Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

Jim Sinclair’s Commentary

What you do not read in the US press or hear on Bloomberg TV is the Germans who have experienced the Weimar Republic and know how it works and firmly believe the US is taking the world directly there again.

The Germans are 100% correct.

The Germans are painted in the GB and US media as intransigents not pulling their weight, and obstructionists in the planetary bailing out plan. Therefore they are seen as the enemy of an economic recovery.

This opens the opportunity for China to take a center position as the nation most likely to pull out first among those anxious at the G 20 for any lifeline.

Brown snubbed over tax
Germans wreck ‘global new deal’
From The Sunday Times

March 29, 2009

GORDON BROWN’S carefully laid plans for a G20 deal on worldwide tax cuts have been scuppered by an eve-of-summit ambush by European leaders.

Angela Merkel, the German chancellor, last night led the assault on the prime minister’s “global new deal” for a $2 trillion-plus fiscal stimulus to end the recession.

“I will not let anyone tell me that we must spend more money,” she said.

The Spanish finance minister, Pedro Solbes, also dismissed new cash being pledged at Thursday’s London summit.

“In these conditions I and the rest of my colleagues from the eurozone believe there is no room for new fiscal stimulus plans,” he said.

Nicolas Sarkozy, the French president, has insisted that “radical reform” of capitalism is more important than tax cutting.

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J

im Sinclair’s Commentary

Do you get the idea that everything around us is coming apart at the seams? You know that Wagoner knows what is contained in the Motors bailout plan.

The G 20 and big claims for the gathering is breaking down into opposing teams, all opposing the USA and GB.

Rick Wagoner, G.M. Chief, Is Said to Be Resigning
By BILL VLASIC and SHERYL GAY STOLBERG
Published: March 29, 2009

DETROIT — The chairman and chief executive of General Motors, Rick Wagoner, resigned Sunday as part of a broad agreement with the Obama administration to funnel more government aid to the ailing auto giant, according to people close to the decision.

Mr. Wagoner, who has served as G.M.’s top executive since 2000, agreed to step down after it was requested by the president’s auto task force, these people said.

G.M. had no immediate comment on the sudden development, which came on the eve of Mr. Obama’s announcement on Monday that is to detail his rescue plans for G.M., Chrysler and the larger American auto industry.

But people in the company said G.M. would issue a statement on Mr. Wagoner after the president unveiled his plan in Washington.

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Jim Sinclair’s Commentary

Gold is no longer an investment. Gold is no longer a portfolio item. Gold is certainly not a trading vehicle. Gold is your lifeline and I mean that literally.

The Quiet Coup
MAY 2009 ATLANTIC

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
by Simon Johnson

ONE THING YOU learn rather quickly when working at the International Monetary Fund is that no one is ever very happy to see you. Typically, your “clients” come in only after private capital has abandoned them, after regional trading-bloc partners have been unable to throw a strong enough lifeline, after last-ditch attempts to borrow from powerful friends like China or the European Union have fallen through. You’re never at the top of anyone’s dance card.

The reason, of course, is that the IMF specializes in telling its clients what they don’t want to hear. I should know; I pressed painful changes on many foreign officials during my time there as chief economist in 2007 and 2008. And I felt the effects of IMF pressure, at least indirectly, when I worked with governments in Eastern Europe as they struggled after 1989, and with the private sector in Asia and Latin America during the crises of the late 1990s and early 2000s. Over that time, from every vantage point, I saw firsthand the steady flow of officials—from Ukraine, Russia, Thailand, Indonesia, South Korea, and elsewhere—trudging to the fund when circumstances were dire and all else had failed.

Every crisis is different, of course. Ukraine faced hyperinflation in 1994; Russia desperately needed help when its short-term-debt rollover scheme exploded in the summer of 1998; the Indonesian rupiah plunged in 1997, nearly leveling the corporate economy; that same year, South Korea’s 30-year economic miracle ground to a halt when foreign banks suddenly refused to extend new credit.

But I must tell you, to IMF officials, all of these crises looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.

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Jim Sinclair’s Commentary

China tells the US and GB to "stuff it," re-lecturing the G 20. Sounds like a battle to me.

China Chastises West in Leadership Bid Before G-20 (Update1)
By Li Yanping and Kevin Hamlin

March 27 (Bloomberg) — China is scolding the world before the Group of 20 meeting next week, telling the largest countries to spend more on stimulus and fix their financial supervision.

Central bank Governor Zhou Xiaochuan yesterday lambasted governments that failed to emulate China’s “decisive” action to spur economic growth. Earlier this week he suggested creating a new international reserve currency to rival the dollar.

Evidence that China’s 4 trillion yuan ($585 billion) stimulus package is taking effect is emboldening the nation’s leaders to dictate their vision for a new world economic and financial order. Premier Wen Jiabao said this month he was worried about the value of China’s $740 billion in U.S. Treasury holdings and asked for a guarantee of their safety.

“China can stand up and say, ‘Our policies have worked, we have stabilized our economy first,’” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. “China is positioning itself to have a much more significant role and influence at this G-20 meeting than it has at any other international forum in the past.”

Leaders of the 20 largest industrial and developing nations meet in London on April 2 to look for ways to alleviate the global financial crisis and strengthen international regulation. The World Bank this month said the global economy will probably shrink for the first time since World War II.

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Jim Sinclair’s Commentary

Dean Harry Schultz has commented before that monetary systems can start this way.

State considers return to gold, silver dollars
Proposed bill slams Fed, allows payments in precious metals

A bill being considered in the Montana Legislature blasts the Federal Reserve’s role in America’s money policy and permits the state to conduct business in gold and silver instead of the Fed’s legal tender notes.

Montana H.B. 639, sponsored by State Rep. Bob Wagner, R-Harrison, doesn’t require the state or citizens to conduct business in gold or silver, but it does require the state to calculate certain transactions in both the current legal tender system and in an electronic gold currency. It further mandates that the state must accept payments in gold or silver for various fees and purchases.

