Posts Categorized: In The News

Posted by & filed under In The News.

Dear CIGAs,

This system capable of manipulating markets has a program for commodity markets, specifically crude oil and gold.

It is strange the way things change. The COMEX and Chicago once accused me of manipulating the world’s gold markets in 1979, convening a meeting in which every chair of the board of directors was occupied. Today the Dark Side admits it has a tool to manipulate the world commodity and gold markets, upsetting international flows of capital and possibly causing bankruptcies, market panic and bubbles, but so far where are the subpoenas?

From the article:

"That was two days after Goldman told the government he had stolen its secret, rapid-fire, stock- and commodities-trading software in early June during his last week as a Goldman employee. Prosecutors say Aleynikov uploaded the program code to an unidentified Web site server in Germany."

Goldman Sachs Loses Grip on Its Doomsday Machine: Jonathan Weil
Commentary by Jonathan Weil

July 9 (Bloomberg) — Never let it be said that the Justice Department can’t move quickly when it gets a hot tip about an alleged crime at a Wall Street bank. It does help, though, if the party doing the complaining is the bank itself, and not merely an aggrieved customer.

Another plus is if the bank tells the feds the security of the U.S. financial markets is at stake. This brings us to the strange tale of Goldman Sachs Group Inc. And Sergey Aleynikov.

Aleynikov, 39, is the former Goldman computer programmer who was arrested on theft charges July 3 as he stepped off a flight at Liberty International Airport in Newark, New Jersey. That was two days after Goldman told the government he had stolen its secret, rapid-fire, stock- and commodities-trading software in early June during his last week as a Goldman employee. Prosecutors say Aleynikov uploaded the program code to an unidentified Web site server in Germany.

It wasn’t just Goldman that faced imminent harm if Aleynikov were to be released, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate judge at his July 4 bail hearing in New York. The 34-year-old prosecutor also dropped this bombshell: “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.”

How could somebody do this? The precise answer isn’t obvious — we’re talking about a black-box trading system here. And Facciponti didn’t elaborate. You don’t need a Goldman Sachs doomsday machine to manipulate markets, of course. A false rumor expertly planted using an ordinary telephone often will do just fine. In any event, the judge rejected Facciponti’s argument that Aleynikov posed a danger to the community, and ruled he could go free on $750,000 bail. He was released July 6.

Market Manipulation

All this leaves us to wonder: Did Goldman really tell the government its high-speed, high-volume, algorithmic-trading program can be used to manipulate markets in unfair ways, as Facciponti said? And shouldn’t Goldman’s bosses be worried this revelation may cause lots of people to start hypothesizing aloud about whether Goldman itself might misuse this program?


Jim Sinclair’s Commentary

MOPE at the highest level is suggesting that actions taken today to force OTC derivatives onto exchanges, making them listed derivatives, can solve the problem. Anyone who thinks this will solve even one cent of the outstanding problem is a believer of baseless fabrication that lacks merit.

The absolute majority of all outstanding derivatives which makes up the number in the article herewith posted cannot be listed because it is impossible to have a clearinghouse guarantee. The reason for this is a lack of standards. There is no way at all to value them outside of cartoon computer modeling which destroys the key element required for a clearinghouse guarantee.

This article is total MOPE BS where the high number of outstanding OTC derivatives are concerned. Only derivatives written in light of new regulations with standards can be listed.

I wish to hell I did not know all this.

Derivatives reform and the potential for a Sarbanes-Oxley effect
July 11, 12:02 PM

In Congressional testimony on Friday, Treasury Secretary Tim Geithner aired concerns that the Obama administration’s efforts to reform the nearly $600 trillion (with a “t”) over-the-counter derivatives market might spur European authorities to allow more permissive governance. This, in turn, could send traders to European markets, in an effort to evade restrictive US trading laws.


Jim Sinclair’s Commentary

The extreme danger in doing this is that you spend your political capital now on a recovery and GM restructured future.

Since the possibility of a recovery is remote, the Fed will have increasing pressure on it to go to infinity with QE.

This is the biggest gamble this administration has taken since sworn in.

President Urges Public Patience on Economy
Published: July 11, 2009

WASHINGTON — President Obama is stepping up efforts to maintain public support for his agenda as rising unemployment presents him with the biggest test of his political strength since taking office.

Faced with an economic downturn that has proved deeper than the White House initially projected, Mr. Obama asked Americans on Saturday to remain patient, arguing that his $787 billion stimulus plan had saved the economy from collapse and put it on a gradual course to recovery.

