Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

A major congratulations goes to Bill and Chris

GATA Urges SEC, CFTC to Investigate Goldman Sachs’ Trading Program
July 08, 2009 09:30 AM Eastern Daylight Time

MANCHESTER, Conn.–(BUSINESS WIRE)–The Gold Anti-Trust Action Committee has urged the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission to investigate the computer trading program of Goldman Sachs Group Inc. that, according to a federal prosecutor, the bank acknowledges can be used to manipulate markets.

GATA’s complaint to the two commissions refers to a July 6 Bloomberg News story — http://www.bloomberg.com/apps/news?pid=20601087&sid=a_6d.tyNe1KQ — reporting the arraignment in U.S. District Court in New York of a former Goldman Sachs employee accused of stealing the program. The prosecutor, Assistant U.S. Attorney Joseph Facciponti, was quoted as telling the court: "The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways."

In its letters to the SEC and CFTC, GATA wrote: "The assistant U.S. attorney’s comment can be construed to suggest Goldman Sachs considers its own manipulation of markets to be fair, while such manipulation by others would be unfair. The court proceeding described in the Bloomberg News story would seem to impugn all markets in which Goldman Sachs trades."

GATA asked each commission "to investigate Goldman Sachs’ trading program urgently and report its findings publicly."

GATA is an educational and civil rights organization that seeks to restore free markets to the precious metals.

The text of GATA’s letters is appended.

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Jim Sinclair’s Commentary

Who said money is the root of all evil? We all know it is oil.

Now Baghdad will have to fight the Kurds, which is nothing really new. The problem is with the US troops withdrawn from the cities, the Kurd problem puts a great strain on the Iraq National Boy Scout troop pretending to be an army.

Baghdad with the majority of Iraq oil is nothing very much. This thing will persist as a bag of worms for the next 100 years, just like the Crusades did.

Kurds Defy Baghdad, Laying Claim to Land and Oil
By SAM DAGHER
Published: July 9, 2009

BAGHDAD — With little notice and almost no public debate, Iraq’s Kurdish leaders are pushing ahead with a new constitution for their semiautonomous region, a step that has alarmed Iraqi and American officials who fear that the move poses a new threat to the country’s unity.

The new constitution, approved by Kurdistan’s parliament two weeks ago and scheduled for a referendum this year, underscores the level of mistrust and bad faith between the region and the central government in Baghdad. And it raises the question of whether a peaceful resolution of disputes between the two is possible, despite intensive cajoling by the United States.

The proposed constitution enshrines Kurdish claims to territories and the oil and gas beneath them. But these claims are disputed by both the federal government in Baghdad and ethnic groups on the ground, and were supposed to be resolved in talks begun quietly last month between the Iraqi and Kurdish governments, sponsored by the United Nations and backed by the United States. Instead, the Kurdish parliament pushed ahead and passed the constitution, partly as a message that it would resist pressure from the American and Iraqi governments to make concessions.

The disputed areas, in northern Iraq, are already volatile: There have been several tense confrontations between Kurdish and federal security forces, as well as frequent attacks aimed at inflaming sectarian and ethnic passions there.

The Obama administration, which is gradually withdrawing American troops from Iraq, was surprised and troubled by the Kurdish move. Vice President Joseph R. Biden Jr., sent to Iraq on July 2 for three days, criticized it in diplomatic and indirect, though unmistakably strong, language as “not helpful” to the administration’s goal of reconciling Iraq’s Arabs and Kurds, in an interview with ABC News.

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Jim Sinclair’s Commentary

Father forgive them for they know not what they do!

U.S. companies lobby Congress on derivatives-WSJ
Fri Jul 10, 2009 2:35am EDT

July 10 (Reuters) – At least 42 nonfinancial companies and trade associations are lobbying the U.S. Congress to push back on proposals that regulate the over-the-counter derivatives market, the Wall Street Journal said on Friday.

Citing its own analysis of lobbying disclosure forms filed through April, the paper said the companies include Caterpillar Inc (CAT.N), Boeing Co (BA.N) and 3M Co (MMM.N), according to the paper.

Caterpillar believes new regulations may drive U.S. companies to seek financing overseas, the paper said.

The paper also quoted Janet Yeomans, treasurer of 3M, as writing in a letter to U.S Senator Mike Crapo: "Not all derivatives have put the financial system at risk and they should not all be treated the same."

Caterpillar, Boeing and 3M could not be immediately reached for comment by Reuters.

President Barack Obama last month laid out his vision for recrafting U.S. financial regulation, vowing to halt "a cascade of mistakes … over the course of decades" that eroded bank and market oversight. [ID:nN17330766]

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Jim Sinclair’s Commentary

Sounds just right to me!

Catching The Gold Bug
By LARRY LIGHT

Worried about a harrowing, inflation-ridden future, Scott Van Steyn has found the answer in a batch of glittering one-ounce gold coins. In fact, they make up a large chunk of the physician’s assets.

“There’s 2,000 years of history to show that gold is the best thing to own during bad inflation,” says Dr. Van Steyn, a 45-year-old orthopedic surgeon in Columbus, Ohio. “People used to laugh at me for buying gold. They don’t anymore.”

More and more investors are acquiring physical gold, or bullion, in the form of small bars the size of iPhones or coins like American Eagles and South African Krugerrands. Individuals’ bullion purchases almost doubled last year, amid apocalyptic panic over the financial system, to 862 metric tons.

Lately, that panic-driven demand has given way to a more subdued, yet still potent, fear that stocks will suffer as the recession grinds on for a long time, so gold makes sense. At the same time, there’s a rising anxiety about inflation among people like Dr. Van Steyn, resulting from the Obama administration’s massive stimulus spending.

“When you’re in uncharted economic waters, people buy gold,” says Shawn Price, manager of the Touchstone Large Cap Growth fund, which holds several hundred ounces of the stuff.

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Jim Sinclair’s Commentary

The money goes in the front door and out the back to the winners of the OTC derivatives. Of course it is worthless.

AIG May Have Zero Value After Rescue, Citigroup Says (Update4)
By Erik Holm and Hugh Son

July 9 (Bloomberg) — American International Group Inc., the insurer bailed out four times by the government, fell the most in nine months after Citigroup Inc. said the firm may have no value left for shareholders after repaying the U.S.

AIG plunged $3.62, or 28 percent, to $9.48 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest drop since September 2008. The insurer has lost more than half its value after implementing a 1-for-20 reverse stock split when trading closed June 30.

“Our valuation includes a 70 percent chance that the equity at AIG is zero,” said Joshua Shanker, an analyst at Citigroup, in a note to investors late yesterday cutting his price target on the New York-based insurer by more than half.

Departing Chief Executive Officer Edward Liddy is under pressure from lawmakers to sell assets to help repay the $182.5 billion rescue package that was required to prop up the insurer after losses on credit-default swaps tied to U.S. home loans. The company said last week that other derivatives, backing about $193 billion in assets for European banks, could have a “material adverse effect” on AIG’s results.

“The company has not been forthcoming about the sequence of events that would result in a loss” on the European contracts, Shanker said. “Even a proportionally small loss could be significant.”

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Jim Sinclair’s Commentary

Here is the hidden but gigantic problem, both in numbers as well as in the ability to disturb the social order.

As CIGA Green Hornet said to me, it is happening everywhere in the USA.

Solving Pittsburgh’s pension problem
City officials debate options while senators plan legislation
Pittsburgh Business Times – by Kris B. Mamula

Legislation that would ease municipal pension headaches statewide will be introduced within a few weeks to coincide with adoption of a new state budget, according to state Sen. Jim Ferlo, a co-sponsor.

The bill is especially important to Pittsburgh, where Mayor Luke Ravenstahl is considering a range of tough choices in solving the city’s pension crisis, including a payroll tax on nonprofits. Hospitals and other medical institutions would pay $11 million of the $16.5 million the tax is expected to generate at a time when government reimbursement for hospitals has been declining and charity care is up sharply.

The city needs to find an additional $10 million to $15 million to right its three pensions, Ravenstahl said. Among the options being considered is the tax on hospitals and other nonprofits — “ugly stuff, things we don’t really want to have to do,” he said.

Ferlo, D-Lawrenceville, said he and Sen. Patrick Browne, R-Allentown and finance committee chairman, will co-sponsor the bill, which would allow the state’s Pennsylvania Municipal Retirement System to take control of plans that are less than 50 percent funded. PMRS runs 900 municipal pension plans statewide, including 50 for police, firefighters and other government agencies in Allegheny County.

At the end of last year, Pittsburgh’s police, fire and nonuniform employee pension plans had a combined liability of $899 million, or about 29 cents on hand for every $1 of obligation to retirees, according to Cathy Qureshi, the city’s assistant director of finance, which experts say is the lowest among any city in the state.

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Jim Sinclair’s Commentary

This is a growing trend as Asia takes economic leadership. America’s xenophobic nature and provincial ways prevent recognition of this reality.

This is what is happening to the US dollar with the US in total denial. You need to be in China or Africa looking back to see what is real.

Suzuki, Mitsubishi Urged to ‘Forget America’ as Sales Slump
By Kiyori Ueno and Alan Ohnsman

July 10 (Bloomberg) — Suzuki Motor Corp. and Mitsubishi Motors Corp., suffering from plunging U.S. sales and excess North American plant capacity, may have to quit the market after a quarter century.

Suzuki, Japan’s fourth-largest carmaker, reported a 78 percent drop in unit sales in June, pushing its first-half decline to 60 percent, the market’s worst. Mitsubishi is down 51 percent this year, and is stuck in a slump that began in 2003.

Both carmakers “should withdraw from the U.S.,” said Yuuki Sakurai, chief executive of Tokyo-based Fukoku Capital Management Inc., which oversees about $10 billion in Tokyo. “It’s time for them to decide whether they pay a high price to continue business there or stop the bleeding.”

Recession, joblessness and weak consumer confidence pushed U.S. auto sales to the lowest since 1976, bringing bankruptcies for General Motors Corp. and Chrysler LLC and a record loss at Toyota Motor Corp. Truckmaker Isuzu Motors Ltd., which halted U.S. consumer sales in January, is the only Japanese brand less familiar to carbuyers than Suzuki or Mitsubishi, according to industry analyst Alexander Edwards.

“Both are struggling with getting customers to initially even consider them,” said Edwards, head of auto research for San Diego-based Strategic Vision Inc.

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Jim Sinclair’s Commentary

Every day and in every way China expands outward in a strong Yuan as the dollar contracts inward on increasing balance sheet weakness.

HK urges China to relax rules on yuan business
07.10.09, 05:09 AM EDT
By Susan Fenton

HONG KONG, July 10 (Reuters) – Hong Kong on Friday urged China to further ease restrictions on Chinese currency business in the territory, including allowing non-financial companies to issue bonds, following the start of cross-border yuan trade settlement this week.

The cross-border yuan trade settlement scheme that began on Monday had so far attracted a modest 30 transactions between Hong Kong and mainland China worth 30 million yuan (US4.4 million), the Hong Kong government said.

It projected trade volumes in yuan, also known as the renminbi, to increase as the number of mainland China companies authorised to participate in the scheme was expected to soon increase to several hundred.

‘It’s too early to assess how much trade it will generate,’ Julia Leung, undersecretary for financial services and the treasury, told a press briefing. ‘It also depends on whether trading companies prefer to settle in renminbi.’

Yuan trade settlement is the latest in a series of measures introduced by China in recent years to allow yuan business in Hong Kong, including the issue of yuan bonds and the opening of yuan bank accounts in the city.

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Jim Sinclair’s Commentary

When you hear all this MOPE keep firmly in mind that the problem is not going forward, but the immense mountain of garbage paper out there with no standards and therefore NO way on earth they can be listed because they simply CANNOT be clearinghouse guaranteed.

This does not rein in one penny of what is out there.

Geithner Seeks ‘Difficult-to-Evade’ Derivatives Laws (Update2)
By Dawn Kopecki and Robert Schmidt

July 10 (Bloomberg) — Treasury Secretary Timothy Geithner is urging Congress to rein in the $592 trillion derivatives market with new U.S. laws that are “difficult to evade.”

The complexity of over-the-counter derivatives contracts and industry growth let corporations take on excessive risk and caused a “very damaging wave of deleveraging” that exacerbated the global credit crisis, Geithner said in prepared testimony to be delivered today at a joint hearing of the House Agriculture and Financial Services committees in Washington.

Geithner repeated President Barack Obama’s call to force “standardized” contracts onto exchanges or regulated trading platforms, and regulate all dealers. Contracts would be subject to new disclosure rules, and “conservative” capital and margin requirements, as well as business-conduct standards, would be imposed on market participants, Geithner said.

The market, which grew almost seven-times since 2000, complicated government efforts throughout the credit crisis to assess potential losses at U.S. banks and corporations because regulators lacked adequate data to measure their risk, he said.

“The status quo has to change,” Keith Styrcula, the chairman and founder of the Structured Products Association, said in an interview today with Bloomberg Television. “It’s been a privately negotiated market, and with the credit default crisis we’ve had, that’s no longer acceptable.”

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Jim Sinclair’s Commentary

Face the facts. The USA’s domination of currencies, markets, economics and soon politics is yesterday’s news.

Denial has 120 days to go.

G-8’s Dominance Faces Challenge From China, India (Update2)
By James G. Neuger

July 10 (Bloomberg) — Leaders of developing countries confronted advanced nations with a demand for a greater role in the management of the global economy, signaling the drift in power away from the financially distressed West.

Five countries with almost half the world’s population — China, India, Brazil, Mexico and South Africa — challenged the hegemony of the U.S. dollar, balked at the industrial world’s strategy for fighting climate change and sought more clout in global markets and institutions.

The encounter in L’Aquila, Italy at the annual Group of Eight summit dramatized the ascendance of emerging nations, led by China, as the worst economic calamity since World War II batters the U.S. and its European allies.

“We have to update and refresh and renew the international institutions that were set up in a different time and place,” President Barack Obama said after the meeting of world leaders ended today. “For us to think we can somehow deal with some of these global challenges in the absence of major powers like China, India and Brazil seems to me wrongheaded.”

Leaders of the G-5, which represents 3 billion people with gross domestic product of $7 trillion, appeared as a united front for a fifth time at the summit of the G-8, the advanced world’s forum founded in 1975.

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Jim Sinclair’s Commentary

As hyperinflation takes hold as the result of the US dollar dropping below .7200 USDX, which it will, the US Trade balance will move out of sight.

