Lawsuits to get payment of those obligations are long and expensive. As often as not, the former tenant could not afford to pay a judgment anyway. (Read "Four Steps to Ending the Foreclosure Crisis.")

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Jim Sinclair’s Commentary

Are these guys trying to start a civil war?

They may not have brains, but you must say "En Grande Bol."

Citigroup Plans Big Bonuses Despite Rules Against Them
By STEPHEN GANDEL Friday, Mar. 20, 2009

AIG isn’t the only bailed-out financial firm paying big bucks to managers who helped steer their company to near collapse. Citigroup has pledged millions of dollars in bonuses to senior executives for the next few years, despite lawmakers efforts to eliminate such payments.

It’s not clear whether the bonuses, which Citigroup says are for 2008 but won’t start paying out until 2010, will be allowed. Under compensation rules passed by Congress in mid-February, cash bonuses are barred for top executives at bailed-out banks.

But Citi finalized its bonus program shortly before the new rules were introduced. That might make the payments permissible, though they could be made almost worthless by new tax rules just passed by the House of Representatives and headed for consideration in the Senate. Even so, Citigroup’s move in January to set in place bonus payments for years to come raises questions about whether it was trying to evade compensation rules it knew were coming.

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Jim Sinclair’s Commentary

Please watch this video as it will explain to you the Gordian Knot that ties Pakistan to Afghanistan not recognized by the US planners. The USA still thinks buying the leadership of Pakistan is some means of overcoming this growing threat to the world. Buying the Pakistan leadership by aid only worsens the problem.

Pakistan is another problem lacking practical solution and a problem soon to take center stage of world geopolitical events. Markets will be thrown into long-term turmoil by what this means to energy supply, and the future of the US dollar.

Please view this well done and educational documentary.

 

Jim Sinclair’s Commentary

Even though bonuses are a beard for the real problem, this cartoon certainly portrays the accurate character of the players. I wear blue shirts with white collars and French cuffs, but let that be the only comparison.

clip_image001

Rather Than Wall Street, Why Not Bail Out A Generation?
by Jesse Jackson

AIG, the world’s largest insurance company, of which we — U.S. taxpayers — now own 80 percent, has consumed nearly 170 billion of our dollars to bail out bad bets it made selling credit insurance to banks and investment houses. This weekend, we learned where the money went — largely to other Wall Street banks: $12.9 billion to Goldman and Sachs; $2.3 to Citibank; and, remarkably, nearly $12 billion to Deutsche Bank of Germany; the same to Societe Generale of France; $8.5 billion to Barclays Bank of England; $5 billion to UBS of Switzerland, which is now under investigation for running a tax avoidance scheme for the very wealthy.

To add insult to this injury, the very bankers who caused the catastrophe are paying themselves "retention bonuses" totaling over $165 million in order to avoid "losing talent." Apparently, it takes a lot of talent to lose hundreds of billions.

This raises a simple question. Instead of using our money to bail out the folks who got us into this mess, why don’t we help the generation that we’ll rely on to dig our way out of the hole? Instead of shipping billions to bankers in Germany and France, why not relieve the debt that burdens more and more of our own children as they struggle to pay for college.

The burdens are clear. College tuitions have been rising faster than inflation — they’re up about 58 percent since 2000. Grants haven’t kept up. As a result, students are taking on more and more debt. These days, two of every three students graduate with debt, which averages more than $21,000. But the average is misleading

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How to create a 1930s type equity rally in a fledgling depression caused by a credit lock up.
By Mr. J.P. Morgan (aka Jim Sinclair)

JPM had to stop the short pool raids that were being conducted by Jesse Livermore. Morgan invited Livermore to visit him. They came to some unpublished arrangement, and Livermore ceased his short selling pool operations.

Today it will require more than lip service so far offered to a future US reinstating of the “Up Tick” rule. It must happen in its full form.

Saying shame-shame to the naked short sellers is a waste of time.

Canada will have to own up to the fact that they are the planetary naked short sale central requiring that brokers ask but one time if the client intends to deliver. The client of course says yes. The Canadian broker then has performed their complete regulatory duty. The client fails to deliver for months or years.

Since a naked short sale results in a credit of the account there are no problems with margin or back office wink-wink.

What is required is the old fashioned uptick rule to come back and be strictly enforced in the USA. T3 (trade date plus three days to deliver) for a fund or institution and T21 (trade date plus twenty one days to make delivery) for an exchange floor or NASDAQ based market maker.

Brokers representing naked short sellers who call themselves specialist/market makers in the shares are kidding no one. They are not market makers that stand ready at all times to make bids and offers in the company being naked shorted via them.

What the naked short has done compared to a legal short is expand the capitalization of the company under attack fraudulently. The legal short seller by borrowing the share to make delivery delivers registered shares and does not expand the capitalization of the company.

In order for a 1930s type rally to have legs, talking about controlling the hammer and sledge no uptick and naked illegal short who fraudulently expanding a company’s capitalization must be controlled and known to be under control. A public roast of a few of those that do not get the message and back off will be necessary.

Short selling is a necessary part of market, but like all games there must be rules and those rules must be adhered to.

J.P. Morgan then turned his attention to the banking system, which was locked up credit wise.

J.P. Morgan’s loaning of funds to each bank came with the specific binding orders that the funds were to be used to make loans and not for any other purpose.

The problem now is that every penny that enters the front door of an AIG, Citi or any other busted beggar goes out the back door to pay off the winners of OTC derivatives.

As long as funds in equals the amount going out the back door, no 1930s type rally can have legs. Thus there will be no "timeout" in the downward spiral during which practical solutions might be sought.

TARP, LARP, FLARP and whatever is to come cannot be for the purpose of making some shadow figures in the dark trillionaires.

Bailouts must be for making loans within and outside the system. Failing to make all the above happen means all hope is lost.

The Fed can buy every instrument the Treasury prints for the rest of your life. Without JP Morgan’s measures as above, it will only result in the US dollar at a negative value.

I know exactly how to turn this thing around, buying time for a solution yet hold no hope that it will occur.

Those that would lose by doing the right thing have the most powerful lobby opposing such actions backed by untold amounts of money and are buying every politician that ever ran for or was appointed to office.

The West has never had more sinister enemies than their own financiers seeking to have more money than any being ever could spend.

Jim Sinclair’s Commentary

These are real people with real problems and deep suffering delivered to them by the degraded, amoral, filthy rich of OTC derivative finance. The USA needs no external enemies when this type of cancer is rotting it from within.

Sacramento’s tent city homeless camp is coming down, sources say
By Cynthia Hubert and Ryan Lillis
Published: Thursday, Mar. 19, 2009 – 12:02 pm

Sacramento’s burgeoning tent city homeless camp north of downtown is about to become history, sources told The Bee today.

Mayor Kevin Johnson, working with a coalition of property owners, homeless advocates and others, has come up with a plan to move 100 to 200 men and women off of the land near the Blue Diamond almond plant and into apartments, shelters and other structures, according to participants in the discussions.

SMUD, which owns the bulk of the land, hopes to fence off the property some time within the next four weeks to pursue an upgrade of its substation there, said spokeswoman Elisabeth Brinton.

"We have been patient, working with city leaders and advocates and taking their lead," Brinton said. "We are committed to doing the right thing for the community."

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Jim Sinclair’s Commentary

On balance the Russians are correct as compared to the US Fed or Treasury in Russia’s resistance to printing paper.

On the downside, the SDR doesn’t have a snowball’s chance in hell of becoming a reserve currency of merit.

The Russians need not be considered the opposition as the West has home grown real enemies from within.

China backs talks on dollar as reserve -Russian source
Thu Mar 19, 2009 11:24am EDT
By Gleb Bryanski

MOSCOW, March 19 (Reuters) – China and other emerging nations back Russia’s call for a discussion on how to replace the dollar as the world’s primary reserve currency, a senior Russian government source said on Thursday. Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions, among other measures in the text of its proposals to the April G20 summit published last Monday.

Calls for a rethink of the dollar’s status as world’s sole benchmark currency come amid concerns about its long-term value as the U.S. Federal Reserve moved to pump more than a trillion dollars of new cash into the ailing economy late Wednesday.

Russia met representatives of China, India and Brazil ahead of the G20 finance ministers meeting last week, as the big emerging powers seek to up their influence on decisionmaking globally. Their first ever joint communique did not mention a new currency but the source said the issue was discussed.

