Posted at 8:06 PM (CST) by & filed under In The News.

A Word of Caution:

Some writers are attempting to take Armstrong’s cycle work and interpolate that to gold using a standard 8.6 year approach.

There is nothing standard about what is out there today.

I would suggest that we should listen to the man himself.

Armstrong looks to June as a very important period for gold. Should that period be a key time for gold the following high would be in the area of $4000.

Barrick settles lawsuit over misleading investors
Joe Schneider, Bloomberg
Published: Monday, March 16, 2009

Barrick Gold Corp., the world’s biggest gold producer, agreed to settle a lawsuit alleging it misled investors by claiming that its hedging program wouldn’t hurt profits as gold prices rose.

Terms of the settlement haven’t been released because Toronto-based Barrick must conclude talks with its insurers before signing the accord, David Brower, a lawyer for investors who sued, said Monday in a letter to U.S. District Judge Richard Berman in New York. Judge Berman postponed a settlement hearing, scheduled for Tuesday, until March 31.

Barrick hedged production by entering into contracts to sell some gold before it was mined to protect against a drop in bullion prices. Shareholders alleged in the lawsuit filed in 2003 that the program was "speculative" and "risky," resulting in a drop in the share price as gold prices rose.

Judge Berman allowed that part of the suit to proceed in a ruling on Jan. 31, 2006, when he threw out claims that Barrick was involved in anticompetitive conduct.

Former Barrick chief executive Randall Oliphant, chief financial officer Jamie Sokalsky and former chief operating officer John Carrington were named in the suit.

Mr. Oliphant was fired in February 2003, after Barrick’s stock fell 17% in the previous year as the price of gold surged to a six-year high. Mr. Oliphant’s successor, Greg Wilkins, abandoned the hedging program.

More…

In Downturn, China Exploits Path to Growth
By KEITH BRADSHER
Published: March 16, 2009

GUANGZHOU, China — The global economic downturn, and efforts to reverse it, will probably make China an even stronger economic competitor than it was before the crisis.

China, the world’s third-largest economy behind the United States and Japan, had already become more assertive; now it is exploiting its unusual position as a country with piles of cash and a strong banking system, at a time when many countries have neither, to acquire natural resources and make new friends.

Last week, China’s prime minister, Wen Jiabao, even reminded Washington that as one of the United States’ biggest creditors, China expects Washington to safeguard its investment.

China’s leaders are turning economic crisis to competitive advantage, said economic analysts.

The country is using its nearly $600 billion economic stimulus package to make its companies better able to compete in markets at home and abroad, to retrain migrant workers on an immense scale and to rapidly expand subsidies for research and development. Construction has already begun on new highways and rail lines that are likely to permanently reduce transportation costs.

More…

 

Jim Sinclair’s Commentary

Don’t be fooled, these are not the counter parties. These are the brokers for the counter parties. This article is more convoluted fabrications.

A.I.G. Reveals Its Biggest Counterparties
March 15, 2009, 5:16 pm
Update | 6:23 p.m.

The American International Group on Sunday released the names of financial institutions that benefited last fall when the Federal Reserve saved it from collapse with an $85 billion rescue loan and then 3 subsequent bailouts.

The disclosure included counterparties to both its credit default swap operations and its securities lending businesses, both of which contributed heavily to A.I.G.’s troubles, as well as to muncipalities who participated in certain investment programs. All told, Sunday’s statement detailed payments of more than $78 billion, all made using government loans. (Read the disclosure by A.I.G. after the jump.)

Many critics of the company have demanded the names of A.I.G.’s counterparties as the insurer received government money totaling $170 billion. A.I.G. said in a statement that it made the disclosure in consultation with the Federal Reserve.

“Our decision to disclose these transactions was made following conversations with the counterparties and the recognition of the extraordinary nature of these transactions,” Edward M. Liddy, A.I.G.’s government-appointed chief executive, said in a statement.

Time and again, the rationale given for bailout out A.I.G. was that its credit default swap agreements — essentially insurance contracts on mortgage-backed securities — were so interwoven into the global financial web that to let the insurer fail would create chaos.

More…

Posted at 7:06 PM (CST) by & filed under Jim's Mailbox.

"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."
–Antony C. Sutton

Jim,

I spent most of the day burning brush and watching the leaves on the brush flare up reminded me of dollars. I got to wondering how much land the 1200 trillion dollars in at or near worthless OTC derivatives would cover. If my math is right, the answer shocked me.

  • one sq foot = 12" x 12"
  • one dollar = 2.61" wide x 6.14" long
  • roughly 9 dollars to cover a square foot.
  • one sq acre = 43,560 square feet
  • 43560 sq ft x 9 dollars per sq foot =
  • 392,040 dollars to cover a square acre.
  • 640 acres is one square mile
  • 250,905,600 dollars to cover a square mile
  • 1200 Trillion dollars in at or near worthless OTC Derivatives will cover 4,782,675.24 square miles.

That made me wonder how much of America would be covered by one dollar bills? I Googled square miles of Texas and found the following: The answer is shocking:

So 1200 trillion dollars in worthless paper would cover all of the United States and Mexico with 486,785 square miles left over to cover other lands with.

Best Regards,
CIGA Daniel

Dear CIGA Dan,

I am sure you will launch every math geek in the gang, but you worked so hard I am obligated to post this.

The point is made. These OTC derivative demons have killed us all to some degree, creating a problem for which there is NO practical solution.

They have been bailed out with our tax dollars.

Regards,
Jim

Jim,

Regarding Bernanke on 60 Minutes Sunday:
Did you watch him on the show last night? He is forecasting the end of the Recession/Depression by the end of 2009. What is he smoking? I think he needs to review Jim’s Formula!!

CIGA Ian

Dear Ian,

He may really believe himself. If so then he is in real trouble.

Regards,
Jim

 

Dear Jim,

China was mentioned in the Financial Times Lex column today. Part of the article is duplicated below.

