Posted at 11:45 PM (CST) by & filed under General Editorial.

Dear CIGAs,

Further to Jim’s comments yesterday regarding the true history of President Abraham Lincoln’s economic and other policies, today’s Globe and Mail contains a very good short history of those policies and their
economic fallout.

While Obama will find in Lincoln much to emulate, he’ll also find much to shun.

CIGA RM

Honest Abe’s spending legacy is a cautionary tale
NEIL REYNOLDS
Globe and Mail Update
January 21, 2009 at 6:00 AM EST

In February, 1861, three weeks before his inauguration, U.S. Republican president-elect Abraham Lincoln assured the troubled country that his first priority as president would be higher tariffs – an economic policy he had championed throughout his political career. In 1832, announcing his candidacy for a seat in the Illinois legislature, Lincoln had said: “I presume you all know who I am. I am humble Abraham Lincoln. My politics are short and sweet, like the old woman’s dance. I am in favour of a national bank, the internal improvement system and a high protective tariff.”

Honest Abe indeed. For 30 years, he pursued these three policy objectives with remarkable consistency and dedication. As a state legislator and as a congressman, he promoted the internal improvement system, a euphemistic phrase that meant deficit spending to fund extravagant economic stimulus programs. As president, he established a central bank to print paper money not supported by gold (the first easy-money “greenbacks”) and raised U.S. protective tariffs to the highest levels in the country’s history.

Taken together, these policies changed U.S. history perhaps as much as his Emancipation Proclamation. Charles Dickens certainly thought so, asserting as early as 1861 that Lincoln’s high tariffs must be regarded as the fundamental cause of the American Civil War.

In 1860, the United States had one of the lowest tariff schedules in the world (average rate: 17 per cent). In 1861, it raised tariffs twice, the first time to 26 per cent, the second time to 36 per cent. In 1862, it raised tariffs to 48 per cent and levied them on a much broader range of goods (including every single farm crop). They remained in effect until the First World War.

Economists say 80 per cent of the costs imposed by these tariffs fell on the import-dependent southern states. In his inaugural speech, Lincoln explicitly promised these states that he would not invade them – provided they paid all “the duties and imposts” that the federal government levied on them.

Perhaps more instructive of Lincoln’s economic instincts, though, was his commitment to the internal improvement system. Railways and canals were the fashionable infrastructure projects of the time – and the great American debate in the years preceding the Civil War was less about slavery than about using public debt to fund the laying of private railway track.

More…

Posted at 9:00 PM (CST) by & filed under General Editorial.

Dear Extended Family,

My thanks go to CIGA Christopher for sending us the just released 2009 Report on Financial Reform by the Group Of Thirty, chaired by Volcker, for review:

 

Click here to view the report…

 

This well designed report deals with the world on the day after. It does not provide a means of addressing the present time meltdown of OTC derivatives that have no substantive means of valuation, being devoid of true markets.

The report focuses on legislation, regulation and supervision going forward, but offers no means of addressing the current conditions to right the wreckage of the world financial system or deal with the downward spiral of business conditions. Sorry.

In a nut shell, it is business as usual, not a Second Coming or the Advent of the Economic Master of the Universe as some anticipate

Respectfully,
Jim

Posted at 7:03 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

From the Golden Children to the Dung Heap Inhabitants. Madoff is spelled BRE-X to the hedge funds

FOCUS: Hedge Funds Not Behind Sell-Off In Banks Say Experts
Wall Street Journal – USA
to arrest concerns about the health of UK financial institutions. This general malaise and investor jitters, rather than short-selling by hedge funds,
See all stories on this topic

Hedge fund loses over $350M in Madoff affair
The Associated Press
ZURICH, Switzerland (AP) — Auriga International Advisers, a hedge fundregistered in the British Virgin Islands, has lost over 400 million Swiss francs
See all stories on this topic

US SEC charges missing Florida fund manager
Reuters – USA
Nadel’s disappearance came a little more than a month after authorities arrested New York money manager Bernard Madoff, who is accused of running a $50
See all stories on this topic

US Jews struggle to come to grips with Madoff
International Herald Tribune – France
Many more investors worldwide found themselves linked to Madoff through their exposure to hedge funds that gave him money to manage. …
See all stories on this topic

US charges missing Florida fund manager with fraud
Reuters – USA
The SEC complaint said the six hedge funds Nadel oversaw, which he valued at more than $300 million, actually contain less than $1 million.
See all stories on this topic

Posted at 5:51 PM (CST) by & filed under General Editorial.

