Posts Categorized: Jim’s Mailbox

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Dear CIGAs,

Are people of this ilk not now in the process of bailing out everything everywhere while saving the world financially?


In our family we decided to move straight to the top by substituting cat food for steak. Inflation? What inflation!

Up until the Boskin/Greenspan agendum surfaced, the CPI was measured using the costs of a fixed basket of goods, a fairly simple and straightforward concept. The identical basket of goods would be priced at prevailing market costs for each period, and the period-to-period change in the cost of that market basket represented the rate of inflation in terms of maintaining a constant standard of living.

The Boskin/Greenspan argument was that when steak got too expensive, the consumer would substitute hamburger for the steak, and that the inflation measure should reflect the costs tied to buying hamburger versus steak, instead of steak versus steak. Of course, replacing hamburger for steak in the calculations would reduce the inflation rate, but it represented the rate of inflation in terms of maintaining a declining standard of living. Cost of living was being replaced by the cost of survival. The old system told you how much you had to increase your income in order to keep buying steak. The new system promised you hamburger, and then dog food, perhaps, after that.

CIGA Marty

Dear Jim,

The question is who in the world is selling off all of this stuff? Is it the hedge funds/mutual funds? It seems that everyone is hitting the exit at the same time on a weekly basis and no matter what we all think/know to be the right place to be, it doesn’t get through to all of those who strive for US Dollars. I agree with you that the dollar is doomed with what is happening, but how long will it take for everyone to wake up, if they even do… Then the turn comes and we see the dollar collapse as fast as Gold has here and Gold moves up inversely. The idea being to ride it out for a period and then go back in at some level potentially much lower.

I take from your comments here that this thinking is nuts and to just stay with the plane even though it has crashed in the high mountains with a huge snow storm upon us. At least it is shelter as they have always taught us in survival training. Don’t try to work your way out, let them come to you.


Dear Bruce,

Your first lesson in staying alive in the wilderness in an emergency is not to panic, not to wander, but rather build or find shelter from the elements before anything else.

Gold is insurance and is shelter in this wilderness caused by demonic OTC derivative manufacturers. A storm is coming that is so serious Weimar now cannot be avoided and might just be duplicated. What do you think the reaction to a market losing 700 points on the Dow is going to be in DC? The Fed and Treasury will manufacture dollars in amounts never contemplated by anyone. The discount rate will drop to negative percentages. The Fed begging bowl window will be open to all and every of the old boys clubs in the US or any other country without limits on the amount of electronically created dollars. Bailouts will from this minute forward cover all and every. That dooms the US dollar and calls for gold over $1650 no matter what the black boxes and their algorithms do tomorrow.

Gold is a currency, always has been a currency and will be the only currency as a result of the madness in creating dollars to infinite levels.

The good days of the Weimar Republic came to an end in the late 1920s, especially as the depression began to take a hold on the German economy. As a result the political situation became uncertain and dangerous. The genuine believers in the republic began to lose the battle against the enemies of the Weimar Republic from the left and the right.

The hyperinflation in the Weimar Republic was accompanied by an economic depression.

Your alternative plan sounds to me as if you would sell you gold shares for zip, and throw your insurance away, hoping to re-enter your insurance at $600.

In the meantime you would hold 100% with cash. I assume it would be in US dollars.

The sellers are all in the paper market for gold. They are comprised of black boxes, 29 year old hedge fund managers and gold holders that were never really convinced. Short sellers in gold can pound and pound just like naked short sellers in equities.

I have made my bet. I am neither looking at it nor bitching about it.

I know without any shadow of doubt that I am right so let the margin traders and constant whiners go to hell.

I have bought insurance. I am not staring at the insurance policy.

You are not nuts, just emotional. That is quite human and normal.

Think about all I have written today, and if you agree, man up, and stop looking at it.

If you do not, then bail out immediately.



The bull market in gold is over! Tell JIM thanks.

Jonathan Cahur

Dear Jonathon,

You are quite welcome.

I suggest since you feel that way you buy a few financials, lots of US dollar T-bills and 30 year US Treasuries.

Best of luck!