While Wagner was unavailable for comment, the bill’s language clearly alleges the nation’s current financial system, with its reliance on the private Federal Reserve system for money supply, is a danger to American freedom.

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Jim Sinclair’s Commentary

China challenges the USA for leadership of the G 20.

The G 20 is setting up for the first major battle for leadership since the US took that position. It has less to do with saving anything. It is the Advent of Sino Signature Leadership sure to come now or very soon. The sun has set on the US dollar at the hand of Greenspan and now Greenspan’s bagged man, Bernanke. The Sun has set on Capitalism as we enter Liberal Facism.

The SDR is not a super currency but a hopeless sow’s ear.

Please keep firmly in mind that the SDR is not a new device or a super currency. It is a failed idea of 1969. A bag of currency backed by swaps making up failed currencies is a failed bag of currency. Add to the failed bag, Russia and China’s currency and unless you drop the dollar, yen and pound, you produce a larger soggy bag of paper which can serve the world only by increasing monetary inflation

China insists on financial system overhaul

MEDELLIN, Colombia (AFP) — Chinese Central Bank Governor Zhou Xiaochuan again urged for international financial reform in the face of the global economic crisis.

Speaking at an Inter-American Development Bank meeting in the northwestern Colombian city of Medellin, Zhou said that current fiscal and monetary measures were useless if the international financial system is not overhauled.

He said financial reform and measures for international development banks like the International Monetary Fund (IMF) and the World Bank would likely be discussed at the upcoming G20 summit of developing and industrialized nations on Thursday in London.

"Up to now we have participated in some working groups which focus on coordinating effort to overcome the negative impact of the financial crisis," Zhou said.

"The second (effort) is maybe financial sector reform, including regulatory reform, and I think we also expect there may be some reform agenda for international financial institutions, including the Fund, the Bank and other development banks."

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Jim Sinclair’s Commentary

Interesting approach with gold added. It depends on how and how much. Otherwise, it is still a bag of paper.

UPDATE 1-Russia wants rouble, yuan, gold in SDR basket
Sat Mar 28, 2009 8:27am EDT

MOSCOW, March 28 (Reuters) – Russia supports expanding the IMF’s Special Drawing Rights (SDR) to include the rouble, the yuan and gold, but sees no chance of the G20 Summit accepting a new reserve currency, a Kremlin aide said on Saturday, agencies reported.

"It would be logical for the set of currencies (that make up the SDR) to be expanded, and it could include other currencies, including the rouble, the yuan and perhaps others," state RIA news agency reported the Kremlin’s senior economic aide Arkady Dvorkovich as saying.

China this week caused a stir ahead of the April 2 Group of 20 meeting of rich and emerging economies when it suggested the world move towards greater use of the International Monetary Fund’s Special Drawing Rights, created by the IMF in 1969 as an international reserve asset.

G20 leaders have made clear that for now the dollar’s status as the dominant reserve unit remains, but the idea of creating a new reserve currency system based on SDRs has not entirely been knocked down.

Dvorkovich said he sees no chance of the G20 accepting a new reserve currency next month, but his comments suggest the issue will be in the spotlight at the meeting, where world leaders will discuss ways to combat the global economic crisis.

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Posted by & filed under In The News.

Dear Friends,

Please accept my sincere thanks for the many birthday wishes I received today. You compliment me by your kind words and remembrance.

Sincerely.
Jim

Jim Sinclair’s Commentary

It is sad this is absolutely true!

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Jim Sinclair’s Commentary

The ground swell will grow because I am as mad as Hell!

Jim Sinclair’s Commentary

The G 20 is sizing up now as a battle between the New Giant and yesterday’s news.

China Chastises West in Leadership Bid Before G-20 (Update1)
By Li Yanping and Kevin Hamlin

March 27 (Bloomberg) — China is scolding the world before the Group of 20 meeting next week, telling the largest countries to spend more on stimulus and fix their financial supervision.

Central bank Governor Zhou Xiaochuan yesterday lambasted governments that failed to emulate China’s “decisive” action to spur economic growth. Earlier this week he suggested creating a new international reserve currency to rival the dollar.

Evidence that China’s 4 trillion yuan ($585 billion) stimulus package is taking effect is emboldening the nation’s leaders to dictate their vision for a new world economic and financial order. Premier Wen Jiabao said this month he was worried about the value of China’s $740 billion in U.S. Treasury holdings and asked for a guarantee of their safety.

“China can stand up and say, ‘Our policies have worked, we have stabilized our economy first,’” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong. “China is positioning itself to have a much more significant role and influence at this G-20 meeting than it has at any other international forum in the past.”

Leaders of the 20 largest industrial and developing nations meet in London on April 2 to look for ways to alleviate the global financial crisis and strengthen international regulation. The World Bank this month said the global economy will probably shrink for the first time since World War II.

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Jim Sinclair’s Commentary

Mickey Mouse fired, world children decimated. Trader Dan’s kids to picket Disney World.

Wall Street cheers action as a profit improving move. Banksters say screw the kids.

Sources: Disney To Eliminate 800 Jobs
Company Employs 62,000 In Central Florida
POSTED: Friday, March 27, 2009
UPDATED: 10:53 am EDT March 27, 2009

ORLANDO, Fla. — Nearly 800 jobs are being eliminated at Walt Disney World, sources told Local 6 News.

The layoffs have been ongoing for weeks, and more workers were laid off on Thursday, Local 6 News reported. The cuts have mostly targeted salaried workers.

More layoffs are expected, although Disney would not say how many total jobs were being dissolved.

Disney announced last month that it would begin laying off workers as it began combining some its Florida backstage operations with California. The company first offered voluntary buyouts to more than 600 park executives, but only 50 employees accepeted the offers.

Disney employs about 62,000 cast members in Central Florida.

