"We can guarantee cash benefits as far out and at whatever size you like,
but we cannot guarantee their purchasing power."

--Alan Greenspan

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GoldMoney's Turk interviewed by GoldSeek Radio on the death of money

Submitted by cpowell on Thu, 2010-07-29 02:54. Section: Daily Dispatches

10:55p ET Wednesday, July 28, 2010

Dear Friend of GATA and Gold:

GoldSeek Radio's Chris Waltzek this week interviewed GoldMoney founder and GATA consultant James Turk about the death of government currencies, with emphasis on the experience of Weimar Germany. The interview is about 20 minutes long and you can listen to it here:

http://radio.goldseek.com/nuggets/turk07.27.10.mp3

In The News Today

Posted: Jul 29 2010 By: Jim Sinclair Post Edited: July 29, 2010 at 2:56 pm

Filed under: In The News

Dear CIGAs,

"Currency Induced Cost Push Inflation" cannot be avoided. It will happen overnight as confidence in currency breaks. All of this has happened before.

There was a major dollar rally in 1931 as many European countries defaulted on their debt. The dollar looked outrageously bullish as a mirror image of the weak European currencies. The media spoke of the USA in the manner of a refuge currency in 1931. Then it all changed as it has here and now.

The dollar returned to its previous bear market, plumbing new lows in 1932 and 1933.

We are, here and now, continuing on QE to infinity. Here and now, the Fat Cat insiders of Wall Street know this and are NOW shifting to massive longs under cover of a paper gold game.

The Fat Cat Wall Street demons will make the most money over the shortest period of time in gold just as they did in 1979-80 and in the 1930s. It is totally obvious to the objective observer of the history of gold and currency.

It is here and now. It has all happened before in the same cyclical time frame as now. But here and now, so many are blind to reality.

So many have become gambleholics. So many have lost emotional balance. So many are being fooled daily by the manipulation of the paper gold market.

The trend of dollar value, here and now, is illustrated below. It is all happening again, here and now.

Harry Schultz knows it. I know this. Few have a clue of the spread of the cancerous economic entity known as "QE to Infinity" in the entire Western World.

History lesson: Huge quantities of cash were needed in Weimar Germany

Jim Sinclair’s Commentary

This is the 2nd state of (economic) Emergency in California.

California ‘fiscal emergency’ declared
29 July 2010 Last updated at 06:49 ET

California governor Arnold Schwarzenegger has declared a fiscal state of emergency, putting pressure on lawmakers to pass a state budget that is now more than a month overdue.

California’s economy, which is the eighth largest in the world, faces a budget deficit of $19bn (£12bn).

Mr Schwarzenegger said that without a budget in place the state’s government would run out of cash by October.

He also ordered most state employees to take three days unpaid leave a month.

Earlier this month, the governor ordered 200,000 state workers to be paid the minimum wage because no budget had been passed.

‘Fiscal meltdown’

The "furlough Friday", which will start in August, requires state workers to take three Fridays off a month until a new budget is enacted.

More…

Jim Sinclair’s Commentary

The US has much more threatening problems than the EU.

1.65 Million Properties Receive Foreclosure Filings in First Half of 2010
Bank Repos Hit Another Record High in Q2 While Defaults and Auctions Decrease; June Marks Third Straight Monthly Decrease in Overall Foreclosure Filings
By RealtyTrac Staff

IRVINE, Calif. – July 15, 2010 – RealtyTrac® (http://www.realtytrac.com/gateway_co.asp?accnt=137300), the leading online marketplace for foreclosure properties, today released its Midyear 2010 U.S. Foreclosure Market Report, which shows a total of 1,961,894 foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 1,654,634 U.S. properties in the first six months of 2010, a 5 percent decrease in total properties from the previous six months but an 8 percent increase in total properties from the first six months of 2009. The report also shows that 1.28 percent of all U.S. housing units (one in 78) received at least one foreclosure filing in the first half of the year.

Foreclosure filings were reported on 313,841 U.S. properties in June, a decrease of nearly 3 percent from the previous month and a decrease of nearly 7 percent from June 2009. June was the sixteenth straight month where the total number of properties with foreclosure filings exceeded 300,000.