“The Country (China) now boasts three of the world’s top 10 companies by market capitalization. It has the world’s biggest bank, Industrial and Commercial Bank of China, and the world’s largest telecoms operator, China Mobile. Petro China is second only to Exxon Mobil, while life assurer China Life is second to none."

"Chinese and US banks have switched places in other ways. Remarkably, the US has a bigger proportion of banking assets in state hands and also more red ink. ICBC, by contrast, made more net profits than any other bank in 2007, and earned nearly $14 billion in the first nine months of 2008.”

As we have often said, the Chinese think for the long term, and this attribute will serve them well as they grow to world economic dominance.

China continues to buy oil assets, base metals assets, and other mining assets worldwide to stoke the fires of their economic machine. We believe that this pattern will continue, especially while good assets can be acquired and while economic nationalism is being muted by the global economic decline.

Respectfully yours,

Monty Guild
www.GuildInvestment.com

Jim,

Like you said, where is this diplomacy in the US? Where is the outrage? How is it that these people are standing up to the banks and we aren’t? I am pissed every day that our banks are getting away with this. I’m ready to march – lets go to DC…

CIGA BJS

EU banks must disclose toxic assets for aid
By Nikki Tait in Brussels
Published: March 14 2009 12:13 | Last updated: March 14 2009 12:13

Banks must disclose their problem assets if they want to avoid lengthy wrangling with Brussels over aid schemes, Europe’s top competition watchdog warned at the weekend.

In a tough-talking speech, EU competition commissioner Neelie Kroes told executives that she would not sign off on restructuring schemes under European Union state aid rules if banks continued to conceal their troubled assets.

”To protect taxpayers and maintain the level playing-field, the public purse will simply not be open to banks who do not want to open their books in return,” she told a conference, organised by Deutsche Bank.

Ms Kroes expressed frustration at the way banks had been behaving to date. ”In many recent meetings with bank chief executives, I am told their bank is fine, but the other banks have problems. They cannot all be right,” she said.¬

”So the high levels of transparency we are demanding are essential for determining the full scope of our collective problems and rebuilding trust.”

More…

Jim,

I would bet there will be a lot of people buying these bumper stickers, well, at least a lot of taxpayers…

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Your CIGA in the Mortgage Finance Industry

Posted at 6:35 PM (CST) by & filed under General Editorial.

Dear CIGAs, At long last we are now offering Compendium Version 2 for sale. There will also be a very limited printing of Compendium Version 1 for sale as well. If you want a copy I suggest you order it while you have the chance. We release Compendiums every couple years to help cover the operating costs of running a site like JSMineset. Over the years we have gotten quite large and these costs have grown substantially. If you like what we do here please purchase a copy – you will be supporting a good cause and allow us to continue providing this service free of charge.

 

**PLEASE NOTE YOU DO NOT NEED A PAYPAL ACCOUNT TO PURCHASE ANY OF THE COMPENDIUM SETS. COMPENDIUMS SHOULD ARRIVE WITHIN 2-4 WEEKS DEPENDING ON YOUR LOCATION**

 

What you will receive with each set:

 

Compendium Version 1 ($50 USD):

Compendium Version 1 includes all articles posted from the inception of JSMineset in 2002 to December 2005. It comes packaged as a searchable PDF database and includes several thousand articles on Gold and financial markets. As a bonus, a separate Technical Analysis video disc by Jim Sinclair is included in the package. This video is viewable on a computer only and is both PC and Mac compatible.

 

Compendium Version 2 ($80 USD):

Compendium Version 2 includes all articles posted from December 2005 to the end of October 2008. All articles are categorized and presented in HTML format and are PC and Mac compatible. Several thousand articles are again included in this archive disc which makes up literally thousands of pages of market commentary from Jim himself. Compendium Version 2 also includes an hour long DVD video commentary on financial markets by Jim Sinclair. This disc is playable in any DVD player and any computer that supports DVD playback.

 

Compendium Version 1 & 2 Package ($130 USD):

This package includes both compendium 1 & 2 which are shown above. As you have noticed by this point, JSMineset does not subsidize costs with garbage advertising nor do we ever promote products through our free eblast system. If you feel JSMineset has helped you over the years purchase Compendiums 1 and 2 and help keep us alive! For the price you pay the information you receive is unbeatable and you know it is going to a good cause.

All prices are in US dollars and include shipping and handling.

Thank you all for your continued support!

Dan Duval
JSMineset Editor

Posted at 1:00 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Here are two Jims and a Dan on the same page!

Comex gold trading is a paper game: Jim Rogers
2009-03-15 23:00:00

Commodity Online 
Even as gold spot and futures prices surge globally and bullion analysts continue to predict that the yellow metal prices will zoom to astronomical levels ranging from $1,000 to $5,000, there is more opposition coming to the paper gold at Comex.

Renowned global commodities investor and analyst Jim Rogers says gold trading at Comex, a division of Nymex, is a paper game and not a physical game.

”If you can take 50% of the gold away from the Comex then the price will be closer to what you are paying for physical today. If you take 50% of anything away, you know take 50% of IBM away the prices are going to go up,” said Rogers, a vocal critic of America and Britain, who left the United States to settle down Singapore.

"It should be obvious that these two very large banks could exert a disproportionate share of influence on the small silver futures market if they were so inclined. When just two traders are allowed by the Commodities Futures Trading Commission (CFTC) and the Securities and ExchangeCommission (SEC) to accumulate so massive a position that it constitutes an overwhelmingly large percentage of the action; when the authorities allow just two banks to literally dominate a market with the weight of their own trading, traders are left to speculate on what the largest traders are going to do instead of concentrating on the supply/demand fundamentals and legitimate price discovery. "

In an interview to Warren Bevan of Gold Seek, Rogers, author of such famous books like Hot Commodities and A Bull in China, who recently launched an agricultural commodities index focused on food consumption in China, said: “If somebody removes 50% of gold from the market, or 50% of anything from the market it’s going to have an effect on the price. A guy who does it, has his own situation. He’s got to come up with a place to store it, insure it and everything else. And if and when he comes back to the market he may have a huge problem because the market will be sitting there waiting for him. Again remove 50% of anything from any market, it has an effect. Burn down half the houses in Phoenix I assure you it would have an effect in the housing market in Phoenix.”

