Sunday, January 31, 2010

“No nation in history has ever printed its way to prosperity, borrowed its way to prosperity or spent its way to prosperity. The US will not be exempt from this truth” – Trader Dan Norcini

Watchdog: CatastrophicFinancial Meltdown Looms
Probe by Treasury's inspector general finds TARP didn't do enough, and that a new fiscal crisis may be on the horizon.

Today, with permission, we present a guest article by David Galland of The Casey Report. It comes to us by way of John Mauldin's excellent (and free) e-newsletter, Thoughts From the Frontline.

An Insider's View of the Real Estate Train Wreck, by David Galland, The Casey Report
The first time I spoke with real estate entrepreneur Andy Miller was in late 2007, when I asked him to serve on the faculty of a Casey Research Summit. As John Mauldin, a former faculty member himself, knows, we're very selective with our speakers. And there was no one in the nation I wanted more than Andy to address the critical topic of real estate.
My interest in Andy was due to the fact that he has been singularly successful in pretty much all aspects of the real estate market, including financing and developing large projects – such as shopping centers, apartment communities, office buildings, and warehouses – from one end of the country to the other. His expertise has also allowed him to build an impressive business providing assistance to large financial institutions that need help in dealing with problem commercial real estate loans. As you might suspect, business is booming.
Back in 2007, however, what most intrigued me about Andy was that he had been almost alone among his peer group in foreseeing the coming end of the real estate bubble, and in liquidating essentially all of his considerable portfolio of projects near the top. There are people that think they know what's going on, and those who actually know – Andy very much belongs in the latter category.
In fact, he initially refused to speak at our event, only agreeing very reluctantly after I had hounded him for several months. The reason for his refusal, I later found out, was that he had spoken at several industry events before the real estate collapse and had been all but booed off the stage for his dire outlook.
The happy ending of this story is that Andy's speech at our Summit was a rousing success, and he enjoyed it so much that he has now spoken at several, and has kindly agreed to sit for periodic interviews to keep our readers up to date on the latest developments in this critical sector. So far, Andy's real estate forecasts continue to come true.
As you'll read in the following excerpt from my latest interview with Andy, who now spends considerable time each day helping the nation's biggest banks cope with growing stacks of problem loans, he remains deeply concerned about the outlook for real estate.
David Galland
No one has been more right on the housing market in recent years. So, what's coming next? Some of the housing numbers in the last few months look a little less ugly. Could housing be getting ready to get well?
MILLER: I don't think so.
For all intents and purposes, the United States home mortgage market has been nationalized without anybody noticing. Last September, reportedly over 95% of all new loans for single-family homes in the U.S. were made with federal assistance, either through Fannie Mae and the implied guarantee, or Freddie Mac, or through the FHA.
If it's true that most of the financing in the single-family home market is being facilitated by government guarantees, that should make everybody very, very concerned. If government support goes away, and it will go away, where will that leave the home market? It leaves you with a catastrophe, because private lenders for single-family homes are nervous. Lenders that are still lending are reverting to 75% to 80% loan to value. But that doesn't help a homeowner whose property is worth less than the mortgage. So when the supply of government-facilitated loans dries up, it's going to put the home market in a very, very bad place.
Why am I so certain that the federal government will have to cut back on its lending? Because most of the financing is done via the bond market, through Ginnie Mae or other government agencies. And the numbers are so big that eventually the bond market is going to gag on the government-sponsored paper.
The public doesn't have any idea of the scale of the guarantees the government is taking on through Fannie, Freddie, and FHA. It's huge. If people understood what the federal government has done and subjected the taxpayers to, there would be a public outrage. But you can't get people to focus on it, and it's very esoteric, it's very hard to understand. But it's not something the bond market won't notice. The government can't keep doing what it has been doing to support mortgage lending without pushing interest rates way up.
Refinancings of single-family homes are very interest-rate sensitive. Consumers have their backs against the wall. They have too much debt. Refinancing their maturing mortgages or their adjustable-rate mortgages is very problematic if rates go up, but that's exactly where they're headed. So anyone who's comforted by current statistics on single-family homes should look beyond the data and into the dynamics of the market. What they'll find is very alarming.
On that topic, recent data I saw was that something like 24% of the loans FHA backed in 2007 are now in default, and for those generated in 2008, 20% are in default, and the FHA is out of money.
MILLER: Fannie Mae had a $19 billion loss for the third quarter of 2009, and they are now drawing on their facility with the U.S. Treasury. We have all forgotten that Fannie and Freddie are still being operated under a federal conservatorship. On Christmas Eve, the agency announced that they were going to remove all the caps on the agencies.
So what about commercial real estate?
MILLER: When I saw what was happening in the housing market, I liquidated all my multifamily apartments, shopping centers, and office buildings. I liquidated all my loan portfolios, and I'm happy I did.
Then it occurred to me in 2005 and 2006 that the commercial world had to follow suit. Why? Because it's a normal progression. Obviously, when single-family homes decline in value, multifamily apartments decline in value. And when consumers hit the wall with spending and debt, that's going to have an impact on retailers that pay for commercial space.
Furthermore, the financing for retail properties had gotten ludicrous. The conduits were making loans that they advertised as 80% of property value when they originated them, but in reality the loan-to-value ratios were well over 100%. And I say that to you with absolute, categorical certainty, because I was a seller and nobody knew the value of the properties that I was selling better than I did. I had operated some of them for 20 years, so I knew exactly what they were bringing in. I knew what the operating expenses were, and I knew what the cap rates were. And, you know, the underwriting on the loan side and the purchasing side of these assets was completely insane. It was ludicrous. It did not reflect at all what the conduits thought they were doing. They were valuing the properties way too aggressively.
I became very bearish about the commercial business starting in late '05. In fact, I think I was in Argentina with Doug Casey, sitting on a veranda at one of the estancias, and he and I were lamenting what was going on in the real estate business, and I said there was going to be a huge adjustment in the commercial market.
Beyond the obvious, that the real estate market has taken pretty significant hits and some banks have been dragged under by their bad loans, what has really changed in real estate since the crash?
MILLER: I think the first thing that changed was that people learned that prices don't go up forever. Lenders also saw that underwriting guidelines for commercial real estate loans, especially in the securitization markets, were erroneous. They realized that some of their properties had been financed too aggressively, but still, I don't think even at the fall of Lehman, anybody was predicting a wholesale collapse in commercial real estate.
But they did see they should be more circumspect with loan underwritings. In fact, after the fall of Lehman, they completely stopped lending. I think they realized we had been living in fantasy land for 10 years. And that was the first change – a mental adjustment from Alice in Wonderland to reality.
Today it's clear that commercial properties are not performing and that values have gone down, although I've got to tell you, the denial is still widespread, particularly in the United States and on the part of lenders sitting on and servicing all these real estate portfolios. People still do not understand how grave this is.
Right now there are an awful lot of banks that do an awful lot of commercial real estate lending, and for about a year now you've been telling me that you saw the first and second quarter of 2010 as being particularly risky for commercial real estate. Why this year, and what do you see happening with these loans and the banks holding them?
MILLER: It's an educated guess, and it hasn't changed. I still think that it's second quarter 2010.
The current volume of defaults is already alarming. And the volume of commercial real estate defaults is growing every month. That can only keep going for so long, and then you hit a breaking point, which I believe will come sometime in 2010. When you hit that breaking point, unless there's some alternative in place, it's going to be a very hideous picture for the bond market and the banking system.
The reason I say second quarter 2010 is a guess is that the Treasury Department, the Federal Reserve, and the FDIC can influence how fast the crisis unfolds. I think they can have an impact on the severity of the crisis as well – not making it less severe but making it more severe. I will get to that in a minute. But they can influence the speed with which it all unfolds, and I'll give you an example.
In November, the FDIC circulated new guidelines for bank regulators to streamline and standardize the way banks are examined. One standout feature is that as long as a bank has evaluated the borrower and the asset behind a loan, if they are convinced the borrower can repay the loan, even if they go into a workout with the borrower, the bank does not have to reserve for the loan. The bank doesn't have to take any hit against its capital, so if the collateral all of a sudden sinks to 50% of the loan balance, the bank still does not have to take any sort of write-down. That obviously allows banks to just sit on weak assets instead of liquidating them or trying to raise more capital.
That's very significant. It means the FDIC and the Treasury Department have decided that rather than see 1,000 or 2,000 banks go under and then create another RTC to sift through all the bad assets, they'll let the banking system warehouse the bad assets. Their plan is to leave the assets in place, and then, when the market changes, let the banks deal with them. Now, that's horribly destructive.
Just to be clear on this, let's say I own an apartment building and I've been making my payments, but I'm having trouble and the value of the property has fallen by half. I go to the bank and say, "Look, I've got a problem," and the bank says, "Okay, let's work something out, and instead of you paying $10,000 a month, you pay us $5,000 a month and we'll shake hands and smile." Then, even though the property's value has dropped, as long as we keep smiling and I'm still making payments, then the bank won't have to reserve anything against the risk that I'll give the building back and it will be worth a whole lot less than the mortgage.
MILLER: I think what you just described is accurate. And it's exactly a Japanese-style solution. This is what Japan did in '89 and '90 because they didn't want their banking system to implode, so they made it easier for their banks to sit on bad assets without owning up to the losses.
And what's the result? Well, it leaves the status quo in place. The real problem with this is twofold. One is that it prolongs the problem – if a bank is allowed to sit on bad assets for three to five years, it's not going to sell them.
Why is that bad? Well, the money tied up in the loans the bank is sitting on is idle. It is not being used for anything productive.
Wouldn't banks know that ultimately the piper must be paid, and so they'd be trying to build cash – trying to build capital to deal with the problem when it comes home to roost?
MILLER: The more intelligent banks are doing exactly that, hoping they can weather the storm by building enough reserves, so when they do ultimately have to take the loss, it's digestible. But in commercial real estate generally, the longer you delay realizing a loss, the more severe it's going to be. I can tell you that because I'm out there servicing real estate all day long. Not facing the problems, and not writing down the values, and not allowing purchasers to come in and take these assets at discounted prices – all the foot-dragging allows the fundamental problem to get worse.
In the apartment business, people are under water, particularly if they got their loan through a conduit. When maintenance is required, a borrower with a property worth less than the loan is very reluctant to reach into his pocket. If you have a $10 million loan on a property now worth $5 million, you're clearly not making any cash flow. So what do you do when you need new roofs? Are you going to dig into your pocket and spend $600,000 on roofing? Not likely. Why would you do that?
Or a borrower who is sitting on a suburban office property – he's got two years left on the loan. He knows he has a loan-to-value problem. Well, a new tenant wants to lease from him, but it would cost $30 a square foot to put the tenant in. Is the borrower going to put the tenant in? I don't think so. So the problems get bigger.
Why would the owner bother going through a workout with the bank if he knows he's so deep underwater he's below snorkel depth?
MILLER: It's always in your interest to delay an inevitable default. For example, the minute you give the property back to the bank, you trigger a huge taxable gain. All of a sudden the forgiveness of debt on your loan becomes taxable income to you. Another reason is that many of these loans are either full recourse or part recourse. If you're a borrower who's guaranteed a loan, why would you want to hasten the call on your guarantee? You want to delay as long as possible because there's always a little hope that values will turn around. So there is no reason to hurry into a default. None.
So that's from the borrower's standpoint. But wouldn't the banks want to clear these loans off their balance sheets?
MILLER: No. The banks have a lot of incentive to delay the realization of the problem because if they liquidate the asset and the loss is realized, then they have to reserve the loss against their capital immediately. If they keep extending the loan under the rules present today, then they can delay a write-down and hope for better days. Remember, you suffer if the bank succumbs and turns around and liquidates that asset, then you really do have to take a write-down because then your capital is gone.
So here we are, we've got the federal government again, through its agencies and the FDIC, ready to support the commercial real estate market. They've taken one step, in allowing banks to use a very loose standard for loss reserves. What else can they do?
MILLER: Well, obviously nobody knows, but I can guess at what's coming by extrapolating from what the federal government has already done. I believe that the Treasury and the Federal Reserve now see that commercial real estate is a huge problem.
I think they're going to contrive something to help assist commercial real estate so that it doesn't hurt the banks that lent on commercial real estate. It'll resemble what they did with housing.
They created a nearly perfect political formula in dealing with housing, and they are going to follow that formula. The entire U.S. residential mortgage market has in effect been nationalized, but there wasn't any act of Congress, no screaming and shouting, no headlines in the Wall Street Journal or the New York Times about "Should we nationalize the home loan market in America." No. It happened right under our noses and with no hue and cry. That's a template for what they could do with the commercial loan market.
And how can they do that? By using federal guarantees much in the way they used federal guarantees for the FHA. FHA issues Ginnie Mae securities, which are sold to the public. Those proceeds are used to make the loans.
But it won't really be a solution. In fact, it will make the problems much more intense.
Don't these properties have to be allowed to go to their intrinsic value before the market can start working again?
MILLER: Yes. Of course, very few people agree with that, because if you let it all go today, there would be enormous losses and a tremendous amount of pain. We're going to have some really terrible, terrible years ahead of us because letting it all go is the only way to be done with the problem.
Do you think the U.S. will come out of this crisis? I mean, do you think the country, the institutions, the government, or the banking sector are going to look anything like they do today when this thing is over?
MILLER: I know this is going to make you laugh, but I'm actually an optimist about this. I'm not optimistic about the short run, and I'm not optimistic about the severity of the problem, but I'm totally optimistic as it relates to the United States of America.
This is a very resilient place. We have very resilient people. There is nothing like the American spirit. There is nothing like American ingenuity anywhere on Planet Earth, and while I certainly believe that we are headed for a catastrophe and a crisis, I also believe that ultimately we are going to come out better.
About: Andy Miller is the co-founder of the Miller Frishman Group, which includes three companies serving different sectors of the real estate market – from mortgage brokerage and banking, to the building, management, and marketing of commercial real estate across the United States. His firm is currently deeply involved in the distressed real estate business, assisting lenders across the nation with their growing portfolios of non-performing loans. (Reposted with permission from John F. Mauldin's e-newsletter, Thoughts From the Frontline.)

