Posted at 3:42 AM (CST) by & filed under General Editorial.

Dear CIGAs,

A low in the gold price in the third week of June 2009 would have significant implications for the target gold will go to in this phase and has NOTHING whatsoever to do with the 121 days to go.

Therefore those of you who hate as a hobby, whine as a past time, and love to hurt for fun, specifically "Non-CIGA Tired in Toronto," need not berate me with foul emails saying I morphed one expectation into another.

There are enough sick people on Facebook and the various chat sites. I do not need more from JSMineset.

I do not hedge nor am I vague concerning what I believe. That makes it easier for you to understand where I am coming from as well as making me the man to beat amongst writers.

121 days speaks directly to the element, "CONFIDENCE," the criteria for value in a reserve currency that is now unravelled where it counts and where MOPE has no impact – in Asia.

Posted at 3:05 PM (CST) by & filed under In The News.

122 days to go

Sinclair16 

Dear CIGAs,

This is precisely what the Formula anticipated in 2006.

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

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

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

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

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

122 days to go.

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

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

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

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

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

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

More…

Jim Sinclair’s Commentary

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

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

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

NYC Freezes Hiring Because Of Senate Gridlock

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

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

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

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

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

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

More…

Jim Sinclair’s Commentary

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

My answer is quite simple: 122 days to go!

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

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

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

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

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

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

More…

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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

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

More…

Jim Sinclair’s Commentary

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

Unwinding at AIG Prompts Pasciucco to Ponder Systemic Failure

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

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

More…

Jim Sinclair’s Commentary

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

These rating companies are worthless relics.

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

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

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

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

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

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

More…

 

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

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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Jim Sinclair’s Commentary

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

See the calming words of Goldman’s attorney:

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

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

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

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

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

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

More…

Posted at 2:59 PM (CST) by & filed under Guild Investment.

WHEN DECIDING WHERE TO INVEST -FIRST LOOK FOR THE GROWTH?

If you are looking for growth, look at India and China and the demand for oil from the aforementioned nations…and from many others.  However, the investment area with the fastest growth in the world is…the available supply of U.S. debt, followed closely by the growth of debt in many European countries.

1. Growth of U.S. and European Debt
The great majority of investors look for growth to identify areas for potential investment.  According to official statements by the U.S. Congressional Budget Office, the investment area with the fastest growth over the next 2-5 years will be the supply of U.S. debt.  This increase in supply may or may not be met with an increase in demand for U.S. debt.  In order to stimulate demand for any product, sellers offer incentives, especially when supply grows rapidly in a short period of time.

What kind of incentives have debt sellers offered historically?  A better yield on the debt is the first and most common offer to sway potential buyers; that means  higher interest rates.

Today, U.S. and European nations find themselves in the unenviable position of  having to sell increasing amounts of debt to increasingly wary buyers.  Many buyers have asked why these governments don’t cut the price of the bonds.  The price of bonds is cut by lowering the value of the currency so that the buyer is not stuck with a high priced product that might decline in value as more debt is floated in coming months and years.  This is an argument that we believe the U.S. Treasury, which is the issuer of U.S. bonds, may wish to implement.  It will solve the problem of selling more debt, although it may anger previous buyers who hold a large amount of U.S. debt already.  Think Saudi Arabia, Japan and China.

A declining dollar also solves the problem of U.S. exports.  With a lower dollar, the US will export more and the economy will recover more rapidly.

Other areas of growth that investors may wish to monitor :

2. Growth of China
Respected economists are predicting 8.2% GDP growth in 2009 and 9.6% GDP growth in 2010.  In our opinion, this makes China a good area for long term investment.

3. Growth of India.
Early indications are for 6% growth in 2009 and we are expecting 6.5% or better growth in 2010.

4. Growth in demand for oil and energy
Oil demand is strong from those countries where growth is strong, primarily China and India. Elsewhere demand is slowly growing and we project that demand will continue as we move toward slightly stronger global growth. At $60 per barrel oil is a very good buy in our opinion.

