Posted at 11:12 AM (CST) by & filed under


Dear CIGAs,

Second quarter GDP growth numbers were revised down last week to a paltry 1.6% from 2.4%.  Wall Street celebrated because some were expecting “growth” to be revised even lower.  The stock market shot up on this news, but should everyone feel relieved because the U.S. got at least some growth?  Consider this–we paid dearly for that 1.6% growth.  If you add up what was spent on TARP, the stimulus bill, nearly $2 trillion spent by the Fed buying mortgage backed securities and Treasuries and all commitments to Fannie, Freddie, FHA and the FDIC, you come up with a total of about $3.7 trillion.  This is what it cost to support the U.S. financial system according to Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program. (Click here for more on this story.) 

To me, spending or committing $3.7 trillion to the American economy and getting just 1.6% growth is frightening.  Expert trader Dan Norcini had a very sarcastic take on this subject in a recent post at  He said, “The fact that it has taken gazillions of conjured-into-existence-out-of-no-where dollars (some call that stimulus) to produce this pitiful growth rate number for the quarter, seems to have escaped the attention of the equity perma bulls who have yet to come to grips with the consequences of all of this. My own view is that it should be a relatively easy matter to get that growth rate up to double the figure given us. All we would need to do to get to 3.2% growth rate is to print twice the number of Dollars and double the rate of government indebtedness.”  (Click here to read Norcini’s entire article.)

To John Williams of, anemic growth was not a surprise.  In an interview yesterday, Williams told me, “The money that was spent just went to support the banking system to help prevent a systemic collapse.  They have prevented a collapse, that’s a big plus. . . . It was not designed to stimulate the economy.  It was designed to prevent a systemic collapse.”  We did get some stimulus from the home buyers tax credit and cash for clunkers.  That’s now gone, and it probably robbed sales of cars and houses from the future.  

So where does that leave us?  We just had dismal numbers reported on jobs, housing and GDP.  Does that mean we are at a bottom?  Not a chance.  If we really were in this so called recovery, wouldn’t we have much stronger growth?  Sure we would, and the Fed also knows there is something very wrong.  It recently announced it would spend at least $10 billion a month buying Treasuries.  The Fed also suggested it would act to keep the economy from sliding further.  That doesn’t sound like a recovery to me.  It sounds like further money printing is in the cards as the economy continues to falter.   

Williams predicts the banks are going to need another “bailout.”  He also told me, next year holds a “particularly high risk for a major systemic disorder, a heavy sell off of the U.S. dollar and early stages of hyperinflation.” He also thinks the stock market is “irrational, unstable and terribly dangerous.”   

In my interview, I asked Williams where people should invest money for safety.  He would not give specific asset categories, but he did say, “You want to be in hard assets that will retain their value against inflation.”  

That sounds to me like a warning to lighten up on the stock market and buy things such as silver and gold coins.  If nothing else, be conservative and protect yourself from the downside risk.  It appears the economy is set for another slide.


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

Jim Sinclair’s Commentary

One thing is for sure. Regardless of whether the rumors are true about the Chinese central banker, you can be sure the people who run the Chinese central bank will not buy many more US Treasuries.

Yes, this statement speaks to the Chinese rating of US Treasury investments, a definite downgrade that Moody’s and Standard and Poors dare not make.

Japan debt safer than U.S. debt: China economist
By Simon Rabinovitch and Aileen Wang
Posted 2010/08/11 at 7:42 am EDT

BEIJING, Aug. 11, 2010 (Reuters) — China has been buying record amounts of Japanese government debt because it is less risky than U.S. debt, at least in the short term, a Chinese government economist said on Wednesday.

Investing in Japanese bonds is safer because so much of the country’s debt is held domestically, and the yen is on course to strengthen further, said Zhang Ming, an economist with the Chinese Academy of Social Sciences, a top government think-tank.

"Even though the difference in yields is big, China has been abandoning U.S. debt and picking up Japanese debt. This definitely shows that it believes the risks of U.S. debt far exceed those of Japanese debt," Zhang said in a report issued by his research institute.

The report was issued a day after the Federal Reserve said it would buy more U.S. government debt in a form of mild quantitative easing to counter economic weakness.

Top Chinese leaders have previously registered their concerns about lax U.S. fiscal policies eroding the value of their investments in the United States.



Jim Sinclair’s Commentary

I wonder if he just figured this out.

This has been true since they planted the buttonwood tree.

Hedge Fund Manager Dan Loeb: "The Whole System Is Rigged"
Posted Aug 31, 2010 12:48pm EDT by Courtney Comstock
Provided by the Business Insider, August 31, 2010:

Apparently everyone’s forwarding around the powerful message in hedge fund manager Dan Loeb’s most recent letter to investors.

The message, from the number of chunks of quotes Dealbook pulls out of Loeb’s letter is: I don’t trust the government to do what’s best for the economy, so I’m pulling out of companies that could be impacted by public policy.