Rogers said that now many things have been used as money. Silver, copper, ivory, many, many, many things. “In fact silver has been used through history much more than gold as a monetary medium of exchange,” he said.

Is silver being artificially held down? “No, I don’t buy that. I know the conspiracy theorists say that but if it were true over the past thirty years there would have to have been hundreds of thousands of people who would know about it and be part of the conspiracy,” said Rogers, who along with billionaire investor George Soros founded the successful Quantum Fund.

It is not just Rogers alone who is upset at the way Comex gold is going. Bevan points out that there is something going on in gold. “The Comex stocks have hardly changed since December and demand and deliveries have been substantial. Also the ETF’s have added over $3 billion just this January. I don’t know where they get their gold but certainly not the Comex.”

Now, do you know that some large American banks are dominating the gold market in the world? Or some of the same banks that helped spawn the current global financial crisis, have the largest positioning in gold and silver futures at Comex, a division of Nymex?

Here is an excerpt from an interesting story that Commodity Online carried sometime back:

”Noted gold market analyst Gene Arensberg, has reviewed the latest gold and silver market data from the U.S. Commodity Futures Trading Commission from a trading standpoint and observes that the largest traders are positioning themselves for a fall in gold but not so much for a fall in silver.

The very largest traders for gold and silver are, wouldn’t you know it, big U.S. banks. It looks like a few big banks, some of the same ones whose brilliant management helped spawn a global financial crisis, have the largest positioning in gold and silver futures. As of February 3, their positioning in gold and silver futures was big all right – big and short the market for gold, somewhat less short silver comparatively speaking.

A short position means the trader profits if prices fall.

According to the monthly CFTC Bank Participation in Futures and Options Market report released Friday, February 6, two large reporting U.S. banks held zero long and 27,189 short futures positions in COMEX silver futures as of February 3. All commercial traders as a group held a net short silver position of 33,173 contracts that same day; so just two banks held 81.96% of all the COMEX commercial net short positioning for silver.

It should be obvious that these two very large banks could exert a disproportionate share of influence on the small silver futures market if they were so inclined. When just two traders are allowed by the Commodities Futures Trading Commission (CFTC) and the Securities and ExchangeCommission (SEC) to accumulate so massive a position that it constitutes an overwhelmingly large percentage of the action; when the authorities allow just two banks to literally dominate a market with the weight of their own trading, traders are left to speculate on what the largest traders are going to do instead of concentrating on the supply/demand fundamentals and legitimate price discovery.

Isn’t that the equivalent of subjects wondering what price the King will decree rather than citizens all haggling in their own self interest to determine a market price? Or, as one trader put it recently, is the COMEX silver market waiting on JP Morgan Chase to show its hand or make a move?

More…

Posted at 7:12 PM (CST) by & filed under In The News.

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ATT00140

 

Jim Sinclair’s Commentary

After the advertisement, the statement of the G-20 is meaningless for an economic recovery, but does contain a commitment to hyperinflation. Whatever is required in what amount required should be done. Even Geithner looked amazed. The G-20 statement is directed to the US Treasury and Fed that WILL via swaps provided what is needed, thereby extending the FUBAR.

You think Geitner’s facial expression betrays his knowledge of what is coming at his and the Fed’s hand? Of course he knows!

There is no difference between what is being done by the US Treasury and the Fed from what the IMF and World Bank lectured all the developing nations not to do because of the hyper-inflationary implications IMPLICIT therein.

The USA is headed for the financial condition of a Banana Republic and is already if the truth was to be known. All of this is delivered to you and I by the manufacturers and distributors of OTC derivatives now at the truthful notional value number of one quadrillion, one thousand, one hundred and forty four trillion US dollars. That is cement shoes on the Western Economy.

Just How Much Is $1 Trillion?

President Obama says his Administration’s stimulus plan could cost more than $1 trillion, and this has many people throwing that number around rather casually.

That got us to thinking about just how much $1 trillion represents.

· $1 trillion is almost enough to buy a controlling interest in all 30 of the companies in the Dow Jones Industrial Average.

· $1 trillion is more than the combined state tax revenue of all 50 states.

· $1 trillion would be enough to buy all of the single-family and multi-family residences in the state of Texas.

· $1 trillion in 2008 dollars would cover the entire U.S. federal budget from George Washington’s inauguration to the end of World War I.

· A stack of 200 $100 bills is roughly an inch thick. If these stacks were set up on end like dominoes, $1 trillion would be the distance from New York City to Chicago.

–From the US Global Investor Alert

Jim Sinclair’s Commentary

Now Obama is talking about the Economic Stimulation requiring $1 trillion:

A quadrillion

Number of zeros

   

3

thousand

 

6

million

 

9

billion

 

12

trillion

 

15

quadrillion

 

     

Now think about how the real number for the total outstanding OTC derivatives, the absolute root of the disaster, is one quadrillion,  one hundred and forty four trillion dollars.

Hyperinflation is assured by this historically unprecedented infusion of endless capital into the world’s monetary system and many private pockets.

Jim Sinclair’s Commentary

This weekend’s drama. Let’s see if AIG gets the bonuses down from $165 million to $160 million.

Treasury pressure leads to AIG scaling back bonuses
updated 1:31 a.m. EDT, Sun March 15, 2009

NEW YORK (CNN) — Under pressure from the Treasury Department, insurance giant AIG plans to scale back bonuses and compensation for some of its top-earning employees.

CNN obtained a letter Saturday from AIG Chairman and CEO Edward Liddy to Treasury Secretary Timothy Geithner, in which Liddy pledges in the letter to reduce 2009 bonus payments, which AIG refers to as "retention payments," by at least 30 percent.

Liddy also addresses steps to limit compensation in AIG Financial Products, the London-based unit responsible for issuing the risky credit default swaps, which on several occasions has brought the company to the brink of collapse.