Saturday, January 30, 2010

Jan. 29 (Bloomberg) -- The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.

Secret Banking Cabal Emerges From AIG Shadows

Revealed: See Who Was Paid Off in the AIG Bailout

Our Financial Rulers are on Another Planet

The Ring of Fire

The future of banking?
How to live without banks

The Fed's Anti-Inflation Exit Strategy Will Fail; Sooner or later the pressure to lend out excess bank reserves will be unstoppable

IMF: Banks Must Raise Billions to Fend Off Crisis

UK Economy Lies on Bed of Nitroglycerin

15 Banks fail in 29 days...Thats 1 bank failure every other day...
Over 200 banks are estimated to fail this year...
Six More Banks Bite the Dust in California, Florida, Georgia, Minnesota, and Washington

Tuesday, January 26, 2010

"When I Look At The United States I Cannot Imagine How They Can Solve Their Problems"

Senate rejects Obama-backed deficit task force

"doubling down" at a casino:
Greece Sells 8 Billion Euros in Notes After Offering Premium

Deficits As Far as the Eye Can See

California inmate release plan begins

FDIC chief expects 2010 bank failures to exceed 2009 Monday, January 25, 2010, 8:32pm EST Modified: Monday, January 25, 2010, 8:34pm
Reacting to President Barack Obama’s recent proposal to impose limits on the size and scope of banks, Federal Deposit Insurance Corp. Chair Sheila Bair said during a visit to Miami Monday that institutions should wall off their non-bank financial activities from their insured deposits.
On Thursday, Obama said he wants to prevent financial institutions that own a bank from also owning, investing in or sponsoring a hedge fund, private equity fund or proprietary trading operations that are not related to serving their customers. The president also said that large financial firms could not increase their national market share of assets other than insured deposits beyond a certain point.
Just before speaking to the Florida Banker’s Association on Monday night, Bair said she hasn’t seen enough details of Obama’s proposal to say whether she supports it or not. She said financial institutions could do a better job of walling of their FDIC-insured banks from some of their more risky financial activities so that the banks aren’t hurt by losses in those areas.
“The bulk of these problems actually occurred outside the insured deposit banks. Just look at Lehman Brothers and AIG,” Bair said.
She added that large institutions should have a self-liquidation plan filed with regulators in case they need to be wound down.

