Posts Categorized: Jim’s Mailbox

Posted by & filed under Jim's Mailbox.

Jim,

I thought this might interest you. Very depressing to think of but like they say, forewarned is forearmed.

CIGA Daniel

Dear CIGA Dan,

Forewarned is forearmed is only true if you visit your local gun store, live on a farm in North Western Connecticut or have a home in the right two places in Africa.

Jim

‘Ariz. police say they are prepared as War College warns military must prep for unrest; IMF warns of economic riots’
Phoenix Business Journal

A new report by the U.S. Army War College talks about the possibility of Pentagon resources and troops being used should the economic crisis lead to civil unrest, such as protests against businesses and government or runs on beleaguered banks.

“Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremes to defend basic domestic order and human security,” said the War College report.

The study says economic collapse, terrorism and loss of legal order are among possible domestic shocks that might require military action within the U.S.

International Monetary Fund Managing Director Dominique Strauss-Kahn warned Wednesday of economy-related riots and unrest in various global markets if the financial crisis is not addressed and lower-income households are hurt by credit constraints and rising unemployment.

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Protectionist dominoes are beginning to tumble across the world
The riots have begun. Civil protest is breaking out in cities across Russia, China, and beyond.
By Ambrose Evans-Pritchard
Last Updated: 11:37AM GMT 21 Dec 2008

Greece has been in turmoil for 11 days. The mood seems to have turned "pre-insurrectionary" in parts of Athens – to borrow from the Marxist handbook.

This is a foretaste of what the world may face as the "crisis of capitalism" – another Marxist phase making a comeback – starts to turn two hundred million lives upside down.

We are advancing to the political stage of this global train wreck. Regimes are being tested. Those relying on perma-boom to mask a lack of democratic or ancestral legitimacy may try to gain time by the usual methods: trade barriers, saber-rattling, and barbed wire.

Dominique Strauss-Kahn, the head of the International Monetary Fund, is worried enough to ditch a half-century of IMF orthodoxy, calling for a fiscal boost worth 2pc of world GDP to "prevent global depression".

"If we are not able to do that, then social unrest may happen in many countries, including advanced economies. We are facing an unprecedented decline in output. All around the planet, the people have reacted with feelings going from surprise to anger, and from anger to fear," he said.

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Jim Sinclair’s Commentary

Every word is truth. Where is the OUTRAGE?

Remember Lee Iacocca, the VP at Ford credited with the birth of the Mustang, the man who rescued Chrysler Corporation from their death throes, and the owner of the famous quote ‘Lead, follow, or get out of the way’? Well, he’s back!  He has a new book, and here are some excerpts.

Lee Iacocca writes:

Am I the only guy in this country who’s fed up with what’s happening? Where the hell is our outrage? We should be screaming bloody murder. We’ve got a gang of clueless bozos steering our ship of state right over a cliff, we’ve got corporate gangsters stealing us blind, and we can’t even clean up after a hurricane much less build a hybrid car. But instead of getting mad, everyone sits around and nods their heads when the politicians say, "Stay the course."

Stay the course? You’ve got to be kidding. This is America, not the damned Titanic. I’ll give you a sound bite: Throw the bums out!

You might think I’m getting senile, that I’ve gone off my rocker, and maybe I have. But someone has to speak up. I hardly recognize this country anymore.

The most famous business leaders are not the innovators but the guys in handcuffs. While we’re fiddling in Iraq , the Middle East is burning and nobody seems to know what to do. And the press is waving ‘pom-poms’ instead of asking hard questions. That’s not the promise of the ‘ America ‘ my parents and yours traveled across the ocean for. I’ve had enough. How about you?

I’ll go a step further. You can’t call yourself a patriot if you’re not outraged. This is a fight I’m ready and willing to have.

The Biggest ‘C’ is Crisis !

Leaders are made, not born. Leadership is forged in times of crisis. It’s easy to sit there with your feet up on the desk and talk theory. Or send someone else’s kids off to war when you’ve never seen a battlefield yourself.  It’s another thing to lead when your world comes tumbling down. George Bush, Dick Chaney and who is this Bozo coming up next?  One of the most Liberal Idiots in the U.S. Senate, and he is talking about disarming America . I can’t believe the

American people aren’t seeing what he is about to do to this country. May God have mercy on us all.