RUSSIA — STILL A DANGEROUS PLACE TO INVEST

Those of you who have read our memos over the years are aware that we have been pessimistic about the investment environment in Russia for some time.

Russia’s court system is corrupt in the extreme as even Mr. Putin and Mr. Medvedev agree.

We have done no investing in Russia recently for this reason and we wanted to bring you up to date on some recent business events in Russia which offer little hope of any return to a positive investment environment in the near future.  An excellent article on this subject appeared in this week’s The Economist titled "Courting Disaster" with the subtitle "Russia’s Dismal Investment Climate."  The following is the last three paragraphs of the article for your perusal.

“The clearest indictment of Russia’s investment climate came a few days ago from IKEA, a Swedish retail chain, whose local operation has grown quickly since it opened its first store near Moscow in 2000. On June 23rd IKEA said it was suspending its investment in Russia because of the “unpredictable character of administrative procedures”, a euphemism for graft. A symbol of Russia’s economic rebound from the 1998 financial crisis has become an emblem of its dire investment climate.

Among 181 countries surveyed by the World Bank for ease of doing business, Russia occupies 120th place, below Nigeria. Transparency International gives Russia barely two points out of ten—its worst performance in ten years, which puts it on a par with Kenya. Until recently the Kremlin had no need to worry about things like property rights and the rule of law. Its oil wealth ensured an economic boom, no matter how it treated investors. Most of the money that flowed into the country came in the form of loans rather than foreign direct investment.

Now the loans have dried up. The Russian economy is forecast to contract by 8.5% this year, an especially dire performance by the standards of the so-called BRIC countries (the others are Brazil, China and India). Russia still blames the global economic crisis for its misfortunes. A closer look at IKEA and Telenor, as well as many of Russia’s own companies, suggests the truth is more complicated.”

Russia RTS Index (last 5 years)

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SHORT SELLING

Short selling without an uptick
There is a secret of which most of the public is unaware.  The secret is how much money trading operations at major brokerages have made shorting stocks during the recent bear market.  There is no doubt that the removal of the uptick rule (after much lobbying by the financial services industry) exacerbated the decline in U.S. stocks.  In our opinion, it hurt the American people and their retirement savings and caused the U.S. market to fall farther than it would have otherwise and there is some evidence it may have caused many small companies to suffer when they could not access the markets for capital.

The SEC is now considering whether to bring back the uptick rule. In our opinion, It should be brought back as soon as possible. Financial thinkers like Jim Sinclair, Jim Cramer and many others agree with our position and want the uptick rule reinstated.  Arrayed against a reinstatement are the traders who find it easier to make large sums of money by bullying stocks down when there is no uptick requirement. If your wish to write the SEC to register your support for the uptick rule we suggest that you do so soon.

Naked Short Selling
Naked short selling is widely used to force small and undercapitalized firms to refianace on very unfavorable terms, profiting the naked short seller handsomely.  In our opinion, naked short selling is at least as dangerous as the short pools of the 1930’s that the then head of the SEC, Joe Kennedy, worked to stop after he had profited greatly as a principal of short pools of his own.  President Roosevelt appointed Kennedy because as one of the short pool operators he knew exactly how they worked.

Today much of the naked short selling takes place outside of the U.S. by foreign brokers who are not supervised by the SEC, but some of it takes place in the U.S. and it is definitely responsible in our opinion for much of the battering that stocks took in the recent bear market.

CHINA, INDIA, FRANCE AND BRAZIL JOIN RUSSIA IN COMPLAINING ABOUT THE U.S. DOLLAR’S ROLE AS THE WORLD RESERVE CURRENCY

In recent pronouncements by high government officials all of these countries have suggested that a new arrangement be concluded to handle world reserve currency duties.  Some suggest a group of currencies should share the duty; some suggest the gradual removal of the U.S. dollar.  All agree that more trade should be done in bilateral currency agreements directly between nations without transiting through U.S. dollars in the process.

Currently, many bilateral and multilateral trade agreements are being undertaken omitting the dollar as a clearing currency.  In addition, many trade loans in other currencies by-passing the traditional dollar role are taking place.  These facts indicate the beginning of a multi-year process through which the U.S. dollar will decrease in influence and eventually be replaced by a new world reserve currency. The change will not happen this year, but it will happen.