Foreclosure filings were reported on 895,521 U.S. properties during the second quarter, a decrease of nearly 4 percent from the previous quarter and an increase of less than 1 percent from the second quarter of 2009.Default and auction notices were down on a quarter-over-quarter and year-over-year basis in the second quarter, but bank repossessions (REOs) increased 5 percent from the previous quarter and 38 percent from Q2 2009 to 269,962 — a new quarterly high for the report.

“The second quarter was a tale of two trends,” said James J. Saccacio, chief executive officer of RealtyTrac. “The pace of properties entering foreclosure slowed as lenders pre-empted or delayed foreclosure proceedings on delinquent properties with more aggressive short sale and loan modification initiatives. Meanwhile the pace of properties completing the foreclosure process through bank repossession quickened as lenders cleared out a backlog of distressed inventory delayed by foreclosure prevention efforts in 2009.

More…

Jim Sinclair’s Commentary

And more and more as we head, without any doubt, into currency induced cost push inflation.

Bank of England chief says stimulus still needed
Bank of England governor says degree of continuing stimulus is key issue
Robert Barr, Associated Press Writer, On Wednesday July 28, 2010, 6:27 am EDT

LONDON (AP) — The governor of the Bank of England said Wednesday that the need to stimulate the economy still takes precedence over concerns about high inflation at a time when the outlook for the global economy remains uncertain.

Governor Mervyn King told Parliament’s Treasury Committee that Britain cannot be confident that a sustained recovery is under way despite last week’s report that the economy grew 1.1 percent in the second quarter — the third quarter of recovery from a deep recession.

"The debate is about the appropriate degree of stimulus, not about applying brakes," King said.

The Bank’s Monetary Policy Committee has kept its key interest rate at an all-time low of 0.5 percent, though one member — Andrew Sentance — is advocating a hike to 0.75 percent because of his concerns about inflation remaining above the official 2 percent target.

"We continue to face the challenge of rebalancing our economy away from consumption towards net exports, and raising our national savings rate. During the rebalancing, there is a risk that the level of money spending in the U.K. will remain weak, with the economy operating below capacity. That would push down on inflation potentially to a rate that is significantly below the 2 percent target," King said.

More…

Jim Sinclair’s Commentary

You heard it from the Brits today. Now hear it from the Fed.

Currency Induced Cost Push Inflation is on its way.

Fed Board Member’s Deflation Warning Hints at Policy Shift
By SEWELL CHAN
Published: July 29, 2010

WASHINGTON — A subtle but significant shift appears to be occurring within the Federal Reserve over the course of monetary policy, amid increasing signs that the economic recovery is weakening.

On Thursday, James Bullard, the president of the Federal Reserve Bank of St. Louis, warned that the Fed’s current policies were putting the American economy at risk of becoming “enmeshed in a Japanese-style deflationary outcome within the next several years.”

The warning by Mr. Bullard, who is a voting member of the Fed committee that determines interest rates, comes days after Ben S. Bernanke, the Fed chairman, said the central bank was prepared to do more to stimulate the economy if needed, though it had no immediate plans to do so.

Mr. Bullard had been viewed as a centrist, and associated with the camp that sees inflation, the Fed’s historic enemy, as a greater threat than deflation.

But with inflation now very low, about half of the Fed’s unofficial target of 2 percent, and with the European debt crisis having roiled the markets, even self-described inflation “hawks” like Mr. Bullard have gotten worried that growth has slowed so much that the economy is at risk of a dangerous cycle of falling prices and wages.

More…

Jim Sinclair’s Commentary

If Moody wishes to self destruct, downgrading US debt is the express lane method.

Moody’s: U.S. needs debt plan.
The U.S. government needs to lay out a credible plan to address its rising debt if it wants to maintain its triple-A credit rating, said Steve Hess, Moody’s top sovereign analyst for the U.S., East Asia and Australasia. At present, the U.S. appears to have "no plan" to deal with its fiscal outlook. The U.S. rating remains on a stable outlook at Moody’s.

Jim Sinclair’s Commentary

The fear "D" word is finding its way into the Halls of Ivy. You can anticipate QE to infinity which is the means of producing currency induced cost push inflation.

Beige Book shows economic fragility.
U.S. economic activity continued to be "weak" in June and into July, the Federal Reserve said in its Beige Book report, in the latest sign that the recovery may be running out of steam. Though most districts reported continued improvements in economic conditions, the improvements were modest; gains were limited for retail sales, housing and construction remained weak, and banking lending remained tight.