Dear Friends,

There is no chance whatsoever that we will sidestep on a global basis the sins of our financial fathers. No administration will make it correct or even better. The best case scenario is a double dip depression, but a depression is in gear and there is no clutch action to shift those gears.

Obama’s fiscal stimulation program is becoming modestly readable. He is hoping to put off major funding inflows into cement and rebar as long as possible in the hope that the monetary stimulation will have an effect, but as below you can see that monetary policy has not and will not do anything positive for the economy. The Fat Cats have all that in their pocketbooks, be it corporate or individual. It has paid off legal claims, attorney’s fees and multiple types of funds due to others.

As soon as they go easy but PR hard the fiscal stimulation fails. The knee jerk reaction will open the flood gates. Banks and financial institutions are still on the begging bowl loan and donation line. Business is just awful and unemployment is in depression territory certainly if viewed through the truth window of Shadow Statistics (www.ShadowStats.com).

The cut in the dividend of GE is simply a harbinger of more problems there. Confidence of builders is in the tank. Consumers are spent out and taken out on a stretcher. There is only one way to go when the problem at the basis of all this remains hidden and unattended to.

When Lehman was thrown under the bus, the $60 trillion plus pile of credit default derivatives imploded. That pile can NEVER have a clearinghouse and it is that pile now sitting on any business recovery of merit. Geitner, our possible new Secretary of the Treasury, fluffed off questions about regulating the OTC derivative market.

You can anticipate piles of BS daily with the media continuing to educate you with disinformation. All of this is like intoxicating the terminally ill patient in order to convince that patient that he can anticipate a long and healthy life. It may be kind but will not make the patient live one more day.

Respectfully yours,
Jim

Commercial Bank Asset Growth Rates

Dear CIGAs,

There is an old saying that you can lead a horse to water, but you cannot make him drink.

This saying certainly applies to the quantitative easing strategy currently being employed by the Fed. Once the derivatives began to collapse in the Fall of 2008, the Fed began to liquefy the banking as the buyer of last resort of bad assets. Over a period of three months, the net free reserve position of the Federal Reserve Bank have been "repaired."

The "repair", however, has had little effect on lending. In fact, since the end of Summer 2009 the growth rate of total loans which includes business, real estate and consumer loans continues to deteriorate. Even more shocking is that the cash assets growth rate has gone parabolic since the Fall of 2008. In other words, banks are hoarding cash and curtailing loans. The return of the real estate and consumer spending (bubbles) cannot happen without access to easy credit.

Times have changed.  I will post more about this on my website.  If I ever get the time…

Take care,
CIGA Eric

Click any chart to enlarge all in PDF format

LTC.ht23 - 20090121_111525 Asset Growth CBUS 1948-present - 20090121_111525

 Asset Growth CBUS 2003-present - 20090121_111525

Posted at 5:37 PM (CST) by & filed under General Editorial.

Dear CIGAs

I have spoken to 3 of the 4 warehouses that hold the COMEX precious metals. It seems that a lot of metals are being withdrawn. Each warehouse states the same bottom line – people/entities are removing metals and it’s far above what the employees would call normal.

With that in mind, we have some difficulties that fall onto the warehouses. These people are very courteous and truly want to help, but the load they have been given has slowed the process down quite a bit. I suggest to all, not to leave a message on their answering machines, but to keep calling till someone picks up the phone. Please be courteous with these people – they are working way too hard to keep up with demand.

Each warehouse has its own procedure for delivery. In order to alleviate some of the headaches for my clients, we are setting up a system where we will do all the leg work (for an additional fee of course) for them. So opening an account to take the physical along with the delivery can now be done within our system.

Our delivery fees have been inflated, so from this point forward the commissions and processing fees are $350 per 100 ounce bar. That price will get one up to the final step which is the arrangement for delivery thru each warehouse. I will give instructions to anyone or brokerage house that needs help in this delivery process.

Most of the question I’ve been getting is where should people store their gold. Should it go to a warehouse in Zurich, Switzerland, Austria? What’s the safest? In earnest, I think the safest place is in your own possession. We’re going back to old times again where you privately kept your wealth with you.

Something else came up in regards to mini gold deliveries. If one wanted to take delivery of a mini bar, they now have to buy 3 instead of one. It seems that this is really a dispute over language than anything else, but the point is being missed. The exchanges were created so that a farmer from Minnesota who has a crop of wheat could take his crop into Chicago and sell it to someone who needed it from another state and to do true hedging. The contracts have a specified size and a buy and sell would commence. In practice you are allowed to trade a mini in the gold market, but the minimum for delivery in gold is still 100 ounces in size. Because of this, I see no point in trading mini gold because of the strings attached.