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Jim Sinclair’s Commentary

Only for the Grace of God, that could have been us.

Don’t let your guard down.

Gold is now a lifeline and not simply a portfolio item. Certainly Volcker did not cave for nothing. He had to see a total world implosion on the horizon to make him throw away the most distinguished financial career of anyone living today!

Look at the damage done to people’s lives by these sociopath Banksters and their OTC derivative manufacturing and distribution networks. Financial misbehavior is not victimless.

Hidden Homeless Emerge as US Economy Worsens
by Steve Gorman and Suzanne Hurt
Published on Thursday, March 26, 2009 by Reuters

SACRAMENTO, Calif. – Emergency shelters brimming with homeless people in California’s capital are quietly turning away more than 200 women and children a night in a sign of the deteriorating U.S. economy.

The displaced individuals on waiting lists at St. John’s Shelter and other facilities often turn instead to relatives or friends for temporary living quarters, perhaps moving into a spare room, garage or trailer. The less fortunate might sleep in their cars or a vacant storage unit.

They are the hidden homeless. And their ranks appear to be growing as rising joblessness and mortgage foreclosures take their toll in Sacramento and other U.S. cities, experts say.

U.S. President Barack Obama recognized the trend in his televised news conference this week, saying, "the homeless problem was bad even when the economy was good," and he vowed to bring greater government resources to bear to deal with it.

"It is not acceptable for children and families to be without a roof over their heads in a country as wealthy as ours," he said.

A "tent city" of up to 200 homeless in Sacramento was thrust into the media spotlight last month as a symbol of the battered U.S. economy. California authorities said this week they would shut down the illegal settlement and find other shelter for its residents, most of them chronically homeless.

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Jim Sinclair’s Commentary

Gold and all things gold are now a lifeline more than an investment.

If you don’t have gold you may be putting more than your portfolio in danger

EU presidency: US stimulus is ‘the road to hell’
By AOIFE WHITE, AP Business Writer – Wed Mar 25, 3:38 pm ET

BRUSSELS – The head of the European Union slammed President Barack Obama’s plan to spend nearly $2 trillion to push the U.S. economy out of recession as "the road to hell" that EU governments must avoid.

The blunt comments by Czech Prime Minister Mirek Topolanek to theEuropean Parliament on Wednesday highlighted simmering European differences with Washington ahead of a key summit next week on fixing the world economy.

It was the strongest pushback yet from a European leader as the 27-nation bloc bristles from U.S. criticism that it is not spending enough to stimulate demand.

Shocked by the outburst, other European politicians went into damage control mode, with some reproaching the Czech leader for his language and others reaffirming their good diplomatic ties with the United States. The leaders of EU’s major nations — France, Britainand Germany, among others — largely ignored Topolanek and his remarks.

Obama pays his first official visit to Europe next week, aiming to thrash out reforms to the global financial system with the Group of 20 nations and call on NATO allies to commit more troops to the U.S. war in Afghanistan.

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Jim Sinclair’s Commentary

Markets have given Pakistan a "Zero Factor" fear rating, so you can be quite sure it will upset markets long term in time. It is a "clutch event" that will permanently shift the gears of the world.

Suicide bomber kills 48 at mosque in Pakistan
From Times Wire Services
3:37 AM PDT, March 27, 2009

Peshawar, Pakistan — A suicide bomber struck a packed mosque during Friday prayers in northwestern Pakistan, killing at least 48 people, a government official said.

Tariq Hayat, the top administrator in the Khyber region, said rescuers have pulled 48 bodies from the rubble of the mosque near the town of Jamrud. He said the death toll was likely to rise.

"Up to 70 people could have been killed," he told Geo TV.

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Pakistani and Afghan Taliban Unify in Face of U.S. Influx
By CARLOTTA GALL

ISLAMABAD, Pakistan — After agreeing to bury their differences and unite forces, Taliban leaders based in Pakistan have closed ranks with their Afghan comrades to ready a new offensive in Afghanistan as the United States prepares to send 17,000 more troops there this year.

In interviews, several Taliban fighters based in the border region said preparations for the anticipated influx of American troops were already being made. A number of new, younger commanders have been preparing to step up a campaign of roadside bombings and suicide attacks to greet the Americans, the fighters said.

The refortified alliance was forged after the reclusive Afghan Taliban leader, Mullah Muhammad Omar, sent emissaries to persuade Pakistani Taliban leaders to join forces and turn their attention to Afghanistan, Pakistani officials and Taliban members said.

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Posted by & filed under In The News.

Jim Sinclair’s Commentary

A 1930s type rally in general equities does not need any reason to occur. It will need the uptick rule put back in place in the USA and enforced in Canada plus action must be taken against naked shorts or the rally will not have the legs of 1930’s.

Credit Union Collapse Signals Depth of Financial Crisis
Geithner’s Toxic Asset Plan Not Specifically Designed for Credit Unions
By Mary Kane 3/26/09 3:09 PM

In a sign of how widespread the nation’s financial crisis has become, even the credit unions are getting creamed.

Problems in the credit union system, once considered a largely mom-and-pop operation immune to turmoil, came to light last week, when their regulator seized two of the nation’s largest credit unions, U.S. Central Credit Union in Lenexa, Kanss, and Western Corp. Federal Credit Union in San Dimas, Calif. The two, with combined assets of $57 billion, are in trouble over the same investments in toxic mortgage backed securities that have felled global banks and led to the credit crunch. Cracks in the credit union system are showing the breadth of the crisis – and raising the possibility of another institution looking to the government for help. In a mirror of the dilemma facing the Federal Deposit Insurance Corp, the insurance fund for credit unions has been depleted by the seizure. Smaller credit unions may have to pony up big fees to replenish it – at the same time economy is hitting them hard, causing depositors to pull out their savings for living expenses. All of it is creating a liquidity squeeze that only threatens to become more severe, said Gerald Hanweck, a finance professor at George Mason University who follows the credit union industry.