“As a result of the swift and aggressive action we took in the first few months of this year, we’ve been able to pull our financial system and our economy back from the brink,” he said, deflecting calls for a new round of stimulus spending and saying that his plan was intended to work not in a few months but over two years.

Facing an array of challenges on Capitol Hill and concern about the huge budget deficit, he cast his main legislative initiatives, starting with his call for overhauling the health care system, as part of a long-term plan to rebuild the economy on a sounder foundation.

Mr. Obama returns to Washington on Sunday from a weeklong trip abroad at a time when Democrats have grown increasingly jittery about the economy and the political risks of the president’s ambitious agenda on health care, energy and climate change, financial regulation and other issues.


Jim Sinclair’s Commentary

Surge this!

Another Insurgency Gains in Pakistan
Published: July 11, 2009

TURBAT, Pakistan — Three local political leaders were seized from a small legal office here in April, handcuffed, blindfolded and hustled into a waiting pickup truck in front of their lawyer and neighboring shopkeepers. Their bodies, riddled with bullets and badly decomposed in the scorching heat, were found in a date palm grove five days later.

Local residents are convinced that the killings were the work of the Pakistani intelligence agencies, and the deaths have provided a new spark for revolt across Baluchistan, a vast and restless province in Pakistan’s southwest where the government faces yet another insurgency.


Jim Sinclair’s Commentary

Let’s have a round of applause for OTC derivatives, doomsday trading programs operated by the Dark Side Empire, algorithms and blameless Wall Street. Well done you sociopath Fat Cats.

More Families Are Becoming Homeless
Largest Increases in 2008 Came in Rural and Suburban Areas, Study Finds

Louis Gill doesn’t like to turn anyone away. The director of the Bakersfield Homeless Center in California has taken to laying out cots and mattresses between the shelter’s 174 registered beds to cope with the rush of homeless families brought to his doors by the financial crisis.

"Last year, we saw a 34 percent increase in homeless families and a 24 percent increase in homeless children," he said. "Why do we go beyond capacity? Because in a just society, a child should not have to sleep outside or in a car."

Gill is a frontline witness to the change in the makeup of the country’s homeless. The stereotype of a homeless person as a single man no longer applies. A resident of the Bakersfield center is far more likely to be a young mother with a "good, solid job and a mortgage that she just couldn’t pay."


Jim Sinclair’s Commentary

What does China know that very few others and almost no one in the West knows.

Hyperinflation is a CURRENCY EVENT and when that currency is a RESERVE CURRENCY the implications are worldwide price increases no one will understand.

China June copper imports hit new record 475,999 T
Fri Jul 10, 2009 5:47am EDT

BEIJING, July 10 (Reuters) – China’s imports of unwrought copper and semi-finished copper products in June hit an all-time record for a fifth straight month of 475,999 tonnes, from May’s record 422,666 tonnes, data from the General Administration of Customs showed on Friday.

But imports of copper scrap fell to 280,000 tonnes in June versus 330,000 tonnes in May.

Imports of unwrought aluminium and semi-finished aluminium products rose to 353,218 tonnes in June versus May’s 331,740 tonnes.

China is the world’s top consumer of copper and aluminium, and the biggest producer of aluminium. (Reporting by Tom Miles; Editing by Chris Lewis) 


Jim Sinclair’s Commentary

This is the tentacles of the cancer of OTC derivatives as they reach down into the real economy.

Each time a real economy business goes belly up out goes the employees. Each employee faces painful economic problems, cutting back on everything. The downward spiral pulls and pushes its way down and down.

Hotel foreclosures spread throughout California
Andrew S. Ross
Sunday, July 12, 2009

The "challenges" for San Francisco’s biggest business are coming thick and fast. That oft-used word at last Tuesday’s San Francisco Visitors & Convention Bureau luncheon rang loud and clear two days later when the Four Seasons Hotel on Market Street defaulted on a $90 million loan. Those who might have forgotten were reminded that Nob Hill’s famedStanford Court Hotel had gone into receivership two weeks earlier, owing $89 million after its new owners bought the place for $93 million two years ago and spent $32 million in renovations. But wait, there’s more. Says Joe D’Alessandro, the bureau’s CEO: "I would not be surprised to see at least a couple more go in the next few months."

There’s a wave of hotel defaults and foreclosures sweeping up and down California, say D’Alessandro and other industry experts. Currently, 32 hotels are in foreclosure and 174 in default statewide, according to a June 28 report by the Atlas Hospitality Group in Irvine ( Listed among the more recent ones are aHawthorne Suites and a Residence Inn in Sacramento.