***Note the starting of aid to states.***

Senate Democrats Said to Consider $80 Billion Jobs Legislation By Brian Faler
Jan. 26 (Bloomberg) — Lawmakers are set to consider a jobs-stimulus package totaling about $80 billion that would provide tax credits to small and medium-sized businesses that hire workers, a Democratic senator said.
The plan, to be presented today to Senate Democrats, would include aid to state governments to prevent layoffs and additional funding for infrastructure projects, said the senator, who asked not be identified. The package also will likely include energy-related provisions such as incentives to weatherize homes, a Senate aide said.
Democratic leaders hope to have the measure on the Senate floor by the second week in February, the aide said, speaking on condition of anonymity.
The proposal is smaller than an economic aid package approved last month by the House, in part because lawmakers plan to approve extensions in unemployment benefits costing tens of billions as part of separate legislation.
The House plan, costing more than $150 billion, eschewed small business tax cuts in favor of spending $53 billion to extend unemployment benefits including so-called COBRA subsidies to help the jobless buy health insurance.

Sunday, January 24, 2010

Thought for the day:
Happy ride to the abattoir (slaughterhouse).
The Chairman of the Federal Reserve and the Secretary of the US Treasury have credible threats to their tenure in office. MOPE has you convinced it means nothing to the US dollar.
Consider what would happen to any other currency on the planet if the same were true.
Tell the lie loud and long enough, and the populous will believe it UNTIL the real downside pain of the fundamental implications are felt.
Most people forget to quote (paraphrased above) the second part of Goebbels’ key lesson on the value and application of state propaganda (MOPE).
Sleep on Sheeples as you take the happy ride to the abattoir.
Jim Sinclair.