"They (China) did not formally put forward their position for the G20 summit but unofficially they had distributed their paper regarding the same ideas (the need for the new currency)," the source told Reuters, speaking on condition of anonymity.

The source said the Chinese paper envisaged the International Monetary Fund’s Special Drawing Rights (SDRs) being first assigned a role of a clearing currency on some transactions and then gradually becoming the main global reserve currency. "They said that the role of reserve currency should be given to SDR," the source said.

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Jim Sinclair’s Commentary

This is a unwise precedent. It makes international capital wary of US domicile.

It is a diversion from the real problem and economically unsound. There are other means of accomplishing the same thing.

House Approves 90% Tax on Bonuses After Bailouts
By CARL HULSE and DAVID M. HERSZENHORN
Published: March 19, 2009

WASHINGTON — The House overwhelmingly approved on Thursday a near total tax on bonuses paid this year to employees of the American International Group and other firms that have accepted large amounts of federal bailout funds, rattling Wall Street as lawmakers rushed to respond to populist anger.

Despite questions about the legality of the retroactive 90 percent levy, Democrats and some Republicans said the tax on bonuses for traders, executives and bankers earning more than $250,000 was the quickest way to show angry Americans that Congress intended to recoup the extra dollars. Even backers of the measure noted it was an extraordinary step.

The House vote sent some employees into a panic about the prospect of, in effect, having to give up money they might already have spent. And it had regulators fearing it could undermine the Treasury’s efforts to stabilize the financial system if banks tried to flee the bailout program or if other firms refused to participate in coming rescue operations to protect their bonuses, some executives said.

Vikram S. Pandit, chief executive of Citigroup, lobbied against the legislation in a meeting Thursday with the Senate majority leader, Senator Harry Reid, according to an industry official.

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Jim Sinclair’s Commentary

Amoral behavior and financial crimes are not victimless.

An employer has obligations to those employed that transcend the employer’s private pocketbook.

The financial rule violator starts a chain of events for which he/she carries eternal responsibility that will not be denied, its outcome here, now and forever.

Desperate Japanese head to ‘suicide forest’
updated 10:19 a.m. EDT, Fri March 20, 2009
By Kyung Lah
AOKIGAHARA FOREST, Japan (CNN) — Aokigahara Forest is known for two things in Japan: breathtaking views of Mount Fuji and suicides. Also called the Sea of Trees, this destination for the desperate is a place where the suicidal disappear, often never to be found in the dense forest.

Taro, a 46-year-old man fired from his job at an iron manufacturing company, hoped to fade into the blackness. "My will to live disappeared," said Taro. "I’d lost my identity, so I didn’t want to live on this earth. That’s why I went there."

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Jim Sinclair’s Commentary

The French get it.

Sarkozy under pressure as ‘millions’ take to streets
By James Mackenzie, Reuters
Thursday, 19 March 2009

As many as three million people took to the streets across France today to protest against President Nicolas Sarkozy’s handling of the economic crisis and demand more help for struggling workers.

The protests, which polls show are backed by three quarters of the French public, reflect growing disillusion with Sarkozy’s pledges of reform as the crisis has thrown tens of thousands out of work and left millions more worried about their jobs.

Bright spring sunshine helped the turnout and the total reported by union organisers surpassed the 2.5 million seen on an earlier day of protest on Jan. 29.

Streets in central Paris were packed with protesters waving anti-Sarkozy placards and chanting slogans, with badges reading "Get lost you little jerk!", the now infamous comment made by Sarkozy to a protestor at an agriculture show, much in evidence.

"There are more and more workers who feel they are not responsible for this crisis but that they are the main victims of it," said Bernard Thibault, head of the CGT, one of the eight trade unions organising the strikes.

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Sodom and Gomorrah

Is described in the old testament as a place where no honest person could be found. Forget Sodom and Gomorrah, this is the final act of deceit that the media will present as a solution to the problem.

Establishing "false fabricating" as an accounting foundation is simply wrong. This act proves beyond any doubt that there is no practical solution to the planetary meltdown of the fraudulent instruments of OTC derivatives.

Financial inhumanity does not deserve to be bailed out of this disaster.

Some change the new faces brought to the filth of the financial community.

"Facts (bankruptcy of spirit and finance) do not cease to exist because they are ignored."
–Aldous Huxley

Shame on the FASB! They have failed to perform their purpose!

 

Click here to view Monty’s recent commentary on FASB 157…

 

Accounting Brothel Opens Doors for Banker Fiesta: Jonathan Weil
Commentary by Jonathan Weil

March 19 (Bloomberg) — The banks demanded that the accountants give them leeway in how they report losses to investors. The accountants responded by giving away their souls.

This week, the Financial Accounting Standards Board unveiled what may be the dumbest, most bankrupt proposal in its 36-year history. If it stands, the FASB ought to change its name to the Fraudulent Accounting Standards Board. It’s that bad.

Here’s what the board is floating. Starting this quarter, U.S. companies would be allowed to report net-income figures that ignore severe, long-term price declines in securities they own. Not just debt securities, mind you, but even common stocks and other equities, too.

All a company would need to do is say it doesn’t intend to sell them and that it probably won’t have to. In most cases, it wouldn’t matter how much the value was down, or for how long. In effect, a company would have to admit being on its deathbed before the rules would force it to take hits to earnings.

So, if these rules had been in place last year, a company that still owned shares of American International Group Inc. or Fannie Mae, for instance, could exclude those stocks’ price declines from net income entirely. It would make no difference that the companies were seized by the government last year, or that both are penny stocks. The loss would get buried away from the income statement, in a balance-sheet line called “accumulated other comprehensive income.”

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Jim Sinclair’s Commentary

Please note the words "Naked Short" and "Fraud" linked together by an unquestionable expert witness.

Naked Short Sales Hint Fraud in Bringing Down Lehman (Update1)
By Gary Matsumoto

March 19 (Bloomberg) — The biggest bankruptcy in history might have been avoided if Wall Street had been prevented from practicing one of its darkest arts.

As Lehman Brothers Holdings Inc. struggled to survive last year, as many as 32.8 million shares in the company were sold and not delivered to buyers on time as of Sept. 11, according to data compiled by the Securities and Exchange Commission and Bloomberg. That was a more than 57-fold increase over the prior year’s peak of 567,518 failed trades on July 30.

The SEC has linked such so-called fails-to-deliver to naked short selling, a strategy that can be used to manipulate markets. A fail-to-deliver is a trade that doesn’t settle within three days.

“We had another word for this in Brooklyn,” said Harvey Pitt, a former SEC chairman. “The word was ‘fraud.’”

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Posted by & filed under In The News.

Dear CIGAs,

Remember less than six weeks ago the prevailing opinion of the talking heads was that the euro was stone dead? The wrong basis for this opinion was that Euroland was in much more trouble than the USA.

The hedgie’s raid was on against the Middle European currencies (still in force) and the prevailing opinion in the financial media is that they are dead. In dollar terms they are all going to look a lot better, especially the healthier ones.

 

Jim Sinclair’s Commentary

You and I know Putin has not been far off the mark in his recent general comments on monetary policy. These comments have not been well entertained by the US media.

Putin is spot on here.

Putin Warns Against Printing Money to Cover Deficit
By Alex Nicholson

March 19 (Bloomberg) — Russia won’t resort to printing money to cover budget deficits that Prime Minister Vladimir Putin said are likely to continue for the “next few years.”

The government should tackle the deficit “by using the reserves that have been accumulated in recent years, or if necessary by borrowing under market conditions,” Putin told the Cabinet in Moscow today, adding that Russia doesn’t yet need to borrow and won’t seek loans abroad. “Resorting to a printing press would be unwise and extremely dangerous.”

Finance Minister Alexei Kudrin said the government plans to borrow 410 billion rubles ($12.3 billion) more than it repays on the domestic market this year, which amounts to about 1 percent of gross domestic product.

Russia’s revised 2009 budget contains a deficit of 2.98 trillion rubles, or 7.4 percent of planned GDP of 40.4 trillion rubles. Kudrin said on March 14 that the deficit may exceed 8 percent of GDP. The deficit will be reduced to 3 percent of GDP in 2011, according to a draft of the government’s anti-crisis plan distributed to reporters.