Trade Deficit in the U.S. Probably Widened on Higher Oil Prices
By Bob Willis

July 10 (Bloomberg) — The U.S. trade deficit probably widened in May for a third month as higher oil prices boosted the bill for imports, while exports declined amid a global recession, economists said before reports today.

The gap increased to $30 billion from $29.2 billion in April, according to the median forecast of 71 economists surveyed by Bloomberg News before the Commerce Department report. Another report from the Labor Department may show import prices continued to rise in June, pushed up by oil costs.

Shrinking economies from Europe to Mexico are curbing demand for U.S. goods, prolonging the worst recession in at least five decades. While imported oil has become more expensive, weak U.S. consumer demand is holding down other imports and helping keep the deficit near a decade-low level.

“Rising oil prices will contribute to the deterioration in the deficit, but it’s still low compared to where it’s been,” said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. “We’re actually picking up a little bit of production simply because people are consuming less imports.”

Dwindling exports are also adding to the deficit. Caterpillar Inc., the world’s largest maker of bulldozers and excavators, suffered a first-quarter decline in machinery sales of 46 percent in the region that includes Europe. Sales for the Peoria, Illinois-based company were down 2 percent in Asia- Pacific and 16 percent in Latin America.

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Jim Sinclair’s Commentary

When a currency event can and will cause hyperinflation gold is your only safe haven.

This is what markets are telling you in the face of furious anti-gold market manipulation and MOPE.

Gold perceived as a safe haven during the recession
Jul 10 2009 by John Cranage, Birmingham Post

Gold has worked down from Alexander’s time. When something holds good for 2,000 years I do not believe it can be so because of prejudice or mistaken theory.”

So wrote Bernard M Baruch, the famous American financier, who lived and worked through a few crises including the Great Depression of the 1930s.

It seems that many investors are rushing to the perceived safe haven of gold during the current recession. Uncertainty over the state of the economy, plummeting share prices, pitiful interest rates and fears over the vulnerability of even the biggest banks have all lead investors to return to the old ways of physically holding gold to protect themselves.

This is reflected in the fact that sales of gold to retail investors has increased by 33 per cent in the first three months of this year. Since the start of 2007 the price of gold has risen from $600 an ounce to nearly $1,000 in February this year. It is currently trading around the $940 an ounce mark.

One of the paradoxes of investing in gold is that it is seen as a hedge against both inflation and deflation. It also seems to have an inverse relationship with the value of the dollar, particularly in times of economic stress.

All these make theoretical sense. In times of inflation the value of money reduces, but there is a finite supply of gold so its value will not reduce in the long term, in fact it should increase.

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Jim Sinclair’s Commentary

The sociopath derivative traders, now with their trillions, do not give a crap that they have killed the world and brought such terrible suffering to so many. It is so very wrong.

Homeless numbers include more families
By KEVIN FREKING, Associated Press Writer Kevin Freking, Associated Press Writer – Thu Jul 9, 3:09 am ET

WASHINGTON – The face of homelessness in the United States is changing to include more families and more people who live in the suburbs and rural communities.

The number of homeless has remained steady since 2007, but within the overall count are trends that can tell officials where federal resources would do the most good, the Housing and Urban Development Department says in its annual report to Congress being released Thursday.

About 1.6 million people used a homeless shelter or lived in transitional housing between Oct. 1, 2007, and Sept. 30, 2008 — about the same as the year before. But within that group, the number of families grew 9 percent, from about 473,000 to 517,000.

Officials said they also saw more demand for transitional housing in the suburbs and in rural areas of the country. Residents of suburban and rural communities made up about a third of those in need of housing, up from about 24 percent the year before.

HUD also attempts to count the number of homeless at a single point in time. In January 2008, about 664,000 people were in homeless shelters or in the streets on a single night. That’s a drop of about 7,500 from the year before, but officials point out that the count occurred just as the nation’s economic woes were beginning and did not account for soaring unemployment and other economic problems that have kicked in during the subsequent months.

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Jim Sinclair’s Commentary

Thank God, Big Brother has made us all safe!

U.S. Senate approves $42.9 billion homeland security bill
By Jeremy Pelofsky Jeremy Pelofsky – Thu Jul 9, 10:40 pm ET

WASHINGTON (Reuters) – The Senate on Thursday approved a wide-ranging $42.9 billion measure to pay for improving U.S. border security, clamp down on illegal immigration and beef up cyber security in fiscal 2010.

The Senate voted 84-6 for the annual spending bill funding the Department of Homeland Security for the year starting October 1, and now lawmakers must work out differences with a $42.6 billion version of the bill that passed the U.S. House of Representatives last month.

Debate over the bills offered insight into deep divisions over how to address illegal immigration into the United States, beef up security on the U.S. borders, and what to do with the estimated 12 million people in the country illegally.

The Senate measure provides $10.1 billion for customs and border protection, including $800 million for bolstering security along the U.S. border with Mexico, where drug and weapons trafficking has spiked and sparked growing concerns.

The legislation also includes almost $400 million for cyber security, a 27 percent increase over fiscal 2009, and comes as several U.S. government websites were attacked in the past few days by hackers.

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Posted by & filed under In The News.

If you don’t read the newspaper you are uninformed, if you do read the newspaper you are misinformed.
–Mark Twain

Dear CIGAs,

A sense of humour on a gift table. What a relief in this Matrix virtual world we live in. That was good for a laugh this morning here in cold Joberg.

Imaginary currency is already here. It is called the dollar. The real currency of the NOW and the future is in the hands of the people and it is called Gold.

Meanwhile COT is throwing all caution to the wind to get you to panic. Some will. Some have. Both will regret that emotional response to Pavlov who along with Geobell invented MOPE’s foundations. MOPE stands for "Management of Perspective Economics."

G-8 leaders to receive books on Canova, gold coins
10:29 AM EDT, July 8, 2009

World leaders attending the Group of Eight summit opening Wednesday in Italy will each be presented with a gift from the past and one for the future.

Handmade books portraying works by Neoclassical sculptor Antonio Canova, as well as gold coins representing an imaginary future world currency will be given to the participants at the opening of the three-day summit.

There are 10 copies of the book, commissioned by Italy’s Premier

Silvio Berlusconi from the Bologna-based art publishing house Fondazione Marilena Ferrari, each with a personalized dedication for the leader who receives it.

The 28-inch by 17.5-inch (71-centimeter by 44.5-centimeter) Canova books were crafted at no cost by 23 Italian craftsmen using traditional techniques, the publishing house said. Each weighs 53 pounds (24 kilograms).

The books’ covers are decorated with white marble bas-reliefs and the volumes are bound with silk and gold thread. They include etchings and dozens of black and white photographs of Canova’s artworks, including artistic close-ups of his statues.

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Jim Sinclair’s Commentary

More debt into the rating tank. I wonder if there was any phony guarantees on this disaster.

Do you think the temporary (that means permanent) liquidity guarantee program will be ok’d by the FDIC (your money)?

Guarantees are not better than the guarantor is. Still, credit default derivatives are being written and referred to publicly as a measure of debt worthiness. What are these people smoking?

Fitch downgrades ratings for CIT Group, says government support is crucial

NEW YORK (AP) — Fitch Ratings downgraded its ratings for CIT Group Inc. deeper into junk status on Wednesday, saying the commercial finance and leasing provider may default on its obligations if it does not receive government aid.

CIT shares fell 23 cents, or 11.6 percent, to $1.75 in afternoon trading. The stock has traded between $1.65 and $13 during the past 52 weeks.

Fitch lowered the long-term issuer default ratings for CIT and its subsidiaries to "BB-" from "BB+" and noted that the company’s application for funding under the FDIC’s Temporary Liquidity Guarantee Program has not yet been approved.

"Today’s rating action reflects that, absent external support, CIT’s franchise value and client confidence could quickly erode and jeopardize CIT’s long-term viability," Fitch said.

Fitch also downgraded CIT’s "individual rating" to "E" from "D," which Fitch said "denotes a bank with very serious problems, which either requires or is likely to require external support."

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Jim Sinclair’s Commentary

Every time I see this I marvel at someone’s sense of humour, way of sending a message, or mistake that he will go to hell for.

G-8 leaders to receive books on Canova, gold coins
By MARTA FALCONI, Associated Press
Wed Jul 8, 10:15 am ET

ROME (AP) — World leaders attending the Group of Eight summit opening Wednesday in Italy will each be presented with a gift from the past and one for the future.

Handmade books portraying works by Neoclassical sculptor Antonio Canova, as well as gold coins representing an imaginary future world currency will be given to the participants at the opening of the three-day summit.

There are 10 copies of the book, commissioned by Italy’s Premier Silvio Berlusconi from the Bologna-based art publishing house Fondazione Marilena Ferrari, each with a personalized dedication for the leader who receives it.

The 28-inch by 17.5-inch (71-centimeter by 44.5-centimeter) Canova books were crafted at no cost by 23 Italian craftsmen using traditional techniques, the publishing house said. Each weighs 53 pounds (24 kilograms).

The books’ covers are decorated with white marble bas-reliefs and the volumes are bound with silk and gold thread. They include etchings and dozens of black and white photographs of Canova’s artworks, including artistic close-ups of his statues.

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Jim Sinclair’s Commentary

Yeah more debt and spending!

Spending and borrowing got us into this mess along of course with OTC derivatives which still are alive and happy.

It is madness to assume doing exactly the same thing that got us into trouble at ever increasing numbers is going to get us out of this mess. Where do we find such geniuses to lead us?

House Majority Leader open to second stimulus bill
Posted: 01:51 PM ET
July 7, 2009

WASHINGTON (CNN) – House Majority Leader Steny Hoyer said Tuesday he would consider supporting a second economic stimulus bill, but said people need to give the package that passed in February more time to work.

The second-ranking Democrat in the House of Representatives said Republican complaints that the nearly $800 billion measure has failed to boost the U.S. economy are premature.

"Certainly, I don’t think we can make a determination as to whether or not that’s been successful — certainly as successful as we want it to be, certainly not as quickly as we want it to be," Hoyer, of Maryland, told reporters. But he added, "I think we need to be open to whether or not we need additional action."

Hoyer said it was too soon to say the February stimulus bill — which passed without a single GOP vote in the House and only three in the Senate — is not working. He said job losses have "substantially decreased" in recent months, and that the recovery package has prevented many people from being laid off from their jobs.

"In fact, we believe it is working," he said. No legislation has been put forward so far.

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Jim Sinclair’s Commentary

Now here is an interesting comment on timing. I am looking at Jan 14th, 2011 and if I recall correctly Armstrong is 2011.45.

U.S. Home Prices to Fall Through 2011’s First Quarter 
By Dan Levy

July 7 (Bloomberg) — Home prices may fall in more than half of the largest U.S. cities through the first quarter of 2011 as unemployment and foreclosures rise, mortgage insurer PMI Group Inc. said.

Thirty of the 50 biggest metropolitan areas have at least a 75 percent chance of lower prices through March 31, 2011, Walnut Creek, California-based PMI said in a report today. The decline is likely to spread to “all regions of the nation” from California, Florida, Nevada and Arizona, the states most affected by the housing slump, PMI said.

“The housing market has been hit by a demand shock of high unemployment and a supply shock of distressed foreclosure sales,” LaVaughn Henry, senior economist at PMI, the fourth- largest U.S. mortgage insurer, said in an interview.

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Posted by & filed under In The News.

121 days to go.

Dear CIGAs,

The dollar is finished in Asia. The dollar rules gold in the inverse.

Yuan Deposes Dollar on China Border in Sign of Future (Update1)
By Bloomberg News

July 8 (Bloomberg) — Huang Xinyuan, who sells mining equipment and pesticides to customers across China’s border with Vietnam, says he no longer wants payment in U.S. dollars and prefers the yuan.

Sales using the greenback at Guangxi Jinbei Group, where Huang is vice president, dropped to 30 percent of contracts in 2008 from 87 percent in 2007. The yuan, which has gained 21 percent since it was allowed to strengthen against the dollar starting in 2005, offers greater stability, he said.

“In recent years, the dollar has gone in only one direction and that is down,” said Huang, 45, in his second- floor office in Pingxiang, a town set amongst karst limestone hills and sugar-cane fields in China’s southwest Guangxi Zhuang Autonomous Region, three kilometers (1.9 miles) from Vietnam. “Settling our orders in yuan removes a major risk.”

China expanded yuan settlement agreements last week from border zones to its largest financial centers, including Shanghai, Guangzhou and Hong Kong. The program is being rolled out across Malaysia, Indonesia, Brazil and Russia, all nations seeking to reduce the dollar’s role as the linchpin of world finance and trade.

The central bank first brought up the concept of a supranational currency to replace the greenback in reserves in March. It will sponsor use of the yuan in trade by arranging export tax rebates. Russia and India said the global financial crisis had highlighted the dollar’s flaws and called for a debate before the Group of Eight leaders meet in L’Aquila, Italy, starting today.

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Jim Sinclair’s Commentary

All this does in our Wild West financial world is send business to other accommodating exchanges such a Iran and Dubai.

This does nothing to control price swings because of arbitrage. It makes the illiquid exchanges top dog liquidity in an instant.

This is MOPE and provincialism common to America. It is too stupid to be stupid. Look at the guy to the left side of the speaker.

U.S. Considers Curbs on Speculative Trading of Oil

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By EDMUND L. ANDREWS
Published: July 7, 2009

WASHINGTON — Reacting to the violent swings in oil prices in recent months, federal regulators announced on Tuesday that they were considering new restrictions on “speculative” traders in markets for oil, natural gas and other energy products.

The move is a big departure from the hands-off approach to market regulation of the last two decades. It also highlights a broader shift toward tougher government oversight under President Obama.

Since Mr. Obama took office, the Justice Department has stepped up antitrust enforcement activities, abandoning many legal doctrines adopted by the Bush administration.

The Obama administration is also proposing an overhaul of financial regulation that would include tougher capital requirements for big banks, tighter regulation of hedge funds and a new consumer protection agency with broad power to regulate credit cards, mortgages and other consumer lending.

In the case of oil and gas trading, regulators made it clear that they were willing to move, without waiting for Congress to act on Mr. Obama’s overhaul, invoking their existing powers.

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Jim Sinclair’s Commentary

The damage is done and the downward spiral keeps expanding. The Formula will not be undone until it completes its currency intentions.