America's Impending Master Class Dictatorship
By Stewart Dougherty
Jan 22 2010 2:24PM
FOREWORD: At certain times, focusing on the big picture is important not just for investment success, but for personal welfare, and even survival. We believe such times are here. It is estimated that 98% of Americans have never held a gold coin in their hands. Yet 100% of Americans regularly handle Federal Reserve Notes. From a contrarian standpoint, the financial message from those two statistics is clear. Even so, gold is much more than money or an investment medium; it stands for liberty and throughout history has facilitated escape and ensured freedom. Never having touched a gold coin is the monetary equivalent to never having breathed fresh air, felt the warmth of sunshine, looked up at the stars or risen from the gutter. Fiat Federal Reserve Notes are becoming nothing more than sewage decomposing in the vast, toxic septic tank of predatory Washington politics, epic Federal Reserve arrogance and error, blatant Wall Street fraud and outright Master Class plunder. Below, we outline America’s troubling and compounding predicament, and urge you to think about how to protect yourself from its consequences, both financially and personally.
Thanks to the endless barrage of feel-good propaganda that daily assaults the American mind, best epitomized a few months ago by the “green shoots,” everything’s-coming-up-roses propaganda touted by Federal Reserve Chairman Bernanke, the citizens have no idea how disastrous the country’s fiscal, monetary and economic problems truly are. Nor do they perceive the rapidly increasing risk of a totalitarian nightmare descending upon the American Republic.
One stark and sobering way to frame the crisis is this: if the United States government were to nationalize (in other words, steal) every penny of private wealth accumulated by America’s citizens since the nation’s founding 235 years ago, the government would remain totally bankrupt.
According to the Federal Reserve’s most recent report on wealth, America’s private net worth was $53.4 trillion as of September, 2009. But at the same time, America’s debt and unfunded liabilities totaled at least $120,000,000,000,000.00 ($120 trillion), or 225% of the citizens’ net worth. Even if the government expropriated every dollar of private wealth in the nation, it would still have a deficit of $66,600,000,000,000.00 ($66.6 trillion), equal to $214,286.00 for every man, woman and child in America and roughly 500% of GDP. If the government does not directly seize the nation’s private wealth, then it will require $389,610 from each and every citizen to balance the country’s books. State, county and municipal debts and deficits are additional, already elephantine in many states (e.g., California, Illinois, New Jersey and New York) and growing at an alarming rate nationwide. In addition to the federal government, dozens of states are already bankrupt and sinking deeper into the morass every day.
The government continues to dig a deeper and deeper fiscal grave in which to bury its citizens. This year, the federal deficit will total at least $1,600,000,000,000.00 ($1.6 trillion), which represents overspending of $4,383,561,600.00 ($4.38 billion) per day. (The deficit during October and November, 2009, the first two months of Fiscal Year 2010, totaled $296,700,000,000.00 ($297 billion), or $4,863,934,000.00 ($4.9 billion) per day, a record.) Using the GAAP accounting method (which is what corporations are required to use because it presents a far more accurate and honest picture of a company’s finances than the cash accounting method primarily and misleadingly used by the U.S. government), the nation’s fiscal year 2009 deficit was roughly $9,000,000,000,000.00 ($9 trillion), or $24,700,000,000.00 ($24.7 billion) per day, as calculated by brilliant and well-respected economist John Williams. ( Fiscal Year 2010’s cash- and GAAP-accounting deficits will likely be worse than 2009’s, given government bailout and new program spending that is on steroids and psychotic.
Putting Fiscal Year 2009’s $9,000,000,000,000.00 ($9 trillion) deficit another way, 17% of America’s private wealth, accumulated over a period of 235 years, was wiped out by just one year’s worth of government deficit spending insanity.
Given this, is it any surprise that Treasury Secretary Geithner has announced that the release of the nation’s FY 2009 supplemental GAAP financial statements has been delayed? Remember, this is the same Secretary Geithner who bullied people to cover up the sordid details of the AIG, or more accurately, the taxpayer-funded, multi-billion dollar, Santa Claus bailout and bonus bonanza for Goldman Sachs. Do you really think this government, characterized as it is by fiscal and monetary secrecy, lies, chicanery, cronyism and stonewalling, wants the people to know what is actually happening? Obviously, it does not, so it hides from the public the inexcusable facts.
It is estimated that the top 1% of Americans control roughly 40% of the nation’s wealth. In other words, 3 million people own $21,400,000,000,000.00 ($21.4 trillion) in net private assets, while the other 305 million own the remaining $32,000,000,000,000.00 ($32 trillion). 77,000,000 (77 million) Americans (the lowest 25%) have mean net assets of minus $2,300 ($-2,300.00) per person; they live from paycheck to paycheck, or on public assistance. The lower 50% of Americans own mean net assets of $27,800 each, about enough to purchase a modest car. Obviously, it would be impossible to retire on such an amount without significant government or other assistance. Meanwhile, the richest 10% of Americans possess mean net assets of $3,976,000.00 each, or 143 times those of the bottom 50%; the top 2% control assets worth more than 1,500 times those in the bottom 50%. When you combine these facts with Wall Street’s typical multi-million dollar annual bonuses, you get an idea of wealth inequality in America. Historically, such extreme inequality has been a well-documented breeding ground for totalitarianism.
If the government decides to expropriate (steal) or commandeer (e.g., force into Treasuries) America’s private wealth in order to buy survival time, such a measure will be designed to destroy the common citizens, not the elite. Insiders will be given advance warning about any such plan, and will be able to transfer their money offshore or into financial vehicles immune from harm. Assuming that the elite moves its money to safety, there would then be $120,000,000,000,000.00 ($120 trillion) in American debt and liabilities supported by only $32,000,000,000,000.00 ($32 trillion) in private net worth, for a deficit of $88,000,000,000,000.00 ($88 trillion). In that case, each American would owe $285,714.29 to balance the country’s books. (Remember to multiply this amount by every person in your household, including any infant children.)
If the common people suspect that something diabolical was in the works, a portion of the $32 trillion in non-elite wealth could be evacuated as well prior to a government expropriation and/or currency devaluation, resulting in less money for the government to steal. What these statistics mean is that it is absolutely impossible for the government to fund its debt and deficits, even if it steals all of the nation’s private wealth. Therefore, the government’s only solutions are either formal bankruptcy (outright debt repudiation and the dismantling of bankrupt government programs) or unprecedented American monetary inflation and debt monetization. If the government chooses to inflate its way out of this fiscal catastrophe, the United States dollar will essentially become worthless. You can be absolutely certain that a PhD. in economics, such as Dr. Bernanke, is well aware of these realities, despite what he might say in speeches. For that matter, so are Chinese schoolchildren, who, when patronized by Treasury Secretary Geithner about America’s “strong dollar,” laughed in his face. One day, perhaps America’s school children will receive a real education so that they, too, will know when to laugh at absurd propaganda.
The government has announced that during the fiscal years from 2010 through 2019, it will create an additional $9,000,000,000,000.00 ($9 trillion) in deficits, an amount that is almost certain to be understated by trillions given the country’s current economic trajectory. The government assumes that this vast additional deficit will be funded by others, such as the Chinese, as it is a statistical fact that the United States will be incapable of funding it.
Furthermore, with the budgetary equivalent of a straight face, the Office of Management and Budget reports in its long-term, inter-generational budget projection that the United States government will experience massive, non-stop deficits for the next 70 (SEVENTY) years, requiring the issuance of tens of trillions of dollars of additional debt. The OMB does not project even one year of surplus during the entire seventy year budget period.
These deficits and debts are now so gargantuan that they have become surreal abstractions impossible even for sophisticated financiers to begin to comprehend. The common citizen has absolutely no idea what these numbers mean, or imply for his or her future. The people have been deluded into thinking that America’s arrogant, egomaniacal, always-wrong-but-never-in-doubt fiscal witch doctors and charlatans, including Greenspan, Rubin, Summers, Geithner and Ponce de Bernanke, have discovered a Monetary Fountain of Youth that endlessly spits up free money from the center of earth, in a geyser of good will toward the United States. Unfortunately, this delusion is false: there is no Monetary Fountain of Youth, and contrary to the apparent beliefs of the self-deified man-gods in Washington, D.C., the debt and deficits are real, completely out of control, and 100% guaranteed to create catastrophic consequences for the nation and its people.
When government “representatives” deliberately sell into slavery the citizens of a so-called free Republic, they have committed treason against those people. This is exactly what has happened in the United States: the citizens have been sold into debt slavery that they and their descendants can never escape, because the debts piled onto their backs can never, ever be paid. Despite expensive and sophisticated brainwashing campaigns emanating from Washington, claiming that America can “grow” out of its deficits and debt, it is arithmetically impossible for the country to do so. The government’s statements that it can dig the nation out of its fiscal hole by digging an even deeper chasm have become parodies and perversions of even totally discredited and morally disgusting Keynesianism.
The people no longer have elected representatives; they have elected traitors.
The enslavement of the American people has been orchestrated by a pernicious Master Class that has taken the United States by the throat. This Master Class is now choking the nation to death as it accelerates its master plan to plunder the people’s dwindling remaining assets. The Master Class comprises politicians, the Wall Street money elite, the Federal Reserve, high-end government (including military) officials, government lobbyists and their paymasters, military suppliers and media oligarchs. The interests and mindset of the Master Class are so totally divorced from those of the average American citizen that it is utterly tone deaf and blind to the justifiable rage sweeping the nation. Its guiding ethics of greed, plunder, power, control and violence are so alien to mainstream American culture and thought that the Master Class might as well be an enemy invader from Mars. But the Master Class here, it is real and it is laying waste to America. To the members of the Master Class, the people are not fellow-citizens; they are instruments of labor, servitude and profit. At first, the Master Class viewed the citizens as serfs; now that they have raped and destroyed the national economy, while in the process amassing unprecedented wealth and power for themselves, they see the people as nothing more than slaves.
America’s public finances are now so completely dysfunctional and chaotic that something far worse than debt enslavement and monetary implosion, terrible curses unto themselves, looms on the horizon: namely, a Master Class-sponsored American dictatorship.
Throughout history, the type of situation in which America now finds itself has been a fertility factory for tyranny. The odds of an outright overthrow of the people by the Washington and Wall Street Axis, or more broadly, the Master Class are increasing dramatically. The fact that so few people believe an American dictatorship is possible is exactly why it is becoming likely.
Dictatorships have blighted history and ruined lives since the beginning of civilization. In recent times alone, tyrants such as Hitler, Stalin, Lenin, Ceausescu, Amin, Hussein, Mussolini, Tojo, Kim, Pinochet, Milosevic, Tito, Batista, Peron, Pol Pot, Mugabe, Marcos, Somoza, Mengistu, Bokassa, Sese Seko, Franco, Ho Chi Minh, Mao, and Castro have power-sprayed blood onto the screen of time and ravaged mankind with murder, torture and human oppression. A full catalog of history’s tyrants would require a book of hundreds of pages. In the past 100 years alone, over 200 million human beings have been annihilated by wars, ethnic cleansings and government assassinations. Just when we think that civilization has been able to rise above tyranny’s inhumanity and disgrace, a new dictator appears on the scene to start the process all over again. Every time this happens, fear and submission paralyze the vast majority of the affected masses, leading them to “follow orders” and lick autocracy’s blood-stained boots.
History has proven to tyrants that oppression works. In fact, it is easy to control a populace, once you control the money, markets, military (including police), media and minions (the recipients of welfare, social security, free health care, government jobs and the like, who are dependent upon the state and likely to be compliant). This is exactly where the United States is today.
Recent American events paint an ominous picture of a Master Class that is now in total control.
When 90% of the American people vehemently rejected the $700,000,000,000.00 ($700 billion) TARP bailout plan, the Master Class put it on a fast track and approved it anyway.
When a clear majority of the American people said no to a government takeover of Chrysler and GM, the Master Class poured billions of taxpayer dollars into those corporate sinkholes and took them over anyway.
When the people said no to multi-trillion dollar crony bailouts for the bankers and insurers whose corruption had caused global financial mayhem, the government pledged to those elite insiders more than $13,000,000,000,000.00 ($13 trillion) of the people’s money anyway.
When the people expressed astonishment and anger that Wall Street planned to pay itself record 2009 bonuses, in the midst of America’s worst-ever fiscal and financial crisis caused by them, Wall Street stuffed its pockets with taxpayer-supported bonus money anyway.
When the people said no to a proposed $40,000,000,000.00 ($40 billion) bailout of AIG and its elite trading partners such as Goldman Sachs (an amount that subsequently exploded to $180,000,000,000.00+ ($180+ billion)), the Master Class went underground, covertly misappropriated taxpayer money and made the payoffs anyway.
When Fannie Mae and Freddie Mac were nationalized at enormous taxpayer expense, the government approved $6,000,000.00 individual pay packages in 2009 (150 times the average American wage) for the CEOs of both failed companies anyway.
When a clear majority of the people said no to nationalized health care, even after being bombarded by a multi-million dollar, lie-drenched propaganda campaign designed to bamboozle them, the House and Senate passed nationalized health care bills anyway.
When more than seven million American workers lost their jobs and were subsisting on unemployment benefits and food stamps, federal government employees, who now earn DOUBLE what private sector workers earn, were given another round of pay and benefits increases anyway.
When private sector workers’ 401Ks and IRA retirement plans plummeted in value due to economic collapse and endemic Wall Street-orchestrated market corruption (including systemic front running, flash trading, naked short selling and other manipulations), government “defined benefit,” lifetime-cost-of-living-adjusted pension plans, despite already being underfunded by $2,000,000,000,000.00 ($2 trillion), were made richer than ever anyway.