“A lot of their membership is becoming unemployed,” Hanweck said. “If the recession keeps getting worse, it’s going to cause a lot of problems for them. More and more credit unions are going to fail.”

The failure of the two large corporate credit unions, which handle investments and other services for the 7,800 traditional retail credit unions, may become a turning point, proving that the industry needs more oversight, Hanweck and others said. The system includes 26 other corporate credit unions, as well as the two that were seized. Yet the credit union industry remains overseen by its own, individual regulator – the National Credit Union Administration, an independent federal agency considered by many as mostly as a cheerleader for the credit union movement, Hanweck said.

All the turmoil could mean that credit unions may become swept up in the Obama administration’s financial regulatory system overhaul, and put under closer supervision by Congress or the FDIC, in addition to requiring a government bailout or some type of federal aid.

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Jim Sinclair’s Commentary

As I told you earlier tonight, here comes the wave of bulls**t on SDRs.

UN panel touts new global currency reserve system
Mar 26 04:09 PM US/Eastern

A UN panel of expert economists pressed Thursday for a new global currency reserve scheme to replace the volatile, dollar-based system and for coordinated steps by rich countries to stimulate their economies.

"A new Global Reserve System — what may be viewed as a greatly expanded SDR (Special Drawing Rights), with regular or cyclically adjusted emissions calibrated to the size of reserve accumulations, could contribute to global stability, economic strength and global equity," the panel said.

As part of several recommendations to tackle the global financial crisis, the panel also noted recovery would require all developed countries, in the short term, to take "strong, coordinated and effective actions to stimulate their economies."

And it stressed the need to "lay the basis for the long-run reforms that will be necessary if we are to have a more stable and more prosperous global economy and avoid future global crises."

The commission, led by US economist Joseph Stiglitz, a frequent critic of globalization and unbridled free markets, is primarily aimed at finding solutions for developing countries.

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Jim Sinclair’s Commentary

The second longer dated Treasury auction today squeaked by so gold took some late selling by the COMEX Comics.

That is good news for gold because there is no chance that the trillion the Fed has set aside to buy US Treasuries has the capacity to offset the lack of foreign buying.

Markets are not pure math calculated on a picture in time.

The fall off of non-US buying of US Treasury instruments is a multiple of the recent $50 billion shortfall.

The Fed better be prepared to self-finance the Treasury because my dear CIGAs, a trillion isn’t what is used to be.

The new extreme "Flailing In The Breeze" plan today took the shape of the US Fed plan to issue their own debt when things get better.

When will people understand that a problem caused by debt and fancy finance cannot be cured by debt and fancy finance. Who is going to act as the Oracle of Washington to declare to the Fed that thing are better now and they can go float debt against expanded and deteriorating balance sheets? This one is an insult to any intelligent person.

Jim Sinclair’s Commentary

The picture speaks for itself.

US says warships deployed before NKorea launch
Thu Mar 26, 11:16 AM

TOKYO (AFP) – The US Navy said Thursday it had deployed two warships in waters off Japan ahead of North Korea’s planned rocket launch early next month.

Two destroyers fitted with Aegis technology to track and destroy missiles left port on Wednesday, US Navy public relations officer Charles Howard told AFP.

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Jim Sinclair’s Commentary

Faber’s opinion reflects Galbraith’s interview this morning. The financial situation is grave and no spin, even of an economic bounce, will serve to make it go away. There simply is too much permanently impaired paper. Bank nationalization will occur.

Marc Faber: ‘It Will All End in Disaster’
March 24, 2009

Dr. Doom takes steps to counter his recently growing reputation as a stock market bull. Marc Faber, publisher of the Gloom, Boom and Doom Report, talks with Erik Schatzker about the prospects for equity markets and recent actions by the Fed and Treasury Department.

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(Click to play in a new window)

On whether Ben Bernanke has redeemed himself and what that means for stocks:

I do not think so. On the contrary, I think what the government is doing and its economic "dream team" under Mr. Bernanke and Mr. Geithner and Mr. Summers are going to be, from a longer term point of view, rather negative.

But, you understand, we can all sit here and say it will all end in disaster.That I’m sure. But, in the meantime, we can have big moves in markets.

On the new bad assets purchase plan:

I think he’s doing the right thing from a very short term perpective. If you have cracks in your walls and just put paint on it, it will hide them and then you sell your house. But it won’t solve the problems of the cracks – it’s the next owner and these are the children of the current taxpayer who will pay for it.

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Jim Sinclair’s Commentary

For your information, courtesy of CIGA JB Slear

OIG-09-035 – Management Letter for Fiscal Year 2008 Audit of the Exchange Stabilization Fund’s Financial Statements

“There appears to be no clear management oversight responsibilities and processes defined or documented to allow for effective review and supervision of financial activities.”

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Posted by & filed under In The News.

Dear CIGAs,

The nasty, persistent and effective woodpecker is the creation of now eleven and one half trillion dollars of monetary stimulation. That is if you include the two new programs of treasury purchases and rotten leftovers of the creation of OTC derivatives known as bank holdings of toxic paper.

That is not Moses or Jesus at the helm no matter how much you hear of a second coming.

The ship is the ship of the financial state.

The crowd on the ship is not your average citizens, but are in fact the denizen banksters.

There is no way to avoid the consequences of this unprecedented monetary activity.

There is no mean to drain this from the monetary system as the Fed would have you believe. It is in the system, not in a make believe black hole somewhere. It is staying in the system, and it will destroy what is left of the system before December of 2012.

Lines and squiggles on the dollar or gold chart are meaningless noise.

The recent gold bank selling is pennies on the dollar of the problem. That is more meaningless short term noise structured to scare the gold ignorant.

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Jim Sinclair’s Commentary

Financial rescue plans being rolled out at an unprecedented pace are starting to appear as if they may well be acts of futility thrown against the wall like cooked pasta to see if one might stick.