On September 11, 2001, we needed a strong leader more than any other time in our history. We needed a steady hand to guide us out of the ashes. A Hell of a Mess. So here’s where we stand. We’re immersed in a bloody war with no plan for winning and no plan for leaving. We’re running the biggest deficit in the history of the country. We’re losing the manufacturing edge to Asia , while our once-great Companies are all moving offshore. We’re getting slaughtered by health care costs. Gas prices are skyrocketing, and nobody in power has a coherent energy policy.  Our schools are the worst in the world. Our borders are like sieves. The middle class is being squeezed every which way. These are times that cry  out for leadership and we are getting ready to put the most Liberal Senator in the U.S. Senate in as our next President because we want to be fair and elect someone just because of his race. We don’t have time to be fair, we need a strong leader.

But when you look around, you’ve got to ask: ‘Where have all the leaders gone?’ Where are the curious, creative communicators? Where are the people of character, courage, conviction, omnipotence, and common sense? I may be a sucker for alliteration, but I hope you get the point.

Name me a leader who has a better idea for homeland security than making us take off our shoes in airports and throw away our shampoo? We’ve spent billions of dollars building a huge new bureaucracy, and all we know how to do is react to things that have already happened.

Name me one leader who emerged from the crisis of Hurricane Katrina. Congress has yet to spend a single day evaluating the response to the hurricane, or demanding accountability for the decisions that were made in the crucial hours after the storm. Everyone’s hunkering down, fingers crossed, hoping it doesn’t happen again. Well guess what people?  We are having more floods right now.  What are we doing to help these people out?  Now, that’s just crazy. Storms happen. Deal with it. Make a plan. Figure out what you’re going to do the next time.  Why are we allowing people to build in flood plains anyway?  If you build in a flood area, expect to be flooded and deal with it. Don’t expect the Government to bail you out.

Name me an industry leader who is thinking creatively about how we can restore our competitive edge in manufacturing. All they seem to be thinking now-days is getting themselves bigger salaries and bonuses. Who would have believed that there could ever be a time when ‘The Big Three’ referred to Japanese car companies? How did this happen, and more important, what are we going to do about it? Likely nothing!

Name me a government leader who can articulate a plan for paying down the debt, or solving the energy crisis, or managing the health care problem. The silence is deafening. But these are the crises that are eating away at our country and milking the middle class dry. I have news for the gang in Congress and the Senate. We didn’t elect you to sit on your asses and do nothing and remain silent while our democracy is being hijacked and our greatness is being replaced with mediocrity. What is everybody so afraid of? That some bonehead on  Fox News will call them a name? Give me a break.  Why don’t you guys show some spine for a change?  I honestly don’t think any of you have one!

Had Enough?

Hey, I’m not trying to be the voice of gloom and doom here. I’m trying to light a fire. I’m speaking out because I have hope; I believe in America … In my lifetime I’ve had the privilege of living through some of America’s greatest moments I’ve also experienced some of our worst crises: the ‘Great Depression’, ‘World War II’, the ‘Korean War’, the ‘Kennedy Assassination’,  the ‘Vietnam War’, the 1970s oil crisis, and the struggles of recent years culminating with 9/11. If I’ve learned one thing, it’s this:

‘You don’t get anywhere by standing on the sidelines waiting for somebody else to take action. Whether it’s building a better car or building a better future for our children, we all have a role to play. That’s the challenge I’m raising in this book. It’s a call to ‘Action’ for people who, like me, believe in America . It’s not too late, but it’s getting pretty close. So let’s  shake

off the crap and go to work. Let’s tell ’em all we’ve had ‘enough.’

Posted by & filed under Jim's Mailbox.

Jim,

What a candid article! Seasons’ Greetings from Tbilisi, Georgia.

Richard

Dear Richard,

Thank you for this most interesting article.

You know most of the wonderful profits and earning of the Wall Street firms now being decorated to the tune of at least $7 trillion never really existed. These profits were derived from cartoon computer generated valuations of OTC derivatives of all kinds on almost everything borrowed or loaned.

To state it another way the earnings were total bullshit, they really never existed except in a computer. The profits that yielded these over the top salaries and bonus were via up value daisy chain Ethernet networks only.

Regards,
Jim

On Wall Street, Bonuses, Not Profits, Were Real
By LOUISE STORY

“As a result of the extraordinary growth at Merrill during my tenure as C.E.O., the board saw fit to increase my compensation each year.”
— E. Stanley O’Neal, the former chief executive of Merrill Lynch, March 2008

For Dow Kim, 2006 was a very good year. While his salary at Merrill Lynch was $350,000, his total compensation was 100 times that — $35 million.