Dear Mr. Sinclair,

In his article Passing Argentina… On Our Way to Weimar, Graham Summers included the following graph. He had the following to say about it: “To put that recent surge in context, consider that the little bump in March 2008 was the Fed pumping the system during the Bear Stearns deal. That slope in July 2008? The Fannie Mae/ Freddie Mac crisis. Compared to the horrific spike that is September 2008, both of these periods appear positively rosy”.

If I invert the graph, it looks eerily like my net worth over the same time frame. Still, I hold my positions and remain of good faith. Thank you for sharing your experience with us through this character-building time.


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You undoubtedly already know this but could you reword the COMEX warehouse article to state that the sum total of gold for delivery at the Comex is the registered number and not the eligible number? 4,135,714 ounces eligible gold can be gold held by customers that will not be tendered…

Your pal,

Dear Dan,

This makes the paper gold market foundation “SET IN SAND” if any of today’s super wealthy financial international Muktars decided to break the bank at the Comex.



I hope I didn’t sound too negative in that last e-mail about keeping short term thoughts close to the vest for fear of sending signals to those who want to hurt us.

I am just totally burnt out with all of this today.

I thought that after 30+ years at this game I would have been a lot smarter, but I have been proven wrong once again and I guess it hurts a bit (actually hurts a lot).

I’m hanging in there, but emotionally I’m a little bit strung out.

Keep the faith, even if I might not be doing so well at it.

Dear Buz,

Every market is under world class manipulation as we approach election day in the midst of possibly the worst financial crisis in world history. This situation is killing us all.

It also makes us ask ourselves does crime pay? It certainly seems so. However, what goes around comes around so I prefer to hack it out without karmic debt.

Look at it this way, pain is the experience between two pleasures.


Hi Jim,

I have been a faithful follower for over 3 years and appreciate your view on gold and the dollar.

I know you are busy but I have a question that I would appreciate you answering on your website.

Since the USDX is comprised of over 57% euros, how will the dollar reach .52 with the European economy so weak?

I know you have the answer, plus I wouldn’t know who else to ask.

Again thanks for all you do. I am in for the long haul.



The dollar, due to the creation of mountains of derivatives and now the bailing out the world, might just be in worse shape. The Weimar mark didn’t do so well.


Dear Mr. Sinclair,

I see the Paul Volcker (highly regarded by yourself) is becoming more closely involved with the Obama campaign. Could this affect the outcome of gold’s price rise if Volcker was to gain persuasive, policy changing sway with Obama?

Best Regards,
CIGA Marc Da

Volcker Makes a Comeback as Part of Obama Brain Trust
By Monica Langley
Tuesday, October 21, 2008

NEW YORK — At 81 years old, former Federal Reserve chairman Paul Volcker is getting a second chance to shape his legacy with a presidential hopeful more than 30 years his junior.

Mr. Volcker has emerged as a top economic adviser to Sen. Barack Obama during a presidential campaign dominated by a global financial crisis. Their growing bond is paying dividends for each man.

Mr. Volcker delivers gravitas and credibility to Sen. Obama, people in the Obama camp say, as well as ideas and approaches to the economic crisis. “Volcker whispering in Obama’s ear will make even Republicans comfortable, because he’s a hero of the right and a supporter of a strong dollar,” says John Tamny, a supply-side economist and Republican.

On Tuesday, Mr. Volcker is scheduled to appear on the campaign trail with Sen. Obama for the first time. At a round-table discussion with voters in Lake Worth, Fla., he’ll “give his view on the state of the economy and the credit markets, and what needs to be done to fix them,” says one campaign adviser.


Dear Marc,

The Mother of All Crisis (Volcker’s statement) cannot stand the previous Volcker approach without a total planetary implosion from which there would be no recovery for generations to come. A socially sensitive president would never support an old Volcker approach.

A Chairman of the Fed must have the full support of the sitting administration to put in place extreme policy reversals in the midst of a total financial meltdown. This is especially true when the meltdowns are barely held together by wide open electronic printing presses and prolific spin.