Delinquencies on U.S. Home-Equity Loans Reach Record (Update1)
By Margaret Chadbourn

July 7 (Bloomberg) — Late payments on home-equity loans rose to a record in the first quarter as 18 straight months of job losses and a slumping economy left more borrowers unable to pay their debts, the American Bankers Association reported.

Delinquencies on home-equity loans climbed to 3.52 percent of all accounts from 3.03 percent in the fourth quarter, and late payments on home-equity lines of credit climbed to a record 1.89 percent, the group reported today. An index of eight types of loans rose for a fourth straight quarter, to 3.23 percent from 3.22 percent in October through December, the group said.

“The number one driver of delinquencies is job losses, which we’ve seen build and build,” James Chessen, the group’s chief economist, said in a telephone interview. “Delinquencies won’t come down without a dramatic improvement in the economy and businesses will have to start hiring again.”

The U.S. economy lost an average 691,000 jobs a month in the quarter, and more than 6.5 million positions have been shed since the recession began in December 2007. The economy this year will shrink the most since 1946, according to a Bloomberg survey of 61 economists last month. President Barack Obama predicted last month unemployment will reach 10 percent this year. The rate was at a 26-year high of 9.5 percent in June.

Delinquent bank-card accounts jumped to a record 6.60 percent of outstanding card debt in the first quarter from 5.52 percent in the previous period, a signal unemployed borrowers are relying on cards as falling prices erode the equity in their homes. More borrowers are using cards to meet daily expenses after losing their jobs, the ABA said.

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Jim Sinclair’s Commentary

Look, be real. The FDIC are bureaucrats, cops, and are busy so the fact anything is done is a miracle.

Watchdog Faults FDIC Oversight Of Failed Texas Bank
By Michael R. Crittenden
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)–The Federal Deposit Insurance Corp. should have been more aggressive in recognizing problems and forcing changes at a failed Texas bank ahead of its collapse, an internal watchdog said in a report released Tuesday.

The FDIC’s office of inspector general said in its report that Houston, TX-based Franklin Bank failed primarily due to management’s "high-risk business strategy." But regulators still should have done more to prevent the bank from failing, auditors said, a collapse that was estimated to cost the government’s deposit insurance fund $1.5 billion.

"In the case of Franklin…while recommendations were made and certain supervisory actions were taken over a five-year period, these actions were not always timely and effective," the inspector general’s report said.

The finding is the latest in a series of reports from federal watchdogs suggesting that regulators could and should have done more to address risky practices in the banking industry. Those practices, including risky real estate lending and a reliance on volatile funding sources, have led banks to fail at rates not seen since the early 1990s.

In the case of Franklin, the inspector general’s office found the bank had weak risk-management controls and was left "unprepared and unable to effectively manage operations in a declining economic environment." The bank was closed by Texas regulators in November.

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Jim Sinclair’s Commentary

That is the gusher down nature of a Wall Street breed crisis: Saving the bacon of the "Financial Fat Cats" that have come home to kill the common man for decades.

Colorado farmers say banking crisis hitting home
By STEVEN K. PAULSON , 07.07.09, 03:14 PM EDT

GREELEY, Colo. — Colorado farmers and bankers on Tuesday told a congressional oversight panel that oversees the bank bailout that the banking crisis is threatening their livelihoods and they need banking standards that are better tailored to their businesses.

The panel met in Colorado’s agricultural heartland to hear from farmers and others who are struggling to get credit amid the economic downturn, and comes three months after Greeley’s New Frontier Bank collapsed, leaving many farmers unable to find lenders willing to give them vital operating loans.

"Our farmers don’t want a bailout, they want the ability to succeed," said Les Hardesty, chairman of the Dairy Farmers of America Mountain Area Council.

Witnesses included Mike Flesher, executive vice president for Farm Credit Services of the Mountain Plains, Lonnie Ochsner, senior vice president for New West Bank, Marc Arnusch, owner of Mark Arnusch Farms, Michael Scuse of the U.S. Department of Agriculture.

Congress created the panel to hold hearings and issue a report on commercial farm credit markets and the use of loan restructuring as an alternative to foreclosure under the Troubled Asset Relief Program, the federal stimulus plan. The report is due July 21.

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Jim Sinclair’s Commentary

The banks never stopped losing. FASB lost it honor. Now there are no earning amongst the financials and FASB is dishonored publicly.

U.S. banks continue to close at record pace
July 7, 8:07 AM

As many Americans began celebrating the 4th of July weekend, another rash of U.S. banks failed and were closed by authorities at the Federal Deposit Insurance Corporation. According to CNN, 52 banks have closed in 2009, more than double the number from last year.  Banks have been hit hard with dropping home values. The recession has increased unemployment, which has caused consumers to default on their loans.

Six family-owned banks in Illinois and one bank in Texas closed Thursday costing the FDIC $343.3 million. The banks were acquired by the FDIC then sold to other institutions and will now reopen. The FDIC said the Illinois banks followed a business model that “created concentrated exposure in each institution." The agency said that the six failures stemmed from the banks’ investments in collateralized debt obligations (CDOs) and other loan losses.

Despite President Obama’s efforts to rein in banks, the carnage continues. This has included billions in aid to banks in return for preferred stock.  As I reported here in June ,10 banks began to repay $68 million in federal aid.  However, financial experts attending the Wall Street Journal Future of Finance Initiative meetings in March predicted 1,500 U.S. bank branches would close by 2010. The Obama administration has tried to stimulate overall lending by backing assets like credit cards and mortgages.

A new ABC NEWS report says new credit cards are down 38%. That’s discouraging for those who want to see banks pumping liquidity into the economy.  "The credit engine needs a tune-up," says Jim Powers, an Equifax assistant vice president.  Equifax is a credit rating agency that provides financial data for consumers.

With leaders in Congress committed to enacting regulatory reform by the end of the year, on June 30th the Obama Administration delivered a bill to Capitol Hill that would create the Consumer Financial Protection Agency.  The new agency is designed with the specific goal of “looking out for American families when they take out loans or use other financial products or services – with a mission to promote access and protect consumers from unscrupulous practices across the market.”  The CFPA would also enforce the new credit card bill signed into law by President Obama and Congress and have authority to deal directly with conflicts in the mortgage markets.

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Jim Sinclair’s Commentary

This is getting boring. Maybe in our lifetime?

S.E.C. May Reinstate Rules for Short-Selling Stocks

They have been reviled as the bad hats of Wall Street, nefarious traders who cashed in on the market collapse and, some insist, helped precipitate it.

Now short-sellers, the market skeptics who correctly called last year’s downturn, are coming under even more unwanted scrutiny, this time from federal regulators. The Securities and Exchange Commission appears poised to reverse itself and reinstate rules that would make shorting stocks — that is, betting their prices will decline — somewhat more difficult.

Whether the S.E.C. will go far enough to satisfy the many critics of short-sellers is far from certain. The controversial role of these investors has divided not only the financial industry, but also federal regulators. As the S.E.C. considers its options, the debate is heating up.

Hedge funds and big pension funds argue that short-selling is vital to modern markets. Such trading not only enables investors to hedge their risks but also to ferret out weak companies or, as in the case of Enron, outright frauds.

But many banks, whose stocks came under attack last autumn, maintain that unfettered short-selling is dangerous. The shorts, their argument goes, helped bring down Bear Stearns and Lehman Brothers last year.

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Jim Sinclair’s Commentary

ETF are not what they appear to be.

You only need to read the prospectus and check the lineage of management to know what master they serve.

In gold there simply isn’t that much to be bought or sold as is reported bought and sold, indicating that the Gold ETF is NOT dealing in the cash market for gold or on the COMEX.

As such, all Gold EFTs are paper OTC derivative plays. Logic denies any other possibility.

There are two glaring risks that many are still taking:
1. ETFs.
2. Internet Financial Entities.

Game Over for U.S. Oil, Natural Gas ETFs?

Commodity ETFs have been criticized from all corners. Investors have pilloried their inability to accurately track the price of their underlying asset. Industry watchdogs have assailed their inadequate disclosure of risks. And regulators have fretted over their ability to unduly manipulate futures markets.

Yet ETFs like the United States Natural Gas Fund (UNG) and the United States Oil Fund (USO) seem to have thus far gotten away high fees, poor disclosure, and disappointing returns, as investors are still buying them in droves. But regulators are less happy, and commodities-futures ETFs may not survive the coming regulatory onslaught.

Bloomberg reported yesterday that the Commodity Futures Trading Commission (CFTC) will open hearings into expanding regulation of speculative trading in commodities. Although the hearings concern all speculators, the regulators are primarly concerned with USO and UNG’s ability to move the oil and natural gas markets higher, adding a speculative premium to energy prices. Trading in the UNG was breifly halted as the SEC denied its routine request to issue more shares.

Ironically, with the USO and UNG, investors get the worst of both worlds. The funds themselves don’t track the price of the commodity very well due to rollover, so investors don’t reap the rewards of higher prices. But many believe their trading nonetheless increases demand for the contracts, driving spot prices prices higher. Not only do the UNG and USO screw you out of your returns, they make filling up and heating your home more costly. The only people who benefit from this scheme are the ETF issuers who collect the fees, and the speculators who actually play the futures markets properly.

The CFTC is considering putting limits on holding futures contracts, which could take a variety of forms including limiting the number of trades or contracts any one market participant can hold. Such a move would directly threaten commodity futures funds, and could force many of the largest ones to close up shop.

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Jim Sinclair’s Commentary

There is a very simple way to know. Whatever is officially said guarantees you the opposite.

Everything suggests that the American bonds seized at Chiasso are real

Official U.S. sources continue to say they are fakes, but there is no news that American experts have inspected them in person. Arrested for another matter, the director of a U.S. radio who says the bonds are real and Japan was trying to sell in Switzerland, not trusting the ability of the United States to honour its debt.

Milan (AsiaNews) – Four weeks have passed since American bonds were confiscated from two Japanese men who were travelling on a direct train to Chiasso, Switzerland, and while there has been clarification of some – very few -points, Italian authorities have remained silent on the rest of the episode.

In addition, a strange coincidence in the timing of the arrest of a director of an internet radio who had made revelations regarding the incident ,increases the already strong oddities surrounding the case. This added to the revaluation of the fact that among the evidence seized there were "Kennedy Bonds", all points toward the authenticity of the items seized by the Guardia di Finanza (GdF) in early June.

The major English-speaking newspapers ignored the story for a couple of weeks. They only started to report on it after the Bloomberg agency carried a story on  18 / 6, in which a spokesman for the Treasury, Meyerhardt, declared that the bonds, based on photos available on the Internet, were "clearly false." The same day, the Financial Times (FT) published an article whose title laid the blame for the (alleged) infringement at the feet of the Italian Mafia, despite the fact that the article failed to make even one possible connection with the episode in Chiasso. Nevertheless, the version of events as reported in FT was taken up by others as being "appropriate" (given that it is a very common cliché about Italy and it is a sequester that took place in Italy) and in the end "colourful." It’s a pity that it goes against all logic: that the Mafia tried to pass unnoticed in its attempt to dump fake bonds amounting to 134.5 billion dollars and moreover were to "stung" a mere step from their gaol,  is not very credible.

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Jim Sinclair’s Commentary

There is no limit to the amount of stimulation or QE that will be applied in the West because the only problem that has been approached is making good to the winners on the OTC derivatives held by major financial institutions.

Banks are still hanging on by their fingernails with all hopes pined on the elusive green shoots.

The first quarter earnings in the financial world were a onetime gift from FASB (at the cost of all they are supposed to stand for) that is now sterile under present circumstances. In simple English, they have already marked up the inventory out of sight.

Should the Fed roll over under the pressure of Administration wishes or the Fed morph from monetary meddler to regulator, the "no limit QE" will become the goal of all stimulative endeavours with all the consequences so ignored by the practitioners of management of perspective economics coming into play.

U.S. must be open to second economic stimulus: Hoyer
Tue Jul 7, 2009 7:38pm EDT
By Susan Cornwell and Jeremy Pelofsky

WASHINGTON (Reuters) – U.S. leaders should be open to the possibility of a second stimulus package to jolt the economy out of a recession still causing job losses, House of Representatives Majority Leader Steny Hoyer said on Tuesday.

But in the Senate, Majority Leader Harry Reid was more skeptical of the need for more stimulus spending — an idea that rattled markets fearful that the economy is far from well and corporate earnings could suffer.

Reid said he saw no evidence another stimulus was needed, saying the "shoots" of economic recovery "are now appearing above the ground."

President Barack Obama led the charge for a two-year $787 billion stimulus package that his fellow Democrats who control Congress pushed through the House and Senate in February and he has argued it would help create or save up to 4 million jobs.

Despite continued large job losses, both Reid and Hoyer — who spoke at separate news conferences — said not enough time had passed since first package was approved for it to have the full impact on the U.S. economy, which has been in a recession since December 2007.

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Jim Sinclair’s Commentary

Of course they don’t. Would you?

Big Banks Don’t Want California’s IOUs
By RYAN KNUTSON

A group of the biggest U.S. banks said they would stop accepting California’s IOUs on Friday, adding pressure on the state to close its $26.3 billion annual budget gap.

Dorothy Cottrill of the state controller’s office inspects IOUs last week.

The development is the latest twist in California’s struggle to deal with the effects of the recession. After state leaders failed to agree on budget solutions last week, California began issuing IOUs — or "individual registered warrants" — to hundreds of thousands of creditors. State Controller John Chiang said that without IOUs, California would run out of cash by July’s end.

But now, if California continues to issue the IOUs, creditors will be forced to hold on to them until they mature on Oct. 2, or find other banks to honor them. When the IOUs mature, holders will be paid back directly by the state at an annual 3.75% interest rate. Some banks might also work with creditors to come up with an interim solution, such as extending them a line of credit, said Beth Mills, a California Bankers Association spokeswoman.

Meanwhile, on Monday morning, a budget meeting between Gov. Arnold Schwarzenegger and legislative leaders failed to produce a result. Amid the budget deadlock, Fitch Ratings on Monday dropped California’s bond rating to BBB, down from A minus, the latest in a series of ratings downgrades for the state.

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Posted by & filed under In The News.

122 days to go

Sinclair16 

Dear CIGAs,

This is precisely what the Formula anticipated in 2006.

As revenue collapses on all fronts while spending for all governmental activities including the major rescue actions rise violently and a few wars are being processed in historically un-winnable areas, the amount of Treasury instruments that must be issued will rise to eclipse the sun.

