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In The News Today

Posted: Dec 15 2010     By: Jim Sinclair      Post Edited: December 15, 2010 at 12:45 pm
Filed under: In The News

My Dear Friends,
All you are looking at is the mirror image event in the US dollar as a product of Mrs. Merkel’s "Open Mouth" euro intervention as a part of the ongoing currency war and profit making short play. Hong Kong equity traders got excited over Mrs. Merkel’s lip service and sold off, putting secondary pressure on gold.
It means very little as gold is going to $1650 and beyond.
Respectfully,
Jim

Jim Sinclair’s Commentary
The Green Hornet says this article run today in the Asia Times is the trend maker, and not the vocal Mrs. Merkel and her euro pound manipulation.
US takes Greek path By Martin Hutchinson
The insouciant approach which President Barack Obama and the US budget negotiators have taken to the federal deficit, adding around US$900 billion to deficits over the next two years with no countervailing spending cuts, has been greeted by a sharp rise in Treasury bond yields.
This brings into focus a very delicate question: at what point does the US government’s credit cease being the world’s "safe haven" and become merely a much larger and more dangerous version of Greece?
For the past two years, anti-Keynesians such as this columnist have warned that massive federal deficits run the risk of crowding out the private sector, especially the small business private sector, which has the most difficulty accessing funding.
With dollar interest rates generally declining and Chinese and other foreign investors happily piling in to fund budget deficits of $1.3-$1.4 trillion, this had appeared a purely theoretical problem. However, with commercial and industrial loans (including small business, but also including the relatively active leveraged buyout sector) declining by 25% to $1.22 trillion in the two years since 2008, the problem has been a real one.
With the supply of long-term government debt so overwhelming, the yield curve between short-term and long-term interest rates has been artificially steep for over two years. Thus banks have been able to borrow in the short-term markets and invest in long-term bonds, picking up a 3% interest spread for doing so, which they leverage 15-20 times.
More…


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