The difference between the two amounts was his bonus, a rich reward for the robust earnings made by the traders he oversaw in Merrill’s mortgage business.

Mr. Kim’s colleagues, not only at his level, but far down the ranks, also pocketed large paychecks. In all, Merrill handed out $5 billion to $6 billion in bonuses that year. A 20-something analyst with a base salary of $130,000 collected a bonus of $250,000. And a 30-something trader with a $180,000 salary got $5 million.

But Merrill’s record earnings in 2006 — $7.5 billion — turned out to be a mirage. The company has since lost three times that amount, largely because the mortgage investments that supposedly had powered some of those profits plunged in value.

Unlike the earnings, however, the bonuses have not been reversed.

As regulators and shareholders sift through the rubble of the financial crisis, questions are being asked about what role lavish bonuses played in the debacle. Scrutiny over pay is intensifying as banks like Merrill prepare to dole out bonuses even after they have had to be propped up with billions of dollars of taxpayers’ money. While bonuses are expected to be half of what they were a year ago, some bankers could still collect millions of dollars.

Critics say bonuses never should have been so big in the first place, because they were based on ephemeral earnings. These people contend that Wall Street’s pay structure, in which bonuses are based on short-term profits, encouraged employees to act like gamblers at a casino — and let them collect their winnings while the roulette wheel was still spinning.

“Compensation was flawed top to bottom,” said Lucian A. Bebchuk, a professor at Harvard Law School and an expert on compensation. “The whole organization was responding to distorted incentives.”

Even Wall Streeters concede they were dazzled by the money. To earn bigger bonuses, many traders ignored or played down the risks they took until their bonuses were paid. Their bosses often turned a blind eye because it was in their interest as well.

“That’s a call that senior management or risk management should question, but of course their pay was tied to it too,” said Brian Lin, a former mortgage trader at Merrill Lynch.

The highest-ranking executives at four firms have agreed under pressure to go without their bonuses, including John A. Thain, who initially wanted a bonus this year since he joined Merrill Lynch as chief executive after its ill-fated mortgage bets were made. And four former executives at one hard-hit bank, UBS of Switzerland, recently volunteered to return some of the bonuses they were paid before the financial crisis. But few think others on Wall Street will follow that lead.

For now, most banks are looking forward rather than backward. Morgan Stanley and UBS are attaching new strings to bonuses, allowing them to pull back part of workers’ payouts if they turn out to have been based on illusory profits. Those policies, had they been in place in recent years, might have clawed back hundreds of millions of dollars of compensation paid out in 2006 to employees at all levels, including senior executives who are still at those banks.

A Bonus Bonanza

For Wall Street, much of this decade represented a new Gilded Age. Salaries were merely play money — a pittance compared to bonuses. Bonus season became an annual celebration of the riches to be had in the markets. That was especially so in the New York area, where nearly $1 out of every $4 that companies paid employees last year went to someone in the financial industry. Bankers celebrated with five-figure dinners, vied to outspend each other at charity auctions and spent their newfound fortunes on new homes, cars and art.

The bonanza redefined success for an entire generation. Graduates of top universities sought their fortunes in banking, rather than in careers like medicine, engineering or teaching. Wall Street worked its rookies hard, but it held out the promise of rich rewards. In college dorms, tales of 30-year-olds pulling down $5 million a year were legion.

While top executives received the biggest bonuses, what is striking is how many employees throughout the ranks took home large paychecks. On Wall Street, the first goal was to make “a buck” — a million dollars. More than 100 people in Merrill’s bond unit alone broke the million-dollar mark in 2006. Goldman Sachs paid more than $20 million apiece to more than 50 people that year, according to a person familiar with the matter. Goldman declined to comment.

Pay was tied to profit, and profit to the easy, borrowed money that could be invested in markets like mortgage securities. As the financial industry’s role in the economy grew, workers’ pay ballooned, leaping sixfold since 1975, nearly twice as much as the increase in pay for the average American worker.

“The financial services industry was in a bubble," said Mark Zandi, chief economist at Moody’s Economy.com. “The industry got a bigger share of the economic pie.”

A Money Machine

Dow Kim stepped into this milieu in the mid-1980s, fresh from the Wharton School at the University of Pennsylvania. Born in Seoul and raised there and in Singapore, Mr. Kim moved to the United States at 16 to attend Phillips Academy in Andover, Mass. A quiet workaholic in an industry of workaholics, he seemed to rise through the ranks by sheer will. After a stint trading bonds in Tokyo, he moved to New Yorkto oversee Merrill’s fixed-income business in 2001. Two years later, he became co-president.