Third Point’s most recent investment strategy reflects Loeb’s belief that banks, healthcare, and for-profit education companies are "overly exposed to unpredictable government regulation."

In the startling conclusion, Loeb says:

“It is easy to see why so many people have concluded that the entire system is rigged.”

Here are the quote chunks we pulled from Dealbook’s analysis of the letter. Key points are bolded:


Jim Sinclair’s Commentary

And I understand in Iran.

Citigroup to Increase China Workforce to 12,000 in Three Years
By Cathy Chan – Aug 31, 2010 9:01 AM MT

Citigroup Inc. plans to almost triple its workforce in China to as many as 12,000 people in the next three years, intensifying its rivalry with HSBC Holdings Plc in the world’s fastest-growing major economy.

The New York-based bank will hire more in China than in any other market in Asia-Pacific, Stephen Bird, Citigroup’s co-chief executive officer for the region, said yesterday in an interview. Citigroup has 4,500 employees in China and 50,000 in Asia, according to spokesman James Griffiths.

Citigroup CEO Vikram Pandit is raising his bet on China, where banks extended a record $1.4 trillion of new loans last year. Unlike HSBC and Standard Chartered Plc, Citigroup has no plans to sell shares in China and will instead fund expansion with money generated in Asia, Bird said on Aug. 25.

“China is one of Citi’s priority markets globally,” said Bird, 43. “We have aggressive consumer banking expansion plans and want to open branches as fast as regulators in China will let us.”

Citigroup has 29 outlets in the country and plans to add 10 more this year. That will still leave it short of HSBC’s 102 outlets and the 59 operated by Standard Chartered.

Standard Chartered, the U.K. bank that gets more than three-quarters of profit from Asia, has more than 4,000 employees at its China unit. HSBC, Europe’s largest lender by market value, has more than 5,000. Industrial & Commercial Bank of China Ltd. had 390,000 workers at the end of 2009.


Jim Sinclair’s Commentary

Even the dead are now homeless.


Jim Sinclair’s Commentary

The Consumer Confidence Index is a survey of economic statistics that is dicey at best.

Consumer confidence rose more than forecast in August. Specifically, the Conference Board’s confidence index increased to 53.5 from a five-month low of 51 in July; beating the Street’s estimate of 50.7. (From

Jim Sinclair’s Commentary

Case-Shiller, your nose is growing.

The S&P/Case-Shiller home-price index for June increased 4.2% from June 2009. (From

Jim Sinclair’s Commentary

Debka is rumored (unconfirmed) to be influenced by Massad.

Regardless, this development is telling.

US to sell Israel massive military fuel stocks worth $2 bn
DEBKAfile Exclusive Report August 28, 2010, 12:53 PM (GMT+02:00)

On Aug. 6, the US Defense Security Cooperation Agency, DSCA, informed Congress of the sale to Israel of 60 million gallons of unleaded gasoline, 284 million gallons of JP-8 aviation jet fuel and 100 million gallons of diesel fuel at an estimated cost of two billion dollars. The date is significant, DEBKAfile’s intelligence sources find.  Ten days earlier, the Japanese tanker M.Star was attacked in Omani waters of the Strait of Hormuz with 200,000 tons of oil.

Although American experts who examined the vessel, they never attributed the damage to sabotage by Iran or al Qaeda, despite the latter’s claim of responsibility on Aug. 4 While Washington did its best to sweep the incident under the rug, Saudi intelligence were worried enough about the threat inching dangerously close to the Gulf’s oil exporting lifeline to launch an independent investigation of the incident.

Their investigators discovered it was staged by a Saudi terrorist who operates out of Iran under the orders of the Revolutionary Guards. To Riyadh, the episode looked like a blunt warning from Tehran to Washington and its allies about the consequences – not just of a direct strike against Iran’s nuclear facilities, but the possibility of sanctions upsetting the equilibrium of the Islamic regime.

Blockage of the Strait of Hormuz would cut off Israel’s primary source of fuel. Therefore, our sources report, a series of accords, some of them secret, have been transacted to back up America’s standing commitment to keep Israel supplied with its energy needs in the event of armed conflict or crisis on world fuel markets.


Jim Sinclair’s Commentary

The Federal Budget Deficit is going further and further out of control.

Record number in government anti-poverty programs
By Richard Wolf, USA TODAY

WASHINGTON — Government anti-poverty programs that have grown to meet the needs of recession victims now serve a record one in six Americans and are continuing to expand.

More than 50 million Americans are on Medicaid, the federal-state program aimed principally at the poor, a survey of state data by USA TODAY shows. That’s up at least 17% since the recession began in December 2007.

POLITICS: Welfare agencies boost voter rolls

"Virtually every Medicaid director in the country would say that their current enrollment is the highest on record," says Vernon Smith of Health Management Associates, which surveys states for Kaiser Family Foundation.