The dollar impact is as devastating as it has been to any empire’s currency that embarked on this well trodden road in history to financial perdition.

This is why a bear market in long bonds is a Pillar of Gold given to you in 2006 in the illustration, The Pillar of Gold at $1650.

This is exactly what you were told would happen nearly four years ago, the order in which it would happen, and exactly what it means to markets. Now I am telling you there is 122 days to go.

The situation in California is a mini prelude to when Washington makes the US dollar a clear IOU chit. It is already, but MOPE via SPIN still has Ivy League Wall Street keeping the sheeple as sheeple.

122 days to go.

US lurching towards ‘debt explosion’ with long-term interest rates on course to double
The US economy is lurching towards crisis with long-term interest rates on course to double, crippling the country’s ability to pay its debts and potentially plunging it into another recession, according to a study by the US’s own central bank
By Philip Aldrick, Banking Editor
Published: 5:44AM BST 06 Jul 2009

In a 2003 paper, Thomas Laubach, the US Federal Reserve’s senior economist, calculated the impact on long-term interest rates of rising fiscal deficits and soaring national debt. Applying his assumptions to the recent spike in the US fiscal deficit and national debt, long-term interests rates will double from their current 3.5pc.

The impact would be devastating by making it punitively expensive to finance national borrowings and leading to what Tim Congdon, founder of Lombard Street Research, called a “debt explosion”. Mr Laubach’s study has implications for the UK, too, as public debt is soaring. A US crisis would have implications for the rest of the world, in any case.

Using historical examples for his paper, New Evidence on the Interest Rate Effects of Budget Deficits and Debt, Mr Laubach came to the conclusion that “a percentage point increase in the projected deficit-to-GDP ratio raises the 10-year bond rate expected to prevail five years into the future by 20 to 40 basis points, a typical estimate is about 25 basis points”.

The US deficit has blown out from 3pc to 13.5pc in the past year but long-term rates are largely unchanged. Assuming Mr Laubach’s “typical estimate”, long-term rates have to climb 2.5 percentage points.

He added: “Similarly, a percentage point increase in the projected debt-to-GDP ratio raises future interest rates by about 4 to 5 basis points.” Economists are predicting a wide range of ratios but Mr Congdon said it was “not unreasonable” to assume debt doubling to 140pc. At that level, Mr Laubach’s calculations would see long-term rates rise by 3.5 percentage points.

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Jim Sinclair’s Commentary

I found an interesting quote that applies to those who I know and have be partners with at one time or another who stole trillions via OTC derivatives. They brought the common man to his knees with suffering, opening a decade in which hope will be crushed and opportunity will exist only for the elitist to enjoy.

"Darum gibt unser Herr Gott gemeiniglich Reichtum der groben Esein, denen er sonst nichts gonnt."
–Martin Luther (1483-1546)

Jim Sinclair’s Commentary

US 30 year US Treasury long term up trend line (28 years) is approximately in the 112-113 levels now.

The dollar is a fundamental disaster. Rogers is completely correct.

Jim Rogers Sells Dollars, Plans to Short Treasuries (Update2)
By Bob Chen

July 6 (Bloomberg) — The dollar and U.S. Treasuries are both likely to slide as soaring government debt in the world’s biggest economy undermines confidence in its assets, according to Jim Rogers, chairman of Rogers Holdings.

“The government is printing lots of money and borrowing even more; that’s not the basis for a sound currency,” he said in a telephone interview today from Singapore. “The idea that anybody would lend money to the U.S. government for 30 years at 3 or 4 or 5 or 6 percent interest is mind-boggling to me.”

Rogers, the author of books including “Investment Biker” and “Adventure Capitalist”, said he holds fewer dollars than a year ago and plans to “short U.S. government bonds someday.” A short bet involves selling a security you don’t own with a view to buying it back after the price has fallen.

The U.S. is stepping up debt sales to finance a record budget deficit as it tries to spend its way out of a recession and that’s causing the supply of the securities to balloon. After more than doubling note and bond offerings to $963 billion in the first half, another $1.1 trillion may be sold by year-end, according to Barclays Plc, one of the 16 primary dealers that are obligated to bid at Treasury auctions.

U.S. debt lost 4.46 percent through June, according to Merrill Lynch & Co.’s U.S. Treasury Master index.The yield on benchmark 30-year notes reached 4.84 percent on June 11, the highest since 2007, and was 4.31 percent as of 2:02 p.m. in Tokyo. It sank to 2.51 percent in December, the lowest since sales of the security began in 1977, as the economic slump fueled demand for the relative safety of government bonds.

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Jim Sinclair’s Commentary

The Chinese, according to Bloomberg on Sunday "Did not know what they wanted."

Of all the rank BS of universal class stupid, that statement was the best.

The dollar is the "Barbaric Relic" and "Gold" is the lynchpin of your future well being.

Shanghai Companies Sign First Yuan Settlement Deals (Update4)
By Bloomberg News

July 6 (Bloomberg) — Three Shanghai companies agreed to settle import and export contracts in yuan for the first time, as China seeks to reduce the role of the dollar in global trade.

Shanghai Silk Group, Shanghai Electric Group Co. and Shanghai Huanyu Import & Export Co. signed contracts worth 14 million yuan ($2 million) with customers in Hong Kong and Indonesia, Fang Xinghai, director general of the municipal government’s financial services office, said at a press conference today. Bank of Communications Co. and Bank of China Ltd. offered transaction services.

China, Russia and India have said the world economy is too reliant on the dollar and called for changes in how $6.5 trillion in foreign-exchange reserves are managed, before Group of Eight leaders meet this week. The settlement program and sales of yuan-denominated debt overseas are designed to make the currency more attractive for central banks to hold.

“This is a first step on the long road towards that target of making the yuan a global reserve currency,” said Nizam Idris, a strategist in Singapore at UBS AG, the world’s second biggest foreign-exchange trader. “That’s probably going to take five years or more.”

The central bank on July 2 allowed companies in Shanghai and four cities in the southern Guangdong province to settle trade in yuan with businesses in Hong Kong, Macau and Association of Southeast Asian Nations. Outside of special border trade zones, companies previously had to convert yuan into dollars or other currencies to settle international trade.

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Jim Sinclair’s Commentary

It starts like this then becomes California followed by a Federal bailout.

NYC municipal bonds with their worthless guarantees will be IOU chits.

NYC Freezes Hiring Because Of Senate Gridlock

Mayor Bloomberg Delaying Planned City Hires Indefinitely, Says Albany Chaos Is Holding Up New Tax Revenue
No New Cops, Firefighters, EMS Workers Or School Safety Agents
Jul 6, 2009 8:07 pm US/Eastern

Chaos is now hitting the city, as Mayor Michael Bloomberg has ordered an across-the-board freeze on hiring and the awarding of city contracts.

"I’ve instructed the city’s budget director to immediately freeze all hiring while the gridlock in the state Senate imperils the city’s budget," Bloomberg said in a statement Monday.

It was to be a joyous week in the police department, with 250 recruits due to be sworn in on Wednesday. Now, their jobs are on hold, and there is no way to know when – or if – the city will have the money to hire them.

Mayor Bloomberg ordered the freeze Monday afternoon, saying the Albany circus has prevented the state senate from approving an increase of 0.5 percent in the city sales tax – money the city needs to balance the budget.

The state must approve new tax measures that were included in the city’s budget for fiscal year 2010, which began July 1.

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Jim Sinclair’s Commentary

Here comes a currency constituent of the "SSCI" while MOPErs spin out their story that yes, there will be some MINOR CHANGES in the system of reserve assets available to central banks, but it lies CENTURIES IN THE FUTURE.

My answer is quite simple: 122 days to go!

China Begins Pilot Program to Settle Trade in Renminbi
By REUTERS
Published: July 6, 2009

SHANGHAI — China has officially opened a pilot program to allow companies to settle imports and exports in renminbi in selected regions, marking a major step toward eventually internationalizing the Chinese currency.

Three pairs of Shanghai companies with their Hong Kong and Indonesian counterparts signed contracts on Monday to be the first to settle business deals in the Chinese currency. Executives said the move would save costs and avoid exchange rate risks.

Bank of China and Bank of Communications were the first lenders to clear transactions in renminbi, considered a lucrative business given China’s expanding economy and huge presence in international trade.

Hong Kong also kicked off the long-awaited yuan settlement program on Monday.

HSBC said it completed its first renminbi trade settlement with Shanghai and its first cross-border credit transaction.

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Jim Sinclair’s Commentary

To be a fool in front of the sheeple is normal as they cannot tell the difference.

To be a fool in front of the entire world is not so good.

The Money Bunnies on Bloomberg TV either do not know or do not care that their words are heard in Mongolia.

When recently discussing this Administration’s universal medical health plan just this type of problem was questioned. The Money Bunny said to the world that the USA will do it right because we are Americans. That is patriotic, yes, but internationally dumb and universally an embarrassment to any knowledgeable person.

Reality check: Canada’s government health care system
By Dana Bash and Lesa Jansen
CNN

KINGSTON, Ontario (CNN) — For Shona Holmes, simple pleasures such as playing with her dog or walking in her plush garden are a gift.

After suffering from crushing headaches and vision problems, she was diagnosed with a brain tumor four years ago. She was told if it wasn’t removed, she could go blind or even die.

"They said to me that you had a brain tumor and it was pressing on your optic chasm and that it needed to come out immediately," Holmes said.

Holmes is Canadian, but the "they" she refers to are doctors at the Mayo Clinic in the United States, where she turned after specialists in her own government-run health care system would not see her fast enough.

"My family doctor at that time tried to get me in to see an endocrinologist and a neurologist," Holmes recalled. "It was going to be four months for one specialist and six months for the other."

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Jim Sinclair’s Commentary

Maybe this is not the best time for this when unemployment is the problem.

Higher minimum wage coming soon
Federal wage floor will rise to $7.25 an hour on July 24. Hike will be felt in 29 states. Can the job market handle it?
By Aaron Smith, CNNMoney.com staff writer
Last Updated: July 6, 2009: 2:56 PM ET

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NEW YORK (CNNMoney.com) — The federal minimum wage is set to increase later this month as the job market shows signs of further decay.

The federal minimum wage will go to $7.25 an hour on July 24 from its current level of $6.55, according to the U.S. Department of Labor.

The impact will be felt in 29 states, and many of them plan to match the federal minimum when it goes through.

Seven states already have laws mandating $7.25 minimum pay, while 14 states and Washington, D.C., exceed the new minimum. Employers are required to pay whichever is the highest: Federal or state.

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Jim Sinclair’s Commentary

Unwind means use yours and my cash to buy out the winning side of the arrangement. This money is not going into a dark hole of destruction, but rather into the bank account of the winners.

Any half whit could have seen this coming. Mia knew it!

Ponder out a window what MOPE, showmanship, and CRAP there is out there.

Unwinding at AIG Prompts Pasciucco to Ponder Systemic Failure

July 1 (Bloomberg) — Gerry Pasciuccostared out from his fourth-floor office at the hurly-burly of midtown Manhattan’s 48th Street, weighing the riskiest trade of his life. Over a 26- year career, he had risen to managing director at Morgan Stanley and earned a seven-figure-plus pay package. It was October 2008, and Edward Liddy, the new chief executive officer of insurerAmerican International Group Inc., had just asked Pasciucco to head the subsidiary at the vortex of the world financial cataclysm: AIG Financial Products Corp.

The mission: unwind AIGFP’s portfolio of 44,000 often complex, long-dated derivatives with a notional value of $2 trillion, close the unit, then fire what remained of its 428 employees and resign.

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Jim Sinclair’s Commentary

Sure, they can. All they need to do is what they are told to do. Now there is a contradiction in terms, but the truth of the matter is….

Can the Federal Reserve stay independent?
Posted by: Peter Coy on July 06

Fed watchers note: Fed Vice-Chairman Donald Kohn is testifying this Thursday on the topic of Federal Reserve independence. It’s before the House Financial Services Subcommittee on Domestic Monetary Policy and Technology. Should be interesting, coming on the heels of Fed Chairman Ben Bernanke’s efforts to fend off congressional attacks, including a bill from Texas Republican Ron Paul seeking to audit the central bank.

Before he joined the Fed, when he was still a Princeton academic, Bernanke seemed to take the position that the Fed merited plenty of independence simply because it was uninvolved in politics. There’s nothing political about managing the economy to hit an inflation-rate target that everyone agrees on, right?

But it’s clear now that Bernanke has a bigger vision for the Fed, one that involves supervisory powers over the entire financial sector. You can argue that the Fed had broad power already, but in politics you never know how much power you have until you try to exercise it. That’s what the Fed is seeking to do now—test its limits.

The deeper the Fed wades into running the financial system as well as the economy, the harder it will be to maintain its cherished independence. That’s just a fact of life in a democracy..

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Jim Sinclair’s Commentary

We anticipated an official play down of reserve currency debate, but be assured these conferences leak like a sieve.

Dollar discomfort thrust onstage for Italy summit
Reuters, Sunday July 5 2009
By Brian Love

PARIS, July 5 (Reuters) – World leaders are bound to express the hope that the worst of the global economic crisis is passing when they meet this week, but they are under pressure, too, to manage a Chinese challenge to decades of dollar supremacy.

Beijing, which has floated the idea of an alternative to the dollar as world reserve currency one day, wants a debate on the matter — sensitive in financial markets which are wary of risks to U.S. asset values — at a July 8-10 summit in Italy, officials say.

With so much of its reserves invested in U.S. assets, BeiJing needs to ensure that its longer-term goals do not spook markets in the short term and hit the dollar’s value — a point Vice Foreign Minister He Yafei made in Rome on Sunday.

"The U.S. dollar is still the most important and major reserve currency of the day, and we believe that that situation will continue for many years to come," He said.

Leaders from the Western economic powers and Russia meet in Italy on Wednesday and are joined the day after by leaders from China, India, Brazil and others to discuss global challenges — chief among them the worst recession in living memory.

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Jim Sinclair’s Commentary

The revival of the US auto industry to which this Administration has so tightly tied their political capital is akin to pushing a granite boulder up a mountain.

Auto parts maker Lear Corp files for bankruptcy
Tue Jul 7, 2009 6:00am EDT

(Reuters) – U.S. auto parts maker Lear Corp filed for Chapter 11 bankruptcy protection on Tuesday, a day after setting out plans to restructure its $3.6 billion debt burden under a proposed deal with creditors.