Even as tremors began to reverberate through the housing market and his own company, Mr. Kim exuded optimism.

After several of his key deputies left the firm in the summer of 2006, he appointed a former colleague from Asia, Osman Semerci, as his deputy, and beneath Mr. Semerci he installed Dale M. Lattanzio and Douglas J. Mallach. Mr. Lattanzio promptly purchased a $5 million home, as well as oceanfront property in Mantoloking, a wealthy enclave in New Jersey, according to county records.

Merrill and the executives in this article declined to comment or say whether they would return past bonuses. Mr. Mallach did not return telephone calls.

Mr. Semerci, Mr. Lattanzio and Mr. Mallach joined Mr. Kim as Merrill entered a new phase in its mortgage buildup. That September, the bank spent $1.3 billion to buy the First Franklin Financial Corporation, a mortgage lender in California, in part so it could bundle its mortgages into lucrative bonds.

Yet Mr. Kim was growing restless. That same month, he told E. Stanley O’Neal, Merrill’s chief executive, that he was considering starting his own hedge fund. His traders were stunned. But Mr. O’Neal persuaded Mr. Kim to stay, assuring him that the future was bright for Merrill’s mortgage business, and, by extension, for Mr. Kim.

Mr. Kim stepped to the lectern on the bond trading floor and told his anxious traders that he was not going anywhere, and that business was looking up, according to four former employees who were there. The traders erupted in applause.

“No one wanted to stop this thing,” said former mortgage analyst at Merrill. “It was a machine, and we all knew it was going to be a very, very good year.”

Merrill Lynch celebrated its success even before the year was over. In November, the company hosted a three-day golf tournament at Pebble Beach, Calif.

Mr. Kim, an avid golfer, played alongside William H. Gross, a founder of Pimco, the big bond house; and Ralph R. Cioffi, who oversaw two Bear Stearns hedge funds whose subsequent collapse in 2007 would send shock waves through the financial world.

“There didn’t seem to be an end in sight,” said a person who attended the tournament.

Back in New York, Mr. Kim’s team was eagerly bundling risky home mortgages into bonds. One of the last deals they put together that year was called “Costa Bella,” or beautiful coast — a name that recallsPebble Beach. The $500 million bundle of loans, a type of investment known as a collateralized debt obligation, was managed by Mr. Gross’s Pimco.

Merrill Lynch collected about $5 million in fees for concocting Costa Bella, which included mortgages originated by First Franklin.

But Costa Bella, like so many other C.D.O.’s, was filled with loans that borrowers could not repay. Initially part of it was rated AAA, but Costa Bella is now deeply troubled. The losses on the investment far exceed the money Merrill collected for putting the deal together.

So Much for So Few

By the time Costa Bella ran into trouble, the Merrill bankers who had devised it had collected their bonuses for 2006. Mr. Kim’s fixed-income unit generated more than half of Merrill’s revenue that year, according to people with direct knowledge of the matter. As a reward, Mr. O’Neal and Mr. Kim paid nearly a third of Merrill’s $5 billion to $6 billion bonus pool to the 2,000 professionals in the division.

Mr. O’Neal himself was paid $46 million, according to Equilar, an executive compensation research firm and data provider in California. Mr. Kim received $35 million. About 57 percent of their pay was in stock, which would lose much of its value over the next two years, but even the cash portions of their bonus were generous: $18.5 million for Mr. O’Neal, and $14.5 million for Mr. Kim, according to Equilar.

Mr. Kim and his deputies were given wide discretion about how to dole out their pot of money. Mr. Semerci was among the highest earners in 2006, at more than $20 million. Below him, Mr. Mallach and Mr. Lattanzio each earned more than $10 million. They were among just over 100 people who accounted for some $500 million of the pool, according to people with direct knowledge of the matter.

After that blowout, Merrill pushed even deeper into the mortgage business, despite growing signs that the housing bubble was starting to burst. That decision proved disastrous. As the problems in the subprime mortgage market exploded into a full-blown crisis, the value of Merrill’s investments plummeted. The firm has since written down its investments by more than $54 billion, selling some of them for pennies on the dollar. (This is more than Madoff’s initial loss estimate).

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Posted by & filed under Guild Investment, Jim's Mailbox.