For those of us that know, these plans appear as knee jerk acts of frustration, and not plans that will fix anything whatsoever.

The public of course just puddles along believing everything they are told by the 6pm news.

The bottom line of all of this is a massive takeover that will leave very few major financial entities at the end of the financial end of days.

“The unspoken fear here is that selling off loan portfolios would lead to more government capital injections into major banks,” said an executive at a large bank…

Richard Bove, an analyst at Rochdale Research, wrote in a note to clients: “[The plan] will not happen because it would destroy bank capital. It might cause a bank to fail the new stress tests under way. Banks will not take this risk.”

But while banks in theory have discretion over whether to sell loans, Sheila Bair, chairman of the Federal Deposit Insurance Corporation, said this decision would be made “in consultation with regulators” – a sign that the authorities might put pressure on banks to sell toxic assets."

One Small Problem With Geithner’s Plan: It Will Bankrupt The Banks
Henry Blodget|Mar. 25, 2009, 6:21 AM

The big problem with Tim Geithner’s plan to fix the banks is the same as it ever was: The gap between what banks say their assets are worth and what the market says they are worth.

When a bank says an asset is worth 60 cents and the market says it’s worth 30 cents, someone has to cover that spread.  The genius of Geithner’s plan is that it pawns most of the cost (and most of the risk) off on the taxpayer without the taxpayer noticing.

But unless the taxpayer gets stuck with the entire spread, which is probably what Geithner is hoping, banks that sell assets will have to take massive writedowns.  This will start the whole cycle of violence again.

This risk to the banks is particularly acute when dealing with whole loans that the banks currently say they have no plans to sell.  These loans are often carried at 100 cents on the dollar, because loans classified as held to maturity don’t have to be marked to market.  Even subsidized buyers won’t likely be willing to pay anywhere near 100 cents on the dollar for these loans.  So, here, the writedowns could potentially be huge.

And then there’s another problem:

If the banks go through the exercise of putting assets up for sale only to have the bids come in at, say, 40 cents instead of the 60 cents on the books, the banks’ accountants and/or federal regulators might notice.  So even if the banks recoil in horror and refuse to sell at 40 cents, someone somewhere might insist that assets now carried at 60 cents be written down to 40 cents (after all, they won’t have the "temporary illiquidity discount" excuse anymore, will they?).  This will blow another huge hole in the banks’ balance sheets.

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Jim Sinclair’s Commentary

The SDR was a joke in 1969 and in 2009 it is a sick joke.

This is the use of an INDEX to pretend to be a currency. To give it any reality of a currency, the government representing the SDR Index would have to issue swaps, which are OTC derivatives, to a sovereign clearing house. The inflationary global implications of this new initiative swamps the problems already in place.

There is no solution in producing more OTC derivative paper (swaps) in a situation already imploding due to too much OTC derivative paper.

The chance of establishing a clearing house for currency swaps to make some resemblance of a currency out of the SDR is zero to net negative.

This is another piece of pasta thrown at the monetary wall to see if it sticks.

Worth considering is the following quote from Paul Volcker:

"One historic way of getting yourself out of this situation — or trying to — is to inflate. Either you do it deliberately or you allow it to happen,” [Volcker] said. “And if we permit that to happen then I think all these dollars will come tumbling down on us.”

Is a global super-currency on the agenda?
Posted by Izabella Kaminska on Mar 25 09:40.

It started out as a call from the likes of George Soros and Ted Truman.

But the IMF’s little known international accounting system of special drawing rights [SDRs] has now been propelled straight into the limelight thanks to both China and Russia. However, while Soros and Truman saw the units as a means to help induce a global helicopter cash drop to kick-start the world economy and save the peripheral states from financial implosion, the Chinese and Russians are advocating the accounting system as a means towards a new global reserve currency.

And this does make some sense. Many months ago, when the topic was firmly off the agenda we asked Ken Rogoff, Harvard economics professor and former chief economist of the IMF, about the role of SDRs in the future. His said they were basically not very meaningful in the absence of a consensus to have a world currency. So is that really what China, Russia, Soros and Truman are advocating?

Worth considering is the following quote from Paul Volcker:

One historic way of getting yourself out of this situation — or trying to — is to inflate. Either you do it deliberately or you allow it to happen,” [Vlocker] said. “And if we permit that to happen then I think all these dollars will come tumbling down on us.” …

If inflation really is on its way on a large Volckerian scale, the dollar reserve system could be under serious pressure – from the point of view it would threaten China’s and other surplus countries’ reserves to such a degree they would be forced to do something about it. Preparing a new alternative system based on SDRs therefore seems a logical contingency for them.

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Durable Goods Orders Tumble in Record Annual Decline
Pattern of Happy Spins Being Given to Volatile Monthly Data
Mr. John Williams

Click here to view the article (Subscription Required)…

Jim Sinclair’s Commentary

I wish him well, but exactly how can anyone do this hat trick?

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Jim Sinclair’s Commentary

Do you ever get the feeling that the banksters, political generals and politicians may have gotten Mother Nature really angry? The pilots of Space Ship Earth are so far off course that it is a daily comedy of errors.

Alaska volcano eruption shuts oil terminal
Bloomberg News
March 25, 2009, 8:58AM

Chevron Corp.’s Drift River oil terminal in Alaska has been shut down following extensive flooding in the area from a volcano eruption earlier this week, a state government agency said.

The terminal supplies Tesoro Corp.’s Kenai refinery, Mickey Driver, a spokesman for Chevron, said in a telephone interview. The terminal handles 8,200 barrels of crude oil a day from Exxon Mobil Corp., Pacific Energy Resources and Chevron, said Driver.

Chevron has not shut in production from the Cook Inlet and can store between seven and 10 days of output near platforms, according to Driver.

No spill has yet to be found, from tanks holding 145,000 barrels of Cook Inlet crude oil on site, according to the report from the Alaska Department of Environmental Conservation.