Lear, which has been weighed down by heavy debts and a sharp decline in automobile demand, said the reorganization had won the support of the majority of its creditors and it expected to submit the proposals to the bankruptcy court in coming days.

Under the plans set out on Monday, Lear would convert $3.6 billion in debt into a combination of new debt, convertible stock and equity warrants. But at that point it did not give a timetable for the bankruptcy proceedings.

The company now says its bankruptcy plan — the largest in a string of failures of auto parts suppliers — was supported by about 68 percent in principal amount of its secured lenders and more than 50 percent in principal amount of its bondholders.

"We intend to proceed on an expedited basis and expect to submit the plan to the Bankruptcy Court within 60 days," Lear Chief Executive Bob Rossiter said in a statement.

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Jim Sinclair’s Commentary

They were best credit rated guaranteed when you were sold them and now if you want to sell them to someone else, don’t even bother trying.

These rating companies are worthless relics.

As California struggles, Fitch cuts debt rating
By Jim Christie Jim Christie Mon Jul 6, 6:45 pm ET

SAN FRANCISCO (Reuters) – California suffered a new setback in its financial crisis on Monday when Fitch Ratings cut its rating on the state’s general obligation debt to just two notches above junk status.

Fitch cut its rating on California’s long-term bonds to "BBB," two notches above speculative grade, citing the state’s budget and cash crisis. The state last week started issuing "IOU" promissory notes to pay for some bills in order to conserve cash.

The credit rating agency also kept the debt of the most populous U.S. state on watch for additional downgrades. California ranks as the lowest-rated state general obligation credit by Fitch, followed by Louisiana, at "A+."

Tom Dresslar, a spokesman for State Treasurer Bill Lockyer, said the other two main credit rating agencies, Standard & Poor’s and Moody’s Investors Service, could soon follow Fitch’s example. "I’m sure their patience is not deep," he said.

Lower ratings threaten to raise California’s borrowing costs during a severe cash crunch in Sacramento, the state capital, one of Fitch’s top concerns.

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Jim Sinclair’s Commentary

Now the center is folding in. Wall Street is made whole and as a result the whole nation suffers.

California Hotel Foreclosures Double in Last Three Months
By Mark Heschmeyer
July 1, 2009

From Watch List reader, Alan X. Reay, founder and president of Atlas Hospitality Group in Irvine, CA, comes this astounding statistic. The number of California hotels in default or foreclosed on has jumped 125% in the last 60 days. The state now has 31 hotels that have been foreclosed on and 175 in default.

With 19.6% of the total, San Bernardino County leads the state in foreclosed hotels. Riverside County follows with 16.1% and San Diego County has 12.9%. Los Angeles County, with 12% of the total, has the most hotels in default. San Bernardino County is next with 9.7% and San Diego County follows with 8%, according to Atlas Hospitality.

"Initially, the wave of distress in California was seen by the smaller, non-flagged hotels in secondary and tertiary markets," Reay said. "As the hotel economy worsened, we have seen it impact all property types. The properties range from the luxurious St. Regis Monarch Beach Resort (pictured) in Dana Point to the more economical Extended Stay and Red Roof Inn chains. No market or brand is immune in this downturn."

Non-franchised hotels account for a disproportionate number of foreclosures. They make up about 87% of the total. However, franchised hotels make up 59% of the defaulted properties.

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I place [the] economy among the first and most important virtues, and public debt as the greatest of dangers to be feared… we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty…or profusion and servitude.
— Thomas Jefferson

Jim Sinclair’s Commentary

CIGA Green Hornet says "$300 billion is chump change in this world."

U.S. Lenders May Have to Raise $300 Billion, Deutsche Bank Says
By Josh Fineman and Ambereen Choudhury

July 7 (Bloomberg) — U.S. banks may have to raise as much as $300 billion to cover growing credit losses and regulators’ future capital requirements, Deutsche Bank AG said.

At least $100 billion might be needed to rebuild Tier 1 common equity, a gauge regulators use to measure a bank’s ability to withstand losses, Deutsche Bank analyst Matt O’Connor wrote in a report. Future Tier 1 requirements may climb close to 10 percent of assets, which would require an additional $100 billion to $200 billion of capital, according to the report.

“We expect continued weak bank results in the second quarter as credit pressures continue,” said O’Connor, who has two “buy” recommendations on the 16 lenders covered by Deutsche Bank: Regions Financial Corp. of Birmingham, Alabama, and Minneapolis-based U.S. Bancorp.

U.S. banks have already raised about $507.1 billion since the beginning of the financial crisis in 2007, according to data compiled by Bloomberg. The Federal Reserve conducted stress tests on the nation’s biggest lenders earlier this year, and forced 10 of them to raise $75 billion as a cushion against a worsening recession.

The U.S. economy will shrink by the most since 1946 this year, according to a Bloomberg survey of 61 economists last month. The jobless rate rose to 9.5 percent in June, the highest since August 1983.

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Jim Sinclair’s Commentary

Well this gives us comfort. We all know that Goldman would never use this algorithm program to manipulate markets.

See the calming words of Goldman’s attorney:

“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said, according to a recording of the hearing made public yesterday. “The copy in Germany is still out there, and we at this time do not know who else has access to it

Goldman May Lose Millions From Ex-Worker’s Code Theft (Update2)
By David Glovin, Christine Harper and Saijel Kishan

July 7 (Bloomberg) — Goldman Sachs Group Inc. may lose its investment in a proprietary trading code and millions of dollars from increased competition if software allegedly stolen by a former employee gets into the wrong hands, a prosecutor said.

Sergey Aleynikov, a 39-year-old ex-Goldman Sachs computer programmer, was arrested July 3 after arriving at Liberty International Airport in Newark, New Jersey, U.S. officials said. Aleynikov, a citizen of America and Russia who joined the bank in 2007, is charged in a criminal complaint with stealing the trading software. Teza Technologies LLC, a Chicago-based firm co-founded by a former Citadel Investment Group LLC trader, said it suspended Aleynikov, who started there on July 2.

At a court appearance July 4 in Manhattan, Assistant U.S. Attorney Joseph Facciponti told a federal judge that Aleynikov’s alleged theft — the largest breach ever at the bank — poses a risk to U.S. markets. Aleynikov transferred the code, worth millions of dollars, to a computer server in Germany, and others may have had access to it, Facciponti said, adding that New York-based Goldman Sachs may be harmed if the software is disseminated.

“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said, according to a recording of the hearing made public yesterday. “The copy in Germany is still out there, and we at this time do not know who else has access to it.”

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Posted by & filed under In The News.

Few men have the virtue to resist the higher bidder.
–George Washington

Jim Sinclair’s Commentary

Look at the Financial Times online and compare it to financial TV this morning.

Chinese officials said this morning that the economic crisis has shown the weaknesses of a dollar-led global economy and that the world should look to displace the dollar, even though that may be a slow process. China may push for the IMF’s Special Drawing Right to be used as a dollar alternative.

 

Jim Sinclair’s Commentary

Did any thinking person anticipate anything other than this?

The ancient strategy of warfare in the Middle East once again resurfaces.

Kirkuk Bomb Kills Iraq Peace Hopes After U.S. Pullout (Update1)
By Daniel Williams

July 6 (Bloomberg) — Jamal Tahir Bakr, police chief of the Iraqi city of Kirkuk, expected the euphoria over the U.S. withdrawal from Iraqi cities to end, just not so quickly.

A car bomb blew up a city bazaar and killed 37 people on June 30, the official withdrawal date. It put an end to any illusion that the U.S. pullout, coupled with heightened control by the Iraqi police and army, would bring peace, he said.

“People were getting hypnotized by the idea that normal times were here,” Bakr said in an interview the day after the bombing. “It didn’t make any difference how much you warned them, they had it in their heads. And then the bomb. The real situation is now clear: The problems are not over.”

Too many conflicts are unresolved, Iraqis in Kirkuk say. An insurgency led by Sunni Muslims that rejects the Shiite Muslim- dominated government of Prime Minister Nuri al-Maliki persists. Kirkuk is rent by a long-running feud between the local Kurdish population and Arab Iraqis. U.S. Vice President Joseph Biden warned al-Maliki on July 3 that the U.S. might disengage from the country if it reverts to sustained violence.

Iraqi police aren’t prepared to take on the heavy burden of securing a city of 1 million people, its own officials say. There aren’t enough of them. And the region around Kirkuk, which supplies 25 percent of Iraq’s oil exports, doesn’t get enough funds from the central government for more police.

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Jim Sinclair’s Commentary

Who do you believe, the financial TV host or China?

Time to re-read my lesson posted yesterday on SSCI (Super Sovereign Currency Index) use as an alternative reserve currency unit.

China officials call for displacing dollar, in time
Mon Jul 6, 2009 3:58am EDT
By Simon Rabinovitch

BEIJING (Reuters) – The financial crisis has laid bare defects in the dollar-led global economy and the world should look to displace the U.S. currency, even if that will take many years, Chinese officials said in comments published on Monday.

The push for fundamental, if gradual, reform of the international financial system comes just before the Group of Eight summit in Italy, where China’s willingness to question the dollar’s role could fuel debate.

The Special Drawing Right (SDR), a unit of account used by the International Monetary Fund, presents a viable alternative to the dollar as a global reserve currency, said Li Ruogu, chairman of the Export-Import Bank of China, a major state-run bank.

"It is a feasible plan to reform the present SDR and make it into a real settlement currency, a universally accepted ‘currency basket’ that would replace the dollar at the heart of the monetary system," Li was cited as saying in Financial News, a newspaper published by the central bank.

The People’s Bank of China made waves in March when it first suggested that the SDR, whose exchange rate is determined by a mixture of dollars, euros, sterling and yen, was better suited than any single currency to be a yardstick for global trade and a reliable store of value.

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Jim Sinclair’s Commentary

Here is a small example of why any gold sold by the IMF is a non-event just like it was in the 70s.

South Korea to buy gold, expecting it to replace dollar
Bank of Korea to Buy Gold for First Time in 11 Years
From Dong-A Ilbo (East Asia Daily)
Seoul, South Korea
Saturday, July 4, 2009

The Bank of Korea has not purchased gold for 11 years but is expected to go on a gold buying spree, as the world’s central banks have bought the commodity since the global economic erupted in September last year.

A Bank of Korea official said yesterday, "The bank has begun to set up a plan to manage foreign exchange reserves for next year. It has also closely watched central banks in other nations and trends in the global gold market. Given the changing global financial environment, the bank’s management plan is critical."

According to experts, the comment implies that the bank plans to buy gold soon. Korea has the world’s sixth most foreign exchange reserves but ranks just 56th in gold holdings.

China, which has the world’s largest foreign exchange reserves, has secretly bought 454 tons of gold over the past six years. This has intensified global competition to obtain more gold.

The amount of gold bought by China over the period is 32 times larger than the Bank of Korea’s gold reserves. The world’s central banks have rushed to buy gold, since they believe the metal will replace the greenback when the dollar’s status as the world’s leading currency weakens.

The bank has said nothing officially, simply saying, "We have made no decision on the purchase of gold and cannot say if we have considered it." It will finalize by November its plan to manage foreign exchange reserves for 2010, but experts forecast that the bank will have no choice but to buy gold soon.

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Jim Sinclair’s Commentary

Of all the dark Western developments that we have the OTC derivative manufacturers and distributors to thank for, this is a big one.

Pensions: why there are dark clouds hanging over your sunset years
By Paul Gosling
Monday, 6 July 2009

I hope you enjoy your job: the chances are you will be doing it for many years longer than you once assumed.

Many of us — probably most — can forget about finishing work at the traditional retirement ages of 60 or 65. Working into our 70s is much more likely.

There are several reasons why old age is now unlikely to be a period of wealth and leisure.

The most important is that employers are cutting-back on their commitments to staff pensions by closing final salary schemes — in which employees are paid a pension of an agreed percentage of their last year’s pay.

Instead, an increasing number of employers only commit to paying a defined contribution to their staff’s pension fund. The risk lies with employees, who are expected to top-up the fund to get a decent pension.

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Jim Sinclair’s Commentary

All CIGAs know this has been going on behind the scenes. If the media put light on the growing support of this it would destroy the Fed if followed through with.

Calls Grow to Increase Stimulus Spending
JULY 6, 2009
By DEBORAH SOLOMON

WASHINGTON — Vice President Joe Biden said the Obama administration "misread how bad the economy was" and didn’t foresee unemployment levels nearing double digits, in comments likely to intensify calls for the administration to do more to counter job losses.

Some economists are pressing the White House to enact a second round of stimulus spending or find some other way to avert a prolonged job and wage slump. But the White House is in a tough spot. Officials want to give the $787 billion stimulus package passed in February time to work — only 10% of the spending is out the door so far — and there is little appetite in Congress, particularly among Republicans, for spending more money at a time of record deficits.

The gloomy job picture threatens any economic recovery. The unemployment rate hit 9.5% last month, figures released last week show, and many now expect it to stay high for a long time, eventually reaching double digits. At the same time, wage growth is slumping. People facing unemployment or wage cuts are less able or willing to spend the money needed to stimulate the economy.

Already, job losses are hindering recovery in the housing market as foreclosures among people with good credit who have been laid off compound the problems with risky mortgages that triggered the sector’s implosion.

"They’re in a bind because the recovery package is just starting to generate positive benefits but, to the extent we know something about the future, unemployment is too high and is going to stay high for a long period," said Lawrence Mishel, president of the Economic Policy Institute, a left-leaning Washington think tank. "When we hit 10% unemployment, which we will within months…even those who don’t lose a job will be affected by the squeeze on wage growth, furloughs and the cutbacks in [retirement] plans," he said.

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Jim Sinclair’s Commentary

Turn the Fed into a regulator while reducing the Fed’s absolute power over monetary affairs. Increase the Administration’s power of monetary affairs via legislative oversight.

The Chairman becomes a puppet.

This goes against the independent owners of the Fed and might just cause a war between King Makers.

This is very dangerous behind the door stuff.

Steve: Fed, Help Us
Steve Forbes, 07.06.09, 06:00 AM EDT

Steve Forbes discusses the prospect of the Federal Reserve getting more responsibilities, and why it doesn’t need any more.

The Obama administration wants to enhance the regulatory powers of the Federal Reserve. That’s a mistake. The Fed has all the power it needs to help the American consumer and the global economy. The Fed needs to stop buying government debt and start focusing on what matters.