"The bright spot is that this is going to be the best buying opportunity since the Great Depression," said Alan Reay, the group’s founder.

Opportunity costs: That presumably is what Hong Kong’s Keck Seng Investments Ltd. saw when it agreed to buy the San Francisco W last week for $90 million. As The Chronicle’s James Temple pointed out, the price represents a 50 percent drop from peak values two years ago. The seller, Starwood Hotels & Resorts Worldwide Inc., which owns numerous hotels in the Bay Area, including the recently opened four-star Rosewood Sand Hill in Silicon Valley, said the sale is one of those the company "is pursuing to further reduce its debt levels."


Jim Sinclair’s Commentary

Timothy F. Geithner vowed that the administration would impose tougher regulations on the largely unregulated market for financial derivatives.

"He told lawmakers that the plan would require that all “standardized” instruments be traded on a regulated exchange or through a central clearinghouse. Participants would have to disclose more information about their transactions, and they would have to meet strict new capital requirements."

Unresolved Questions After Hearing With Geithner
Published: July 10, 2009

WASHINGTON — The issues were arcane and technical, but the hearing drew an extraordinary turnout: 110 members of Congress, many of whom waited three hours to ask questions for five minutes.

All eyes were on Timothy F. Geithner, the Treasury secretary, who testified Friday about the Obama administration’s proposal to regulate the multitrillion-dollar market for financial derivatives, the hedging instruments that bankrupted the American International Group in September.

But after three hours, many of the hardest questions remained unanswered.

Mr. Geithner vowed that the administration would impose tougher regulations on the freewheeling market for derivatives like credit-default swaps, which insure investors from losses on bond defaults.

He told lawmakers that the plan would require that all “standardized” instruments be traded on a regulated exchange or through a central clearinghouse. Participants would have to disclose more information about their transactions, and they would have to meet strict new capital requirements.


Jim Sinclair’s Commentary

2002 is a while back, but recall my mention of the main gold buyers as Chung Phat and Dr. No?

Golden Yuan?

China’s increase in gold reserves has another more profound implication that most commentators haven’t realized. It’s clear to me that China has plans to replace the U.S. dollar as a reserve currency with an at least partially gold-backed yuan. I have to give Jim Sinclair credit, as he predicted the Chinese were moving to a gold-backed yuan in 2002 as part of their “long term plan of Economic Ascendancy.” He deduced that the Chinese government allowed the private ownership and sale of gold by their citizens in order to re-monetize gold. China has experienced the folly of paper money many times before and – as Mr. Sinclair puts it – “their memory is culturally infinite.” The Chinese are aware they must step in to facilitate the move back to hard money.

China is doing little to hide its intentions. Chinese officials have long complained about the excesses allowed by the dominance of the USD, and have recently called for the use of Special Drawing Rights to settle trades. In April, the Chinese completed currency swaps with many countries including Indonesia, Malaysia, South Korea and Argentina for use in bilateral trade, avoiding the USD. The BRIC countries (Brazil, Russia, India, and China) just discussed a “supranational” currency to reduce dependence on the U.S. dollar at a summit in June, and American officials were not permitted to attend.

However, to have a true reserve currency, China would need to allow full convertibility. The Chinese government would need to loosen the trading band which manages the yuan-U.S. dollar exchange rate. The yuan has gained more than 6% since the dollar peg was eliminated in July 2005, but the currency is sure to rise sharply if permitted as it’s clearly undervalued.


Posted by & filed under In The News.

Dear CIGAs,

Mr. Sneavely drops off the unemployment list as he falls out of the safety net into pure hell as a father and householder, yet Wall Street is totally insulated.


Jim Sinclair’s Commentary

119 days to go!

Western Media (China bashers) and Governments should really stop screwing with China. This paper dragon business is insulting the world’s (not only the US) bankers, and a super power.

Respect – where has it gone?

China demands currency reform, France backs debate
Thu Jul 9, 2009 5:53pm EDT
By Simon Rabinovitch and Matt Falloon

L’AQUILA, Italy, July 9 (Reuters) – China called on Thursday for reform of the reserve currency system at a meeting of world leaders in one of its most direct attacks on the dollar’s global dominance.

Chinese State Councillor Dai Bingguo did not specifically name the dollar at talks between the Group of Eight rich nations and G5 emerging powers, but he was unequivocal in calling for the world to diversify the reserve currency system and aim at relatively stable exchange rates.