Dear Jim,

Please note this Reuters memo from yesterday. Norway has the safest bonds while Germany is also safe.

Your pal,
Monty

Norway safest govt debt investment, Ecuador riskiest -study
Tuesday, December 16, 2008 2:14:06 AM (GMT-08:00)
Provided by: Reuters News

LONDON: The country least likely to default on its sovereign debt in the next five years is Norway and the country most likely to is Ecuador, according to a study by data provider CMA Datavision.

Using an "industry standard" model and its own credit default swap (CDS) pricing data, CMA Datavision says the cumulative probability of default (CPD) for Norway over the period is three percent, and 93 percent for Ecuador.

The United States’ CPD is six percent, making it the sixth most financially stable sovereign behind Norway, Japan, Germany, France and Finland.

Argentina, Ukraine, Pakistan and Venezuela all have a CPD of 80 percent or higher, according to the study.

The cost of insuring against governments defaulting on their debt has ballooned in recent months as the global economic downturn has forced them to announce heavy borrowing plans to pay for large-scale fiscal packages of spending and tax cuts.

The CDS rates on US, UK and most euro zone sovereign debt have hit record highs recently. Looking at CDS pricing in isolation, investors are paying more to insure against the UK government defaulting than McDonald’s.

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Jim,

I would like to congratulate you and Peter about your article on hyper inflation.

I lived in Brazil and this is exactly what happened.

A Dragon named Inflation

I lived in Brazil during the 1960s and 70s, so I have an idea of what rampant, uncontrolled inflation can do. At its worst, the currency was losing about 30 to 40% of its value each month. This explains how 1 = 1 came to be 1 = 0.00000000000000001, or whatever. This page is supposed to give the reader an idea of what happens when you live where inflation is out of control. Please understand that in the last eight years, things (I mean the annual inflation rate) have been fairly good by Brazilian standards, even if the real (as Brazil’s currency is now called) is under a lot of pressure from many different areas (exports, government spending, foreign debt, etc…). This page looks back at life and money in Brazil in the last forty years or so.

The president’s monetary policy vs the dragon. Brazil humorists have a lot of fun with inflation, and the public is always skeptical of their ability to control the dragon. For some reason, inflation is often symbolized as a dragon, just as the income tax is a lion. Anyway, in the cartoon, the dragon is not impressed with the new real currency.

A high inflation rate means you do to bed with $100 in the bank (or in your pocket) and wake up with $98 or 99, and on the next day you have $96, without spending a penny (well, acentavo). It also means when you get paid, you immediately go to the market for groceries and/or stores to purchase any basic goods you may need. This page is about Brazil’s battle with the evil dragon viewed though it’s paper money .

For most of the early part of then 20th century, Brazil’s money was called Reis, meaning "kings". By the 1930s the standard denomination was Mil Reis meaning a thousand kings — that is alot of blue blood flowing on the market.

By 1942 the currency that devalued so much that the Vargas government instituted a monetary reform, changing the currency to cruzeiros (crosses) at a value of 1000 to 1. Twenty thousand reaisbank notes were stamped as twenty cruzeiros, as seen in the example here. Over the next fifty years, the poor stamp overlay machines were to stay busy. As you will notice on this page I have tried to find paper notes "stamped" (carimbadas) with the new values. These notes remained in circulation a few months until the new "official" notes with the new denominations became available.

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We don’t know when Hyperinflation will come to the US but it will come.

When you will start seeing prices of essential goods rising, this will be it. But people on the street shouldn’t trust the government inflation numbers! We just have to go regularly into the supermarket near us to find out as hyperinflation may well be worldwide.

By reading Peter’s Formula, I noticed that the vicious cycle is maintained by a weak government (see part 9 of the 10 steps) policy such as printing fiat money in unreasonable ways. In Brazil, in the 70’s, we had dumb government solutions such as price readjustment indexes.

In the US, Volcker with its strong monetary policy helped stop this vicious cycle in the 70’s by raising rates to unprecedented levels. Will Obama follow Volcker’s steps at one point of his presidential mandate? I don’t think so or maybe a long way down the road.

Thank you for all!
Best regards,
CIGA Christopher

Dear Christopher:

Thanks are to Peter, a man of rare perception, a true student of economic history and a man to be reckoned with. When introducing his economic committee, President Elect Obama said no less than six times that this group would disagree. The liberal economic policy will be followed with ever expanding Fiscal Stimulation along with both the Fed and Treasury continuing to bail out every major entity that falls.