The government approved the plan and the revised budget with Russia’s first deficit in a decade as it attempts to stabilize the economy with a 1.6 trillion ruble bailout modeled on plans developed by the U.S. and U.K.

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Jim Sinclair’s Commentary

Financial crimes are not victim-less. The way to correct the criminal element (suits) is to make financial crimes, in which a death is a result, a capital crime. They are capital crimes, you know!

Without buyers, Bank Medici to give up its license
Thursday, March 19, 2009

VIENNA: Bank Medici, which managed $3.2 billion in funds that were invested in the Ponzi scheme operated by Bernard L. Madoff, will return its banking license after talks with possible buyers of the bank failed, the Austrian lender said Thursday.

The bank said it would probably not be able to strike a deal soon because market conditions had cast a shadow over negotiations with investors who it had said might be interested in its banking license.

‘‘Market turbulences have heavily influenced talks to potential investors, and a transaction in the near future is unlikely,’’ Bank Medici said.

‘‘Under the current circumstances, it is not possible to build a substantial new banking business to substitute lost revenue,’’ it added. ‘‘Therefore the supervisory board decided yesterday to return the banking license.’’

Medici was the investment manager for the Herald Lux Fund and a distributor for both Herald Lux and another fund, Herald, which had a combined $2.1 billion under management before Mr. Madoff’s fraud was exposed. It was also the investment manager for the Thema International Fund, which had $1.1 billion under management.

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Jim Sinclair’s Commentary

Recall our conversation concerning the decline in the dollar from the algorithm driven dollar bear market rally being akin to a person walking into an elevator only to find no elevator car, but only an elevator shaft straight down.

China backs talks on dollar as reserve -Russian source
Thu Mar 19, 2009 11:24am EDT
By Gleb Bryanski

MOSCOW, March 19 (Reuters) – China and other emerging nations back Russia’s call for a discussion on how to replace the dollar as the world’s primary reserve currency, a senior Russian government source said on Thursday. Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions, among other measures in the text of its proposals to the April G20 summit published last Monday.

Calls for a rethink of the dollar’s status as world’s sole benchmark currency come amid concerns about its long-term value as the U.S. Federal Reserve moved to pump more than a trillion dollars of new cash into the ailing economy late Wednesday.

Russia met representatives of China, India and Brazil ahead of the G20 finance ministers meeting last week, as the big emerging powers seek to up their influence on decisionmaking globally. Their first ever joint communique did not mention a new currency but the source said the issue was discussed.

"They (China) did not formally put forward their position for the G20 summit but unofficially they had distributed their paper regarding the same ideas (the need for the new currency)," the source told Reuters, speaking on condition of anonymity.

The source said the Chinese paper envisaged the International Monetary Fund’s Special Drawing Rights (SDRs) being first assigned a role of a clearing currency on some transactions and then gradually becoming the main global reserve currency. "They said that the role of reserve currency should be given to SDR," the source said.

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Jim Sinclair’s Commentary

The end is precious!

Jim Sinclair’s Commentary

Back door or front door, no matter what it is getting bailed out which will lead to hyperinflation.

It must be obvious to you now that there will be no limit to bailouts short of a new revolution in the USA.

Parts makers are surging on the stock exchange because they are broke and getting bailed out to go broke again.

It should also be obvious to you that when I sent you an email titled "This is It," it was in fact "It."

I do not send emails unless there is large interest and the content is need to know.

U.S. to Aid Auto Industry With $5 Billion for Suppliers
By BILL VLASIC
Published: March 19, 2009

DETROIT — The Obama administration moved on Thursday to stabilize the American auto industry by creating a $5 billion fund to support troubled parts suppliers.

The Treasury Department said the program would guarantee payments to suppliers for products shipped to ailing car companies.

The supplier fund is the first direct action taken by President Obama’s auto task force to prop up the auto industry, which has suffered big losses from the steep decline in new-vehicle sales.

“The Supplier Support Program will help stabilize a critical component of the American auto industry during the difficult period that lies ahead,” Treasury Secretary Timothy F. Geithner said in a statement.

The presidential task force is continuing to review requests for additional federal aid from General Motors and Chrysler, both of which are subsisting on government loans.

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Jim Sinclair’s Commentary

No wonder Spitzer got set up. He asked for it. He may be asking for it again as below.

This also speaks to the strategy of setting up and then knocking down the straw man to create a diversion from the real for the general public.

The Real AIG Scandal
Tuesday 17 March 2009
by: Eliot Spitzer  |  Visit article original @ Slate Magazine

It’s not the bonuses. It’s that AIG’s counterparties are getting paid back in full.

Everybody is rushing to condemn AIG’s bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG’s counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?

For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman’s collapse, they feared a systemic failure could be triggered by AIG’s inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG’s trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG’s counterparties are justified with an appeal to the sanctity of contract. If AIG’s contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.

But wait a moment, aren’t we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes – income taxes to sales taxes – to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won’t be laid off. Why can’t Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn’t we already give Goldman a $25 billion capital infusion, and aren’t they sitting on more than $100 billion in cash? Haven’t we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn’t they have accepted a discount, and couldn’t they have agreed to certain conditions before the AIG dollars – that is, our dollars – flowed?

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Jim Sinclair’s Commentary

1. Please note that financial news services this morning are mating the word FRAUD with NAKED SHORT SELLING. The case being quoted is the raid on Lehman after Bear Stearns collapsed. If one entity goes down on this then all entities who have practiced this become targets of successful slam dunk civil litigation. The need is only to review fails to deliver, using "discovery" for the details.

2. Conversations on reinstatement of the "Up Tick Rule" in the US are picking up speed at exchange management and legislative levels. The question is will Canada enforce the rules they have or keep the only onus on the broker to ask if their client intends to make delivery. If the client says yes it all ends there. Market makers in Canada and the US are beards for naked short selling brokerage house income. I have been in this business for 50 years now. There is little I do not know about the cheaters.

3. Banks who are predicting positive earnings in the first quarter of 2009 are relying on a abrogation of the mark to market rules of FASB. Please note Monty’s excellent review of the impact of such a change posted yesterday here…

Bankers don’t give a damn about the damage they do as long as their ends are accomplished. That is the UGLY face of personal enterprise, not a form of capitalism but instead more fascism.

Respectfully yours,
Jim

 

Jim Sinclair’s Commentary

A more accurate depiction of the AIG bailout:

AIG-Robber

 

Jim Sinclair’s Commentary

A very good, simple and clear representation of the problem lacking a practical solution.

clip_image001

 

Jim Sinclair’s Commentary

Here is the reason behind the Fed action to buy Treasuries thereby monetizing in a form, itself.

Allure of US Treasuries set to fade
By Wang Xu (China Daily)
Updated: 2009-03-18 07:27

Holdings of US Treasury bonds rose in January, but the increase is the slightest since last June, indicating the country’s appetite for the securities is set to diminish as a result of the falling trade surplus and rising concern over investment security.

image The country’s reserves of US Treasuries rose by $12.2 billion to $739.6 billion by the end of January, according to the latest International Capital Report by the US Treasury Department. Although China remained the largest creditor of the US government, analysts say its future purchases would shrink.

Treasury debt holdings grew by $14.3 billion in December.

"Purchases of US Treasuries are set to decline, given the fall in the trade surplus," Erh-Cheng Hwa, chief economist of Bank of Communications, told China Daily.

China ran hefty trade surpluses in the past years and accumulated $1.95 trillion in foreign exchange reserves by the end of 2008. In an attempt to seek stable returns, most of the reserves were channeled to low-risk assets such as US Treasury bonds.

The nation’s trade surplus dropped to $4.8 billion in February, down 87.6 percent from a year earlier. Some analysts say it may decline further as the nation’s stimulus package props up demand for foreign goods while doing little to boost exports.

Sun Mingchun, economist with Nomura International, estimates that the trade surplus is likely to fall to $155 billion this year, only about half of last year.

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Jim Sinclair’s Commentary

This is nothing compared to what is coming in the midst of rotten business.

Consumer prices rise 0.4 percent in February
Consumer prices rise in Feb. by largest amount in 7 months as gasoline, clothing prices jump
Martin Crutsinger, AP Economics Writer
Wednesday March 18, 2009, 3:42 pm EDT

WASHINGTON (AP) — U.S. consumer prices rose in February by the largest amount in seven months as gasoline prices surged again and clothing costs jumped the most in nearly two decades.