The following story illustrates that the US mint is having a hard time meeting coin demand. However in the years leading up to Y2K the mint cranked out many more bullion coins than this year by multiples of two or three. So, is physical gold hard to come by? What is the real reason that the US mint is not producing product? If this is unprecedented (the mints were not cleaned out in the 1970’s), maybe we are seeing the real big money going for the gold?

Like everything else that has happened so far, it looks like another sign that “This is it.”


Examining the “Unprecedented Demand” for Gold Eagle Coins
by: Michael Zielinski October 09, 2008

Earlier this week, the United States Mint took further actions to meet the increased demand for gold and silver bullion coins. This included production halts for certain bullion offerings and the continued allocation for one ounce Gold and Silver American Eagle coins.

Within the memorandum sent to authorized bullion purchasers, the US Mint specifically stated, “gold and silver demand is unprecedented.” Throughout the course of this year, the Mint has provided similar explanations each time a new suspension or allocation program went into effect. While sales of Silver Eagle coins are higher than any other year in history, the sales of Gold Eagle coins are far below their peak.


Dear Mr. Sinclair,

I found today’s missive coupled with yesterdays FYI bullet points truly fascinating. Your depth of knowledge is constantly surpassing itself.

From my interpretation I found myself hinged on one primary aspect of the missive. You note the “possibility” of default due to the amount of COMEX reserves vs. the perpetuation and sheer size of the US dollar markets, however you note that during silver’s meteoric rise default was not necessary, only the “theory” or “noise” that the Hunt’s were going to take delivery of more silver than was available. We know the coin markets are already being cleaned out. Is all we need merely the perception of a run on COMEX by Asia?

Best Regards,
CIGA Marc Da

Dear Marc,

You are quite correct from a price impact perspective.


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Click here to listen to a song on the current economic crisis.



Jim Rogers said the next to come is an “inflationary holocaust.” This was taped last week. The salient comment, past half way into his interview, dovetails what you often have written about. The agreement you have is that monetary inflation is the cause and precursor of price inflation regardless of the level of business activity. The greater the amount of money and the shorter the time in history to inject this infinite floods of dollars result in a “inflationary holocaust” quite soon.

Click here to see the video…

CIGA Christopher

Dear Christopher:

Today every political and financial interviewer pulled out a host of Nobel Laureates, Professors, Dean of Business Schools, former Secretaries of the Treasury and other well known equity professionals to high five and applaud the G7 accomplishment of flooding the world with dollars.

Speaker of the House Pilosi got into the act by rehashing the hash of the bailout. She was sure to emphasize the line “do more.”

The answer that governments apply to all situations is to throw cash in dollar swaps in the trillions as a off balance sheet injections.

How did Einstein define insanity? I believe he said it was doing the same thing repeatedly while anticipating different results. The government is doing the same thing that created this crisis and is apparently anticipating different results.

As Jim Rogers says, we are bailing out 29 year old brats driving Maserati’s who we know are the manufacturers of mountains of OTC derivatives. The actions of these brats will end (via what was done this weekend) the financial world as we know it.

The inflation that is heading towards us without regard to the level of business activity is WILD.

I am not concerned that gold will fail to trade at $1650 by January 11, 2011. My concern is that it might be much higher.


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Dear CIGAs,

Today is no different from yesterday. This thing remains “Out of Control”

Today’s so called new initiatives was not an intervention as it was proposed before as part of the 6 prior interventions.

Equity markets are saying, “We saw that one before.”

Gold is a paper play as part of trying to make today’s speaker look good.


”Life’s tough… it’s even tougher if you’re stupid.”
— John Wayne

Dear Jim,

South African gold output is down 23% on a strike
Respectfully yours,
Monty Guild