Respectfully yours,
Jim

Posted by & filed under Guild Investment, Jim's Mailbox.

Dear Jim,

The president of Guild Investment Management, Inc. Tony Danaher, forwarded this to me today.

David Rosenberg is Merrill Lynch’s chief US economist.

David Rosenberg had some interesting comments: "Port activity in the United States is imploding — inbound cargo at the Port of L.A. slipped 9.7% YoY and was down 13.6% at Long Beach; outbound shipments were even weaker in a sign of ever-weakening domestic demand abroad with traffic down 12.8% Year on Year at the Port of LA and -23.6% at Long Beach. And get this — the only activity is in empty vessels — up 0.2% Year on Year in November. Global recessions beget global trade protectionism, which in turn begets global geopolitical strains, which finally begets investor buying of "safe havens" like gold (which looks on the precipice of breaking out to the upside again).

Respectfully yours,
Monty Guild
www.GuildInvestment.com

Posted by & filed under Jim's Mailbox.

Dear Monty and Dan,

I think this is very important. An ex-Fed bigwig sees the solution as revaluing the gold on the books. I have not seen this commented on and thought it would be of interest.

The Gold comment is about 8 minutes into the video.

Click here to view the video…

He says not to worry about the Fed’s balance sheet because they can just revalue their "gold certificates." This comment is at min. 11:20

This is very interesting coming from an ex-Fed big wig. Gold revaluation is beginning to be discussed…

Thanks,
CIGA Andrew S.

Dear Dan and Monty,

This video has good things in it and not only on gold. It should be reviewed by serious students and investors in gold and the US dollar from the moment it starts until the very end.

Think "Federal Reserve Gold Certificate Ratio, Revitalized and Modernized," and not tied to interest rates but rather to a measure of international liquidity. This would require gold be re-valued to market prices.

It seems to me we will draw closer and closer to a US dollar FRGCR backstop being called on as we near the .62 to .52 range on the USDX.

Respectfully yours,
Jim

Jim,

For your information..

Global interest cuts:
Korea cuts rates 100bps to 3%, 50bps was expected;
Taiwan cuts rates 75bps to 2%, 50bps was expected;
South Africa cuts rates 50bps to 11.50%, expected;
Switzerland cut rates 50bps to 0.50%, expected;

Anthony R. Danaher
www.guildinvestment.com

Jim,

I own several warehouse receipts for numbered allocated silver bars but am concerned after reading Dr. Fekete’s recent warning:

"Item 6: Even allocated and segregated metal account gold is not safe. The temptation on the account providers to default will be irresistible. They are not going to release the gold until expressly ordered by the courts, and will make sure that no gold will be left by then."

Do you believe that this is correct and also true for silver? If so, what safe storage options are there for relatively bulky silver in the United States?

Your insights on storage options for precious metals and degrees of safety would be greatly appreciated.

CIGA Ron M.

Dear Ron,

This week on www.jsmineset.com I gave you a total review of how to take delivery, how to transport precious metals, how to store precious metals safely and even provided a person to help you do it.

My reasons are different from Dr. Fekete’s take, but the remedy is the same.

All the best,
Jim

Click here to read the original article…

Posted by & filed under Jim's Mailbox.

Dear Jim,

People have been incredibly slow to look ahead but the announcement today of a budget deficit of over $180 billion for the month of November 2008 (one month), seems to have spurred them to action. They have been selling the dollar and buying gold and iron ore (which benefits the infrastructure spending in China and the US). By the way, 12 times $180 billion is $ 2.16 trillion. That amount sounds to me like a good guess for the next 12 month’s budget deficit.

Respectfully yours,
Monty Guild

Fed Weighs Debt Sales of Its Own
Move Presents Challenges: ‘Very Close Cousins to Existing Treasury Bills’
By JON HILSENRATH and DAMIAN PALETTA

The Federal Reserve is considering issuing its own debt for the first time, a move that would give the central bank additional flexibility as it tries to stabilize rocky financial markets.

Government debt issuance is largely the province of the Treasury Department, and the Fed already can print as much money as it wants. But as the credit crisis drags on and the economy suffers from recession, Fed officials are looking broadly for new financial tools.

Fed officials have approached Congress about the concept, which could include issuing bills or some other form of debt, according to people familiar with the matter.

It isn’t known whether these preliminary discussions will result in a formal proposal or Fed action. One hurdle: The Federal Reserve Act doesn’t explicitly permit the Fed to issue notes beyond currency.

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