SILVER

The Coming Silver Supernova

Lorimer Wilson

“Few investment opportunities arise in our lifetime like silver. The stage is set for a silver price percentage gain of extraordinary magnitude! Forget the popular refrain of ‘Got Gold?’ and make some additions to your portfolio to take advantage of the coming silver supernova!” So said author Donald Poitras in an email sent to Wilson after reading Wilson’s article on the possible impact the historical gold:silver ratio could have on the price of silver if gold goes parabolic. In addition to the gold:silver ratio, there are other sound reasons why silver can expect to experience a percentage gain of extraordinary magnitude in the years to come: diminishing supply and increasing demand; a massive short position exists; in-ground silver is limited and will become much more expensive to mine. As a result, the price of silver can only increase dramatically. It is time, writes Wilson, to embrace the new refrain, ‘Got silver?’

www.gold-eagle.com/editorials_08/wilsonl072210.html

a CBO report on the U.S. debt crisis that is a must read. The key word: unsustainable levels of debt. There are some articles discussing the CBO report in The American Spectator and in The New American.

Market Commentary From Monty Guild

Posted: Jul 29 2010 By: Monty Guild Post Edited: July 29, 2010 at 7:05 pm

Filed under: Guild Investment

Dear Monty,

China knows the evil of over the counter derivatives. They handle substantial financial fraud as a capital crime.

Going forward, listed derivatives with a clearinghouse function, margin requirements and standardized contract points can exist without endangering either China or the world. China has no significant backlog of the OTC type weapons of mass financial destruction. The Western World is overhung by $1.4 quadrillion dollars of notional value OTC derivatives before the BIS went to the cartoon value of "value to maturity," the ultimate Pollyanna computer fabrication. The size of the OTC weapons of mass financial destruction has grown during the crisis that they are in fact responsible for.

China, who considers major white collar crimes as capital crimes ( punishable by death), will not screw up themselves and the world in their version of the credit default LISTED derivatives.

Asia and Africa is where the future is. Now it is go East young man, go East.

China in Asia, and Tanzania in East Africa are the pots of gold at the end of the rainbow.

Regards,
Jim

Dear CIGAs,

WHY DOES HIGH PRICED REAL ESTATE SELL SO EASILY IN CHINA?

China appears to have a huge "grey" economy, meaning that it is fueled by grey or unreported income. On July 19th, China’s most famous researcher on grey income, Dr. Wang Xiaolu, stipulated that actual urban household income may be 100 percent higher than the official data reported by the government. He also concluded that China’s per capita disposable income in 2008 should have been 67 percent higher than the official data.

Dr. Wang goes on to say that China’s national housing affordability ratio (the ratio of average home prices to average income) should have been about 2.8x in 2008, and is about 3.5x currently, which are lower than in many developed countries. His research concludes that the income gap between the top 10 percent and bottom 10 percent of the population was 26x; considerably higher than the government’s estimate of 9x.

In our opinion, this goes a long way to explain why the wealthy continue to buy real estate, and how they can afford the high prices. It also explains why the government is so intent to spend national resources to build low income housing and to stop the speculation in high priced status properties so the wealth gap does not continue to escalate. China’s leaders consider, among other things, the Confucian ideal of moderation and a cohesive society in their planning. Clearly, huge income and wealth disparities undermine these Confucian ideals.

CHINA TO IMPLEMENT CREDIT DEFAULT SWAPS IN THE SECOND HALF OF 2010; THIS WILL CHANGE THE WAY THEY MANAGE THEIR ECONOMY

China’s National Association of Financial Market Institutional Investors (NAFMII) recently announced their plan to launch a market for credit default swaps. In China, these will be known as credit risk mitigation (CRM) contracts. The NAFMII report said Chinese credit derivatives must follow the principles of simplicity and transparency and cater to the ‘real’ economy.

Economical management is paramount in China. For years, the central government has allowed local governments to create economic growth through activities such as selling real estate to developers who in turn create housing and large commercial developments. The ultimate effect of this has been more employment and more demand for raw materials. Now, the Central Government is reigning in local government flexibility, and is going to manage the money supply by growing it and shrinking it in a manner similar to the U.S. Federal Reserve. Furthermore, they will expand a bond market for Chinese government bonds and begin to use bond issuance as a method to control the money supply in China.