The delivery process is really not that difficult, it just can be time consuming. Either way, I’m at your service and understand the procedures well enough to offer my services.

JB Slear

Fort Wealth Trading Co. LLC
www.FortWealth.com
866-443-0868 ext 104

Posted at 2:56 PM (CST) by & filed under Jim's Mailbox.

Dear Friends,

Like it or not, double dip or not, a long term depression is upon us. The Brits may well need what they are asking for, as may you.

Dear Jim,

I read the following accounts and could not help ponder how we may be headed there very soon and how people made due. The news sounds a lot like things now, especially the bank failures and layoffs!

Best,
CIGA Big T

"I Remember . . ." – Reminiscences of the Great Depression

"I remember…"
(Reminiscences of the Great Depression)

Everyone has a story to tell about the past.

During the Great Depression of the 1930s, some Michiganians bartered and traded for food, clothes, shelter and services. Sharing and "making do" became a way of life. People who lived during the Depression have interesting stories to share about how they coped with hard times.

The following reminiscences were published in Michigan History Magazine, January-February, 1982 (Vol. 66, No. 1). The last reminiscence is from an oral history of Richard Waskin.

Marie Beyne Gillis Tubbs Remembers Her Father’s Music

The business of my father (Theodore J. Beyne) was at a standstill. Since his hobby was playing the violin in the newly formed Grand Rapids Symphony Orchestra, he had time to search within himself for things to do. He began to compose beautiful music–three symphonies, quartettes, violin, piano and cello concertos and other piano music.

My first memory of hearing his music played was at the beginning of the Depression at the band shell at the city’s John Ball Park. His orchestral arrangement of Hoagy Carmichael’s "Star Dust" was performed by the WPA orchestra, which had been formed to provide employment for out-of-work musicians. How clearly I remember, out of the depths of dark feelings springing from closed banks and no work, the wonderful sensation that comes from something more than "bread alone." And I remember his pleased reaction (he was overwhelmed) at the audience’s appreciation shown with lots of applause. "Depression go hang for the moment."

More…

Posted at 12:11 AM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

Food for thought?

Carrying Several Passports? It’s Not Just for Spies
By MICHAEL T. LUONGO
Published: January 19, 2009

Alessandro Pappalardo, an artist in New York, holds passports from Italy and Argentina and, last year, added an American one. Previously an executive with Aerolíneas Argentinas, he said, “I used to go a lot to Brazil, and I would always decide what passport to show depending on what line was shorter.”

Stefan Stefanov, a citizen of the United States and Bulgaria who works for FirstApex Group in Warsaw, said he decided which passport to use depending on where he was going. “Of course, I don’t hide that I am a U.S. citizen,” Mr. Stefanov said. “But I don’t parade it either.”

Dual passports are no longer the sole province of people who grew up in more than one country. Millions of American citizens potentially qualify for various reasons — ethnic heritage, religion, country of birth or where their spouse was born.

“The fact is people don’t think about it until it is pointed out to them,” said Jan Dvorak, president of Travisa, a passport services company in Washington. Some Americans, he said, “don’t realize that they actually have dual nationality.”

While there are no hard numbers, more Americans seem to be trying to qualify for additional passports. “Savvy travelers and business travelers want to make sure they have two passports based on nationality because there are certain advantages,” Mr. Dvorak said.

More…

Jim Sinclair’s Commentary

Keep a close eye on both Russia and former USSR nations making a MAJOR thrust into property and company mineral acquisitions as North American and South African majors slumber on.

Russia Prepares To Rival Rio And BHP
Vidya Ram , 01.16.09, 01:15 PM EST

A merger of Russian miners could be unwelcome competition for beleaguered European miners.

If plummeting commodity prices haven’t been keeping Rio Tinto’s Tom Albanese and BHP Billiton’s Marius Kloppers awake at night, the latest news out of Russia almost certainly will. Plans to create a super-miner, by merging three troubled miners, seems to be gaining momentum.

Making a big push internationally into the mining sector may not be ideal for the firms, timing wise, but with the backing of the comparatively-deep-pocketed Kremlin, a super-miner could pose a new and un-welcomed threat for the likes of BHP and Rio Tinto (nyse: RTP – news – people ). The super-miner would be in line for a bailout from the Kremlin should it come into existance.

Talks over a possible merger of mining firms Rusal, Norilsk Nickel and Metalloinvest are taking place in Moscow, reported a number of papers, including Russia’s Vedomosti. Rusal and Norilsk Nickel were unavailable for comment at the time of publication, while Metalloinvest said it would be responding to requests next week.

That same report suggested that the state could acquire a stake by converting the firms’ joint debts into a stake in the new company.