South African Aug. Gold Output Falls 23% on Strike

Oct. 9 (Bloomberg) — South Africa, the world’s biggest producer of precious metals, said gold production fell 23 percent in August from a year earlier because of an electricity shortage and a protest against power price increases. “There was the Aug. 6 strike by Cosatu that affected mines quite heavily,” Alex Conradie, an economist at the Department of Minerals and Energy, said by telephone from Pretoria today. “The power issues also weren’t there a year ago.” The Congress of South African Trade Unions, known as Cosatu, protested against a 27.5 percent tariff increase by state-owned Eskom Holdings Ltd. to help fund a $44 billion expansion. The utility, which supplies 95 percent of South Africa’s power, started rationing supplies to mines this year because of a shortage of capacity. South Africa’s total mining output declined 6.2 percent and non-gold production fell 3.5 percent, Pretoria-based Statistics South Africa said today on its Web site. Mineral sales jumped 58 percent to 27.52 billion rand ($3.04 billion) in July from a year earlier, it said. Mineral sales data lag production data by a month. South Africa produces more than three-quarters of the world’s platinum and also turns out diamonds, coal, chrome and iron ore. South Africa was the world’s biggest gold producer for more than a century until last year when it was overtaken by China. Ageing ore bodies and safety-related mine stoppages cut 2007 output by 7.4 percent from 2006.

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Hello Jim,

Have you ever heard the discussion about Comex defaulting on Gold? Would you be able to share your opinion on the topic? The questions are being brought up on CNBC. A video on the story is below


Click here to view the video

Dear JB,

There was a time that I would have dismissed that idea as manic. Now it is a different story.

The cash market in anything does not command the price. The leveraged market is most powerful where prices are concerned.

I see the tight gold bullion cash market as the one that causes the short side significant bankruptcy rather than the violent paper gold market as the “Out of Control” banking problem ignites unstoppable rockets that blast the price of gold to unexpected levels in a straight line. The price violence you see now is because of this cash market versus bullion market relationship.

Today, insolvency in the hundreds of billions can happen anywhere. There was a day when the guarantee of the clearing house, the exchange itself ,and the member’s personal wealth that stands behind the paper gold contracts was more than satisfactory for comfort. In today’s world of monumental insolvency nothing can be considered sacred in terms of financial guarantees by market participants or orderly prices.

The bottom line is never say never.



The $700 billion didn’t work (surprise!). Libor is heading up again. Game over!

CIGA Pedro

Libor for Overnight Dollar Loans Jumps as Credit Freeze Deepens
By Lukanyo Mnyanda and Andrew MacAskill

Oct. 7 (Bloomberg) — The cost of borrowing in dollars overnight in London jumped as U.K. lenders held talks with the government on emergency funding and Iceland nationalized its second-biggest bank amid an unprecedented credit squeeze.

The London interbank offered rate, or Libor, that banks charge each other for such loans rose 157 basis points to 3.94 percent today, the British Bankers’ Association said. The corresponding rate for euros climbed 22 basis points to 4.27 percent


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There is no doubt the US dollar is going to hit .52 in the coming years. Is there a chance the physical market is breaking or pressuring the Comex Paper market?


Dear Alex,

The answer to your question is YES. Add to that the fact that gold is the ultimate currency, not paper.


Dear Jim,

I stand in awe to imagine 16000+ bank owned properties from foreclosures in one city alone, with 12000+ coming in pre-foreclosure! It is truly incredible. This amounts to HUGE selling pressure on real estate in coming months and years!

When gold is over $10,000 and estimated tax collections turn positive I will have to buy one in Arizona or Florida, along with an airplane!

CIGA Big Tatanka

Dear CIGA Big T,

I agree on one thing. I will buy an A-10 Wart-hog. The early models are in for decommissioning in two years.

All the best,

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I go away on vacation for about 2 weeks and mayhem ensues. I knew my bank would go under, but not this fast (I work there, but no account). I just want to point out that YOU WERE RIGHT! If your readers who have not acted don’t listen now, that is all in their hands. I was prepared thanks to you, and want to thank you.

Best Regards,

“One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It is simply too painful to acknowledge — even to ourselves — that we’ve been so credulous” -Carl Sagan

Dear Jim,

Good news! Ben Stein and the New York Times finally caught on to what you’ve been saying for 8 years.

In Financial Food Chains, Little Guys Can’t Win

IMAGINE, if you will, that a man who had much to do with creating the present credit crisis now says he is the man to fix this giant problem, and that his work is so important that he will need a trillion dollars or so of your money. Then add that this man thinks he is so indispensable that he wants Congress to forbid any judicial or administrative questioning of anything he does with your dollars.