But the increase appeared to ease many economists’ concerns about dangerous price movements in either direction. The recession is expected to dampen any inflation pressures for at least the rest of this year, while the slight uptick in prices over the last two months also has made the possibility of deflation more remote.

The Labor Department reported Wednesday that consumer inflation rose 0.4 percent in February, the biggest one-month jump since a 0.7 percent rise in July. Two-thirds of last month’s increase, which was slightly more than analysts expected, reflected a big jump in gasoline pump prices.

Core inflation, which excludes food and energy, rose 0.2 percent in February, also slightly higher than the 0.1 percent rise economists expected.

The Federal Reserve, meanwhile, said Wednesday it would spend up to $300 billion to buy long-term government bonds, a new step aimed at lifting the country out of recession by lowering rates on mortgages and other consumer debt. The central bank also will spend another $750 billion on mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac, bringing its total purchases of those securities to $1.25 trillion.

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Jim Sinclair’s Commentary

New $1 buying power note identified at the Treasury printing press.

Zimbabwe demands apology from USA regarding monetary policy criticisms

new dollar

 

Jim Sinclair’s Commentary

What you will not see on Bloomberg

Jim Sinclair’s Commentary

The dollar rally has fundamentally been a joke since it started.

The dollar rally was technical money flows that triggered algorithms firing illogical signals bound to bury the computer trader.

.7200 on the USDX is not a fundamentally defendable level.

.5200 to .6200 is the magnet.

By the way, $887.50 on gold wasn’t too bad either.

Dollar Rally Crumbles as Fed Ramps Up Printing Press
By Oliver Biggadike and Ye Xie

March 19 (Bloomberg) — The rally that pushed the dollar to the highest levels since 2006 is in danger of crumbling as the Federal Reserve starts buying Treasuries and ramps up its purchases of mortgage debt, adding to a flood of greenbacks.

“The implications of today’s Fed decision are unambiguous,” currency strategists at Citigroup Inc. wrote in a research report within a half hour of the Fed’s decision yesterday. The dollar “should weaken,” they said.

Fed policy makers said yesterday they plan to buy as much as $300 billion of U.S. government bonds and step up purchases of mortgage bonds, expanding the central bank’s balance sheet by as much as $1.15 trillion. The extra supply of dollars threatens to overwhelm investors just as the budget deficit swells.

The trade-weighted Dollar Index, which tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, tumbled 2.7 percent to 84.595, its biggest one-day drop since 1971. That pushed its decline to 5.6 percent since reaching 89.62 on March 4, the highest in almost four years.

It fell yesterday by the most in nine years versus the euro, to $1.3474, and traded at $1.3631 as of 12:01 p.m. in London. The dollar dropped today against Japan’s currency to a three-week low of 94.72 yen.

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Jim Sinclair’s Commentary

Hyperinflation is caused by inventing money out of thin air in significant size.

The following Times article defines yesterday’s announcement for Fed initiative action as "a tactic that amounts to creating vast new sums of money out of thin air.

Fed Plans to Inject Another $1 Trillion to Aid the Economy
By EDMUND L. ANDREWS
Published: March 18, 2009

WASHINGTON — The Federal Reserve sharply stepped up its efforts to bolster the economy on Wednesday, announcing that it would pump an extra $1 trillion into the financial system by purchasing Treasury bonds and mortgage securities.

Having already reduced the key interest rate it controls nearly to zero, the central bank has increasingly turned to alternatives like buying securities as a way of getting more dollars into the economy, a tactic that amounts to creating vast new sums of money out of thin air. But the moves on Wednesday were its biggest yet, almost doubling all of the Fed’s measures in the last year.

The action makes the Fed a buyer of long-term government bonds rather than the short-term debt that it typically buys and sells to help control the money supply.

The idea was to encourage more economic activity by lowering interest rates, including those on home loans, and to help the financial system as it struggles under the crushing weight of bad loans and poor investments.

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Jim Sinclair’s Commentary

Looks like the Fed and Treasury want a 1930’s type rally.

Don’t feed the bears
Commentary: SEC should restore the uptick rule to calm financial markets
By Chuck Jaffe, MarketWatch
Last update: 10:40 p.m. EDT March 17, 2009

BOSTON (MarketWatch) — The government is stressing that it doesn’t want companies — especially financial firms — to collapse. Now it looks like Washington may finally offer some support by reinstating a rule that was foolishly removed after working for more than 65 years.

Forget for a moment that trading rules always sound like inside baseball because the logic behind both the rules and stock trading can be hard to follow. But if you follow the string out long enough, you will quickly figure out how one little rule change probably made your bad market ride even worse.

On Monday, a bipartisan bill was introduced in Congress that would require the Securities and Exchange Commission to reinstate the "uptick rule," which from 1938 until 2007 prevented traders from making a short sale unless the price of a stock in its most recent trade had been up from previous levels. It was the second Congressional push for the rule this year, and this time it appears the calls for action will be answered because, just last week, the SEC announced plans to revisit the rule — and to consider other short-selling regulations — on April 8.

Short shrift

A short sale is a bet against a stock, and typically involves borrowing shares, selling them, and waiting for the stock’s price to decline before buying the shares back on the open market. The borrower gets the stock back, and the short-seller keeps the difference between the higher selling price and the lower repurchase price.

The basic reason for the uptick rule is that requiring the market to have an upward move makes short sales more difficult, easing some of the downward pressure that builds when a market is in a free-fall.

Critics noted that traders and market sharpies never worried much about the uptick rule, knowing that plenty of stocks that are dropping will take a momentary pause for a quick upside trade. Moreover, short-sellers and their trading partners would sometimes create those upside trades just so they could follow suit with the short sale they really wanted to do.

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Jim Sinclair’s Commentary

The inviting conclusion to the panic tactics of the US financial leaders is that the entire mountain of OTC derivatives have rolled over as a domino impact of the Lehman collapse.

The question now is if the rating agencies will keep US debt AAA.

I would guess the rating agencies will remain a degraded, untrustworthy bunch and keep the rating.

What the Pros Say: US Is Now ‘Bankrupt’
19 Mar 2009 | 06:04 AM ET

Global stocks traded higher, as did the dollar against the euro, Thursday after the Federal Reserve’s surprise announcement it would buy $300 billion in US Treasurys in order to help the ailing economy.

But experts tell CNBC they have concerns over the Fed’s latest move and that the current national balance sheet is a disaster.

US is Already ‘Bankrupt’

Technically, the U.S. is already "bankrupt" because it has a debt that is almost four times the size of its economy, says Puru Saxena, CEO of Puru Saxena Wealth Management. He tells CNBC that the U.S. is at risk of hyperinflation.

Fed to Buy Treasurys is Not a Good Sign

Stephen Roach, chairman for Asia at Morgan Stanley does not view the Fed’s plan to buy $300 billion worth of long-dated government debt as a constructive sign for prospects going forward.

Fed’s Move Unlikely to Help Economy

The Fed pumping money into Treasurys won’t help, says Martin Weiss, president of Weiss Research. He also discusses what can be done to turn the US economy around.

The US Stuck in Zero-Rate Mode?

America is arrogant to deny their similarity to Japan’s economy, says Stephen Roach, chairman for Asia at Morgan Stanley. He tells CNBC that the US economy is in a "zero-interest rate" mode, like Japan.

Quantitative Easing & the Fed’s Balance Sheet

Thomas Lam, vice president and senior treasury economist at UOB, says the Fed’s latest moves such as to buy long-dated Treasurys will stretch its balance sheet and pump more liquidity into economy.

Tackling US Economy

Housing problems need to be tackled before the U.S. economy can pick up, according to Adam Carr, senior economist at ICAP.

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Jim Sinclair’s Commentary

You have to see the mindset of the "I deserve it all, and I deserve it NOW!"

The public is starting to get very angry at this "screw you" attitude.

That is taxpayer’s money they are squandering on a bunch of idiots that caused all the problems in the first place.

Four Fannie Mae execs to get big bonuses
updated 1:00 a.m. EDT, Thu March 19, 2009

NEW YORK (CNN) — Troubled mortgage giant Fannie Mae planned to pay four top executives retention bonuses ranging from $470,000 to $611,000, according to a February SEC filing.

Executive vice presidents Kenneth Bacon, David Hisey, Michael Williams and Thomas Lund will be receiving bonuses of close to half a million dollars each. Bacon supervises community development for the company, Hisey is its deputy chief financial officer, Williams is its COO and Lund oversees the single-family mortgage business.