Norilsk Nickel Chief Executive Denis Morozov, which heads the palladium and nickel miner, had previously talked of his ambitions of making his firm the BHP Billiton (nyse: BHP – news – people ) of Russia. However, hopes of any merger in the mining sector had been held up by constant bickering over control, until now. (See "Russian Billionaires Tussel Over Nickel Giant.")

More…

 

Jim Sinclair’s Commentary

As a note of reference, please read the total history of the Lincoln administration as a historical reality, not a political construct.

Our new administration has undertaken that administration as its example to emulate.

The wartime President Lincoln set the blue print for the Cheney/Bush Administration.

Before you scream, study!

 

Jim Sinclair’s Commentary

It will take both fancy bookkeeping and a miracle to hold it there.

Roubini Predicts U.S. Losses May Reach $3.6 Trillion (Update1)
By Henry Meyer and Ayesha Daya

Jan. 20 (Bloomberg) — U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis.”

Losses and writedowns at financial companies worldwide have risen to more than $1 trillion since the U.S. subprime mortgage market collapsed in 2007, according to data compiled by Bloomberg.

President Barack Obama will have to use as much as $1 trillion of public funds to shore up the capitalization of the banking sector, following the $350 billion injection by the Bush administration, Roubini told Bloomberg News. Congress last year approved a $700 billion rescue fund, of which half remains to be disbursed.

Bank of America Corp., the largest U.S. bank by assets, posted a quarterly loss of $1.79 billion last week, its first since 1991, and received $138 billion in emergency government funds. Citigroup Inc.posted an $8.29 billion fourth-quarter loss, completing its worst year, and plans to split in two under Chief Executive Officer Vikram Pandit’s plan to rebuild a capital base eroded by the credit crisis.

More…

Jim Sinclair’s Commentary

This is not without logic as an enduring recovery in China first would make a freely trading Chinese currency attractive as a reserve item. Time then could make the Chinese unit a major reserve currency.

Should that occur "Lenin" would take the position of the world’s leading economist. Think about that and know Greenspan is responsible for this phenomena with the support of all the OTC derivative traders around the world.

Jim Rogers sees Renminbi replacing US Dollar as world reserve currency
Tuesday, January 20, 2009

Legendary global investor Jim Rogers said the Renminbi may possibly replace the US dollar as the international reserve currency 15 years from now.

Addressing the Asian Financial Forum in Hong Kong, an event that brought together about a thousand participants from around the globe, Rogers said he found Asia to be the place where "the world is changing" as he toured the world in 1990 through 1992.

"This is going to be the new centre of the world, not just the financial but the political world," he said.

The only currency that could replace the US dollar "this year" would be the euro, while the only conceivable currency that can replace the dollar as the reserve currency "15 years from now" is renminbi.

Rogers said he believed China will rise despite possible setbacks.

The United States also experienced setbacks and had various problems back in the 19th century, which, nevertheless, did not stop it from becoming the greatest success of the 20th century, he said.

More…

 

Jim Sinclair’s Commentary

Let’s not take our eyes off Pakistan.

Pakistan kills 22 militants near Afghan border: officials

PESHAWAR, Pakistan (AFP) — Pakistani troops backed by war planes and helicopter gunships on Tuesday killed 22 militants in a major offensive against insurgents near the Afghan border, security officials said.

"We have launched a major operation in Mohmand district early this morning," a paramilitary force official told AFP.

"At least 22 insurgents have died so far. Aircraft participated in the operation in Mohmand for the first time," he said.

Troops pounded suspected militant locations in the northwestern tribal region and destroyed several bases, said the official requesting anonymity.

More…

India tests missile amid tensions with Pakistan
Tue Jan 20, 2009 2:59am EST

NEW DELHI (Reuters) – India successfully tested a supersonic cruise missile Tuesday in a remote desert close to the Pakistan border, officials said, amid continuing tensions with its nuclear-armed rival over the November attacks in Mumbai.

Indian officials say the launch of the Brahmos was only part of ongoing reliability tests, but some analysts say the timing was sensitive and could alarm Pakistan.

"The test was successful," a defense ministry spokesman said, without giving details.

The Brahmos, which can travel at up to 2.8 times the speed of sound and has a range of 290 km (180 miles), was tested at Pokhran, a desert town along India-Pakistan border and also the site of India’s 1998 nuclear tests.

More…

Posted at 5:42 PM (CST) by & filed under Jim's Mailbox.

Dear Jim,

Although this article has been written a few weeks ago, I think it is important to share it with you and the other CIGAs.