The G-8 meeting will reaffirm the dollar as the world reserve currency.  Japan, Saudi Arabia, the Philippines and many others for whom the U.S. provides a defense umbrella, will not take kindly to the idea of losing the U.S. dollar as world reserve currency.  They feel a debt to the U.S. for military and/or humanitarian support so they will do what they can to delay the removal of the U.S. dollar as world reserve currency.  The tug of war will proceed for some time.

A TRIP TO CHINA

Monty Guild, Tony Danaher and our analysts frequently visit companies and analysts in countries where we have invested or many be interested in investing. Over the years we have prioritized travel to Europe, India, China, Hong Kong, Southeast Asia and Latin America.  In recent years, trips to China and other parts of Asia have been made about twice a year by Monty, Tony and other company analysts.

Monty and an analyst associate will be traveling to 2 cities in China and to Hong Kong from the 10th through the 20th of July and will be reporting to the office daily on the companies and industry analysts that they are meeting.

SUMMARY

We continue to believe that buying India, China, oil and gold on dips will provide excellent long term returns.  One curiosity is that while China has been in a bull market, U.S. based ETF’s focusing on China have not participated as much as they should have based entirely on the appreciation of their underlying components.  Currently, there is the largest discrepancy in history between the value of U.S. based Chinese ETF’s and their component values in China.  We believe that this is either due to the fact that U.S. and European speculators are ignorant of the underlying values of the components of the Chinese ETF’s , or because they expect the Chinese market to follow the U.S. and European  markets lower, which has not happened.

Thanks for listening.

Monty Guild and Tony Danaher
www.GuildInvestment.com

Posted at 1:43 PM (CST) by & filed under Trader Dan Norcini.

Dear CIGAs,

The sinking crude oil market continues to undercut any strength in gold as it feeds into the deflation psychology which is not the least bit helpful to a higher gold price. As long as crude oil continues to move lower, gold will struggle as momentum based funds will move back out of the gold market while shorter term oriented hedgies will press the short side, nipping any rallies in the bud. If you notice on an intraday chart, as crude oil moved off its worst levels of the day, gold came back in force as did both the HUI and the XAU.

Technically gold is still stuck in a very broad consolidation pattern with a current bias towards weakness as it moves down to test the lower region of that nearly 5 month long range. Markets in consolidation modes no longer attract the attention of the movement chasing funds whereas they were once viewed as opportunities for long term players to build a large position size in anticipation of the eventual resolving of the pattern in one direction or the other. Nowadays, if it ain’t movin’, they go and find some newer and more exciting playground somewhere else. Gotta have the Mortal Kombat action or they get bored.

I am not sure what it is going to take to fire up some upside excitement in gold but seasonally summer is not a particularly strong month for the metal so as long as it can continue to attract buying as it nears the bottom of the broad price range that has contained it for this year, that should be considered friendly. We are going to need to see gold manage a close above $940 to at least push a few shorts out of the market. Much stronger resistance remains near the $960 level.

Until this deflation/inflation battle resolves itself, the markets will remain the domain of the one minute bar chart geeks and commenting on their price action is pretty much a day to day event with only the naïve suggesting than any one day’s price action is indicative of a new price trend. I really do not see anything beginning a solid trending move until the US Dollar begins a sustained trend downward.

I want to echo Jim’s comments on the hyperinflation front – it is the loss of confidence in a currency that results in a runaway in prices. Looking back throughout history, who is to say with pinpoint accuracy that it was this event or that event that was the exact cause of such an occurrence? Rather it was the culmination of a series of events that developed out of national monetary and/or fiscal policies, coupled with unexpected geopolitical events that led to the loss of confidence in a currency. Some random event then was the final straw that broke the proverbial camel’s back and created the final event.