The terminal and related pipeline were shut early March 23 following the eruption of Mount Redoubt. The terminal can hold at least 1 million barrels.

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Jim Sinclair’s Commentary

If you want a 1930s type rally stop the discussion and do the deed. Reinstate the uptick short selling rule, enforce criminal fraud commercial statutes and slam shut the naked short seller.

This is not like the usual PR build up to a bailout. You can talk all you want but you must do the deed if you wish to accomplish the result. No tightening of rules are required when the act is commercial fraud.

Where do they find a "Toddler Duvoos" that talks about criminal activity as if it was a trip to the mall? Trader Dan is feeling the frustration we all are.

Putting Some Clothes On Capital Markets
Brett Joshpe, 03.25.09, 01:55 PM EDT

How to fix naked short-selling.

With the stock market losing approximately half its value in 17 months, talk is rampant about how best to regulate businesses and capital markets to prevent future financial crises. To that end, Sens. Ted Kaufman, D-Del., and Johnny Isakson, R-Ga., introduced a bill this month that would accomplish two important goals: improving the efficient and transparent functioning of equity markets, and preventing the price manipulation that helped push our financial system to the brink.

It requires the Securities Exchange Commission (SEC) to revise several rules, including reinstating the uptick rule and tightening rules against naked short-selling. The uptick rule, which has been the focus of much discussion after it was repealed in 2007, banned short-selling unless the sale price was higher than the last different price.

The current proposal would go further than the prior rule by eliminating "zero plus" tick short sales, which is when the stock trades flat after a prior uptick. Short-sellers would only be able to sell on a legitimate increase and, in the case of financial stocks, only after a five cent or more increase.

Cracking down on naked short-selling, however, is even more crucial in preventing stock manipulations that would damage the market. Currently, the rule against naked short-selling requires short-sellers to do one of three things: borrow the stock prior to selling it short, identify the stock before selling it short, or have a reasonable belief that they will be able to locate the stock in the future. This third prong is the exception that swallows the rule.

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Jim Sinclair’s Commentary

The story here is the weak US government debt auction. It is timely to buy a trillion dollars worth of US debt. That might take a week or two to accomplish.

Does this not make a call for an SDR made up of the dollar, yen, pound and euro look one sided silly?

Stocks slide after weak government debt auction
By TIM PARADIS – 2 hours ago

NEW YORK (AP) — Stocks lost ground Wednesday after a weak auction of U.S. government debt stirred worries about how easily Washington will be able to raise money to fund its economic rescue program.

Investors gave an unexpectedly cool response to a $24 billion auction of 5-year Treasury notes Wednesday, just a day after a $40 billion auction of 2-year notes suggested strong demand. Treasury prices also declined following the auction.

The government is running up record deficits in order to fund an array of plans to provide stimulus to the economy and support to the ailing financial system. Any suggestion that demand for U.S. government debt is weakening would be negative for stocks.

The market had been higher earlier in the day on enthusiasm over economic reports showing increased demand for big-ticket manufactured goods and higher sales of new homes. Both readings came in better than forecast.

In late afternoon trading, the Dow fell 108.08, or 1.4 percent, to 7,551.89. The Dow had been up about 200 points at its high of the day. The blue chips fell nearly 116 points on Tuesday and surged almost 500 on Monday.

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Jim Sinclair’s Commentary

Do you really think throwing money at the Pakistan government ($10 billion requested) or accelerated talks between US representatives and Pakistan is going to cure this problem?

Be serious, Pakistan is lost to the Taliban. It has been for the last 18 months.

No commentator is focused on the degree of destabilization this is going to cause at just the wrong time.

Afghan Strikes by Taliban Get Pakistan Help, U.S. Aides Say
By MARK MAZZETTI and ERIC SCHMITT
Published: March 25, 2009

WASHINGTON — The Taliban’s widening military campaign in southern Afghanistan is made possible in part by direct support from operatives in Pakistan’s military intelligence agency, despite Pakistani government promises to sever ties to militant groups fighting in Afghanistan, according to American government officials.

The support consists of money, military supplies and strategic planning guidance to Taliban commanders who are gearing up to confront the international force in Afghanistan that will soon include some 17,000 American reinforcements.

Support for the Taliban, as well as other militant groups, is coordinated by operatives inside the shadowy S Wing of the Pakistan’s spy service, the Directorate for Inter-Services Intelligence, the officials said. There is even evidence that ISI operatives meet regularly with Taliban commanders to discuss whether the Taliban should intensify or scale back violence in the months before the Afghan elections, scheduled for August.

Details of the ISI’s continuing ties to militant groups were described by a half-dozen American, Pakistani and other security officials during recent interviews in Washington and the Pakistani capital, Islamabad. All requested anonymity because they were discussing classified and sensitive intelligence information.

The American officials said proof of the ties between the Taliban and Pakistani spies came from electronic surveillance and trusted informants. The Pakistani officials interviewed said that they had firsthand knowledge of the connections, though they denied that the ties were strengthening the insurgency.

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Jim Sinclair’s Commentary

Whatever is left after the OTC derivatives ravage the banks, litigation will consume.

Five Public Pension Funds Sue BofA
By DAN FITZPATRICK
MARCH 25, 2009, 7:32 P.M. ET

Five public pension funds are seeking lead status in a class-action suit against Bank of America Corp., alleging that the nation’s largest bank by assets made "untrue statements" in the run-up to its purchase of Merrill Lynch & Co. and did not disclose material information to shareholders. The funds claim to have lost $274 million on their Bank of America investments between July 21, 2008 and Jan. 20, 2009. They include the State Teachers Retirement System of Ohio, the Ohio Public Employees Retirement System, the Teacher Retirement System of Texas, a Dutch national fund known as Stichting Pensioenfonds Zorg en Welzijn and Fjarde AP-Fonden, a Swedish pension fund.