By contrast, Fannie Mae CFO David Johnson received no bonus on top of his salary of $625,000, while CEO Herb Allison received no compensation or bonuses in 2008 or 2009.

A spokesman for Fannie Mae deferred comment on the bonuses to the Federal Housing Finance Agency.

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Jim Sinclair’s Commentary

This is our money all these bankster types are paying out.

Judge orders release of Merrill bonus recipient names

NEW YORK (CNN) — New York State Supreme Court Justice Bernard Fried ordered Bank of America on Wednesday to disclose information about nearly $3.6 billion in bonuses Merrill Lynch paid employees just before it was acquired by the bank.

The judge’s decision concluded weeks of back-and-forth between New York Attorney General Andrew Cuomo and Bank of America regarding the release of the information. Cuomo is leading an investigation into whether Bank of America and Merrill failed to properly disclose to shareholders details about the bonuses.

"Today’s decision in the Bank of America case is a victory for taxpayers," Cuomo said in a statement. He added, "Fried’s decision will now lift the shroud of secrecy surrounding the $3.6 billion in premature bonuses Merrill Lynch rushed out in early December. "

Bank of America spokesman Scott Silvestri said the bank would abide by the judge’s ruling.

"We will, of course, comply with the order of the court and turn over the information requested. We will continue to cooperate in the attorney general’s investigation," Silvestri said.

A petition to keep information including bonus details confidential was initially filed by Bank of America in New York state court on March 4. At the time, Bank of America spokesman Robert Stickler said, "We do this out of concern for the privacy of our employees and because we think disclosure would create a competitive disadvantage."

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Jim Sinclair’s Commentary

This is simple, predictable and unavoidable no matter how creative purchases via the Caribbean can be. This is the primary reason for the Fed committing to purchases US Treasuries, the value of which is a number certain to grow in size over time.

Quantitative Easing here is Easing of Credit Markets due to the externally falling sales by the US Treasury more than actual sales by non US entities.

Foreign debt purchases fall sharply in January
Offshore banking centers sell Treasurys; central banks sell agencies
By Laura Mandaro, MarketWatch
Last update: 3:59 p.m. EDT March 16, 2009

SAN FRANCISCO (MarketWatch) – A big jump in foreign sales of long-term U.S. securities raised concerns Monday that the U.S., in the midst of a massive debt issuance to fund its economic revival plans, may run into trouble getting other countries to finance its deficit.

Foreign purchases of long-term U.S. Treasurys, Fannie Mae (FNM) and Freddie Mac (FRE

) bonds, corporate debt and stocks — netted for acquisitions of foreign debt from U.S. residents — dropped to negative $43 billion in January from positive $34.7 billion in December, said the Treasury Department Monday.

January’s sales marked a record low, said currency strategist Michael Woolfolk, and the reasons for the plunge could spell bad news for the U.S. dollar.

"This was a truly awful report, throwing into question the funding of the U.S. current account deficit," said Woolfolk, senior currency strategist at the Bank of New York Mellon, in emailed comments.

Economists anticipate the U.S. current account gap, or the balance of trade with other countries in goods, services and investments, narrowed to a deficit of about $137.5 billion in the fourth quarter. The Commerce Department releases that report Wednesday.

Concerns that U.S. creditors could balk at buying more U.S. debt were thrown into relief last week after China, the biggest holder of U.S. government debt, said it was worried about the safety of its U.S. bonds.

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Posted by & filed under In The News.

Dear CIGAs,

I would honestly suggest with today’s action this young man make his total $36,000,000 by the time he is 11.

Only 8 years old

Jim Sinclair’s Commentary

Mugabe is the Chairman of the Federal Reserve.

What a horrible mistake this is! Now you can count on Confetti Money.

Now you know how truly horrible the OTC derivative meltdown is. What a mess the main manufacturer and distributor of this toxic paper, the USA, is in

There is no practical solution to this problem so ignore the ignoramuses on the Comex. Use the Comex to buy every time the ignoramuses raid and sell the short squeeze if you must trade.

Fed to Buy $1 Trillion in Securities to Aid Economy
By EDMUND L. ANDREWS
Published: March 18, 2009

WASHINGTON — Saying that the recession continues to deepen, the Federal Reserve announced Wednesday that it would pump an extra $1 trillion into the mortgage market and longer-term Treasury securities in order to revive the economy.

“Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending,” the Fed said, adding that it would “employ all available tools to promote economic recovery and to preserve price stability.”

As expected, the Fed kept its benchmark interest rate at virtually zero. But in a surprise, it dramatically increased the amount of money it will create out of thin air to thaw out the still-frozen credit markets that have cramped lending to consumers and businesses alike.

Indeed, the immediate effect on the bond markets was striking, with prices rising and yields dropping sharply on the news. The yield on the 30-year Treasury bond, about 3.75 percent before the announcement, fell quickly to 3.4 percent and remained volatile. At the same time, the dollar plunged about 3 percent against other major currencies.

Stocks moved higher on the Fed action. The Dow Jones industrial average was down about 50 points before the 2:15 p.m. announcement, but within an hour it was up 120 points for the day.

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Jim Sinclair’s Commentary

This is right out of the Great Depression 101 text book.

We are embarking on the 1930s Civilian Conservation Corp of a modestly different mode.

This along with the central bank monetizing your own debt (Zimbabwe 2005-2009), the reinstitution of the failed SDR and the political AIG bonus straw man means that this thing is so out of control our leadership is flailing wildly in the wind.

We are in huge trouble as a nation.

Alf you are so right!

House Readies Passage of Volunteerism Bill Critics Call Pricey, Forced Service
The legislation will expand the 1993 AmeriCorps program to match the renewed interest in national service since President Obama’s election, which backers say is crucial in tough economic times.
By Kelley Beaucar Vlahos
FOXNews.com
Wednesday, March 18, 2009

WASHINGTON — The House of Representatives is expected to pass a measure Wednesday that supporters are calling the most sweeping reform of nationally-backed volunteer programs since AmeriCorps. But some opponents are strongly criticizing the legislation, calling it expensive indoctrination and forced advocacy.

The Generations Invigorating Volunteerism and Education Act, known as the GIVE Act — sponsored by Reps. Carolyn McCarthy, D-N.Y, and George Miller, D-Calif. — was approved by a 34-3 vote in the House Education and Labor Committee last week.

The legislation would create 175,000 "new service opportunities" under AmeriCorps, bringing the number of participants in the national volunteer program to 250,000. It would also create additional "corps" to expand the reach of volunteerism into new sectors, including a Clean Energy Corps, Education Corps, Healthy Futures Corps and Veterans Service Corps, and it expands the National Civilian Community Corps to focus on additional areas like disaster relief and energy conservation.

It is the first time the AmeriCorps program, which was created by President Clinton in 1993, will be reauthorized, and supporters say it will have additional funding to match the renewed interest in national service since President Obama’s election and the acute need for volunteerism and charity in tough economic times.

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Jim Sinclair’s Commentary

Surprise, surprise, the straw man is falling

A.I.G. Chief Expected to Offer Bonus Compromise

Edward M. Liddy, the embattled chief of American International Group, is expected to tell a House committee that he will ask employees who received widely criticized bonuses last week to give half the money back.

WASHINGTON — As the lucrative bonuses paid to employees of the American International Group fueled fresh outrage at the White House and on Capitol Hill on Wednesday, the embattled chief executive of A.I.G. said that he had asked some recipients to give at least half the money back.

The chief executive, Edward M. Liddy, made the announcement during his testimony on Wednesday afternoon before a Congressional committee investigating the problems at the insurance giant.

“I have asked the employees of A.I.G. Financial Products to step up and do the right thing,” Mr. Liddy told lawmakers. “Specifically, I have asked those who received retention payments of $100,000 or more to return at least half of those payments.”

The A.I.G. chief said that some recipients had already offered to give up all of their bonuses, and he added later that he expected to get most of the money back.

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Jim Sinclair’s Commentary

No need for the UN to propose this dollar position as it about to occur in the marketplace.

U.N. panel says world should ditch dollar
Wed Mar 18, 2009 11:16am EDT
By Jeremy Gaunt, European Investment Correspondent

LUXEMBOURG (Reuters) – A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar.

Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.

Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform.