The long, shameful litany of events signaling the total divorce between the Master Class and the people of the United States doesn’t stop there. It goes on and on.
The message from the American Master Class to the American people is simple and clear:
We Defy You.
Governments that openly defy the people are either already totalitarian or in the process of becoming so. Monetarily, the United States clearly functions as a totalitarian dictatorship already, with a Federal Reserve that operates in secrecy, creates limitless amounts of debt and currency at will, and showers trillions of dollars upon favored Master Class insiders with zero transparency or accountability whatsoever. The Federal Reserve is so shameless about its dictatorial powers that it flatly refuses to provide details about multi-trillion dollar bailouts and rescues of privileged elites, in open defiance of Congress and the people. The fact that they get away with these blatant acts of defiance demonstrates the true extent of the Master Class chokehold on America.
If the Master Class were a benign despot and if its policies and programs actually worked, that would be one thing. But that is not the case. Rather, its programs are in a complete shambles.
Every single government entitlement program in the United States is bankrupt. This includes Social Security ($17,500,000,000,000.00 underfunded; $17.5 trillion); Medicare Part A ($36,700,000,000,000.00 underfunded; $36.7 trillion); Medicare Part B ($37,000,000,000,000.00 underfunded; $37 trillion); Medicare Part D ($15,600,000,000,000 underfunded; $15.6 trillion), Government and military pensions ($2,000,000,000,000 underfunded; $2 trillion), Food Stamps (current underfunding difficult to measure because the number of recipients is exploding; hundreds of billions underfunded versus original projections, minimum); and the list goes on. The above underfunding amounts are NET of projected tax receipts over the next 50 years. But the current recession has invalidated virtually all long-term budget and tax receipt assumptions, meaning that the true underfunded amounts are now greater than current, already mind-boggling estimates.
While the above statistics are terrifying enough to any citizen with a functioning brain, what is Twilight Zone-eerie and a far more serious cause for alarm is the casual indifference with which the Master Class is now making the country’s dire and irreparable fiscal circumstances even worse.
The nationalized health care program will cost at least $1 trillion over the next ten years, and most likely multiples of that. It is being crammed down America’s throat by a bankrupt government that does not have the money today and will not have the money tomorrow to pay for it. Worse is the fact that the same government that has bankrupted each and every existing social program now intends to directly or indirectly control the health care of all citizens. Based on the government’s existing track record and the health care program’s enormous complexity, invasiveness and cost, the probability that it will become a national fiscal and humanitarian catastrophe is roughly 100%.
“Cap and Trade” is a multi-trillion dollar tax scam being foisted onto the American public without a legitimate debate or popular referendum. You might be surprised to learn that “Climate Revenues” are already included in the federal budget, starting with $79,000,000,000.00 ($79 billion) in fiscal year 2012, which begins only 20 months from now. During fiscal years 2012 through 2019, the government expects to collect $646,000,000,000.00 ($646 billion) in “Climate Revenues,” a completely new tax category. Have any of your elected traitors told you that they have enacted $646,000,000,000.00 ($646 billion) in “Climate” taxes beginning twenty months from now and continuing forever? These “Climate Revenues” are based on junk science, lies and hysteria, and have been pimped by greed-diseased parasites who seek to make billions from operating and manipulating the Cap and Trade “marketplace.” Favored elitists such as Hank Paulson, Al Gore, General Electric and Goldman Sachs, among others, have positioned themselves to profit from the nation’s upcoming Cap and Trade tax misery and economic debilitation.
The reality is that the giant Ponzi scheme called the United States of America is running out of money. In any Ponzi scheme, money must constantly be poured into the top of the funnel in order to pay the redeemers at the bottom. As the number of redeemers has grown, tax receipts have fallen far short of covering their withdrawals, a problem that has now become an outright government funding emergency further aggravated by the fiscal, financial and economic crises.
If the Washington and Wall Street Axis were not legally able to create and distribute counterfeit American money, the Ponzi scheme would have collapsed already. Trillions of new, out-of-thin-air, printing-press and electronic “dollars” have bought the Axis additional time, but new sources of revenue must immediately be found to keep the scam alive. Congress is fully aware of this reality. Outright tax increases would be bad politics during a recession that is morphing into a depression, and also bad for 2010 re-election campaigns, so they cannot be implemented. Therefore, Congress continues to advance the health care and Cap and Trade agendas, which are nothing but taxation Trojan Horses festooned in righteousness and sanctimony, despite overwhelming popular opposition.
If the nationalized health care program is passed, revenues and fees will kick in immediately in 2010, whereas costs will not begin to accrue until 2012 and later. The government plans to spend the revenues immediately to forestall a total fiscal collapse. Nationalized health care has absolutely nothing to do with health care; it has to do with creating an immediate revenue stream to help fix the current government funding crisis. Similarly, Cap and Trade has nothing to do with fixing the environment. It, too, is nothing more than a massive tax increase similarly designed to address the government’s epic funding shortfall, with thick slices of pork thrown in for privileged insiders and deceitful propagandists like bloated “Father of the Internet” and now “Savior of the World” Al Gore.
The last thing the Master Class wants is for the people to understand the disastrous state of the nation’s finances. Master Class brainwashing tells the people that it is “negative” and “pessimistic” to look at the facts, despite the fact that psychological health is characterized by the ability to identify and deal with reality. The Master Class wants the people to put on Bozo the Clown happy faces and let sugar plums and green shoots dance in their brains as they write one check after another to pay for Cap and Trade, nationalized health care, and a mind-numbing assortment of other taxes and fees.
On Sunday night, November 30, 2009, North Korea’s dictator Kim Jong Il (a name that says it all, even better than Made-off’s), an international poster child of Master Class psychological illness, devalued his country’s currency by 99%. This vicious tyrant, who has given birth to a national hell on earth, is chauffeured in Mercedes Benz limousines, drinks the finest imported whiskies and dines in imperial dignity on foods prepared by personal chefs while his citizens starve to death on the streets or, at best, eke out a subsistence living. Kim became paranoid that the people were actually figuring out how to improve their pitiful, impoverished lives in tiny ways, so he decided to wipe them out. The people were given one week to exchange their money at a rate of 100 old Won for 1 new Won. Any lifetime family savings in excess of roughly $700.00 were simply confiscated by the North Korean government. To keep the people in line, the military and police were put on high alert, fully prepared to kill or arrest any protesters.
On January 9, 2010, Venezuela’s strong man Hugo Chavez devalued his country’s currency by 50%, overnight and without warning, causing immediate inflation, shortages of food and supplies, and general financial chaos throughout the nation.
While you might be shaking your head in pity over the plight of the citizens of North Korea and Venezuela, ask yourself this: could this not happen in the United States?
On April 5, 1933, President Franklin D. Roosevelt, an Obama hero, outlawed gold ownership overnight by signing Executive Order 6102, which gave the people three and one-half weeks to surrender all privately-owned bullion to the government for a price of $20.67 per ounce. On January 30, 1934, nine months after collecting the people’s gold, Roosevelt devalued the dollar 69% overnight, by raising the gold price from $20.67 to $35.00 per ounce.
Since its founding in 1913, the Federal Reserve has devalued the dollar by 98+% thanks to endless money printing and debt creation, a corrosive and impoverishing process that is now accelerating. In the past year, the Fed has engineered $20+ trillion in bailouts, subsidies and guarantees for well-connected and lucky scavengers and opportunists, an amount equal to roughly 40% of the total private wealth created in this country since its inception. All because a few elitist government man-gods with an almost perfect record of error and failure have deemed in their imperial wisdom that it shall be so. The citizens, whose hard-earned wealth is being systematically destroyed by this continual, government-decreed monetary debasement were never invited to the debate or given a say, which is par for the course for dictatorships. This massive de facto devaluation now hangs over the people’s wealth like a great monetary sword of Damocles.
Conceptually, whether it is a 50% overnight devaluation in Venezuela, a 69% overnight devaluation in the United States, a 98% devaluation in America over time, or a 99% overnight devaluation in North Korea, what is the difference? The fact is: there is no difference; monetary debasements are all the same. In each and every case, the people’s wealth is stolen via government edict, while the people stand by helplessly and in shock.
So one must ask: For whom does the bell toll? A foreign “them,” or a domestic us? Who is to say that you will not be told tomorrow morning that, effective immediately, in accordance with some perversely named mandate such as the “American Monetary Security, Wealth Preservation and Terrorism Prevention Act,” enacted by emergency for “the safety of the nation and the financial well being of the citizens,” all existing currency and bank balances will be redenominated in “New Dollars,” at a conversion rate of 1 new for every 100 old currency units? Would this not simply be another, almost predictable act of defiance toward the American people by the Master Class? And if that happened, do you honestly believe that the Master Class would not have been alerted in advance and allowed to make special preparations for itself ahead of the devaluation? Do you think they intend to go down in the same ship as the people they defy? If such a currency devaluation were announced, what could you do about it? March on Washington? But how would you get there if your money had been wiped out?
Despite what you may hear from State Media, which includes virtually all establishment news organizations, particularly financial ones (e.g., CNBC), America is on the precipice. No bankrupt nation in history has ever defended or preserved the freedoms of its citizens. In fact, it has been the exact opposite: in desperation, bankrupt governments have routinely plundered their citizens’ wealth and imposed totalitarian controls. What will make things different for the United States, the largest debtor nation in all of recorded civilization?
The United States government cannot ever, possibly pay its debts, is pathologically incapable of controlling its spending or curbing its hunger for both domestic and international empire and persistently refuses to tell the American people the truth. If America’s citizens were told the truth and given the benefit of true leadership, as opposed to the guile and dishonesty of an endless array of political liars and hacks, perhaps they could rally and defeat the problems that afflict them. But instead, they are fed by the Master Class a steady diet of narcotic propaganda that deludes, confuses and enervates them. The truth cannot set people free if it is never told, and that is the essence of America’s gathering tragedy.
In a future article, we will detail specific developments you should watch for to chart the course of America’s ominous and potentially deadly national storm. The current, grave situation is already a clear call to action. When the signals become even more urgent, it will be late in the game to take protective action, and possibly too late. Citizens should begin to prepare now not just for financial survival, but for the personal security of themselves and their loved ones should a Category 5 economic and political hurricane rip into the nation, something that becomes more likely every day.
With respect to personal finances, in virtually every national currency devaluation and major political upheaval in the past, gold has represented sanctuary for the affected people. Gold has not just preserved wealth, but personal freedom as well. While governments can devalue fiat currencies, they cannot, by edict, devalue gold. Yes, they can try to manipulate its price, but unless all governments join in the collusion, ultimately the price will return to market. The market for gold is global, and demand exists in all nations and among all peoples. Should the government attempt to confiscate gold, it will be an outright admission that the financial system is collapsing, and the people will know better than to hand over to a corrupt government their only means of survival. The most important point is this: devalued currencies never rise again. Once they are destroyed, they are gone forever, and those whose wealth had once been denominated in them are wiped out. As you have no doubt heard before, not one fiat currency has survived over time, and that is an indisputable fact. More significantly, no fiat currency has ever suffered the abuse that has been inflicted upon the United States dollar, meaning that it is at extreme risk. Gold has been money for 5,000 years. It has not merely survived, it has prevailed over each and every fiat currency collapse throughout history. Given this, the most important financial question a person can ask him- or herself today is: How is my wealth denominated at this time? And given its denomination, is my wealth likely to be safe in current and evolving circumstances?
One thing is certain: as the epic David and Goliath monetary battle unfolds, between the people fighting to defend their hard-earned wealth on one side, and a Master Class that greedily and pathologically wants to plunder them on the other, the price of gold will become extremely volatile for a period of time. Volatility will, in fact, tell you that the War on Wealth has officially been declared, and will be your signal to do whatever you must to protect what is yours. As the government Goliath and its Master Class allies short tonnes of bullion into rigged futures markets in a desperate attempt to make gold look dangerous and risky, the Davids will be coming forth not just in the United States but from all corners of the globe, buying 10 grams here and one ounce there. There are 6.8 billion Davids, versus one diseased Master Class that numbers in the small millions. There is no way the Master Class can defeat the people, if the people finally rise up and say “No More of Your Plunder. No More of Your Cold and Soulless Financial Oppression. No More of Your Cynical and Godless Exploitation.”
If you find the above argument compelling, you should consider how to protect yourself from Executive Orders that could be issued at any time, under any pretext, and that could be extremely hostile to your financial and/or personal health and well being. One simple way to start is to purchase one ounce of gold for yourself and each member of your household, and much more if you can afford it. That is not financial advice; it is merely the common sense generously communicated to you by history.
Stewart Dougherty