I maintain that such will be the case with the US Dollar. The seeds for the loss of its place of supremacy among the nations of the earth have been planted and are now being quite effectively nurtured by the present policies of this nation. As long as confidence, that ethereal, vapor-like substance, can be maintained, hyperinflation will not occur. But once confidence is lost in a currency that has no backing other than the “full faith and credit of the government”, from whence does it draw its support in the minds of the people? What happens when a sufficient majority lose their trust or faith in the government’s ability to manage a crisis? Think it cannot happen here? Guess again! How many of you out there ever believed you would live long enough to see the state of California run completely out of money and issue IOU’s with which to pay its creditors? Does anyone who is reading this believe that the majority of the citizens in that state have any confidence or “trust” left in the political leaders of that state? If California were in the business of issuing a currency, I assure you that such a currency would now be in the scrap heap along with the rest of the contents of the dumpsters that can be found in that state. The only reason anyone is even accepting those IOU’s is because they believe that the feds are eventually going to bail them out.

What happens when the next state goes belly up and begins issuing its IOU’s? and the next, and then another? When does it stop? When you really sit down and think about it, our federal government is doing nothing different than the state of California – it is issuing IOU’s (excuse me – these go by the fancy name of US Treasury obligations). So what would happen in the event that the rest of the world, or the US citizens themselves, reach a point where they lose confidence in the ability of their political leaders to do the right thing and form the correct policies? Answer – a crisis of CONFIDENCE in the national currency. That is what contains the makings of a hyperinflationary event. It really is that simple. Once confidence is lost it cannot be regained without great changes occurring. In some cases, it can NEVER be regained. But one thing is as sure as the sun rising in the morning – people who hold that particular currency will begin to frantically look for something, anything, that they can find to purchase with that currency in order to get rid of it and obtain something of perceived value. That then feeds on itself and as more confidence is lost and further fear takes hold, human nature then moves into the panic phase in which rational thought disappears.

I surely do hope that for the sake of our nation and more importantly, for the sake of our children, that from some quarter, true statesmen will arise who will rightly discern the problem and take the drastic and necessary steps needed to right the ship of state and provide some sort of stability out of which normalcy can return. Only time will tell whether that will occur.

In the meantime, now you know why the present Administration and the monetary authorities have embarked upon what Jim refers to as MOPE. They know how elusive a thing this “confidence” is and they FEAR losing it and will do ANYTHING, and I do mean ANYTHING, in an attempt to preserve it.

Posted at 11:41 AM (CST) by & filed under General Editorial.

Dear Friends,

I have been invited to present at the GeoForum in Johannesburg this coming Friday at 9AM.

This is an industry honor. Of course, I have accepted.

Those of you in South Africa that might wish to attend can contact:

Robbie Cameron
RCA Conference Organisers
PO Box 72147 Parkview 2122
tel +27 11 728 8173 / 4511
fax +27 11 728 1675 / 086 653 7108
robbie@rca.co.za www.rca.co.za
skype: robbiecam2

Respectfully yours,
Jim

Posted at 11:33 AM (CST) by & filed under Jim's Mailbox.

Dear Jim,

This is a first. Sure, it is only between the mainland and HK, however it sets the stage.

CIGA Ro

Bank of China to transact first cross-border yuan settlement Monday
www.chinaview.cn
2009-07-05 23:25:35

BEIJING, July 5 (Xinhua) — The Bank of China (BOC), China’s largest foreign exchange bank, will transact the first cross-border yuan trade settlement deal Monday, a source with the bank said Sunday night.

The BOC Shanghai branch would receive the first cross-border yuan trade settlement deal from the BOC (Hong Kong) Monday, the unidentified source said.

The payee would be Shanghai Electric International Economic and Trading Co., Ltd. under Shanghai Electric Group Co., Ltd. and the remitter would be the company’s business partner in Hong Kong.

More…

Dear CIGA Ro,

Very few have seen the true implications of what the media calls a modest development.

This is what is known as a "landmark" event.

Congrats on your most pertinent and correct comment.

Jim

Dear CIGAs,

Here is a message sent to a COT friend:

Never be a robot to any system. The dollar rules gold today. For gold to be bearish the dollar must be bullish. You can have a bearish dollar and sluggish gold. You cannot have a bearish dollar and bearish gold. What makes it happen in any present time will make it happen in that present time. Always remain malleable and never be a one system TA Stiff!