"It is a good moment to move to a shared reserve currency," he said.

Central banks hold their reserves in a variety of currencies and gold, but the dollar has dominated as the most convincing store of value — though its rate has wavered in recent years as the United States ran up huge twin budget and external deficits.

Some analysts said news of the U.N. panel’s recommendation extended dollar losses because it fed into concerns about the future of the greenback as the main global reserve currency, raising the chances of central bank sales of dollar holdings.

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Posted by & filed under In The News.

Dear CIGAs,

Remember our repeated discussions a while back about the Slowest Train Wreck in History, Fannie and Freddie? How many times were the shorts run out? The answer is on every rally in the general indices.

Gold is exactly the same in reverse. At every opportunity the Comex paper shorts raid gold and run out the longs.

Just like the shorting of Fannie and Freddie turned out to be one of the best and safest plays in the market, long gold will also prove to be a safe play as it rises to my and maybe Alf’s goals, supported by Armstrong’s research.

Today you are being had yet again.

 

Jim Sinclair’s Commentary

Today’s decline in gold has nothing to do with SDRs.

There is nothing new in SDRs as they are 40 years old this year. Their introduction in 1969 was one of the reasons for the bull market in gold from 1968 to 1980.

What you are witnessing is the COMEX paper gold manipulators once again having their way with you.

Assuming no one of size wishes to take delivery out of the Comex warehouse, then this is a perma-experience as gold rises to $1224, $1650 and beyond.

It assures that very few of you will be left in gold or silver, having decided to go out into the cold. Some of you may even put all you have in SDR bonds.

Nothing assures a top in the US dollar better than SDRs.

Gold is a currency, has been a currency for all written history and will prove itself so in 2009.

The US dollar is as much a bubble as were tech stocks. The USDX is what an SDR is. The US dollar will trade at .8200, .7200, .6200 and below.

The frustration that the COMEX will deliver to you if unopposed will certainly take out 75% of whatever is left of the gold gang. It will prove once again that it is the Goldman’s of the world that make the real money in gold.

Today is a pure paper manipulation.

 

Jim Sinclair’s Commentary

I have two observations here:

1. The US dollar represents a banana republic monetarily.

2. Compared to the nominal amount of derivatives outstanding at above one quadrillion (past BIS truthfulness, a number that has since been degraded), 11 trillion is chump change.

3. If you throw your gold away for dollars you are mad victims of the majors on the Comex.

National debt hits record $11 trillion
By MANU RAJU | 3/17/09 6:42 PM EDT

The eye-popping national debt surpassed $11 trillion Monday, the largest in U.S. history.

The new Treasury Department figures on the national debt were released as the non-partisan Congressional Budget Office is expected to project that the annual budget deficit will be higher than previously estimated by the White House’s Office of Management and Budget. The debt, which refers to the cumulative amount of money the government owes, hit $10.9 trillion on Friday.

The whopping number has major ramifications for President Barack Obama, who is trying to push through a raft of big-ticket bills on health care, energy, education and climate change — while also attempting to stabilize the swooning economy.

Sen. Kent Conrad (D-N.D.), chairman of the Budget Committee, said Tuesday that the numbers could force Congress to make "adjustments" to Obama’s $3.6 trillion budget plan.

"It’s very important get a result for the American people and one that has the priorities that have been [announced] by the president in terms of reducing our dependence on foreign energy, that’s in all of our interests, excellence in education, health care reform and dramatic reduction of the deficit,” Conrad told reporters. “Those will be our guiding principles as we go forward, but as I say, we’ve not yet seen CBO’s new numbers. But I think we can all anticipate because they were done substantially later than OMB’s, that they are going to be more adverse. That that’s going to require all of us to make adjustments.”

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Jim Sinclair’s Commentary

Have you ever felt you might be on the wrong planet?

FDIC Criticizes Massachusetts Bank With No Bad Loans for Being Too Cautious
Tuesday , March 17, 2009

A Massachusetts bank that has defied the odds and remained free of bad loans amid the economic crisis is now being criticized by the Federal Deposit Insurance Corp. for the cautious business practices that caused its rare success.

The secret behind East Bridgewater Savings Bank’s accomplishments is the careful approach of 62-year-old chief executive Joseph Petrucelli.

"We’re paranoid about credit quality," he told the Boston Business Journal.

That paranoia has allowed East Bridgewater Savings Bank to stand out among a flurry a failing banks, with no delinquent loans or foreclosures on its books, the Journal reported. East Bridgewater Savings didn’t even need to set aside in money in 2008 for anticipated loan losses.

But rather than reward Petrucelli’s tactics, the FDIC recently criticized his bank for not lending enough, slapping it with a "needs to improve" rating under the Community Reinvestment Act, the Journal reported.

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Jim Sinclair’s Commentary

We do not need Russia to weaken the US dollar. The Fed and the Treasury are totally capable of that.

The dollar death nell is contained in:

SDRs (just as it was in 1969).

The Zimbabwean approach to monetizing your own debt as per the Fed purchase of US Treasuries.

Russia bids to topple cash system
MOSCOW
17/03/2009 1:00:00 AM

Russia has unveiled radical plans for sweeping global financial reforms designed to weaken US dominance and consign an ”obsolescent” world economic order to the past.

The Kremlin said in a six-page document addressed to the upcoming Group of 20 summit in London the downturn was the result of a collapse of the existing financial system due to poor management and inadequacy. It said the crisis showed the need to abandon traditional approaches and adopt collective and globally agreed decisions aimed essentially at developing a globalisation process management system.

The document spelled out five principles on which a ”new international financial architecture” should be based and offered proposals in eight specific areas for the G20 to consider, including reform of the international monetary and financial system, reform of the system’s institutions and tightening international regulation and financial supervision. Russia said the London summit should agree on ”parameters” of a new financial system but should be followed by an international conference to adopt conventions on new regulations. AFP

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Jim Sinclair’s Commentary

Ever heard of the political maxim of building a straw man and tearing it down to demonstrate you are doing something for the man in the street?

Outcry Builds in Washington for Recovery of A.I.G. Bonuses
By JACKIE CALMES and LOUISE STORY
Published: March 17, 2009

WASHINGTON — The bonuses that the American International Group awarded last week were paid to 418 employees and included $33.6 million for 52 people who have left the failed insurance conglomerate, according to the office of the New York attorney general.

The company paid the bonuses, including more than $1 million each to 73 people, to almost all of the employees in the financial products unit responsible for creating the exotic derivatives that caused A.I.G.’s near collapse and started the government rescue to avoid a global financial crisis.

A.I.G. has received nearly $200 billion in federal bailout funds.

The information adds to the firestorm confronting the Obama administration and Congress since the weekend disclosure that A.I.G., almost 80 percent owned by the government, paid out $165 million in bonuses.

Even before the New York attorney general, Andrew M. Cuomo, divulged the new data on bonus payments in a letter to Representative Barney Frank, the Massachusetts Democrat and chairman of the Financial Services Committee, the White House and Congress separately were rushing to get out in front of the mounting public furor. Officials and lawmakers condemned A.I.G., pointed fingers at each other and promised speedy action to recoup the taxpayers’ money.

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Posted by & filed under In The News.

Dear CIGAs,

Here are this morning’s news highlights:

1. There is no inflation. Oh yeah? There is $9.5 trillion in inflation that will transmit to prices for which there is no practical cure.

2. Not to worry, the Fed will drain as inflation starts. Oh yeah? The Fed is going to drain trillions from the world economy? That is total non-sense. There is no tool in the Fed’s power to pull off that miracle without causing a second disaster.

3. The mark to market rule of FASB 157 appear as if it is going to be modified so that value will be computer modeled according to assumptions of lines of income to maturity of SIVs, OTC derivatives. As a product of this value cartoon, no balance sheet for anyone from GE to the financials can be relied upon as factual. Who knows, maybe the world wants to be lied to.

4. Talk is ramping up as a PR campaign concerning the benefits of the US Fed buying tons of US Treasuries to hold rates. I might add as international demand for Treasuries falls that will threaten rates as that would force the borrowing to inland demand.

5. Housing starts are up which simply means that there will be more apartments and condos in inventory. Sales are in the trash can as building increases means more inventory. If builders have or can get building loans they would build them regardless of what the potential to sell is. Builders live off the building loan.

The COMEX gang was on gold the instant the PPI came out but that will continue until more deliveries are taken out of the COMEX warehouse.