Saturday, January 23, 2010

By: Jim Sinclair Post Edited: January 23, 2010 at 9:52 pm
Filed under: General Editorial
Dear Friends,
When in the history of the United States has there been a credible movement to remove both the Chairman of the Federal Reserve and the Secretary of the US Treasury? The answer is never since the invention of the private bank, the US Federal Reserve.
I have been telling you for months that there is a war going on between the Banksters and Daddy Warbucks. This is best understood as the desire to bring the power of the Federal Reserve into the Oval office, not by trusting an appointee but by absolute control over the appointee. Failing that the plan is to emasculate the Fed.
The loss of Mass. to the Democratic party has had the effect of causing the fear of evaporation of their political base. The immediate reaction landed deservedly on the banksters, but quickly it was realized that as much as Main Street hates the banksters, it is jobs and the general economy that has the power to deem this administration a one term wonder.
Some feel that there is a plan to dump the equity market here so as to be able to bring it back going into November. That is giving these people more credit than deserved as a loss of their only shining gain, the wealth effect of the 1932 type bear stock market rally, is not easily controlled. If it and the economy go into a double dip whereby a new low could be established, it will be a really shocking low. The risk is simply too high that control, once lost, cannot be recaptured. That was proven painfully in the 30s. Once the bear market rally was over it was all toast for years. Only a world war reversed the depression.
The poorly thought out knee jerk reaction to the Mass. political loss has put the market and more than likely the economy into a state of flux, which has the capacity to put this entire western world mess into a flat spin which as in a fighter aircraft is nearly impossible to correct.
Stay the course but tighten your seat belt in gold.
Volatility is going ballistic but one thing is for sure and that is a $1650 minimum price objective with much more probable.
Regards, Jim

Jim Sinclair’s Commentary
MOPE would have you believe that Greece is a terrible problem for the euro, but California is not a problem in the US dollar.
The opposite is the fact.
The dollar has 40 potential Greeces with California more than 400% larger in GDP terms than Greece, and it is already broken.
The Fed and the Treasury will have to bail out the states. They simply have no other option whatsoever.
Stay the course but prepare for unprecedented volatility.