Cash in the banking system is not the problem, so the Fed buying Treasuries won’t solve anything. The Fed should be aggressively buying mortgage-backed securities, packages of credit card loans, car loans and other kinds of credit, as it promised to do last year. The Fed’s balance sheet has shrunk since December, indicating an appallingly timid response in the face of the crisis. The Fed doesn’t have to balloon its balance sheet when it purchases these consumer credit packages, but it does have to pump hundreds of millions of dollars into the system to get credit flowing again.

In terms of regulation, it is a bit ironic they’re still going to put new powers in the Federal Reserve–an agency that didn’t exercise proper oversight over the banking system and whose lousy monetary policy in 2003 and 2004 made the bubble possible. The Fed doesn’t need new powers, it needs to clean up the mess it created.

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Jim Sinclair’s Commentary

The real question is will the Fed maintain absolute control over monetary policy.

The administration wants QE at an infinite level. Bernanke is willing but reluctant.

The showdown between the private owners of the Fed and this Administration and its King Makers is at hand. I wager on the Administration and its King Makers in this fire fight.

As far as the dollar is concerned, it is secondary and maybe not even that to the intentions of taking control away from the Fed.

Make the Fed a regulator, not an absolute power over monetary policy which can unseat an administration. Remember who appointed Bernanke and therefore where Bernanke came from.

Maybe there is no compromise in this fire fight.

Will Bernanke keep his job?
Obama will have to make a big decision: Whether to reappoint the Fed chair. Bernanke has detractors on the Hill. Right now at least, odds are he’ll hang on.
By Jennifer Liberto, CNNMoney.com senior writer
Last Updated: July 6, 2009: 11:22 AM ET

WASHINGTON (CNNMoney.com) — In the next six months, President Obama faces one of his biggest and most important decisions about the economy.

Should Federal Reserve Chairman Ben Bernanke keep his job?

Bernanke’s term comes to an end on Jan. 31. Obama will either reappoint or replace him. And the president has been coy about his leanings.

Last month, Obama offered a strong defense of Bernanke, saying he has done a "fine job." At the same time, Obama acknowledged that the Fed had missed key aspects of the financial crisis, saying it "didn’t do everything that needed to be done."

As the nation slogs through the recession — now in its 20th month — the role of the central bank’s chief has never been more important.

The Fed is charged with examining bank soundness, as well as checking the cost and availability of money and credit in the economy. Lately, given the more than $1 trillion the Fed has printed to get the markets moving, there’s a renewed focus on watching for signs of inflation.

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Jim Sinclair’s Commentary

The process is accelerating as we discussed. Apparently, it will not be silenced.

Calls grow to supplant dollar as global currency
France joins China, India and Russia in calling for a new reserve standard on the eve of the G8 summit
Karim Bardeesy

From Monday’s Globe and Mail Last updated on Monday, Jul. 06, 2009 09:51AM EDT

The call to find an alternative to the U.S dollar as the global reserve currency is gaining momentum as France joined calls by China, India and Russia for a review of the world’s currency practices.

French Finance Minister Christine Lagarde challenged the dollar’s supremacy “in a world that has changed because of the crisis and the growing role of emerging countries.”

The questioning of the U.S. dollar as the key currency for central banks by a leader of a major European economy gives renewed life to the issue at this week’s Group of Eight summit meeting in L’Aquila, Italy. The U.S. dollar has long served as the dominant medium of exchange, and tends to dominate the official money reserves that countries hold through their governments and at their central banks.

In the first quarter of 2009, 65 per cent of the world’s allocated foreign exchange holdings were held in U.S. dollars, according to the International Monetary Fund. That’s the highest in seven quarters.

The push for an alternative is being driven in large part by concern over the weakened state of the U.S. economy.

The country is forecasting fiscal deficits for the next decade.

That’s leading large holders of U.S. debt such as China to worry that the U.S. dollar may not be as safe as it once was. In addition, the dollar has been volatile on international currency markets, and the U.S. is running ongoing trade deficits.

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Jim Sinclair’s Commentary

Those that support, no demand, an alternative to the US dollar are turning up the volume.

Bloomberg and all the key financial TV stations are broadcasted everywhere in the world.

Non US principles are taking offense to the US media’s unbridled MOPE and SPIN.

Dollar’s Days of Dominance Are Over
July 05, 2009

While it may not constitute the final “nail in the coffin”, India commemorated the 4th of July by joining China and Russia in announcing they were seeking “alternatives” to the U.S. dollar (as “reserve currency”). With yet one more “prop” removed from the gangrenous greenback, this left only the submissive Japanese as the last major holder of U.S. dollars who strongly supports its continued status.

Bloomberg reported Saturday that the economic advisor to Indian Prime Minister Manmohan Singh has publicly and explicitly recommended that India reduce the U.S. dollar component of its currency reserves. “The major part of India reserves [totaling $264 billion] is in U.S. dollars – that is something that’s a problem for us,” said Suresh Tendulkar.

These remarks come only one day after China’s former Vice Premier, Zeng Peiyan stated, “There should be a system to maintain the stability of the major reserve currencies.”

Several comments need to be made with reference to this remark. First, China commonly uses “voices” of those associated to but not in the government to indirectly reveal its thoughts on issues. Thus the fact that Zeng is a former Vice Premier should not be taken to mean that his remark is not indicative of the position of the Chinese government.

Second, there were two subtleties which should cause Americans (and the Obama regime) serious concern. First, Zeng spoke of “major reserve currencies” – making it explicitly clear that he (and China) no longer consider the dollar the sole “reserve currency” today. The other point to ponder is Zeng’s reference of a “system to maintain stability” in currency markets. The U.S. dollar was that system.

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Posted by & filed under In The News.

"The only victories which leave no regret are those which are gained over ignorance."
–Napoleon

Dear CIGAs,

There is nothing like a warm welcoming to please the heart!

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Jim Sinclair’s Commentary

They used to steal people to elicit secrets. Now all you need is a good hacker.

It couldn’t happen to nicer people.

A Goldman trading scandal?
Posted by: Matthew Goldstein
July 5th, 2009

Did someone try to steal Goldman Sachs’ secret sauce?

While most in the US were celebrating the 4th of July, a Russian immigrant living in New Jersey was being held on federal charges of stealing top-secret computer trading codes from a major New York-based financial institution—that sources say is none other than Goldman Sachs.

The allegations, if true, are big news because the codes the accused man, Sergey Aleynikov, tried to steal is the secret code to unlocking Goldman’s automated stocks and commodities trading businesses. Federal authorities allege the computer codes and related-trading files that Aleynikov uploaded to a German-based website help this major “financial institution” generate millions of dollars in profits each year.

The platform is one of the things that apparently gives Goldman a leg-up over the competition when it comes to rapid-fire trading of stocks and commodities. Federal authorities say the platform quickly processes rapid developments in the markets and uses top secret mathematical formulas to allow the firm to make highly-profitable automated trades.

The criminal case has the potential to shed a light on the inner workings of an important profit center for Goldman and other Wall Street firms. The federal charges also raise serious questions about the safeguards Wall Street firms deploy to protect their proprietary trading systems.

The criminal case began to unfold on the evening of July 3 when Aleynikov was arrested by FBI agents at Newark Liberty Airport, after returning from Chicago. Aleynikov had just started a job with another firm in Chicago, after leaving the big firm in NY in early June. It appears the financial institution allegedly victimized by Aleynikov had alerted federal authorities that its former employee might be up to no good.

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Jim Sinclair’s Commentary

This title, free of MOPE and SPIN, should read "Federal Reserve under extreme administrative pressure to take QE (free and unfettered printing of electronic money) to infinity in order to peg rates and drive a golden/silver spike into the US dollar’s failing heart."

Fed pressured to peg interest rates

Top Federal Reserve officials are piling pressure on Ben Bernanke, the central bank’s chairman, to keep US interest rates pegged in the present range of zero to 0.25% indefinitely, even though futures markets are pointing to a rise in the cost of borrowing some time before year’s end.

They also say the world’s most powerful central bank should not rush to unwind its stimulus programme as the economy pulls itself out of the worse slump since the Great Depression.

In fact, given prospects for a very slow recovery marked by high unemployment, the Fed’s key interest rate could stay near zero for years, said Janet Yellen, president of the San Francisco Fed in a speech ahead of the US July 4 holiday.

"It’s not outside the realm of possibilities that the fed funds rate could stay at zero for the next couple of years," Yellen said in San Francisco.

The next Fed policy meeting will not be held until August 11-12 but some of the bank’s top officials are clearly laying down markers ahead of the deliberations.

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Jim Sinclair’s Commentary

The present Administration has invested a great deal of its political mojo into a successful rescue of GM.

Other than manipulation of sales (MOPE) in the first 90 days after bankruptcy, a failure in all sales can be anticipated. The Volt is a pure joke technically.

See the Tesla if you want to see a technically advanced but still dicey electric car.

How Bad Are Auto Sales? Ten Questions and Answers
By JOSEPH R. SZCZESNY / DETROIT Sunday, Jul. 05, 2009

How bad are sales, really?
After edging up in May, sales again in June dropped below the 10 million-unit annual sales pace again in June, which puts new vehicles sales at the slowest pace since the recession in 1958-a downturn that forced some carmakers, notably Packard, to shut their doors for good. Meanwhile each of the "Big Six," (the three domestic carmakers plus Toyota, Honda, Nissan, which together account for 75% of all vehicle sales in the United States) all reported double digit declines in sales. The declines ranged from 11% at Ford to nearly 42% at Chrysler. German automakers such as Volkswagen, BMW, Porsche and Mercedes-Benz also reported double digit declines.

How much will the new federal "Cash for Clunkers" program help stimulate sales?Carmakers are hoping the "cash for clunkers" program will add about 250,000 units to industry’s sales total in the next few months. However, the program, which offers rebates of between $3,500 and $4,500 to consumers trading in older vehicles for new, more efficient vehicles, won’t get rolling until July 24, and its $1 billion in funding expires Sept. 30. Automakers are already lobbying for more cash. Germany sank $6 billion into a similar scrappage program, China put $4 billion into its equivalent of cash for clunkers and Brazil put up $3 billion, notes Mark LaNeve, GM,s vice president of sales, service and marketing.

How long can Detroit sustain itself when monthly sales numbers are this bad?
The two bankrupt companies, Chrysler and General Motors, have closed assembly lines for much of May and June, which reduces their revenue substantially. Chrysler started up this week but will close again next week for summer changeovers. Both GM and Chrysler have built their recovery plans on very low sales estimates, which is the principal reason they have closed so many factories and discarded so many employees as they restructure. GM just announced plans to shed another 4,000 salaried employees by October, at which point it expects to have trimmed $12 billion in costs. GM also has cut its advertising spending in half this year, which doesn’t exactly stimulate sales. Bottom line: The next 12 to 18 months are perilous for both companies-and they need a modest improvement in sales just to survive. Ford, on the other hand, has played a difficult hand quite deftly. Despite a drop in sales volume, it has out=performed the market during the second quarter and has actually reclaimed second place in total sales from Toyota, and is closing in on GM.

Are rental-fleet sales down for good?
Jim Farley, Ford group executive for sales and marketing, says that rental fleets are starting to look for replacements for worn out vehicles. Rental fleets have kept cars in service longer than in the past but they’re going to have to pay more for replacements because automakers have slashed assembly capacity. One of the reasons Chrysler sales have dropped so dramatically this year is that it withdrew from the fleet business because it was unprofitable.

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Jim Sinclair’s Commentary

When do you think Economic Rescue and Stimulation Package #7 will come?

Biden: ‘We misread how bad the economy was’

(AP:WASHINGTON) Vice President Joe Biden says the Obama administration "misread how bad the economy was" but stands by its stimulus package and believes the plan will create more jobs as the pace of its spending picks up.

Biden, in an interview airing Sunday on ABC’s "This Week," says the nation’s 9.5 percent unemployment rate is too high. He says there will be more jobs created in coming months.

Biden noted that the $787 billion stimulus package was set up to spend the money over 18 months. Major programs will take effect in September, including $7.5 billion for broadband Internet service, along with new money for high-speed rail and the nation’s electrical grid.

Biden says it’s premature to say whether the country will need a second stimulus package.

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Jim Sinclair’s Commentary

Retaliation against the BRIC’s earlier than anticipated stand on the dollar.

DC could not give a flying f*** about clean air. These are dangerous games of Tariff War at the exactly wrong time.

China joins carbon tax protest
By Alan Beattie in London and Kathrin Hille in Beijing
Published: July 3 2009 19:20 | Last updated: July 3 2009 19:20

Beijing on Friday joined a growing clamour of complaint about US plans for a carbon tax on imports from countries without their own emission caps, warning it could set off a global trade war.

The warning follows the passage of a cap-and-trade bill in the US House of Representatives last weekend, which contained tough provisions to impose carbon tariffs to ensure that American companies would not lose competitive advantage. A recent report by the World Trade Organisation and the UN said such taxes could in theory be crafted to be compatible with WTO law, but it would be hard to prove they were not an illegal disguised restriction on international trade.

"It has always been China’s position that the international society should fight climate change together, but the proposal of some developed countries to slap a carbon tariff on some imported products violates the WTO’s basic principles and is trade protectionism in the disguise of environmental protection," said Yao Jian, spokesman for China’s ministry of commerce.

Earlier this week, Jairam Ramesh, the Indian environment minister, described carbon tariffs as "pernicious" and flatly rejected the idea of negotiating climate change at the WTO.

After the passage of the House bill by a narrow vote last week, President Barack Obama warned imposing carbon border taxes might send a protectionist signal. "I think there may be other ways of doing it than with a tariff approach," he said. The bill now moves to the Senate, where it is likely to receive an even rougher ride from moderate Democrats concerned about imposing more costs on US businesses.

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Posted by & filed under In The News.

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EDUCATION TO PROTECT YOU FROM FABRICATION:

This is not a tip sheet, but a text book covering hundreds of years of market experience from us all. The Compendium is the largest text book ever on coins and currency. The fireside chats are periodic reviews. Your actions are the test and your results are the marks.

Look how rarely we speak publicly.

Our method is to teach using daily markets as the text book and Dan’s charts as a technical analysis manual. Monty teaches general economics as it impacts the topics of his broad international emerging market view.

Please use the tools we offer you.

John Adams, on the importance of a financial education:

"All the perplexities, confusion and distress in America arise not from the defects of the Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation."