Robert Kiyosaki, author of "Rich Dad Poor Dad", believes that the most important asset is our brain and urges everyone to get a financial education to help them do their homework instead of blindly following so called financial experts. He gives some interesting insight on how we got into this mess and how people must act to protect themselves.

Like you, he thinks the world power is pyramidal and this crisis is the result of a "wider struggle for power and domination".

He obviously favors Gold as protection.

While he was in South Africa, he interviewed 3 couples from Zimbabwe about:

1. How fast did the economy turn?
2. When did you know that you were in financial trouble?
3. When did you finally decide to leave Zimbabwe?
4. If you could do things differently, what would you have done?

It´s very interesting to see how different the reaction of each couple were and how they were almost all taken by surprise, except for one.

Regards,
CIGA Christopher

How the Financial Crisis Was Built Into the System
by Robert Kiyosaki
Posted on Monday, November 24, 2008, 12:00AM

How did we get into the current financial mess? Great question.

Turmoil in the Making
In 1910, seven men held a secret meeting on Jekyll Island off the coast of Georgia. It’s estimated that those seven men represented one-sixth of the world’s wealth. Six were Americans representing J.P. Morgan, John D. Rockefeller, and the U.S. government. One was a European representing the Rothschilds and Warburgs.

In 1913, the U.S. Federal Reserve Bank was created as a direct result of that secret meeting. Interestingly, the U.S. Federal Reserve Bank isn’t federal, there are no reserves, and it’s not a bank. Those seven men, some American and some European, created this new entity, commonly referred to as the Fed, to take control of the banking system and the money supply of the United States.

In 1944, a meeting in Bretton Woods, N.H., led to the creation of the International Monetary Fund and the World Bank. While the stated purposes for the two new organizations initially sounded admirable, the IMF and the World Bank were created to do to the world what the Federal Reserve Bank does to the United States.

In 1971, President Richard Nixon signed an executive order declaring that the United States no longer had to redeem its paper dollars for gold. With that, the first phase of the takeover of the world banking system and money supply was complete.

In 2008, the world is in economic turmoil. The rich are getting richer, but most people are becoming poorer. Much of this turmoil is directly related to those meetings that took place decades ago. In other words, much of this turmoil is by design.

Power and Domination
Some people say these events are part of a grand conspiracy, and that might well be. Some people say they represent the struggle between capitalists, communists and socialists, and that might be, too.

I personally don’t participate in the debate over a possible global conspiracy; it’s a waste of time. To me, the wider struggle is for power and domination. And while this struggle has done a lot of good — and a lot of bad — I just want to know how to avoid becoming its victim. I see no reason to be a mouse trying to stop a herd of elephants from fighting.

Currently, many people are suffering due to high oil price, the slowdown in the economy, loss of jobs, declines in home values, increased bankruptcies and businesses closings, savings being wiped out, the plummeting stock market, and rising inflation. These realities are all direct results of this financial power struggle, and millions of people are its victims today.

More…

 

Dear Little Tatanka,

Glad you are back and hope you are feeling better. That is a long flight(s)!

This makes no sense. Germany last year was still a net exporter of goods. The Bundesbank is the heart of the Euro and with Germany being the European powerhouse, one wonders, if they can’t finance operations it is only a matter of time before ALL bonds are rejected en masse.

The ECB even has a higher interest rate than the Fed, so it seems to me very soon the USA will hit a brick wall at 1000 mph! (as you have said, in the second half of 2009). As you have said, to trade your insurance is insanity!)

Best,
CIGA BT

German bond sale’s fate signals trouble ahead
By David Oakley in London
Published: January 7 2009 13:30 | Last updated: January 7 2009 20:45

A German sovereign bond auction failed on Wednesday as investors shunned one of the most liquid and safe assets in the world in a warning for governments seeking to raise record amounts of debt to stimulate slowing economies.

The fate of the first eurozone bond auction of 2009 signals trouble ahead as governments around the world hope to issue an estimated $3,000bn in debt this year, three times more than in 2008.

The 10-year bonds failed to attract enough bids to reach the €6bn the German government wanted. Bids of €5.24bn, a cover of only 87 per cent, amounted to the second worst auction on record in terms of demand.

Such developments were rare before the credit crisis. Before the seven German bond auctions that failed last year, the last German bond auction to fail was in July 2000 after the dotcom crash.

More…

Dear Big Tatanka,

The Weimar Experience is a failure of a singular currency. A planetary Weimar experience is a failure of all currencies in terms of gold. Gold is the certain winner. All else will be relative to each other. I will write more on what this means to currencies as soon as I complete an intensive review of every major nation’s new addiction to bailouts in terms of GDP on a percentage momentum basis.

Respectfully yours,
Jim