CHINA PLANS TO CHANGE THEIR ECONOMIC MODEL TO AVOID TOO MUCH SPENDING AND RISK-TAKING BY LOCAL GOVERNMENTS IN THE FUTURE

China has taken on a new policy approach translated by some as ‘loose fiscal policy and tight monetary policy’. Loose fiscal policy refers to the bevy of tax incentive and other fiscal measures to stimulate spending by government and private developers on affordable public housing and other public works.

Tight monetary policy means government will continue to reign in loan growth, especially to Local Government Funding Vehicles. Total loans in the economy are expected to decline over the remainder of 2010 and in future years. The commencement of a government bond market in coming months will create another policy tool for government planners.

FACTS ABOUT CHINA’S LOCAL GOVERNMENT FUNDING VEHICLES [LGFV]

Many rumors are swirling around about these vehicles, most of which are inaccurate. They argue for the potential of a meltdown in Chinese economic activity. We disagree with most of these confused analyses.

On July 20, 2010, China’s CBRC (China Banking Regulatory Commission) published information about outstanding bank loans including the loans to the local government funding vehicles. Total loans outstanding to these vehicles were about 1 trillion U.S. dollars on June 30, 2010. The report states that 27 percent were fully viable, 50 percent need to be serviced by secondary sources (legal guarantors or secondary cash flows), and 23 percent could pose a risk of default if cash flows do not improve or new guarantors are not found. Let us focus upon the 23 percent with potential problems, which is about $230 billion U.S. dollars.

Of these loans, we assume that about 2/3 will benefit from rising land prices or cash flows from completed projects already under construction. We estimate that about $75 billion U.S. dollars in bad loans will need to be written off or re-capitalized. Assuming all of the questionable loans go bad (a very unlikely occurrence in our view) write offs would total $230 billion.

On a national level, China has about $1.4 trillion in cash reserves available. In addition, the formation of a bond market, stock sales and cash held by provincial and local governments can also be used to restructure the bad debts. Bad debts are likely to be anywhere from $75 billion to $230 billion in the worst case scenario. While this is serious, such figures are not unmanageable given the size of their reserves.

INDIA’S GDP GROWTH IS APPROACHING A VERY IMPRESSIVE 10 PERCENT

India will continue to grow rapidly. We expect India’s high inflation (and rising interest rates) which have frightened many investors, will moderate after September when a successful monsoon season finishes with good rainfall, moderating food prices.

GOLD PRICES

We believe that all of the serious economic and political problems that have argued for a strong gold price continue to support rising demand for gold over the long-term. India, Russia, China, and Persian Gulf countries are all accumulating gold. A few weak, fiscally unsound institutions have been selling some of their gold to raise cash. Demand has far outstripped supply over the last eight years and we have repeatedly seen that using periods of price decline to add to long term positions in gold is wise.

Gold recently approached $1,140 an ounce, which many technical analysts believe is a good buy point. We suggest that gold taking partial profits in holdings on rallies and taking a larger percentage of your profits at $1650 per ounce.

We have been buyers during every prolonged period of gold weakness for years, and we continue to be buyers of gold during the current bout of weakness. A word to the wise is sufficient.

U.S. MARKET VOLATILITY

Markets have been volatile and we believe that they will remain volatile until the U.S. Securities and Exchange Commission begins to rein in the activities of the high frequency trading community. These fast traders create unstable markets, increase volatility, and are scaring individual investors away from the markets. When their actions are moderated, market movements will be more driven by fundamentals, and the individual investor will return, making the U.S. stock and bond market much healthier.

SUMMARY

We believe that higher volatility warrants high cash balances as volatility leads to market dislocations and good buying opportunities.

In our opinion, gold is approaching attractive prices for additions to portfolios. We also find some high-yielding oil related shares to be attractive on price declines. Longer term, China, India, Malaysia, Thailand, Singapore, and Brazil continue to be attractive destinations for investment capital.

Thanks for listening. We hope you are enjoying the summer season, and we encourage you to contact us if we can be of service.

Monty Guild and Tony Danaher
www.GuildInvestment.com