France also unexpectedly called for a currency discussion and moving toward a "multimonetary" system, though Britain warned any debate should be reserved for the long term to avoid destabilizing markets in the midst of a global recession.

China’s ideas for changing the system had previously been mentioned in reports by its central bank, but had never been voiced in a speech by such a high-ranking political leader.

"We should have a better system for reserve currency issuance and regulation so that we can maintain relative stability of major reserve currencies’ exchange rates and promote a diversified and rational international reserve currency system," Dai told the summit in Italy, according to a statement read by Foreign Ministry spokesman Ma Zhaoxu.


Jim Sinclair’s Commentary

As long as Wall Street owns Washington, Bubble Creation is the name of the Game.

Could cap-and-trade create another economic bubble?
By Eoin O’Carroll | 07.10.09

The American Clean Energy and Security Act, which squeaked through the House of Representatives by a vote of 219-212 last month and is set to be taken up by the Senate in September, proposes to create a huge new market for trading carbon emission permits and offsets. This system would create whole new classes of financial assets, which financial firms could securitize, derivatize, and speculate on.

Sound familiar? Many critics are pointing out that this new market for carbon derivatives could, without effective oversight, usher in another Wall Street free-for-all just like the one that precipitated the implosion of the global economy.

Writing in Mother Jones magazine, reporter Rachel Morris explains that this new market — which is expected to become the world’s largest derivatives market — would be based on two instruments: carbon allowances, that is, permits granted by the government to companies, allowing them to emit greenhouses gases; and carbon offsets, which allow companies to emit in excess of their allowance, provided that they invest in a project that reduces emissions somewhere else, such as a reforestation initiative in the Amazon.

Additionally, carbon emitters and financial services firms would be allowed to trade in carbon derivatives — think “offset futures” or “allowance swaps” — creating a market that Ms. Morris calls “vast, complicated, and dauntingly difficult to monitor.”

And prone to melting down, Ms. Morris warns. Just as the inability of homeowners to make good on their subprime mortgages ended up pulling the rug out from under the credit market, carbon offsets that are based on shaky greenhouse-gas mitigation projects could cause the carbon market to tank, with implications for the broader economy.


Jim Sinclair’s Commentary

When markets are worldwide and scoundrels will use corporations, partnerships or charities to trade through, what impact can this have other than reducing volume on US exchanges? That might not actually be a bad start.

Futures regulators to move quickly on position limits
Fri Jul 10, 2009 2:30pm EDT
By Christopher Doering

WASHINGTON (Reuters) – The Commodity Futures Trading Commission will move aggressively to rein in excessive speculation in energy and commodity markets by focusing on expanding its existing authority and could have new regulations in place by late October.

Bart Chilton, one of five commissioners at the CFTC, said he could not predict what the agency will do, but he would like to see the proposed rules issued in September, then implemented by late October or November after a period of public comment.

"We’re looking at a pretty fast timeline," Chilton told Reuters in an interview. "We’re going to use our authority to the fullest extent possible. That doesn’t mean we’re going to be draconian or go too far."

In response to recent swings in oil prices, the CFTC announced this week it was considering clamping down on big market players by implementing position limits on futures contracts.

The surprise announcement marked an abrupt departure for the once-staid agency that drew criticized for its hands-off approach toward market regulation during the last two decades.


Jim Sinclair’s Commentary

From Tech Magazine, an ode to the father of over the counter derivatives.

The next article titled the “Recipe for Disaster: The Formula That Killed Wall Street Again," might well be "The Goldman Sachs Algorithm Trading and Bullying Program."

Recipe for Disaster: The Formula That Killed Wall Street
By Felix Salmon

A year ago, it was hardly unthinkable that a math wizard like David X. Li might someday earn a Nobel Prize. After all, financial economists—even Wall Street quants—have received the Nobel in economics before, and Li’s work on measuring risk has had more impact, more quickly, than previous Nobel Prize-winning contributions to the field. Today, though, as dazed bankers, politicians, regulators, and investors survey the wreckage of the biggest financial meltdown since the Great Depression, Li is probably thankful he still has a job in finance at all. Not that his achievement should be dismissed. He took a notoriously tough nut—determining correlation, or how seemingly disparate events are related—and cracked it wide open with a simple and elegant mathematical formula, one that would become ubiquitous in finance worldwide.

For five years, Li’s formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. With his brilliant spark of mathematical legerdemain, Li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels.