 

Jim Sinclair’s Commentary

This has caused short term weakness, however it is a confirmation of the longer term uptrend.

Hyperinflation cannot be avoided and would sustain Alf’s objectives. There is no comparison here at all to what a top in the gold price looks like.

There is an axiom that if a market lets you out easily, you should stay. If a market offers you a ragged exit only, you should get out.

If Mr. Hulbert needs to find a person quite positive on gold he only needs to speak to me.

Where have all the gold bugs gone?
Commentary: Huge shift among gold timers from bull to bear
By Mark Hulbert, MarketWatch
Last update: 12:01 a.m. EDT March 17, 2009

ANNANDALE, Va. (MarketWatch) — Call it the retreat of the gold bugs.

Over the past three weeks, the editor of the average gold timing newsletter I monitor has hastily jumped off the bullish bandwagon. And a not insignificant number have taken the occasion to furthermore jump onto the bearish bandwagon.

At least from the point of view of contrarian analysis, this is good news for gold.

Consider the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average recommended gold market exposure among a subset of short-term gold timing newsletters tracked by the Hulbert Financial Digest. The HGNSI’s latest reading is minus 16.5%, which means that the editor of the average gold timing newsletter is recommending that his subscribers allocate 16.5% of their gold portfolios to shorting the market.

Three weeks ago, in contrast, the HGNSI stood at 60.9%. So in just 15 trading sessions, the average recommended gold market exposure has fallen by more than 77 percentage points.

What sins did gold bullion commit to elicit this huge of a reaction? Failing to rise convincingly above the psychologically important $1,000 barrier, apparently: Spot gold in the futures market was able to close above that level for just one day (Feb. 20), and only barely at that ($1,001.70). And it then dropped.

Still, gold didn’t fall off a cliff. It’s currently just 8% below its Feb. 20 close, after all. Declines of that magnitude typically do not lead to such marked shifts in sentiment from bulls to bears.

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Jim Sinclair’s Commentary

Well UBS? At least it makes for some good reading.

UBS Investment Research
Q-Series®: Gold

What is next for gold?

Where could prices go?
We believe that the current environment is one which can best be characterised as having a ‘low margin of error’ for central bankers; with the prospects for deflation/inflation as becoming more extreme. The high potential for policy error is generating considerable interest in certain assets which are perceived as ‘stores of value’ including gold.

Our econometric model indicates upside risk
Using a proprietary econometric model we have generated a probability cone for the future possible price path for gold. Using different environments for the level of inflation volatility, US dollar and absolute level of inflation we have determined that future returns on gold are likely to be positively asymmetric, with potential upside to US$2,500/oz.

Exposure to gold recommended
Our asset allocation team has moved gold to overweight from neutral. Given the broad uncertainties in the current macro climate we believe that investors should look to gold given its historic tendency to act as a hedge against these risks.

Equity performance
Our assessment of equity performance from 1900 suggests that gold equities are strong performers versus the market during periods of financial risk. During the 1929 crash, for example, Homestake Mining strongly outperformed the S&P. Preferred gold mining equities include Goldcorp, Anglogold and Lihir.

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Jim Sinclair’s Commentary

AIG is not the only entity that will not repay one penny of the trillion the Treasury and Fed have provided (of course at no risk to the Treasury or Fed). What that means is you, I and our grandchildren are going to pay it back. Keep in mind the funds have not disappeared into a black hole somewhere. All that money has gone to the winners of the OTC derivatives. Yes, all that money.

AIG likely won’t be able to pay taxpayers back
The Associated Press
8:06 PM EST March 16, 2009

Pressure is mounting on the government to revise its bailout of AIG to ensure that taxpayers are repaid as much as possible of the $170 billion lent to the troubled insurer.

Experts warn we shouldn’t expect to get much back.

The problem stems from AIG’s obligations to its trading partners. So far, the hobbled insurance giant has honored in full its contracts with U.S. and foreign banks. It’s paid out more than $90 billion in taxpayer money to keep some of the biggest names in finance from losing money on bad bets linked to subprime mortgages and other risky assets.

As the cost of the rescue swells, experts says it’s becoming harder to envision a scenario in which the government could recoup its full investment. Even though the AIG payouts to major banks have angered critics of the bailout, it might be legally impossible to claw back any of the billions already doled out.

"A contract is a contract," said Russell Walker, a risk management professor at Northwestern University. "That money all went to people who bought protection from AIG."

The government agreed to uphold those contracts when it seized control of American International Group in September. It argued that failing to repay the debts of the globally interconnected company could cause catastrophic losses at big international banks, potentially toppling the financial system.

Scrutiny of AIG’s dealings with its trading partners comes after revelations over the weekend that the insurer plans to pay out tens of millions in executive bonuses. President Barack Obama on Monday accused AIG of "recklessness and greed." He pledged to try to block it from handing out the bonuses, which AIG insists it’s contractually obligated to pay.

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Jim Sinclair’s Commentary

This is only one of the problems but it is one that can have the most significant impact on non Wall Streeters. It is a significant risk to the social order.

Many of these people are not sheep and will walk to the slaughter obediently, subserviently and quietly.

Hidden Pension Fiasco May Foment Another $1 Trillion Bailout
By David Evans

March 3 (Bloomberg) — The Chicago Transit Authority retirement plan had a $1.5 billion hole in its stash of assets in 2007. At the height of a four-year bull market, it didn’t have enough cash on hand to pay its retirees through 2013, meaning it was underfunded to the tune of 62 percent.

The CTA, which manages the second-largest public transit system in the U.S., had to hope for a huge contribution from the Illinois state legislature. That wasn’t going to happen.

Then the authority found an answer.

“We’ve identified the problem and a solution,” said CTA Chairman Carole Brown on April 16, 2007. The agency decided to raise money from a bond sale.

A year later, it asked Illinois Auditor General William Holland to research its plan. The state hired an actuary, did a study and, on July 17, concluded that the sale of bonds would most likely result in a loss of taxpayers’ money.

Thirteen days after that, the CTA ignored the warning and issued $1.9 billion in bonds. Before the year ended, the pension fund was paying out more to bondholders than it was earning on its new influx of money. Instead of closing its funding gap, the CTA was falling further behind.

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Jim Sinclair’s Commentary

This is also securitized as OTC derivatives. It is another problem to add to the pile of items not going away.

U.S. credit card defaults rise to 20 year-high
Mon Mar 16, 2009 6:15pm EDT
By Juan Lagorio

NEW YORK, March 16 (Reuters) – U.S. credit card defaults rose in February to their highest level in at least 20 years, with losses particularly severe at American Express Co and Citigroup amid a deepening recession.

AmEx, the largest U.S. charge card operator by sales volume, said its net charge-off rate — debts companies believe they will never be able to collect — rose to 8.70 percent in February from 8.30 percent in January.

The credit card company’s shares wiped out early gains and ended down 3.3 percent as loan losses exceeded expectations. Moshe Orenbuch, an analyst at Credit Suisse, said American Express credit card losses were 10 basis points larger than forecast.

In addition, Citigroup Inc — one of the largest issuers of MasterCard cards — disappointed analysts as its default rate soared to 9.33 percent in February, from 6.95 percent a month earlier, according to a report based on trusts representing a portion of securitized credit card debt.

"There is a continued deterioration. Trends in credit cards will get worse before they start getting better," said Walter Todd, a portfolio manager at Greenwood Capital Associates.

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Jim Sinclair’s Commentary

The Talking Heads, although somewhat cautious, are using the increased building of condos and apartments as an indicator of a bottom. They are forgetting the following.

Corporate meltdown leaves renters in limbo
Large apartment complexes abandoned to receivership and unruly weeds
By Kari Huus
updated 3:26 a.m. PT, Mon., March. 16, 2009

Nicholle Krause first noticed the weeds sprouting in the usually well-manicured grounds of her 320-unit apartment complex in Chandler, Ariz., in December. Soon, signs of neglect began multiplying: Garbage spilled over from the dumpsters, the water in the swimming pool turned a slimy pea green and the grounds were infested by swarms of bees — especially alarming because Krause is severely allergic to bee stings.

“I couldn’t even go outside to enjoy where I live,” said Krause, a 21-year-old office worker who pays $827 a month for a one-bedroom apartment with garage space. “I shouldn’t have to pay $800 a month to live in a … hole.”