In the letter, Liddy says the unit’s 25 highest-paid contract employees will reduce their salaries to $1 this year and all other officers in the unit will reduce their salaries by 10 percent. Other "non-cash compensation" will be reduced or eliminated.

More…

Jim Sinclair’s Commentary

Expect the Federal Reserve to discuss a program of buying its own 10 year treasuries.

It is hard for me to believe that the Federal Reserve will monetize its own debt. That out bananas the most egregious of Banana Republic economics. how can any sane commentator discuss this as a reasonable approach to running monetary policy?

It is certainly a program the Chinese would love to participate in.

All artificial efforts to control interest rates fail. That is a market axiom.

Expect more of the following:

Bernanke talks up debt monetization as printing presses go into even higher gear
Tue, Dec 2 2008, 07:36 GMT
by John Hardy

The US dollar got an extra boost to start the month yesterday when the Chinese authorities fixed the renminbi at its weakest level versus the greenback since this spring, and the ‘trading range’ for the day was larger than the range for the past 4-5 months. The timing of the move was significant considering that Paulson is meeting with his Chinese counterparts at the fifth round of the US-China Strategic Economic Dialog talks on Thursday and Friday. There is intense speculation that the Chinese may want the renminbi to weaken to support growth. Any decided effort by the Chinese to keep their currency weak would certainly support the greenback’s rally. The currency has been effectively pegged to the USD for months, so the Chinese have seen their currency gain sharply on most other currencies around the world. This is a key story to watch this week.

Paulson and Bernanke are making it clear that they will do everything in their power to keep yields on the long end of the yield curve as low as possible in an effort to shore up the US housing market. Bernanke was out directly talking up the idea of debt monetization. So far, these scary plans to buy money with money straight from the printing presses is being taken in stride and long yields continue to fall precipitously (macro players are also getting flushed out of the formerly popular bets on the yield curve steepening – the 2-10 spread has collapsed from a near record 260+ bps in mid-November to 180 bps at present.) Are we on the way to deflation or hyperinflation or both…? It’s tough to say, but the Fed has lost control of credit markets by having to resort to these desperate measures. Lenders in the real market for loans are paying record wide spreads to benchmarks if they can get any credit at all, and consumers are also feeling the pinch on their credit cards, where credit limits are being slashed and interest rates jacked up to ridiculous levels – often 30% or more. So despite effectively zero interest rates, quantitative easing, and now signs of debt monetization, the average lender is experiencing a steadily tightening noose on their credit.

More…

Jim Sinclair’s Commentary

Comic relief has brought up serious questions concerning the equity cheerleaders that call themselves interviewers on financial TV.

Jon Stewart puts spotlight on CNBC and meltdown
By DAVID BAUDER

(AP:NEW YORK) The feud between Jon Stewart and CNBC’s Jim Cramer has been good for laughs _ and ratings _ but has also raised the serious question of whether the experts at TV’s No. 1 financial news network should have seen the meltdown coming and warned the public.

Over the past two weeks, Stewart’s "Daily Show" on Comedy Central has ridiculed CNBC personalities, including Cramer, the manic host of "Mad Money," by airing video clips of them making exuberantly bullish statements about the market and various investment banks shortly before they collapsed.

Stewart has charged that people at CNBC knew what was going on behind the scenes on Wall Street but didn’t tell the public. He has accused CNBC anchors and pundits of abandoning their journalistic duties and acting like cheerleaders for the market.

"In a tremendous boom period, they covered the boom and people wanted to believe in the boom," said Andrew Leckey, a former CNBC anchor and now president of the Donald W. Reynolds National Center for Business Journalism at Arizona State University. "They didn’t uncover the lies that were told to them. Nobody did. But they should be held to a higher responsibility."

But Don Hodges, chairman of Hodges Capital Management in Dallas, said he doesn’t fault CNBC for not seeing the bust coming.

More…

Jim Sinclair’s Commentary

The inviting conclusion is that these two events have a common relationship, if not intentional certain serendipity.

US warships head for South China Sea after standoff
Tim Reid in Washington
March 14, 2009

A potential conflict was brewing last night in the South China Sea after President Obama dispatched heavily armed American destroyers to the scene of a naval standoff between the US and China at the weekend.

Mr Obama’s decision to send an armed escort for US surveillance ships in the area follows the aggressive and co-ordinated manoeuvres of five Chinese boats on Sunday. They harassed and nearly collided with an unarmed American vessel.

Washington accused the Chinese ships of moving directly in front of the US Navy surveillance ship Impeccable, forcing its crew to take emergency action, and to deploy a high-pressure water hose to deter the Chinese ships. Formal protests were lodged with Beijing after the incident.

On a day that Mr Obama and his senior officials met the Chinese Foreign Minister, Yang Jiechi, in Washington, Beijing showed no sign of backing down. Its military chiefs accused the unarmed US Navy ship of being on a spying mission.

The US keeps a close eye on China’s arsenal, including its expanding fleet of submarines in the area. Washington says that the confrontation occurred in international waters, but Beijing claims nearly all the South China Sea as its own, putting it in conflict with five other nations that have claims over different parts of the waters.

More…

China’s Leader Says He Is ‘Worried’ Over U.S. Treasuries
By MICHAEL WINES, KEITH BRADSHER and MARK LANDLER
Published: March 13, 2009

BEIJING — The Chinese prime minister, Wen Jiabao, spoke in unusually blunt terms on Friday about the “safety” of China’s $1 trillion investment in American government debt, the world’s largest such holding, and urged the Obama administration to offer assurances that the securities would maintain their value.

Speaking ahead of a meeting of finance ministers and bankers this weekend near London to lay the groundwork for next month’s Group of 20 summit meeting of the nations with the 20 largest economies, Mr. Wen said that he was “worried” about China’s holdings of United States Treasury bonds and other debt, and that China was watching economic developments in the United States closely.

As the financial crisis has unfolded, China has become increasingly vocal about what it perceives as Washington’s mismanagement of the global economy and financial system, joining a chorus of foreign critics of unbridled American capitalism. On Thursday, for example, France and Germany rebuffed American calls to coordinate a global stimulus packageat the G-20 meeting, saying financial regulation should come first.