His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. And it became so deeply entrenched—and was making people so much money—that warnings about its limitations were largely ignored.

Then the model fell apart. Cracks started appearing early on, when financial markets began behaving in ways that users of Li’s formula hadn’t expected. The cracks became full-fledged canyons in 2008—when ruptures in the financial system’s foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril.

David X. Li, it’s safe to say, won’t be getting that Nobel anytime soon. One result of the collapse has been the end of financial economics as something to be celebrated rather than feared. And Li’s Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees.


Jim Sinclair’s Commentary

The symbol of a new world currency – the G8 Gold coin.

The Russians gave the currency of the future to the G8 which is Gold. That is the truth, like it or not!

The subtle nature of the Russian gift to the G8 and BRIC nations has eluded all commentary and as well our esteemed leaders.

The inscription on the coin was " Unity in Diversity." This inscription in the Christian tradition can be aligned with "I am the vine and you are the fruit of the vine." It might be aligned with the mystical body of Christ of which all are considered one.

In the Gnostic tradition is would simply be the Gnostic Gospel of St. John.

In the Hindu tradition it is pure Vedantic philosophy.

Unity in Diversity can be considered in higher physics as the big bang theory, black holes or quantum mechanics theory.

The bottom line is that Unity in Diversity in hundreds of disciplines and persuasion means TRUTH. The Russians gave the currency of the future to the G8, which is gold. That is the TRUTH, like it or not!

Medvedev Shows Off Sample Coin of New ‘World Currency’ at G-8
By Lyubov Pronina

July 10 (Bloomberg) — Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin of a “united future world currency.”

“Here it is,” Medvedev told reporters today in L’Aquila, Italy, after a summit of the Group of Eight nations. “You can see it and touch it.”

The coin, which bears the words “unity in diversity,” was minted in Belgium and presented to the heads of G-8 delegations, Medvedev said.

The question of a supranational currency “concerns everyone now, even the mints,” Medvedev said. The test coin “means they’re getting ready. I think it’s a good sign that we understand how interdependent we are.”

Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the U.S. dollar’s future as a global reserve currency. Russia’s proposals for the G-20 meeting in London in April included the creation of a supranational currency.


Jim Sinclair’s Commentary

There is so much that has escaped programs designed to rescue Wall Street and send Main Street to hell.

Commercial Real Estate Is a ‘Time Bomb,’ Maloney Says (Update2)
By Dawn Kopecki

July 9 (Bloomberg) — The $3.5 trillion commercial real estate market is a ticking “time bomb” that may lead to a second wave of losses at large U.S. banks, congressional Joint Economic Committee Chairwoman Carolyn Maloney said.

About $700 billion in commercial mortgages will need to be refinanced before the end of 2010 and “doing nothing is not an option,” Maloney, a New York Democrat, said at a committee hearing today. This “looming crisis” may lead to significant losses for banks, force shopping center and hotel owners into bankruptcy, and impede economic recovery, she said.

The response by banks to this “growing threat has been slow and inadequate,” said James Helsel, a partner at RSR Realtors in Harrisburg, Pennsylvania, and treasurer for the National Association of Realtors. “The lack of liquidity and banks’ reluctance to extend lending are also becoming apparent in the increasing level of delinquent properties.”

There were 5,315 commercial properties in default, foreclosure or bankruptcy at the end of June, more than twice the number at the end of last year, with hotels and retail among the most “problematic,’ Real Capital Analytics Inc. said in a report yesterday. Losses on commercial mortgage-backed securities, or CMBS, will total 9 percent to 12 percent of the market, or as much as $90 billion, said Richard Parkus, a research analyst for Deutsche Bank Securities in New York.


Jim Sinclair’s Commentary

Of course they have, and will continue to. As you integrate even modest percentages of people in huge populations as consumers, business booms.

China tops U.S. in car sales so far this year
Jul 9, 2009, 4:38 p.m. EST
By Shawn Langlois, MarketWatch

SAN FRANCISCO (MarketWatch) – China wrestled the new-car sales crown from the U.S. through the first half of the year, topping 6 million cars and trucks at a time when the long-time global sales leader grapples with historic declines.

Vehicle sales in China jumped 36.5% in June from a year ago to mark the fourth straight month that vehicle sales have topped 1.1 million units, according to data released by the China Association of Automobile Manufacturers on Thursday.

Sales for the month reached 1.14 million units, bringing total sales for the first half of the year to 6.09 million units, a rise of 17.7% from the same months a year earlier thanks in part to generous government incentives, including tax breaks and subsidies.