You might think of a latter-day Lenin or Fidel Castro, but you would be far afield. Instead, you should be thinking of Treasury Secretary Henry M. Paulson Jr. and the rapidly disintegrating United States of America, right here and now.


There is a problem, though. With specific reference to the potential for credit default swaps to cause an international financial collapse, he claims, “Almost no one (except Mr. Buffet) saw this coming, at least not on this scale.” Such ingratitude!

Respectfully yours,
CIGA Richard B.

Dear Jim,


Central banks and governments are now in a frantic state to save banks and financial entities that are falling like dominos on an hourly basis. It is almost impossible to keep up with all the businesses that have collapsed worldwide only in the last week. The authorities around the world have no choice. They will print any amount of money to save whoever needs to be saved. Also the whole world is waiting for the US rescue package of $ 700 billion to be passed. This might help for a few days or weeks but not much longer


The authorities are throwing pennies at a multi trillion or quadrillion dollar problem.

The amounts of money that needs to be printed to bail out the system is so large that it would dwarf what happened in the Weimar Republic in the 1920’s.


Let us put the latest US rescue package of $ 700 billion in proportion:

  • Only last week $ 1 trillion of liquidity was injected into the US financial system. Thus in one week more money was injected than the proposed rescue. US and other central banks are injecting at least hundreds of billions of dollars every week and the bank system is still totally paralyzed. LIBOR (inter-bank) rates are at record highs and banks refuse to lend to each other.
  • Banks have loan books in the dollar trillions against assets which are falling precipitously in value. The banks, with the help of central banks, have in the last decade flooded the market with easy credit that have inflated all asset values to totally unsustainable levels. This bubble is now bursting and the banks will over the next year or two sit on virtually worthless and unrealizable collateral with $ trillions in losses.
  • The crisis is currently focusing on the financial system but soon “Main-Street” (consumers) will be an additional massive problem. Personal loans, credit card loans, car loans etc are at levels which most consumers had problems repaying in good times. The increase in food and energy prices combined with higher mortgage rates and falling unemployment will lead to bank losses of $ hundreds of billions.
  • But all of the above is dwarfed by the derivatives outstanding of $ 1 quadrillion. This figure is so big that it is impossible to fathom. When a financial institution fails it is the gross amount that is due. A major part of these derivatives is worthless although only minimal write-downs have been made. Authorities have allowed the derivatives to be marked to model rather than to market. But at some point in the not too distant future the derivatives bubble is likely to burst. It is doubtful that the governments around the world will have time to print $ 1 quadrillion but even if they did it would obviously be worthless money.


In the last few years no politicians, central bankers, bankers or other so called experts have warned the public of the disastrous consequences of the credit and asset bubbles that have been taking place. On the contrary everybody has embraced the Goldilocks scenario.
It is the same situation today. Virtually nobody will tell you the real problem and the real risks. We urge you not to trust anybody. Everybody you talk to has a vested interest. Therefore it is essential to make up your own mind (which is difficult with so much contradictory advice) and to decide based on all the facts how to protect yourself.

We advised our clients back in 2002 to put a major part of their capital into physical gold stored outside the banking system. Gold has doubled or tripled since then depending on your base currency. Our view is that the real move in precious metals is still to come and that it will start this autumn. For any cash above the government guaranteed levels we recommend short dated government securities preferably in Swiss Francs.

1 October 2008


In case you missed this!

‘Unseen’ and ‘unprecedented’ demand for bullion by rich
Wealthy Investors Hoard Bullion
By Javier Blas
Financial Times, London
Tuesday, September 30, 2008

KYOTO, Japan — Investors in gold are demanding “unprecedented” physical amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen.

Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.

“There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career,” said Jeremy Charles, chairman of the LBMA. “The gold refineries cannot produce enough bars.”

The move comes as fears grow among investors over the losses at investment vehicles previously considered almost risk-free, such as money funds.

Philip Clewes-Garner, associate director of precious metals at HSBC, added that investors were not flying into gold simply because they saw it as a haven amid Wall Street’s woes. “It is a flight into gold because it is a physical asset,” he said.


CIGA Babtkis