Friday, January 22, 2010

Obama's bank plan is 'doomed to failure'

The Panic Button Has Been Pushed Posted: Jan 22 2010 By: Jim Sinclair Post Edited: January 22, 2010 at 1:55 pm
Filed under: General Editorial
Dear Friends,
This administration has its head in rarefied Wall Street air. They honestly believe the reason they lost Mass. was public anger at the banksters alone. Now they have set things in total flux both for the re-nomination of Bernanke and the loss of their bankster’s backing, but also at a time when the Supreme Court declared no limits on corporate political giving.
Unleashing those corporate political funds will result in a battle bigger than the health bill in the sense of lobbyists over new banking rules.
All of this is meaningless looking forward to the November 2010 elections. All that counts is jobs, jobs and more jobs.
What is clear here is that the panic button has been pushed by the administration who still thinks they live in Wall Street, not Main Street. Be assured that Volcker understands the systemic disaster we are in, and will do nothing to pull the plug on the mountain of OTC derivatives. He is simply too smart for that.
Getting the banks out of the guaranteed risk business is a long term correction, but still not the basic problem. The horse is out of the barn, the damage has been done and there is no immediate or medium term fix in taking the banks out of the OTC derivative business.
The basic problem that still exists is the fraudulent OTC derivatives produced since 1991 that are yet to be addressed in any manner or form except through the capitulation of FASB, which permitted falsified values. All that did was make the situation worse.
Nothing that has occurred is dollar positive.
The economic reason for the dollar rally was the bullish Christmas financial party prediction that is simply non-existent and therefore not sustainable. It is a business activity bottom bouncing experience that can easily have its bottom plug pulled now that everything has been sent into a state of flux.
Stay the gold course. Things are becoming more, not less of a mess, and it is not hard to see. Only gold can guarantee you against the madness of our financial leadership. Remember the big economic lie works if repeated loudly again and again, but when the public feels the pain of the big lie it collapses in on itself. The man who invented MOPE made that statement. It proved true politically in the German campaign against the Russian winter. It imploded in Germany in 1944.
Economically it is appearing thin now. The voters have rebelled.
Respectfully, Jim

Ten Companies Flashing Financial Danger Signs

Obama Bank Curbs May Not Leave Financial System Safer

Top U.K. Economist Dumas: Euro Will Collapse

The Global Debt Bomb: "If 2008 was the year of the subprime meltdown, 2010 will be the year entire nations start going broke."

Why Americans should care about the debt crisis in Greece

Identifying Sure Signs of the Final Economic Plunge

Banks Pull Another $1 Billion from Small Business Lending

Stockpiling food, water in case of emergency is smart, not paranoid

Thursday, January 21, 2010

U.S. Dollar

Dear CIGAs,
If you want to see how the financial media has presented today’s events, go to Bloomberg’s website. At the close of the market day there is not ONE single story about the equity market blowout today. Not one.
Now you know (if you don’t already) what you are dealing with in the financial media. Now you know what MOPE is all about. Today’s crushing of equities simply did not merit mention.

Dear Friends,
Because of paper gold, market games can be played. What cannot be done is for paper gold to produce bullion.
The bullies can attack the paper gold market in unison, but they cannot create supply in real bullion with the ease of highly leveraged paper.
The pros depend on the under-financed public to stampede under the pressure of fear of loss.
Believe me, I used to run the locals (pros) all over the lot, and on occasion I got significant paybacks.
However, in the final analysis all we did was add noise to a market that went from $40 to $887.50 Real gold (bullion) is in meagre supply.
What that means is algorithms must lose and fundamentals must rule.
All the violent trading resulting in ever increasing volatility in the gold price is but manic noise inside of a major uptrend that will make me look bad for having been too conservative in my year 2000 price objective of $1650.
If you had lived through a top in the gold market, you would know that without any question whatsoever, this is not it.
Ignore those writers who wish to sell a service by feeding on your fear. Gold is going to and through $1224.10 on its way to $1274-$1278. Following that it is on to $1650 and Armstrong and Alf’s numbers.
Respectfully yours, Jim

Initial jobless claims unexpectedly rise

Russia diversifies into Canadian dollars

The Housing Timebomb

No Genuine Economic Recovery Happening

Foreclosures Up 14% in December.

Sell your soul to the government...
Obama to Nationalize Student Lending with Pending Budget Bill

Wednesday, January 20, 2010

The reason Fort Knox will remain a mighty fortress, however, may come down to something Alan Greenspan once told Paul. When Paul asked the former Fed Chairman why the Fed hangs onto its hefty gold reserves, "Greenspan said, 'Just in case we need it,'" says Paul. "You hold onto it because it's the ultimate in money."

Martin Weiss: 200 Bank Failures Expected in 2010

2010-2020 Towards a Knockout Victory by Gold Over the Dollar

Euro Rupture as Greek Crisis Escalates

Senate Dems propose allowing gov't to borrow additional $1.9T to pay its bills, increasing debt limit to $14.3T

Tuesday, January 19, 2010

By: Jim Sinclair Post Edited: January 19, 2010 at 5:10 pm
Filed under: General Editorial
Dear Extended Family,
The only light shining on the dollar is the shadow cast by a barrage of MOPE over the implications of Greece and the weaker members of the euro financial problems, and now the discovery that the economic recovery in Euroland is nothing to write home about.
By comparison, there is total media silence on the implications of the bankruptcy of many US states.
It is crystal clear to any thinking person that the outrageous claims of the US economy recovering and sustaining that recovery is nothing more than Pixie Dust.
The dollar has no meaningful upside because its only fundamental can come from flag waving and the falsehood that major dollar holders are dollar bound by size.
The synthetic short based on the dollar carry trade is nonsense in light of the Fed’s need to continue QE to infinity regardless of the daily bull about draining.
The dollar is the most fundamental of all markets because of the size and desire for a means of diversification.
All you need to do is to keep a weekly record of what China is spending on energy and materials to know dollar diversification is a simple business tactic for nations lacking debt.
Few have granted that the outlaw banksters have a large problem with their trillions of dollars. What you are forgetting is to be crooks of this magnitude they have to be damn smart. You can be sure that as a minimum they are already diversified in their dollar holdings and are at a minimum 50% non-dollar. You can also be sure they have 5-10% in gold and that percent will move higher. People that can rip off the world surely anticipate and care for themselves. To think otherwise is foolish.
Gold is going to $1224, onward past $1274-$1278 on its way to $1650 before it moves onward to Alf Fields and Martin Armstrong’s numbers.
The US dollar is no safe haven and has no ability to insure buying power.
Respectfully yours, Jim

Same option as the US....
UK’s Only Options are “Default, Inflation or Belt-Tightening”

US 2009 Foreclosures Shatter Record Despite Aid

Doug Casey Says Stock Market Set to Crash

Dr. Gary North: Why Deflation is Not Ahead

Californians down on finances

Monday, January 18, 2010

By: Jim Sinclair Post Edited: January 18, 2010 at 5:38 pm
Filed under: In The News
Thoughts For The Day:
Even our school of economics and investors have become habituated to the social, political and financial calamity at hand. The outlaw financial leadership of the entire Western world has sold out our heritage on both sides of the pond.
Governments, states, municipalities, towns and hamlets are broke. Insurance companies, banks and major investment houses are valuing their assets from worth-less to worth-full.
The stampede to the bonus stock holder’s asset give away is clearly because this is the last dip at the well for a decade.
All paper money in the West is the common shares of the bankrupts.
Asia and Africa are rising and their ascension cannot be stopped. They have long term business plans and are working those plans to protect themselves from the multitudinous sins of the West and control world commerce.
Stand back for a moment, without emotion, and look at where we are.
Protect yourselves because no one else is going to do it.
Cling to money that has no liability attached to it, the only honest money, Gold.

Financial Times prints a column complaining of market rigging

World Gold Council aims to push Indians out of real metal into paper

Jim Rogers: "Food prices are going to go through the roof"

Monday, January 18, 2010Text Size:
From Newsmax:Legendary investor Jim Rogers remains bullish on commodities and says the world will soon face food shortages."The fundamentals (for agriculture) have gotten better," he says."The inventories are now at the lowest they've been in decades, not in years.”And that trend is just intensifying, Rogers tells CNBC.“Things are getting worse. Many farmers..."Read full article...