"If this trend lasts for the whole year, it will put China on top for the first time ever," said Lincoln Merrihew, managing director at research firm Compete. "While the shift isn’t at all surprising, it’s happening faster than most people thought."

The U.S. showed signs of bottoming out in June, but the results were still dramatically off previous highs with consumers still dealing with the sour economy. Total new car and light trucks sales dropped 28% from a year ago, resulting in an annualized sales rate of 9.69 million, according to Autodata Corp. See full story.

Analysts forecast the U.S. market to potentially fall short of the 10 million-vehicle mark while China’s industry group is looking for sales in its country to move past 11 million cars and trucks by the end of the year.


Jim Sinclair’s Commentary

According to our friend Armstrong, cyclically speaking, a third party may well succeed in the next election.

The Fed Must Be Stopped
Written by: Ron Paul
July 9, 2009

Our country currently finds itself in the midst of the worst economic crisis since the 1930s and, as during all economic crises, people search for the answer as to why this has happened.  Not only have large financial firms been affected, but also mainstays of American industry such as GM and Chrysler, all the way down to the Mom & Pop stores on Main Street.  The easy way out is to blame the traditional scapegoats: foreign governments, fraudulent businessmen, and greedy speculators.  But the real villain is far more sinister; the organization entrusted with maintaining a stable dollar and touted as the guarantor of economic stability – the Federal Reserve.  

In the United States, monetary policy has been the domain of the Federal Reserve since its inception in 1913.  Since that time we have had a number of cyclical recessions, each one following a boom caused by the Federal Reserve’s loose monetary policy.  The problem with the Federal Reserve is that i t interferes with market pricing functions.  Interest rates are a price just like any other and arise because of the fact that people prefer to consume in the present rather than in the future.  The extent to which people defer present consumption is reflected in interest rates, which in a free market are determined by the spontaneous interactions and decisions of millions of people.

Fed intervention to set prices throws markets and interest rates out of equilibrium.  When the Federal Reserve pushes interest rates below what the market rate would be, everyone wants to borrow money for long-term projects.  Shortages of loanable funds would occur, except that the Federal Reserve has the ability to create bank balances out of thin air.  The Fed can create a bank ledger on paper, or on a computer, establish a balance of millions or billions of dollars, and then spend these dollars out into the economy.

Loans become cheap, and the result of these lower interest rates is an economic boom which eventually manifests itself as a bubble.  Beginning in 2001, the Federal Reserve pushed interest rates to as low as one percent, which after adjusting for inflation meant that the real interest rate was negative, so businesses were actually making money by taking out loans.  This was the fuel for the housing bubble and the reason there are 19 million empty houses today.


Jim Sinclair’s Commentary

QE is alive and well

Federal Reserve Purchases $3 Billion In Long-Term Bonds 15

(RTTNews) – The Federal Reserve continued its treasury buyback program Thursday, completing its second quantitative easing move of the week.

The New York Federal Reserve purchased $3 billion worth of securities with maturity dates ranging from July of 2010 to April of 2011. The day’s buyback saw a total of $17.1 billion in treasuries submitted for purchase. Overall, the Fed has purchased a total of $200.72 billion since the program began on March 25th.\


Jim Sinclair’s Commentary

Here is an equation you can count on from California to New York: Restrict new hiring of police and fire fighters. Release large amounts of convicted prisoners. Increase the risks of the ordinary law abiding citizens.

Up To 10,000 Illinois Prisoners May Be Released
Gov. Pat Quinn: Release Of Inmates Could Save Taxpayers $125 Million
Jul 8, 2009 5:35 pm US/Central
Mike Flannery

CHICAGO (CBS) ― Up to 10,000 convicted criminals could soon be released early from prisons across Illinois. It’s all because of the state’s budget mess. Gov. Pat Quinn says cutting those prisoners loose could save more than $100 million. But at what cost to you?

CBS 2 Political Editor Mike Flannery reports that some people are worried. They don’t want to pay higher taxes. And they don’t want these prison reductions set for Sept. 30, either.

"Oh, my God. I don’t agree with that at all," one woman said. "They can pull money out of some other things."

The proposed prisoner release stems from plans to lay off more than 1,000 corrections workers at Stateville Prison and a half-dozen facilities downstate.

The state’s making a list of thousands of so-called non-violent inmates with less than one year left to serve who could be released early. The governor says it could save taxpayers $125 million.

But some don’t like the idea.


Jim Sinclair’s Commentary

For your information.