Ohio Attorney General Richard Cordray said in a release that Bank of America engaged in "wrongful conduct."

"We believe that Bank of America executives had material information that raised serious reservations about the deal but they did not disclose this

information to shareholders," he said in a release.

The funds have filed their motion for appointment as lead plaintiff in the U.S. District Court for the Southern District of New York.

On Monday, the California Public Employees Retirement System and the California State Teachers Retirement System also filed for lead plaintiff status.

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Posted by & filed under In The News.

Dear CIGAs,

1. Manufacture a Straw-man.
2. Accuse the Straw-man of Wrong Doing.
3. Knock down the Straw-man, thereby diverting attention from the real problem to the manufactured problem which you now have solved.
4. Take a deep bow to the applauding audience.

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Jim Sinclair’s Commentary

I believe I wrote this one for you today before Bloomberg.

China ‘Super Currency’ Call Shows Dollar Concern (Update1)
By Li Yanping

March 24 (Bloomberg) — China’s call for a new international reserve currency may signal its concern at the dollar’s weakness and ambitions for a leadership role at next week’s Group of 20 summit, economists said.

Central bank Governor Zhou Xiaochuan yesterday urged the International Monetary Fund to create a “super-sovereign reserve currency.” The dollar weakened after the Federal Reserve said it would buy Treasuries and the U.S. government outlined plans to buy illiquid bank assets

“China is concerned about the potential for a slide in the dollar as the U.S. attempts to stimulate its economy,” said Mark Williams, a London-based economist at Capital Economics Ltd. The “rare” sight of a Chinese official attempting to reframe an international debate may be “a sign of China becoming more engaged,” he said.

Zhou’s comments may also signal ambitions for the yuan to play a bigger global role. The central bank this week signed a currency swap with Indonesia, adding to agreements since December with South Korea, Hong Kong, Malaysia and Belarus. It’s also preparing for trade settlement in the Chinese currency with Hong Kong, Macau and the Association of Southeast Asian Nations.

“There is concern and even frustration among top policymakers in Beijing about China’s high exposure to U.S. dollar-denominated financial assets,” said Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong.

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Jim Sinclair’s Commentary

The major import by the Allies after World War II was not limited to Rocket Scientists.

If you tell a lie big enough and keep repeating it, people will eventually come to believe it.  The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie.  It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”
–Joseph Goebbels

Nothing has changed in gold whatsoever with the exception of the Gold Bank collecting on their shorts sold into the recent rally. What they do is produce noise, but as in the 70s their major product is a longer time to get to a higher price than would have occurred without them. They build up a spring mechanism in the marketplace whilst taking gold away from the dedicated few and supplying it to the Banksters who garner the best profit in the shortest period of time.

The Gold banks are the property of the Banksters. It does not require Scotland Yard to see what is happening. Is gold not up from $248 despite all the noise produced by the COMEX?

Since you do not intend to take COMEX matters into your own hands, get used to it. Gold goes ten steps forward, and nine back, ever rising in price over time. You take ten steps forward and eleven backwards, every time losing your a**.

You buy gold and all things gold for insurance and within a week you have morphed into a speculator.

What can I do? So many of you listen to and believe in today’s Goebbels.

Jim Sinclair’s Commentary

Russia is an expert at losing nuclear materials so this warning should be listened to.

Is any thinking person concerned both about the safety of the already in place devices and the knowledge of how to produce more?

Russia ‘Concerned’ About Safety of Pakistan’s Nuclear Arsenal
By Lyubov Pronina and Ellen Pinchuk

March 24 (Bloomberg) — Russia is “very much concerned” about the safety of Pakistan’s nuclear arsenal, and the country must be stabilized before peace can be achieved in neighboring Afghanistan, Deputy Prime Minister Sergei Ivanov said.

“It’s obvious to anybody that the Pakistani-Afghan border is a safe haven for terrorists, for the Taliban,” Ivanov said today in a Bloomberg Television interview in Moscow. “They hit and run back to Pakistan. So you have to deal with both. Both are very unstable.”

Ivanov said a military solution won’t work in Afghanistan, and Russia won’t send troops to join the United Nations-mandated International Security Assistance Force in the country, led by the U.S. and its North Atlantic Treaty Organization allies. The Soviet army fought a nine-year Afghan war that ended in 1989, and the present coalition has partly “followed the Soviet experience,” he said.

Last month U.S. President Barack Obama ordered an additional 17,000 U.S. troops to Afghanistan, adding to 38,000 personnel already in the country, saying the war against the Taliban is “still winnable.” Military force alone won’t be able to deal with the threat posed by a “resurgent” Taliban, he said.

Russian-U.S. relations have begun to thaw since Obama’s election after sinking to a post-Cold War low under his predecessor, George W. Bush. Rapprochement has been most evident on the issue of supplying U.S. and NATO forces in Afghanistan.

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Jim Sinclair’s Commentary

Run it up the flag pole and see who salutes.

Geithner, Bernanke reject China currency proposal
Head of China’s central bank says a new reserve currency should be created
By Polya Lesova, MarketWatch
Last update: 3:41 p.m. EDT March 24, 2009

NEW YORK (MarketWatch) — Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Timothy Geithner flatly rejected on Tuesday a call from a senior Chinese official to drop the dollar as the world’s key reserve currency.

Zhou Xiaochuan, head of the People’s Bank of China, proposed the creation a new international reserve currency in an essay published on the central bank’s Web site on Monday.

The proposal is the latest sign of tension between China and the U.S. over important global economic matters. Zhou is expected to attend the Group of 20 meeting in London on April 2 where reform of the global financial system is on the table. “The desirable goal of reforming the international monetary system, therefore, is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies,” Zhou wrote in the essay, according to its English translation on the central bank’s Web site.

A super-sovereign reserve currency managed by a global institution could be used to both create and control the global liquidity, Zhou wrote.