The program has grown even before the new health care law adds about 16 million people, beginning in 2014. That has strained doctors. "Private physicians are already indicating that they’re at their limit," says Dan Hawkins of the National Association of Community Health Centers.

More than 40 million people get food stamps, an increase of nearly 50% during the economic downturn, according to government data through May. The program has grown steadily for three years.


Posted at 4:59 PM (CST) by & filed under Jim's Mailbox.

Canadian dollar ‘big winner’ with more quantitative easing

While the Canadian dollar will benefit, it will not be the ‘big’ winner. Gold has consistently outperformed all fiat, including the Loonie, since 2000. Expect this trend to continue as long as devaluation through perpetual stimulus remains the official solution.

If the Fed pursues another round of quantitative easing, the Canadian dollar may be the big winner. The loonie has tended to perform fairly well following previous QE episodes, according to Barclays strategist Paul Robinson.




Analyst: Citigroup Is Cooking the Books

Headline should read who’s not cooking their books? Generous accounting flexibility allows financial firms to reports earnings that do not exist. This is hardly a news flash.

An all-out war has broken out between Citigroup CEO Vikram Pandit and a prominent securities analyst who is saying that the big bank may be cooking the books by inflating its earnings through an accounting gimmick, FOX Business Network has learned.



Broke City Breaking Employee Contracts

Since local governments cannot devalue their currencies to pay for services they cannot afford, they must either receive "free" money from the federal government (which can print money) or drastically curtail their spending. The federal government’s most recent liquidity infusion to local and state coffers to fill budget holes suggests that they are fully aware of the economic consequences of public sector employment contraction. Unfortunately, the small cash infusions won’t provide much more than a temporary solution to a long-term secular problem.

The city of Miami is so broke it’s forcing employees to take pay cuts, even though they’re under contract.

Mayor Tomas Regalado said he’s never seen a financial mess like this before, and his options are grim.

“It’s either that or we layoff 1,000 employees or we raise taxes to the max, and we’re not raising taxes to the max,” the mayor said.



Posted at 1:34 PM (CST) by & filed under General Editorial.

Dear CIGAs,

What Martin Armstrong offers you for free is amazing.

Knowledge of world economies is key to understanding your own economy and currency in this mirror image Forex market.

Click images to enlarge Martin Armstrong’s latest in PDF format

Armstrong_Page_1 Armstrong_Page_2


Posted at 1:28 PM (CST) by & filed under In The News.

Jim Sinclair’s Commentary

The following is a rumor and must be read as such.

Stratfor is usually a good source.

What gets my attention is speculation on fear of the death penalty for owning US government bonds. That has to tell you something.

China: Rumors of the Central Bank Chief’s Defection
August 30, 2010 | 1406 GMT

Rumors have circulated in China that People’s Bank of China (PBC) Gov. Zhou Xiaochuan may have left the country. The rumors appear to have started following reports on Aug. 28 which cited Ming Pao, a Hong Kong-based news agency, saying that because of an approximately $430 billion loss on U.S. Treasury bonds, the Chinese government may punish some individuals within the PBC, including Zhou. Although Ming Pao on Aug. 30 published a report on its website indicating that the prior report was fabricated by a mainland news site that had attributed the false information to Ming Pao, rumors of Zhou’s defection have spread around China intensively, and Zhou’s name has been blocked from Internet search engines in China.

STRATFOR has received no confirmation of the rumor, and reports by state-run Chinese media appeared to send strong indications that Zhou is in no trouble at the moment. However, the release of this rumor and its dispersion throughout the public is significant, particularly as the Communist Party of China (CPC) is preparing for a leadership transition in 2012.


Posted at 1:27 PM (CST) by & filed under Jim's Mailbox.


In the early 1980s I wrote a book on the strategic metals and materials war. I owned a minor metals trading business in London at 116 Borough High Street.

I know this market better than most. This is HUGE. It can shut down the Western World high tech industry.


Backlash over China curb on metal exports

Draconian describes one perspective. Strategic position or reposition describes another. It’s difficult to establish leverage in trade negotiations when huge structural deficits places hat during the Treasury auctions to the same nations setting the ‘unfavorable’ rules.

China’s draconian export curbs on rare earth minerals needed by the rest of the world for frontier technologies is escalating into a serious diplomatic and trade clash with the United States and other leading powers.


Thanks Bob


Americans spend a bit more as economy limps along

As I suggested in my commentary, If you don’t like the message conveyed by economic time series, revise it! , personal spending and consumption data, as well as many more economic series, are hardly worthy following due to constant revision and massaging techniques. Capital flows could care less about utopia theories based on biased and historically uncomparable economic times series.

Americans are spending a little more this summer, but hardly enough to rejuvenate the weakening economy.

What is needed is a bigger boost in salaries and more jobs. Economists don’t see either coming this year, which is why the economy is likely to limp along.