July 9, 2009

WHEN I last wrote about Goldman Sachs in late March the most politically-connected and luckiest firm on Wall Street was in the middle of rigging the stock market — again.

"Something smells fishy in the market. And the aroma seems to be coming from Goldman Sachs," is the way I put it in that March 28 column.

Well, a lot has changed in just the past few weeks. And I’d like to put it all together for you, and for the rest of the media should it choose to follow what is shaping up to be the most incredible financial story ever.

Back in March I noted that the rally occurring in the stock market had the indisputable fingerprints of Goldman all over it. There were numbers to back it up.

Despite the fact that regular investors seemed to be pulling their money out of the market or — at best — investing conservatively, stock prices were zooming. The reason was simple: Big investors were pouring money into equities.


Jim Sinclair’s Commentary

You think there is a stop sign at 10% unemployment because the present Administration has admitted this double digit will be accomplished?

No end in sight to US jobless rise
By Hossein Askari and Noureddine Krichene

The unemployment rate in the United States rose to 9.5% in June 2009 from 3.6% in October 2000 and 4.1% in October 2006. Most puzzling, as indicated in the chart below, has been the obvious failure of Federal Reserve chairman Ben Bernanke’s unprecedented aggressive monetary policy to produce the quick economic recovery that he promised at each interest rate cut.

The more he cut interest rates and the more he inflated the balance sheet of the Fed, the higher unemployment has risen. Unemployment has kept on rising even though the federal funds rate has been near zero since December 2008. The unfulfilled promise of Bernanke, a proclaimed expert of the Great Depression, has been certainly disappointing. However, Bernanke and his supporters have kept crediting themselves that, without unorthodox cheap monetary policy, the unemployment rate would have been much higher.


Jim Sinclair’s Commentary

Have you read the book, One Point Safe?

It is one of the few books to make the NY Times Best Sellers list but not go into a second printing

Swiss to destroy papers in intl nuke smuggling case
Thu Jun 25, 2009 3:03am IST
By Laura MacInnis

GENEVA, June 24 (Reuters) – Switzerland said on Wednesday it would destroy bomb designs and other sensitive documents seized from a Swiss man accused of being part of an international nuclear smuggling ring.

Thousands of papers were confiscated from Urs Tinner, who is being prosecuted for his suspected role in a trafficking network run by Pakistan’s Abdul Qadeer Khan, who in 2004 admitted to leaking nuclear secrets.

The Khan network trafficked nuclear materials, equipment and know-how to Iran, Libya and North Korea for about two decades. Its leader was released from house arrest earlier this year on the order of Pakistan’s High Court.

In a statement posted on the federal government’s website, Swiss authorities said they had agreed with the International Atomic Energy Agency (IAEA) that documents related to uranium enrichment or atomic weapon design posed a risk.

Switzerland, which is not a nuclear power, is not authorised under the global Non-Proliferation treaty to possess documents related to nuclear weaponry.


Jim Sinclair’s Commentary

Marc says, "all the MOPE in the world can’t hide these number." The scary reality is that they must grow and grow. The dollar cannot and will not survive this onslaught of supply

Monthly Treasury Issuance Chart


Jim Sinclair’s Commentary

It was a slow week.

Wyoming Bank Closed; 53rd Failure of 2009
By AP Saturday, Jul. 11, 2009

(AP / NEW YORK) — Regulators have shuttered Bank of Wyoming, marking the 53rd failure this year of a federally insured bank.

The Federal Deposit Insurance Corp. on Friday was appointed receiver of the failed bank, based in Thermopolis, Wyo. It had $70 million in assets and $67 million in deposits as of June 30. (See TIME’s photos of the G-20 protests)

The FDIC says Central Bank & Trust of Lander, Wyo., will assume all deposits and purchase about $55 million in assets.

The FDIC will retain the remaining assets to sell at a later date.


Jim Sinclair’s Commentary

You have to love how prices are changed by $50.

COMEX traders predict gold at $1,600 by December

Here are 10 compelling reasons why gold is going to do well this year.

The Stimulus Effect: Including $1 trillion in cash infusions, the stimulus plan will pump $9.7 trillion into the economy, according to Bloomberg. As the Globe & Mail reports flatly, “Many believe that the monetary stimulus efforts will cause a spike in inflation,” driving gold higher.

COMEX Traders Predict $1,600 Gold… by December: If gold trades at or above $1,600 by December, some 100,000 call option contracts will be “in the money.” Big-money players Goldman Sachs and JPMorgan are reportedly helping to drive the action, ahead of a huge purchase of gold futures contracts.