It wasn’t until early March that Krause and other residents learned why the complex – the alluringly named Alante at the Islands — was rapidly going to seed. The property owner, Irvine, Calif.-based Bethany Holdings Group, had abandoned the complex and a dozen other large rental properties in the greater Phoenix area after defaulting on hundreds of millions of dollars in loans.

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Jim Sinclair’s Commentary

Seems the Greeks take financial misconduct, or plain stupidity, somewhat more seriously than New Yorkers.

Greek extremists threaten more bombings after Citibank attacks

ATHENS (AFP) — A Greek extremist group known for its violent attacks has threatened to carry out more bombings in the wake of two recent strikes targeting US banking group Citibank.

In an eight-page proclamation published in Greek weekly Pontiki, far-left group Revolutionary Struggle said its aim remained to foment "revolution" and use the global economic crisis against capitalism.

"We intend to continue timed (bomb) attacks," the proclamation said.

"We need to rid ourselves for good of all the scum of economic and political power so that humanity can free itself from these criminals.

"We must create (a mass movement) here and now so that the crisis can become the system’s tomb," it added.

Greece’s most dangerous far-left organisation earlier admitted responsibility for two attacks against Citibank targets in north Athens that caused no injuries.

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Jim Sinclair’s Commentary

This is hard to believe.

Should Geithner resign it would be critically bad for expectations of Obama’s ability to lead any business recovery.

Internationally, it would be an embarrassment to his administration that would be difficult if not impossible to overcome.

Geithner "Out Of The Loop," Resignation Talk Begins
Henry Blodget
Mar. 17, 2009, 2:25 PM

A week ago, we lost patience with Tim Geithner and called for him to be fired. He won’t be fired, of course–throwing him under the bus only a month or so into his tenure would embarrass the Obama administration–but we have now heard the first public discussion of a possible resignation.

Why might Tim Geithner resign?

· He still has no coherent plan to fix the banking system

· He has convinced no one that he’s the right man to lead us out of this.

· He helped design the past administration’s failed bailouts

· He was the architect of the original AIG bailout

· He tacitly helped cover up the AIG "counterparty" bailout beneficiaries for 6 months

· He approved the latest round of AIG bonuses last week (according to AIG)

At the very least, Geithner needs to answer for his role in the original AIG bailout, which has been a disaster, as well as the counterparty cover-up.

In September, Geithner and Hank Paulson engineered an AIG bailout in which Paulson’s firm (and one of Geithner’s patrons on the New York Fed) secretly received $13 billion of taxpayer money that no taxpayer was told about. Now that taxpayers have found out about it, they are justifiably pissed.

In any event, Republicans have been emboldened by Geithner’s stumbles, and they’re getting closer to calling for his head:

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Jim Sinclair’s Commentary

Take your pick. There are so many black holes out there that our financial leadership has hit the panic button (SDRs). This speaks quite poorly for the grand hope that this new administration can save the USA (or world) from anything.

Freddie Mac: The Government’s Next Black Hole?
By STEPHEN GANDEL
Tuesday, Mar. 17, 2009

AIG is to date the most expensive corporate bailout in American history, requiring $180 billion in government funds. But it may soon have competition. Last week mortgage giant Freddie Mac said it had lost $50 billion in 2008 alone. A look at the company’s books suggests the government will have to spend at least triple that much to save the financial firm from collapse. If the housing market worsens, the tab could be even larger.

"Freddie’s portfolio of [mortgage] insurance is more risky than the market was led to believe," says Paul Miller, an analyst at FBR Capital Markets. Sister company Fannie Mae lost even more last year, with $58.7 billion of red ink. But Fannie was better capitalized than Freddie going into the credit crunch. So even though Freddie by many measures is smaller than Fannie, the problems at Freddie will probably end up costing more.

Citigroup and other banks have also lost money and will need more capital to survive. But in those cases it’s not clear who will take the hit — shareholders, bondholders or the government. In the cases of AIG, Freddie Mac and Fannie Mae, however, there is no question where the money will come from. Freddie and Fannie were taken over by the government and put into conservatorship last fall. AIG is currently 80% owned by the government. The losses at those companies are now taxpayer losses.

And like AIG, Freddie has had to go back to the government a number of times with cup in hand. The mortgage giant has already received $14 billion in government aid. After a fourth-quarter loss of $24 billion, the company said it needed an additional $31 billion from the government to keep the lights on.

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Posted by & filed under In The News.

A Word of Caution:

Some writers are attempting to take Armstrong’s cycle work and interpolate that to gold using a standard 8.6 year approach.

There is nothing standard about what is out there today.

I would suggest that we should listen to the man himself.

Armstrong looks to June as a very important period for gold. Should that period be a key time for gold the following high would be in the area of $4000.

Barrick settles lawsuit over misleading investors
Joe Schneider, Bloomberg
Published: Monday, March 16, 2009

Barrick Gold Corp., the world’s biggest gold producer, agreed to settle a lawsuit alleging it misled investors by claiming that its hedging program wouldn’t hurt profits as gold prices rose.

Terms of the settlement haven’t been released because Toronto-based Barrick must conclude talks with its insurers before signing the accord, David Brower, a lawyer for investors who sued, said Monday in a letter to U.S. District Judge Richard Berman in New York. Judge Berman postponed a settlement hearing, scheduled for Tuesday, until March 31.

Barrick hedged production by entering into contracts to sell some gold before it was mined to protect against a drop in bullion prices. Shareholders alleged in the lawsuit filed in 2003 that the program was "speculative" and "risky," resulting in a drop in the share price as gold prices rose.

Judge Berman allowed that part of the suit to proceed in a ruling on Jan. 31, 2006, when he threw out claims that Barrick was involved in anticompetitive conduct.

Former Barrick chief executive Randall Oliphant, chief financial officer Jamie Sokalsky and former chief operating officer John Carrington were named in the suit.

Mr. Oliphant was fired in February 2003, after Barrick’s stock fell 17% in the previous year as the price of gold surged to a six-year high. Mr. Oliphant’s successor, Greg Wilkins, abandoned the hedging program.

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In Downturn, China Exploits Path to Growth
By KEITH BRADSHER
Published: March 16, 2009

GUANGZHOU, China — The global economic downturn, and efforts to reverse it, will probably make China an even stronger economic competitor than it was before the crisis.

China, the world’s third-largest economy behind the United States and Japan, had already become more assertive; now it is exploiting its unusual position as a country with piles of cash and a strong banking system, at a time when many countries have neither, to acquire natural resources and make new friends.

Last week, China’s prime minister, Wen Jiabao, even reminded Washington that as one of the United States’ biggest creditors, China expects Washington to safeguard its investment.

China’s leaders are turning economic crisis to competitive advantage, said economic analysts.

The country is using its nearly $600 billion economic stimulus package to make its companies better able to compete in markets at home and abroad, to retrain migrant workers on an immense scale and to rapidly expand subsidies for research and development. Construction has already begun on new highways and rail lines that are likely to permanently reduce transportation costs.

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Jim Sinclair’s Commentary

Don’t be fooled, these are not the counter parties. These are the brokers for the counter parties. This article is more convoluted fabrications.

A.I.G. Reveals Its Biggest Counterparties
March 15, 2009, 5:16 pm
Update | 6:23 p.m.

The American International Group on Sunday released the names of financial institutions that benefited last fall when the Federal Reserve saved it from collapse with an $85 billion rescue loan and then 3 subsequent bailouts.

The disclosure included counterparties to both its credit default swap operations and its securities lending businesses, both of which contributed heavily to A.I.G.’s troubles, as well as to muncipalities who participated in certain investment programs. All told, Sunday’s statement detailed payments of more than $78 billion, all made using government loans. (Read the disclosure by A.I.G. after the jump.)

Many critics of the company have demanded the names of A.I.G.’s counterparties as the insurer received government money totaling $170 billion. A.I.G. said in a statement that it made the disclosure in consultation with the Federal Reserve.

“Our decision to disclose these transactions was made following conversations with the counterparties and the recognition of the extraordinary nature of these transactions,” Edward M. Liddy, A.I.G.’s government-appointed chief executive, said in a statement.

Time and again, the rationale given for bailout out A.I.G. was that its credit default swap agreements — essentially insurance contracts on mortgage-backed securities — were so interwoven into the global financial web that to let the insurer fail would create chaos.

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