Is the American Economy Destined to Fail?

Government Bonds -- the New Junk?

Four Economic Scenarios You Better Hope Won't Materialize

Financial Markets and Economic Crisis Outlook 2010, When Hope Turns to Fear

Dr. Gary North: Deflationists Predicting Price Deflation are Not Economists, They are Journalists

What Happens When the Fed Stops Quantitative Easing

Thursday, January 14, 2010

A Season Of Discontent: The only alternatives for which majorities express "a lot" of trust to help manage financial risk are close family members (64 percent) and their own efforts (74 percent)

Panic buying hits supermarkets as shelves stripped of essentials over snow fears

Food Shortages Coming, Buy Commodities: Jim Rogers

Jim Sinclair’s Commentary
You have to love how Greece is being MOPEd concerning the Euro but there isn’t a peep out F-TV or other media about the new black hole of California.
GOP, Dems in “Death Embrace”: U.S. Budget “About to Go Off a Cliff," Cal Prof Says CIGA Eric
U.S. Budget “About to Go Off a Cliff," Cal Prof Says
If we haven’t already gone off the cliff, see chart, then it’s probably best not to ask what if he’s right.
The budget deficit is skyrocketing
Raise taxes or cut spending? Washington must take action on both fronts to curb U.S. debt or run the risk of a dollar crisis, according to a report by the Committee on the Fiscal Future of the United States, a panel of bipartisan experts.
1. Raise Taxes 2. Cut Spending 3. Devaluation
The first two choices are hard. The last one is easy. Political will is like electricity, it always seeks the path of least resistance.

US must cut spending to save AAA rating, warns Fitch

The Coming Sovereign Debt Crisis, by Nouriel Roubini and Arpitha Bykere

This is totally hysterical, and only something a governments and renowned experts possibly could do.
Regards, Jim
New Lincoln penny, unveiled here, to feature union shield CIGA Eric
The U.S. Commission of Fine Arts (a group that includes architects, art experts and others who make their livings creating pretty things) first recommended that 13 stalks of bound wheat decorate the back of the 2010 penny. Then, however, someone discovered that shafts of wheat also appeared on German coins minted during the 1920s and 1930s, the era when the German government was known as the Weimar Republic.
With history repeating, they should have went with it.
"Ask yourself why totalitarian dictatorships find it necessary to pour money and effort into propaganda for their own helpless, chained, gagged slaves, who have no means of protest or defense. The answer is that even the humblest peasant or the lowest savage would rise in blind rebellion were he to realize that he is being immolated, not to some incomprehensible ‘noble purpose’, but to plain, naked, human evil." — Ayn Rand

Dear CIGAs,
Here are the rules of MOPE:
1. MOPE must be carefully timed:
a. The communication must reach the audience ahead of the competing truth. b. A MOPE campaign must begin at the optimum moment. c. A MOPE theme must be repeated, but not beyond some point of diminishing effectiveness
2. MOPE must label events and people with distinctive phrases or slogans such as "gold bugs" and "carry trade."
a. They must evoke desired responses which the audience previously possessed. b. They must be easily learned. c. They must be utilized again and again, but only in appropriate situations. d. They must be boomerang-proof.

Jim Sinclair’s Commentary
Be realistic. Greece is not in as bad a shape as California is.
The scariest of all things is that there are 40 states in various conditions of financial collapse right behind California.
This situation alone could be the dollar’s Terminator. Sleep on Sheeple!
California Creditors Dread IOUs With Aid Plea Failing By Edwin Chen, John McCormick and Michael Marois
Jan. 13 (Bloomberg) — California’s hopes are fading for federal help in closing a projected $19.9 billion deficit that has caused the lowest-rated state’s borrowing costs to rise 24 percent since September.
“We recognize they have enormous problems,” David Axelrod, senior adviser to President Barack Obama, said in an interview. “But we can’t solve all of those problems from Washington.”
Investors are growing more concerned that California, whose debt rating was cut today by Standard & Poor’s, will repeat last year’s fiscal crisis that forced it to use IOUs to pay bills. With Governor Arnold Schwarzenegger seeking $6.9 billion in federal assistance to narrow the deficit, the extra yield paid on the state’s 10-year bonds over AAA-rated municipal securities rose to 1.31 percentage points yesterday from 1.06 points on Sept. 11, according to Bloomberg fair market value index data.
Schwarzenegger’s plea for help for California, the world’s eighth-largest economy, may become a test case for Obama, who last year called the Republican governor “an outstanding partner with our administration.” Dozens of states face budget shortfalls amid the worst recession since the Great Depression, and at least 36 have already reduced fiscal 2010 expenditures, according to the National Association of State Budget Officers.

Economy has Six Months to Live

Yahoo Tech Ticker Video Interview: January 13

The Capture of Our Government by Wall Street

Wall Street, Politicians Still Don't Get It

The latest from the White House: President Obama Signs Executive Order Establishing Council of Governors; Executive Order will Strengthen Further Partnership Between the Federal and State and Local Governments to Better Protect Our Nation. Hmmm... In Beltway speak "partnership" or "cooperation" often mean "control." This could considerably degrade our 10 Amendment protections!

Wednesday, January 13, 2010

The Recession Is Over, the Economic Depression Just Beginning

Dollar Crisis Looms if US Doesn't Curb Debt: Experts

Jim Sinclair’s Commentary
Sir Richard speaks on gold and the lack of a PRACTICAL method to either sustain a dollar rally or drain the trillions injected into the international economy.
Richard Russell comments on gold – again
January 12, 2010 – I’ve been a fan of Noriel Roubini’s, (my daughter’s been to his parties) one of the very few economists who foresaw and predicted the housing collapse. That great call made Roubini famous. But I was surprised and dismayed to note Roubini’s recent warning about what he termed the "gold bubble." Roubini is the son of an Iranian-Jewish family, and if that didn’t provide him with respec t for gold I don’t know what would. Actually I was shocked that the brilliant Roubini didn’t understand gold, all of which leads to today’s site.
At any rate, I feel the urge to talk about the fundamentals of gold. Eighty-five percent of all the gold ever mined in world history is here on the surface of the earth today — it’s in your tooth crown, it’s in your sweetie’s ring, it’s on the ceiling of your church, it’s in those heavy bars buried deep in the vaults of the New York Fed, it’s in the case of your Rolex watch. In general, gold is not "used up," it’s simply accumulated.
Gold is mentioned repeatedly in the Bible. Gold appears to be etched into the DNA of man. Gold has been lusted after and treasured since the dawn of civilization. The search for gold opened up America’s West. The quest for gold sent the merciless Spanish explorers into the Americas. Gold has been an item of wealth through the dark ages, through two world wars, through the Holocaust, through the Crusades, through Biblical times. As far as I can discover, there has never been a time when man has not lusted for the beautiful yellow metal that never tarnishes.
Gold is the standard around which all other prices revolve. The price of gold does not change. Gold is the eternal, immutable standard. Gold is priced by the minute worldwide in dollars. If the dollar price of gold rises (as now), the dollar is, in effect, being devalued. All other currencies are compared with the dollar. Thus, if the price of gold rises, that rise effects all other currencies, and thus all currencies move around the dollar, and the dollar in turn fluctuates around gold.
The Founding fathers had intimate experience with fiat paper currency, and the Constitution of the United States states that only gold and silver are to be considered money. Further, the Constitution warns specifically against paper money. Prior to 1931 you could take your dollars to a national bank and exchange those dollars for gold. Since the dollar was backed by gold, the discipline of gold limited the number of dollars that could be issued by the United States. Not enough gold, stop printing dollars.

In California, Hopes Fading for Federal Bailout

How nation's true jobless rate is closer to 22%

2010: Giant, Gathering Storm Clouds

Tips: Gold May Hit $1,375, Dollar Going Down

November Trade Deficit Increases to $36.4 Billion

Gabriel Sukenik: The Fed vs. the free market