 

Jim Sinclair’s Commentary

How the hell is MOPE going to do this when it is MOPE that killed us all to some degree in the first place?

U.S. must restore faith in monetary system
By George Gurley
July 5, 2009

Money is the root of all evil. But, according to Niall Ferguson in “The Ascent of Money,” it’s also the “root of most progress.” Woolgatherers from Rousseau to Marx have dreamed of a society that operated without money. Yet, money and its offspring — credit and debt — have been “as important as any technological innovation in the rise of civilization,” writes Ferguson.

Money in some form has been around since the beginning of time. Shells, beads, stone discs, cattle, gold and silver have performed its roles. But money got really interesting when someone figured out that paper backed by gold could serve as a medium of exchange. A unit of gold held in reserve could be multiplied by issuing units of paper money. It was a kind of magic, which dramatically stimulated economic activity and increased wealth. As long as people had faith that they could redeem their paper for gold, the magic worked.

At some point, however, the magicians created too much money. Excess liquidity drove prices up. Fear overcame euphoria. One day the gong of doom sounded and everyone wanted to exchange paper money for gold. But there wasn’t enough gold in the vaults to cover all the paper money afloat. A moment of epiphany arrived: The paper was worthless. The bubble burst. The financial system collapsed.

We’re living in a modern version of this eternally recurring tale. There are many competing explanations for the current economic meltdown. The web of mistakes and culprits was complex. But the ultimate cause was expansive monetary policy. Low interest rates and excess money supply inflated the bubble, driving up the price of real estate and oil, tempting investors to take outrageous risks and stoking the deadly sin, Greed. This should have been no surprise. Loose monetary policy makes booms and busts inevitable. Now, the government’s colossal bailout and stimulus schemes promise to inflate another bubble — while we’re still recovering from the last.

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Jim Sinclair’s Commentary

Hasn’t MOPE blasted out everywhere that discussion of SSCI (Super Sovereign Currency Index) is not a point of interest to the G8 but only to the plus 5? They have been suggesting it is hardly a subject of discussion for the G8 with the implications that the BRICs are not really serious about it.

The Westerners, dollar market wise, have been feeding on this garbage disinformation.

Russia’s Putin to discuss reserve currencies with US Obama in Moscow
3 Jul, 10:39 PM

Russia’s Prime Minister Vladimir Putin may discuss reserve currencies with US President Barack Obama at a breakfast in Moscow next week, Putin’s spokesman said on Thursday.

Putin, who developed a good personal rapport with Obama’s predecessor George W. Bush despite Russia-US relations hitting post-Cold War lows, will have one-and-a-half hour long meeting with Obama during the US president’s first visit to Russia.

"It would be logical to suggest that an exchange of opinions regarding the global economic crisis will take place, in this context the issue of reserve currencies can be raised," said Dmitry Peskov. The meeting’s agenda is still being made final.

The government has been careful to maintain that the key meetings Obama will have will be with President Dmitry Medvedev while Putin, still seen as Russia’s most influential politician, will keep a low profile.

"Mechanisms of cooperation may be discussed at the meeting of the heads of state," Peskov said, when asked if Russia and the US could create an intergovernmental commission for day-to-day cooperation.

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Jim Sinclair’s Commentary

Yes, going forward on brand new paper. Looking back at the mountain of nuclear OTC derivative crap, it means nothing.

The present, absolute majority of outstanding OTC derivatives have no standards. No standards means no clearinghouse possible. No clearinghouse possible means they cannot be listed because they cannot be properly valued each day.

These facts make this great news below not news at all. Say hello to MOPE once again.

Clearing key to making derivatives safer: EU
Fri Jul 3, 6:22 am ET

BRUSSELS (Reuters) – Derivatives pose risks on financial markets that central clearing of contracts would mitigate, the European Commission said on Friday, outlining plans that fall short of more radical U.S. steps.

EU Internal Market Commissioner, Charlie McCreevy, opened an investigation into the sector last October, a month after the collapse of Lehman Brothers, a bank heavily involved in the global $600 trillion off-exchange derivatives market.

McCreevy published his findings and policy proposals on Friday which said standardization of contracts — a process already underway — is also needed, as well as the creation of a central data depository to store records of trades.

The plans stop short of more radical steps envisaged by the United States which seek to go beyond centrally clearing over-the-counter trades to shift trading onto exchanges or trading platforms where possible.

"In this respect the Commission will further assess the pros and cons of channeling of further trade flow through transparent and efficient trading venues and the appropriate level of transparency — price, transaction, position — for the variety of derivative markets trading venues," the Commission’s policy document said.

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Jim Sinclair’s Commentary

Where minerals can be purchased you will find the Chinese. The industry only thinks "sell to them" and never asks why the Chinese are so ready to buy or tries to join forces.

The answer is simple. If you intend to move away from the dollar you have reasons. When you consider those reason you know a currency event due to QE is on the horizon. You also know what that means to the price of all raw materials, so you buy them first.

All the dopey extractive industry management, like the ones below, see is the Chinese solution to their illiquidity problems brought on in every case without exception by the idiot short of final product derivatives they entered into. Most thought these contracts were FREE money. Free? Like hell it is.

Do not get me wrong. Not every Chinese is a genius either. Dumbo lives everywhere.

The slowest of them all seems to be the ex-patriot Chinese that has lived in the West too long and really believes he now knows it all.

Teck to sell 17 pct stake to China for C$1.7 bln
Fri Jul 3, 2009 10:02am EDT
By Cameron French

TORONTO, July 3 (Reuters) – Canada’s Teck Resources (TCKb.TO) will sell a 17.2 percent equity stake to state-owned China Investment Corp through a private placement that will raise C$1.74 billion ($1.5 billion) and help the miner pay down debt, it said on Friday.

Teck, a top producer of zinc, copper, and metallurgical coal, will sell 101.3 million shares at C$17.21 each, a 7 percent discount to Thursday’s closing price of C$18.50 on the Toronto Stock Exchange.

Despite the discount, Teck’s shares rose 3.2 percent, or 60 Canadian cents to C$19.10 just after markets opened, the biggest gain among base metals miners in Toronto.

The deal, which will give CIC a 6.7 percent voting stake in the company, comes as Chinese companies have been taking advantage of depressed resource prices buy stakes in producers and lock in access to commodities, particularly oil.

However, the deal does not involve an offtake agreement, and Teck said that CIC, a sovereign wealth fund, has said it is acquiring the shares "for investment purposes as a long-term passive financial investor" and has agreed to hold the stock for at least a year after the deal closes in mid-July.

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Jim Sinclair’s Commentary

Here is the most recent advertisement for stocking up the political personality retirement fund account.

If you think Swat residents will see five cents on the dollar of this you are nuts.

Pakistan desperately short of money to resettle Swat residents
BY SAEED SHAH
MCCLATCHY NEWSPAPERS

PESHAWAR, Pakistan — Major Western countries, after applauding Pakistan’s military crackdown on Islamic extremists in the Swat valley in the country’s northwest, haven’t pledged the money needed to resettle the population now that the fighting is mostly over, and humanitarian organizations fear that 2 million people will be sent back home before it’s safe to go.

Unless the United States and other allies provide the required money to reconstruct Swat, Pakistan risks losing the "hearts and minds" of those who had to flee the operation that fought the Islamic extremists who’d overrun the region. Islamabad doesn’t have the money, Pakistani officials said.

The rehabilitation cost is estimated at $2.5 billion, according to Lt. Gen. Nadeem Ahmed, the head of the military’s special unit set up to look after the internally displaced.

The national government is expected to announce shortly that the Swat refugees will begin returning later this month. So far, however, the government in Islamabad has promised only $300 million to the North West Frontier Province, mostly to beef up police in Swat.

Ahmed said he was optimistic that the international community would provide money once Pakistan presented its "game plan" for rehabilitating Swat.

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Jim Sinclair’s Commentary

Winning the hearts and minds of those folks we are liberating is the key.

U.S. Faces Resentment in Afghan Region
By CARLOTTA GALL
Published: July 2, 2009

LASHKAR GAH, Afghanistan — The mood of the Afghan people has tipped into a popular revolt in some parts of southern Afghanistan, presenting incoming American forces with an even harder job than expected in reversing military losses to the Taliban and winning over the population.

Villagers in some districts have taken up arms against foreign troops to protect their homes or in anger after losing relatives in airstrikes, several community representatives interviewed said. Others have been moved to join the insurgents out of poverty or simply because the Taliban’s influence is so pervasive here

On Thursday morning, 4,000 American Marines began a major offensive to try to take back the region from the strongest Taliban insurgency in the country. The Marines are part of a larger deployment of additional troops being ordered by the new American commander in Afghanistan, Gen. Stanley A. McChrystal, to concentrate not just on killing Taliban fighters but on protecting the population.

Yet Taliban control of the countryside is so extensive in provinces like Kandahar and Helmand that winning districts back will involve tough fighting and may ignite further tensions, residents and local officials warn. The government has no presence in 5 of Helmand’s 13 districts, and in several others, like Nawa, it holds only the district town, where troops and officials live virtually under siege.

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Jim Sinclair’s Commentary

An Israeli submarine, one would assume nuclear capable, sailed the Suez yesterday in a clear signal to Iran of it easy reach.

The further the US withdraws from Israel, the greener the olive branch the US offers to those that deny the state of Israel and the closer Israel comes to Iran.

Being in close striking distance for Israel and Iran opens the possibility of an accident that would trigger the unthinkable.

Jim Sinclair’s Commentary

A settlement here, a settlement there.

A submarine here, a few long range F-16s there, a few deep penetration bunker busters shipped during the Bush Administration there.

A capture of some of the Gaza gang on the high seas.

A major miscalculation, and the geopolitical Formula given to you, most unfortunately, will be correct.
Gaza aid boat passengers still in Israeli custody
By Aron Heller, 38 mins ago

JERUSALEM – Most members of a group of foreign peace activists seized at sea by the Israeli navy remained in custody Friday, three days after their failed attempt to run Israel’s blockade of the Gaza Strip, relatives and supporters said.

In the latest attempt by activists to break a crippling two-year blockade of Gaza, a group called the Free Gaza Movement sent the ship loaded with humanitarian supplies and 21 activists and crew from Cyprus.

The Israeli navy intercepted the ship Tuesday after it ignored repeated messages saying it would not be allowed to enter Gaza waters and ordering it to turn back.

Among those still being held Friday were former U.S. Representative Cynthia McKinney and Nobel Peace Prize laureate Mairead Corrigan Maguire, said Sandra Law, mother of detained British activist Alex Harrison.

Law, speaking to The Associated Press from her London home, said her daughter was being held together with other women from the group at Ramle jail, near Ben-Gurion airport. She said she spoke briefly to her daughter on Friday.

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Jim Sinclair’s Commentary

The process has begun. It will not be MOPE’d away.

India Joins Russia, China in Questioning U.S. Dollar Dominance
By Mark Deen and Isabelle Mas

July 3 (Bloomberg) — Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars.

“The major part of Indian reserves are in dollars — that is something that’s a problem for us,” Tendulkar, chairman of the Prime Minister’s Economic Advisory Council, said in an interview today in Aix-en-Provence, France, where he was attending an economic conference.

Singh is preparing to join leaders from the Group of Eight industrialized nations — the U.S., Japan, Germany, Britain, France, Italy, Canada and Russia — at a summit in Italy next week which is due to tackle the global economy. China and Brazil will also send representative to the G-8 summit.

As the talks have neared, China and Russia have stepped up calls for a rethink of how global currency reserves are composed and managed, underlining a power shift to emerging markets from the developed nations that spawned the financial crisis.

“There should be a system to maintain the stability of the major reserve currencies,” Former Chinese Vice Premier Zeng Peiyan said in a speech in Beijing today, highlighting the nation’s concerns about a global financial system dominated by the dollar.

Fiscal and current-account deficits must be supervised as “your currency is likely to become my problem,” said Zeng, who is now the head of a research center under the government’s top economic planning agency. The People’s Bank of China said June 26 that the International Monetary Fund should manage more of members’ reserves.

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Posted by & filed under In The News.

126 Dollar Days to go

Jim Sinclair’s Commentary

The truth in China runs totally juxtapose to the truth according to US media, financial TV and the usual chorus of talking heads, China bashers and so called experts.

The following is a comment made by the Deputy Foreign minister to a group of visiting business people. There was no maybe or conversation on the topic. It was emphatic.

“The financial crisis has fully exposed some shortcomings in the international currency system.

China is not seeking discussions but wants a diversified reserve currency.”

Last week the Bank of China renewed its call for the creation of a super sovereign reserve currency (defined as a basket of currencies) to reduce the dollar’s global domination.

The US media pumped out more MOPE and Spin that China was only talking, having no real intention of demanding any such thing.

The problem is that the upcoming G8 plus 5 summit is going to be all about reduction of dependence on the US dollar. All other subjects of discussion are just diversions.

A change is coming and the timeframe can be measured in months, not a decade.

Jim Sinclair’s Commentary

California IOUs have some value, but for 7 days only.

You think California will be able to pay off these IOUs in 7 days, or even 7 months for that matter?

What do you think this means to business in California? What do you think this means to the worthless guarantees on California municipals? What is next? Los Angeles County 20% five year municipal bonds? Maybe they could get short term loans from the Bloods or the Crips?

Bank of America sets cutoff for redeeming California IOUs
The bank warns it will halt the transactions after July 10. Some other big financial institutions follow suit.
By Tom Petruno
July 3, 2009

Bank of America Corp. set the tone for the banking industry’s response to California’s decision to issue IOUs.

That message, essentially, is this: "We’ll help you for a week. If you can’t get your act together and nail down a budget by then, you’re on your own."

Bank of America announced late Wednesday that it would redeem in full the state’s IOUs (formally, "registered warrants") from current BofA customers who want to cash them in. But the bank set a cutoff date of July 10.

On Thursday, other big banks including Chase, Wells Fargo & Co. and Union Bank followed BofA’s lead, saying they’ll cash the IOUs from customers only through July 10.

Some banks, including City National, didn’t set a cutoff date, but they didn’t preclude doing so at some point. Many credit unions also have agreed to accept the IOUs from customers without setting a time limit, the California Credit Union League said.

The big banks’ hardball strategy will create hardships for their customers if no budget deal is struck soon and the state continues to issue IOUs instead of checks. The state set a redemption date of Oct. 2 for the IOUs, although it said it might redeem them before then if it has the cash. Other lenders may step up to buy the IOUs in the interim, but probably at a discount to face value, unlike the big banks’ redemption programs.