Jim

Dear Jim,

On June 29, 2009, the RCM issued a press release about their missing gold. The report notes that after a three-month audit by Deloitte & Touche there are 17,514 OZs missing that cannot be attributed to any accounting error.

RCM management stopped short of admitting the gold is gone. According to the press release, RCM’s President emphasized, "the Mint will aggressively continue its efforts both internally and with outside experts to determine the sources of the unreconciled difference."

However, the Mint also noted it had "notified its insurance carriers that it intends to file a claim under its ‘All Risks’ insurance policy which, if successful, will largely offset the amount of any unreconciled difference."

In this context, "All Risks" means employee dishonesty. Insurance companies don’t pay for sloppy accounting, nor do they like to pay out $16 million plus. At least we know someone will now do a thorough investigation.

The full Press Release can be found here…

Best wishes,
CIGA Richard B.

CIGA Richard B,

If a Government Mint can have significant amounts of gold go missing what makes you think that "Honest Abe’s Internet Mint" even exists?

The only totally safe storage is in the vault of you.

I will not even opine on pieces of paper representing gold in storage.

It is amazing how otherwise smart people select the lazy way to protect their life’s work from being decimated by our esteemed financial leadership in and out of government.

Jim

Jim,

AH1N1 is being downplayed by North American media, but nowhere else.

China is a sea of surgical masks. That is scary as you can’t tell if the fellow who just passed within 6 inches of you has it or is trying to prevent getting it.

I got shot in the forehead with a laser thermometer before I was allowed out of my seat on Air China. I got it again at customs.

I think on the way home I will bring a tin foil hat and put it on when I see the laser army heading my way.

Maybe that is not as humorous as I feel it is because these health soldiers look real mean.

Great Britain this past weekend issued a national medical alert estimating that by August they anticipate 100,000 new confirmed AH1N1 flue cases per day.

My Dear Friends,

Please take precautions. This is no joke.

Sincerely,
Jim

Posted at 12:41 PM (CST) by & filed under General Editorial.

Dear Friends,

The hyperinflation we face has nothing to do with demand pull. It is a currency event as it has always been in every historic example going back to the Romans.

Hyperinflation has always occurred in the condition of the most vile economic activity. MOPE via its tool SPIN cannot and will not prevent what is 123 days away.

Anticipate MOPE (Management of Perspective Economics) to reach spiritual levels as the G8 plus 5 shovels out garbage to camouflage the discussions with the Plus 5 on dollar diversification via SSCI (Super Sovereign Currency Index) as a reserve currency unit.

This morning China is referred to by financial TV MOPE as not knowing what it wants. That is outrageous BS. China knows EXACTLY what they want and have defined it in a manner that is without question a Super Sovereign Reserve Currency package as part of available central bank reserves. There is no ambiguity at all concerning all the BRIC nation’s positions.

I will sum up the situation as 123 days to go.

I wager some of you have or will throw away your only insurance during this period at higher gold prices, trading later only to go into gold sticker shock.

Gold is headed to $1224 on its way to $1650 and Alf’s numbers.

The US dollar is going to have a very cold and uncomfortable winter.

Respectfully yours,
Jim

Posted at 12:18 PM (CST) by & filed under In The News.

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

Jim Sinclair’s Commentary

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

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

 

Jim Sinclair’s Commentary

Did any thinking person anticipate anything other than this?

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

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

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

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

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

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

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

More…

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

More…

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

More…

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

More…

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

More…

Jim Sinclair’s Commentary

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

The Chairman becomes a puppet.

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

This is very dangerous behind the door stuff.

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

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

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

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

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

More…

Jim Sinclair’s Commentary

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

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

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

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

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

Maybe there is no compromise in this fire fight.

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

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

Should Federal Reserve Chairman Ben Bernanke keep his job?

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

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

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

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

More…

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

The country is forecasting fiscal deficits for the next decade.

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

More…

Jim Sinclair’s Commentary

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

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

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

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

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

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

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

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

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

More…