In January, Mr. Wen gave a speech criticizing what he called an “unsustainable model of development characterized by prolonged low savings and high consumption.” There was little doubt that he was referring to the United States.

Mr. Wen sounded similar themes in his remarks on Friday, which came in response to questions at a news conference at the end of the Chinese Parliament’s annual session. While refraining from direct criticism of the Obama administration’s economic policies, he reminded Washington of China’s status as its largest creditor. With budget deficits mounting rapidly, the United States needs China if it is to finance all that new debt at low interest rates.

More…

Jim Sinclair’s Commentary

My gawd, you and I take risks working long and hard to succeed.

These guys deal in unlisted, unfunded, unregulated, fraudulent, non-transparent paper, screw up, go begging, get our money, and receive huge bonuses for total failure, total dereliction of human duty, and in that public ignoble failure cause extreme pain and potentially life long suffering to others.

Rather than huge cash presents they deserve public flogging, if not life imprisonment at Attica.

What the hell is the world thinking? Where is your total outrage?

A.I.G. Planning Huge Bonuses After $170 Billion Bailout
By EDMUND L. ANDREWS and PETER BAKER

Published: March 14, 2009

WASHINGTON — The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance.

The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. Past bonuses already have prompted President Obama and Congress to impose tough rules on corporate executive compensation at firms bailed out with taxpayer money.

More…

Jim Sinclair’s Commentary

The US threatens China on the sea so Russia threatens the US with bombers stationed a good stone’s throw away from Florida.

Putin will do what he says and that is quite dangerous.

Russian strategic bombers could use Cuba airfields
Sat March 14, 2009

MOSCOW, Russia (CNN) — Russia expressed interest in using Cuban airfields during patrol missions of its strategic bombers, Russia’s Interfax news agency reported

"There are four or five airfields in Cuba with 4,000-meter-long runways, which absolutely suit us," Maj. Gen. Anatoly Zhikharev told Interfax.

Zhikharev, who is the chief of staff of the Russian Air Force’s long-range aviation, said, "If the two chiefs of state display such a political will, we are ready to fly there."

Zhikharev also told Interfax that Venezuelan President Hugo Chavez has offered a military airfield on La Orchila island as a temporary base for Russian strategic bombers.

"If a relevant political decision is made, this is possible," he said, according to Interfax. Zhikharev said he visited La Orchila in 2008 and can confirm that with minor reconstruction, the airfield owned by a local naval base can accept fully-loaded Russian strategic bombers

More…

Jim Sinclair’s Commentary

Does anybody believe this bombastic bull? How much money are they wasting on wine and cuisine for bureaucrats that can’t find their way out of a paper bag?

G20 make pledge to restore growth

Finance ministers from the G20 group of rich and emerging nations have pledged to make a "sustained effort" to pull the world economy out of recession.

"We are committed to deliver the scale of sustained effort necessary to restore growth," they said in a joint statement after their talks in the UK.

UK Chancellor Alistair Darling said they agreed the International Monetary Fund (IMF) should be given more money.

The talks were held amid reports of rifts over the best way forward.

BBC economics editor Stephanie Flanders said that the outline agreements represented "cheap talk", and differences remain.

The outline agreements will now provide the basis for more concrete pledges at next month’s meeting of G20 leaders in London.

More…

Jim Sinclair’s Commentary

Do not confuse UBS with Switzerland. They are both different lands. One has serious, long standing cultural traditions unlikely to fold, and the other is OTC derivative central in la-la land.

Switzerland eases banking secrecy

Switzerland, the world’s largest offshore financial centre, has agreed to accept concessions on bank secrecy.

However, while it will now abide by international rules on bank data sharing, it said it would only respond to "concrete and justified" requests.

The government added that it would still protect banking customers from "unjustified watching from abroad".

Switzerland’s announcement comes after it had risked being added to a global blacklist of uncooperative tax havens.

More…

Jim Sinclair’s Commentary

Bloomberg, are you listening?

TheStreet.com shakes up the corner office
Commentary: Stability is required in a period of tumult

By MarketWatch

NEW YORK (MarketWatch) — Jim Cramer’s week from hell just got even worse on Friday.

Fresh from being dressed down on "The Daily Show" on Thursday night, Cramer had to answer for more bad news when Thomas Clarke resigned as CEO of The Street.com Inc. (TSCM)

TheStreet.com, Inc, the online financial news site co-founded by Cramer. Board member Darryl Otte will be the interim CEO.

Cramer, who took the reins as chairman last October, is synonymous with the fortunes of The Street as one of the Web site’s signature columnists. The company’s share price stood at $2 on Friday morning, underscoring its woes and struggle for survival.

TheStreet made big bets on its commentators, and it counted on a bull market to maintain the public’s interest. Problem is, TheStreet’s columnists often come across as being shrill and dogmatic. They seem to care more about speaking to one another than informing their readers.

TheStreet somehow got away from the central mission of every business: serve your customers.

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Jim Sinclair’s Commentary

You will now be hearing often about a new chapter in this disaster. It is known as Chapter 9. Guaranteed Municipal are now a joke in terms of guarantee.

Ch 9 Primer
Municipal Bankruptcy.

Get ready or get buried. Please note the following passage:

The purpose of chapter 9 is to provide a financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts and obligations. Reorganization of the debts of a municipality is typically accomplished either by extending debt maturities, reducing the amount of debt principal or interest, or refinancing the debt by obtaining a new loan.

• extending debt maturities
• reducing the amount of debt principal
• reducing the amount of interest
• refinancing
Got that? There is no authority for new taxes. Good news but unfortunately the only good news. Reading further:

Different types of bonds receive different treatment in municipal bankruptcy cases. General obligation bonds are treated as general debt in the chapter 9 case. The municipality is not required to make payments of either debt principal or interest on account of such bonds during the case. The obligations created by general obligation bonds are subject to negotiation and possible restructuring under the plan of adjustment.