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Jim Sinclair’s Commentary

Would it not be reasonable for California citizens to pay their state taxes with IOUs carrying 3.75% interest?

You think things are just dandy with Green Shots popping up everywhere?

What exactly are the suppliers being paid $3.4 billion in IOUs going to pay their workers with?

This is a downward spiral nearing the end point of the Formula wherein non-US consumers of US debt instruments get tired of supporting a dark comedy of errors.

IOUs from California are on their way
By Mike Zapler
Posted: 07/02/2009 05:43:55 PM PDT

SACRAMENTO — With its bank balance careening toward zero, California began sending tens of thousands of IOUs to its creditors on Thursday, the latest black eye for the state and its broken budget system.

Nearly 30,000 IOUs began rolling off state printing presses hours after officials agreed to pay recipients 3.75 percent interest on the notes. California will continue to pay about $3.4 billion of its obligations this month with scrip instead of cash if the governor and legislators don’t soon find a way to balance the state’s books.

It will be the first time since 1992 that vendors, taxpayers and social service providers will receive IOUs, formally known as registered warrants, from the state. The IOUs will mature on Oct. 2 unless banks agree to honor them sooner.

So far, Bank of America, Wells Fargo and Chase have said they will cash IOUs from customers through July 10, state Treasurer Bill Lockyer’s office reported. But as partisan sniping continued in the Capitol on Thursday, it remains far from certain that Gov. Arnold Schwarzenegger and legislators will hatch an agreement by then.

Schwarzenegger was asked at a news conference what he would tell people who receive the IOUs in lieu of actual money.

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Jim Sinclair’s Commentary

We should have known that when the FDIC started releasing stats on bank failures Wednesday, this week would be another record. 7 busted banks!

How is that for a Green Shot? You think the Bank of China can’t count?

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Failed Bank List


The FDIC is often appointed as receiver for failed banks. This page contains useful information for the customers and vendors of these banks. This includes information on the acquiring bank (if applicable), how your accounts and loans are affected, and how vendors can file claims against the receivership. Failed Financial Institution Contact Searchdisplays point of contact information related to failed banks.

This list includes banks which have failed since October 1, 2000.

Click arrows next to headers to sort in Ascending or Descending order.

Bank Name

City

State

CERT #

Closing Date

Updated Date

Founders Bank

Worth

IL

18390

July 2, 2009

July 2, 2009

Millennium State Bank of Texas

Dallas

TX

57667

July 2, 2009

July 2, 2009

First National Bank of Danville

Danville

IL

3644

July 2, 2009

July 2, 2009

Elizabeth State Bank

Elizabeth

IL

9262

July 2, 2009

July 2, 2009

Rock River Bank

Oregon

IL

15302

July 2, 2009

July 2, 2009

First State Bank of Winchester

Winchester

IL

11710

July 2, 2009

July 2, 2009

John Warner Bank

Clinton

IL

12093

July 2, 2009

July 2, 2009

Mirae Bank

Los Angeles

CA

57332

June 26, 2009

July 2, 2009

MetroPacific Bank

Irvine

CA

57893

June 26, 2009

July 2, 2009

Horizon Bank

Pine City

MN

9744

June 26, 2009

July 2, 2009

Neighborhood Community Bank

Newnan

GA

35285

June 26, 2009

July 2, 2009

Community Bank of West Georgia

Villa Rica

GA

57436

June 26, 2009

June 30, 2009

First National Bank of Anthony

Anthony

KS

4614

June 19, 2009

June 23, 2009

Cooperative Bank

Wilmington

NC

27837

June 19, 2009

June 23, 2009

Southern Community Bank

Fayetteville

GA

35251

June 19, 2009

June 23, 2009

Bank of Lincolnwood

Lincolnwood

IL

17309

June 5, 2009

June 12, 2009

Citizens National Bank

Macomb

IL

5757

May 22, 2009

June 1, 2009

Strategic Capital Bank

Champaign

IL

35175

May 22, 2009

June 23, 2009

BankUnited, FSB

Coral Gables

FL

32247

May 21, 2009

June 8, 2009

Westsound Bank

Bremerton

WA

34843

May 8, 2009

May 12, 2009

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Jim Sinclair’s Commentary

Here is a suggestion: Shut it down, burn the paper, imprison the manufacturers and distributors.

Give all their wealth to Mother’s T’s order. Prevent them from breeding.

EU body to publish OTC derivatives plan on Friday
07.02.09, 02:28 PM EDT

LONDON, July 2 (Reuters) – The European Commission will publish on Friday its long-awaited policy proposals on how to make the EU’s derivatives market safer, with a focus on centrally clearing trades, one of its senior officials said.

‘We will be publishing our paper tomorrow on the OTC derivatives industry,’ David Wright, deputy head of the Commission’s internal market unit, told a conference.

Wright said the focus would be on central clearing of OTC derivatives trades, confirming a Reuters report on Wednesday.

The report will launch a public consultation before final proposals are drawn up later in the year as part of global efforts to restore confidence in markets shaken by the worst crisis since the 1930s.

Wright also defended the Commission’s draft rules to regulate hedge funds which have been criticised by the industry and Britain for being too draconian and impinging on third country operators.

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Jim Sinclair’s Commentary

You know for the equity gang, if you missed this rally, you have missed it, period. This may be all she sung.

Link to audio …

Is Wall Street’s Day of Reckoning Still to Come?
July 02, 2009

“Liar’s Poker” author Michael Lewis hasn’t been a popular guy on Wall Street since he wrote the book 25 years ago. Since then, he has written about finance many times and he is working on a new book about the current financial crisis. Although the banks have been scared and many have been shaken to their foundations, Lewis contends that there may be more upheavals to come. He is also shocked that the Treasury, the SEC and other agencies haven’t really begun to investigate what happened in the subprime mess. He says that when he has interviewed numerous executives from financial institutions, such as AIG’s Financial Products division, they tell him that no one from a regulator has come to try to find out exactly what happened. That fact alone, is simply astonishing.

In interviewing various people at places like AIG, "nobody from the Treausury has shown up" to ask around to find out what happened and what went on. "We don’t know the full extent of the losses in side the institutions." "This crisis is far from over."

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Jim Sinclair’s Commentary

Wake up you slumbering Western sheeple! China is not just talking as your media would have you believe. As head of the BRICs they are ACTING!

Relaxing the Renminbi trade rule is a result of the hedge fund frantic shoving of the dollar up and down without season or reason. This removes overt foreign exchange impacts on earnings from cross border trade transactions.

It acts to reduce dollar use and therefore dollar demand as it works its way up the line of transactions.

Renminbi trade rule comes into effect
By Zhang Ran (China Daily)
Updated: 2009-07-03 08:06

China’s central bank yesterday released a rule permitting companies in select cities to settle cross-border trades using the yuan, as part of efforts to reduce reliance on the US dollar for international trade.

Banks will be able to offer yuan settlement services from now on, PBOC said in a statement on its website. It said tax authorities were working on the specific regulations for rebates.

The move, it claimed in the statement, would likely reduce companies’ exposure to foreign exchange risks, increase liquidity in foreign trade and cut transaction costs.

"Companies in China and neighboring countries are facing relatively huge risks of exchange-rate fluctuations because of big swings in the US dollar, the euro and other major settlement currencies in the wake of the global financial crisis," the central bank said.

The government in April said it would allow Shanghai and four cities in the southern Guangdong province – Shenzhen, Guangzhou, Zhuhai and Dongguan – to settle international trade in the yuan on a pilot basis. Companies in these cities, and elsewhere, currently have to convert yuan into dollars or other currencies to settle their export-import bills.

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Jim Sinclair’s Commentary

Here is the most recent advertisement for stocking up the political retirement fund.

If you think Swat residents will see five cents on the dollar of this you are nuts.

Pakistan desperately short of money to resettle Swat residents
BY SAEED SHAH
MCCLATCHY NEWSPAPERS

PESHAWAR, Pakistan — Major Western countries, after applauding Pakistan’s military crackdown on Islamic extremists in the Swat valley in the country’s northwest, haven’t pledged the money needed to resettle the population now that the fighting is mostly over, and humanitarian organizations fear that 2 million people will be sent back home before it’s safe to go.

Unless the United States and other allies provide the required money to reconstruct Swat, Pakistan risks losing the "hearts and minds" of those who had to flee the operation that fought the Islamic extremists who’d overrun the region. Islamabad doesn’t have the money, Pakistani officials said.

The rehabilitation cost is estimated at $2.5 billion, according to Lt. Gen. Nadeem Ahmed, the head of the military’s special unit set up to look after the internally displaced.

The national government is expected to announce shortly that the Swat refugees will begin returning later this month. So far, however, the government in Islamabad has promised only $300 million to the North West Frontier Province, mostly to beef up police in Swat.

More…

Jim Sinclair’s Commentary

In this article some noted talking head says that Gold is taking its cue from the US dollar. I am sure he does not know the implications of his statement.

Crude oil, nickel, the long bond market and most everything else does as well. Therefore the market is telling you that the dollar will be the currency event that triggers hyperinflation during dire US business conditions.

Stuff this argument of inflation and deflation then make your opinion on the value of the currency by the name of gold.

Wake up and listen to the market explaining to you what lies in the future. The future is within the next 126 days.

DJ PRECIOUS METALS: Dollar, Pre-Holiday Squaring Hurt NY Gold

Gains posted by the U.S. dollar combined with pre-holiday liquidation to send gold and other precious metals lower Thursday.

August gold fell $10.30 to $931 an ounce on the Comex division of the New York Mercantile Exchange. September silver lost 35.2 cents to $13.408.

"It’s taking its cue from the buck," said Ralph Preston, senior market analyst with Heritage West Financial.

 

Jim Sinclair’s Commentary

OK, that is two in one day so let’s go for 3 more.

Do you really believe that these banks all just happened to fail this week? MOPE organizes the number of events to make public and when.

This is a practice to habitualize the public to bank failures, therein not increasing the fear of deposits now insured up to $250,000 paper dollars.

Guarantees from the Federal Government are a form of IOU.

Millennium State Bank of Texas fails
Dallas Business Journal – by Chad Eric Watt Staff Writer
Thursday, July 2, 2009, 5:21pm CDT

The Texas Department of Banking on Thursday closed Dallas-based Millennium State Bank of Texas, the first bank failure in Texas this year and the first in the Dallas area in more than a decade.

The six-year-old bank had one office in Dallas on Webb Chapel Road near Interstate 635.

Irving-based State Bank of Texas has acquired essentially all the assets of Millennium, according to the Federal Deposit Insurance Corp.

Seven groups put in bids for Millennium, according to the FDIC.

All depositors of Millennium State Bank will have access to their funds over the July Fourth weekend, according to the FDIC. On Monday July 6, they will automatically become depositors of State Bank of Texas.

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Jim Sinclair’s Commentary

Come on we had 4 in 1 day last week. Let’s go for 5 in 2 days this week.

Harvard State Bank assumes Rock River Bank deposits
FDIC: Your deposits are safe
By Vinde Wells – Editor

A Federal Deposit Insurance Corporation (FDIC) official reassured Rock River Bank customers that their money is safe despite the failure of the bank Thursday.

"There is no need for panic. No depositor lost any money," said David T. Lok, senior ombudsman specialist from the FDIC Office of the Ombudsman. "Harvard State Bank assumed all deposits of the Rock River Bank."

Lok answered questions from reporters and customers outside the Oregon bank’s front door Thursday evening while a large group of bank examiners worked inside with local bank employees.

"It is business as usual for our customers," Lok said. "They should continue banking as usual. They can use the ATM, write a check, or use their debit cards."

He said the Rock River Bank branches will be closed on Friday and Saturday for the Fourth of July holiday, but will reopen Monday as Harvard State Bank.

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Jim Sinclair’s Commentary

Thanks to the Green Hornet, here is an article that underscore a lesson in arbitrage that I have been labouring to impart to you. It is a key element in today’s bad dream. It is a "New Normal" that when any bankruptcy occurs in the chain, called an OTC derivative, the entire NOMINAL VALUE of that derivative becomes REAL VALUE in liquidation.

This is the legacy of letting Lehman go purposely.

When derivatives go bad: Matthew Goldstein
Reuters, Thursday July 2 2009
By Matthew Goldstein

NEW YORK, July 2 (Reuters) – THUD! That’s the sound a busted derivative trade makes when it lands at the courthouse steps.

Drake Capital Management, once a highflying hedge fund manager that is now winding down its operations, claims it’s still owed some $102 million on a derivatives trade that went kablooie when Lehman Brothers filed for bankruptcy. Like most of Lehman’s thousands of creditors, the New York hedge fund hasn’t been paid a penny.

So Drake has filed a weighty 543-page document in bankruptcy court to press its point. A close look at the Drake filing shows why the Obama administration’s proposal to regulate and rein in these often exotic financial instruments may be easier said then done.

Only five pages of the filing are devoted to the so-called proof of claim, where Drake co-founder Steven Luttrell explains why the hedge fund is still owed money. Most of the remaining 538 pages are what constitutes the actual derivative — the various contractual agreements spelling out the terms of the trades between Drake and Lehman. The agreements date back to August 2004.

To be precise, there wasn’t just a single derivatives trade between Drake and Lehman. In fact, there were many different trades involving a whole assortment of underlying assets including foreign currencies, municipal bonds, corporate bonds and sovereign debt. Drake kept expanding its trading relationship with Lehman by adding on one derivative transaction after another.

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EU urges Iran to release British Embassy staff, considers pulling ambassadors in protest
July 2nd, 2009

STOCKHOLM — The European Union demanded on Thursday that Iran release all detained British Embassy staff amid disagreement over how many there were and discussion of a British proposal for the bloc to jointly withdraw all 27 of its ambassadors from the country.

Recalling the diplomats would be an extraordinary move and a powerful signal of EU unity in the wake of Tehran’s postelection crackdown.

But punishing the regime too harshly also risks spoiling chances of making headway on the critical issue of Iran’s disputed nuclear program.

Swedish Foreign Minister Carl Bildt suggested Iran could avoid a widening diplomatic rift by releasing local British Embassy staff who were detained for an alleged role in postelection protests.

Nine local staff were initially detained over the weekend. Iranian state TV on Wednesday said Tehran released all but one of the employees, but Bildt said “more than one” remained in custody.

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