“Big Money” Inflows: In 2008, NYC-based hedge fund Paulson & Co’s flagship fund returned 37%, as the world markets burned. Paulson’s bullish on gold, big time, including the Mar. 17 purchase of 39.9 million shares of AngloGold, worth $1.28 billion. Other major hedge funds are piling into gold, too, including Eton Park Capital, Green light Capital and Hayman Advisors.

China’s Doubling Down! China just revealed that it has doubled its gold holdings to 1,054 tons. Yet that still only equals 1.6% of its overall reserves. As China moves out of U.S. Treasuries and into gold, this will help fuel the next leg of the run-up.

Demand Building across the Board: Worldwide demand for gold jumped by $29.7 billion in the first quarter, a 36% bolt, according to the World Gold Council. Demand for gold ETFs (Exchange Traded Funds) rocketed 540%… another trigger for the coming gold boom.


Jim Sinclair’s Commentary

Why would anyone accept California IOUs? What makes you think California’s problem is short term other than MOPE?

Where is the White Knight to save a state, if the Feds do not?

Today final day before some banks won’t accept state IOUs
By Shauntel Lowe/Times-Herald staff writer
Posted: 07/10/2009 02:57:37 PM PDT

Today is the last day many major banks will accept state-issued IOUs. Bank of America and JPMorgan Chase officials have said they will not accept the IOUs, also known as registered warrants, after today.

The state has issued more than 100,000 IOUs worth nearly $400 million since July 2 after legislators failed to pass a budget before the end of the previous fiscal year.

The IOUs have gone out for taxpayer refunds and contractor and county program payments.

JPMorgan Chase, formerly Washington Mutual in California, has a "frequently asked questions" document on its Web site specifically about the IOUs at or

A Bank of America spokeswoman said customers have until the end of the day to deposit their IOUs. After today, the bank will work with customers on a one-on-one basis if it is a hardship to not be able to cash the IOU.

The state-issued IOUs do not mature until Oct. 2 when the state is expected to redeem them with 3.75 interest.


Jim Sinclair’s Commentary

Wake up sheeple! Many of you are in total denial of reality.

119 days to go.

I firmly believe that the MOPE reporting on the G8, which was the G8 plus 5, has angered the Chinese.

The Chinese as spokes-nation for the BRICs seems to be getting hotter every day.

China criticises dollar
Dai Bingguo, who is standing in for the Chinese president Hu Jintao at the G8 meetings, raised questions over the dominant role of the dollar as the world’s reserve currency.
By Malcolm Moore in Shanghai
Published: 8:01AM BST 10 Jul 2009

The discussion, which took place between the leaders of five emerging economies and the G8 industrialised nations, including Barack Obama, caused concern among western leaders.

"We should have a better system for reserve currency issuance and regulation, so that we can maintain relative stability of major reserve currencies exchange rates and promote a diversified and rational international reserve currency system,” said Mr Dai, according to the Chinese foreign ministry.

While he did not single out the dollar, Mr Dai was clearly calling for the world to diversify its reserve currency system and stabilise exchange rates among leading currencies.

China has made a series of attacks on the dollar in recent months, and went as far as to question Hillary Clinton, the US secretary of state, about the trustworthiness of the currency on her visit to China earlier this year.

A policy paper from the governor of the People’s Bank of China also laid out an alternative to the dollar in the form of a special international reserve currency administered by the International Monetary Fund.


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 — — 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.


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
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.


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]


Jim Sinclair’s Commentary

Sounds just right to me!

Catching The Gold Bug

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.


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.”


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.


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.


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.


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.”


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.


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.



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.


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.



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.


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.


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."


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.


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.


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.


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.



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


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.


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.


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

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.


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.


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.


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.


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.


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.


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.


Jim Sinclair’s Commentary

Of course they don’t. Would you?

Big Banks Don’t Want California’s IOUs

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.


Posted by & filed under In The News.

122 days to go


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.


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.


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.


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.


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
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.


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

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."


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, staff writer
Last Updated: July 6, 2009: 2:56 PM ET


NEW YORK ( — 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.



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.


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..


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.


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.


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.


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.



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.


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.”


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.


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.


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.


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.


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

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.


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.


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, senior writer
Last Updated: July 6, 2009: 11:22 AM ET

WASHINGTON ( — 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.


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.


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.


Posted by & filed under In The News.

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

Dear CIGAs,

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


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.


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.


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.


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.


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.