“And when a country’s currency is no longer used as the yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic imbalances,” he said. “This will significantly reduce the risks of a future crisis and enhance crisis management capability.”

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Dear Friends,

If any of you out there are having significant difficulties with securitized investment vehicles or mortgage debt foreclosures here is a resource:

Marie McDonnell
Truth In Lending Audit & Recovery Services, LLC
Mortgage Fraud and Forensic Analysts
Marie.McDonnell@truthinlending.net
30 Main Street, Rear
P.O. Box 2760
Orleans, MA 02653
Tel. (508) 255-8829
Cell (508) 292-5555
Fax (508) 255-9626

Regards,
Jim

Jim Sinclair’s Commentary

Do you ever get the feeling that all this rescuing has very little to do with interest outside of those of the Banksters here and there?

Banks ‘too big to fail’, said Brown – yet business is too small to save
By HARRY PHIBBS
Last updated at 3:37 PM on 24th March 2009

It’s tough on the streets – especially for shop keepers and other small businesses who find their customers have less money to spend.

The number of empty shops and offices along the high street provides a dreary confirmation of the statistics reported almost daily.

Now the Government is piling on the agony with a five per cent hike in business rates.

Some will face much bigger rises as the cap on business rates is also being removed – at the worst possible time.

Why five per cent? The collapse in the economy means inflation has almost flattened to zero. But the Chancellor of the Exchequer Alistair Darling says his formula for business rate increases is based on what the inflation rate was last September. So we wouldn’t want to interfere with his formula, would we? Darling fiddles while Rome burns.

He says the Government can’t ‘afford’ to forgo the increased revenue. Such is the smug complacency of the public sector.

Expanding Government spending programmes are taken as a given – everything else must accommodate this. Government will tax and borrow up to its eyeballs, but to actually reduce its budget is off limits.

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Jim Sinclair’s Commentary

Peace comes in different forms

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Jim Sinclair’s Commentary

usdollar100marx

The predictable result of all this is hyperinflation and a totally bombed out dollar as financial firms consolidate into less than 12 entities in the USA. My estimate is this will have occurred before 2012.

The end result of this is the consolidation of wealth and power into a very small management package.

It is another statement made by this initiative, if you have ears to hear, that says there is no practical solution to this problem which is much larger than anyone realizes.

Sounds like GE could be the focus here.

U.S. Seeks Expanded Power to Seize Firms
Goal Is to Limit Risk to Broader Economy
By Binyamin Appelbaum and David Cho
Washington Post Staff Writers
Tuesday, March 24, 2009; Page A01

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks.

Giving the Treasury secretary authority over a broader range of companies would mark a significant shift from the existing model of financial regulation, which relies on independent agencies that are shielded from the political process. The Treasury secretary, a member of the president’s Cabinet, would exercise the new powers in consultation with the White House, the Federal Reserve and other regulators, according to the document.

The administration plans to send legislation to Capitol Hill this week. Sources cautioned that the details, including the Treasury’s role, are still in flux.

Treasury Secretary Timothy F. Geithner is set to argue for the new powers at a hearing today on Capitol Hill about the furor over bonuses paid to executives at American International Group, which the government has propped up with about $180 billion in federal aid. Administration officials have said that the proposed authority would have allowed them to seize AIG last fall and wind down its operations at less cost to taxpayers.

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Posted by & filed under In The News.

Dear CIGAs,

The media is rejoicing today because China likes US treasuries, but tonight they do not want the US dollar. Now there is a contradiction in terms.

The West will never learn that the East will always speak obligingly when they cannot oblige. The Western Media insists, consistently, on making fools of themselves on everything Chinese.

What the Chinese and Russians are moving toward is using a basket of currencies in which the dollar is not a primary price element as a reserve index. That would be the final song for the USA dollar.

Now does that look like a major give up on all paper currencies? It makes me think of Gold as a currency! How about you?

What a mess Washington has on its hands because of one non-simple thing, OTC derivatives.

China calls for new reserve currency
By Jamil Anderlini in Beijing
Published: March 23 2009 12:16 | Last updated: March 24 2009 00:06

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

Analysts said the proposal was an indication of Beijing’s fears that actions being taken to save the domestic US economy would have a negative impact on China.

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.

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Jim Sinclair’s Commentary

This is an interesting addition to today’s gala biz news events.

When it goes wrong today, it really goes wrong.

No, nothing today is going to increase participation in small business lending. In fact, trend wise it will not be long until there is no small business lending.

Top lenders pull plug on small biz loans
Several of the SBA’s most active lenders have sharply reduced their loan volume. Will new government programs get them back into the lending market?
By Emily Maltby, CNNMoney.com staff writer
Last Updated: March 23, 2009: 4:23 PM ET

NEW YORK (CNNMoney.com) — At a time when small business owners desperately need loans and credit lines to help them weather the recession, some of the industry’s most active lenders have bolted shut the doors to their vaults.

Temecula Valley Bancorp (TMCV) and Capital One Bank (COF, Fortune 500) have stopped taking applications for new loans through the Small Business Administration’s flagship 7(a) loan program, and Bank of America (BAC, Fortune 500) has slowed its lending volume to a trickle. Small Business Loan Source, a non-bank SBA lender that specialized in commercial real estate financing, is closed to new applications and leaving all new SBA lending activity to its parent company, First Bank in Clayton, Mo.

These four institutions were among the 30 largest SBA lenders in the 2008 fiscal year, accounting for 4% of the program’s loan volume, or $524 million of the $12.8 billion that was lent to nearly 70,000 businesses, according to data compiled by Coleman Publishing, which monitors small business lending trends.

Their sudden absence from the lending scene has left a hole that the banks continuing to participate in the program have not filled in. If current lending trends continue, only two of the top 30 lenders are projected to increase their loan volume this year, according to Bob Coleman, the head of Coleman Publishing.

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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."

More…

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.

More…

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