Special revenue bonds, by contrast, will continue to be secured and serviced during the pendency of the chapter 9 case through continuing application and payment of ongoing special revenues.

GO (General Obligation) debt is worthless. Municipal pensioners stand in line with all the other debtors. Special revenue bonds are only protected to the limits of revenue received.

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Jim Sinclair’s Commentary

This is a greater problem than Iraq and Afghanistan together.

A pre-emptive act is probable.

Pakistan teeters on the brink of chaos
By Jonathan Manthorpe, Vancouver SunMarch 13, 2009

Washington and London are leaning heavily on Pakistan’s squabbling political leaders as the nuclear-armed nation totters on the brink of chaos.

Britain’s foreign secretary David Miliband, U.S. ambassador to Islamabad Anne Patterson and Washington’s regional point man Richard Holbrooke are all expressing concern to Pakistani leaders that a mass anti-government march due to arrive in the capital on Monday threatens to topple the year-old and insecure administration of president Asif Ali Zardari.

The sense of impending doom is heightened by the increasing authority over large areas of Pakistan of the Taliban, whose fighters are waging a guerrilla war against North Atlantic Treaty Organization forces, including Canadians, across the border in Afghanistan.

Riot police arrested hundreds of demonstrators in the southern commercial centre Karachi on Thursday as opponents of the government of Zardari and his Pakistan People’s Party (PPP) attempted to set out on a so-called "long march" in buses and cars to the capital Islamabad.

The Zardari government has issued a two-week ban on gatherings of more than four people in an attempt to head off the march by supporters of former prime minister Nawaz Sharif and his opposition Muslim League.

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Jim Sinclair’s Commentary

Another Taliban picnic.

Militants torch NATO trucks in Pakistan: police

PESHAWAR, Pakistan (AFP) — Taliban militants in northwestern Pakistan torched eight trucks carrying supplies for NATO forces in neighbouring Afghanistan in a pre-dawn attack on Sunday, police said.

A dozen more trucks and trailers were damaged when the militants, armed with automatic weapons and rockets, attacked a terminal on the outskirts of Peshawar city.

"Taliban militants fired four rockets on a truck terminal on the ring road on the city’s outskirts and destroyed eight trucks completely," local police official Gohar Khan told AFP.

"The militants also torched 12 more trucks and trailers."

Khan said police arrived during the attack, in which the two truck drivers were shot and injured, but the militants fled to the neighbouring tribal area.

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Posted at 6:22 PM (CST) by & filed under Jim's Mailbox.

Dear CIGAs,

The following is for my CIGAs flying as passengers and pilot friends. The following is purported to be real:

Never let it be said that ground crews have never lacked a sense of humor. Here are some actual maintenance complaints submitted by UPS ‘ pilots (marked with a P) and the solutions recorded (marked with an S) by maintenance engineers.

By the way, UPS is the only major airline that has never, ever, had an accident.

P: Noise coming from under instrument panel. Sounds like midget
pounding on something with a hammer.
S: Took hammer away from midget.

P: Test flight OK, except auto-land very rough.
S: Probably because auto-land is not installed on this aircraft.

P: Something loose in cockpit
S: Something tightened in cockpit

P: Dead bugs on windshield.
S: Live bugs on back-order.

P: Autopilot in altitude-hold mode has a 200 ft. per min. descent.
S: Cannot reproduce problem on ground.

P: Evidence of leak on right main landing gear.
S: Evidence removed.

P: DME volume unbelievably loud.
S: DME volume set to more believable level.

P: Friction locks cause throttle levers to stick.
S: That’s what friction locks are for.

P: IFF inoperative in OFF mode.
S: IFF IS inoperative in OFF mode.

P: Suspected crack in windshield.
S: Suspect you’re right.

P: Number 3 engine missing.
S: Engine found on right wing after brief search.

PS: Aircraft acting funny
S: Aircraft warned to straighten up, fly right and be serious.

P: Target radar hums.
S: Reprogrammed target radar with lyrics.

P: Mouse in cockpit.
S: Cat installed.

Jim,

About this article…

"Stewart has charged that people at CNBC knew what was going on behind the scenes on Wall Street but didn’t tell the public. He has accused CNBC anchors and pundits of abandoning their journalistic duties and acting like cheerleaders for the market.

"In a tremendous boom period, they covered the boom and people wanted to believe in the boom," said Andrew Leckey, a former CNBC anchor and now president of the Donald W. Reynolds National Center for Business Journalism at Arizona State University. "They didn’t uncover the lies that were told to them. Nobody did. But they should be held to a higher responsibility."

But Don Hodges, chairman of Hodges Capital Management in Dallas, said he doesn’t fault CNBC for not seeing the bust coming.

"I’m not sure that anybody had seen it coming," he said. "I’ve listened to all of the so-called experts, and it’s obvious that everybody is very confused."

Oh really, no one saw this "coming"! Many people saw this coming but journalists were not taking the problem seriously. This is a little missive from March of 2008.

Have a nice weekend and welcome to hell!
CIGA Greg Hunter

Dear CIGA Richard,

I trust you are doing well in Tbilisi.

QUESTION #1 – AMOUNT OF OTC DERIVATIVES OUTSTANDING NOTIONAL VALUE?

The answer to your question of what is the notional value of all OTC derivatives outstanding must now be answered by interpolation as the Bank for International Settlement has adopted the Shiller approach of "Value to Maturity."

The assumption required to determine what the financial conditions will be at the maturity render the conclusions another computer cartoon, but pleasing to the statisticians working for the bank 30% lower in notional value.

The number issued prior to the change of method of calculation was one quadrillion, one hundred and forty four trillion dollars.

This has been reduced to 700 trillion dollars.

Now we need to increase any BIS total OTC derivative total notional value figure by 30% to approach the real notional value of OTC derivatives outstanding.

Start with the most recent number of 700 trillion, recognizing this number is but 60% of the real number. Then consider that in bankruptcy notional value becomes full value.

QUESTION #2 – WHAT IS ALL THE TALK ABOUT FOUNDING EXCHANGE TRADING OF OTC DERIVATIVES?

There is no way OTC derivatives can ever be traded on an organized exchange primarily because there is no standard arrangement in the specific performance contracts. It is implicit that to have a clearinghouse function where the winner gets paid and the loser pays in daily true valuation has to be easily arrived at.

Going forward, exchange listings for certain types of derivatives is probable.

Going forward is not the problem. Looking back is the disaster.

QUESTION #3 – Is AIG STILL ISSUING DERIVATIVES.

In the sense of the need to adjust those that they have in terms of market changes, yes.

Good to hear from you.

Respectfully yours,
Jim

Dear CIGA Randy,

You ask about when to sell gold.

There is a good argument that gold will not fall like it did in 1980.

As gold reaches $1650, we will examine the sell question, but before that there is no need.

Regards,
Jim

Jim,

I thought you might get a kick out of the following link to the Application for Federal Bailout 2008 – 2009.

Click here to view the application…

You may have already seen this, but if not… enjoy.

As they say…. the truth is said in jest.

CIGA Buz

 

Dear Jim,

Maybe they should buy 165 million in lead and shackle it to all the legs of the AIG people who get "bonuses"! Rewarding dishonesty and stupidity, or should I say incompetence, is disgusting! They need to be tried for treason!

Best,
CIGA BT

Obama team anger simmers over AIG bonuses
Sun Mar 15, 12:38 PM
By John O’Callaghan and Philip Barbara

WASHINGTON (Reuters) – The Obama administration has done all it can to discourage big bonus payouts by American International Group Inc, advisers to the president said on Sunday, as anger rose over the embattled insurer’s plans.

AIG, which has received three U.S. government bailouts totaling $180 billion, is at the heart of a global financial crisis that President Barack Obama is trying to address with plans for trillions of dollars in spending.

The economy dominated Sunday’s television news shows, with several of Obama’s top advisers and senior Republicans squaring off over the financial sector bailout and healthcare reform.

More…

Jim,

This article states that 49 mainstream economic forecasters are losing faith in the current administration because of its failure to create a viable plan to stabilize big U.S. banks.

Geithner testified on Thursday that, "It requires different approaches, and to solve it we’re going to have to work with the market, because we don’t want the taxpayer and the government taking all those risks on the government’s balance sheet and leaving the government with huge, incalculable losses — risks we cannot manage effectively."

It seems to me that his admission that the losses would be "incalculable" is tantamount to saying what you’ve been saying all along: "There is no practical solution to the OTC derivative problem." Hats off for figuring this out years in advance!

Regards,
CIGA Wallace

Obama’s econ failure: Still no plan to fix the banks
Kevin G. Hall, Mcclatchy Newspapers – Thu Mar 12, 5:26 pm ET

WASHINGTON — The Treasury Department has failed to persuade the world that it has a viable plan to stabilize big U.S. banks, and unless and until it does so, the economic downturn at home and abroad is unlikely to bottom out.

Federal Reserve Chairman Ben Bernanke has said as much, telling Congress last week that "restoring a reasonable degree of financial stability will be critical determinants of the timing and strength of the recovery."

Yet experts warn that each week that goes by without a credible bank plan puts an economic recovery and public confidence in President Barack Obama at risk.

A McClatchy-Ipsos poll this week found that 65 percent of Americans still approve of Obama. However, a Wall Street Journal survey of 49 mainstream economic forecasters this week found that this elite group — which influences public confidence — is losing faith in Obama and in Treasury Secretary Timothy Geithner .

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Posted at 7:00 PM (CST) by & filed under In The News.

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Dear CIGAs,

Let’s not write off the Swiss too fast!

Swiss Gold

Jim Sinclair’s Commentary

The following is a lesson in socialistic thinking.

It is also a lesson in how governments will run nationalized businesses by vetting the CEOs.

Citi get ready!

"In these current economic crises, we are sorry but we see no other alternative but to reduce our staff.

We have to lay off André."

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Jim Sinclair’s Commentary

Can you imagine if they had to mark to market what these pensions would be worth?

Florida’s public employee pension fund plummets
By Sydney P. Freedberg, Times Staff Writer
In Print: Friday, March 13, 2009

Florida’s giant public employee pension fund needs a bailout.

Hit by the stock market crash and losses in risky investments, the pension plan faces a big funding gap, according to a study presented Thursday.

That means that the Legislature likely will have to ask financially strapped state and local governments to pony up additional cash to meet their pension promises.

Almost 1 million public employees and retirees — from teachers and firefighters to social workers and police officers — participate in Florida’s plan.

Because of the funding hole, their employers could see their pension costs roughly double from 10 to 20 percent of their payrolls in six years, according to the study.

The more local governments put in the fund, the more they will have to compensate by hiking property taxes or reducing services. All Floridians, not just those in the pension plan, could be affected.

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Jim Sinclair’s Commentary

Now here is a total contradiction in terms. The US ambassador is going to defuse this?

Note the cane swinging in the lower right corner. Now there is diplomacy in action by the Pakistan police.

American Envoys Try to Defuse a Political Crisis in Pakistan

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RAIWIND, Pakistan — In an effort to defuse the Pakistani political crisis, the American ambassador, Anne W. Patterson, traveled to see the opposition leader Nawaz Sharif to urge him to reconcile with Pakistan’s president, Mr. Sharif said.

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Jim Sinclair’s Commentary

You have the ability to stop the Comex manipulators but they know you will not.

World mints report soaring demand for gold coins
Fri Mar 13, 2009 8:36am EDT
7:07am EDT

LONDON (Reuters) – Mints around the world say demand for gold coins has risen sharply as interest in the precious metal soars on the back of financial instability and concerns over the inflation outlook.

The Royal Canadian Mint, which produces Maple Leaf bullion coins, said it quadrupled its production capacity late last year as demand for gold and silver bullion products leapt.

Gold was one of the few commodities to rise last year as turmoil in the financial sector sharpened investors’ appetite for assets seen as a safe store of value, such as bullion.

Spot gold rallied to an 11-month high of $1,005.40 on February 20 as a slide in equity markets increased interest in the precious metal. Demand for physical gold products such as coins and bars has been particularly strong, traders say.

The United States Mint said sales of its one-ounce American Eagle gold bullion coins rocketed to 710,000 ounces in 2008, from 140,000 ounces a year before.

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Jim Sinclair’s Commentary

Sounds quite correct to me!

Stewart slings barbs face-to-face with Cramer

NEW YORK (CNN) — After a week of pointed verbal barbs, host Jon Stewart sat face-to-face with financial analyst Jim Cramer on Comedy Central’s "The Daily Show" and continued the assault Thursday. Stewart blamed Cramer and cable network CNBC for being irresponsible cheerleaders in the lead-up to the stock market meltdown.

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Jim Sinclair’s Commentary

Now here is one way to negotiate with your bankers. How dare they want guarantees (not reassurance as today’s morning spin says) on already full faith and credit guarantees that Treasury instruments carry.

China condemns US warship deployment as tensions mount
March 13, 2009
Jane Macartney in Beijing and Tim Reid in Washington

Chinese Navy officers reacted with annoyance today when it emerged that the United States had sent a destroyer to back up a surveillance vessel in the South China Sea after it was harassed by People’s Liberation Army (PLA) sailors.

The decision by President Obama to send an armed escort for US surveillance ships in the area follows the aggressive and co-ordinated manoeuvres of five Chinese boats on Sunday. The vessels harassed and nearly collided with the unarmed USNS Impecccable.

One unidentified officer quoted in the China Daily newspaper said that the decision was disproportionate. While China’s Foreign Ministry has so far kept tight-lipped on the latest development, the decision to run such a comment so swiftly in the state-run English-language newspaper was a signal of Beijing’s concerns.

One naval source said the PLA had taken note of the latest US move and was watching developments closely

Another described the deployment of the USS Chung-Hoon, armed with torpedoes and missiles, as a signal of the Pentagon’s intention to “keep on pressing” China in the South China Sea.

He added: “The timing and the extent have gone beyond what you could call proportionate.”

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Jim Sinclair’s Commentary

Face it. Armstrong is right, Alf is right, and the Western world is stone cold broke!

"Think again, however, if you believe you’ve found quiet refuge among the growing ranks of play-it-safe types who have nearly $3.9 trillion stashed in these investments."

Shakeout from money fund’s collapse just starting
AP Online via NewsEdge :

BOSTON_It’s not the sexiest investment around, but the money-market mutual fund has become a high-demand safe haven for those who can no longer stomach the stock market.

Think again, however, if you believe you’ve found quiet refuge among the growing ranks of play-it-safe types who have nearly $3.9 trillion stashed in these investments.

Money funds are generally safe places to park cash because they invest in the safest types of debt. Many buy government bonds such as Treasury bills, while so-called prime funds seek slightly higher yields but accept marginal risk by venturing into short-term corporate bonds.

The downside of such risk hit home last fall when a soured investment in Lehman Brothers debt spooked investors who suddenly pulled cash out of the Reserve Primary Fund. While that run was triggered by the fund’s institutional clients, individual investors could end up losing roughly 8 cents on each dollar invested. The fund’s collapse marked just the second instance that money fund investors have been exposed to losses in the nearly four decades money funds have been around.

To prevent another such debacle, the industry and government regulators are weighing fundamental changes in how money funds operate. Their moves could make money funds even safer, but trim their already tiny yields.

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Jim Sinclair’s Commentary

They have the ability to stop the short side manipulators by taking delivery out of the Comex warehouse, but don’t hold your breath until they do.

Third Point Goes For The Gold
March 13, 2009

Another prominent hedge fund is turning to gold to weather tough times.

Third Point has told investors that it has moved a substantial amount of its assets into the precious metal, following the lead of another activist hedge fund shop, Greenlight Capital. Gold is now the single largest holding in Third Point’s fund, the Financial Times reports.

Third Point founder Daniel Loeb, famous for his poison pen, offered a self-critical take in the letter, acknowledging that “mistakes were made” last year. Were they ever: Third Point plunged 38% in 2008, although it has recovered somewhat this year, returning 1.8% so far.

Loeb paints a grim picture of the global economy, calling attention to the “issue of global insolvency which can be addressed only by massive corporate and sovereign restructuring.” He also played up the issue of corporate pension plans.

“I recently read the 10-K for a major steel company based in the U.S. whose pension liability went from a surplus of $200 million at the end of 2007 to a deficit of approximately $2 billion at the end of 2008,” he wrote. “To add insult to injury, in addition to its pension liability, this company’s healthcare plan is underfunded by $3 billion.”

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Jim Sinclair’s Commentary

Will China be reassured when they wish to be guaranteed?

Do you really believe that a statement that the budget deficit now headed into the TRILLIONs will be cut in half in four years is sound comfort for a debt holder?

Did you ever imagine that this would be the subject of a public exchange of statements?

Obama Aides Try to Reassure China on Treasury Debt
By Rebecca Christie and Kim Chipman

March 13 (Bloomberg) — The Obama administration sought to ease Chinese Premier Wen Jiabao’s concern about the security of his country’s investments in U.S. government debt, reiterating pledges to cut the budget deficit in half in four years.

“There’s no safer investment in the world than in the United States,” White House Press Secretary Robert Gibbs said today.

Wen earlier said that China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” he said at a press briefing in Beijing.

President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of U.S. debt sales to fund a $787 billion stimulus package and a deficit this year forecast to reach $1.5 trillion. Investors abroad own almost half of all U.S. debt outstanding, and China last year overtook Japan as the biggest foreign buyer.

Wen’s words contributed to a decline in Treasuries, before the losses were recouped. Yields on benchmark 10-year notes rose as high as 2.96 percent, from 2.85 percent late yesterday, and were at 2.89 percent at 4:14 p.m. in New York.

White House National Economic Council Director Lawrence Summers, asked today about Wen’s remarks, said overseas “confidence” in Treasuries would be hurt without the administration’s steps to end the economy’s decline.

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